For risk control product managers, understanding the evolution history and core elements of credit products is not only a “make-up lesson”, but also a basic skill for building risk control strategies and designing system rules. This article systematically sorts out the development context and key structure of credit products, helps you understand the starting point and boundary of risk control from a product perspective, and is a knowledge map worth collecting.
In the modern economy and society, consumer credit is everywhere, whether it is the life app Meituan or the taxi app Didi, etc., they all provide consumer credit services. Of course, financial products and services from the perspective of consumers are different from the perspective of business operators designing products. This article will introduce the history of consumer credit and the elements of consumer credit products.
1. The history of consumer credit
The earliest credit behavior can be traced back to the Spring and Autumn Period and the Warring States Period, according to the “Guanzi”, there is a phenomenon of grain lending in the western part of Qi, but this system is not perfect, mainly a kind of reciprocal lending, people help each other solve temporary difficulties in production and life through borrowing, often based on favors and mutual assistance, rather than for profit purposes, more similar to a charity or reciprocal behavior.
In the Western Han Dynasty, with the prosperity of commerce, the credit industry also ushered in its first major development. Credit during this period was mainly based on in-kind lending, such as grain, coins, etc. Wealthy businessmen became the main suppliers of funds, and they needed to provide loans to the people who had funds and charged a certain amount of interest. At that time, the annual interest rate was generally about 20%, and this lending activity was relatively common, becoming one of the important sources of income for some wealthy families, but the phenomenon of usury also began to appear and was strictly controlled by the government.
During the Ming and Qing dynasties, the commodity economy further developed, and the demand for financial services increased, giving birth to financial firms such as banks, ticket numbers, and pawnshops. The bank was originally mainly engaged in currency exchange, and later gradually developed into the main credit lending, but consumer credit generally only occurs between acquaintances, relatives, and fellow villagers, with a strong human touch. Jin merchants played a role in promoting the concept of consumer finance during this period.
In 1985, the Bank of China issued the first credit card in China, the Bank of China “Bank of China Card”, marking the beginning of modern consumer finance in our country, but there were few users at that time. In 1998, affected by the Asian financial crisis, our country put forward a strategic policy to expand domestic demand, and the “Measures for the Administration of Personal Housing Loans” and the “Guiding Opinions on the Development of Personal Consumer Credit” were promulgated. Since the pilot of consumer finance companies in 2009, consumer finance products have become increasingly abundant and the number of service groups has been expanding.
The origin of modern consumer credit in Europe and the United States can be traced back to European and American countries in the 19th century. After the Industrial Revolution, productivity has been greatly improved, and various consumer goods have emerged, such as sewing machines and other industrial products have begun to enter households, but the price is relatively high, and it is difficult for ordinary families to pay at one time. As a result, some merchants began to offer credit sales methods such as installment payments to promote the sale of goods. In 1916, the U.S. government promulgated the Uniform Microfinance Act, which promoted the development of consumer credit from a legal level, and the establishment of the General Motors Bill Acceptance Company in 1919 further promoted the development of automobile consumer credit. By the 20s of the 20th century, consumer credit in the United States entered a golden age and was widely used in automobiles, home appliances and other fields.
In the period of active market economy and economic growth, private lending has a positive effect on economic development, and the government usually retains its living space, while preventing problems such as excessive interest rates through supervision to promote the stable development of the market.
2. Elements of modern consumer credit products
Without a good product, no matter how good the risk control strategy is, it cannot achieve the profitability of the overall financial product, and the content that needs to be confirmed when planning consumer credit products includes: the form of the product, the product terms to attract good customers and avoid bad customers, and the credit process of the entire product to achieve the profit target.
1. Definition and classification of credit products
A product is a collection of loans or lines of credit that share the same set of access criteria and terms. For example, a new car loan usually has a set of loan terms, while a used car loan is another set of loan terms, each with its own access criteria, monitoring metrics, and profit model.
——”The True Scriptures of Consumer Finance”
Classification by use
- Housing loans: It is the main component of consumer credit, accounting for a large proportion. Including loans for the purchase of ordinary housing for self-use, as well as loans for urban residents to repair and build their own houses, generally need to be collateralized by the purchased houses.
