Finance:Guaranteed consumer funding

Guaranteed consumer funding is a type of credit similar to layaway, which allows consumers to purchase items on a payment plan regardless of their credit history.

This process requires signing a contract in which the consumer promises to make all of the payments in full by their due date. In return he will receive guaranteed credit and are allowed to use the product as he pays it off.

With this type of loan the consumer does not receive his purchased items right away, as he would using traditional credit purchasing methods. Instead he is expected to make a predetermined number of timely payments as a show of good faith. If those requirements are met, the consumer may collect his purchased items and continue to make the payments until the contract has been fulfilled and the item has been paid off. However, the item will cost as much as four times the actual value of the item. There have been many complaints from people that they did not get the item, even after it was paid for in full.

Due to the nature of the purchase and the terms of extended credit, generally these services do not have a cancellation or refund policy. However this information must be part of the signed contract in order to be enforced.

Along with secured loans / credit and layaway programs, guaranteed consumer funding is a good way to help re-build bad credit and establish credit for those without. Many "Credit Repair" claims are scams.

Seeing a payment contract to completion generally results in a positive report to the credit bureaus on your behalf.

If a contract is signed for the guaranteed credit services, then the consumer is protected by the truth in lending act which requires lenders to fully disclose all terms of the agreement to potential customers. These terms include but are not limited to: duration of the loan, required payments & their due dates, cancellation / refund policy, availability of the merchandise, and total cost to the consumer.

See also

• Christmas club
• Hire purchase
• Installment loan
• Savings account
• Savings stamp

References

• LA Times - The Lowdown on Layaway, Credit Card and Check Transactions
• Federal Trade Commission- Facts for Businesses Offering Layaways
• University of Florida - Layaway Purchase Plans
• St. Petersburg Times - The Unlost Art of Layaway
• Federal Trade Commission - Facts for Consumers