As a creditor or lender, you have the right and expectation to thoroughly
analyze your clients before granting them requested loans. While some
people may cry foul and declare that you are discriminating against certain
people, it is nothing more than a smart business practice and should not
be taken personally. After all, when you loan someone a sizeable amount
of money, it will be your finances on the line, not theirs, if they fail
to make their payments or lose it all to bankruptcy.
If you are a lender, you should always consider these aspects of a potential client:
Credit score: Although it is just a number, a person’s credit score can tell you
everything you really need to know about them upfront if you know how
to analyze the information. If a client has a history of missing payments,
using multiple lenders, or accruing debt, they will be issued a low credit
score, down to 300 or so. If a client pays off their credit cards each
month, relies on big loans only when necessary, and has successfully paid
for large purchases like homes or automobiles, the credit score rises
up to 850 or more.
Income stability: Even the most financially responsible people can accrue some debt when
they are going out on a limb for a new business venture or making a large,
life-changing purpose. As a lender, you should be concerned with how likely
they are to pay off their debts. Sometimes called capacity, this means
judging their past income and career stability to determine if they will
continue to make money in the future.
Collateral products: What does your client already possess when requesting a loan? If they
are looking for a sizeable amount, you may want to ask them to offer some
of their own property as collateral, or something you get to keep or control
should they fail to pay back their loan. Common assets chosen as collateral
are automobiles with high resale value and real estate.
Backup plans: A reliable client for your loan will have backup plans, or capital kept
in reserves. Savings accounts, investments in companies, and stocks can
all serve to repay their loan if their primary means of income fail due
to unforeseen circumstances.
Purpose: Finally, you have a right to know, or at least to ask, what they intend
to use your loan for. Are they trying to start a new business? Great!
If successful, you should expect to see the loan repaid within a few years.
Or are they just looking to add a new wing to their home? Not as great.
There is nothing inherent to that purpose that speaks to their intent
to re-earn the money they borrowed from you. Remember that you have the
right to deny a loan if you do not believe their purpose for wanting it
What to Do If Things Fall Through
You probably already know that there are no guarantees in the world of
finances and lending. If you have given a loan to a client you trusted
absolutely and they have stopped making their interest payments on it,
you should consider your legal options as soon as possible to avoid losing
big in the end.
Contact The Pritchard Law Firm and our Fort Worth consumer collections attorney today to learn how we
can help you with
consumer collection concerns while staying completely within the boundaries of the law.