Consumer Credit: Moving Between Loans and Rates
Consumer credit is a particular form of financing aimed at favoring the purchase of goods by consumers who otherwise could not afford them. Very often in fact an investment in a durable good like a car or a household appliance is not for everyone: for this reason, it is the manufacturers themselves, or those that deal with distribution or sales (let us consider the case of the dealers in car sector), to propose financing solutions in favor of the buyer. It is no coincidence that it is precisely the car and appliance sectors in which it is most common to come across offers of this kind, even if they are not the only ones.
The peculiarity of consumer credit is that the loan can be addressed only to a private person, understood as a consumer (VAT numbers, for example, are not among the possible beneficiaries), and must have as its purpose the purchase of an asset or a consumption service. It is therefore a form of loan aimed at, that is, usable only for a specific purpose. The classic form of this loan involves the loan of the sum necessary for the purchase of the asset to be repaid then usually in installments. The seller or producer who offers this possibility relies for financing services on a partner bank or a financial company.
And these subjects need remuneration, in the form of an interest rate. This is why we must be wary of offers at a zero rate, or rather, it is necessary to analyze carefully the contractual conditions that can hide unexpected expenses. It is good to understand at what rate we are referring to, when we speak of “zero interest”. In fact, there are two reference rates to take as reference: the TAN, nominal annual rate, and the APR, the annual percentage rate of charge. While the TAN calculates the real interest to be paid to the creditor, the APR also counts the expenses necessary to open and settle the loan. For this reason, this is higher than the TAN.
Well, in the interest-free consumer credit offers the additional costs are often not present. So it is the difference between TAN and APR that is zeroed, not the actual interests. Pay attention to read carefully the contractual proposals of the loan and compare the two rates with each other, to see if indeed favorable conditions are granted.