Simply put, Consumer Credit is credit given to consumers so that they can buy goods or services.
Consumer credit allows you to get an advance or loan to spend money on products or services for family, household or personal uses that are repaid at a specified future date.
One of the main advantages of consumer credit is that consumers can buy goods and services now, and only pay for them later. This means that you can purchase items you need when your funds are low as it offers a backup form of payment.
A disadvantage of consumer credit is that it is costly. If you fail to repay a loan or a credit card balance, this will negatively impact your credit score (a number based on your credit history that evaluates your creditworthiness), and will results in late fees and penalties.
The Consumer Credit Index (CCI) therefore, measures consumer credit health. It combines actual consumer borrowing and repayment behaviour with variables that impact on household finances.
This provides valuable business insights with which to evaluate consumer behaviour, financial distress, household cash flow, and household budget dynamics.
The index estimates household cash flow in order to determine financial pressure or financial relief.
It does this by looking at the following:
- Whether or not you in three months in arrears
- Whether you pay your debts timeously
- Your household income and inflation, and
- Debt repayment costs.
The CCI is based on a 100-point scale where any number above 50 indicates consumer credit health has improved over the past year; any number below, shows it has deteriorated.