What's Personal Loans & Consumer Financing

Just by looking at a bank's website, you can see the various names banks use to market their loans. But do you know the difference between personal loans & consumer financing? Here's how to tell them apart.

What's a Personal Loan?

A personal loan is money borrowed from a financial institution such as a bank for a fixed repayment period and monthly repayment amount. Most personal loans are unsecured, so you don't need to provide collateral to borrow money. Loan amounts range from about $1,000 to over $50,000, and interest rates typically range from 3% to 36%. Borrowers usually take one to seven years to pay off the money.

Personal Loan Type

Most personal loans work similarly, but there are differences between the loan product and the lender. Here are the main types of personal loans you should know about:

• Most personal loans are unsecured, but some are not. That means you don't have to provide any collateral to qualify. With an unsecured personal loan, you receive cash in a lump sum and pay off the loan with fixed monthly payments on a fixed repayment schedule. 

• Secured Personal Loans: personal loans require you to provide collateral in order to qualify. Other assets such as a house, ship, or car may be used instead of cash as collateral. If you default, lenders may be able to confiscate those assets if you default.

• Building Loans: Credit lines are not provided by credit building loans.These loans are credited into a lender-controlled savings account and you pay the balance for the life of the loan. During this time, lenders report payments to credit bureaus so they can create a history of responsible use of credit. At the end of the loan, you will be required to pay the full amount minus the loan fees. 

• Professional Lenders: Some service-oriented companies offer personal loans to their customers as a way to help them pay for their products and services. For example, you can get a loan from a home improvement store when you buy a new appliance. These loans are usually convenient, but they don't always offer the best rates and terms.

What's Consumer Financing?

Consumer finance programs offer loans or lines of credit to individual consumers, giving them more choice when it comes to purchasing.

Imagine a customer buying a new sofa online. When considering a purchase, buyers know that cheap furniture probably won't hold up to their children, pets, life, and time, but that investing in a quality sofa is currently not economically feasible. I'm thinking about

If the retailer has a consumer finance program, the retailer can offer this customer application for a store credit card at the point of sale. Customers can secure the perfect sofa without having to pay the full amount up front. Retailers may also offer programs that offer payment options to customers by offering incentives through installment payments, monthly installments, or loyalty programs. Offering one or more flexible payment options can help you close deals.

The Benefits of Corporate Consumer Finance

We've learned a lot about retail by serving millions of people and funding nearly $166 billion in sales. The Synchrony 2021 Home Purchase Study builds on this knowledge to help business owners understand the exact benefits of consumer finance and how its availability affects customer behavior

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