consumer credit, short- and intermediate-term loans used to finance the purchase of commodities or services for personal consumption or to refinance debts incurred for such purposes. The loans may be supplied by lenders in the form of cash loans or by sellers in the form of sales credit. Related Topics: credit.


A consumer credit system allows consumers to borrow money or incur debt, and to defer repayment of that money over time. Having credit enables consumers to buy goods or assets without having to pay for them in cash at the time of purchase.

Frequently Asked Questions

What is consumer credit give an example?

Consumer credit is money that consumers can borrow to pay for goods or services. Access to credit allows consumers to make purchases today and then pay for them over a period of time. Banks, financial institutions, and businesses make credit available to consumers. Examples of consumer credit include: Credit cards.

What is consumer credit and its types?

There are two types of consumer credit: revolving credit and installment credit. With revolving credit, the person is approved for a specified amount of credit and can use it whenever he or she needs it, as with a credit card.

What are the types of credit?

There are three main types of credit: installment credit, revolving credit, and open credit. Each of these is borrowed and repaid with a different structure.

What are the advantages and disadvantages of consumer credit?

Some of those are: Consumer credit can come at a cost, including interest charges and potential fees. Access to consumer credit might enable you to spend beyond your means. Missed payments and high debt levels could damage your credit and impact your ability to obtain credit in the future.

What is the most common source of consumer credit?

The most common source of consumer credit is: depository institutions such as banks and credit unions.

What are the two most common types of consumer loans?

The most common consumer loans come in the form of installment loans. These types of loans are dispensed by a lender in one lump sum, and then paid back over time in what are usually monthly payments. The most popular consumer installment loan products are mortgages, student loans, auto loans and personal loans.

What is the difference between consumer credit and trade credit?

Trade credit is similar to the kind of credit consumers use, except it’s between a retailer and the supplier who sells them inventory. It allows the retailer to get the inventory items today and pay for them at a later date, hopefully after the purchased inventory items have been sold!

What are the functions of credit?

The main function of credit is to relieve the constraint imposed by balanced budgets on economic agents, that is, to meet the financial requirements of investors who have to spend more on trade and investment than their own savings.

What are 3 lines of credit?

There are three types of credit accounts: revolving, installment and open. One of the most common types of credit accounts, revolving credit is a line of credit that you can borrow from freely but that has a cap, known as a credit limit, on how much can be used at any given time.

What are instruments of credit?

A promissory note or other written evidence of a debt. Examples include bonds and loans. banking. finance. financial services.

What are terms of credit?

Terms of credit comprise interest rate, collateral and documentation requirement, and the mode of repayment. *The terms of credit vary substantially from one credit arrangement to another. They may vary depending on the nature of the lender and the borrower.

Who are the users of credit?

A credit card authorized user is a person who has permission to use another person’s credit card but isn’t legally responsible for paying the bill. For personal cards, authorized users are usually family members, such as a child or a spouse.

What are the two basic types of credit?

The two major categories for consumer credit are open-end and closed-end credit. Open-end credit, better known as revolving credit, can be used repeatedly for purchases that will be paid back monthly.

Is credit a loan?.

While a loan provides all the money requested in one go at the time it is issued, in the case of a credit, the bank provides the customer with an amount of money, which can be used as required, using the entire amount borrowed, part of it or none at all.

What are five examples of consumer loans?

The most common types of consumer loans are – mortgage, auto loan, education loan, personal loan, refinance loan, and credit card.