Consumer credit: what it is (in simple words), pros and cons for the borrower

When there is not enough money for everyday needs and the purchase of necessary goods for yourself or your family, it is possible to borrow money from the bank. To do this, you need to take out a consumer loan. It is only for individuals, but not for legal persons. You can get money for a specific purpose: to buy a car, household appliances, for travel, medical treatment, and so on. It is also possible to take a loan without reporting to the bank. What is the best way? In any case, the money the borrower receives immediately, this is the main advantage of consumer credit of any type.

Types

Consumer credit comes in several types:

• Targeted - for a specific purchase, which the borrower specifies when executing the contract. The bank can transfer the amount of the cost of the goods immediately to the seller's account, if a POS loan is drawn up in the store. Under the affiliate program the rates can be lower.
• On security - such a loan is confirmed by a pledge. It is a guarantee, a car or other property is suitable. If the property is pledged, it is allowed to use, but can not be sold or given as a gift. The advantage of a secured loan is that you will have to pay a lower interest rate.
• The longer the period, the shorter the loan will be, the cheaper the loan will be. The longer the term, the lower the interest rate. You need to ask the bank about the conditions of your loan.

Consumer credit can be not only targeted - for a particular purchase or task, but also non-targeted. In this case, the recipient spends the funds on anything without reporting to the bank. It is easier to get a non-targeted loan because it requires fewer documents. In comparison with general purpose loans, this type of credit has some disadvantages: its duration is limited, the amount is smaller, and the interest is higher.

Pros and cons of consumer credit

Pros:

• A large amount of cash is given immediately (or transferred to the seller's account).
• The borrower can participate in promotions, and buy goods at a discount.
• Usually the loan is quick, with no red tape or bureaucracy.
• Because of the high competition, banks are providing more and more favorable conditions for customers.
• It is possible to issue a target or non-targeted consumer credit.

Cons:

• Overpayment is inevitable, because they necessarily assign an interest rate.
• If there is no official registration at work, it is extremely difficult to take out a consumer loan.
• Strict penalties for late payment or refusal of full repayment are possible.
• The borrower gets into debt for the duration of the loan. If the borrower's income decreases, it will be difficult to pay back the loan.
• There are age and other restrictions on the loan.
• Insurance is likely to be required if the borrower is not retired.

Getting a consumer loan is not difficult. It is necessary to choose a bank with more favorable conditions, to prepare the necessary documents. A visit to the bank usually does not take much time. The money can be received in cash, or it can be transferred to the seller immediately after the conclusion of the contract (if the loan is targeted). If you have the opportunity to repay the credit ahead of schedule, it is possible. This way you can save money and reduce your overpayments.