What Is a Consumer Loan, And What Can You Get It For?
Consumer Loan: Like it or not, the truth is that we live in debt. It has probably happened to you that you wanted to buy furniture or some household appliance, but you did not have the money for it. One of the solutions to such a problem is a consumer loan.
What can you take a consumer loan for?
A consumer loan can be characterized as a loan intended for a consumer for non-business purposes, usually for the purchase of consumer goods. So the definition is clear. You can take out a consumer loan for a car, a vacation, or buy equipment for your apartment.
However, a consumer loan can be used, for example, to finance the purchase or renovation of real estate. It is possible to take out a consumer loan for anything. As a rule, the bank does not monitor the purpose of using funds.
The bank provides consumer credit in various forms. It can be, for example, a loan, authorized overdraft, or credit card.
A consumer loan can be guaranteed, but the bank does not require real estate security. Some banks also provide consumer loans without proof of income. The conditions for obtaining a consumer loan usually require that the applicant be over 18 years of age and, as a rule, should be a citizen of the Slovak Republic with a permanent residence.
Note: A non-purpose consumer loan is one in which the bank does not require the client to document the purpose of using the funds.
- according to the subject – purposeless and purposeful
- according to collateral – secured and unsecured loans
- repayment methods – one-time, gradual
- maturity dates – short-term, medium-term, and long-term
Non-purpose loans are those that we can use for anything. We already have to document what we used the money for. Secured loans are guaranteed by immovable property, for example, a mortgage loan, movable property, a bond with a bank deposit, a guarantor, etc. Short-term loans are due within one year, medium-term loans within five years, and long-term loans over five years.
Advantages and disadvantages of a consumer loan
One of the disadvantages of a consumer loan is that it is more challenging to arrange than an installment purchase. This is because proof of your ability to repay the loan is usually required, or you must provide collateral or have a guarantor. For many, it is also a disadvantage that you must also have an account in the bank from which you want a consumer loan.
However, the clear advantage is that a consumer loan will cost you less than buying in installments. This is due to the interest rate, which ranges from approximately five to ten percent for a consumer loan, but when buying in installments, you can overpay for the goods by more than twenty percent.