Consumer loan is one of the forms of a bank loan. This type of banking product is provided for specific needs, which do not have to result solely from life necessity. Consumer lending can be incurred both for the purpose of paying current expenses, purchase of audio and video equipment or a car, as well as for financing foreign holidays or renovation of an apartment. This type of loan is not granted for purposes that are related to running a business, but nevertheless it can be used for the company’s needs. There is no need to provide evidence of the use of funds. In order to take out a consumer loan, you should go to the bank. The loan repayment is determined individually with the bank and its collateral is usually the borrower’s income.
Ways to secure consumer credit
There are also other ways to secure consumer credit, including:
- surety – granting consent by a third party to repay the loan in a situation where the borrower will not pay the installments
- blocking of funds on a bank account – granting the bank power of attorney to block all or part of the amount on the bank account
- deposit – transfer of the amount indicated in the concluded contract for the benefit of the bank
- bill of exchange – a security paper, which is the promise of the issuer to pay a specified sum at a given time and place
- loan insurance – taking over part of the risk from the borrower to the insurance company in a situation where the borrower will not pay back the installments on a regular basis
- power of attorney to the account – consent to debiting the borrower’s bank account with instructions placed by the bank under the loan agreement
Consumer loan is directed to a wide range of potential borrowers due to the wide spectrum of its use. The abovementioned lack of necessity to provide evidence of the use of funds makes it also beneficial for farm owners.
The amount of the loan depends on the repayment ability of the person who incurs it, which results in the decision being made very quickly. It does not have top-down standards regarding the terms of the contract. Both the amount and the interest rate and the repayment period depend on the individual agreement between the borrower and the bank. In addition, the general characteristics of consumer loans also depend on the object of the loan.
There are consumer and non-cash consumer loans. The former are concluded in the form of a contract in which the bank undertakes to pay the agreed amount to the borrower’s account. As a consequence, the borrower disposes of the funds obtained by way of credit. Consumer non-cash loan is a loan in which the bank settles directly with the seller or service provider who sells the good to the borrower. The borrower is obliged to return the borrowed money to the bank. This is so-called installment sale.
The advantages of consumer loans can definitely include:
- The possibility of allocating funds for expenses that are not necessarily related to the necessity of life
- A large spectrum of loan goals
- A quick credit decision
- A small amount of paperwork
- Minimum loan repayment security
- The individual approach that the bank has towards the borrower
- It is possible to start a cash or non-cash loan