How to be Money wise by howardtheduck

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									How to be Moneywise




• Applying for credit and the credit contract

• Creating a budget and sticking to it

• Managing debt

• All you need to know about loans

A consumer guide from the Office of Fair Trading
Minister’s message
No matter who you are or how much you earn, equipping
yourself with the knowledge of using and managing money
wisely can make a real difference to your financial health and
reduce the chances of getting into financial difficulties.
Australians are using credit more than ever before. The average
number of credit purchases made per month in Australia since
1998 has almost tripled.
Australians spent $169.6 billion using credit in 2005 - an
increase of $11.7 billion from 2004.
Consumers can access credit nearly everywhere - in department stores, furniture
shops, jewellers, car yards and real estate agents, as well as from banks, credit
unions and even over the internet.
Despite this widespread use of credit, many consumers have only a limited
knowledge of their rights and responsibilities under the law.
Used sensibly, credit can be useful but it does come at a price.
How to be Moneywise provides advice on how to use credit and money wisely to
avoid getting in over your head. If you are already experiencing financial difficulties,
the guide also provides advice and contacts to help you make sound financial
decisions to get you back on track.




Margaret Keech MP
Minister for Tourism, Fair Trading, Wine Industry Development and Women




Disclaimer
This publication aims to provide consumers with a general understanding of their rights and
responsibilities in the Queensland marketplace. It is not a comprehensive statement of the law and the
law may change at any time.
The laws referred to in this guide are complex and various qualifications may apply to the provisions in
different circumstances. You are encouraged to obtain independent legal or financial counselling advice
if you are unsure of how these laws apply to your situation.
Acknowledgements                          Contents
This publication is based on
                                          Minister’s message ........................................... i         Student loans ................................................. 25
information published by the                Disclaimer .......................................................i      Higher Education Contribution Scheme
following organisations:                  Acknowledgements .......................................... ii             (HECS)/Higher Education Loan Programme
• Legal Aid Queensland;                     Feedback........................................................ ii      (HELP) ..........................................................25
• Australian Securities & Investments     What is credit?.................................................. 1      Credit cards .................................................... 25
                                                                                                                     Offers to increase your credit limit.................26
    Commission (ASIC);                    Credit and the law............................................. 1          Benefits of using a credit card.......................26
• Consumer Credit Legal Centre, NSW;      Borrowing money always costs money .............. 2                        Repaying your credit card debt ......................27
• NSW Office of Fair Trading;               Easy money or debt trap? ................................2               Store cards ...................................................27
                                          Working out your budget and what you can                                   Charge cards ................................................27
• Office of Business & Consumer
                                          afford to borrow ................................................ 3      Credit alternatives .......................................... 27
    Affairs, SA;                            What is your income? ......................................3             It’s easy to get carried away ..........................27
• Consumer magazine, Consumers              What are your expenses? ................................3                Paying cash ..................................................27
    Institute of New Zealand; and         Budget planner ................................................. 4         Lay-bys .........................................................28
                                            Balancing the books .......................................6                The written lay-by agreement ....................28
• The Office of Fair Trading,                                                                                           Breaking your lay-by agreement .................28
    United Kingdom.                       Can you get credit? ........................................... 6          Credit unions ................................................28
                                            Your credit history...........................................6          Don’t forget the sales....................................28
We acknowledge and thank them for           Bad credit history? ..........................................7
                                                                                                                   Debit arrangements ........................................ 28
their assistance. We would also like to   Credit tips......................................................... 7     Debit cards ...................................................28
                                            Compounding interest ....................................8               Direct debits .................................................29
thank the following organisations for
                                          The credit contract ............................................ 8       Managing debt ............................................... 29
their input:                                Credit insurance ...........................................10           What are your debts? ....................................29
• Queensland Consumer Association;          After you’ve signed .......................................10               Rent ..........................................................29
• Lifeline Queensland;                      Joint borrowers and guarantors .....................10                      Mortgage...................................................30
                                            Witnessing a credit contract                                                Income tax ................................................30
• Financial Planning Association            – helping family and friends .........................11                    Court fines and court orders ......................30
   of Queensland;                         Finance brokers .............................................. 11             Child maintenance ....................................30
• Townsville Community Legal              Interest-free loans .......................................... 13             Gas, electricity, water,
   Service; and                             Interest-free is not fee free ............................13                telephone and mobiles .............................30
                                            Interest-free car loans ..................................14                Credit or store card ....................................30
• Centre for Credit and Consumer Law.                                                                                   Credit agreements .....................................30
                                            Understanding terms and conditions ............14
                                                                                                                     Struggling with debt .....................................31
                                          Car finance ..................................................... 15
                                                                                                                     Budgeting when you’re in debt .....................31
Feedback                                  Payday loans .................................................. 16            Take a look at your budget .........................31
                                            Laws governing payday lenders ....................16                        Can you spend less? ..................................31
Your feedback is important to us.           Disadvantages of payday lending..................17                         Can you increase your income? ..................31
Please make comment through our web       Personal loans ................................................ 17            Make an action plan .................................32
site at www.fairtrading.qld.gov.au or     Property loans (mortgages) ............................ 18
                                                                                                                        Bad response from creditors? ....................32
write to us at:                                                                                                         Getting deeper into debt? ..........................32
                                            Repay your mortgage quicker ........................19
                                              Small savings add up ................................19              Relationship debt ........................................... 32
The Editor – Moneywise                        Repay the mortgage before you save .........20                         To protect your financial position when you
Communication Branch                          Keep repayments high when rates                                        separate, think about: ..................................33
                                              go down ....................................................20            Bank accounts...........................................33
Marketplace Strategy Division                 Shorten the term .......................................20                Home loans, car loans and other
Office of Fair Trading                        Make repayments more often ....................20                         joint loans .................................................33
GPO Box 3111                                  Get a reducing mortgage ...........................20                     Credit cards ...............................................33
                                            Mortgage offset ............................................20              Utility bills .................................................33
Brisbane QLD 4001                           Redrawing equity ..........................................21               Rent and bond ..........................................33
                                            Refinancing ..................................................21            Keep copies of letters and documents
                                            Line of credit ................................................22           and get advice ...........................................33
                                            Reverse mortgages .......................................23              Property settlements ....................................34
                                            Vendor finance/wrap loans ...........................24

