Are you thinking about consumer credit, or have you heard about it and are you curious to know what it means? In principle, almost all private loans are consumer credit in nature, except when you want to make an investment in a home for example.
A consumer credit helps you to be able to consume, the counterpart of investment. Are you buying a home with the credit? Then you make an investment, after all, you receive a house that belongs to the real estate that usually retains its value.
Credit to consume
A consumer credit is intended for consumption, it allows you to make certain purchases that you can immediately enjoy. For example, do you want to buy a new car, or are you looking for a new kitchen? In those cases you can use a consumer credit. You spend on movable property, purchases that are subject to depreciation and that in time become less valuable. The car you buy is worth considerably less after a few years and you can’t just sell the kitchen for the price you paid for it.
Personal loan or revolving credit
A consumer credit is available in different variants. For example, you can use a personal loan or a revolving credit. With a personal loan you borrow a one-off amount that you will pay off during the term (often linearly). Do you use a revolving credit? Then you can withdraw repaid amounts, up to the maximum credit limit that you have agreed with the bank. Both the personal loan and the revolving credit are examples of a consumer credit, although they both have their own advantages and disadvantages.
Repay the credit
Are you taking out a consumer credit? Then bear in mind that you pay interest on the loan and that you must also ensure that it is repaid. You could take out a mortgage ‘repayment-free’ a few years ago, because the value of what you purchase will usually only increase. With a consumer credit it is different, the value of your purchase will only decrease. You cannot sell your purchase to repay the credit. Instead, with a consumer credit you take care of the repayments yourself, in addition to the interest that you pay monthly.