Tips for the Responsible Use of Credit
Because credit can easily be obtained, it’s easy to forget that it’s simply another name for debt. The first step to using credit wisely is to add up the various costs of borrowing, including interest, fees and other charges, so that you know the total cost up front before you borrow.
Ability to repay
Before taking out any form of debt, you should make sure you can afford to repay it. When you apply for a loan, we will conduct a check with you to make sure you have enough surplus income to service your loan. It’s important to ensure your new loan commitment will not cause difficulty in other areas of your life.
Know your loan
If you have any questions about the terms and conditions of the loan, do not hesitate to ask when you apply. If your application is approved, you may be asked to go to our branch to sign your contract. Be sure to allow yourself plenty of time to read through the loan contract so that you understand the terms and conditions. If you are not comfortable reading the contract in the branch, or would like independent advice, you can take a copy of the contract and return to sign it at a later stage.
Extra costs
When putting your budget together, don’t forget to include extra costs that you may incur when you make a purchase using credit. For example, consider the additional costs you incur when you purchase a car. In addition to your loan repayments you need to keep in mind the ongoing cost of fuel, insurance, registration, maintenance and road service.
Do not purchase things you cannot afford
When using a credit card it’s easy to spend more money than you earn each month and make purchases that you cannot really afford. Try the following tips to help avoid overspending on your credit card:
- Pay off your balance every month and at the very least pay more than the minimum payment amount.
- Avoid using one credit card to pay off another one.
- Keep your credit cards secure and don’t give them out to friends or family.
- Avoid owing more money on your credit card than you can pay back.
- Keep track of your credit card balance. Be sure to save your receipts so you can compare them to your credit card statement.
- Pay your bill by its due date.
- Think of a credit card as a short-term loan that has to be paid back within 30 days.
- Leave your credit card at home to avoid impulse purchases. This will give you a cooling-off period. If you still want the item after thinking it over, you can always go back and get it. Many times, you’ll find that it wasn’t as important as you first thought.
Managing payments with loan insurance
Even the most responsible money manager might get into financial difficulty due to sickness, injury, disease or involuntary job loss. This may affect your ability to meet your loan payments.
One preventative measure is to insure against these unexpected events by taking out loan insurance.
It is important to understand the insurance you are considering; does it suit your needs and will it cover the events you want to insure against? Make sure you read the terms and conditions and get independent advice if you are not sure.
Recognise the Need for Help
If you are in financial difficulty, ignoring the problem will not make it go away. You should contact us immediately to discuss any problems. We can outline options to help you get back on track.
You may also wish to seek the advice of an independent financial counsellor. There are many benefits in contacting a non-profit independent financial counselling service. Financial counsellors do not charge a fee and will carry out private interviews to assist you in looking at options for improvement and change. A financial counsellor may negotiate on your behalf and provide advocacy and information on a variety of issues from budgeting, to debt recovery.
New South Wales – Credit and Debt Hotline – 1800 808 488
The following websites provide further information on responsible money management:
If you are experiencing financial difficulties
We will work with you in a constructive way if you experience genuine difficulties meeting your financial commitments. With your agreement and commitment, we will try to assist you to overcome those difficulties. We will do this whether or not you have a right to seek a hardship variation or change under consumer credit laws.
We will have procedures in place to ensure we:
- Adhere to hardship variation or change provisions of Consumer Credit Laws
- Respond promptly to any request or application made to us (we may also initiate contact to discuss your financial situation)
- Genuinely consider your application or request, taking account of your situation. However, we will only be able to do this if you provide us with the financial information and documents we may reasonably need to assess your situation for ourselves
- Encourage you to keep making whatever payments you can while we are considering your request
- Consider longer term as well as short-term financial issues when they are relevant. If you are experiencing longer term difficulties, we will try to develop an appropriate solution with you to allow you to meet your obligations
- Not list your default on your credit reference file while we are considering your application or request
- When you have made an application or request in respect of a debt, not sell that debt to a debt buy-out business while we are still considering the application or request
- Suggest other options or avenues that may be available to you, if we are unable to agree to your application or request
- If we agree on a plan to assist you, summarise this in a letter to you
- If we are unable to assist you, advise you promptly in writing, and
- Refer you to a financial counselling or similar service in appropriate cases (subject to availability).
