Credit Appliation Analysis

Credit Analysis Smehra

Credit Analysis for Neal Harris

Neal Harris recently submitted his credit application for our consideration. Mr. Harris is 45 years old, married and has 2 children. He currently works at Franklin Industries where he has been employed as office manager for 2 years. Prior to that, he was in sales at Providencial Insurance for 3 years. Neal has resided at his current residence in Tennessee for 1 year.

His credit application has been filed in joint with his wife, Helen Harris, 43 years old. Helen has recently returned to the workforce from being a housewife. She is also employed by Franklin Industries where she has been marketing director for 4 months. Both individuals have a checking and savings account with AmSouth. The purpose of their loan is for a 2003 Chevrolet Tahoe. Following is a review of the 5 C's of Credit for Mr. And Mrs. Harris and conclusion for their loan.

Capacity

Upon evaluation of the Harris' credit reports, Helen Harris has no outstanding or prior outstanding credit. Neal Harris' credit report is concurrence to his application's list of obligations, which include a mortgage with Countrywide (monthly payment of $1,100.00), and an auto payment with Nissan, of an outstanding balance of $5,000. There are also two credit cards listed that amount to total monthly payments of $150.00. The Harris' total net income amounts to $4,250.00.

The Harris' should be spending no more than $850 (20%) of their net income on credit purchases. As shown in their application, this total amounts to $600 due in total to American Express and Visa. Discover card is listed as a credit card, but the Harris' have no balance with the company. The Harris' are currently paying $150/month on credit card debit, a total that is well below their 20% capacity. Coupled with their $150/month payment to AmSouth, the Harris' have sufficient capacity for a loan.

Character

Neal Harris currently has a mortgage with Countrywide and an auto payment with Nissan. His current balance for his mortgage is 150,000 ($1,100/month) and for the auto, $5,000 (175/month). In 2001, Mr. Harris filed for Chapter 7. According to his credit report, payments seem to be made in a timely fashion. The Harris' total annual income is $73,000, consisting of annual incomes and a supplementary income from Amway of $3,000. Upon review of Harris' credit report and financial form, his current liabilities lie at $159,900. He appears to be paying his debts off in a timely fashion in accordance with his monthly salary.

Capital

The Harris' have an annual income of $73,000 and total assets worth $218, 350. Their net worth and liabilities is listed at $159,900. While $3,000 of their annual income is through a supplementary income through AmWay and can not be relied upon as a mean for the year, the Harris' have sufficient capital for their loan requirements.

Collateral

The 2003 Chevy Tahoe is considered collateral, and is listed at $36,000, with a down payment of $12,000. Mr. Harris is requesting a loan of $24,000; 48 months at 4% for a total of $540/month repayment option. Mr. Harris also has two other automobiles, the Nissan (currently being repaid through Nissan) valued at $4,500 and a 1990 Ford listed at $750. The Harris' net worth amounts to $218, 350 which also includes cash assets of $11,000. The Harris' collateral garners for an attractive loan package as they appear to be a low-to-medium risk in regards to their collateral and abilities to pay back loans.

Conditions

The required loan for a car is set at 4% over 48 months, for a monthly payment of $540 from an initial loan of $24,000. As noted in their application the Harris' are currently paying Nissan $175/month to cover their $5,000 purchase. The car is listed as an asset, and it is believed that this second car is being purchased in conjunction with Mrs. Harris' return to work. She is working part-time and the couple has two children, therefore warranting a bigger and more reliable car, i.e: a newer model compared to their 1990 Ford.

The requested loan and repayment conditions appear to be in use for the purchase of a 2003 Chevy Tahoe - down payment of $12,000, total cost of $36,000. The loan compromises of the remainder of the sale price and therefore appears that it will be used solely for the purchase of the vehicle.