 ii                                                                                                                                                                                 iii
Getting help ................................................... 34       Australians are using credit more than       legally enforced by the courts whether
  Dispute resolution schemes .........................34
  Hardship variations to loan repayments ........35
                                                                          ever before. Despite the increased use       written or spoken.
  Borrowing to get out of debt                                            of credit, many consumers have only a
  (consolidation) .............................................35         limited knowledge of their rights and
  No interest loans ..........................................36
                                                                          responsibilities under the law.              Credit and the law
Harassment from creditors.............................. 36
  Collection of old debts ..................................37            Used sensibly, credit can be very            The Consumer Credit Code (the Code)
  Being taken to court? ....................................37
     The court process ......................................38
                                                                          useful but it does come at a price.          standardises the law across Australia
     What to do next .........................................38                                                       for credit provided to individuals
                                                                          The purpose of this booklet is to
  Writing letters to debt collectors                                                                                   (or a restricted strata corporation)
  - for a debt less than six years old .................39                provide you with information on using
                                                                                                                       for personal, household or
     Sample letter to debt collector                                      and managing money, in particular
     - for a debt less than six years old ..............39                                                             domestic purposes.
  Writing letters to debt collectors
                                                                          credit, wisely. Equipped with this
  - for a debt more than six years old ...............40                  knowledge, you will hopefully enjoy          The Code incorporates protections for
     Sample letter to a debt collector                                    your financial health and avoid              consumers of credit. For example, under
     - for a debt more than six years old ............40
  Sample letter to cancel your direct
                                                                          financial difficulty.                        the Code, lenders must tell you what
  debit arrangements ......................................41                                                          your rights and obligations are under
Glossary ......................................................... 42                                                  any credit arrangement. This means they
  Acronyms .....................................................43        What is credit?                              must give you a written contract that
Useful contacts ............................................... 43                                                     includes information on interest rates,
  Queensland Government ..............................44                  Credit is money that is borrowed and
                                                                                                                       fees, commissions and the payment
  Australian Government (Federal)...................44                    then paid back over time with an
  Industry and other Organisations ..................45                                                                schedule.
  Dispute Resolution and
                                                                          additional charge known as interest.
  Ombudsman Services ..................................46                                                              It’s your responsibility to read the pre-
                                                                          Consumers can access credit nearly
  Counselling Services.....................................47                                                          contractual statement, information sheet
                                                                          everywhere – in department stores,
Index .............................................................. 49                                                and contract so you fully understand
Notes.............................................................. 50
                                                                          furniture shops, jewellers, car yards
                                                                                                                       this information. You should always
                                                                          and real estate agencies, as well as
                                                                                                                       seek independent legal and financial
                                                                          from banks, credit unions and even
                                                                                                                       advice before you sign any contract, in
                                                                          over the internet.
                                                                                                                       particular for credit lending agreements.
                                                                          There are many types of credit
                                                                                                                       The Code also protects you if you get
                                                                          including personal loans, home loans,
                                                                                                                       into trouble. For example, if you lose
                                                                          credit cards, overdrafts, ‘interest-free’
                                                                                                                       your job or are sick, you can ask to
                                                                          loans, store credit cards, lines of credit
                                                                                                                       have your contract changed so that
                                                                          and payday loans.
                                                                                                                       you can better meet your repayments
                                                                          Credit can be provided between               (see ‘Hardship variations to loan
                                                                          people or between people and                 repayments’ on page 34).
                                                                          business. Technically, credit
                                                                                                                       If you believe your contract is unjust
                                                                          transactions are known as contracts
                                                                                                                       you can go to court and ask for it
                                                                          and the people or businesses involved
                                                                                                                       to be changed so you can meet
                                                                          are known as parties.
                                                                                                                       your repayments.
                                                                          A contract consists of an offer by one
                                                                          party and the acceptance of that offer
                                                                          by the other party. Contracts can be

 iv                                                                                                                                                             1
Borrowing money                             The disadvantages of using credit or a
                                            loan are:
                                                                                         Case study – cost of credit                        To help you determine your budget see
                                                                                                                                            page 4 & 5 for our budget planner, or
always costs money                          • it is easy to spend more than you
                                                                                         Jason wanted to buy a computer valued at
                                                                                         $1,000 on credit card, instead of paying cash      download a free budget planner from:
                                               intended and buy items you don’t          for it. The difference in paying cash versus       • www.fido.asic.gov.au in the “other
The cost of borrowing money is made            really need or want;                      credit ended up being quite significant after         calculators” section; or
up of interest, fees and charges. To        • it will cost you more than it would if     fees, charges and interest were added to the
                                                                                                                                            • www.cannex.com.au.
borrow money, you will most likely                                                       cost of the computer.
                                               you paid cash;
have to sign and enter into a credit, or                                                 If he paid cash, Jason was offered a discount
                                            • some of your income each month is          of $50, making the total cost of the computer      What is your income?
loan, agreement.
                                               tied up in the repayments;                $950. If he were to put it on credit with an
Before you sign a credit agreement, or      • if your circumstances change (e.g.         interest rate of 15% per annum, and pay it         Now add up all the money you have
contract, work out the actual amount           you lose your job), you might not be      back in two years by monthly instalments with      coming in:
                                                                                         the following conditions, the total cost would     • wages/salary/pension – include the
you will have to pay back in dollar            able to keep up the repayments and        be $1,229.76:
terms – you may be surprised how               may get into serious debt; and                                                                  money from any casual work you do;
                                                                                         • pay back $48.49 per month over two years
much it actually costs to borrow money.     • if you do not read the small print of          (accounting for monthly compounding            • benefits – child benefit, etc.;
Sometimes a loan with a higher interest        your loan or credit agreement very            interest of 15% per annum on balance of        • child support – record what you
                                                                                             the account each month.) = $1,163.76; and         actually get – if your ex-partner does
rate may be cheaper than a loan with a         carefully you will not understand         • pay $1.50 per month account keeping fee
lower rate because of the difference in        what you are agreeing to pay and                                                                not pay what they should, the Child
                                                                                             (x 24 months = $36).
the fees and charges that apply.               how the conditions change if                                                                    Support Agency may be able to help
                                                                                         If he paid by credit, Jason would be paying more
                                               you default.                              than the $950 or the initial value of $1,000.         (see Useful Contacts);
The cost of borrowing money varies                                                                                                          • contributions from other people
greatly depending on:                       Before you borrow money:                           Always add up the total cost
                                                                                                                                               in the household – do you have a
• the type of loan;                         • shop around for the best deal. Ask               of credit before signing up.
                                                                                                                                               lodger? Do any of your children pay
• the type of lender (bank, credit             yourself if you can buy it at a lower                                                           towards their keep?; and
   union, finance company, shop);
• how interest is calculated;
                                               price or get cheaper credit from
                                               another store or lender?
                                                                                        Working out your                                    • other – do you have any other
                                                                                                                                               money coming in regularly, or
• how long you take to pay it back; and
• whether it is secured or unsecured.
                                            • work out the real cost of credit and      budget and what you                                    occasionally (e.g. share dividends,
                                               check the interest rate. Ask what the                                                           interest from term deposits, etc.)?
Shop around and ask lenders what               cash price is and how much extra it      can afford to borrow
the full cost of the loan will be in           will cost to pay by instalments;
                                            • check your budget so you know
                                                                                        Before you apply for credit or a loan,              What are your expenses?
dollars and cents, as interest rates vary                                               you should figure out how much
between lenders.                               what you can afford to repay. If                                                             Use the budget planner to write down
                                                                                        you can afford to repay on a regular                what you spend each day, week, month
                                               interest rates go up, the car needs      basis. This will help you set a realistic
Easy money or debt trap?                       repairing, or the kids need new                                                              or quarter on:
                                                                                        affordable limit you can borrow.                    • your home – rent or mortgage, gas,
The advantages of using credit are:            shoes, will you be able to keep up
                                               the repayments;                          To calculate the amount you can afford                  electricity, rates, telephone,
• if you need something urgently,
   you can get it right away instead of     • don’t take out a loan for longer than     to repay, work out your income (how                     insurance, etc.;
   having to save;                             you need. Ask how quickly you could      much money you’ve got coming in) and                • food and clothes – don’t forget
• you can spread the cost of a big             pay it off and what the most you can     expenses (how much you are already                      take-away meals and any clothes
   item over time (but you can do this         afford to repay monthly is; and          spending). Remember to leave a                          you buy for work;
   by saving too); and                      • seek independent legal and                margin for emergencies.                             • travel – list all the costs of running a
• it is convenient – you don’t have            financial advice before you sign                                                                 vehicle (e.g. insurance, rego, petrol,
                                                                                        If you write down everything you spend,
   to carry large amounts of money             any contract, in particular for credit                                                           maintenance costs), as well as any
                                                                                        it will be easier to see if you could save
   with you.                                   lending agreements.                                                                              public transport costs;
                                                                                        money somewhere by cutting back on
                                                                                        non-essentials.

