Finding the best consumer finance company for your business can be difficult. Many companies offer similar services, so knowing which one will work best with your budget and goals is hard. That said, more and more businesses understand that they need to partner with the right consumer finance company sooner rather than later.
Otherwise, you risk losing out on potential clients, greater service orders and purchases, or worse: collaborating with the wrong lender or investors.
This article will explain what consumer finance companies are, their benefits and how you can find a consumer finance company that is perfect for you!
Table of contents
What is consumer financing?
Consumer financing is a type of lending in which goods are bought for cash on a deferred payment plan.
These plans can be set up for as little as one to two weeks or stretched out over an entire year, and some companies offer installment loans so that payments don’t need to be made all at once.
In short: consumer financing is the financial instrument that will help your customers purchase their choice.
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What is a consumer finance company?
Essentially, a consumer finance company is a type of company that provides consumer financing.
To be more concrete, consumer finance companies are financial institutions that provide unsecured consumer credit products such as installment loans and lines of credit.
These loans are usually used by middle-class Americans who have not been recognized by more traditional banks or lenders due to a bad credit score or another factor.
Therefore, by partnering with businesses, consumer finance companies can offer a flexible financing solution to their customers or patients.
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Types of consumer finance companies
There are several types of companies that offer finance solutions for customers. For example, some consumer finance companies offer personal loans, retail installment lending, and home equity lines of credit.
The type of consumer finance company that is right for you will depend on what kind of credit score and other factors in your life are the most relevant to securing a loan or line of credit.
However, before getting into that, let’s look at the main areas for which these financial institutions offer consumer financing.
Personal Loans
A personal loan is financing offered by some consumer finance companies to consumers with bad or no credit scores.
This type of loan offers the borrower an opportunity to borrow money they can use for whatever purpose they deem necessary. For instance, the borrower can use the money to consolidate their debt, pay off a medical bill or purchase an item they cannot afford.
Retail Installment Lending
It is common for consumer finance companies to offer retail installment lending, some of whom specialize exclusively in it. Often referred to as RILO companies (retail installment lenders), this type of business will provide consumers with loans for the purchase of goods.
A major retailer will offer a type of financing called revolving retail installment lending, which is essentially an open-ended line of credit with no preselected limit or repayment term that allows consumers who are unable to obtain other types of loans (or have bad credit) access to consumer credit when needed.
The retailers are the eligible recipients of these loans for them to provide items at lower prices which consumers can then use as an installment plan with monthly payments, such as is seen with retail finance companies and credit cards.
Home Equity Lines of Credit (HELOC)
A home equity line of credit is a loan that uses your home’s equity as collateral.
You can withdraw up to the full credit limit on demand, and you’re only required to make monthly interest-only payments (no principle or repayment) until you repay in full.
This is an attractive form of financing because it offers a lot more flexibility than other types of loans.
In any event, there are several types of finance companies, and the important thing is to figure out which one is right for you.
Components of Consumer Financing
These refer principally to the terms and conditions that surround how the loan is given.
This will impact you directly regarding how soon you receive your money for services rendered when a customer orders.
Interest Rate
One of the fundamental aspects of consumer financing is the interest to be paid once a customer agrees to finance your services. Interest rate refers to an additional cost placed on the loan which the borrower must pay over a set period. This is usually calculated as a percentage.
Traditional third-party lenders’ finance companies are notorious for offering high-interest rates on service loans. This can be discouraging to potential customers who may feel that elevated interest rates may not be a smart financial decision in the long run.
Borrowing Time Frame
Another huge element of consumer financing is service centers around the borrowing time frame. For informational purposes, the time frame refers to the period given to the consumer to pay back the loan which was provided.
If the borrowing time frame is a short window, it may not be appealing to a client.
On the other hand, it is common for a company or lender to offer larger repayment periods but higher interest rates.
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Business Payments
As a business interested in facilitating consumer finance to your customers, it is important to ensure you get paid on time for services rendered.
Some finance companies who partner with businesses for this type of finance solution only release part of the funds to you when the customer confirms their order, sometimes taking several weeks or months to give you the remaining sum.
The benefit of consumer finance companies
You can reap several benefits from utilizing a high-quality customer financing program. Several financing companies provide exceptional terms, but not all provide the same benefits.
There are benefits for customers and businesses that choose to use financing services. Financing allows for individuals to pay monthly instead of a massive up-front cost. As you could probably imagine, most people cannot spend a significant amount of money at once.
By allowing monthly payments, a larger amount of customers can afford these expensive products. This is great for customers that want to make a purchase based on a payment plan, but it is also great for businesses that want to bring new customers into their business.
