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Simple English definitions for legal terms
consumer finance company
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A quick definition of consumer finance company:
A consumer finance company is a type of company that provides loans directly to individuals. They may also purchase loans from other companies that lend money to borrowers. These companies are different from banks because they do not accept deposits or offer other banking services. Consumer finance companies are sometimes called small-loan companies because they typically offer smaller loans than banks. They may also charge higher interest rates than banks because they lend to people who may not qualify for bank loans.
A more thorough explanation:
A consumer finance company is a type of nonbank company that provides loans directly to consumers or purchases notes from other companies that make loans to borrowers. These companies specialize in extending credit to individuals for personal use, such as buying a car or paying for medical expenses.
- Small-loan company: A finance company that deals directly with consumers in extending credit. For example, a small-loan company may offer short-term loans to individuals who need to cover unexpected expenses.
- Sales finance company: A finance company that purchases consumer installment paper arising from the sale of consumer durables "on time." For example, a sales finance company may purchase the installment contracts for a car dealership's customers, allowing the dealership to receive payment upfront while the finance company collects payments from the customers over time.
These examples illustrate how consumer finance companies provide credit to individuals for personal use or to finance purchases. They may offer different types of loans, such as short-term or installment loans, and may specialize in specific industries, such as automotive financing.