According to the statistics of the National Bank of Belgium, almost 8.2 million consumer credit contracts were issued in 2017. With 6 million contracts, the credit line is by far the most popular form of money refueling. This form of financing is touted by sellers as a lot more flexible than the installment loan . The fact that the amount made available through a credit opening can be retrieved again and again, however, also entails the greatest risk.
The core of the story is that as a consumer you do not live above your stand. And that is easy. Incidentally, it is a misconception that only people with lower wages suffer from credit problems. To begin with, it is very easy to obtain multiple credit openings and cards from various stores and lenders. The lender only needs to check whether you are not registered as a defaulter . If that is not the case, you get green light.
Although it would be unreasonable to label any kind of consumer credit, it is becoming increasingly common to report malpractice. Consumer credits can certainly be useful in a number of cases. Just think of a renovation , the purchase of solar panels or larger purchases such as those of a car . But for a new TV, smartphone, etc., you better put aside a few months of savings.
Anyone who decides to enter into a consumer credit, should keep the following in mind.
- When you draw up a contract for credit opening , an agreed amount is made available that you can freely dispose of. Usually this amount is higher than the purchase price of a certain device and you can also re-record it as stated. Realize that a credit entry contract is not free and that the rates vary quite a bit from the provider to the provider. As always, comparing and reading all conditions is the message. Legally you as a borrower also have to take into account the so-called zero setting term . (This means that each time after a certain period of time you have to repay the outstanding balance of your credit opening at least once, so that the outstanding balance will be zero.)
- All costs must be presented transparently in the so – called Gandalf form . This is a European standard document in which all elements of the credit agreement must be presented transparently. The consumer must receive this document before signing and must be able to take it with him to be able to compare it with other offers.
- Occasionally the lender or broker insists on taking out debt balance insurance when taking out the credit facility. This has little or no use for you as a consumer because the amounts are relatively small and the term is short (compared to a home loan). Know in any case that the debt balance insurance (contrary to what is sometimes claimed) is not mandatory .
The risk of a credit opening is that you get a decent sum of ‘easy money’ with it. If you do not get to the bottom of your credit options, lenders will also sometimes point out to you that you can safely spend a little extra time.
The government is doing its best to eliminate malpractice with lending. For example, several credit institutions have already been suspended in the past. The infringements that are punished are of different nature:
- Bad or misleading information about the rates.
- The imposition of higher loan amounts than those demanded by the consumer.
- Mandatory subscription to insurance.