Consumer credit is now just as common as bank credit. But where are the big differences between the two types of credit, and what should you watch out for when it comes to consumer credit?
What is a consumer loan
A consumer credit is granted for goods that are slightly more expensive than the goods for everyday use. A classic example of this would be various electrical devices such as a washing machine or a notebook. Not everyone has a round sum ready to be able to afford it immediately, because the price of a device can easily be in a four-digit range. The electronics retailers know it and have long been offering financing directly in the shop. But consumer credit is also often offered at mail order companies.
But even if it seems so practical: you can see what you want and have it immediately, and you can also afford it with the help of the financing offered – caution is advised here! A financing here, a credit card payment there, and you are already in the area where you can easily take over. Because such financing offers mean for buyers that they treat themselves to something that they basically cannot afford. Otherwise the full price would be paid immediately. In addition, consumer loans are very expensive – the rates are simply very high, and interest rates are often in the double digits.
What can still happen that a consumer credit can be canceled if payment behavior is poor – and then it would be due in full immediately.
Affordable alternative to consumer credit
An affordable financing alternative to a consumer loan would be a normal loan, either at the house bank or online. Loan interest rates are currently very low and far from the double-digit range as is the case with consumer credit – namely in the low single-digit range. There are many providers, so that despite sometimes different conditions, lenders get away with it more cheaply than with consumer credit directly in various shops.
It would be even cheaper to get by without a loan and save the desired amount – provided that the necessary patience is available!