Indigenous factsheet: Credit
ONLINE TEXT VERSION - July 2017
What is credit?
You use credit to buy things when you don't have the cash.
Credit means you are borrowing money that you have to pay back
If you use credit you end up paying more than if you paid in
cash. This is because you have to pay back the money you borrowed
plus interest, fees and charges (depending on how much you borrow).
Also, if you don't pay the money back on time, there will be extra
Tip: Check the interest rate
Always check the rate of interest you will be charged. The
higher the interest, the more money you will have to pay
Types of credit
There are many different types of credit:
- Credit cards
- Home loans
- Car loans
- Rent to buy deals
- Rental of household goods
- Interest-free deals
- Book up
- Payday loans (short term and small amount loans)
Questions to ask
Too much credit can cause money problems. Before you use credit
to buy something ask yourself these questions:
- Is credit the best option for me - could I save the cash
- Can I afford to pay back the money plus the extra charges?
- Have I read the documents before signing them?
Case study: Mike gets a no interest loan
Mike's fridge broke down and he needed $400 for a new one. Mike
thought about getting a payday loan but found out he would be
charged $96 in fees and 40% interest if he couldn't pay it back in
time, meaning Mike would have paid more than $800 for the $400
Mike's sister suggested he apply for a loan through the No
Interest Loans Scheme at the local community centre. He applied,
got the loan, and bought his new fridge. Mike was able to pay back
the loan over 18 months.
See a free financial counsellor before you sign a credit
document. They can also help you sort out your debts. Call 1800 007
ASIC Indigenous Helpline: 1300 365 957 ASIC Infoline: 1300 300
Last updated: 04 Jul 2017