Consumer credit is defined as the contract by which a lender grants a consumer credit in the form of deferred payment, loan or other financial facility. The finalized loan falls into this category. This is a personal loan reserved for consumers and therefore it is not granted to companies or individuals wishing to finance their business.
We try to understand what is its operation and what guarantees are required.
How does it work
This is a type of loan granted by an institution or a credit company and granted at the same time as a purchase. The loan therefore consists of a loan linked to a contract for the purchase of a consumer good (such as cars, appliances) or a service (such as courses, travel, gymnasium). In this case the financial company, often affiliated with the seller, pays the latter directly. The installments are pre-established and their flexibility is linked to the terms of the contract, as is the case with personal loans.
The parts of the contract
When a finalized loan contract is stipulated, the amount of the loan is paid out to the seller. The actors of a loan are therefore:
- the client requesting the loan;
- the seller who benefits from the sum requested on loan;
- the institution or credit company that provides the loan itself.
The guarantees required
Unlike the mortgage, for example, the consumer credit finalized does not provide for the demonstration of collateral (such as the mortgage). However, in cases such as a fixed-term employment contract, lenders may request additional personal guarantees, such as the signature of a third party who commits himself to the creditor in the event of the insolvency of the principal debtor. Another possible restriction and obstacle to the granting of financing can be a negative credit history.
The zero rate
When we simply want to stimulate the purchase, allowing the consumer to face an otherwise unsustainable expense, we are faced with a zero-rate loan. In cases such as these, credit can be understood as a sort of “discount”.
The seller, in fact, has every interest in taking on the burden of financing towards the institute or the credit company. This is obviously a very advantageous solution for the buyer because it provides for the total elimination of interest rates, which often weigh heavily on the repayment installments.