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What is Consumer Finance?

Malcolm Tatum
By
Updated May 16, 2024
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Consumer finance has to do with the lending process that occurs between the consumer and a lender. In some instances, the lender may be a bank or financial institution. At other times, the lender may be a business that offers in house credit in exchange for the business of the consumer. Consumer finance can include just about any type of lending activity that results in the extension of credit to a consumer.

Most people have received financial assistance in obtaining desirable products through the use of consumer finance methods. In retail banking, the lender extends secured and unsecured loans to consumers who wish to purchase automobiles, homes, or engage in other activities that require substantial financing, such as remodeling a home. Generally, consumer lending of this type caries some degree of competition, since the consumer with a solid credit rating can often shop around and secure superior interest rates and terms for the loan agreement.

At the same time, not all forms of consumer finance are in the best interests of the consumer. In many parts of the world, institutions are in the business of lending money even to consumers with poor credit ratings, or who lack a reasonable ability to repay the borrowed funds. This can take the form of credit card offers, loans with extremely high rates of interest included in the finance structure of the loan, and other terms that will be difficult if not impossible for the consumer to meet.

As with any type of financial arrangement, it is important for the consumer to understand the exact nature of the commitment that is made as part of any consumer finance strategy. By understanding and accepting the terms and conditions associated with any lending situation, the consumer is pledging that the ability to repay within terms is present, and that the consumer has every intention of complying with each component or section of the loan agreement. To this end, it is in the best interests of the individual consumer to seek out the most desirable arrangements for any type of consumer finance, taking care to avoid any situation that will place an undue amount of stress on the resources in the possession of the consumer.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
By anon296087 — On Oct 09, 2012

I want to know if it is mandatory for banks or financial

institutions to send periodic statements on

accounts like two year CDs?

By Crispety — On Aug 08, 2010

Sunshine31- Let me answer that. Yes you can get financing, but it'll cost you a lot more money.

Consumer finance loans are loans are offered to people with bad credit. These people usually cannot get loans from the bank so they seek alternative financing.

Many people use these types of loans to make large purchases such as furniture and automobiles. Since these are the riskiest of loans companies in the consumer finance business charge the highest rates.

With more people suffering from bad credit due to job losses and an inability to pay their bills, the consumer finance industry continues to grow as a result.

By sunshine31 — On Aug 08, 2010

SauteePan- But what options do you have if you have bad credit? Can you still get financing?

By SauteePan — On Aug 08, 2010

Subway11- I know what you mean. When I purchased some furniture a few years back General Electric consumer finance company was backing my loan, not the retailer. I was offered 18 months with no interest as long as I made equal payments.

By subway11 — On Aug 08, 2010

Consumer finance company is usually banks and financial lending institutions that offer to extend credit to consumers.

Sometimes this is in the form of a credit card, or financing options for large purchases. Retail consumer finance could evolve revolving credit cards for a particular retailer.

In order to entice customers to obtain credit, many retailers offer financing incentives to their customers.

These incentives can include interest-free financing for a year with equal installments, or it may even include a waiver of payments and interest for the entire year. The consumer would not accrue any interest until after the year is up.

Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
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