Consumer loans have been around for quite a while, but they have never gained as much popularity as credit cards have in recent times. Credit cards are extremely popular because they give the user a way to buy things at a low interest rate, and they do not require any kind of collateral or security deposit to back up the amount that is being purchased. On the other hand, the consumer loans that are available through many lending institutions do require collateral, such as home property or cars. There are benefits and disadvantages to both types of consumer loans.
For individuals who are looking to purchase a new home or car, the fast loans offer a convenient way to make the big purchase without having to put too much money down and waiting several months for the money to be posted to the account. The consumer loans can also be used by consumers who are looking to purchase second homes, college dorms, and even vacation homes. In addition to providing money quickly, the lenders provide the customers with terms that are much more flexible than those of personal loans. Many lenders will allow consumers to pay back the money in installments over a period of three to five years, depending on how much they make and how much they spend.
The downside to the consumer loans is that they tend to come with very high interest rates. The reason for this is that the lender stands to make a profit on these loans, which means that they will charge a higher interest rate than would a loan from a traditional financial institution. Another disadvantage is that because there are so many people applying for these loans, competition between lenders has increased the availability of the loans. The result is that consumers may have to pay a slightly higher interest rate than someone with a lower credit score and a similar income because of competition among lenders. The upside, however, is that the lower interest rate that is charged to the consumer when taking a loan from a traditional financial institution may often be less than what is charged to an individual when taking a consumer loan.