Should Store Loans Be Considered: The Benefits and Disadvantages of Product Loan

In this article, we will cover the practical issues of commodity lending, namely, what is easier and faster – making a loan directly at a point of sale or contacting the bank for a cash loan.

The main advantages of commodity lending

The main advantages of commodity lending

Comfort. Of course, one of the main advantages of this lending is to arrange a loan right at the point where the borrower plans to buy the goods he needs. For example, you went to a store without planning to make a specific purchase without having a lot of money, but here you saw that there was a product that you would like to buy. After making a loan directly at the store, you will be able to leave your purchase within a few minutes. This option is most often offered to sellers who are in doubt, because it helps buyers to buy the right product quickly and easily, even if they have temporary financial difficulties;

Efficiency. Another advantage is the expediency of the loan. The whole crediting process (getting the necessary consultations, filling in the borrower’s questionnaire, the process of photographing, sending the loan application, obtaining the result, registration of the goods and the conclusion of the contract) takes an average of 20 minutes.

When it comes to some fairly expensive purchase, the clearance may take a little longer because the final decision is made by the lender’s security staff. But, most often, the design period does not exceed 30-40 minutes. If you compare this time with the standard procedure of registration of consumer credit, then only studying the borrower’s questionnaire can take 3-7 days there. You also need to add the time that the borrower will have to spend on several trips to the bank branch;

High chances of getting a positive answer

High chances of getting a positive answer

Many are aware that commodity lending has long been the subject of scrutiny for fraudsters who often make such loans to third parties or forged documents, providing bank employees with false information. In any case, we are not agitating you to follow the example of these scammers, and we urge you to pay attention to the big plus of this type of lending. Commodity lending provides for a simplified procedure for evaluating the borrower. And since commodity loans are issued for small amounts, it is very easy for creditors to use “conveyor” design – a large number of loans issued at a huge interest. As a result, the financial company carries minimal risks – even if some borrowers are late in repaying the debt, the lender will still receive its profits. It should also be mentioned that increasing the likelihood of a positive answer to such a loan is several times very simple – you must agree to making the first payment, which should be at least 10% of the total loan amount;

Minimum requirements for the borrower. Due to the fact that the borrower does not need to present a large number of different certificates and documents, as is often the case with a “traditional” loan at a bank branch, commodity lending is maximally accessible to all comers. You will be able to use this type of crediting even when you are not officially arranged at your work, receiving a w / o “in the envelope” – during the loan, you will not be asked to provide a certificate of work or a workbook, you just need to provide a company name, where you work and her phone number. You will also need to provide the credit manager with your passport and other document that can be used to identify you;

Minimal risk. Since the borrower does not receive cash on hand, the likelihood of loss or theft of issued funds is reduced.

Disadvantages of commodity lending

Disadvantages of commodity lending

The advantages of commodity lending are indisputable, but this type of express credit has its disadvantages, and it is quite significant.

  • The main disadvantage of commodity lending, which can outweigh its benefits, is the serious overpayments of such loans. At the same time, they can consist of both accrued interest (which in some cases can reach 120-150% per annum), as well as of various commissions, as well as additional contributions. For example, a “traditional” bank loan (even if it’s a credit card), the overpayment will be 1-2 times less.
  • Availability of compulsory insurance. Although it is not compulsory to insure your health or life when making a loan, the banks often use it as an additional service, and credit managers, without specifying it with the customer, indicate this point in the contract, resulting in the amount of overpayment repeatedly is increasing. For this reason, always read the agreement very carefully before signing it and specify that you do not need the insurance service, as if the employees of a banking institution did not try to impose it on you.
  • Low level of competence of credit managers. All employees who sit in shops, making loans to buyers for the goods, can be conditionally divided into 2 groups: employees of the bank and cashiers of the store. The last group is people who do not have the necessary training, as well as work experience, who have received minimal training in a credit company. The first group includes bank employees, who are just starting their own path in a similar field, and also do not have the necessary experience and knowledge. This factor quite often causes a complete misunderstanding by the borrower of the nature of the credit, and as a result – overdue loans, outstanding loans, complaints, etc.
  • Unprofitable repayment . This situation is not uncommon. Commodity lending is offered by banks that do not have their ATMs or offices in the locality in which they offer the service. Therefore, the borrower can not partially or fully repay such a loan without paying the additional fees. He is forced to pay this loan through terminals, post offices or cash desks of other banks, while spending extra money.
  • Problems with returning or exchanging a loaned item. Due to the fact that the product borrowed by the borrower is often a pledge to the lender, the borrower must agree with all of his actions (in relation to the product). For example, if a product is defective and the borrower needs to exchange it for a cheaper or expensive product, then he may face a serious problem because the real amount of the loan will start to differ from that stipulated in the loan agreement, and accordingly – the monthly payments will start to differ.

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