Credit can help you do many things: buy your dream house, get a
new car or pay for essential household items. But getting into debt
is easier than getting out of it. Fees, charges and interest rates
can make credit very expensive, especially if you borrow more than
you can afford. Find out how to stay in control of your credit and
Work out if you can afford to
If you're thinking about borrowing money, ask yourself the
What am I borrowing money for?
Is it for something you need, or something you want? Are you
borrowing money to help someone else? See loans involving family
and friends before you go ahead. Or do you need credit to pay
electricity and other bills? See trouble with debt for options other
Is borrowing my best option?
There may be other ways to get what you want without borrowing
money. For example, you can save and buy the item outright, or put it on lay-by and gradually pay it off. If you
are on a low income, you may qualify for a no or
Have I checked my credit health?
Have you got a free copy of your credit report? Credit providers use your
report to assess your capacity to repay a new loan, credit card, or
mobile phone plan, or if you seek to increase your limit on an
existing credit card. See credit reports and credit
Can I afford the repayments?
Work out your current spending and how much you can afford in
Allow for interest rate rises, unexpected expenses and financial
emergencies. Before you borrow, try living on less for a few months
to see if you can afford the loan.
Is now the right time to borrow?
Think about any changes that might affect your income. How
secure is your job? Are you planning to start a family or take time
off for study? Do you have any health issues that may mean you'll
earn less for a while? If you said 'yes' to any of these questions,
you might be better off saving now and borrowing later.
Know who and what you're dealing
Credit providers and brokers that are not licensed are
operating illegally in Australia. Make sure you only deal with
a company or person who is licensed.
Search ASIC Connect's Professional Registers to
check your credit provider has been licensed or you can
phone ASIC's Infoline on 1300 300 630.
Make sure you know what you're signing up for before you go
ahead. Check the terms and conditions of any loan contract,
including penalties for missed repayments or for paying off a loan
early. See credit contract.
Warning about loan scams
Be suspicious if you are contacted out of the blue by a company
offering loans with low interest rates, as they could be operating
a loan scam. Also be cautious if you come across a website offering
loan applications online as you will need to check they are
legitmate before apply for a loan. See our tips on how to pick a loan scam.
Don't be pressured into buying
Salespeople use different techniques to persuade you to buy
their product or service. Learn how to avoid sales pressure so you
don't end up with something you can't afford and/or don't really
The best way to stay in control of your debt is not to fall
behind on your repayments. See making repayments for tips on paying
off your loans faster.
Work out your how much your repayments will be.
Get help if you can't pay your debts
It's important to act quickly if you're having trouble making
repayments. Keep paying what you can afford. Even though it can be
difficult to face the problem, ignoring it will only make things
worse. Contact your credit provider without delay. There are places
you can go for help. See trouble with debt.
Complain if things go wrong
Try to resolve any problem with your credit provider or broker
first. If you aren't satisfied, go to ASIC's how to
complain webpage or call ASIC's Infoline on 1300 300 630.
Case study: Diane gives herself room to move
took out a home loan 3 years ago but her repayments have gone up
due to a few interest rate rises. She had budgeted for these
interest rate rises when she took out her loan, but things are
Now that she has bigger repayments, Diane decided to use a
budget planner to work out how much she was spending on her
mortgage, food, transport and petrol. The budget planner helped her
see where she could cut back on her spending, like car pooling 3
days a week to save on petrol. Diane feels better now that she has
fine-tuned her budget and knows exactly how much she has for her
What if your loan is
If your loan is rejected, there are some things you can
do. To find out more, see loan rejection.
Whether you're getting a home loan or thinking
about increasing your credit card limit, be a smart borrower and
keep your debts under control.
Last updated: 25 Jan 2017