People, who spend money in advance to buy a product or service, use consumer credit as their lifeline. Refer https://instabank.fi/kulutusluotto, to get the best deals on consumer credit, if you are looking for one. A credit card is one of the common examples of consumer credit. People buy goods and services using a credit card and pay towards the end of the month. Those who do not pay off within a considerable time limit are charged with the additional interest. Somehow, it is a great tool when you need to buy something urgently, and you are out of cash/money.
Here are a few types of consumer credit which are generally used:
Non-installment Credit
This type of lending could be unsecured or secured depending on the discretion of the company which is offering. The whole due on account of this credit needs to be paid by the creditor in one go, i.e., in lump sum amount. There is not preset installment amount for this, and hence this type of credit is generally for small amounts, and a short period says one month.
Revolving Open-End Credit
This type of credit is generally available with the credit cards. As people get along with cash forecasting, it is easier to obtain. There is a set limit of credit which a creditor can use at his leisure. Usually, at the end of the month, the creditor pays off the utilized credit. Unless the company closes the account, the credit does not close, thus making it revolving.
Installment Closed-End Credit
A certain amount is received by the consumer to buy the required goods or services under this credit, for example, car loans. Under a car loan, the company extends the confidence to buy a car that does not go beyond the sales price of the vehicle. Over some time, the consumer needs to repay installments with fixed monthly payments. It adds to the convenience of expensive consumer goods as the creditor does not require repaying in lump-sum.
Charge Cards
Generally issued by the department stores, these cards are used to buy the products that are offered by the company providing such cards. Although credit cards have mainly replaced such cards, the consumer has to repay the amount utilized along with interest.
Travel & Entertainment Cards
The user is required to pay the full amount utilized for the month at the month-end. However, no interest is charged on them. Some of the popular T&E cards are American Express, Carte Balance and Diners Club.
Debit Cards
Under this credit, once the consumer purchases anything, the amount is electronically deducted from their account from the bank account. The deducted amount is transferred to the seller’s account. Logically, these are not ‘credit’ cards because the consumer quickly pays off the amount from their bank account directly.
Secured and unsecured are the two primary types of loans. Under a secured loan, the consumer needs to put up collateral or security to get the desired credit. Home loans and Car loans are majorly classified as secured loans. Unsecured loans are risky for the lender and t