What is a consumer credit?

Many banks and financial institutions provide consumer credit for individuals who want to finance purchases of goods or services. More and more people are using it to purchase capital goods or to finance major expenses such as a car or home equipment.

What’s a consumer credit?

To give a definition of a consumer credit, it is a contract by which a financial institution makes available to an individual a sum of money repayable over time in instalments. Consumer credit concerns loans not intended for the construction or purchase of real estate. It can be an earmarked credit which is allocated to a defined good and only it, such as a car, a trip or a gift. It can also concern revolving credits or personal loans known as revolving credits. This type of credit is unallocated and the borrower is free to use the amount granted. It can also be assimilated to leasing or hire purchase.

The particularities of a consumer credit

The definition of consumer credit makes it specifically intended for private individuals. In France, the regulatory definition of this type of credit indicates that the repayment period is set at more than three months and the amount of the loan varies between 200 and 75,000 euros. As for the granting of this type of credit by financial institutions, it depends on the borrower’s situation, stable income and debt ratio. The borrower must not have experienced any incident recorded in the Central Cheque Register or the National Register of Individual Repayment Incidents at the Banque de France. In addition, construction loans, bank overdrafts and free loans repayable in more than three months, as well as leases with a purchase option, are also considered as consumer credit.

Terms and conditions of repayment of consumer credit

In most cases, the repayment of a consumer credit is made in the form of constant monthly payments. Due to the definition of a consumer credit, the early repayment of this type of credit does not give rise to the recovery of an early termination indemnity by the debtor. For a permanent credit, a reserve is granted to which the repayments of the borrowed credit can be made good. For a student loan, the borrower only pays interest on the borrowed credit or the associated insurance. The repayment period, for its part, succeeds the deductible and bears the same conditions as a traditional consumer credit. To help you, you can find out more about online brokerage sites.

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