October 06, 2021

Everything You Need to Know About Consumer Finance Companies

By Sona Mathews

A lot of businesses are beginning to see the need to have a partnership with consumer finance companies.

But, unfortunately, so many businesses have learned the disadvantage of not having this important partnership the hard way, from losing potential clients to being incapable of increasing purchases and orders, and so on.

Everything You Need to Know About Consumer Finance Companies: eAskme
Everything You Need to Know About Consumer Finance Companies: eAskme

Finding the right company may be difficult.

There are a lot of companies that offer the same services; therefore, it may be confusing to choose what will best suit your goals and budgets.

One way to curb this confusion is to understand what consumer finance companies are all about.

This way, you will be able to find the right company for your needs!

Understanding Consumer Finance

To properly discuss these companies, we need first to understand the industry and the concept behind it.

Consumer financing refers to a form of crediting where goods and products are bought on a delayed payment arrangement.

The plan's duration can be as small as 1 or 2 weeks or be stretched over as long as a year.

Some companies give loans that can be paid in installments to make the payments over time rather than at once.

Consumer Financing Companies – Definition and Types

Any company that offers consumer financing is a consumer financing company.

More specifically, these companies are institutions that offer unsecured consumer loans like credit lines and installment loans.

Often, these loans are used by those traditional lenders or banks that don't accept them because of factors like bad credit scores.

Simply put, a consumer finance company provides short-term but high-interest credits to their customers for purchases.


Various types of businesses offer this type of credit.

For instance, some of them may give personal loans; others may offer retail installment loans, home equity loans, etc.

Some known sources of this type of loan include:

  • Amazon Lending
  • Toyota Financial Services
  • Ford Credit
  • Paypal

Some banks, credit unions, credit card businesses, and even some brands (from various niches) offer this type of service.

These creditors are controlled by a federal agency known as the Consumer Financial Protection Bureau.

This agency is the United State's tool for protecting and regulating the consumer's rights.

Choosing a company should be based on credit scores and similar important factors relevant to getting a loan.

But, before we delve into all that, let us closely examine the areas these companies offer this service.

Everything You Need to Know About Consumer Finance Companies: eAskme

Areas Consumer Financing is Offered

The following are some of the major areas where this service is offered:

Home Equity

To obtain this loan type, you have to be a homeowner.

This is because the equity of your home will be used as collateral for the loan.

You may decide to withdraw the full credit on demand.

This type of financing is quite attractive because its flexibility is a lot better when compared with other types of financing.

For instance, you only need to pay interest-only monthly till you have repaid the loan in full.

Personal Loans

This is offered to people with no or bad credit scores.

With this loan, you can use the borrowed money for any purpose of your choice.

For instance, you may use the loan to pay off your medical bill, purchase a product, or even pay a debt.

The company lends the money, and the customer can choose to do whatever they want with it.

Retail Installment

This type of financing is quite common. Some companies even exclusively specialize in it.

Companies that offer this exclusively are called Retail Installment Lenders (RILO).

They typically offer loans for products purchase.

If the company is a major one, they may offer a sub-type of this crediting known as revolving retail installment lending.

This is a credit that does not have a preselected repayment agreement or limit. This allows those who can't get other loan types access to credit when it is needed.

Everything You Need to Know About Consumer Finance Companies: eAskme

Customer Financing – Components

Understanding the components of this service is important for anybody who wishes to take it.

Below are some of the major components:

Interest Rate

This is a very important aspect of this service.

It is the additional cost the customer has to pay after receiving the loan. This additional cost is often paid over a given period.

The interest is typically calculated by percentage. So, the higher the loan borrowed, the higher the interest rate.

Unfortunately, most lenders often offer high rates, and this may be discouraging.

If you obtain a loan with a high-interest rate, you may ultimately realize that it wasn't a wise choice.

Time Frame

By time frame, we mean the time which the customer is given to pay the loan back.

This is a very important component that will determine if the loan will be worth your time or not.

If the time is short, it may be less appealing to you.

However, if you need a loan with a long repayment time frame, the interest rates may be quite high than if the repayment time frame wasn't so long.

Business Payments

If you own a business and intend to offer financing services to your clients or customers, you have to make sure you are paid for the service on time.

Sometimes, if you partner with consumer financial companies, they may give out half of the fund and release the rest after the order is confirmed.

But, sometimes, they may take weeks, even months, before releasing the remaining fund.

This could be an issue for some niches of business.

For instance, if you are involved in construction, full capital is required to start the project.

So, getting the funds in parts may affect the project's timeliness or even put a halt to its progress.

What Company Should You Choose?

If you are looking to partner with a consumer finance company, you need to consider your customers' needs.

Each customer has a different financial profile, so you need to ensure that you have plans that will fit almost all types of profiles.

For example, some may not mind a high-interest rate as long as the payment period is long, while for others, the reverse may be the case.

If you are unable to cater to these various needs, you may end losing potential clients. Therefore, the company you choose should offer flexible plans.

A flexible plan means the loans can be paid back in installments.

Flexible plans offer a wide range of payment time frames that can be adjusted to suit individual needs.

Furthermore, a consumer can decide to change their loan's terms whenever they want.

Also, ensure that the company you pick is reliable.

Finally, ensure you fully understand all that has so far been discussed in this article. This will ensure that any decision you make will be well-informed.


We hope you now know everything you need to know about consumer finance companies.

With all that has been discussed in this article, choosing a company that will suit your needs should no longer be confusing.

If you still have any question, feel free to ask me via comments.

Don't forget to join the eAskme newsletter to stay tuned with us.

You May Also Like These;