Home Loans

Loans

Definition of Consumer Credit

Definition of Consumer Credit

Almost ubiquitous in this day and age are paid advertisements and other offers targeted at debtors in need of relief from creditors and lenders. Often, a loud voice will be expressing with some urgency the value of a particular company’s services and what soliciting their help may do for one’s desire to improve his or her credit. 
 
Consumer credit is that of funds, specific items or specific services extended to the consumer in exchange for later payment in accordance with an established, signed agreement and based on agreed-upon dates of return. Commonly, consumer credit services that afford people such privileges include banks, car dealers, credit card companies, and retailers. In of itself, consumer credit lacks value unless it is attached to a particular credited item. Only then will a dollar amount become realized in securing that asset. In dealing with consumer credit services, one must generally repay the principal amount borrowed plus a percentage of interest.
 
Overall, consumer credit, owing to its convenience to downright necessity, is an important economic force in the United States and abroad. However, for the individual it may prove rather dangerous. Consumers who are not watchful of their use of credit and spend their money recklessly may find they have accrued a significant amount of debt in a short amount of time. Plus, in some instances, any error on their part may be compounded by unlawful, unethical business practices on the part of consumer credit services.
Debtors and borrowers should be held accountable for their financial decisions when appropriate. Just the same, lenders and credit agencies should not be given a free pass, especially not when they deliberately deceive their customers. Along these lines, an array of laws and organizations exist for the benefit of the disenfranchised consumer. Legislative enactments such as the Consumer Credit Protection Act and the efforts of the FTC and FDIC epitomize the public’s desire for equity in borrowing and lending.

Make Sure You Know the Other Loans

Make Sure You Know the Other Loans Although home mortgages and car loans are two of the most common varieties, there are many different types of personal loans that an individual may choose to apply for. Debtors may have trouble obtaining line of credit loans if they have a poor credit history or a low credit score. Generally, a low credit score will indicate that a borrower has had trouble making his/her monthly payments, or that he/she has failed to pay debts all together. In instances such as this, creditors may choose not to grant an applicant credit because he/she is a risk.

Individuals who are experiencing this problem may choose to apply for personal loans known as “bad credit loans.” These personal loans may include line of credit loans, or installment loans for the purchase of a large item, such as a motor vehicle. Bad credit loans may be beneficial to an individual who is unable to obtain a customary loan from a bank or a credit union, because a lender will generally not run a credit check on an applicant.

Applicants may be granted unsecured line of credit loans. However, creditors will charge unusually high interest rates for debtors who are granted bad credit loans. Moreover, the terms and conditions of these types of personal loans are strict. If an individual utilizes a bad credit loan in order to purchase a motor vehicle, the vehicle may be repossessed by the lender if the debtor is late on one payment. A payday loan is another type of loan that a consumer may apply for if he/she has a poor credit history.

An individual who applies for a payday loan will be granted a small line of credit, usually $500, for a specified period of time. The borrower will be required to provide the lender with a check for the sum of the specified monetary value, and the interest that the lender charges. The lender will not cash the check until the date that the creditor and the debtor agreed upon. If the borrower is unable to produce the money to cover the check by the agreed upon date, he/she will be required to extend the loan.

This means that the debtor will be required to pay the creditor double the interest. The interest that is associated with these line of credit loans tends to be almost absurdly high, and therefore, payday loans have been outlawed in many states. Other types of personal loans that an individual may choose to apply for include home equity loans and merchant loans. When a debtor takes part in a home equity loan, he/she uses his/her home’s equity as collateral for credit.

These types of loans are often utilized in order to pay for a child’s college education, or to purchase necessary equipment for a small business. Merchant loans are line of credit loans, in which a business grants a consumer a specified amount of credit so that he/she can purchase goods from that corporation. They are credit cards that are only valid in a specific store. While all of these types of personal loans may be valuable in certain situations, it is important to be cautious when dealing with credit. If a borrower is not careful, he/she may accrue unmanageable debt and find himself/herself in a financial crisis.