Benefits For Customers
- Long-Term Payment Plans for Customers
- More Potential Customers for Businesses
- Great Way to Build and Restore Credit History
- Favorable Terms from Several High-Quality Financing Companies
Benefits For Businesses
- Increase In Sales and Business Growth
- Increase In Return Customers
- Customer Base Growth
Flexible Finance Plans
Flexible finance plans are a type of loan that can be repaid in installments. Some call it installment loans, but this is a misnomer because they involve even more flexibility than the term would suggest.
This type of lending has also gained traction with consumer finance companies because flexible financing helps them grow and expand their customer base.
Flexible financing offers a range of repayment periods that can be tailored and adjusted according to your needs. The borrower may even be able to change their loan terms at any time.
This type of arrangement is very flexible, and it can be adjusted as needed with little to no added fees or charges which are typically associated with refinancing your loan.
Flexible financing plans also have features such as a low minimum monthly payment that may not exceed a certain amount or even low-interest rates, however, that varies based on the finance company providing the solution.
Flexible finance plans are a huge plus to businesses for the following reasons:
Brand awareness
This type of financing solution is a great way to build up brand awareness among potential customers.
Increasing customer loyalty
Flexible financing solutions can also help increase customer loyalty and retention rates, which are crucial for any business looking to maintain its competitive edge in the industry.
Minimized risk factor
Businesses that choose this option have their risk factor minimized because if the customer defaults on its loan, then they can recover a certain amount of collateral.
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Top consumer finance companies
PayPal Credit
PayPal Credit is one of the most popular customer financing companies in 2023. They are partnered with several popular retailers. PayPal Credit allows shoppers to purchase at websites like eBay, Best Buy, and Target. Qualified customers will receive an initial credit line with special terms.
Usually, customers will have six months to pay off their large purchases with no interest. Purchases that qualify must be more than 99 dollars.
One of the most popular retailers for PayPal Credit is eBay, specifically because of the long-term partnership between the two familiar brands.
Customers may qualify for additional credit line bonuses depending on the retailer. Still, the overall flexibility that is provided by PayPal Credit is one of the reasons that it has such a reliable reputation with these online retailers.
Another unique factor to remember is that PayPal Credit doesn’t provide you with a credit card. PayPal Credit is a credit line that is integrated into your PayPal account. You can use linked bank accounts and your PayPal balance to make monthly payments. There are also no pre-payment penalties, so you can pay off your entire PayPal Credit balance at any time.
Pros
- Available on Several Online Retailers (eBay, Target, Best Buy)
- No Interest on Purchases over $99 for 6 Months
- Customers are Eligible for Periodic Credit Line Increases
- There are No Pre-Payment Penalties
Cons
- Not All Customers Will Qualify for a Credit Line with PayPal Credit.
- Large Interest Rats after Promotional Period Expires
ViaBill
ViaBill is another popular customer financing solution for shoppers to consider using on eligible websites. This platform is designed to split larger purchases into four equal monthly payments. If you properly pay each of your four monthly payments, you will be paying no additional interest on your purchase.
Customers can also be confident that ViaBill utilizes safe and secure servers to protect all personal information. ViaBill is already integrated into more than 5,000 retailers and continues to expand to new platforms regularly.
Pros
- Pay for Large Purchases with Four Separate Monthly Payments
- No Additional Interest if the Purchase is Paid On Time
- Extremely Safe and Secure for Customers
Cons
- Not All Customers are Eligible
- Some Popular Retailers Don’t Support ViaBill’s Customer Financing.
Afterpay
Afterpay is an extremely popular selection for customer financing because of its incredible reputation with shoppers and retailers. Customers can split up their larger purchases into separate monthly payments with no additional interest. Late fees will only apply to customers that fail to pay their monthly bills on time. Customers may also be eligible to re-schedule their monthly payments a few times yearly.
The Afterpay customer financing platform is extremely popular with online clothing retailers. Customers will certainly have a great opportunity to use Afterpay when making significant purchases on eligible retailers. Select the ‘Afterpay’ checkout option to get an instant eligibility notice.
Pros
- No Interest if Paid On Time
- No Additional Fees if Paid On Time
- Instant Eligibility Notice on Checkout
Cons
- Not Supported for Several Online Retailers
Affirm
The Affirm financing process is extremely simple to use. You can conveniently select their platform at checkout at an eligible retailer for an instant decision on eligibility. If you qualify, you will receive your estimated monthly payment for your purchase.
This platform is specifically designed for consumers who want to pay for their purchases later. Customers can select their preferred payment date, and there will never be late fees or additional penalty fees.
Pros
- No Late Fees or Penalty Fees
- Customers can choose their Preferred Payment Schedule.
Cons
- Not Widely Available on Retailers
- Limited Customer Service
FinanceIt
Finance is certainly one of the most recognized customer financing platforms. Instead of paying massive up-front costs, you can significantly reduce your initial costs and pay for larger purchases over some time. You will receive rapid approval decisions after completing your application.