 2                                                                                                                                                                                 3
Budget planner

Choose a time period (e.g. fortnightly or monthly), type in your regular income and
expenses. Remember to use the same time period for income and expenses.


                  Type of income                                              Amount received each period                           Transport expenses                 Savings
                  Salary or wage (after tax)                                                $                                       Car registration           $       Superannuation contrib.       $
                  Pension or Government allowance                                           $                                       Parking                    $       Regular savings               $
      Income




                  Child support or other repayments                                         $                                       Fuel                       $       Regular investments           $
                  Regular income from investments*                                          $                                       Repairs/Maintenance        $       Other                         $
                  Other                                                                     $                                       Public transport           $
                  TOTAL INCOME                                                              $                                       Sub total                  $       Sub total                     $
                  Household expenses                           Educational expenses                                                 Personal expenses                  Other expenses
                  Rent                         $               School fees                  $                                       Clothes/Shoes              $       Child care                    $




                                                                                                             Expenses (continued)
                  Repairs                      $               University/TAFE fees         $                                       Hair/Beauty                $       Child support payments        $
                  Gas                          $               Tuition                      $                                       Sub total                  $       Gifts                         $
                  Electricity                  $               Books and uniforms           $                                       Medical expenses                   Donations                     $
                  Water                        $               Camps/Excursions             $                                       Doctor                     $       Hobbies and sports            $
                  Telephone/Mobile             $               Sub total                    $                                       Medicines                  $       Subscriptions                 $
                  Rates                        $               Debt repayments                                                      Dentist                    $       Newspaper/Magazines           $
      Expenses




                  Body corporate fee           $               Mortgage                     $                                       Sub total                  $       Movies/DVDs                   $
                  Internet                     $               Car loan                     $                                       Insurance                          Restaurants/Takeaway          $
                  Cable/TV                     $               HECS/HELP payment            $                                       Home/Contents              $       Alcohol/Cigarettes            $
                  Furniture                    $               Credit cards                 $                                       Car                        $       Pet food                      $
                  Appliances                   $               Personal loans               $                                       Health                     $       Other pet costs               $
                  Groceries                    $               Store cards                  $                                       Income protection          $       Other                         $
                  Gardening                    $               Lay-bys                      $                                       Life                       $
                  Other                        $               Other                        $                                       Sub total                  $       Sub total                     $
                  Sub total                    $               Sub total                    $                                       TOTAL EXPENSES                                                   $
                  * include income such as rent from an investment property, distributions from a            Net                                TOTAL INCOME       —   TOTAL EXPENSES            =       SAVINGS
                  managed fund, or dividends from shares.
                                                                                                            Result




