Credit Project 2

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  • Next, Richard looked at the conditions. Chuck wanted a loan to help finance his book, but Richard found it to be to much of a risk, to invest in. Richard also thought, that Chuck wouldn't make enough money to pay back the loan in a reasonable time. So Chuck got another X. Charlie needs a loan to help her buy a car, so she can get to   her job easier. Richard saw this as a better investment   since   Charlie has a well paying job.
  • After that Richard looked at their collateral, or the things that the bank can take from them.  In Chuck's case, the only thing the bank has as a collateral is his house, which is still a lot. Though in Charlie's case, the bank could resell the car she bought with the loan, or they could take her home.
  • And finally, he looked at their capacity.  So he used the 20/10 rule to see who could handle the loan. To find if they could he took their annual income  and multiplied it by 20%, and to see if they could handle the monthly payments, he took their annual income, divided it by 12, then multiplied it by 10%. Chuck wants to borrow  $4,500 which is way over 20% of his  annual income, but he can afford the $143 monthly payments.  He can only afford  $3,432 . Charlie wants to borrow $1,000, just to finish off what she already has. She can afford $9,261.60 so she is all set.
  • Then he looked at their capitol, or assets. Chuck got an X for this one as well. He rents an tiny little house and usually only keeps $25.00 in the bank. Though Charlie passed this one as well. She has a stable job, a savings account with a little less than $10,000 in it.
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