What lies behind the term “consumer credit”? Let’s delve deeper…
Understanding Consumer Credit
Consumer credit is gaining popularity. More and more individuals are using it to finance a vehicle or household equipment. Discover our comprehensive guide on the different types of consumer credit, credit consolidation, lending institutions, their regulations, and repayment terms.
Definition of Consumer Credit
Granted by banks or specialized financial companies to individuals, consumer credit is a type of loan whose use is strictly regulated by the Economic Law Code (ELC). Thus, consumer credit is solely intended for financing common equipment goods and services.
This credit can be used to pay for consumer goods such as a car, computer equipment, household appliances, furniture, or even wedding organization with a wedding planner. It can also be used to pay off taxes or debts. However, consumer credit cannot be used for purchasing real estate (although a personal loan can be used to finance renovation work).
Who is Eligible for Consumer Credit?
Consumer credit is only granted to individuals for private purposes. Companies cannot use this type of credit. Similarly, an individual seeking a loan for purely professional purposes cannot obtain consumer credit. However, a professional wishing to acquire a car for personal use may occasionally use it for professional activities.
Different Types of Consumer Credit
Though the term consumer credit is widespread, it exists in different forms. It is even possible to subscribe to several of these credits. Given the high interest rates, the risk of over-indebtedness exists. Some of these credits allow for credit consolidation to reduce repayment amounts.
Installment Loan
Flexible and easy to obtain, this loan sets payment terms (duration and amount). It is regularly used for credit consolidation. However, interest rates can be significant.
Installment Sale
Credit contract intended for the purchase of a good or service in several periodic installments.
Leasing
Also known as ‘leasing’ or ‘LOA’ (for Lease with Purchase Option), leasing is often used for a car. This credit is similar to a lease where the amount is paid to the lender until the end of the contract. At that date, the borrower can purchase the asset.
Credit Line
A line of credit granted by the bank to cover personal expenses.
Bridge Loan
When a property owner wishes to buy a new property, a bridge loan is contracted for the time it takes to sell the first property. Funds are lent for a short period and repaid at the end of the contract.
Overdraft Facility
The bank’s authorization for an overdraft is also a form of credit. The bank grants an overdraft that allows the individual to make payments.
Personal Loan
A personal loan consists of a lump sum payment. The borrower repays in fixed monthly installments. A personal loan can be used to finance work or for credit consolidation.
Who to Turn to for Consumer Credit?
Consumer credit is provided by Credafin. Apply with our services for a free evaluation.
