Final answer:
Lenders have three main obligations or covenants they require from borrowers: income and credit check, cosigner or guarantor, and collateral.
Step-by-step explanation:
In the financial capital market, lenders have three main obligations or covenants they require from borrowers:
- Income and Credit Check: Lenders require borrowers to fill out forms regarding their income sources, and they conduct a credit check on the individual's past borrowing.
- Cosigner or Guarantor: Another approach lenders take is to require a cosigner or guarantor on a loan. This is a person or firm who legally pledges to repay some or all of the money if the original borrower does not.
- Collateral: Lenders may also require collateral, which is often property or equipment that the lender would have the right to seize and sell if the borrower does not repay the loan.