Collateral Available to Secure the Loan

Consumer Credit
Steve Bang
 Consumer Credit
Character and Conditions

The 5 C’s of Credit

• Capacity of the borrower to pay

• Credit history of the borrower
• Character of the borrower and Market Conditions
• Capital worth of the borrower
• Collateral available to secure to the loan
 Consumer Credit
Collateral Available to Secure the Loan

Marks’ And Bailey’s TDSR

• Current TDSR = 2,120 + 635 + 150 + 500 + 750 + 100 = 20.6%

• 20,666
•  
• Revised TDSR =2,120+635+150+500+750+100+755(land)
+200(tax)= 24.6%
• 20,666 + 500 (rent)

• Note: Maximum limits used on all credit cards

• Mark and Bailey have the capacity to re-pay the loan
 Consumer Credit
Collateral Available to Secure the Loan

Mark and Bailey

Credit History – Excellent

Character and Conditions – Excellent
Capital Net Worth - $1,017,200
Loan Decision – Approved
 Consumer Credit
Collateral Available to Secure the Loan
Mark and Bailey – Collateral

• Personal Guarantee from Mark and Bailey to repay the loan

(for $40,000)
• TFSA with Everyday Bank ($41,000)
• GIC with Everyday Bank ($62,000)
• Mortgage over High Park Home ($40,000)
• Mortgage over new land ($40,000)
• Discount Brokerage Account (full account)
• Mark’s BMW i (value of car)
• Mark’s shares in Citrus Produce (all $50,000)
• Marks stamp collection (entire $55,000 worth)
 Consumer Credit
Collateral Available to Secure the Loan
Options for Securing a Loan:

1. Personal Guarantee
2. Cash and Cash Equivalents
3. Principal Residence
4. Other Real Estate
5. Stocks, Bonds and Mutual Funds
6. Motorized and Recreational Vehicles
7. Stocks in Private Companies
8. Personal Items
9. Co-Signor
Consumer Credit
Collateral Available to Secure the Loan

Equity Lending

“Safe” Lending versus “Sound” Lending

 Consumer Credit
Collateral Available to Secure the Loan

Planning for good Collateral

1. Is Collateral Really Necessary?

2. Negotiating the Best Rate
3. Re-Assessing the need for Collateral
4. Managing the Loan Payout Process