The interest rates on your purchasing loan will vary based on your credit history. Promotional offers pop up from time to time, but they don’t seem to be as generous as several of the other platforms that we have looked at.
Pros
- Instant Approval Decision
- Fast and Simple Loan Application
- Regular Monthly Payments with Custom Schedule Offering
Cons
- No Promotional Interest Rates
- Some of their Interest Rates are Very High
United Consumer Financial Services
UCFS is an exceptional customer financing company that has rapidly expanded across dozens of popular businesses and industries. UCFS works with business owners directly to provide an ideal solution that helps them grow their businesses by offering to finance to customers.
Pros
- Available at Several Popular Retailers
- Has an Online Application Process
- Has a Simple Bill Pay System
Cons
- Does Not Offer Direct to Consumer Financing Options
Amazon Credit
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Amazon Credit has several interesting perks, but this financing option is only available on Amazon’s website. There are three primary promotional periods, including 6-Month, 12-Month, and 24-Month options with varying purchase requirements.
Special financing will offer 0% APR if the purchase is completed within the financing promotional period.
Amazon Credit also offers no annual fees and provides customers with zero-fraud liability. Customers are also eligible for cash-back when making an eligible purchase with the Amazon Credit line.
In addition to all those fantastic perks and benefits, customers may also be eligible to receive a $40 Amazon Gift Card if approved for the Amazon Credit financing promotional offer.
Pros
- Eligible Customers will receive a $40 Amazon Gift Card for their Approval.
- Three Different Amazon Credit Promotional Offers (6-Months, 12-Months, and 24-Months)
- No Annual Fees and Zero Fraud Liability for Consumers
- Instant Credit Decisions are Available
Cons
- Only Available on Amazon’s Website for Financing
Circle Internet Financial
Located in the USA, Circle is a digital currency company founded in 2013, and is building a suite of consumer products aimed at enabling greater ease of use in online and in-person payments, enhanced security and privacy for consumers, and the convenience of free, instant, global digital money transfers.
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EVEN Financial
Located in the USA and Founded in 2015, Even Financial is a B2B2C fintech company transforming how financial institutions find and connect with consumers.
By seamlessly connecting financial institutions (including American Express, Goldman Sachs, and SoFi) and channel partners (such as TransUnion, The Smart Wallet, and The Penny Hoarder) via its industry-leading API,
Even turns any consumer touchpoint into an ROI-driven, programmatic acquisition source with full compliance and security across loans, savings, credit cards, and more.
Ripple
Ripple provides global financial settlement solutions to enable the world to exchange value like it already exchanges information – giving rise to an Internet of Value (IoV).
The Ripple solutions lower the total settlement cost by enabling banks to transact directly, instantly, and with certainty of settlement.
Banks worldwide are partnering with Ripple to improve their cross-border payment offerings, and to join the growing, global network of financial institutions and market makers laying the foundation for the Internet of Value.
Bambu
Located in Singapore and launched in 2016, Bambu is one of Asia’s first B2B Robo Advisers. Bambu has built a range of applications for use by businesses seeking to offer their customers automated, technology-augmented investment services (‘Robo’ advice).
From simple savings products for retail, portfolios for the mass affluent, and more detailed portfolios for private banking clients, Bambu’s B2B digital platform provides innovative, cost-effective ease of use and an efficient entry point into the world of wealth.
Acorns
Located in the USA and founded in 2012, Acorns is the first company to offer micro-investing to the world. The proprietary financial engine allows customers to round up spare change from everyday purchases and invest these sub-dollar amounts into a professionally managed portfolio of index funds.
Simply connect any credit or debit card and a checking account, then spend money like you normally do to watch your portfolio grow with the market. It’s easy to start when you can invest any amount, any time with no commissions or minimums.
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FAQs
A consumer finance company does not receive deposits but does make loans to customers for business or personal use. It derives its profits from the interest on these loans. It is also called simply a finance company.
Credit cards: Used by consumers to finance everyday purchases.
Auto loans: Used by consumers to finance the purchase of a vehicle.
Student loans: Used by consumers to finance education.
Personal loans: Used by consumers for personal purposes.
The major consumer financial markets include mortgage lending, student loans, automobile loans, credit cards and payments, payday loans and other alternative credit financial products, and checking accounts and substitutes.
Consumers can borrow from several sources. The most important sources of consumer loans include deposit-type financial institutions, consumer finance companies, sales finance companies, life insurance policy loans, real estate equity loans, friends and family, and pawnshops.
The most common consumer loans come in the form of installment loans.
Conclusion
All In all, choosing a consumer finance company to work with during business operations is complex.
But by using the information in this article, you can ensure that you are dealing with one of the best consumer finance companies for your specific needs.
Considering all of this, the best approach to consumer financing is to partner with a company that offers flexible finance plans.
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