A consumer loan is a type of financing made to an individual by a lending institution or consumer loan provider. The most popular types of consumer loan providers are banks, credit unions and finance companies. In contrast to many commercial or business loan, the consumer loan is provided to individuals.
Consumer loans are actually a category within the broader consumer finance space, and include credit cards, car purchase loans and residential mortgage financing.
Within the consumer loan sector, individual borrowers can find a variety of different programs and loan product names, including the following:
Mortgage, store or car loans are provided by lenders for a specific purpose. However, many consumer loans, such as title and personal loans, set no limits on what borrowers can do with the loan funds.
The qualification requirements of the various types of consumer loans vary according to the loan type and the lender. Each consumer loan provider uses its own lending guidelines to determine which applicants may qualify for their loans.
For example, many conventional mortgage lenders require very stringent credit, income and asset requirements in order to qualify for a prime mortgage loan. These types of prime lenders rarely accept consumers with poor, damaged or bad credit.
Other lenders, however, are more flexible when it comes to their credit requirements. Many payday and personal loan providers, for example, are able to lend to consumers with less-than-perfect credit.
Consumer loans are an important financial tool in today’s economy, helping to spur the purchase of goods and services and pay them off over time. Consumer loans are available for all types of borrowers and circumstances and can be found at any bank, credit union or finance company. Due to the number of outlets for consumer loans, interest rates and loan terms will vary based upon the borrower’s credit qualifications and the purpose of the loan.
Disclaimer: NetCredit is a direct personal loan provider and does not provide financial advice, nor does it vouch for any vendor or service mentioned on our NetCredit personal finance blog or online consumer loan glossary. Always research and perform due diligence on any service provider or vendor before deciding to use them, and we recommend that you speak with a financial advisor regarding all decisions that will affect your finances.