So, What’s credit?
Credit is an important financing option for both business and individuals. Knowing the different types of credit instruments available, their characteristics, yields and other important credit and fixed-income topics.
5 C’s of Credit
The 5 Cs of Credit is a framework used by financial institutions and other non-bank lenders to evaluate the creditworthiness of a borrower, as well as the strength of an overall borrowing request.
Character | Capacity | Capital | Collateral | Conditions
Understanding Credit Risk
Credit is defined as one party (a creditor) providing resources to another party (the borrower) in exchange for future repayment. Credit risk is the risk that some (or all) of the repayments may not be made, and that the creditor may lose some (or all) of its principal.
Lenders employ a variety of risk rating and loan pricing tools to understand a prospective borrower’s financial health. Broadly speaking, these tools and models support the measurement and mitigation of credit risk.
The 5 Cs of credit are heavily factored into these risk rating and pricing models.
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