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.