Credit Appraisal: The Five “C”s

Credit Appraisal: The Five “C”s

Author Name : Dr. Somnath Patil, Dr. Meghana Bhilare

ABSTRACT

Credit appraisal is the process through which lending organization assesses, technical viability, economic feasibility and credit worthiness of the prospective borrower. The essence of the credit appraisal process is that to evaluate if the borrower will be able to repay the loan amount in stipulated time. The lender assesses the borrower’s loan proposal using 5 “C”s. They are – character or honesty and integrity, capacity or cashflows, condition or the state of the economy, capital or the equity portion and collateral or the secondary source of repayment. Evaluation using the 5 “C”s is comprehensive and thorough and an important criteria for granting loans to the borrowers.

Keywords: credit appraisal, character, capacity, condition, capital, collateral