Chapter 13: Types of Consumer Credit

Question 1

Non-revolving credit

Answer 1

consumer repays loan within the term of the credit agreement payment schedule

Amounts cannot be drawn again

Question 2

Non-revolving cash credit

Answer 2

Credit sum is paid into consumer bank account (personal loan) for any use

Bank can stipulate some conditions “non-possessory right of pledge” on some goods. Think car can be taken if the loan is not paid.

Question 3

Non-revolving purchase financing

Answer 3

Agreement between 3 parties
* consumer
* credit provider
* supplier of goods

Consumer does not get the cash, goes straight to supplier from credit provider

Agreement includes retention of title and final instalment

Question 4

Retention of title

Answer 4

Difference between owner and possessor (person who owns the property)

Credit prover can own property until consumer pays loan

Question 4

Final instalment

Answer 4

The last repayment of a non-revolving credit facility

Often higher tha the monthly payments - is interest only

Question 5

Continuous credit

Answer 5

Specified credit limit
Consumer can decide how much to use within a credit limit, how often etc.

Three types:
* Continuous or revolving cash credit
* Continuous or revolving purchase financing
* Credit cards

Question 6

Continuous / revolving cash credit

Answer 6

Two parties:
Consumer and credit provider

Amount is deposited in consumer’s account

Question 7

Continuous / revolving purchase financing

Answer 7

Three parties
Consumer does not get the money, used to purchase specific goods (e.g. credit opened for web company like Wehkamp - consumer can continue to make new purchases)

Question 8

Credit cards

Answer 8

Used to buy goods / services
Credit card company acts as a guarantor, often paid monthly

Question 9

Current account credit

Answer 9

credit facility often linked to a payment account

credit conditions are similar to a continuous /revolving cash credit but no repayment installments, repayment is decided up front.