Becoming A Responsible Homeowner

How To Apply The Many C's Of Credit To Get A Personal Loan

If you are considering applying for a personal loan, then you have likely heard that approval of a loan depends on the three Cs of credit. Unfortunately, depending on who you ask, these three Cs can stand for different things. claims the three c's are Credit, Cash Flow, and Collateral, while claims that they are Credit, Capacity, and Collateral, and claims they are Character, Capital, and Capacity. With all of the Cs floating around, it can be difficult to understand what a personal loan lender is going to look for when they give you a loan. Read on to find out more about these important Cs.


Your credit history, and the credit score that reflects it, is the foundation of negotiating a loan with a lender. Lenders who offer loans without a credit check or to people with low credit scores tend to offer smaller loans with higher interest rates. Knowing your credit score can help you narrow down your options for loans and negotiate the best possible interest rate for you. Many personal loan lenders require a credit check because the loan is unsecured. However, some lenders do not. 

Cash Flow 

Cash flow tends to examine your debt-to-income ratio. For this, you will have to declare any debts you have, such as credit cards, student loans, mortgages, or basic living expenses such as rent. This will be compared to the amount of income you regularly and consistently make. If you are self-employed, establishing your income can be more difficult than if you have an employer. Similarly, if you work on commission or recently received a promotion, you will need thorough documentation to prove your income. 

Most personal loan lenders are concerned with either your credit history or your current cash flow when they are determining whether lending to you would be risky. Some lenders consider both aspects and some only consider one or the other. 


With personal loans, you do not have to be concerned with collateral, since personal loans are unsecured, meaning they do not require collateral. The cost of an unsecured loan usually means a higher interest rate, but it is available to people who may not have collateral or do not want to risk losing their collateral. 


Capacity is similar to your cash flow, in that it takes into consideration your debt-to-income ratio. However, it also looks at your overall financial profile. This means that your financial assets, such as a home, car, and boat, can affect your capacity even if you are not using them as collateral. 

A higher capacity can often mean a lower interest rate, so it is important to bring in documentation regarding your assets even if you are applying for an unsecured personal loan. 


Capital is often used interchangeably with capacity. It refers to your current liquid and non-liquid assets. 


Character is an important aspect of any loan. While part of your character will be determined by your credit history, part of it is also determined by the impression that you make on your lending agent. Simple things such as a neat application free of grammar errors and spelling mistakes, a complete financial profile, being on time for your meetings, and dressing nicely can all make a positive impact on your lender, helping you get approved for a loan. Since an unsecured personal loan is built on trust that you will pay it back, these impressions are important. 

Understanding the aspects that go into deciding whether you qualify for an unsecured personal loan can help you determine which lenders you should apply with and what loan terms you should expect to be offered. This can make the entire process of applying for a loan easier and faster.