4                                                                                                                                                                                                                  5
• financial commitments – include           you to pay the loan off quicker, which      • defaults and court processes                Bad credit history?
  the repayments you are making on          means you will pay less in the long run.      such as claims, summonses and               Having a bad credit record can
  loans or credit agreements;                                                             judgments, which are held on file           seriously affect your chances of getting
• entertainment, videos, movies,                                                          for five years from the date they are
  restaurants, cafes; and                   Can you get credit?                           noted, (bankruptcy is on your file
                                                                                                                                      a loan and other forms of credit.
• other things – school fees, CDs,                                                        for seven years).                           Entries in your credit record for overdue
  magazines, gifts, etc. Don’t forget                                                                                                 accounts are removed from your file after
                                            Your credit history                         Your loan application may be rejected         five years. Entries relating to bankruptcy
  regular occasional items like
                                            Individuals do not have ‘credit ratings’.   because of loans or credit you failed         remain on your file for seven years.
  haircuts, shoe repairs or video rental.
                                            However, there are credit reporting         to repay in the past. If you are rejected
  And do you have any pets? A mobile                                                                                                  If you are having difficulty obtaining
                                            agencies that collect information about     on the basis of records kept by a credit
  phone? Do you play the lottery?                                                                                                     a loan due to a bad credit history, it
                                            what loans you apply for and whether        reporting agency, you must be advised
Be honest! A budget can only help you       you have defaulted on those loans.          in writing why your application               would help to start creating a savings
if you make it as accurate as possible.     This information includes your credit       was declined.                                 record. Putting small amounts of money
                                            history with banks, utilities such as                                                     away consistently can demonstrate a
                                                                                        If you would like to obtain a free copy       positive savings pattern. Eventually
Balancing the books                         gas, electricity, telephones and finance    of your individual credit file (to help
                                            companies. They do not keep a record                                                      this, along with a consistent income,
Now add up all your income and                                                          you manage your credit arrangements           may help counteract a bad credit
                                            of whether you pay on time, although        or correct misinformation) download a
expenses for the week, month or                                                                                                       history. Alternatively, you can wait the
                                            this information may be available from      copy of the credit file – Standard File
quarter. If your expenses are more                                                                                                    five years until the bad entry has been
                                            institutions you have borrowed from.        Service Application form from
than your income, look carefully at                                                                                                   removed from your record.
                                            Information they do keep includes:          www.baycorpadvantage.com or write to
the things you buy to determine if you
                                            • accounts overdue by more than 60          Baycorp Advantage Public Access, PO           Be aware that a “no” to a credit
can spend less. Make sure you have
                                                days where a credit provider has        Box 964, North Sydney, NSW, 2059 to           application does not necessarily mean
enough money in your budget to pay
                                                tried to contact you by letter;         request one.                                  your credit file is flawed. Credit providers
bills when they arrive, but also to have
                                            • previously listed overdue accounts                                                      each have their own lending criteria, so
money on hand in case something                                                         It is important to clearly state whether
                                                that have been settled or brought up                                                  seek an explanation as to why you were
unexpected happens. For example,                                                        you are requesting a copy of your credit
                                                to date;                                                                              refused credit. Another lender may be
what if you or your partner falls ill or                                                file, or your insurance file.
                                            • bankruptcy orders;                                                                      happy to give you credit or a loan.
the car needs repairing? If you spend
                                            • court judgments;                          Alternatively, you can use the credit
all your income, you could easily get
                                            • records of some current credit            express service (a fee is charged) at
further into debt.
                                                accounts; and                           www.baycorpadvantage.com which                Credit tips
Unexpected problems like job losses,                                                    provides an online ordering system to
accidents and illness, partnership                                                                                                    Before you make your decision or sign a
                                                                                        obtain a copy of your own file.               credit or loan agreement contract:
breakdown and business losses can
cause serious credit problems.                                                          If the information in your credit record is   • shop around as interest rates
                                                                                        wrong, or there is some other problem,           can vary;
From your budget, you should be able                                                    you can make a complaint to Baycorp           • determine if the interest rate is fixed
to see how much you can afford to pay                                                   Advantage on (02) 9464 6000 or contact           (i.e. won’t change over the course of
back per week, fortnight, month, etc.                                                   the Federal Privacy Commissioner on              the loan) or variable;
(income minus expenses). Before you                                                     1300 363 992 or www.privacy.gov.au.           • check the conditions and if they
commit to a loan or buy on credit, make                                                                                                  suit you. For example, can you
sure you have budgeted to cover the                                                     If you have never applied for credit,            change how and where you make
repayments. If your contract allows you                                                 your loan application will usually be            repayments? If you have spare
to do so, aim to repay more than the                                                    assessed on the basis of your income,            money, can you repay the loan early
minimum each time. This will enable                                                     property and other commitments.                  – without penalties?

 6                                                                                                                                                                             7
• look for and ask about any                To compare, if you make monthly              In most cases, once you sign you’re         WARNING: It is not uncommon for
  additional fees and charges. These        repayments on a $1,000 loan and              bound by that contract no matter            lenders to ask borrowers to sign a
  may include establishment fees,           interest is calculated daily at 15% (p.a.)   how surprised you might be by its           “Business/investment purposes
  legal fees, application fees and          the first month’s interest would be          contents later.                             declaration”. Be warned that doing this
  insurance. Understand what they           $12.32. At the end of the month, the                                                     can void your protection under the Code
                                                                                         A lender must give you a pre-contractual
  are and when you have to pay them;        interest is added to the loan ($1,000                                                    unless it can be proved that the lender
• read and understand the contract                                                       statement and information sheet before
                                            + $12.32 = $1,012.32). When you pay                                                      knew, or had reason to believe, that the
  before you sign. If you have                                                           you enter into a contract. These give
                                            your first repayment of $40 the loan                                                     credit was for personal purposes.
  questions, ASK THEM;                                                                   you details about the amount of credit,
                                            balance reduces to $972.32.
• in most cases, the credit contract is                                                  interest rates, fees and charges, the       It is an offence for someone to pressure
  separate from the contract to buy         If you paid weekly amounts of $10,           credit providers name and other key         you into signing a contract or to visit
  the goods – you can’t always cancel       instead of the monthly $40 payment,          pieces of information.                      your house to sign a credit contract
  the credit contract if you decide you     your interest would be calculated on                                                     without prior invitation.
                                                                                         A few tips to consider before signing a
  no longer want the goods;                 a reduced principal throughout the
                                                                                         credit contract (or any contract) are:      Your credit contract must contain the
• take all the time you need before         month - $1,000 for the first 7 days,
                                                                                         • a contract is a legally binding           following terms and information:
  signing up;                               then $990 for the next 7 days, then
                                                                                             agreement;                              • the name of the business or person
• keep all your paperwork in a safe         $980 for the next 7 days, and then
                                                                                         • if it’s a large document, take it             lending you the money;
  place; and                                $970 for the next 7 days, then $960
                                                                                             home and read it at your own pace       • details about the credit to
• remember, the faster you repay your       for the next 2 days. At the end of the
                                                                                             or seek advice. Think twice about           be provided;
  loan, the less you will pay overall.      month the interest ($2.87 + $2.85 +
                                                                                             a credit provider who won’t let you     • how interest is calculated and when
                                            $2.82 + $2.79 + $0.79 = $12.12) is
Before signing a credit contract, you                                                        take it away – you have every right         it is charged;
                                            added to the loan and under the weekly
should find out how the lender will                                                          to do this;                             • the annual percentage rate
                                            payment scheme, your loan balance
deal with any complaints or issues that                                                  • don’t be rushed into signing                  of interest;
                                            reduces to $972.12.
arise in case of a dispute. Find out what                                                    something you haven’t read or           • number, amount and frequency
dispute resolution policy your lender has   Whilst the 20 cent saving in this                don’t understand;                           of repayments;
in place, and whether it has received       example may seem small, in larger            • don’t trust a credit provider who         • amount of credit to be provided
Australian Securities and Investments       loans over longer periods, savings can           says “this is just the standard fine        (or the maximum amount if not
Commission (ASIC) approval.                 be significant.                                  print, don’t worry”;                        specifically calculable);
                                                                                         • if the contract is for a significant      • credit fees and charges to be paid;
Compounding interest                                                                         amount, consider seeking legal          • how you are to be informed if there
Compounding interest refers to the
                                            The credit contract                              advice, particularly for property and       are changes to the contract;
way in which interest is calculated on                                                       business transactions;                  • any default rate of interest and how
                                            By law, you need to sign a contract
your loan. Most loans calculate interest                                                 • ask for any interest rate to be               this is calculated;
                                            when obtaining credit.
on a daily basis, and add this to the                                                        recorded as an annual rate. This will
balance of your loan at predetermined       While many consumers might find                  make the rate easier to compare;
periods (i.e. monthly). This means you      the contract and fine print a chore to       • look for minimum monthly
effectively end up paying interest on       read, it is legally binding and therefore        repayments, fees, charges and
your interest.                              important you read and understand                penalties for early termination; or
                                            it. Some people think the fine print is      • agree to a lender/agent filling in the
Compounding interest can be reduced         something you just have to live with,            details after. Never sign a contract
by paying weekly or fortnightly because     but if you don’t agree with it, or don’t         that has not been completed in full.
your interest will be calculated on         understand any terms and conditions
lesser amounts.                             don’t sign the contract until you do.


