Types of Consumer
Credit
Revolving credit: it is an ongoing credit
arrangement whereby the financier on a revolving basis grants credit. The
consumer is entitled to avail credit to the extent sanctioned as credit limit ex:
Credit Card
•
Fixed credit: it is like a term loan
where by the financier provides loans for a fixed period of time. The credit
has to be repaid within a stipulated period ex: monthly installment loan, hire
purchase.
•
Cash Loan: Under this type of credit
banks and financial institutions provide money with which the consumers buy
goods for personal consumption here the lender and seller are different and
lender does not have the responsibility of seller.
•
Secured Finance: when the credit granted
by financial institutions is secured by collateral it takes the form of secured
finance. The collateral is taken by the creditor in order to satisfy the debt
in the event of default by the borrower. The collateral may be in the form of
personal property, real property or liquid assets.
•
Unsecured Finance: When there is no
security offered by the consumer against which money is granted by financial
institutions, it is called unsecured finance.
•
Traders: The predominant agencies that
are involved in consumer finance are traders. They include sales finance
companies, hire purchase and other such financial institutions.
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