The 4 Cs
Wealth – accumulating it is something every person strives for. The thing about wealth is, you cannot, and shouldn’t, work for it constantly. You need to let it work for you too… And that is precisely where the issue lies, for not many people realise this.
1
Creation of Income
The primary focus. This is what every person works for. As a breadwinner, there are a number of reasons a person focuses majorly on income generation, like -
- Supporting the family, the livelihood
- Improving and maintaining a certain standard of living
- Wanting to have a certain social status
2
Consumption of Income
This involves expending the income on necessities and other arenas. One area that must be given more thought when it comes to deciding what to spend on. Consumption should be judicious. More on necessities than wants and other luxuries.
3
Continuation of Income
The most important, yet the most overlooked aspect of family welfare. Continuation of income is about planning and organising our wealth for the future. This is what prepares you for contingencies. This takes care of the family in case of foreseen/unforeseen circ*mstances where you would have limited or no income – for eg. Retirement, medical emergencies, etc.
4
Conservation of Income
This might be listed last but never should be the last step. Usually, people tend to conserve what is left after creation and consumption. When in fact, a portion of your income should always we conserved first, based on your future goals, and then what is left should be consumed well.
FAQs
Character, capital, capacity, and collateral – purpose isn't tied entirely to any one of the four Cs of credit worthiness. If your business is lacking in one of the Cs, it doesn't mean it has a weak purpose, and vice versa.
Which of the 4 Cs refers to your ability to earn enough verifiable income to make the mortgage payments and cover all other living expenses? ›
Capacity refers to a potential borrower's ability to repay the loan. A lender will look at your income, savings, employment status and history, and any other financial obligations (such as a car loan, student loans, etc.) to assess your debt-to-income ratio (DTI) and determine if you qualify for the mortgage loan.
What are the 4 C's of real estate? ›
Standards may differ from lender to lender, but there are four core components — the four C's — that lenders will evaluate in determining whether they will make a loan: capacity, capital, collateral and credit.
What is the most important of the four C's of banking? ›
Capacity refers to the borrower's ability to pay back a loan. This is one of a creditor's most important considerations when lending money.
What do the 4 C's mean? ›
Do you know what they are? Communication, collaboration, critical thinking, and creativity are considered the four c's and are all skills that are needed in order to succeed in today's world.
What does the 4 C's mean? ›
The 21st century learning skills are often called the 4 C's: critical thinking, creative thinking, communicating, and collaborating. These skills help students learn, and so they are vital to success in school and beyond.
Which of the four C's refers to your ability to earn enough? ›
Capacity. Capacity refers to your present and future ability to meet your payments. In other words, do you make enough money to pay the loan on time every month? The lender may consider several factors when it comes to capacity.
What are the 4 C's in a mortgage? ›
Meet the Fantastic Four - the 4 C's: Capacity, Credit, Collateral, and Capital. These titans hold the power to make or break your dream of homeownership. They're the guardians of mortgage approval, keeping a watchful eye on every aspect of your financial life.
Which of the 4 Cs of creditworthiness indicates your ability to repay a loan? ›
Of the Four C's of Credit, capacity is often the most important. Capacity refers to a borrower's ability to pay back his/her loan. Obviously, your ability to pay back a loan is an important factor for a lender when considering you for a loan, but different lenders will measure this ability in different ways.
What is one of the 4 C's of credit granting? ›
They look at four main factors, commonly known as the four C's: credit, capacity, capital, and collateral.
The 4 Cs of credit analysis include capacity, collateral, covenants, and character. Capacity is the ability of the issuer to make debt payments according to the payment schedule. Collateral is the quality and value of the assets that serve as collateral for the issued debt.
Do I have to put 20% down? ›
A 20 percent down payment may be traditional, but it's not mandatory — in fact, according to 2023 data from the National Association of Realtors, the median down payment for U.S. homebuyers was 14 percent of the purchase price, not 20.
What are the 4 C's of banking? ›
Concept 86: Four Cs (Capacity, Collateral, Covenants, and Character) of Traditional Credit Analysis. The components of traditional credit analysis are known as the 4 Cs: Capacity: The ability of the borrower to make interest and principal payments on time.
What are the four 4 functions of money explain? ›
whatever serves society in four functions: as a medium of exchange, a store of value, a unit of account, and a standard of deferred payment.
