Consumer Credit: Definition and Principle
By definition, consumer credit is a cash loan granted by a financial institution (bank, credit institution, retailer, etc.) to the borrower, in exchange for financial compensation in the form of interest. Once the funds are disbursed, under specific conditions, they can be used to carry out a wide range of personal projects.

It should be noted that signing a loan agreement commits the borrower to making each monthly payment until the end of the repayment period. With the exception of mortgages, consumer loans are used to finance consumer goods or services:

• Furniture or new equipment: household appliances, computers, etc.
• Driving licenses,
• Car or motorcycle (new or used),
• “Financing a dream trip,”
• Home renovation or improvement projects, etc.

What are the different types of consumer credit?
There are many types of consumer credit. Aside from purpose-specific loans, which require the borrower to provide proof of fund usage, the other most common types of credit are personal loans and revolving credit. The unique feature of revolving credit is that the borrowed capital is replenished as repayments are made.

In both cases, the borrower is free to use the funds as they see fit. Moreover, these are two types of financing that can be adapted to any kind of project. Comparatively, this is not the case with purpose-specific credit. This type of credit takes effect upon the purchase of the product or service.

Similarly, the lending institution requires a purchase invoice to justify the use of the allocated funds. For example, a car loan is exclusively used to finance a new or used car. The same applies to home improvement loans, which are intended for construction or renovation projects.

Objectively, only the listed renovation works can be included in the financing package. Specifically, you can only finance one specific project at a time by choosing a car loan or a project loan.

Which type of credit is the easiest to obtain?
In most cases, the easiest credit to obtain is a revolving loan. It should be noted that this type of financing falls under consumer loans. It is easy to secure a revolving loan from various banks or large retailers (physical stores or online).

Compared to a car loan or a personal loan, a revolving cash loan is accessible to most people. Given how easy it is to obtain, many households face financial difficulties. Particularly since a revolving loan creates a permanent imbalance in the budget, sometimes with serious consequences.

Revolving credit should be considered a last resort. With this in mind, it is crucial to control how the borrowed funds are used and to try to limit their usage.

In addition to the ease of obtaining revolving credit, special attention should be paid to the APR associated with the revolving loan offer. It turns out that the interest rates charged are among the highest in the banking market. This is one of the reasons that increases the risk of falling into over-indebtedness.