Consumer Credit – What it is, Advantages and Disadvantages

Consumer Credit – What it is, Advantages and Disadvantages

Consumer credit arises with a single purpose and is to cover the satisfaction of a consumption need of people who do not have a current economic capacity to cover their cash costs. In Mexico, consumer credit carries a significant amount in terms of access to consumption, since more than 40% of purchases or sales of Mexicans are carried out through this type of system.

Consumer credit – What is consumer credit?

Consumer credit - What is consumer credit?

Consumer credit is a loan that is acquired to be able to buy a good or a service for personal use in certain terms. It is a loan where the requestor receives a sum of money in their own hands and agrees to return it to the institution or financial company that grants the credit, in the time agreed in advance and with the interest already established. Normally the payments are in 24, 36, 48, 60 or more months depending on the amount of the credit that is obtained.

This type of loans are used by the population, since they allow them to acquire all kinds of products at very good prices and pay us little by little. However, the problem is that sometimes many people abuse this type of credit to make goods or services that are not necessary or do not require borrowing more than they were previously.

Consumer credit – What are its advantages?

Consumer credit - What are its advantages?

  • It gives the opportunity to the consumers to use the products or services without having liquidated the loan or without having enough money to buy in cash.
  • They allow retailers to make purchases online easily (thanks to the credit cards provided by this type of credit).
  • When complying with the payment of the debt a good credit history is built.
  • The loan is accessed very easily and quickly without having to present documents as collateral.
  • The variety of things that can be acquired is vast.
  • The hitch and fertilizers are not high.

Consumer credit – Your advantages

Consumer credit - Your advantages

One of the main disadvantages that we find in consumer credit is that consumers’ savings capacity is reduced, which leaves them extremely vulnerable in case of emergencies.

Consumer credit – Its function

Consumer credit - Its function

The function of consumer credit is that consumers can postpone the payment of their purchases and for interest at a predetermined interest rate or on some occasions variable. Most consumers use it to purchase goods such as: screens, computers, cell phones, clothing, shoes, cars, trips, etc. It is also common to request retail consumers and consumers who tend to make compulsive purchases. You can acquire a consumer credit as long as you do it responsibly, since you remember that you will have to pay the money you borrow, so you can inform yourself of the credits offered by the banks or financial institutions and acquire one that you can pay. Consumer credit is a type of loan that a financial institution grants in order to allow you to buy goods or only because you have a certain amount of money. It is estimated that for 2017, consumer loans will increase until reaching a usury rate of 33.51%. Every year people have the expectation of taking a consumer credit, as if it were plastic money. This type of consumer credit is specially designed to acquire goods or services that can serve the user. Consumer credit – What is the usury rate in consumer credit? The usury rate consists of setting a maximum level above which no bank can charge interest for the granting of consumer and commercial loans. It is for this reason that the rate of usury goes up or down.

Consumer credit – Risks in consumer credit

Consumer credit - Risks in consumer credit

One of the main risks of consumer credit could be a pass-through of the exchange rate in inflation, the increases in the Banxico rate that would reduce credit, which would lead to fewer jobs due to the reduction of public bonds.

Consumer credit – Why is consumer credit vital?

Despite the measures the government has taken with all the reforms, consumer credit remains the main factor of economic growth in the country. Consumer confidence with consumer credit has been growing over the years, and may be due to an improvement in the economic outlook within households and their ability to acquire durable goods such as: cars, appliances, electrical appliances, among others.

Many people use this consumer credit to be able to acquire goods, since they can not acquire them in cash, this facilitates their easy acquiring, however it is a problem when they can not pay what they have borrowed.

Consumer credit – How is it used?

Consumer credit - How is it used?

Consumer loans not only serve to acquire goods, but also can be used to acquire intangible assets such as paying for an airplane flight or for any leisure activity. The consumer credit can be used to pay with plastic, the consumption credit also serves to stagger the payments on an agreement period with the institution that grants it are generally periods of payment of 6, 12 and 24 months, depending on how you choose them.

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