Consumer credit is the set of all those financing activities for people or families that serve the primary needs of spending households. For example, consumer credit today is one of the main channels that support consumption, allowing payments to be deferred over time, paying in installments and postponing expenses.
In the USA, for example, consumer credit is one of the main levers for current spending by American families.
Main forms and credit instruments
Long-term loans for purposes such as buying a house like a mortgage do not fall into the category of consumer credit. Loans for securities investments for companies such as equipment leases are not consumer credit either.
In Italy, ONLY the banks, together with the financial intermediaries registered in special registers, are the only ones authorized to provide consumer credit.
We remind you that all operators authorized to carry out the profession of credit brokers, such as agents in financial activities that perform credit intermediation, must be registered with the Body of agents and credit brokers (OAM).
The Consumer Code governs the institution of financial intermediation as per Legislative Decree 6 September 2005 n. 206, and the fundamental changes made by the legislative decree 13th August 2010 n. 141.
The main forms of consumer credit
The first distinction to be made is that of finalized consumer credit and unfinished consumer credit.
The final consumer credit (or finalized loan)
In this first case, these are financings that have as their purpose the purchase of a movable asset, the purchase of a trip or the furnishing of one’s own home, the purchase of a television, a car or a smartphone. Typically access to consumer credit is aimed at when you buy at a point of sale (or even online) agreement and, instead of paying the full price due, you require a loan that allows you to pay in installments the price of the good and spread it over time.
The customer is therefore bound to the purchase of a consumer good, for this reason, it is termed consumer credit, having to specify the purpose of the loan and necessarily bringing to the attention of the financing institution. In this case, the financed amount will be paid directly to the seller, while the consumer may return the price of the asset in installments to the lender, with additional interest and any expenses.
Non-finalized consumer credit (or non-finalized loan)
The second type of consumer credit is the non-finalized loan, in which the customer has no restrictions on the destination and is free to dispose of the requested amount on loan without having to specify the motivation. The financed amount will then be credited directly to the consumer’s bank account.
Generally speaking, the targeted loans differ from the latter due to their greater simplicity and rapidity in the establishment of the practice of consumer credit, in fact, they can sometimes be provided by the same sales point of the good in question thanks to commercial and financial agreements with the banks.
Non-finalized consumer credit, on the other hand, provides a loan that will be granted exclusively by credit institutions.
The consumer has at his disposal a very high offer of the possibility of tools with which to access personal payday loans or consumer credit, we state some main types:
- personal payday loan;
- Fifth salary assignment;
- Credit card, also prepaid;
- Forms of payment both postponed and in installments;
- Consolidation and refinancing of previous debt.
For example, we mention two of the most used tools that we will explore later. The personal payday loan, which is the most widespread product on the financial market, is less complex but is subject to a greater credit risk for the granting institution, because the concession is mainly influenced by the creditworthiness of the consumer; We will deal with it in a special chapter of this guide, given the diffusion and importance today in Italy.
The salary assignment is a much more complex instrument, but it represents a valid alternative for those who are not allowed access to other forms of credit.
Both instruments are subject to limitations and resolution conditions, which will be extensively described in the respective chapters of our online loan guide, together with more technical information such as interest rates, insurance, guarantees, and preliminary inquiry procedures.