From January to September, the number of consumer loans granted by banks increased by 6.3% compared to last year. Back on the particularities of this product which is on the rise.
Consumer credit is a loan granted to an individual by a bank or a credit institution. Intended for the purchase of a consumer good (a household appliance, furniture, a vehicle, etc.), it cannot be used for the acquisition of real estate. Although its operation is simple and the restrictions are few, there are however several types of consumer credit, which each meet different needs. Explanations.
How does consumer credit work?
The amounts granted under a consumer credit amount to at least $200 and are capped at $75,000. The repayment duration of this type of credit:
- Must be greater than 3 months.
- Must be spread over a period of between 3 months and 3 years when the amounts borrowed are from 200 to 3,000 dollars.
- Must be between 3 months and 5 years when the amounts borrowed are greater than $3,000.
A consumer credit is granted by a lending organization after studying your file: state of health, professional situation, financial capacity, etc. In order to verify that you will be able to repay the loan, the lender is now obliged to consult the Personal Credit Repayment Incident File (FICP) before granting you the loan.
What are the advantages of consumer credit?
If the interest rates applied can be high, consumer credit has a number of advantages:
- It can be of great help if you are not able to buy a good on your savings alone.
- It helps smooth the financial effort over time and better manage your budget, especially since its interest rate is fixed, as well as the amount of its monthly payments.
- It is flexible, leaving the borrower the choice of the formula that suits him best (amount of monthly payments, repayment period, etc.).
What are the main forms of consumer credit?
One of the most common consumer credit formulas is the personal loan. It does not imply that the borrowed capital is allocated to a particular purchase and the borrower can use it as he sees fit (purchase, service, etc.). This is not the case for the assigned credit (car, work) which, as its name suggests, is intended for the purchase of a property defined at the time of subscription. Thus, the credit must only be used to finance the property in question and proofs may be requested from a certain amount. In any case, in either case, the rate and duration of repayment are freely set in agreement with the lender.
For its part, revolving credit (also called revolving credit) provides the borrower with an amount that he can use as he wishes. This amount is replenished over the reimbursements. If revolving credit is often associated with a credit card, the borrower can request at any time a reduction in the amount of the credit, or even the suspension or termination of the contract.
Another option in consumer credit is rental with a purchase option (LOA) or leasing. Praised for the purchase of a vehicle, it consists of the payment of a monthly rent which allows in fine to acquire the good in question at the end of the contract.
Finally, be aware that consumer credit covers a much broader reality than that commonly accepted. A payment delay, a bank overdraft or even a payment facility can be considered as consumer credits.