The consumer should understand that consumer credit and credit card have different uses. Did you know that a credit card can be an expensive means of payment as well as a consumer credit?
Consumer credit is used to finance a purchase when you want to repay the credit in installments. Usually, consumer credit is used, for example, for renovation, travel or a car. Often a credit card is used in the same way, ignoring the fact that a credit card can become very expensive if the credit is repaid in installments. Consumer credit, too, will be expensive if the payment time is extended too long.
When applying for any kind of credit, you need to make a realistic assessment of your repayment ability and always want to compete. The same goes for credit cards. Loan comparison service that allows you to compare loans for free and choose the best loan offer from dozens of banks and financial institutions.
What is a consumer credit and what is it worth using?
Consumer credit is a one-off loan and, as its name implies, is intended for consumption, ie for financing the purchase. A consumer loan is applied for a certain amount and is repaid according to the payment schedule, after which the contract terminates.
- The amount of a consumer credit is typically between USD 1,000 and USD 50,000.
- The loan period is usually a few years.
- Consumer credit is unsecured or unsecured.
- The interest rate is often determined by the risk assessment of the lender.
- The annual interest rate is approximately 4.5-20%.
- Possibility to get free or install free months depending on the lender.
- Depending on the lender, the loan may be raised on the same terms.
Consumer credit is marketed, for example, as a home loan or car loan. Contribution contracts offered by shops are also counted as consumer loans. That is, installment deals offered by a furniture or electronics store are consumer credits when the payment is split into smaller installments over a longer payment period. However, it must be remembered that the installation agreement is always based on a bank or financial institution. The current cost of an installment contract may be significantly higher than the cost of a consumer credit purchased through a tender process.
The pros and cons of consumer credit
There are two types of consumer credit: secured and unsecured. Of course, a secured consumer loan has a lower interest rate because there is some collateral for the credit. The bank or financial institution advises the repayment ability of unsecured consumer credit applicants and the interest rate is determined by the bank’s risk assessment. Depending on the bank, the interest rate on a consumer loan can also be fixed, so it is the same for all borrowers. If possible, you should apply for a consumer credit with a parallel applicant. A parallel applicant may be, for example, a partner or spouse. In this case, the interest rate on the loan is likely to be lower than applying alone. The annual interest rate on consumer credit starts at around 4.5% and can vary up to 20%, depending on the bank and the applicant.
Depending on your bank, it is possible to get repayment free or deferred months for your consumer loan payment plan. It should be remembered, however, that during the grace period, the interest on the loan will still be due. Consumer credit becomes more expensive the longer you pay for credit. It is always worthwhile to compete for consumer credit and not to be the first to come forward.
In a study commissioned , 38% of respondents compare consumer credit when they are taking one. On the other hand, only 5% of respondents found it easy to compare credit with one another. This is partly due to the fact that consumer credit prices vary widely and that terms and conditions may vary depending on your bank or financial institution. Despite the fact that consumer credit prices vary widely, most consumers are hardly competitive at all. According to the survey, only 16% of respondents had bid for consumer credit in the last year, while 83% had not bid for it in over a year or at all. Some consumers did not even know that competitive bidding was possible and some relied on their own bank because it was easy to apply for and manage credit through their own online banking.
Credit Card – Flexibility in Everyday Purchase
According to a survey, about 80% of people have a credit card. It is quite common for the credit feature to be on the same card as the debit card and taken from the bank where the consumer’s account is located. A credit card is a very convenient means of payment, but it also has its advantages and disadvantages.
Paying with a credit card gives you approximately 30 days of non-interest payment. Some credit card companies offer up to 45 days free of charge. It is definitely a good idea to use a credit card when shopping online, especially when booking a holiday. For example, if an airline goes bankrupt before booked flights are even used, the consumer can seek redress from the credit card company. The same goes for other online purchases made with a credit card. The right to claim a refund from a credit card company is based on the Consumer Protection Act. When paying with a debit card, you do not have the same right, but you must claim compensation directly from the company where the product or service was purchased .
- The interest-free payment period is approximately 30-45 days.
- Consumer Protection Act When Buying Products and Services, money can be claimed back from a credit card company if the seller does not deliver the product or service purchased, for example due to bankruptcy.
- The credit line is usually between USD 1,000 and USD 10,000.
- It is also possible for students to get a credit card if certain conditions are met.
- Your credit card may include purchase and travel insurance and travel cancellation cover.
- The interest rate varies from card to card.
- Some cards include opening, annual, and account management fees.
Using a credit card gives you the flexibility to make small purchases everyday. The actual annual interest rates on credit cards revolve around 15% on both sides. On some cards, the actual annual rate may be well over 20%. According to a study , few consumers compete for credit cards. According to the survey, only 11% of respondents had competed for credit cards within the last year. However, about one-third of respondents found it difficult to compare credit cards and some did not know that competitive bidding was even possible.
With consumer credit, you pay in installments and your credit card gives you security when shopping online
Which is better, consumer credit or credit card? It depends entirely on what you are getting and how quickly any credit can be repaid. The first thing to think about is whether or not you really need the product or service you need to finance. Could you make the purchase a little later after saving money for it? The consumer must evaluate his own repayment ability in a very realistic way. It’s a good idea to have a monthly budget that includes all your income and expenses, and leaves room for unexpected expenses.
Use consumer credit:
- when you want a credit of between USD 1,000 and USD 50,000,
- you want to pay in installments at a relatively low interest rate or
- when the loan period remains relatively short.
Use credit card:
- when you buy something relatively small or need short-term flexibility in your daily life,
- when you buy products or services online and
- when you are able to pay off the loan in full by the due date.
Combined loan savings
If you have more than one credit card, unsecured loan or multiple consumer loans, you might want to check out what kind of combination loans are available. A compound loan will lower your credit costs by combining all your loans and loans into a larger loan. By combining loans, you only have to pay off a loan, which can shorten the loan period and save you thousands of dollars in credit costs. An interest rate cap came into effect on September 1, 2019, limiting the interest rate on consumer loans to 20% and the annual cost of the loan to USD 150. The new law applies to all compound loans and consumer loans. Nowadays, there are more loans available at cheaper rates. By competing and combining your existing loans or credits, you can save on the total cost of the loans.
Always competes with consumer loans, credit cards, and compound loans. Comparing loans and loans is your best chance to find the most suitable and affordable loan.
Combine your loans and easily find the most affordable option from dozens of banks and financial institutions in a single application.