Final answer:
Banks in the financial capital market require a borrower to provide income details and undergo a credit check to assess risk. A cosigner or collateral may also be necessary to secure the loan.
Step-by-step explanation:
When a bank considers providing a loan, they engage in a process designed to mitigate their risk and ensure that the borrower has the ability to repay the loan. The initial step requires a prospective borrower to fill out forms detailing their sources of income. To gauge creditworthiness, a credit check is conducted on the individual's past borrowing habits.
Banks may also necessitate a cosigner for the loan. A cosigner is an additional person or entity that signs the loan agreement and legally pledges to cover the debt if the original borrower fails to make payments. Another method to secure the loan is through collateral, which can be in the form of property or equipment that the bank has the right to seize and sell if the loan is defaulted on.