What are the Advantages and Disadvantages of Consumer Financing?

Consumer financing has been developed to meet the spending needs of individuals who do not have the financial capacity to cover their expenses in cash. This type of access to consumption is a credit given under certain conditions for the purchase of a good or service for personal use. The role of consumer financing is to permit consumers, at a fixed and often variable interest rate, to delay payment for purchases and pay with interest. It is used by many customers to buy durable consumer goods and services at higher prices, such as televisions, stoves, computers, refrigerators, clothes, shoes, vehicles, home or car repairs, travel, among others; it is also popular for many distributors and for impulse purchases.

Advantages

(1) It enables customers to use goods and services while still paying for them without willing to queue until they have saved sufficient money to buy them in cash.

(2) Credit cards and retail cards allow convenient online shopping for consumers.

(3) Paying off financing generates a favourable credit history successfully, encouraging borrowers to take advantage of other opportunities for financing.

(4) Without needing to show documents as collateral that you sometimes don't even have, obtain funding reasonably easily and quickly.

(5) With this form of financing, the range of things you can purchase is very large, ranging from household products to personal items.

(6) The down payment and, obviously, the instalments given are not very high.

Disadvantages

(1) There is a substantial rise in the final price of the item purchased by financing.

(2) The interest rate can be excessive because if the client does not ask for it, it is data that is not presented to the client.

(3) Other fees and commissions are also charged, such as account management, annuity, insurance, etc.

(4) Payments last so long that the payment is not completed in certain situations.

5) As payments are not made, it is appropriate to continue with the seizure in certain situations.

(6) One of the drawbacks to using this consumer financing is that it limits the opportunity to save money that, if financial crises occur, can leave families vulnerable.

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