 8                                                                                                                                                                         9
• how often account statements will           After you’ve signed                          loan and interest. If the loan defaults,   or guarantor. Remember your signature
  be sent to you;                             • Keep a copy of the contract.               the lender will generally go after the     is a legal tool, so be very clear about
• whether any mortgage or guarantee           • If you change your mind and decide         person with the highest income or          what you are signing.
  has been taken by you or                      you want to cancel the contract, act       assets, or the one who can be located.
  another person;
• details of any commission to be
                                                quickly. Get legal advice if you are
                                                not sure what rights you have.
                                                                                           Before signing as a joint/co-borrower or   Finance brokers
                                                                                           guarantor ask yourself:
  paid; and                                   • Always check the statements the            • why should I take on this                Finance brokers are go-betweens who
• details of credit-related insurance           lender sends you, showing the                 responsibility;                         arrange loans for people for a fee
  included in the contract.                     repayments you have made. If               • can I afford to repay the loan if the    (paid by you, or the lender, or both).
According to the Consumer Credit Code,          there are any problems, call the              other person does not pay;              Some people use a finance broker
once a contract is signed the lender            lender immediately.                        • do I want to repay the loan if the       because they don’t want to spend time
must provide you with a copy of the           • If you are paying direct debit/               other person does not pay; and          researching individual finance products,
written contract within 14 days, and in         electronically from your bank account      • is there another alternative? Maybe      or because they are more convenient.
some cases, regular account statements.         or your employer deducts/debits               the borrower can approach a
                                                your income, check repayments are                                                     Finance brokers should obtain a
                                                                                              different lender, or provide security
                                                going out as they should.                                                             product suitable for you based on their
Credit insurance                                                                              for the loan instead.
                                                                                                                                      knowledge of and access to a broad
When entering a credit contract, the                                                       Many family members have suffered          range of products.
lender might ask you to take out credit       Joint borrowers and guarantors               great personal and financial loss as a
                                                                                                                                      Some finance brokers, who are called
insurance. Credit insurance is used to        If you are asked to borrow money             result of wanting to help others or not
                                                                                                                                      mortgage brokers, specialise in
ensure that you (the debtor/borrower)         jointly with another person, or              feeling able to say no.
                                                                                                                                      arranging home loans.
will be able to make repayments if you        guarantee their loan...BEWARE! This is
                                                                                           You have no legal obligation to sign
get sick, lose your job or are otherwise      a big commitment.                                                                       Finance brokers cannot necessarily get
                                                                                           a contract as a guarantor or as a
unable to make repayments. However,                                                                                                   you a better loan than you can arrange
                                              If you become a joint borrower (also         joint borrower.
because most lenders are willing to                                                                                                   for yourself. It is your repayment
                                              known as a co-borrower), both of you
renegotiate credit contracts if your                                                       If someone has pressured you into          capacity that a creditor must assess,
                                              become responsible for the whole debt.
circumstances cause you hardship, this                                                     signing something against your will,       not how the broker presents the loan.
insurance is often of little value.           If you sign a contract as a joint borrower   or you have already signed something
                                                                                                                                      While finance brokers may save you
                                              or guarantor and the other person            you did not understand, you should get
For credit insurance some lenders will                                                                                                time and effort, they usually have
                                              cannot repay the loan for any reason,        legal advice immediately.
require you to nominate an item of value                                                                                              access to a limited product range. You
                                              then you will have to repay the whole
(such as a car) as security for the loan                                                                                              can access all the same products on
amount, and if you are unable to repay                                                     Witnessing a credit contract               the market and may find one more
the loan, the lender can take possession                                                   – helping family and friends
of the item and sell it to recover its                                                     Sometimes a lender or sales person
costs. Lenders may require you to take                                                     will ask you to sign a document to
out comprehensive insurance on this                                                        witness another person’s signature, or
item to protect it from losing its value if                                                act as a personal referee to help family
it is damaged or stolen.                                                                   or friends get a loan. They may call
In most cases, you don’t have to buy                                                       this a ‘minor formality’ but NEVER sign
credit insurance to obtain credit.                                                         a document in these circumstances
Shop around to see if a lender will                                                        unless the space is clearly marked
provide finance without requiring                                                          ‘witness’ – otherwise you may be
credit insurance.                                                                          signing the contract as a joint borrower

