The phrase “consumer credit” is familiar to almost every modern person, and many people have already experienced what it is like to be a borrower. However, there are some citizens who have never borrowed from any financial organization before, and therefore all the subtleties of consumer lending are new to them. Strictly speaking a scientific language to consumer loans includes all loans distributed to private individuals. However, in addition to this, banks made an additional division within this group according to the extent of the number of loans. So, the mortgage and car loan were singled out separately. In consumer loans, cash loans and small targeted loans remained.
Under what conditions are consumer loans issued?
The concept of what amount of loan is considered large, and what is not quite subjective. Many banks promise that they can take out a consumer loan in the amount of up to 100.000 dollars, which in principle is not bad for mortgages. However, in fact, the amount of consumer loans issued rarely exceeds 10,000 dollars. And it is not that lenders are unwilling to give more, but that large amounts of loans require collateral from the borrower, and not everyone has one. A standard consumer loan can often be issued without any guarantees from the applicant. In some situations, banks do not even require a mandatory document on earnings, although without it, the annual interest rate will be increased.
In general, there is a large difference in rates for consumer loans, depending on which credit program a person will use. For example, if they issue a non-cash product loan directly in the store, the annual loan fee will not exceed 17%. If the applicant needs cash, and very quickly, the interest rate may exceed 30% per annum. At the same time, the duration of repayment of a consumer loan rarely lasts longer than 3 years. For a longer period, only expensive household appliances are issued.
Under what security can I take a consumer loan?
The cost of consumer credit is determined primarily by the reliability of the applicant in the eyes of the bank. This reliability will be indicated by the level of its income, as well as the presence of valuable property in the property of the borrower. A significant role will be played by the borrower’s credit record, earned by them in the process of paying off previous debts. If the borrower has no problems with payments, the bank will trust them more. If there were delays, the financial institution can either refuse to borrow, or set a higher fee for using the money, or require a deposit, if the product is not such. As a rule, cars, and apartments are used as collateral. A little less often, they can act as a private house or land plot. Even less often, a deposit or any securities serve as collateral for a loan. In the case of mortgaging real estate or transport, the borrower will have to pay for the services of appraisers who will name the value of the property and insurers who will insure it.
In general, these expenses will make the loan more expensive by 10-15%. If the borrower does not have a suitable property, or he does not want to overpay intermediaries once again, he can offer the bank a guarantor instead of collateral. However, in order for the financial institution to approve his candidacy, the guarantor must have a decent income and a positive reputation as a borrower. In some banks, guarantors are perceived even more enthusiastically than collateral, since in the latter case, the lender has yet to sell the property to return the money.