Private Lending and the 5 C’s of Credit

If you do a lot of “A” mortgage business, you’ll be familiar with the 5 C’s of Credit. They are:

1. Character (will this borrower pay?)
2. Capacity (is the borrower able to pay?)
3. Capital (how much of the borrower’s money is in the deal?)
4. Creditworthiness (Does the borrower have a history of paying?), and
5. Collateral (what security is available to secure the loan?)

The 5 C’s aren’t limited to the banks and big lenders – they are important to private lenders too. The difference is simply that private lenders will accept a different level of proof of each. For example, Capacity is only stated, not proven. Creditworthiness and Character are based on the borrower’s story. Collateral however is held to a high standard, sometimes even higher than the banks. So what does this mean to brokers?

Consider the 5 C’s when you’re preparing your mortgage application for a Private Lender. Make sure that all 5 are addressed and you’ll give your application a much better chance of finding success.