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Consumer credit has been defined as credit granted to consumer permitting the ownership of goods or services during a term of payment. This includes purchases made on credit cards, lines of credit and some loans. Consumer credits has the characteristic of supporting investment, but only to finance current expenditure of households. Consumer credit is the opportunity given to household or its memebers to buy houshold goods or services and paying the bill sometime later.
For example the lender provides the debtor opportunity to buy something he sells without immediate payment and the debtor promishes to clear the debt sometime later.Consumers buy various household items on credit and in turn bear certain interest rates prevailing in the market. Many shops are sponsored by the companies manufacturing goods who are provided with facilities to grant credt buying on zero rte of interest.
Installment credit is a payment of dues in installment that is fixed and includes interest amount if any. There are credits allowyed on land purchase, construction of home loan, home mortgage, home improvement loan, Home equity loan, auto loan, boat loan, student loan, vacation loan or personal loan for marriage or other purposes.
Revolving credit is different from consumer credit. In this system of credit the credit limit is fixed and once this limit is achieved the credit is again revolved for another limit. In case of crdit cards in the modern days this revolving system is carried to provide liquidity to card holders provided the old debts are cleared.
The credit card holder may use buying goods or services or withdraw money upto a pre-approved credit limit. The borrower may repay this debt over a time agreed by the the lender or bank who issues credit card. Once ths repayment is done the amount of credit limit is revived that can be again used by the holder for fresh transactions on credit.
credit is very valuable way of financing purchases by consumers. credit does not come free. Only those consumers can avail credit who are credit worthy. The present income of the person, his present assets, his expenditure habit, his loan repayment ability and many other factors go to make up the credit worthiness of a person. The persons are given ratings of creditscore based on these factors. Below the average creditscore the person is not allowed credit buying. In case he is allowed this facility he would pay higher interest rate and are kept under survilliance till he clear his dues.
There are major laws in the country that regulates the credit facilities to consumers. Consumer debt the out come of consumer credit is a form of liability of household that are governed by certain laws framed for this purpose. The major laws that regulate credit are as follows: Fair credit Reporting Act, Equal credit Opportunity Act, Fair credit Billing Act, Fair Debt Collection Practice Act.. The equal credit Opportunity Act allows all consumers equal opportunity to obtain credit. Fair credit Reporting Act gives right to consumers to review their credit report and to have incorrect report corrected. Consumers are entitled to one free report every year if they could certify his unemployed status and their plan to get job within 60 days and they are on welfare. Consumers are given full protection to avail credit if they satisfy the minimum standard fixed.Other Articles