- Auto loan: It is the second largest consumer credit type after housing loans. Provided by commercial banks, automobile enterprise group finance companies and auto finance companies, the proportion of loan purchases is increasing.
- Credit card: It is one of the common forms of consumer credit, including general cards, gold cards, platinum cards, commercial cards, private label credit cards and other types. Users can spend within the credit limit, supporting installment repayment and recycling of the credit.
- Student loans: divided into national student loans and general commercial student loans. The national student loan is to support students from economically disadvantaged families to pay tuition fees and living expenses, and the education department sets up a special account to subsidize the interest; General business student loans are loans provided by banks to students to pay for tuition, living expenses and other study-related expenses.
- Comprehensive consumer loan: No specific consumption use, the borrower needs to provide a valid right pledge guarantee recognized by the lender or a legal and effective real estate as a mortgage guarantee, etc., with a loan amount of 2,000 yuan to 50,000 yuan and a term of six months to three years.
- Tourism loan: It is a loan issued by the lender to the borrower to pay for travel expenses, which generally needs to be pledged by the valid rights recognized by the lender as pledge guarantee or a solventive unit or individual with the ability to repay the principal and interest of the loan and bear joint and several liabilities as a guarantor.
- Durable consumer goods loans: Used to purchase large durable consumer goods, such as home appliances, electronic products, etc., providing consumers with the convenience of enjoying large goods in advance.
- Other consumer loans: It also includes various forms such as medical loans, decoration loans, education loans (non-student aid, such as extracurricular training, etc.), tourism loans, etc., to meet people’s capital needs in different life scenarios and consumption needs.
Classified by guarantee method
- Credit loans: Mainly issued based on the borrower’s credit status, without the need to provide collateral or collateral, such as short-term credit loans, partial credit card overdrafts, etc., but usually have high credit requirements for borrowers.
- Mortgage: Borrowers need to provide certain collateral, such as real estate, vehicles, etc., to reduce the risk of financial institutions. Housing loans, car loans, etc. are mostly used in this way, and the loan amount is generally related to the value of the collateral.
- Pledge loans: Borrowers need to provide valuable items or rights as pledges, such as certificates of deposit, bonds, insurance policies, etc., and financial institutions determine the loan amount based on the value of the pledge, which is relatively risky.
- Guaranteed loan: A third party provides a guarantee for the borrower, and when the borrower is unable to repay the loan, the guarantor is responsible for repayment. It is suitable for borrowers with average credit or lack of collateral, but requires a suitable guarantor.
2. Credit product limit
Personal consumption credit: generally based on factors such as personal income, assets, and credit status. For example, the limit of a credit card is usually within tens of thousands of yuan, and for ordinary office workers, it may be about 5,000 yuan to 20,000 yuan; Personal consumption loans, such as decoration, car purchase, etc., may be about 100,000 yuan to 1 million yuan.
Housing credit: The amount mainly depends on the total purchase price, down payment ratio and the borrower’s ability to repay. Generally, it does not exceed 80% of the total purchase price, and the amount may be higher for the first home and the buyer has good credit and stable income, but for investment or second homes, the down payment ratio and loan amount will be adjusted accordingly.
Small and micro enterprise credit: The amount is usually determined according to the business scale, cash flow, tax payment, collateral value, etc. of the enterprise. For example, based on the annual tax payment of the enterprise, the approved amount is generally about 1 million yuan to 10 million yuan according to a certain multiple.
3. Pricing of credit products
Benchmark interest rate reference: The loan benchmark interest rate announced by the central bank is an important reference indicator, and financial institutions will float pricing up and down based on factors such as market conditions, their own cost of funds and risk appetite. For example, the loan prime rate (LPR) on June 20, 2025 is: 3.0% for 1-year LPR and 3.5% for LPR over 5 years.
Risk premium: The risk premium is determined based on the borrower’s credit risk profile. Borrowers with lower credit ratings and higher default risks will have higher loan interest rates accordingly. For example, individuals or small and micro businesses with low credit scores may face interest rates that are 1-3 percentage points higher or even higher than those of customers with good credit.
Market supply and demand: When the market is highly competitive, financial institutions may appropriately reduce loan interest rates in order to attract customers. When the market is tight and credit demand is strong, interest rates may rise. For example, when the Internet finance industry emerged, in order to compete for market share, the initial interest rate of some online lending platforms was relatively low.
