Credit Union's Loan Qualification Guidelines
When reviewing loan requests, AA Credit union Loan Officers consider
"the three Cs of Credit" - Character, Capacity, and Collateral.
Qualities that display good character are stability and
credit history.
- Indicators of stability include:
- Time with current employer.
- Length of time in a particular industry.
- Indicators of acceptable credit include:
- All credit accounts generally being paid on time.
- All credit accounts being current.
- No accounts being in "collection" status.
- No accounts being "charged-off" as bad debt.
Capacity is a measure of a borrower's ability to repay
debt, and AA Credit Union Loan Officers consider two measures when
evaluating loan applications.
- "Debt-to-income ratios"
- Those ratios are calculated by dividing applicants' monthly
living expenses by their monthly incomes.
- For example, $800 in expenses divided by $2,000 in gross
monthly income results in a debt-to-income ratio of 40%.
- Acceptable debt-to-income ratios generally range from 38%
to 46% depending on applicants' income levels.
- Amount of "unsecured debt"
- This type of debt includes credit cards, lines of credit,
and personal loans.
Collateral is property pledged by borrowers to protect
lenders' interests.
- Collateralized loans generally offer much lower interest rates
than non-collateralized loans.
- Borrowers agree to allow liens to be filed against property
that has been pledged as collateral.
- Collateral can be seized and sold to satisfy debt in the
unlikely event of default by borrowers.
- AA Credit Union accepts several types of property as collateral
for loans.
- New and used vehicles
- Boats
- Airplanes
- Recreational Vehicles (motorcycles, all-terrain vehicles,
tractors, etc.)
- Members' share accounts
- AA Credit Union also offers non-collateralized loans.
- Personal Advances
- Lines of Credit
- Education Advances
- Education Lines of Credit
- Personal Computer Loans
The preceding explanations are intended to educate members about
AA Credit Union's lending practices. Requests for credit are evaluated
on their own unique merits. Individual Loan Officers grant or decline
requests within these general guidelines but at their own discretion.
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