With credit becoming a hot topic, many people have questions. One of the biggest is, what are credit providers? Credit providers are companies that offer financial solutions.
These solutions range from loans, credit cards, and overdraft facilities. They are regulated by an independent body that is completely responsible for ensuring the conduct of the firms. It is of the utmost importance to research the different options available to you, especially when it comes to looking for credit.
Many different providers will offer different benefits depending on your individual circumstances. Keep reading to learn about what are credit providers.
What are credit providers?
For the purposes of the Privacy Act, the following entities can be considered credit providers:
- Specific organisations or small business operators that provide credit to people in connection with the hiring, leasing, or even renting of goods.
- A bank.
- An organisation or small business operator that supplies goods and services where payment is deferred for over 7 days. This applies to telecommunications carriers, energy, and water utilities.
- A retailer that issues credit cards in compliance with the sale of goods or services.
- An organisation or small business operate if a large part of its business is the provision of credit. This applies to building societies, finance companies, or credit unions.
Debt collectors and so on may also be considered credit providers. However, general insurers, employers, or real estate agents are not credit providers. So what are credit providers?
1. Banks
Everyone knows that banks are the most popular credit providers. They are financial institutions where people and organisations can go to borrow and invest their money. Your interest rate will depend greatly on your credit history, account history, and loan size.
The types of credit that are usually offered at banks range greatly. From secured credit such as car loans and mortgages to unsecured credit such as personal loans and credit cards. They differ greatly. Secured credit involves using an asset as security that can be taken if you default on your loan.
Unsecured credit involves no asset, and the terms depend on credit history and your application details.
2. Payday loan companies
Payday loans are typically more flexible in terms of lending. Especially for people with a poor credit history. Though payday loans aren’t always easier. There is an increased risk, and the short-term factor of the loan can entice rather high-interest rates.
There is now a cap on the amount of interest they can charge. However, the cost is still expensive. Some lenders will avoid interest and instead apply a fee. Payday loans can definitely be a good tool, but the high-interest rates can make them difficult.
Missed repayments are common with payday loans. Missed repayments could make it more difficult to get credit in the future. It is an important thing to know about what are credit providers.
3. Grocery stores
Some grocery stores such as Coles and Woolworths offer their own credit cards. They usually fall into two different categories. The first is a store credit card which is similar to a normal credit card. However, it is usually limited to a particular chain or group.
They come with plenty of benefits. The second is credit cards that are just linked to the store. They can be used anywhere but will have the grocery store’s branding. Though these cards are linked to the store, the credit could still be provided by a bank.
4. Credit unions
Credit unions are considered an alternative to banks. This is because they provide financial products and services. The difference is that the money used is normally given back to the local community. Borrowing from a credit union does require a membership and these members may all share something in common.
These things include:
- Location
- Jobs
- Trade unions
Usually, credit unions provide smaller loans than the big banks do. They can also be a far cheaper alternative. It is good to know about credit unions when looking at what are credit providers.
5. Peer-to-peer lending
When looking at what are credit providers, it is good to know about peer-to-peer lenders. Peer-to-peer lending connects individuals or companies who are looking to borrow money with prospective lenders searching for a higher return on their investment.
It is often known as crowd-lending. Lenders can also receive better return rates than many other savings accounts. However, there is no guarantee the money will return. If borrowers default on their loans, it may be seen as more of an investment than a savings method.
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