10                                                                                                                                                                         11
suitable than the one on offer through        • ask what experience the broker has;      • do not leave any parts of any               • using interest-free terms to
the broker.                                   • shop around. Ring other finance            contract or agreement incomplete              purchase a product before you’ve
                                                brokers and check what they charge         for the broker to fill in. Complete the       shopped around or considered the
Some brokers obtain loans for
                                                and what they offer. Remember,             documents yourself so you are sure            consequences;
consumers that may seem more
                                                there is currently no legal                the information given to the lender         • the credit card you will probably
affordable because the repayments are
                                                requirement for a broker to have           is right; and                                 have also signed up for without
initially interest only. However, once
                                                any particular training, skills or       • do not agree to ‘doctor’ any                  realising. Some interest-free credit
the interest only period expires, some
                                                qualifications, so see if you can do       figures. If you get finance when the          agreements work by providing you
borrowers find they cannot repay both
                                                better on your own and you may             information given to the lender was           a credit card with the amount of
principal and interest and get into
                                                end up saving a lot of money in            incorrect or deliberately misleading,         the loan charged to it. The limit of
serious financial difficulty.
                                                the process;                               you may be guilty of credit fraud             the card is usually higher than this
If you are seeking another loan               • ask how much the service will cost         and could face a criminal charge.             amount. Some cards may also offer
because you have difficulties paying            you and when you have to pay;                                                            cash advances and EFTPOS. This
the loans you already have, you should        • make sure your contract with the                                                         provides easy access to finance
first try to come to an arrangement with        broker says the broker is only paid if   Interest-free loans                             which must be managed carefully.
your existing lenders.                          they get a loan for you that suits all                                                   Remember: borrowing money costs
                                                                                         Many shops offer interest-free loans
                                                your requirements, and not just any                                                      money; and
If a broker rings you at home or comes                                                   for purchasing goods such as furniture,
                                                offer of a loan;                                                                       • shops may include an “interest”
to your front door without contacting                                                    computers and entertainment systems.
                                              • ask about commissions and                                                                component in the purchase price.
you first, you are covered by the door-                                                  When you accept one of these deals
                                                kickbacks the broker receives from                                                       So while you don’t pay interest in
to-door provisions of the Fair Trading                                                   you sign a loan contract, usually with
                                                each lender;                                                                             instalments, you pay more than the
Act 1989. Under these provisions,                                                        a finance company. These contracts
                                              • ask what the reasons are for the                                                         cash price for the goods.
brokers must give you a written                                                          usually say the loan will only be interest-
                                                broker recommending one product/
contract and allow a 10 day ‘cooling-                                                    free if you repay the entire amount
                                                service over another. Check the                                                        Interest-free is not fee free
off’ period. During this time, no money                                                  within the agreed interest-free period.
                                                broker is not just recommending
should change hands and services                                                                                                       Interest-free agreements usually have
                                                the lender who pays them the             If you cannot repay the loan in that
should not be delivered. You should                                                                                                    establishment fees, stamp duty and
                                                highest commission;                      time, you will have to pay high
receive two forms – one explaining the                                                                                                 monthly account-keeping fees. For
                                              • ask for a list of products/financial     interest, often on the whole amount,
‘cooling-off period’ and one that can                                                                                                  example, a purchase of $2,000 over
                                                institutions the broker deals with;      from the date you bought the goods.
be used to cancel the contract. You are                                                                                                a two-year interest-free period may
                                              • do not pay an “up-front” fee (don’t
not covered by these provisions if you                                                   Beware of:                                    incur a $20 establishment fee, $60 in
                                                pay the broker until the lender has
initiate contact with the broker, or if the                                              • advertising that emphasises the             account-keeping fees ($2.50 per month
                                                approved the loan) and check the
broker makes an appointment with you                                                       short-term benefits, not the potential      for 24 months), a $20 account closure
                                                fee is reasonable (less than 2 per
before approaching you.                                                                    long-term costs, encouraging you to         fee, late fees and stamp duty, not to
                                                cent of the amount borrowed);
                                                                                           “Buy Now, Pay Later!”;                      mention the considerable interest if
Be wary of brokers who come to your           • you should have a written
                                                                                         • pressure from sales people. If you’re       you don’t repay it all by the end of the
home, as some are trained to get past           agreement with the broker setting
                                                                                           getting pressured, walk away. Give          interest-free period!
your politeness and may refuse to leave         out what they will do for you and
                                                                                           yourself time to decide if you can
until you sign up.                              how much it will cost. Do not sign                                                     Consumers often assume if they only
                                                                                           afford the item and if you really need
If you do use a finance broker:                 anything without reading and                                                           pay the minimum monthly amount on
                                                                                           it. Businesses regularly provide
• ask them if they belong to any                understanding everything, if you’re                                                    the statement they’ll pay it off in full by
                                                                                           interest-free offers so there is no
    industry association and if the             not sure, ask;                                                                         the end of the interest-free period. This
                                                                                           need to make a decision on the spot;
    association has an ASIC-approved                                                                                                   rarely occurs and brings a nasty shock
    dispute resolution policy;                                                                                                         to many.


