An important distinction needs to be drawn between consumer credit, a straightforward bank loan or unsecured loan, and credit access granted directly from mainstream banks via credit card/charge accounts. Here, the full explanation given by Finnish finance organization, Kulutusluotottaja.fi, is abbreviated for ease of reference and in layman’s terms to make it as clear as possible to Finnish consumers considering this type of financing option.
The Finnish credit granters explain that consumer credit is a loan that can be accessed for short-term purchasing requirements when ready cash is not available. The loan is paid off in a much shorter time frame in comparison to long-term loan agreements with mainstream institutions. Essentially, consumer credit is a deferred payment system, making it easier for consumers to access items for purchase not immediately available to them due to financial shortfalls.
For instance, if a young gentleman is about to set off on his career path by attending an important job interview, he wishes to attire himself impeccably. But he has no formal suit to wear to the interview. He does still have his regular job and can submit proof of income to his new lender to access the middle of the month credit amount required to purchase the suit. He is not overextending himself and is only taking out what is needed.
Because the suit is decent and expensive, he needs time to pay it off. An agreed installment is entered into and he makes his first payment at the end of the next month after he has received his monthly pay check. He can even pay extra if he has that available, thus shortening the installment period. The loan amount agreed to does not amount to more than a few thousand Euros.