Given the importance of finance in people’s lives, there is a need to know what finance is available to you and what is relevant to your needs. For most people, consumer finance is going to be the most common finance option for their needs. Consumer finance is provided by retail banks and they provide deals that allows consumer to borrow money.
The most common examples of consumer finance include loans, credits cards, car loans and even mortgage loans. The consumer finance option that is right for you may not be suitable for someone else so it is important to know what deal is right for you and what you can obtain. There is also a need to know what you can afford to obtain. You should only look for consumer finance that you can afford and that is suitable to your needs.
This is why before you rush into taking out consumer finance; it makes sense to weigh up your options. First of all, be aware that not all consumer finance companies are the same. You may think that they are providing you with similar products but what is actually on offer can vary significantly from company to company. You should take the time to review the interest rates and the terms and conditions on offer. A failure to take these steps may see losing out or spending more money than you would have hoped to in dealing with credit.
A non-instalment credit option can come in a secured or unsecured manner, depending on the amount of credit and the company providing the credit. The thing that stands this style of credit apart from other forms of credit is the fact that the amount owed is paid back in a lump sum. This is different from the forms of credit that are paid back on a monthly basis. This style of credit option tends to be paid back in a short amount of time.
A great example of this style of credit is a payday loan, which is normally paid back within a month after the borrower has received their pay. This style of loan, particularly payday loans have received considerable criticism in some quarters due to the high level of APR associated with this style of loan. This has led to people being forced to find a lot of money in the short term to pay off their loan.
There have bene legal changes to these loans, which means that the sums of money associated with the loan are capped but non-instalment credit options are still viewed suspiciously in some quarters.
Instalment Closed-End Credit
This style of credit is provided to allow someone to buy an item, or items, up to a set level of credit. A relevant example of this style of credit can be seen with a car loan. The lending company provides the buyer with the funds to buy the car and the credit on offer doesn’t extend beyond the price of the vehicle.
This style of loan is paid back over time in instalments, as opposed to being paid back in a lump sum. This is because the finance on offer is usually beyond the monthly pay cheque of an individual. Gaining access to the credit allows the individual to buy a car and then pay it off a more suitable rate every month.
Revolving Open-End Credit
This style of credit comes with an upper limit of credit they can access, but the borrower is free to use as much or as little as they like up to that point. The most obvious example of this style of credit comes with a credit card. The user is required to pay off a certain amount of the credit every single month, with the lender stipulating a minimum payment figure each month. The amount of money that has to be paid off each month depends on the size of the credit, the terms and conditions and how much money you have actually used on the card.
It is possible for the user to pay more than the minimum amount and it is recommended that borrowers pay off as much of their credit as they can each month.
Andrew Reilly is a freelance writer with a focus on news stories and consumer interest articles. He has been writing professionally for 9 years but has been writing for as long as he can care to remember. When Andrew isn’t sat behind a laptop or researching a story, he will be found watching a gig or a game of football.