Getting a Loan - The Homer Fund

Evaluating a Loan Application ExerciseAs a loan officer for the Pay-Us-Back (PUB) Loan Fund, you make recommendationsto the loan committee about who should receive a loan. This month the followingapplications are on your desk. Use the five C’s of credit to assess the applicants’credit worthiness.1. Kavitha is a 25-year-old single mom. She makes $22,000 a year ($1,833 permonth). She has been working at Home Depot for three years. She has $600 inher savings account at Example Bank. She has one credit card and has made hercredit card payments on time. Her monthly expenses are $800.Kavitha is applying for a $1,200 loan to purchase a computer. She would like touse the money in her savings account as collateral for the loan.a. Using the five C’s of credit, what observations can you make about Kavitha’sability to repay a loan?1. Character:2. Capacity:3. Capital:4. Collateral:5. Conditions:Character:credit historyCapacity: repaymentsources, debt-toincomeratioCapital: personalinvestment,alternative repaymentsourcesCollateral: personalvaluables toguarantee repaymentConditions: situationsthat affect repaymentb. What questions would you like to ask Kavitha?c. Given what you know, do you recommend making Kavitha a loan? _________11