Consumer credit is a means of filling an immediate need, especially for a purchase to be made. Thanks to the Lagarde law, the borrower is better protected when he applies for a credit for consumption purposes. In addition, consumer credit takes different forms which should be known and clearly distinguished in order to better choose the right one.
Classic loans: personal loan and earmarked loan
The classic consumer loan can be offered in two forms: personal loan and earmarked loan. It is said that these credits are conventional because the rates are fixed, the monthly payments and the duration of the credit are known in advance, there will be no additional costs.
We talk about personal loan when the borrower does not mention the use of the loan he makes, so he is free to use the borrowed money for any purchase he wants to make. On the other hand, the credit allocated is a credit used for a specific purchase (car, household appliances, work, etc.).
Regardless of the type of conventional consumer credit, the credit agreement must mention all the details of the credit contracted, in particular the type, the APR and the total cost of the credit. Given the many credit offers that can be found on the market, the APR is the point to check to compare these and make a wise choice.
As for revolving credit, it is a reserve of money made available to the borrower and which he will have to repay by monthly payments.
As long as the latter does not touch this reserve, he has nothing to repay, but when he takes this reserve money, he will have to pay monthly payments to gradually repay the amount he borrowed.
As the repayments it makes, the reserve is replenished and the borrower can draw on it again, which is why it is called renewable. On the other hand, this credit is granted at variable rate and the rate is higher than a conventional credit.
We find this type of credit in banks but also in stores in the form of payment card or loyalty card. For a revolving credit, it is always better to choose higher monthly payments so that the credit is interesting.