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There are many reasons why you have to take a loan. With natural disasters and misfortunes occurring all year, it's almost impossible not to get a house loan, salary advance loan, additional business financing, or even a credit builder loan especially if it's to repair your home, as emergency money when things get tough or to finance a significant unexpected expense. Aside from the common requirements for applying for a loan, such as stable employment. Here is a list of other criteria that lenders use to verify the borrower's background.

Capability to Pay

The initial stage of most lenders in assessing the capacity of a loan application is to do a background check by this link: They determine whether the applicant is able to pay the amount based on his employment status, education, skills, payment history, and credit history. Aside from examining the income of the applicant, the lender also takes note of the length of time the applicant is employed at his current job and his future work stability. It is the ability of the borrower to successfully pay the interests and the principal payments on a given period that matters.

The borrower’s ability to pay is one of the critical factors in the lender’s evaluation before giving the loan.

The greater the borrower's financial stability, the greater the likelihood of approval. Failure to come up with the bank’s criteria for repaying the loan would make the bank automatically reject your request for a loan. The borrower’s ability to pay is one of the critical factors in the lender’s evaluation before giving the loan.

Condition of the Industry

Another important criterion is the applicant's industry, whether it is work or business. The creditor will determine whether the debtor's ability to pay is affected by the economic condition of the industry or business. If you are working on a contractual basis, you may have difficulty obtaining a loan due to the insecurity of your employment situation. The same is true for businesses seeking a loan, which unfortunately have a lower success rate nowadays due to the ongoing slump in the economy.

Collateral of the Debtor

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Collateral refers to something, whether physical or intangible, that the debtor pledges as security for repayment of the loan and can be forfeited in the event of a default. Collateral is simply an asset such as a car, house, or jewelry that a borrower offers up but you can still use your collateral like your car and house while you are paying off the loan. Oftentimes, the collateral is the object for which the borrower is borrowing the money, such as auto loans, which are secured by cars, or mortgages, which are secured by houses. As a result, loans backed by collateral are sometimes referred to as secured loans. They are less risky for lenders, so borrowers receive lower interest rates and better terms than with other unsecured forms of financing.

Banks and other creditors will also scrutinize the validity of the collateral to make sure that they will not encounter any problems if they assume ownership of the possession in cases of forfeitures.


For applicants seeking a loan to start a business, the credit source is usually reviewed. After the lender evaluates the business plan and its funding, the lender will be able to know how responsible the debtor is in handling the money and repaying it. The creditor typically looks at the company's balance sheet, capital structure, profit and loss statement, return of equity, and return of investment status.

Lenders also consider any capital the borrower puts toward a potential investment. If the borrower makes a large contribution then the chance of default will decrease considerably. An example is a borrower who is able to put down a down payment on a home would find it easier to receive a mortgage.

Character review and reference

Reviewing the applicant's character informs the bank about the applicant's attitude toward money and debt repayment. Everything about the borrower’s personal data will be examined. This includes family history, personality, hobbies and habits, educational and work history, and how you are perceived by others based on your character references. 

Nathalie Nicole Smith states that working hard and staying true to yourself are sure ways to win in life.

Nowadays, insurance companies and large financial lending institutions are also using social media to conduct background checks on every applicant. Many lenders use Facebook, Twitter, and other social platforms to screen potential borrowers before approving loan applications. These give a reminder to all that it is always advisable to be responsible with your social media accounts.

Once you are confident that you have passed all of the five C’s, you can now apply for a bank or government loan.