Question from a reader:
Please tell me your recommended consumer finance options. I have been working as a part-time worker for three years, earning an annual income of 3.8 million yen, and I live alone. I would like to borrow 400,000 to 500,000 yen for the first time. If anyone has detailed knowledge, I would appreciate your guidance on how to
proceed. Comments advising against this are unnecessary.

Considerations and Recommendations for Consumer Finance

Recently, I received a question from a reader who wants to use consumer finance. Specifically, it was from someone who has been working as a part-time worker for three years, earning an annual income of 3.8 million yen, and living alone, who wants to borrow 400,000 to 500,000 yen for the first time. In this article, I will share insights on consumer finance from a legal perspective and how to choose a provider, hoping it will be helpful.

What is Consumer Finance?

First, let’s briefly review what consumer finance is. Consumer finance refers to financial institutions that primarily provide small loans to individuals. For example, you can borrow money for various needs such as living expenses, unexpected costs, or educational funds. Legally, consumer finance operates under the “Money Lending Business Act.” This law stipulates the maximum interest rates, lending conditions, and protections for users. Particularly regarding interest rates, there is a cap set, and exceeding this limit is illegal. Therefore, there is a reassuring aspect to using these services.

How to Choose Consumer Finance

Now, there are several important points to consider when choosing consumer finance. I myself once had a friend who said, “I need money urgently,” and I researched at that time, so I hope you find my insights helpful.

1. Compare Interest Rates

Interest rates for consumer finance vary by company. Generally, interest rates are displayed as annual rates, with around 18% being common. The lower this rate, the lighter the repayment burden will be. However, the total repayment amount also changes based on the loan amount and repayment period, so it’s important to compare thoroughly before making a decision.

2. Check the Repayment Plan

The plan for repaying the borrowed money is also important. By choosing a plan that fits your lifestyle—such as how much you will repay each month and the number of repayments—you can continue to repay without strain. For example, a friend of mine chose a plan that allowed for larger repayments during bonus periods to reduce interest as much as possible.

3. Availability of Interest-Free Periods

Some consumer finance companies offer campaigns where you can borrow without interest. They may provide interest-free loans for a certain period to first-time users, so taking advantage of this can be a good option. However, be sure to pay close attention to the interest rates after the interest-free period ends.

4. Research Reviews and Reputation

It’s also important to research reviews and reputations from actual users. You can easily find information online, so it’s a good idea to refer to others’ experiences to determine whether a provider is trustworthy. I also made my final decision based on stories I heard from friends and reviews.

Legal Considerations

When using consumer finance, it’s essential to be cautious from a legal perspective. In particular, excessive borrowing or falling into a situation where repayment becomes difficult can ultimately lead to risks such as bankruptcy. Here, I’d like to share a story about someone I know. He was in trouble due to unexpected expenses and borrowed money from a consumer finance company. Initially, everything went smoothly, but as repayment became tough, he started borrowing from other financial institutions. As a result, he ended up declaring bankruptcy. Such situations are not uncommon, and without a solid repayment plan, you can find yourself climbing a dangerous mountain.

Conclusion

Using consumer finance can sometimes be an effective means, but it’s important to have knowledge about laws and contracts and to make appropriate judgments. Carefully consider the loan amount, interest rates, and repayment plans, and choose a service that suits you. I myself learned about using financial institutions when I was younger, and now I manage my household finances well. To avoid future risks and lead a stable life, knowledge is power. I hope you also make informed decisions that will enrich your life.