The Difference Between Consumer Loans and Consumer Credit

The Difference Between Consumer Loans and Consumer Credit

If you’re considering taking out a loan to finance a purchase or pay for the cost of a financial crisis,  perhaps you’ve heard about consumer credit and loans for consumers. You may also not know how each of these options works.  

The basics will be covered here, including an easy definition and difference between of a consumer loans and consumer credit. We will also provide you with information to determine which kind of consumer loan might be the best choice for your needs.

What is a consumer loan?

Each loan involves the transfer of funds from the lender to the borrower with the expectation that the loan amount is to be paid back within a certain period of time.

Borrowers pay interest–a portion of the amount borrowed to the lender in exchange in exchange for a loan. The loan has a due date, a time when the borrower is required to pay the money back.

The best consumer loan is determined by the person who will be the beneficiary of the loan. Consumer loans are offered to borrowers, not companies or small businesses. Loans offered to businesses are referred to as business or corporate funding.

What is consumer credit?

The term “consumer credit” is a word that is used more often to describe how much debt is incurred by individuals. 

Types of consumer loans

There are many different ways for individuals to take out a loan. We will explore the loans based on factors like the loan term, interest rate among others.  

Payday loans:

  •  Payback within some weeks
  • Request a loan through a payday lender online, or in-person
  • The funds usually are available on the same day.
  • credit-checks are seldom needed.
  • The range is from $100 to $1,000, based on the state.
Repayments and costs
  • The typical lender charges the borrower a flat, fixed fee determined by the amount of money borrowed
  • You’ll have until the next payday to repay the amount you borrowed, plus cost – all at once

Auto title loans

Repay the loan within 30 days, or for a few months

Short-term secured loan which uses your car’s title or another valuable object (e.g. jewelry, etc.) as collateral. The lender will keep the collateral till you pay the loan.

The typical loan term is just a few weeks or several months

If you aren’t able to pay back the amount borrowed and the fees by the expiration of your term, the lender may take possession of your vehicle, or retain any item you gave as collateral

The amount depends on how much your vehicle is worth. They are generally between 25 and 50% of the value of the vehicle.

Repayment and costs
  • Most lenders charge finance fees up to 25 percent per month, which is equivalent to an APR that is at least 300%.
  • Other fees are often imposed such as appraisal or storage fees.
Credit card
  • Minimum payment due every 30 days
  • You are able to make purchases continuously (i.e. take out loans) until you have reached your credit limit.
  • credit cards are regarded as “revolving” debt
  • If you apply for a credit or debit card, the company that issues it will review your credit report to determine the APR (annual percentage rate) (APR) along with your limit on credit
  • Credit limits can vary from a few hundred dollars to thousands of dollars, and the APR can vary from 12 to 20%.
  •  A better credit score can usually get you with a larger limit and lower APR
Repayment and costs
  • If you pay all of the amounts in total every month and you don’t pay interest.
  • If you fail to pay the entire balance you’ll be charged interest on the remaining balance. interest on credit cards increases and you’ll be charged more interest for the longer you put off paying

Personal installment loans

  •  Pay within a few months or some years
  • You can request an individual installment loan through an online lender, credit union, or bank.
  • The lender verifies your credit in the application process.
  • If you’re approved for the loan, the cash is typically in your account within a few days, or as early as the next business day.
  • You can use the money to fund a variety of purposes such as financing a financial crisis or for home improvement
  • The range is from just a few hundred dollars up from a couple of hundred dollars to several thousand subject to the lending institution
Repayment and costs
  • They have a fixed rate of interest and a predetermined period of time, which can range between a few weeks to several years
  • You’ll pay on a regular basis typically biweekly or monthly Each payment will be exactly the exact amount.

Auto loan

  • Payback within the period of three or five years
  • The car acts as collateral. 
  • You can request a loan via an online lender, a credit union, or a bank
  • Car dealers also provide financing
  • If you do not make the required repayments on your car loan, then the bank may take possession 
  • The amount of your auto loan as well as the rate of interest will depend on factors such as your credit history, your other income, debts, and the type of car you’re looking to purchase
Repayment and costs
  • You’ll pay monthly for the loan in order to cover the principal amount and the interest
  • A majority of car loans have fixed interest rates as well as established maturity dates, usually in between 3 and 5 years. As a result, your monthly payment will be the same

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