In conventionally known term bank 5 C to assess whether someone is worthy to be given credit aka loans, ie Character, Capacity, Credit, Capital and Collateral. Character to be one of the most important assessment before financial institutions lend to us. Because the character of the borrower that will determine whether the borrower will be responsible and return the loan. The Capacity and Credit worthiness will be assessed through a company or business that is being executed. While the Capital to prove that someone who wants to try (with a note of debt is used as working capital) convinced by his efforts are realized in the form of initial capital. While Collateral itself is a necessary guarantee of financial institutions (read: the bank) to provide certainty to banks that loan money will be refunded.
From the coverage I’ve read electronically mediated and conventional theory of the seminars taught convert debt into asset is how to get credit from the bank and play money loans. Credit or debt is divided into 2 of consumer debt and debt productive. Well, the concept of debt which later became known asset is the productive Where debt is debt where the debt productive debt used to buy productive assets or out of production to generate money that can be used to repay principal and interest repayments of the debt.
Well that could then be a potential future problem is that if the assets that have been obtained by way of debt is then pledged as collateral to back new loans. In the financial world is known as leverage. Become dangerous and potentially a problem because if one day the bad credit or can not be paid more because of one thing and another will cause all these debts will be jammed. Unfortunately the debt owed is secured only by an asset.
This is the beginning of a massive credit crunch that caused the economy to collapse the USA about 2 years ago.