There is more than one way to finance your purchases. When you want something, but you don't want to pay for it right away (who hasn't been there?), you can ask for a personal loan from a financial institution. Or you can use other tools, such as consumer credit. Well, keep listening, this might interest you.
Both a loan and a credit are debts, but they work a little differently. What differentiates a loan from a consumer credit is that, with the latter, the loan is linked to the purchase of that product. In addition, it is usually formed through the company that sells it or offers the service. But let's look at an example.
To understand what a consumer loan is, think about that 12-month financing with or without interest that Ikea offers you when you buy furniture, MediaMarkt for your television or dental clinics for their treatments. These are the best examples of consumer credit. Do you get the idea?
The way a consumer loan works is as follows : you buy the item in the store and sign a loan at that time with their financial institution or the external financial institution with which they have an agreement. And this is, in turn, the one who “pays” the store for what you have just bought.
Once you sign, you will have to pay back the money month by month as stipulated in the contract. Simple, transparent and for the whole family, right?
Characteristics of consumer credits
Consumer loans are regulated by Law 16/2011 on Consumer Credit Contracts and the Bank of Spain (BdE) considers them to be a category or type of loan. “Okay, so what does all this mean?” you might be wondering.
The difference with a mortgage loan , for example, is that it is not a loan with collateral, as is the case with a mortgage, the house. The collateral, in this case, is your assets, my friend. Present and future. In other words: you and everything you have acts as collateral for the consumer credit.
There are also limits to the amount you can obtain with this type of credit. Law 16/2011 establishes that the amount must be greater than 200 euros and less than 75,000 euros . Anything above these figures falls into the category of personal loans and does not enjoy (as the Law states) the additional protection of consumer credits.
This protection will allow you to withdraw from consumer credit for 14 days during which you will only need to return the money plus the interest accrued to date without the possibility of penalty and without having to give explanations.
Keep this in mind before signing a consumer loan!
As with any other loan, the entity or business that acts as an intermediary must inform you of the conditions of the loan. This includes (take note) the interest rate and the APR or Annual Percentage Rate. Pay attention to this last detail! Especially if it is a consumer loan with no interest or at 0%.
It's one thing not to charge interest, but quite another not to have any fees. The APR is calculated by adding the nominal interest rate or NIR and the fees and costs. That's why a 0% loan can have an APR of 0.5%, for example. In addition, this APR is what you can use to compare the financing offer with other loans.
Also, remember that you can ask the bank for a binding offer if you don't want to decide on the spot. They must also keep this offer for a period of 14 days. This way you can compare with other financing alternatives!
Consumer credit: better have this documentation at hand!
Consumer loans are granted quickly, but you will still need to provide certain financial documents.
Usually, it is enough to provide your most recent pay slips, although for higher amounts, your employment history and even your personal income tax return are also usually required.
Now that you have all the information, it's time to compare!