12                                                                                                                                                                             13
 Case study                                        conditions. You may lose your car         • Calculate how much you need to            could be $75 or more a week based on
 – cost of interest-free credit                    and money. Make sure you read the           repay each month to ensure the full       paying for:
                                                   fine print carefully before signing an      amount is paid within the interest-       • registration and compulsory third
 You buy a computer for $1,500 in January
 with an agreement of six months’ interest-free    interest-free loan contract.                free period. The minimum monthly             party insurance (a periodic payment
 financing. You make monthly repayments                                                        amount may not be enough, which              card is available from the Post
                                                   Don’t buy cars on impulse, or be
 of $100 during the six months. On 1 July,                                                     means you will incur interest charges.       Office so you can set aside money);
 according to the agreement you signed,            pressured by salespeople. Find out the                                                • insurance – a finance company
 interest charges are assessed on the remaining    value first.                                                                             may insist on comprehensive
 balance of $900 from the date of purchase.
 The interest charges at an average annual         WARNING: If your repayments are late,     Car finance                                    insurance. This could cost you
 percentage rate of 18 per cent would total $81    even by 24 hours, the car could be                                                       about $26 a week;
                                                                                             If you need to take out a loan to buy a     • regular maintenance – allow $10-
 giving you a balance of $981. If you continue     repossessed immediately. The dealer
 to make a repayment of $100 a month, it will                                                car, make sure you work out how much           $20 per week;
                                                   usually owns the vehicle until the last
 take you 11 months to repay the balance and                                                 you can comfortably afford each month       • unexpected repairs – possibly $15
 you will have also paid a total of $169.24 in     repayment is made, so if you miss a
                                                                                             in loan repayments. Take into account          per week depending on the age of
 interest charges.                                 repayment and the car is repossessed,
                                                                                             the “up-front” costs and the regular           the car;
 To repay the full amount in the 6 month           you may not get any money back,
                                                                                             car-related costs you also need to          • replacement of worn tyres – about
 interest-free period you will have to repay       regardless of how much you paid.
 $250 a month.                                                                               budget for.                                    every 2-3 years;
 A better way to take advantage of the interest-                                             Up-front costs – it’s more than the price   • fuel – check how far the car can
 free financing using this example is to wait      Understanding terms                                                                      travel on a litre of petrol;
                                                                                             on the windscreen and can include:
 nine months to buy the computer. If you save      and conditions                            • annual registration fee of about          • parking – can cost up to $15-$30 a
 $100 a month you will have $900 to use as a
 down payment when purchasing the computer.        Understand the terms and conditions          $265 for a 4-cylinder car, $375 for         day; and
 You can then pay $100 a month to repay the        of your contract before you sign. Read       a 6-cylinder car, and $500 for an 8-     • motoring subscription – RACQ
 remaining balance of $600 before the interest-    your contract carefully and don’t be                                                     membership is $58 plus $33 joining
 free period ends and save the $169.24 in
                                                                                                cylinder car (as at August 2006);
 interest charges.
                                                   afraid to ask if there is something you   • compulsory third party insurance;            fee (as at August 2006).
                                                   are unsure about.                         • dealer delivery charges;                  These costs can be even more for 4WDs
                                                   • Take note of the exact timeframe        • state government stamp duty of $2
Interest-free car loans                                                                                                                  or older used cars that are heavy on
                                                       – make sure you know the exact           in every $100 of market value;           fuel and/or require more maintenance.
A number of car loans are advertised                   date that the interest-free period    • transfer fee of about $18;
as ‘interest-free’. This may sound like                ends, and always aim to repay the     • cost of independent mechanical            Obtaining finance to purchase a car will
an easy way of buying a car, but it can                full amount by this date to avoid        inspection. RACQ is from $130            add to the cost of the vehicle (loan set-
cause you trouble. If a car is advertised              being charged interest.                  for members and $180 for                 up costs, interest, etc.), so try to keep the
at significantly more than the same                                                             non-members;                             amount borrowed to a minimum. Check
car being sold by another dealer,                                                            • REVS (Register of Encumbered              the current value of vehicles on internet
it may have the interest included                                                               Vehicles) checks are $14.80 and          sites such as www.redbook.com.au or
in the purchase price. You may be                                                               standard Vcheck starts at $13.05;        with the RACQ (www.racq.com.au).
offered finance on the basis that the                                                           and                                      Most car traders offer to arrange
total interest owed is rolled into the                                                       • insurance costs which could start         finance but it may be cheaper to
purchase price.                                                                                 at $1,300 per year, depending on         obtain your own. Always take time
If you buy a car on this basis, you miss                                                        the type of cover chosen and your        to shop around for the best deal and
out on important consumer protection                                                            driving history.                         competitive interest rates.
under the Consumer Credit Code. If                                                           Ongoing costs – an independent study        Before you sign the loan agreement
so, there may be no rules about what                                                         has shown the basic cost of running         read the contract and ask any
can happen if you miss a repayment,                                                          a car, excluding loan repayments,           questions you have so you know what
or can’t comply exactly with your loan
14                                                                                                                                                                                 15
you are liable for. Ask what happens if   Laws governing payday lenders               so consumers don’t have the same                    you would pay back $1,367.78 in total
you cannot or do not pay on time.         Short-term credit provided for a total of   level of protection if things go wrong.             over the three months).
                                          no more than 62 days is subject to the      These lenders use other tactics such as
Before you buy a car, get a free                                                                                                          It is important to work out what the
                                          Consumer Credit Code if one or both of      charging membership, administration
copy of the Office of Fair Trading’s                                                                                                      repayments with interest will be and
                                          the following conditions apply:             fees and other special fees and charges.
Glovebox Guide. For more                                                                                                                  check whether you can afford it before
                                          1. the total fees and charges payable       However, when you calculate all the
information call 13 13 04, or visit                                                                                                       you commit.
                                               are more than five per cent of the     fees and charges as an annual interest
www.fairtrading.qld.gov.au.
                                               amount of credit; and/or               rate you will see why these loans can               Some payday lenders require security
                                          2. the interest rate charged is more        quickly turn your short-term loan into a            that is often worth more than the
Payday loans                                   than 24 per cent per annum.            massive debt. Percentage rates using                amount borrowed, for example, a bill of
                                                                                      this method can be up to 1,300 per cent             sale over a car.
Payday lenders offer short-term cash      As many payday lenders charge more          and in Victoria have even been as high
                                          than five per cent in fees and/or 24 per                                                        Some payday lenders have harassed
loans between paydays.                                                                as 2,158 per cent1. They may also use
                                          cent in interest per annum, they must                                                           and intimidated borrowers. If you have
                                                                                      tactics of promoting 20 per cent interest
Payday loans are marketed as quick        comply with the Code.                                                                           any concerns, contact the Office of Fair
                                                                                      charged monthly which may sound great
and easy to obtain, available ‘on the                                                                                                     Trading on 13 13 04.
                                          Payday lenders must:                        but when that is converted to an annual
spot’, ‘cash when you need it’ or ‘cash
                                          • let you know all the terms of the loan    fee it ends up being 240 per cent.
within the hour’.
                                             before you sign any contract so you      As payday type loans may be a high                  Personal loans
Payday loans are particularly appealing      can compare the total cost of the        cost credit alternative, the Office of Fair
to people ineligible for a loan from         loan with other lenders, including                                                           Financial institutions provide personal
                                                                                      Trading recommends you seek financial
formal banks or financial institutions.      fees and charges payable, the                                                                loans so you can pay for medium-
                                                                                      advice when researching these loans.
                                             interest rate, repayments, loan terms                                                        priced items with cash (or a cheque).
Payday lenders sometimes disclose
the repayments only, not the interest        and whether security is required;                                                            You pay for what you borrow at
                                          • provide you with a written copy of
                                                                                      Disadvantages of payday lending
rate, making it difficult for people to                                                                                                   the lender’s interest rate. If you
compare rates with other lenders.            the loan contract;                       Small borrowed amounts can quickly                  borrow more than the lender agreed
                                          • keep proper records of the                blow out to huge borrowed amounts.                  (overdraw on the loan), or don’t pay it
Unlike banks, building societies or
                                             repayments made; and                     The interest fees charged are often                 back in the time you agreed, you will
credit unions, payday lenders do not
                                          • make sure the borrower can                extremely high when compared to                     probably have to pay extra charges.
always put customers through proper
                                             repay the loan without                   other loans. The annual percentage                  Also as some personal loan lenders
credit checks. Often all you need to
                                             substantial hardship.                    of interest rates for payday loans can              will ask for security and if you default
get the loan is proof of residence and
                                          Payday lenders which offer short-term       start at 250 per cent and go higher                 on the loan, you may lose some or all
an income.
                                          loans outside the conditions outlined       than 1,300 per cent. Make sure you                  of that security.
 Example of payday loan ad:               above are not covered by the Code           understand how much interest you will               The interest rate for personal loans
                                                                                      be paying before signing up.                        is generally lower than credit cards
        Cheque cashing,                                                                                                                   and can be a better option for large
                                                                                      For example, on a $1,000 (with
        pay day advance,                                                              monthly compounding interest) to be                 purchases. Another advantage
        cash loans                                                                    paid back over three months with an
                                                                                      annual interest of 250 per cent, you
                                                                                                                                          personal loans have over a credit card
                                                                                                                                          is that personal loans are fixed-term
        $100 – $3,000.                                                                would pay $367.78 in interest on the                loans. That is, you will repay them by
           Fast approval                                                              loan on top of the $1,000 principal (i.e.           a certain date. Credit card debts are
                                                                                                                                          usually open-ended.
                                                                                      1 Wilson D, July 2002, Payday Lending in Victoria
                                                                                        - A research report, Consumer Law Centre,
                                                                                        Victoria.

