A consumer credit is a form of borrowing, in which the amount of the loan is used to purchase a product with a limited shelf life.
The most important forms of consumer credit
The most common forms of consumer loans are revolving loans and personal loans.
A personal loan is characterized by the fact that it is a loan with a fixed term and a fixed interest rate. You pay a fixed amount during the entire term of the loan.
With a revolving credit, the interest is variable. You pay a percentage of the principal each month as repayment and in addition the variable interest on the amount of the revolving credit that you have actually taken out and used. This means that the monthly amount that you have to pay is variable.
What are consumer loans used for?
These loans are used for many different purposes. The most common are:
- TV and audio equipment
- White goods such as washing machines
As you can see, these are goods with limited shelf life. On the other hand, they are products that last for years.
Purchase on installment and lease
Nowadays you come across more and more products that you can buy on installment. Or in the form of a lease. It used to be focused on cars, now you can lease a box spring.
This shows many similarities with an installment purchase. However, the difference is that at the end of a lease, the product you have leased is not automatically your property.
You often have the option to make this your property for a predetermined amount. In the case of purchase on installment, however, the product is automatically your property after the last payment.
Borrow a small amount
A specific form of consumer credit is a mini loan. Due to the short duration of these loans and the high interest rate, such a loan is less or not suitable for a large purchase such as a car,
Such a small loan is often used when borrowing money quickly is desired. Moreover, you can take out this loan without a BKR review taking place. Because such a loan can be taken out quickly and paid out quickly, it is also called a flash credit.
Are in red
Standing in red is also a form of consumer credit. This is usually a fairly expensive method of borrowing money. Especially when it comes to standing unauthorized. Then the maximum permitted credit compensation is often charged.
The costs of a loan belong to the costs of a purchase
When purchasing goods and determining the total costs of the purchase, it is wise to include the costs of consumer credit in order to assess whether you can afford the purchase yourself.
You often come across promotional promotions where, for example, you do not have to pay interest in the first year. Especially when purchasing a car this happens regularly. However, if you do not pay off the credit within this interest-free period, it is advisable to thoroughly examine the conditions after this period before taking out a loan. Know how much you have to pay in the future.
The cost of a consumer credit
The biggest cost of a loan is usually the interest that you have to pay. In addition, a closing commission may be charged in some cases. With a mini loan, costs for a guarantee can also be charged.
If you request a guarantee through the lender, the costs of a guarantee can increase considerably. This means that the total costs of a mini loan, in addition to the higher interest that you have to pay, can go down considerably.
It is not correct to regard interest and repayment as costs. When paying, you give back what you have received. You do need to have the financial capacity to pay this repayment, but strictly speaking, these are not costs.