Growth and jobs | Be Prepared Before Applying For This Loan | News

GARFIELD GOULBOURNE, account manager at JN Bank and ambassador of JN BeWi$e, urges prospects to bring the necessary information when applying for a loan, in order to be good candidates.

Goulbourne’s advice comes in the context of Financial Literacy Month observed in April.

“While saving and investing are ways to achieve financial goals, for some assets, like a car and a house, the purchase price is usually a moving number and one would always be catching up. “What then? Is there any other way to achieve financial goals? Financial institutions offer various credit products and services available to the public,” he noted.

Ambassador JN BeWi$ea however warned that borrowers should be able to demonstrate that they are creditworthy, as financial institutions will carry out a thorough risk assessment of a debtor before granting a loan.

He noted that when assessing the risk of a potential borrower, lending institutions will consider the following “seven Cs”: capacity, capital, collateral, character, compliance, conditions and trust.

ABILITY

Explaining the ability, Goulbourne said: “For personal loans, some people only consider their income as a deciding factor when looking to borrow. However, what about existing credit obligations and other recurring expenses? When it comes to responsible borrowing, many institutions use a total debt service ratio (TDSR), which can even be as high as 50%.

He said his TDSR is calculated by dividing the gross monthly income by the total monthly payment. “For example, if a business has a 50% TDSR threshold and its gross revenue is J$300,000, all of your other loans, including the one to be taken out, must not exceed $150,000.”

CAPITAL CITY

Goulbourne said, sometimes, “the risk assessment requires the debtor to pay a percentage of the value of the asset purchased”. For example, on a seven-year-old vehicle, a lender may be reluctant to finance 100%. Therefore, the borrower may be required to provide part of the funds and without this injection of capital, the loan may not be granted.

COLLATERAL

In terms of collateral, Goulbourne said there are many occasions, including when borrowing to finance a business, where collateral will be required. Besides the directors’ unlimited personal guarantee, there are occasions when institutions may be more willing to lend if the company’s physical assets are used as collateral to secure the loan. Collateral options can be motor vehicles, a home, or even a bill of sale for property or equipment used in the business.

CHARACTER, COMPLIANCE, CONDITIONS AND TRUST

He also pointed out that a person’s credit history is very important when considering a loan application.

“The capacity or ability to repay is not the only determinant for lending. Many people earn well and have attractive TDSR ratios; however, their credit history shows reluctance to repay the facilities previously granted to them. It can be a stain on a person’s character and can cause institutions to give these people high debt or refuse to lend to them,” he said.

Additionally, Goulbourne said deliberate attempts to conceal credit obligations may cause institutions to rethink lending to those lending prospects.

He also encouraged applicants to comply with the requirements of financial institutions by providing all necessary documents to comply.

“Often individuals may not receive the loan because they may refuse to comply with the financial institution’s compliance requirements,” he pointed out.

Comments are closed.