Consumer credit is granted by credit institutions to individuals to enable them to finance the most important expenses, in particular to acquire durable goods. Auto credit and work credit are two forms of consumer credit.
Consumer credit is very diverse, by its very nature: it adapts to your needs, and varies according to the nature of the establishment which grants it to you. Thus, for the purchase of household appliances for example, certain establishments will offer you related loans (of the “revolving” type) which cover the amount of the purchase.
Types of consumer credit
There are two main “families” of consumer credit:
- on the one hand, the so-called amortizable loans. These are conventional loans, which, like mortgage for example, allows repayments spread over time (in the form of monthly payments). They generally contract with a bank or a specialized credit institution. There are two main types of repayable credit: personal loans, and restricted loans.
- On the other hand, the so-called renewable credits. They are also called permanent credit or revolving credit. This type of credit consists in making available to the borrower a reserve of money which he can use for his purchases thanks to an associated card.
Who to contact to take out a consumer loan?
There are two types of players in France who share the consumer credit market: on the one hand, specialized financing establishments, which can only provide you with consumer credits. It is usually this type of establishment that establishes relationships with stores, and which allow you to buy certain goods directly on credit.
On the other hand, general banks are the only ones able to market any type of bank credit.
Advantages and disadvantages of consumer credit
The main advantage is to allow the purchase of substantial goods without this too damaging your budget, by spreading the load over several months.
Consumer loans have some drawbacks: on the one hand, they are often granted at relatively high interest rates compared to the market; on the other hand, they expose you to over-indebtedness, 86% of the files deposited in over-indebtedness commissions including a revolving credit. Finally, they are subject to misleading advertising: be careful to calculate the final TEG proposed before signing!