Term factors: The longer the loan term, the higher the interest rate usually because long-term loans face relatively greater risks, such as inflation risk, risk of changes in borrower’s financial situation, etc. For example, home loans generally have longer terms, and interest rates may be 1-2 percentage points higher than short-term consumer loans.
4. Number of credit product periods
Short-term credit: The term is usually less than 1 year, such as personal credit card installment repayment, generally there are 3, 6, 9, 12 installments and other options; Short-term working capital loans for small and micro enterprises generally range from 3 months to 1 year.
Medium-term credit: the term is about 1-5 years, such as personal auto consumer loans, the term is generally 2-5 years; Medium-term project loans for small and medium-sized enterprises usually have a term of 3-5 years.
Long-term credit: with a term of more than 5 years, housing loans are the most common long-term credit products, with a general term of 10-30 years; The loan term for large-scale infrastructure projects will also be longer, possibly 10-20 years or even longer.
5. Repayment method of credit products
- Equal principal and interest: The monthly repayment amount is fixed, including principal and interest, and the proportion of principal in the monthly repayment increases month by month and the proportion of interest decreases month by month. The advantage is that the monthly repayment pressure is balanced, which is convenient for borrowers to make capital planning; The disadvantage is that the total interest expense is relatively high. It is suitable for borrowers with stable income, limited repayment ability and do not want excessive repayment pressure in the early stage, such as office workers.
- Equal principal: The principal returned every month is fixed, and the interest is calculated according to the remaining principal, and the monthly repayment amount decreases month by month. The advantage is that the early repayment pressure is greater, but the total interest expense is relatively small; The disadvantage is that the early repayment amount is high, which puts greater financial pressure on the repayer. It is suitable for people who have a certain economic foundation, can afford higher repayment in the early stage, and want to have a low total interest expense, such as civil servants and employees of state-owned enterprises.
- Interest before principal: Before the loan maturity date, you only need to repay interest every month, and repay the principal in one lump sum when maturity. The advantage is that the early repayment pressure is small, and only interest needs to be paid every month; The disadvantage is that the last installment is under high pressure and the total interest expense is high. It is suitable for borrowers who need short-term capital turnover and are expected to have a large inflow of funds at a certain point in the future, such as small and micro business owners, individual industrial and commercial households, etc.
- Borrow and repay at any time: Borrowers borrow and repay at any time according to their own needs, and interest is calculated according to the actual number of days of use. The advantage is that it is flexible and convenient, and can adjust the borrowing and repayment time at any time according to its own capital needs, effectively reducing interest expenses; The disadvantage is that the borrower needs to have strong financial planning and liquidity management skills. It is suitable for people with frequent capital flow and short-term capital turnover needs, such as freelancers, self-employed people, etc.
- Combination repayment: Divide the loan amount into several parts and use different repayment methods to combine, such as equal principal in the early stage and equal principal and interest in the later stage. The advantage is that the repayment plan can be flexibly customized according to the borrower’s financial situation and needs, and the repayment structure can be optimized; The disadvantage is that the repayment method is more complex and requires the borrower to have a clear understanding and planning of their financial situation. It is suitable for people who have high requirements for financial planning and have certain financial management skills.
When designing market credit products, financial institutions usually consider various factors to meet the needs of different customers while ensuring that their own risks are controllable and returns are maximized.
The five principles of consumer credit business management in the “True Classic of Consumer Finance”
1. The principle of risk-return balance
The level of risk and return must be reasonably balanced, and profit maximization is more reasonable than loss minimization.
2. The principle of business planning to prepare for a rainy day
Planning when acquiring and managing accounts can reduce problems with collection and write-off.
3. The principle of management through probability
Management is carried out through statistical technical control and prediction of risk probability, rather than trying to eliminate bad debts.
4. Adopt the principle of business index system management
Establish a complete performance indicator system, with dedicated personnel to analyze these performance indicators and use the analysis results for daily business.
5. Risk management principles with clear rights and responsibilities
Regardless of which method is used for risk management, the person responsible for risk control management must have clear responsibilities and authority.