Understand the Concept of Utility Credit

Understand the Concept of Utility CreditWhen individuals utilize consumer credit, in basic terms, they obtain items and pay for them later. Utility credit is based on the same fundamental concept as consumer credit. An individual will receive necessary services now and he/she will pay for these credit services later. Utilities are one of the many types of credit services that permit an individual to pay for the labor or the resources after they have been used. Some of the most common and most important utilities include gas, water, electricity, and phone service.

Utility credit, in short, is one of the credit services that is essential to everyday life. Utility credit is a credit account, much like a credit card account. An individual will be required to pay a utility company for the services that they provide, and the lender will keep records of the borrower’s payment history. In most cases, payments will be made on a monthly basis. If an individual is unable to pay a lender for the utilized credit services, than the debtor may be refused access to important utilities. The large majority of homeowners will establish utility credit by employing these credit services.

Proper credit management is essential to maintaining a viable level of utility credit. Every utility company will maintain records of its’ borrowers credit histories. If an individual misses a monthly payment, or if he/she is late on numerous payments, this will translate into a poor credit history. If an individual does not ensure adequate credit management, he/she may experience unpleasant repercussions. For example, an individual who fails to pay his/her water bill will have their water turned off.

Likewise, if electric bills go unpaid, a debtor will have his/her lights shut off. A history of effective credit management is essential if an individual wishes to change utility companies in the future. A utility company will review an individual’s utility history in order to determine whether he/she is a high-risk investment. If a utility company feels that an applicant is financially irresponsible, or if they believe that there is a chance they will not receive timely payment, a utility company may refuse to provide services to an individual.

Poor credit management may result in the necessity to provide utility companies with a deposit when seeking a new lender. Many utility companies require new customers to provide a security deposit when enlisting the use of their services. It is possible for a utility company to only require a deposit from an individual whose utility credit history displays evidence of financial irresponsibility.

By requiring an individual to provide a deposit, the utility company will be compensated if the borrower fails to pay his/her first month’s bill. In some cases, a woman may have trouble attaining utility credit if her utilities were previously listed in her husband’s name. Credit discrimination against women is illegal and should be reported to the appropriate authorities. 

Types of Credit You Should Know

Types of Credit You Should Know

For individuals unfamiliar with credit and its various types of credit, the process of obtaining a loan may be confusing. There are numerous different types of credit that are available to consumers. Each of these types of credit maintain different uses, as well as different terms and conditions.
A consumer may want to obtain a line of credit for everyday purchases, or he/she may be in need of a loan to assist with a large purchase. There is a type of credit available to fit the needs of most consumers. Becoming familiar with the different types of credit will allow an individual to understand the financial options that are available to him/her. 


Business Credit
Business credit adheres to the same fundamental principles as consumer credit. A corporation will be granted a credit line in order to make purchases that are related to the operation and maintenance of the business. These credit lines are not for the personal use of the business owner and should only be utilized in order to make business-related purchases.
In order for a corporation to open a line of credit or a financial loan, it must first establish its business credit. To achieve this, a corporation must be functional for a specified time period and must have successfully engaged in numerous business and consumer transactions. It is vital for a corporation to have credit established before it can obtain a loan from a bank or a credit union. If an individual wants to start a small business, they will be required to obtain producer credit. Producer credit is also sometimes known as a small business loan.
Home Mortgage Loan and Other Loans

Different types of loans are suitable for people who are experiencing different situations and circumstances. While one type of loan may be beneficial for an individual who is looking to purchase a home, another form of credit will be appropriate for an individual who wants to send his/her child to college.
It is common for an individual who has experienced financial difficulties in the past to have trouble obtaining a loan. However, there are loans that have been developed specifically for low-income consumers and for individuals who have a low credit score or poor credit history. These loans, otherwise known as bad credit loans, are often controversial. Due to the exploitative nature of these loans, numerous states have chosen to outlaw them.
No matter what type of loan an individual chooses to apply for, it is important that debtors handle their credit responsibly. Abusing credit lines may result in long-term negative consequences, which may make it difficult for a borrower to obtain a loan or a credit line in the future.