What is Consumer Finance?

Consumer finance has to do with the lending process that occurs

between the consumer and a lender. In some instances, the
lender may be a bank or financial institution. At other times, the
lender may be a business that offers in house credit in exchange
for the business of the consumer. Consumer finance can include
just about any type of lending activity that results in the
extension of credit to a consumer.

Need for Consumer Finance?

1. The Right to Safety - to be protected against the marketing of goods which are hazardous to health or
life.
2. The Right to Choose - to be assured, wherever possible, access to a variety of products and services at
competitive prices: and in those industries where competition is not workable and Government
regulation is substituted, an assurance of satisfactory quality and service at fair prices.
3. The Right to Information - to be protected against fraudulent, deceitful or grossly misleading
information, advertising, labeling, or other practices, and to be given the facts s/he needs to make an
informed choice.
 4. The Right to be Heard - to be assured that consumer interests will receive full and sympathetic
consideration in the formulation of Government policy, and fair and expeditious treatment in its
administrative tribunals.
5. The Consumers International (CI), former International Organisation of Consumer Unions (IOCU), the
umbrella body, for 240 organisations in over 100 countries, expanded the charter of consumers rights
contained in the US Bill to eight, which in a logical order reads:
6. 1. Basic Needs
2. Safety
3. Information
4. Choice
5. Representation
6. Redress
7. Consumer Education and
8. Healthy Environment.

Advantages & Disadvantages of

Consumer Credit
By an eHow Contributor

I want to do this! What's This?

According to the Consumer Federation of America, 80
percent of households in the United States have a least
one credit card. About 60 percent of those households
have a balance on at least one credit card that is carried
over each month. The availability of consumer credit can
be an advantage for financially responsible consumers.
Consumer credit, however, can also be dangerous.
Convenient
1. One advantage of consumer credit is the convenience it provides. With lightweight credit
cards, it is not always necessary to carry around a large wallet or purse filled with cash. You
can purchase items without carrying your checkbook everywhere. Credit cards are accepted in
most retail and grocery stores.

Emergencies
2. Many people live paycheck to paycheck. If the car breaks down or a child becomes ill, these
families could quickly find themselves in a financial crisis. One small emergency could ruin a
family's finances. With consumer credit, you can have the purchasing power that can see you
through these emergencies. Handled responsibly, credit cards can keep you from stress and
worry about how your family's financial needs will be met.

Large Purchases
3. Without consumer credit, large purchases would not be possible for many people. The ability
to pay cash for a car or other big-ticket items isn't available to everyone. Consumer credit
allows a family to afford the necessities and use the purchased item while paying for it. If the
family car breaks down, consumer credit allows you to replace it immediately instead of saving
for years and doing without the transportation you need.

Builds Credit
4. For young people, using a small amount of consumer credit helps to establish a good credit
rating. A good credit rating becomes important if you need to borrow money for a financial
emergency or large purchase. In some instances, a poor credit rating can also cost you a shot
at a job or apartment. A good credit rating helps you to stay out of financial trouble, and you
can build your credit by making small credit card purchases and paying the bill in full every
month.

Temptation
5. A major disadvantage of consumer credit is the false sense of empowerment it provides. If you
have a line of credit, you are more likely to be tempted to make purchases that you cannot
afford. You may be tempted to overspend at the grocery store if you aren't sticking to a tight
budget.

More Expensive
6. When you pay cash for an item, the item's cost is obvious. When you purchase the item with a
credit card, however, you may continue to pay for the interest on that purchase for months to
come. Credit card interest is compounded--often daily. Therefore, a purchase that is not paid
in full becomes more expensive every day.

Unrealistic Lifestyle
7. Consumer credit can get you used to living a lifestyle that is beyond your means. If you do not
handle consumer credit responsibly, less of your income will be available in future years.
 Living above your means now will result in a lower standard of living later. The stress of paying
off debt and the loss of financial freedom can cause even more of a strain on your financial life.

