Consumer Credit

Consumer Credit

Consumer credit is a debt that a person incurs in buying a good or service. Equal credit includes purchases with credit cards, lines of credit and some loans. Credit is also known as consumer debt. Consumer credit is divided into two classifications: revolving credit and installment credit. The most common form of consumer credit is a credit card.

OPENING 'Consumer Credit'
Economists and other financial analysts often measure consumer credit, which serves as an indicator of economic growth. For example, if consumers can easily borrow money and pay off those debts on time, then the economy is stimulated, resulting in economic growth.

Consumer credit is the portion of the credit that consumers use to buy non-investment services consumed or assets that depreciate rapidly. This includes automobiles, education costs, recreational vehicles (RV), boat loans and trailers, but does not include the debts available to buy in investment accounts or real estate. For example, a mortgage loan is not a consumer credit. However, 65-inch HDTV loaded on a credit card is consumer credit.

Consumer credit allows consumers to obtain an advance or loan to spend money on products or services for family, domestic or personal uses, reimbursed at a specific future date. Retailers, department stores, banks and other financial institutions offer consumer credit.

Advantages of consumer credit
The main advantage of consumer credit is that individuals can buy goods and services and pay them later. Consumers can buy the items they need when their funds are low. Consumer credit offers an alternative form of payment and a monthly payment.

Disadvantages of consumer credit
The main disadvantage of using consumer credit is the cost. If a consumer does not pay the balance of a loan or credit card, this affects the credit scores, the terms and conditions, and the result of the late fees and fines.

Types of consumer credit
The credit in installments is used for a specific purpose, for a defined amount and for a specific period. Payments are usually the same amount each month. Examples of purchases made with credit include large appliances, cars, and furniture. This is a type of loan that offers lower interest rates than the revolving credit. For example, a car company has a lien on the car until the car loan is repaid. The total amount of principal and interest is returned within a predefined period. If the client does not pay the loan, the company can recover the car and collect fines.

The credit can be converted for any purpose. Loans are made continuously for purchases until the consumer reaches their credit limit. Customers receive periodic invoices to make at least a minimum monthly payment. For example, Visa can approve a consumer for a $ 5,000 credit card limit with an interest rate of 13%. If the consumer does not comply with the payments, the credit card company may charge late fees or other penalties.