Consumer credit | Finance your costs

The consumer credit is a type of loan granted by a bank or financial institution to a private person to finance the purchase of a good or service. Thanks to the credit, the borrower can finance consumer goods and his / her private expenses. The consumer credit is granted to physical persons ; companies and non-profit organizations are therefore not eligible. Private individuals may not use the credit to pay for a project in the context of a professional activity. If the purchased product is mainly used for personal purposes, the credit is nevertheless considered as consumer credit. 

For example: you are a dealer and you buy a new car that you only occasionally use to deliver goods; you use the car mainly to drive from your home to work. The credit will be considered as a consumer credit.

 

The personal loan

This involves a loan of € 500 to € 150,000 to finance a personal project, such as the purchase of a new boiler or a second car or to pay for your volunteer trip to Mali. The rates applicable to a consumer credit in Belgium vary between 5.2% and 10% depending on the amount, the duration and the financial institution. In the context of a personal loan, the borrower does not have to justify his purchases and he / she is free to spend the money. To find out more about how loans work in Belgium, don’t hesitate to view our loan guide.

The installment sale

You have caught your eye on a new television, but have you planned a whole lot of spending for the rest of the month? In some stores, customers can purchase the products on credit through monthly payments over a set term. Such a term usually varies between 12 and 24 months and the interest is often higher than that of a personal loan; this way the sellers can take a margin.

Financing rent or leasing

A finance lease is a lease with the option to purchase the property through monthly lump sum payments. At the end of the contract it is possible to buy the property at a predetermined price. For example, with some leasing contracts it is possible for motorists to acquire the vehicle on the expiration date of the contract.

The bridging loan

The bridging credit is an atypical credit to the extent that it is an advance that must be repaid in one go. The credit is granted to a private individual who expects a large sum of money in the future and usually occurs in the context of the sale of a house aimed at the purchase of a new residence. Getting the house sold and receiving the money from the sale can take some time. In the meantime, it is possible to use the bridging loan to pay for the new home. The credit will be repaid in one go thanks to the money from the sale of the first home.

The permitted debit balance on an account

It is possible to request a permitted debit balance linked to your current account. This gives you the ability to respond quickly to unexpected expenses. The limit will depend on the account and the chosen financial institution, which means that you should inform your bank well if you consider this option. Keep in mind that if you exceed the limit, you will have to pay extra costs that may be very expensive for you. 

This type of consumer credit also requires that you be involved in your own finances: an account that is constantly in the red gives a certain image to your bank that you can play tricks in the future.

The opening of a credit line using a credit card

Thanks to a credit card it is possible to open a credit line, also called renewable credit. The principle is simple: depending on the chosen card, you enjoy a cash reserve that you can continue to make endless use of on condition that you pay a minimum monthly amount. If not, interest is involved. It can be a practical solution if a financial problem arises, but only works as a timely parachute : you have to repay the minimum amount every month.

With a consumer credit you can purchase different types of goods and services. This can range from the replacement of a washing machine to the refurbishment of a children’s room, a second car or the financing of a marriage. The consumer credit is a loan like another that the borrower must repay within the specified period. The borrower must also make an effort to pay interest.

The answer is no. There is a clear distinction between consumer credit and a mortgage loan. With the last credit, the borrower can purchase a property. In the context of a mortgage loan, the bank requests a mortgage on the property in order to guarantee the repayment of the borrowed sum. In the event of non-repayment, the borrower has the right to seize the property and resell it. Since a house or an apartment is not consumer goods, it is therefore not possible to take out consumer credit for this.

With a consumer credit you can spread your expenses and maintain a better balance in your budget. An expense such as the purchase of a new refrigerator can be a big bite out of your monthly budget and have consequences for the coming months. In that case, it may be interesting to apply for a consumer credit. You can also always use your savings, but if you have saved all the time for that one purchase, you will be finished.

Just like with any loan, you will have to pay back the borrowed sum plus interest with a consumer credit. Borrowing money alsocosts money. Therefore, ask yourself whether the planned edition is really necessary. Buying to buy is risky and exposes you to the snowball effect : before you realize you have multiple consumer loans, which means that you can quickly lose track of all your repayments. This is the most common cause of excessive debt in Belgium. 

The decision to take out such a loan is therefore not one that you have to take in a hurry. Considering the advantages and disadvantages of the loan is certainly not superfluous.

The first thing to do is to determine the purpose and amount of the loan. That is why you have to shape your project: do you only want to replace the ceramics in your kitchen or all electrical household appliances? Since this is not about the same budget, a different credit may be more interesting for you depending on its purpose. A renovation of the household appliances fits perfectly in the context of a personal credit; the replacement of your kitchen tiles, on the other hand, will be less expensive, which means that a renovation loan is more appropriate. 

The rates for renovation loans in Belgium vary between 2.55% and 6.40%, while those for personal loans start from 5.20%. Compare loans onlinebefore taking any steps. With personal loans you can save up to € 1,000; an amount that goes up to € 2,000 with renovation loans!

Have you chosen to take out consumer credit? Then don’t hesitate to first simulate your loan on TopCompare.be and find the cheapest rate in the market. The various sacrifices are presented to you in the form of a comparison table for a clear overview. 

In order to apply for a consumer credit in Belgium, the following conditions are legally required:

• you must be at least 18 years old;
• you must be a resident in Belgium;
• you must have regular income and you must not be listed on the blacklist of the Central Individual Credit Register.

If you are listed on the blacklist of the Central Individual Credit Register, consult our blog article to find out more about your options. 

Ultimately, the financial institution will ask for your income and credit history to evaluate your creditworthiness and repayment capacity. Know that different banks work with different requirements and that your credit application may be refused at one bank but may be accepted at the other. So do not hesitate to compare loans and do not give up if your credit application is initially rejected.