The popularity of consumer loans is growing, especially at a time of very low interest rates. Indeed, at low interest rates, even purely consumer debt is conducive to building a new quality of domestic households functioning, without excessive economic dependence on large financial institutions. When does consumer credit turn out to be a good option for a household budget?
Characteristics of the simplest consumer loan
Consumer credit is money to spend for any purpose. The bank has no right to ask what you spend extra money on. Only timely repayment and confirmation of positive creditworthiness before entering into such an obligation are counted. The consumer loan agreement is heavily standardized. This form of debt is directly related to the Consumer Credit Act. The debt limit is slightly over USD 250,000, and therefore quite a lot.
It’s even the amount to buy real estate. The average value of consumer credit according to industry statistics is about USD 50,000. Borrowers who do not need such large funds use payday loans instead of consumer loans in retail banks, very short-term cash loans in banks, mainly online.
So when is consumer credit a good solution for a household budget?
First of all, when you are on the verge of creditworthiness and you need capital to meet the necessary life needs, consumer credit is a sensible solution. However, try to search for promotions, commission-free obligations, or without the need for insurance. Consumer credit insurance is optional, although many advisors say it is mandatory. Don’t get stretched for additional costs when signing the contract.
Consumer credit is medium expensive, but you can set up a flexible, very low installment, which allows you to function normally. A retail bank usually informs the borrower about the real level of interest rates, presents additional fees or potential restructuring options. Before starting cooperation with the lender, carefully study the consumer credit law. Thanks to this you will see what rights the lender has and which borrower. In this way you will quickly eliminate financial institutions that do not meet legal standards. Do you use this form of debt?