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Consumer credit

Consumer credit is a loan obtained by a person (the consumer) in order to purchase goods and services (specific loan) or for personal reasons (personal loan or pledge of 1/5 of salary). Consumer credit can be granted as an extension of payment for goods and services purchased or in the form of a loan or other type of finance. Loans granted for purposes associated with the consumer’s profession (such as to purchase a car to transport employees) are not consumer credit.

The consumer’s obligations are a) in the case of an extension of payment, to pay the seller on the agreed dates, and b) in the case of a loan, the pay the amount lent (the principal) and interest calculated according to a financial parameter (the rate of interest). The principal and the interest are paid gradually over a period of time by making regular payments (instalments), as a rule every month. A consumer who has received a loan is also required to pay the administration costs. The APRC (annual percentage rate of charge) is an index of the total cost of the consumer credit.

Extensions of payment are granted by the supplier of the goods and services, while loans are granted by banks or finance companies. Like banks, finance companies can grant various type of credit – mortgages, consumer credit, leasing – but unlike banks they do not collect funds in the form of current or deposit accounts.

Among the various forms of finance, consumer credit as a rule has a duration of 12 to 72 months and is not backed by real collateral (the good purchased is provided as security) or a personal guarantee (surety). In practice, consumer credit can be obtained from suppliers that have an arrangement with a bank or finance company simply by providing some documents, including the last pay slip. As a rule, the consumer can obtain the good immediately, while the bank or finance company may take a little longer to grant the credit.