Consumer loans: a gimmick for borrowers or to solve financial problems?

When you need to make a purchase but you don't have enough money, a consumer loan is the solution. Some borrowers ask themselves: “how to understand what a consumer loan is?”. It is money that a borrower borrows at interest from a bank or microfinance organization to purchase goods or services. These loans are granted exclusively to individuals.

Consumer loans are divided according to three criteria:

  1. by purpose… If a loan is made for a specific purchase, it will be directed. For example, when applying for a POS loan at an electronics store. There are also non-targeted loans when the borrower does not report expenditures.
  2. by time… MFOs issue short-term loans. So on the portal Micro-Loan.Com Money through the Zolotaya Korona system is issued for a period of up to 1 year. And most loans from microfinance organizations take up to 30 days. Banks issue loans for a period of six months or more. The loan term affects the interest rate.
  3. Providing… When applying for small loans, collateral is not required. But if a large loan is issued, the lender will need collateral, which is a guarantee that the borrowed funds will be returned.

Benefits of consumer loans

Any borrower knows how to use a consumer loan. Just take out a loan, spend it on your own needs and pay off the debt on time.

But not all borrowers realize the main advantages of consumer loans. The main advantages of a consumer loan include:

  • Lender selection… The borrower himself chooses who to contact. Today, banks and microfinance organizations specialize in issuing loans. Banks have strict requirements for borrowers and MFIs are more loyal. On average, they approve over 85% of orders.
  • Availability… Anyone with a stable income can apply for a consumer loan and receive it. With a good credit history, you can contact a banking institution. If the CI is bad, microfinance companies that cooperate with troubled borrowers come to their rescue. Anyone can check their credit score at National Bureau of Credit Histories (NBCH).
  • The minimum set of documents to be provided… Required documents include Russian passport and paper confirming registration at the place of stay.
  • High registration speed… At the bank, consumer loans are issued in 2-3 days, and if we are talking about a targeted loan in a store, then even faster. If we talk about MFIs, they issue loans online and the decision is considered to take 1 to 30 minutes. Upon approval, the loan funds are instantly transferred to the borrower using the method of their choice.
  • Variety of ways to make money… Banks offer consumer cash loans. At the same time, microfinance organizations offer borrowers a choice. Money can be received on a bank card, e-wallets (QIWI, WebMoney, Yandex.Money) or in cash by transferring money through payment systems.
  • No need to insure. When receiving a consumer loan, insurance is issued only at the request of the customer. But he has the right to refuse this service, saving money.
  • The possibility of purchasing a product or service in installments at a fixed price.

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Disadvantages of consumer loans

The disadvantages of consumer credit are not so obvious. This includes a short loan period and, as a result, a high interest rate. Interest rates at banks are lower than at microfinance organizations. But it is important to note that many MFIs are taking action interest free loan for new borrowers. That is, new customers can get an interest-free loan. If they borrow 15 thousand rubles, they return the same amount. But only on the condition that the loans are repaid on time. This is not a scam, as it may seem at first glance, but a marketing ploy to attract new customers. Interest-free loans are issued to new borrowers only, while loyalty programs are available to regular customers.

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Another disadvantage of a consumer loan is a relatively small loan amount:

  1. In banks, the maximum size of consumer loans is 200-300 thousand rubles. But, subject to collateral (provision by the collateral taker), the amount may be increased in proportion to the collateral value.
  2. In microfinance organizations, the credit limit is 100 thousand rubles. Only regular customers can count on the amount of more than 30 thousand rubles, who have already granted loans and proved their solvency, reliability and honesty.

Is there a middle ground?

Lending from microfinance organizations is a good alternative to consumer bank loans. It is well known that MFIs have taken the lead in consumer lending and are holding it firmly in their hands. For borrowers, microfinance organizations are an opportunity to get money for misuse, without leaving home. You just need to go to the website, fill in a form and submit the application. Everything takes less than 20 minutes.

At the same time, the borrower is not obliged to inform for what purposes the consumer loan will be used, as it can be spent on anything: repairing an apartment, traveling abroad, buying appliances, obtaining a child's education, etc.

Regular customers of a microfinance organization receive nice bonuses. For them, the interest rate is reduced and the credit limit increased. There are prize draws and various promotions.

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Personal loans can be the solution to many problems. But you need to understand how consumer loans are issued and how to choose the right loan product. When choosing a loan, note: the conditions (available credit limit, interest rate, loan terms), the presence or absence of commissions, requirements for the borrower, the speed of processing the loan. Considering all these factors, you will get a profitable consumer loan to solve financial issues.

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