Barb has decided to buy a new car as her present vehicle, a 7-year-old KIA Rio, has been costing her money lately. She wants a used three-year-old Chevy Spark. The Pontiac dealership has them on sale right now for $15,000. The dealership has offered her $3,200 on a trade-in. She will use this money as the down payment.

Barb is 53 and was divorced three years ago. She has no children. She has worked as an Editorial Assistant for a major weekly magazine for the last four years.

Barb has a SCOTIA VISA with a credit limit of $5,000. She also applied for and received a PC MasterCard card three months ago. The credit limit is $3,000. Barb likes to use her credit cards and presently owes $1,500 on both her SCOTIA VISA and PC MasterCard.

Barb has come into NAITLAB to arrange financing under a 5-year installment contract. She has never dealt with NAITLAB before.

Consumer Credit Analysis

In the questions below, you are required to identify each statement under the C of credit to which it relates. Select the BEST response.

Character

Capacity

Capital

Credit

Collateral

Remember: When answering questions in all sections of the case, you are to assume the role of a lender employed by a financial institution. Some questions could have more than one answer.

Barb currently grosses $55,000 annually.

The Newsprint Union, of which she is a member, may go on strike next month due to contract negotiation problems.

If they go out on strike, Barb could be out for up to two months, during which time she will earn $300/week in strike pay.

Barb’s home is appraised at $250,000.

She has been living at that address for the past 10 years.

Two years ago, Barb renewed her mortgage (with a competitor). At that time, the principal was $50,000 financed at 5% amortized over 25 years, with a payment of $381.60 per month. The balance owed is $48,609.

Barb estimates heat is $100 per month and taxes are $200.

Her home is modestly furnished.

All of her credit cards are rated R1.

She has $7,500 in savings and $20,000 in RRSP.

After taking the loan application, you order a credit bureau check on her, and all information matches what she stated, except that she did not tell you that she had three judgements against her because of credit problems during her marriage. These judgments have been settled but still appear on her record.