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.