Consumer Loans

Consumer Loans and Financing Options

Posted on June 3, 2017 ยท Posted in Accounting And Banking, Debit And Credit, Finance

The word “credit” is taken from the Latin “Credo”, which roughly translates to “I Believe” convenient to reinforce a tradition of trust transactions involving monetary sense. In the old days, loans and consumer loan are purely made by guarantee through the spoken instead of the written word. Credit in the old days does not necessarily mean money, and the term was used to describe the exchange of goods and services.

However, in the modern economy, the term denotes a credit operation involving money. Contracts today and long-term contracts, most of them written in legal terms that are beyond the ordinary people’s understanding, fulfill loan and reception obligations.

Credit, deferred payment or payment at a later date for receipt of cash, goods or services. Deferred payment (late payment) is what is known as “debt.” The credit is granted by a creditor to a debtor or creditor or debtor.

The sum of money given to an individual for family, home, and personal education is called a “loan”, also called consumer credit, consumer loans, and retail loans.

Some major categories of consumer loans

Loans to consumers are characterized by different types: convertible loans, installment loans, individual loans, secured and unsecured loans, fixed rate and variable rate loans, etc.

  • Individual loans – also called bridging or bridging loans; As the term suggests, they are the short-term financing requirement. Individual loans have to be repaid at the end of the loan in a lump sum, including interest rates.
  • Installment loans or EMI – are paid at regular intervals, usually monthly. Home loans and vehicles fall into this category. The longer the repayment period, the more cash-flow calculations as interest rates vary.
  • Secured loans – in this category, you “guarantee” an asset, a home, a car or any collateral that can be used to recover the payment if you fail to meet the guaranteed payments. Secured loans also apply to home and car loans, and since they are backed by a considerable guarantee, the interest rates on these loans are lower.
  • Unsecured loans – are those that do not require collateral and usually given only to borrowers with excellent credit ratings and histories, most often companies or individuals with high net worth and net interest rates are compounded.
  • Fixed rate loans: a large percentage of consumer loan fits into this group. The same rate applies during the term of the loan but when compared to variable rate loans, fixed rate loans attract more interest, since there is a probability that the lender will make losses if the market swings.
  • Variable rate loans – in advance these loans have a lower interest rate and not the adjustable rate applicable interest rates at regular intervals of the loan term. The interest rate is based on a system governed by market trends and interest differential calculated monthly semiannually or annually index.
  • Convertible loans – are those in which the structure of interest can range from fixed rate to variable or vice versa over a predetermined period of the loan.

Securing consumer credit or consumer loans can be a very complicated process and requires not only your informed and evaluated inputs but also financial advice from a specialized financial advisor. It is helpful to remember the “Six C Credit”, namely the capacity, capital, character, guarantees, conditions, and credit.

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