What is Consumer Loan?

Borrowers can use this to reduce their debt burden through consolidated loans. This process is also called refinancing RefinancingRefinancing is defined as taking a new debt obligation in exchange for an ongoing debt obligation. In other words, it is merely an act of replacing an ongoing debt obligation with a further debt obligation concerning specific terms and conditions like interest rates tenure.read more, and people do this to get rid of the debt burden faster by availing of refinance loans at a cheaper interest rate.

Personal loans also belong to consumer loans, which help people fulfill experiences like traveling abroad, completing their education, or even utilizing the sum for small or major home improvements. That comes in handy for both smaller and larger needs of the borrower.

Types of Consumer Loans

You are free to use this image on you website, templates, etc., Please provide us with an attribution linkHow to Provide Attribution?Article Link to be HyperlinkedFor eg:Source: Consumer Loan (wallstreetmojo.com)

  • Mortgages: Mortgages are typically linked to buying a new house. Banks give this type based on the credit score and the ability of down paymentDown PaymentDown payment is the initial deposit made by the buyer to the seller when purchasing an expensive item, such as residential property or a car. It comprises a portion of the total purchase amount of the asset and takes place via cash, bank check, credit card, or online banking.
  • read more, which a borrower has to facilitate buying a new home.Credit Cards: This is the most widely used and popular consumer loan. A credit card helps borrowers purchase their daily needs, from apparel to groceries, through a credit line granted to them by the credit card company. However, the interest charges are a bit high in this case, and failing to pay attracts a high level of penalty.Auto Loans: Auto loans are typically meant for buying vehicles. These are generally available at the bank or the car dealership itself.Education Loans: Education loans are targeted to fulfill the education needs of students in terms of paying their college or tuition fees. It helps students pursue their education, and the loan repaymentLoan RepaymentA loan repayment calculator helps in determining the amount of each installment payable by the borrower on taking a certain amount as a loan at a specific interest rate to be repaid in periodic installments for a particular tenure.read more starts when they have graduated from college.Refinance Loans: A refinances the loan, as the name suggests, is used to refinance an already existing loan. For example, one can use it to refinance their car loans, education loans, house loans, and even credit cards. A refinance loan ideally has a fixed payment at a lower interest rate, which helps the borrower close the earlier loan.Home Equity Loans: This is a kind of consumer loan where one can utilize the equity valueEquity ValueEquity Value, also known as market capitalization, is the sum-total of the values the shareholders have made available for the business and can be calculated by multiplying the market value per share by the total number of shares outstanding.read more of one’s home to borrow money. Typically, this is used for making improvements to the houses.Personal Loans: Personal loans cater to the buyer’s daily needs and can work on various purchases. Personal loans allow the borrower to do anything from repairs to business investments.

Who is Eligible for Consumer Loans?

The minimum eligibility to apply for a consumer loan is 21, and the maximum can go up to 60 years of age. If one is salaried, the maximum age limit is 60 years. However, if some are self-employed professionals, they can go till 65 years of age. Also, this depends on bank to bank, and factors such as credit score are also considered.

Interest Rate on Consumer Loans

The below rates are based on rates levied in USA: –

  • Personal loans = 5% – 36% depending on credit scoreEducation loans = 4.5 % – 6%Credit card = 13% to 16%House loan = 3.5% – 4%Refinance loan = 3.5% – 4%Auto loans = 5.3% – 6%

Documents Required

  • Identity Proof: Driving license, passport, state ID, birth certificate, certificate of citizenship, utility bills, etc.Address Proof: Current rent agreement or any documents with the address mentioned.Income Proof: Banks statement, tax returns, and payslips.Other Documents: Current credit card or loan statement, an alternate source of income proof, current rent, or mortgage.

Uses

  • Refinance a current loan outstanding.Pursue education and thus help in the payment of tuition fees.Buying a car for private or commercial use.Building a house or going for improvement or repairs.Aim to purchase daily needs like groceries or clothing.

Benefits

  • Easy access to funds whenever the need arises and in times of critical requirement.It offers to enhance financial flexibility ranging from various types of loans.It offers decent interest rates and is versatile.They are good when it comes to debt consolidationDebt ConsolidationDebt consolidation is a process which streamline several loans into a single one to receive the benefit of a lower interest rate. The reduced periodic payment leads to a reduction in liability.read more.One can borrow the amount one requires, and loan approval is quick.

This article is a guide to Consumer Loan meaning. We discuss consumer loan types,’ eligibility, benefits, uses, and interest rates. Also, you can learn more about it from the following articles: –

  • Non-Conforming LoanFHA LoanEvergreen LoanRecourse LoanSoft Loan