They may be repayable in regular installments or by a single payment made for the loan, plus the finance charge, at the end of the time period. The lending agency, the credit rating of the debtor, the purpose of the loan and the collateral available are determining factors in the total finance charge. Sources of consumer credit Banks lend money for a variety of reasons. Most consumer bank loans are repaid on the installment basis, much like an installment sales plan. The annual percentage rate compares favorably with other sources, but standards for qualifying for a loan may be higher than those of other creditors.
Many banks also offer an automatic overdraft or advance to their checking account customers.
To use this feature, the customer must qualify in advance for such a loan and a ceiling is placed on the amount a customer may borrow. To activate such a loan, all the customer has to do is write a check for more than the amount that is in the checking account. Repayment is made either through regular installments or from the next deposit into the account. Savings and loan associations have recently been allowed by law to expand their consumer lending options. The annual percentage rate and qualification standards for a loan are comparable to those at commercial banks.