The P.A.

A weekly address from Patrick Adams,
President of St. Louis Community Credit Union

Peeling Back The Layers

On March 2nd, 2009, posted in: Uncategorized by

Due to a lack of conscious planning, I ended up in Northern Michigan a couple of weeks ago. February in Northern Michigan, although beautiful, is far from the tropics. Everybody is dressed in a “Gore-Tex” coat – just like George Castanza from the wildly popular TV sitcom Seinfeld.

Who knows how many layers people are wearing? Gloves, hats, sweaters, multiple shirts, long underwear, socks with batteries, and fur-lined, lace-up boots were the attire of choice. Peeling off the layers must take some time and effort.

The same holds true when you find yourself in need of borrowing money. The financial institution starts peeling back the layers of a lifetime of financial activity to determine whether or not your loan request should be approved.

Have you ever wondered how a loan gets approved? The layers that represent years of your personal, financial and employment information are peeled back by credit-granting professionals. Most of the time, a loan underwriter (the decision-maker) focuses on what is commonly referred to in the industry as the 3 Cs of credit granting:

1)Collateral. You probably have a better chance for approval if you offer up security for the loan request. A car, house, CDs, savings accounts, etc., all serve to make your request a little more appealing. Collateral also usually drops the rate of interest you pay.
2)Capacity. You must have the ability to repay the loan, plus all the other debt and monthly obligations you currently owe. You know the answer to this concern better than anyone. Remember…don’t take out a loan you can’t repay.
3)Credit History. A credit score and your credit history are more than black ink on white paper – they represent your standard of living. A good score and good history lowers your rate and betters your chance for approval. Bad credit history either leads to a loan denial or an approval with a higher rate of interest.

If you want a better chance of getting your loan approved, get these three Cs in order. You may have some peeling back to do in your own right. Understand each of these concerns and whether or not they help your chances for approval. When you feel there is a weakness, peel back the issues and get to the root of the problem. Only then can you take a big step to procuring a loan.

Oh yeah, one more thing…stay warm. The good news is…spring is almost here!

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