Question

In the 5 Cs of credit, what does capacity measure?

Answer 1

Answer:

it is intelligent question

I don't know

Answer 2

In the 5 Cs of credit, capacity measures a borrowers capability to pay back a loan.

• It estimates the debt to income ratio of the applicant.

• There are five Cs used by the lenders to judge the potential borrowers. They are as follows:

1. Character- credit history of applicant

2. Capacity- debt to income ratio

3. Capital- amount of money possessed

4. Collateral- security for a loan

5. Conditions- purpose, amount and interest rate of the loan.