Consumer and consumer credit – what are the differences?
The basic difference between consumer and consumer credit is that one of them is legally defined. They relate to various concepts:
- person (consumer) – an entity to whom consumer credit is granted,
- manner of spending funds (consumption) – consumer credit.
Consumer credit – what is it?
Consumer credit is financing provided to the consumer by the lender. It is intended for natural persons who do not run a business. The main difference is that this loan is regulated by law. Records about it appear in the Consumer Credit Act, which will be a big plus for you. The Act sets out the rules and procedure for concluding the contract, the obligations of the creditor and consumer regarding information, conclusion of the contract and the effects of breaches of these obligations. Below you will find the most important information.
Consumer credit – features:
- A consumer loan may have a maximum amount of $ 255 550 or the equivalent in foreign currency. If the amount of the loan granted is higher, you will not benefit from the protection provided by the provisions of the Consumer Credit Act.
- It includes, among others: loans, credits, revolving loans granted by banks, credit unions and loan companies.
- The lender or loan broker must inform you about:
loan interest rate and conditions of its change,
– total loan amount,
– the actual annual interest rate,
– the duration of the contract,
– the total repayment amount,
– any additional costs,
– installment amounts,
– dates and method of paying out the loan,
– the right to withdraw from the contract,
– early loan repayment options,
– additional products required (e.g. insurance).
- There is no upper commission limit for granting it.
- The interest rate on the loan cannot be higher than four times the NBP lombard rate, which is currently 10%.
- You should receive a free information form before entering into a loan agreement . You will find there all credit data.
- You have the right to repay the loan early – in part or in full.
- Consumer credit is defined in the Consumer Credit Act of 2011.
Consumer loan – what is it?
The definition of consumer credit is not included in any law. So you can assume that this is a certain product category, not a separate product. In practice, it is simply a cash loan or cash loan. You can borrow funds for any purpose, that is for everything – going on vacation, renovating an apartment or buying new electronic equipment.
Cash loans are available at most banks, and best of all – you can also apply for them online or by phone. This will allow you to do all the formalities without leaving your home.
Consumer loan – features:
- The loan is used to finance the current needs of the household.
- You can borrow funds for any purpose .
- The loan is paid out in cash or without cash (transfer to an account).
- Credit costs are set individually.
- All repayment conditions, withdrawal from the contract as well as loan parameters and costs are described in the contract .
- The loan terms depend on the bank’s internal policy and your financial situation and relationship with the bank.
- Consumer loans include cash loans, installment sales, overdraft facilities and credit cards.
- There is no specific upper amount of this loan, although in banks we can meet with an amount of up to $ 220,000 and a repayment period of up to 10 years.
- The loan is granted in a bank , and the activities of banks are also regulated by the Consumer Credit Act – as opposed to loan companies.
Consumer and consumer credit – differences
As you can see above, it is not surprising that consumer and consumer loans are notoriously mistaken for each other. The main difference is the fact that the former are regulated by law, and the latter are offered only by banks and do not require providing the purpose for which you want to allocate funds.
When it comes to the formalities involved in applying for a loan, it all depends on the amount you want to receive. When deciding on a small consumer loan (e.g. purchase of a fridge in installments), you only need to show your ID card. After checking in BIK, the lender will decide to grant funding. While applying for a larger amount – no matter whether from a consumer or consumer loan, you may need a certificate from your employer, a bank statement and, of course, meeting the lender’s conditions. These include a positive credit history and appropriate age.
Regardless of whether you apply for a consumer or consumer loan, pay off your debt within the prescribed periods. Irregular repayments can lead to serious problems, being entered in the BIG register and additional costs, e.g. penalty interest, paid reminders and reduction of creditworthiness.