Importance Of Consumer Credit To The Economy


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The consumer credit report is an indication of a country’s economy. That’s because consumers of a thriving economy feel more confident in taking a debt. They know that they have a stable income and can pay it off. Hence they take more loans and fuel the financial market.

Credits are provided by legal banking platforms like banks, and lending firms. The consumer credit of Finland increased from €16451 million in January 2019 to €16642 million in December 2019. It points to the increase in the economic stability of the nation.

What is consumer credit?

It includes all the credits taken for the purchase of goods and services. Loans for the purchase of assets like houses are not included.

Types of consumer credit

There are 3 types of consumer credits:

  • Installment consumer credit: When the lender puts a cap on the credit amount, it is called installment consumer credit. The repayment period is locked and is determined at the time of credit approval. The whole loan is paid back in small amounts. This includes the principal amount as well as the interest rate over it. Education loans, car loans, and home loans come in this category.
  • Non-installment consumer credit: This loan can be secured or unsecured. It is usually for a small-time period. The consumer has to pay back the whole amount in a lump sum at the end of the period.
  • Revolving consumer credit: The consumer can take credit according to his/her needs. He/she only needs to lay back a part of the credit at the end of the month. Usually, the lending firm or bank issues a bill. Credit cards come under this category. The consumer never gets rid of the credit. It keeps on piling up. He/she only pays back a part each month. Hence the credit keeps on revolving. This account does not close unless the lending company closes it.

How consumer credit affects the economy?

Consumer credit affects the economy in the following ways:

  • Higher GDP: Consumer credit allows consumers to spend more. They can spend on goods, services, and assets. It points to more purchasing power. More purchasing power means higher GDP. This fuels the economy. Each transaction earns some interest rate. When these transactions happen on a large scale, they keep the banks going and the economy in good shape.
  • Better employment: This is the direct impact of higher GDP. When people spend more, they invest more. They, in turn, need more services. All this leads to higher employment. Let us explain this by an example. More people buy laptops on the credit card.

This means more outlets that sell this. Each outlet employs a minimum of 5 people. Every laptop needs a repair shop. Again 3 people per laptop shop. High-speed internet service providers, delivery men, etc. are all needed. Now imagine all this on a large scale. You can visualize the employment that higher spending brings.


Better consumer credit is an indicator of a better economy. Every country strives to achieve this and maintain it in the long run. At the same time, consumers need easy platforms for taking loans. kulutusluotto – Instabank is an excellent option for safe yet instant loans.

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mohit sharma
Mohit Sharma, He has worked with various business magazines like Business Today,He is an addicted reader of self-help books, fiction, and journals. He is a great enthusiast of hosting events and photography. He has worked with the team of Google too in hosting some of their summits and bagged appreciations also.

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