Loan Zone: Secrets of the Cs

5 basic underwriting red flags that can sink your loan

Keep your credit union on a safe and profitable course by knowing these “secrets of the Cs”—five underwriting red flags that signify your potential loan is a sinking ship.

What are the Cs? They are key factors that should always be considered and reviewed with care to identify your loan’s potential.

1. Capacity

Capacity is the borrower’s ability to repay a debt by its final maturity date. To consider capacity, you’ll want to look at the borrower’s employment, income and debt-to-income ratio. You’ll look at job changes, inconsistent hours, address consistency, paystubs, W2s, and IRS transcripts; all of these data points must match with the application.

Self-employed borrowers are increasingly scrutinized because of their nebulous work life. Commissions, bonuses and overtime income are looked at carefully.


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