Consumer Loans

Consumer loan as the term connotes is for the final use. A consumer loan is extended for the purpose of the purchase of durable household goods. Since consumer loan entails consumption however these may be obtained by the borrower for meeting the need for medical care, education, and other expenses of domestic chores. The consumer may also be extended as bridge finance in case of a mortgage.  These loans carry fixed interest rates. Banks are exposed to interest rate risk during the rising interest trend in the market. Therefore banks usually charge a higher rate as compared to rates charged on another form of lending. These loans are categorized into installment (bullet payment) or non-installment (balloon Payment). Consumer loans are generally availed by fixed-income individuals. The repayment schedule, amount, and period is negotiated with the borrower. Over the years consumer loans have become very attractive and banks are competing for achieving a good market share in this area of credit. Almost every bank has a credit card facility which has become a lucrative source of consumer financing and built a vast clientele base.

 Period

Consumer loans are extended from a period of one year to 7 years.

 Securities 

1. Lien on salary for deduction of installment amount regularly.
2. Personal Guarantee
3. Lien on Asset financed 

Repayment 

It may be a regular monthly installment plan, non-installment, or credit card rollover plan.