In summer 2019, people’s households had unsecured consumer credit worth approximately USD 5.5 billion, and unsecured consumer credit has already overtaken collateralized credit. In the light of the bank statistics, unsecured consumer credit seems to be number one alternative to consumer loans.
We compiled the most important information on unsecured consumer credit into a data package, which also outlines the reasons behind the popularity of the loan format.
Applying for a consumer credit is quick and easy
Nowadays, unsecured consumer credit can be applied for online easily and quickly. Many consumers particularly appreciate the ease of searching.
The loan offer is often received immediately and the money is usually credited within 1-3 days, depending on the service provider. Using a loan service is flexible in any other way, as typically filing an application does not bind you to raising a loan.
Unsecured consumer credit is an attractive form of loan also because it is easy to compare and bid for credit. Many electronic loan services work by getting multiple quotes from a single application. For example, Orlando’s loan comparison is a free service.
Electronically applied for consumer credit is a quick loan, which is why many people mix consumer credit and instant leverage. In the early years, the instant loan was the only loan available quickly, but times have changed. Nowadays, consumer credit is the best solution for even the most acute loan need.
The ease of applying is one of the reasons for the popularity of unsecured consumer credit.
The interest rate on a consumer credit is based on your ability to pay – this is how you get an affordable consumer credit
The average interest rate on unsecured consumer loans granted by people’s credit institutions is approximately 5.5%. One of the secrets of low interest rates on consumer credit is the accurate analysis of solvency.
When applying for unsecured consumer credit, the lender or broker asks, for example: your financial and work situation. Based on this information, the system seeks to find a consumer credit that suits your customer profile.
The interest rate on a consumer credit is determined in a simple way: the better your ability to pay, the lower the interest rate. The interest rate is the remuneration of the lending bank or financial institution for the credit risk it bears.
Improving solvency by raising income levels is not always possible, at least not quickly. However, there are a few steps you can take to get a better interest rate on your consumer credit:
- Pay off your old debts: The less you have old debts, the better the lender will see your solvency.
- Get a consolidation loan – if you can’t pay off your old loans before taking out a new consumer loan. One big consumer loan becomes cheaper than many small loans.
- Compare consumer loans carefully – either with a loan comparison service or by reading loan reviews.
- Keep your payout time as short as possible – interest and other costs run every day of the loan.
The interest rate cap on loans will come into effect on 1 September 2019. The interest rate cap will also have a maximum rate of 20% per annum on unsecured consumer credit, but the reform will only apply to loans made after that date. So if your old loan has an interest rate of over 20%, you may want to take a new consumer loan at a lower cost and pay off your old debt. You can read more about the interest rate ceiling here.
Repayment of consumer credit
The repayment period for a consumer loan is usually between 1 and 15 years, but this depends on the size of the loan and the terms and conditions of the lender. However, consumer credit typically has a longer maturity, as the loan is repaid in installments. Instead, the smallest quick levers can be repaid in one installment.
If your financial situation changes, you can negotiate with your bank or financial institution about repayment-free months. Consumer credit may include free repayment gratuities, but in some cases you may have to pay compensation. You can also discuss the postponement of the monthly payment due, for example, if your payday changes.
If you are unable to pay the consumer credit on its due date, consult your lender for a new payment plan. The new ceiling for credit limits outlines that credit agreements concluded after September 1, 2019 may charge a maximum of USD 20 per year.
A consumer loan can be repaid before the loan matures. However, the lender may claim compensation for the early repayment of the credit.