Consumer credit means a standard loan for an ordinary person. The loan can be purpose-built (money must be spent on a predetermined goal) or non-purpose (money can be used for anything).
Consumer loans can be arranged online. In case of obtaining a loan, the loan applicant receives the money either on account or in cash.
Who can apply for consumer credit?
Consumer credit is not automatically received by every applicant. Both banks and non-banks assess the applicant’s creditworthiness and creditworthiness.
The applicant must meet the following conditions:
- be an individual and be over 18 years of age
- permanent residence in the the country
Some providers also require the borrower to have a bank account with them. If the applicant applies for a loan with his / her bank, where he / she already has a bank account (ie has a bank history), the application may be shortened. For example, the applicant does not have to provide proof of regular income.
Many companies offer a loan without proof of income without having to open a bank account.
Types of consumer loans in the the country
Consumer loans are divided into several main types, including:
- classic loans
- American mortgage (non-purpose loan)
- building savings loan (must not be secured by a lien on real estate)
- financial leasing (must be a purchase, not a rental of a vehicle, for example)
- consumer car loan
Most consumer loans are not purpose-built, but in the case of a consumer car loan it is purpose-built and must be used to purchase a vehicle.
What to look for when looking for consumer credit?
At present, there are a large number of banking and non-banking companies on the market that offer consumer credit. It pays to get an overview through a credit calculator on the best deals and compare multiple consumer credit providers.
Those interested in consumer credit should monitor these parameters:
- interest rate
- APR (Annual Cost Percentage Rate)
- Interest on late payments
- fees and sanctions
- the amount borrowed and the total amount repaid.
The most important indicator for the profitability of consumer credit is the APRC, which, unlike interest, also includes all fees associated with consumer credit. Each provider is obliged to inform about the amount in advance for the APR calculation you can also use online calculators.
What to watch out for when choosing a consumer loan?
When choosing a consumer loan, it pays to observe several factors that determine its advantage or potential disadvantage. These indicators include:
- the loan settlement fee prior to the conclusion of the credit agreement
- non-transparent terms of a specific consumer loan
- high APR (causes high debtor payments)
- monthly fees for maintaining the loan itself
- poor or missing communication from the lender
- the need to maintain an account with a particular bank
While having a current account with a bank may not be too much of a problem if management is free, non-transparent conditions are a very risky factor. They are often rather the domain of non-banking companies, so it is necessary to actually read every point of the contract for non-bank consumer loans.