Consumer credit is also termed as consumer debt. Basically, a consumer credit is a form of credit offered to a customer allowing the possession or usage of services and goods in the duration of the payment term. There are different forms and functions of consumer credit.
Concept of Consumer Credit
Consumer credit is a type of debt, which is obtained by an individual for the intention of buying a service or commodity. Consumer credit can be received in the form of lines of credit, credit card debts (buying commodities with the help of credit cards) and many other forms of loans. Consumer credit is also known as consumer loan. Consumer credit is applied to finance consumption instead of investment.
Consumer credit also includes offering loans to people with poor credit scores. In the United States, this is termed as subprime lending.
Usage of Consumer Credit
Consumer credit is utilized by families and individuals for family, personal or household aims or uses. With the help of consumer credit, families and individuals are able to purchase the necessary or coveted commodities and services implementing their earnings in the future.
Forms of Consumer Credit
Consumer credit is available in different forms and they include the following:
- Automobile loans
- Education loans
- Recreational vehicle (RV) loans
- Trailer and boat loans
- Payday loans
- Credit card debt (Forms of open-end credit)
- Lines of credit
Availability of Consumer Credit
Consumer credit is available in the form of bank loans, as well as indirect finance, for example, hire-purchase agreements and retail finance loans. Consumer credit comes under the purview of retail banking.
Consumer credits are considered as a form of unsecured loan so a higher rate of interest is charged on this type of loans.
The leading financial service providers that offer consumer credit include the following:
- CitiFinancial
- HSBC (Hong Kong and Shanghai Banking Corporation Ltd.) Finance
- Wells Fargo
- CIT Group Incorporated
- ICICI Bank Limited