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What Is Consumer Financing & Why Is It Useful ?

Ever heard the term consumer finance? You might think I know what’s a consumer and what finance means but consumer finance is an alien term.

So, let us give you a tour of the world of consumer financing.

What Is Consumer Financing?

Consumer financing means lending money or granting credits to consumers so that they could buy goods of their everyday needs or spend it on some other necessities like a property, a TV, or even that branded watch you want.

Types Of Consumer Financing :

Consumer finance is divided into various categories:

  • Revolving Credit : revolving credit is a process in which the credit is granted throughout the granting period and the limit is set on the amount of money one can withdraw just like a credit card.
  • Fixed Credit : fixed credit is a process in which credit is granted for a particular period and the sum credited could be varied and does not have a limit just like loans.

Who Lends The Money?

The source through which consumer financing is received are many, and some of them are listed below.

Traders :

Traders play a prominent role in consumer financing it involves finance companies and other financial institutions that grant the credits to the consumer.

Commercial Banks :

Banks lend a huge sum of money to consumers with varied interest rates thus proving one the most important source for consumer financing.

Credit Card Companies :

Credit card companies provide various packages to choose from according to your requirement. These ensure limited cash as per limits provided but also ensure cash safety.

Why Is Consumer Financing Useful?

Can be used in emergencies:

Consumer Financing proves most useful in an emergency, a huge sum of money is available to you in times of emergencies like illness, accidents, or natural calamities and you get a long duration to repay as well.

Meeting Needs :

It helps in meeting the daily needs of people in a situation where we buy a house or even a few other necessities.

Saving :

It ensures people save money and teaches them appropriate money management skills.

Investment :

It could prove useful in making investments in shares and deposits thus give you financial security as well.

Thus, we can say that consumer financing is a way people acquire money to meet their money needs, it is extremely useful and ensures a good saving practice as well as a standard of living.

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