Consumer finance, consumer financing and consumer loans refer to loans in general but they also have a different meaning that has emerged over time.
In US the word consumer finance refers to sub prime loans that are different from prime loans or the normal loans. Sub prime loans are those loans that are given to people with bad credit. The interest rate for such loans is very high in extreme cases and finding a loan for people with bad credit is comparatively hard and was even impossible some five to ten years back.
The companies who keep track of credit ratings record every default on loans and payments that the person makes and hence your credit rating ill be a reflection of the risk associated with lending money to you. A bad credit rating can be repaired if you take expert tips and guidance from professionals who know which factor help with speedy recovery of a bad credit rating.
In many instances people with bad credit rating end up getting exploited as they have a bad financial condition and not everyone is willing to lend money to them. Especially the big banks very straightly refuse loans to people with bad credit and are not ready to take up the risk that comes with these people. When these people get refused for credit they turn to consumer credit services that are ready with their high interest rate sub prime loans that are in fact designed to take advantage of the situation these people are in.
The entire process of the change in definition of consumer credit changed when it became hard to get credit approved from banks. Banks had rigid policies regarding loans and they would reject people very frequently and those desperate for money would then turn to the consumer finance companies that existed even then but charged very high interest rates to everyone. One advantage that these companies had over banks was that they were active in marketing their services to consumers hence; the customer who was refused a loan from the bank instantly was reminded of these companies and turned to them for a loan.
Consumer debt companies at that time catered to every person with high interest rates and anyone who could afford to pay these rates was welcome. After banks improved their services and relaxed their loaning policies people with good credit ratings were accepted at the banks but those with bad credit were rejected. Hence, only the people with bad credit ratings started going to the consumer finance companies and accepted their high interest rates. This then became a common practice to charge high to people with bad credit.
The consumer credit companies take undue advantage of the people with not much awareness regarding what a consumer credit report is and what is a credit rating. When people with a good credit rating go to these companies to get loans the company will not advise them to seek a better loan at lower rates that they can get from banks or other companies. These companies are present in more number in areas where people do not have much awareness about consumer credit service and consumers loans etc.
One service provided by a consumer credit agency to the bad credit people is consumer credit consolidation but these firms earn more out of high interest rates and hence they inform the loan owner that after their loans are consolidated their monthly installments will decrease but they do not inform them that taxes and certain other factors are not being counted and as a result the loan borrowers end up paying a lot more than they originally had to. Consumer consolidation is very useful in making loans easier to pay back and less expensive then before but if you will get your loan consolidated from the same company that originated your loan they may not give you the best advice as they have a bias.
After your credit rating has improved over the years you can get your loan consolidated and can get your sub prime loan converted into a prime loan and by doing that you can save thousands of dollars on your loan payment. But to get the best advice always consult a different company than the one who originated your loan.
Consumer lending or consumer financial services are also being offered by some banks now. Although big banks still continue to avoid taking the risk but some smaller banks are catering to the needs of this market segment. It is always advised to check and compare rates before taking a consumer loan as not everyone will take advantage of your critical situation. There are companies in the market who genuinely are interested in helping the people recover from bad debt and bad credit rating and from time to time tip them on how to improve their credit rating.
Staying current on your current consumer credit report is very important. If you do not want others to take advantage of you and earn undue money out of your pocket it is better to get your credit report generated after every few months because if you are careful your credit rating will repair slowly and gradually and you can get a better bargain on your loans with your improved credit rating. Apart from checking around for loan rates also make sure to take your current credit rating out so that you know where you stand when you go to a lender for a loan.
Consumer credit counseling can give you some useful tips on how to repair your bad credit fast and by taking small measures. Always seek the consumer credit counseling service from someone you can trust as if you are properly advised on that your troubles can be pretty much over in not very long duration of time. Most people will advice you to pay your credit card bills in time as frequent defaults on credit cards also affects your credit rating for the worse.
Missing an installment payment on a loan also gives a blow to your credit rating and it so happens at times that you simply forget the date you had to make payment on. This is a frequent practice when you are juggling too many loan payments in one month and loan consolidation is the best solution for this problem.