Using credit carefully

If you’re thinking of taking out a personal loan for a holiday, applying for a credit card or signing up for car finance? The good news is you are covered by a law known as the National Credit Code. Before you use credit, you need to know the ins and outs.

Before you borrow money, the credit provider must give you a pre-contractual statement and information statement. This information will tell you all the costs of the loan so you’ll know whether you are able to afford it.

Early payouts

An early pay out fee may be charged in cases where a borrower pays back the total amount of money owed under a credit contract, before the contract expires. This charge is most commonly found in home loan contracts.

An early pay out fee is charged by credit providers to help them recoup money they would have received from interest charges. In order to charge an early pay out fee, the fee must be disclosed in the original credit contract, or the credit provider must give you notice in writing of the introduction of such a fee.

Will I pay less interest if I pay out my loan early?

Yes, the interest charges depend on the actual time money is owing. However, you may still be up for an early termination charge and other fees if it’s the contract.

Can my contract be changed by my credit provider?

Yes, but only if your contract specifies that it can be changed and tells you how you’ll be informed.

What happens if I have problems making repayments?

The National Credit Code allows you to get help if you’re unable to make repayments due to temporary hardship like illness or unemployment. Get in touch with your credit provider immediately if you think you may have a problem.

You can agree on an arrangement. If you’re unable to reach an agreement, contact your credit provider's external dispute resolution scheme or a financial counsellor, or get legal advice about how to apply to the court to have your contract changed.

What happens if the credit provider asks for a guarantor?

If a relative, friend or partner agrees to be a guarantor for your loan, it means they are guaranteeing to repay the loan to the lender. Being a guarantor is not to be taken lightly. It makes that person liable for your debts, if you default on the loan. Under the National Credit Code, guarantors must be given a copy of the loan contract and a document explaining their rights and liabilities before signing a guarantee.


Consumer credit insurance covers you in case you can’t make repayments. Credit providers can’t force you to take out this insurance but they can insist that you insure mortgaged goods against loss or damage (eg. comprehensive insurance on a motor vehicle). The insurance doesn’t have to be arranged through the lender, we encourage you to shop around.

Finance brokers

The Consumer Credit Administration Act 2003 protects consumers who use finance brokers to get consumer credit and housing loans. The Act regulates the conduct of finance brokers by:

  • requiring records of transactions to be made and kept for seven years
  • requiring contracts to be in writing and signed by the person to be charged commission
  • requiring valuation fees paid by consumers to be held in trust and any balance remaining after payment of the valuer to be refunded
  • prohibiting the payment of commission before the credit is secured, or where the credit secured is for an amount less than specified, or on less favourable terms than those specified in the written contract
  • providing for consumer redress through the NSW Civil and Administrative Tribunal when excessive commission is charged  and
  • enabling disciplinary action to be taken by the Fair Trading for breaches of the Act.

If you’re having issues with a finance broker, we may be able to help you. Contact your nearest Fair Trading Centre on 13 32 20 for more information.

The Credit and Investments Ombudsman (CIO) helps consumers, at no charge. CIO is an easily accessible, impartial and independent service authorised by the Australian Securities and Investments Commission (ASIC) and the Office of the Australian Information Commissioner (OAIC).

Telephone: 1800 138 422
Postal address: PO Box A252, Sydney South 1235.

Tips about using credit


  • Pay your account in full each month whenever possible.
  • Take advantage of any ‘interest free’ period.
  • Use your card for purchases only, not cash advances.
  • Use debit cards ie. where money is deducted straight from your bank account.
  • Remember that the department store cards might have higher interest rates.


  • Don’t treat credit cards as ‘money on tap’.
  • Don’t buy something on credit that you wouldn't have bought for cash.
  • Don’t ignore the warning signs such as reaching your credit limit or needing to use your card for a cash advance.

Personal loans can be a good alternative to credit cards. The interest rate is often cheaper and encourages a more disciplined way of paying a loan if you're tempted to only pay the minimum required on your credit card account.

Check your credit rating

Credit reporting agencies hold information on your credit history. The type of information can include loan applications or enquiries made through member subscribers, late payment and default history, address and employment details. Credit reporting agencies may be able to check your credit worthiness and provide you with information on whether you’ve had problems repaying a loan.

To get a copy of your individual credit file, call one of the credit reporting agencies listed below or visit their website.

Veda Advantage Public Access

Telephone: 1300 762 207
Postal Address: PO Box 964, North Sydney NSW 2059.
Fax: (02) 9951 7880

Dun & Bradstreet

Telephone: 1300 734 806
Postal Address: PO Box 7083, Sydney NSW 2001
Fax: (02) 8270 2866

The Federal Privacy Act 1988 contains strict safeguards for handling people’s consumer credit information by the credit industry. If you believe a listing with one of these credit agencies is incorrect, the Federal Privacy Commissioner might be able to help.

Tel: 1300 363 992
Postal Address: GPO Box 5218, Sydney NSW 2001.

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