In case of financial difficulties, especially for the purchase of certain goods, you may hesitate to ask your bank or an organization for help. However, things are not always clear from the client’s perspective, which is why this article will help you understand how it works.
What is consumer credit?
Consumer credit is, as its name suggests, a means of being credited to make transactions other than real estate. It allows you to obtain the necessary funds, ranging from €200 to €75,000, for the purchase of consumer goods such as furniture, household appliances, or vehicles, or to have cash available.
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What are the different types of credit available?
In this regard, the types of credit are diverse and variable. Nevertheless, of course, you need to inquire in advance if you have the possibility to benefit from this type of credit. The path is far from obvious. The following are the types of credit for consumer credit:
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- Granted credit;
- Personal loan;
- Revolving credit;
- Free credit;
- Private payment card;
- Lifetime mortgage loan;
- Personal microcredit;
- State-guaranteed student loan;
- Credit granted for a specific use;
- Lease with an option to purchase.
Who can benefit from it?
Consumer credit is intended solely for individuals. For others, that is, businesses and self-employed professionals, they have the option to obtain other forms of credit to finance their assets.
In general, the use of such credit is involved in significant purchases that require additional financing to contribute. It may or may not be secured, meaning that the credit can be assigned to a specific asset, stipulated in the contractual subscription.
What are the advantages and disadvantages?
For the borrower.
By obtaining consumer credit, the borrower will be able to purchase so-called consumer goods that are difficult to buy all at once. Nevertheless, the risk of over-indebtedness in the future is very high. Another thing to consider in your approach is the cost. This credit is generally granted at very high interest rates compared to market rates.
For the lender.
By encouraging a person to consume, they contribute to the growth of the country’s economy as well as to employment. The lender also has various protective measures such as:
- The obligation for the lender to provide the future borrower with a pre-contractual information sheet describing the characteristics of the contract. This way, the borrower will be able to make an informed decision;
- The obligation for the lender to maintain the contractual offer by reminding the credit conditions for 15 clear days;
- The obligation for the lender to verify the borrower’s creditworthiness by consulting, among others, the National Register of Credit Repayment Incidents (FICP);
- The possibility for the borrower to withdraw within fourteen calendar days following the acceptance of the credit contract offer. A withdrawal form is provided as an annex to the credit contract;
- The possibility for the borrower to repay early all or leave a remaining credit to be paid.