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.