Consumer credits and quick loans
Who grants consumer credits?
When taking out consumer credit, always check who is providing the credit.
Credit for buying domestic appliances and furniture, for example, is often provided by a separate finance company, even though the agreement is made in the shop.
Who supervises providers of consumer credit?
Consumer credits are granted by many service providers, of which banks and bank-linked finance companies as well as other consumer credit providers starting from 1 July 2023 are supervised by the Finnish Financial Supervisory Authority (FIN-FSA). In Finland, authorization granted by the FIN-FSA is not required to practice the granting of credit alone. However, all credit providers must be registered into FIN-FSA’s register of consumer credit providers and peer-topeer loan brokers. Only registered entities are permitted to provide consumer credits and housing association loans and to broker peer-to-peer loans.
How can I compare consumer credits?
The credit provider must state the actual annual interest rate. The actual annual interest rate refers to the interest rate percentage which takes into account, in addition the interest rate on the credit, other credit costs (for example account opening fee, instalment fee, account management and processing fees) and the repayment schedule.
In addition, the credit provider must submit key credit agreement and consumer rights information on the Standard European Consumer Credit Information form
Can I cancel a credit agreement I have signed?
Consumer credits can be cancelled within 14 days of the signing of the credit agreement. In this situation, however, it is possible that the credit provider may demand, as compensation, interest on the credit for the time that the credit was available to you.
Can the credit provider demand that the debt be paid off at once?
A consumer credit agreement may state that that the credit provider has the right to cancel the agreement and require payment of the outstanding credit at once if payment of a credit instalment is overdue. In that case, the borrower is required to repay the loan at once.
What is a credit card?
A credit card can be used as a versatile payment instrument. Credit cards can be divided into all-purpose credit cards and special-purpose credit cards.
All-purpose credit cards are usually international credit cards accepted as payment instruments in most shops in Finland and abroad, as well as on the internet. Often, it is also possible to use these cards for cash withdrawals and payment of bills.
Special-purpose credit cards are accepted as payment instruments only by the card-issuing shop and shops belonging to the same group as the card-issuing shop or its partners.
In addition to annual fees, credit cards are subject to other expenses, such as interest on credit provided. The credit card invoice can usually be settled as a single payment on the due date or in agreed monthly instalments. If monthly instalments are used, the amount of interest payable will increase.
Accounts with overdraft facility
An account with an overdraft facility is suitable for fairly small credit needs. A credit limit agreed in advance is then available on the account if needed. Payments made to the account, such as salaries or wages, reduce the used portion of the overdraft. Accounts with an overdraft facility have declined though the use of card products, but they have not disappeared completely. For businesses in particular, accounts with an overdraft facility provide flexibility in cash management.
Interest is charged on the amount overdrawn. If the account remains overdrawn for an extended period of time, interest and other expenses may easily become high.
Promissory note loans, hire purchase and quick loans are one-off credits
Promissory note loans
Promissory note loans granted by banks are well suited for larger acquisitions. In a promissory note loan, an agreed loan amount is made available to the borrower, who undertakes to repay the loan according to an agreed repayment schedule.
The creditor may require collateral (a guarantee or pledge) provided by an external party in security for repayment of the loan amount. The borrower and especially the potential guarantor should remember that the loan amount may be collected in full from the guarantor or paid out from the proceeds of the pledge if the debtor fails to service the loan for whatever reason.
Hire purchase is often the form of credit used in car purchases, for example. The title to the article purchased is not immediately transferred to the buyer; the seller may retain either the right to withdraw the article or the title to the article until the purchase price in full or at least a certain portion of the instalments has been paid.
In general, quick loans are unsecured loans, with maturities of less than three months offered via mobile phone or the internet. The quick loan business has grown rapidly in Finland in recent years, and there are lots of such lenders in the market.