The term ‘consumer finance’ pertains to a kind of arrangement where a financial company loans money to the customer(s) so that they can purchase goods and services. Be it obtaining a car, availing of a holiday, purchasing a piece of furniture, or paying utility bills, the setup enables the customer to make payments in short intervals. Thus, they do not have to face the burden of going out of their way to pay for something that they cannot afford at the moment.

Now, you must be wondering what is a consumer finance account, isn’t it? Here we will talk about how a consumer finance company account can help you. Without further ado, let us look at the advantages and disadvantages of a consumer finance company account.

What is a Consumer Finance Company Account?

If you use this type of loan, you will not need to pay off the entire purchase at a go. What happens is that they spread out all the payments on an instalment plan. Thus, you can pay the whole amount in instalments with a certain amount of interest. Besides supporting the buyer, the consumer finance account helps the seller in making substantial sales. Moreover, the added interest amount benefits the financing company to a great extent. 

Consumer Finance- its Different Types

Consumer finance refers to all sorts of bank accounts, loans, and credit cards. It mainly applies to the money the company makes available to customers for purchasing some particular commodity. For instance, an auto company or a furniture store may have a consumer finance account with a financial company. This system will enable the buyer to get hold of items that they are not ready to pay for all at once. The company will loan money or hand a credit card to the customer so that they can buy the goods or the services. Thereafter, the customer needs to pay back the loaned amount within a stipulated time.

Now that you have learned what is a consumer finance account, let us look at its drawbacks. This kind of arrangement is a bit problematic because the customer has to pay a greater amount of money for the service in the long run. The annual percentage rate (APR) becomes extremely high in most cases. For example, a customer wants a three-piece suite that is currently priced at Rs. 30,000. However, it might go up to Rs. 50,000 in the passage of around ten years due to the addition of the annual percentage rate.

Another major problem of a consumer finance account is the payday loan. It is a short-term loan that can prove to be useful to people under emergency circumstances. For example, an individual may have run out of sufficient money to pay off rent or clear utility bills. It may also happen that someone is not being able to make both ends meet. Though they can utilize the loan amount to fulfil their needs, it becomes a cycle of debt in the long run. Not only are the interest rates substantially high but also they include some extra hidden charges. Payday loaners often target such borrowers who will be unable to make the payment. It enables the former party to increase the interest rate to a great extent.

Now that we have taken care of your question regarding what is a consumer finance account, let us get to know how such an arrangement can help you.

Consumer Finance Account- Its Advantages

  • The customer will receive quick cash but they do not have to wait for loan approval or a bank account.
  • Consumer finance has provisions named credit cards and retail cards that help a consumer to make online purchases quite easily.
  • Generally, they will not ask you to prove your credit history.
  • You can purchase an item without a complete upfront payment.
  • Consumers can obtain a wide range of commodities such as household goods and/or personal items.
  • The arrangement also helps you to acquire money in an emergency situation.

Things That you Need to Keep in Mind

An individual has to keep in mind the following factors to utilize financing properly:

  • If you save effectively and promote the same in your family, you will never get into debt provided that you always have the necessary funding to purchase things.
  • Before applying for a consumer loan, you must analyze a plethora of options and choose the one that suits your situation in the best possible way.
  • You have to calculate all the subscriptions to every option for having an idea about the product you intend to purchase.
  • It is not a great idea to get accommodated to these kinds of purchases offering the scope of weekly or monthly payments.
  • You must have a solid understanding of your solvency and ability to clear off the payments before you opt for a consumer finance loan.
  • In case you can buy a commodity without a consumer finance loan, you must not opt for it at all.
  • Another factor is that the overpricing of an item is different from its interest rate.
  • It is also crucial that you remember to ask if the weekly or monthly payments comprise additional expenses such as insurance and administration charges.
  • Punctual payments to avoid the collection of embargoes is essential.
  • You must analyze your ability to make payments before opting for financing.

Nowadays, there are heavy regulations on consumer finance because it can cause damage to those who are exposed to financial vulnerabilities. Though you can easily get these kinds of loans, the exorbitant interest rates are extremely difficult to get rid of. Consumer finance company accounts provide small loans to their customers with the hidden motive of engaging desperate consumers in a spiral of never-ending debts and high-interest payments.

If you are doubtful about your ability to make repayments, you need to avoid using consumer finance account(s) to buy products and/or services. The purchase must be worth the extra money you have to pay off to clear your cycle of repayments. So, you must make a wise decision beforehand.