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What Is Consumer Finance?

Consumer finance refers to the set of activities that lenders and borrowers engage in. The lender can be represented by any entity, but is usually a business. In the same manner, borrowers may be individuals or business entities as well.

Consumer finance is a very broad term that covers a host of activities. Perhaps one of the most common activities that fall under consumer finance is when an individual approaches his local bank for a loan. Banks have a wide variety of loan products that they offer to their clients. Personal loans - either secured or unsecured - are at the top of the list. Other loans include automobile loans, home loans, and so on. It is up to the consumers to make decisions as to which bank to use for such loans, as the rates and terms vary widely from one bank to another.

Another activity that falls under consumer finance is using credit cards. Credit card companies have enjoyed more and more clients in the recent years. In a sense, owning and using a credit card is much like taking out a loan. Having a credit card can be very convenient, but the interest rates applied on credit cards are notoriously high.

Consumer finance is a tricky business in terms of benefits for the consumer. It is important to bear in mind that institutions lending out money in one form or another are there to make a profit. As such, it is up to the consumer to make sure that he gets the best possible deal out of a transaction. Otherwise, debt may simply accrue over the years and before one knows it, debt may become unmanageable.

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