Consumer credit means credit that a creditor grants or promises to grant in the form of a loan, payment deferral or other such financial arrangement, on the basis of a mutual agreement.
Consumer credits include credit card loans (such as Visa and Mastercard), housing and study loans, hire purchase loans and credit card loans provided by financing companies for making purchases at furniture shops. In additions to banks, consumer credits are also granted by financing and credit card companies, travel organisers, mail order businesses and instant loan companies. Consumer credits are divided into one-time credits and overdraft facilities.
An overdraft facility is a consumer credit that is continuously available to the borrower up to an agreed credit limit without any specific decision by the lender. Overdraft facilities include credit card loans and charge cards.
Interest costs of overdraft facilities depend on how much use of the facility is made during a month. Fees such as annual fees, an interest, which depends on the use of the credit facility, and account management fees may be charged for a credit card.
In a one-time credit, you take out a loan of specific amount and repay it in accordance with an agreed timetable in one or more instalments. Unsecured one-time credits include instant loans and loans offered by mail-order businesses, while loans taken out for buying a car are examples of secured one-time credits.
Part payment refers to a trade in goods whose price is paid in instalments under an agreement pertaining to this transaction.
The transaction is paid in instalments, one or more of which falls due after the goods in question have been handed over to the purchaser. The seller also reserves the right to reclaim the goods or retain right of possession, in case the purchaser neglects to fulfil his or her obligations under the agreement, until the total price or a specified number of the instalments that fall due after the handover of the goods have been paid.
When making a hire purchase, the ownership of the product is not immediately transferred to you. The seller may retain the right to take back the product or claim the title to the product as long as the product remains unpaid in whole or in part. Hire purchase is the form of credit used when such items as cars are bought.
An instant loan usually refers to an unsecured one-time credit of short duration that is offered by mobile phone or on the Internet.
The interest, expenses and other fees arising from the credit.
Interest is the compensation paid to the lender for the period during which the loan is available to the borrower. The interest paid by the borrower (e.g. 3.0 per cent) consists of the reference rate used as the basis (e.g. 1.0 per cent) and the margin (e.g. 2 per cent). A fixed interest rate remains unchanged for an agreed period, whereas the interest on a loan tied to a short-term reference rate (prime, euribor) fluctuates.
The reference rate is the interest rate to which the loan is tied. The prime rate is a bank-specific reference rate, which is at the discretion of individual banks. Euribor is the reference rate for the euro zone and the average of the interest rates quoted by the banks in the euro zone. Euribor rates are calculated on a daily basis for periods of one, two and three weeks and for 1-12 months. Euribor-tied loans are always reviewed at agreed intervals.
A customer-specific supplement added to the reference rate (e.g. 1.4 per cent).
Total interest rate
The total interest paid on the loan is the reference rate plus the margin.
Effective interest rate
The effective interest rate means all costs charged on the credit calculated as annual interest. Instalments are included in the calculations.
Credit card loans can usually be repaid in one instalment on due date or in monthly instalments agreed in advance. Instant loans are usually repaid in one instalment. When repaying loans granted by banks, you can choose between fixed equal instalments, annuity payments or equal instalments.
In fixed-term loans paid in instalments, the borrower has the right to receive an amortisation table on request and free of charge. The lender may charge a reasonable compensation for the costs arising from a housing loan amortisation table if the borrower requests the table more often than once a year.