Understanding loans and credit

Things to think about

There are things you need to think about when taking out a loan or using credit, this includes:

• if this is something you need now
• if you can save up for it and pay in full later
• if making repayments will make your budgeting tight
• if repayments will make it hard to pay for bills, rent or food
• if repayments will stop you from saving or having money for emergencies
• if there are other ways to get or pay for what you want.

Before applying for a loan or credit, review or make your budget. That way you’ll know if you can afford the repayments. You can use our tools for managing your money. The simple money manager tool can help you to budget. The rent versus buy calculator can help you work out the costs of renting versus buying household items.

If you apply for a loan or credit, always check the terms and conditions. There’ll be things lenders won’t tell you up front. Don’t sign a contract if you still have questions.

There’s finance that’s safe and affordable like a no interest loan from Good Shepherd.

Think about talking to a professional, like a financial counsellor, before you take out a loan or credit. Find out about free financial help and information.

Types of loans and credit

There are many types of loans and credit with different fees, charges and interest rates.

Visit the Moneysmart website for advice about:

• pay day loans that can have high fees and charges
• how credit cards work and how to manage them
• debt agreements, as they may stop you from borrowing in the future
• rent to buy or consumer leases
• how buy now, pay later services work
• what to consider when consolidating loans
• the impact of bankruptcy on future borrowing and jobs
• what to do when you experience loan rejection on a loan or credit application.

No interest loans

No interest loans can be used for the purchase of essential goods and services. A no interest loan has 0% interest and no fees or charges ever. You can use them to help cover unexpected costs and pay the money back at a rate that’s manageable for you. Some of the essential goods and services you can use a no interest loan for include:

• household items like appliances, white goods and furniture
• car repairs and registration
• medical, dental, well-being and life event expenses
• bond and rent in advance for a new rental property with a registered agent
• rates
• costs associated with a natural disaster.

Find out more about no interest loans and a full list of what you can use them for on the Good Shepherd website.

Licensed lenders

If you get a loan or credit, it’s a good idea to protect yourself. This may mean taking the time to choose the right loan or lender.

There are laws that licensed lenders must follow when lending money to you.

Visit the ASIC website to:

• check for a licensed credit provider
• find out more about loans and credit card rules.

If you’re unhappy with a lender, find out how to make a complaint on the Moneysmart website.

Loan scams

Be cautious if you get a phone call or an email from a salesperson offering you a loan or credit. It could be a loan scam. Don’t give them any personal information over the phone or click any links in emails or text messages you think are suspicious.

Protect yourself by doing some research before you agree to anything. A scam can appear as a great deal but will cost you a lot of money if you’re not careful.

Protecting you from scams is important to us. Find out about how to identify scams and getting help with a scam or reporting one.

Find out about loan scams on the Moneysmart website.

Other help

Find out information about getting financial help and information.