Consumer credit is a credit granted or promised to the consumer in the form of a loan, deferral of payment or other form of financial arrangement. The purpose of this loan is for consumption purposes and the term ” consumer credit ” includes both unsecured and secured loans as long as the purpose is for consumption.
In most cases, these types of loans have a relatively short maturity, meaning they typically last for five years, but can also be for days, weeks or months. There are many different ways to obtain consumer credit, including obtaining a loan from a domestic or foreign credit specialist or from a bank.
What is Consumer Credit ?
Non-recurring loans are also counted as consumer credit and are the most common types of consumer credit. Banks can usually apply for larger sums of credit, but of course, better collateral, or even guarantors, is needed to make the loan successful. However, with these sums, you will be able to do bigger things, like even kitchen renovations. Other common items are, for example, installment loans, which are used to buy cars, where the lender has the opportunity to immediately buy the car and pay it off gradually with interest.
The granting of consumer credit is allowed in Finland only to companies that are registered in a separate register kept by the Regional Administration of Southern Finland. This is to ensure that lenders follow “good lending practices” and that litigation or misunderstandings do not occur too often. When the rules of the game are clear, it is safer for all parties to work together and the terms and criteria set by the company should be read before applying for credit.
Consumer credit and interest
Interest rates on consumer loans vary widely depending on the loan provider, the lender and the amount of the loan, and other terms and conditions attached to the loan. In general, the annual percentage rate of charge on consumer credit is between 9% and 30%, but interest rates that are significantly higher than this are constantly being discussed. As a single factor, the interest rate is most affected by the borrower’s ability to provide collateral for the loan.
The annual percentage rate of charge includes the cost of withdrawing the consumer credit, the billing surcharges, the reference interest rate, and the margin. All of these factors vary for both external and internal reasons, meaning that interest rates on loans can take big leaps in a short period of time.
Banks often have the lowest interest rates on loans, but the search process is long and somewhat tedious. Borrowers are carefully blamed and often consumer credit requires comprehensive collateral, or a guarantor, to qualify for the loan. Banks are a relatively reliable financial institution, so you should start applying for consumer credit when you are not in a hurry or when you are looking for larger sums. You also often need to go to the bank in person to sign the loan agreement.
Another way to apply for a consumer credit is to have a variety of credit specialists who can get a loan in your account in just a few minutes. In these, the entire loan application process is done online, so you do not need to schedule time for it separately. The amount of consumer credit available ranges from hundreds of euros to thousands, and up to 10,000 for some companies, which means almost the same opportunities as banks. Interest rates on loans can be in the same range as banks, or sometimes higher. Usually, the first time borrower is offered special packages that provide a certain amount of free, interest-free payment for a loan of the agreed size. Even if interest rates are slightly higher, these companies are able to provide help exactly when it is needed. At worst, bank runners that last weeks or months are forgotten when a few clicks are ahead of the consumer credit. This way, for example, you can have a good time shopping for Christmas, and you will also have money for January.
So there are different options for each loan applicant for different needs. At its lowest, a loan can get up to about 4% interest rate, but sometimes it goes up to double digits. So it’s a good idea to check out what’s on offer and find out where to find the best loan for your needs.
Consumer loan loan repayment and loan terms
Repayment of consumer loans is effected by invoicing, ie after the loan is received, the borrower pays each month, or according to the payment plan, the agreed amount until the entire loan plus interest has been repaid. After that, the customer is no longer liable to the company from which the loan was taken, but payments must be made in due time to avoid problems. Each company offers slightly different options for repayment installments and payment times, so just by comparing, find the best loan for yourself.
Banks can also request a loan offer, so they can also compare it with online loans. For example, a loan of $ 10,000 can be agreed for a 5-year repayment period, with a monthly payment of as much as $ 270. This means that after five years, the effective annual percentage rate of charge on consumer credit is 10.37% of the loan amount. Different companies also offer different offers where you can obtain consumer credit and other loans at no interest when certain stated conditions are met. These can only be packages for new customers, attracting new customers with small loan amounts to become business customers. In any case, they are worth taking advantage of as interest-free and no-cost consumer credit is always a benefit to the lender!