Types of financing options for Consumers

 Home loans

 Student loans

 Car loans

 Personal Loans

 Credit Card

 Debt Consolidation

Home Loan
A home loan (also called a mortgage) is a loan agreement that enables a person to borrow money to buy a house or other
property. The property is used as security for the loan. The lender may take possession of the property if the loan cannot
be repaid. A person may obtain a mortgage any financial institution that offers. A standard loan includes a Principal
(unpaid loan amount) and interest over a 25 year period. Depending on the loan agreement, the home loan may come at
either a variable or fix interest amount.

As you pay off the loan initially a large portion of your loan repayment will go towards the interest. However as the
borrower pays off the loan, more of the each monthly payment goes to the principal and less towards the interest
eventually paying off the loan.

Variable Vs Fixed Interest rate

Variable rate depends on the official interest rate set by the central bank of each country. This rate in conjunction with
the banks spread forms the interest rate. This variable rate can fluctuate depending on central bank strategy, by
cutting interest rates, there will be a reduction in repayments and increasing interest rates means an increase in
repayments to your lender.
Fixed rate is a fixed interest rate set by the agreement with your financial institution; this rate is set for the life of the
loan period agreed upon with your institution. This means you will have a set repayment to pay consistently through
the life of your loan.

What is a a Personal Secured Loan?

A personal loan is a loan to an individual that can be used for
almost any purchase, including purchasing cars, schoolbooks,
holidays or paying off existing debts. The lending criteria can be
structured to meet different individuals requirements:
 with secured and unsecured loans
 Length of loan may vary with individual requirements eg 1 to
5 years
 variable vs fixed interest rates
How much can I borrow for a personal loan?
Usually the key aspects in guiding the lending institution of the
amount to borrow can include:
 How much income do you earn per year – Providing
payslips
 How long you have been at this employment
 Good credit rating

If property is secured against the loan, is it mortgaged and if so

how much ?

High Risk Personal Loans vs Low Risk Loans

Personal loans are considered more risky than other types of
loans. Borrowing to purchase a home is considered a good
business decision as well as borrowing to invest in a newfound
business. These types of borrowing tend to convince lenders
that they are of lesser risk. However personal loans can be
used for virtually any purpose and this lack of certainty in
investment decision provides lenders with higher risk of default.

What is the difference between secured and unsecured loan

A financial institution may provide a secured personal loan with
the offer lower interest rates if security is used against your
house or some other security. In case of default the lender is
able to seize/claim the security.

However in most cases financial institution provide unsecured

personal loans. These are higher risk then secured personal
loans because the lender is not able to claim on a security such
as your home in case of default. Note. Depending on
circumstances they may still be able to claim the amount due in
case of default.

Personal loan interest repayments vs time.

The actual repayment of a personal loan depends upon the
repayment method chosen by the borrower. Monthly
repayments would incur higher repayments of interest then
repayments of weekly or fortnightly.
The length of the loan affects how much interest is actually paid.
The longer the period of the loan, the more interest you would
have to pay.

Disclaimer, the use of this website provides no actual advice is

to be taken, refer to your financial institution for quality advice.
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student loan

student loan

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Definition
A loan offered to students which is used to pay off
education-related expenses, such as college tuition,
room and board at the university, or textbooks.
Many of these loans are offered to students at a
lower interest rate, such as the Perkins loan or
Stafford loan. In general, students are not required
to pay back these loans until the end of a grace
period, which usually begins after they have
completed their education

Credit Card
A card entitling the owner to use funds from the issuing company
up to a certain limit. The holder of a credit card may use it to buy a
good or service. When one does this, the issuing company
effectively gives the card holder a loan for the amount of the good
or service, which the holder is expected to repay. Most credit cards
have variable and relatively high interest rates on these loans.
Credit cards also have a limit, which may be raised or lowered
depending on the creditworthiness of the card holder. Most analysts
recommend treating a credit card as a short-term loan, as allowing
the interest to compound for too long may result in dire financial
straits.

Consumer Finance in India report establishes the size and

structure of the market for ATMs, credit cards, debit cards, store
cards and smart cards. It looks at key players in the market (issuers
and operators), number of cards in circulation, numbers
transactions and value of transactions. It offers strategic analysis of
sector forecasts and trends to watch.
Why buy this report
• Get insight into trends in market performance
• Pinpoint growth sectors and identify factors driving change
• Identify market and brand leaders and understand the
competitive environment
Product coverage
Consumer lending; Financial cards and payments