16                                                                                                                                                                              17
If you have a large credit card debt, it                                                4.    What is the comparative interest      15. How accessible is the lender
may be better to get a personal loan                                                          rate on the loan? So you can              (e.g. can I visit a branch or talk
and repay it to avoid the higher interest                                                     compare against other lenders             to someone if I need to discuss
rates. Beware of debt consolidation                                                           (Some loans have discounted               my loan, or can I access my loan
loans (see page 35).                                                                          ‘honeymoon’ rates to get your             account over the internet)?
                                                                                              business, but revert to a higher      16. Does the institution have a dispute
                                                                                              rate after the first year. These          resolution system in place?
Property loans                              • formal valuation; and                           types of loans can work out to be     17. What happens if I am late, or miss
                                            • building and pest inspections.
(mortgages)                                                                                   more expensive than other types
                                                                                              in the long run).
                                                                                                                                        a repayment?
                                                                                                                                    18. When and on what basis are
                                            Shop around to compare loans and
A home loan is a large debt you live        understand all the differences and          5.    What is the basic variable and/or         interest charges calculated? What
with for many years, so it is important     implications of the various types of              fixed term interest rate?                 are the implications of this?
you carefully research, compare and         loans, interest rates, fees and charges     6.    Can I fix the interest rate and are
fully understand the differences so you     before you make any decisions. Make               there any restrictions for doing      Repay your mortgage quicker
choose the one most suitable for you.       sure you use the comparison rate for              so (e.g. can I still make extra
                                                                                              repayments on a fixed rate loan)?     There are several practical things
                                            fixed-term loans to properly compare.
Before shopping around for a home                                                                                                   you can do to repay your mortgage
                                                                                        7.    Can part of my loan be at a fixed
loan, work out how much you can afford      Use the CANNEX website                                                                  quicker without going to the extremes
                                                                                              rate and part at a variable rate?
to repay each month. If appropriate,        www.cannex.com.au which lets you                                                        of refinancing or setting up mortgage
                                                                                              Are there extra fees and charges if
also look into the first home buyer’s       search for loans according to the type                                                  offsets.
                                                                                              I do it this way?
grant offered by the Office of State        you need, and find the cheapest one.
                                                                                        8.    Can I change between fixed and        Small savings add up
Revenue (OSR) in Queensland                 This site is free, independent and used
                                                                                              variable rates throughout the life
www.osr.qld.gov.au or 1300 300 734.         by industry professionals.                                                              Simple things such as cutting down
                                                                                              of the loan without any charges?
                                                                                                                                    on one small luxury item a week, such
When you prepare your budget,               Remember also that the credit contract      9.    What up-front and ongoing fees
                                                                                                                                    as one less coffee a day, can save you
remember to factor in extra costs           is separate from the contract to buy              and charges are there on the loan?
                                                                                                                                    hundreds of dollars a year which, if
associated with buying a house such as:     the property. You can’t cancel the          10.   Can I make fortnightly (or weekly)
                                                                                                                                    put into your mortgage, can potentially
• mortgage fees and charges;                credit contract if you have already               repayments? Making fortnightly/
                                                                                                                                    save you thousands on your loan.
• interest rates rising to over 10 per      signed it and decide you no longer                weekly payments will mean you
   cent in the future;                      want the property.                                pay less interest in the long run.    Want proof? The average cost of one
• land and water rates;                                                                 11.   Will it cost me if I want to change   cup of coffee a day ($3.50) for one
                                            Some questions to ask your financial
• house and contents insurance;                                                               my repayment frequency during         week (x7 days) is roughly $25. Save
                                            institution when thinking about a
• house repairs; and                                                                          the loan?                             $25 every week and that’s $108.50 per
                                            home loan.
• body corporate fees (if applicable).                                                  12.   Can I make additional one-off         month. If you pay this every month into
                                            1.   What is the maximum amount                   repayments of any size into the       a standard $100,000 mortgage at a 9
Remember to set aside additional
                                                 I can borrow and what will my                loan without any charges?             per cent interest rate for 25 years, you’ll
funds to pay for:
                                                 minimum repayments be?                 13.   Does the loan have all the            save $52,975 and three years off the
• legal fees (including mortgage
                                            2.   What is the maximum term of the              features I need, such as an offset    loan period.
   insurance and mortgage
                                                 loan (this will affect the amount of         account, the ability to make extra
   documentation);                                                                                                                  However, you may need to check with
                                                 your minimum repayments)?                    repayments, and the ability to
• removalists;                                                                                                                      your lender first that there are no
                                            3.   Will I need to pay mortgage                  redraw those extra repayments if I
• security deposits;                                                                                                                penalties for making larger or extra
                                                 insurance and if so, how much is it?         need to?
• connection fees for essential                                                                                                     repayments, or if you have to keep up
                                                                                        14.   What charges do I have to pay if I
   services such as electricity                                                                                                     the new repayments for the remainder
                                                                                              want to refinance the loan, or pay
   and telephone;                                                                                                                   of a fixed rate period.
                                                                                              it off sooner?

18                                                                                                                                                                          19
Repay the mortgage before you save           of their mortgage through this relatively                                                         • may limit the number of redraws
Try to repay the mortgage before you         painless method.                                                                                    per year.
build up your savings (even if you’ve got                                                                                                      Loans with a redraw facility usually cost
                                             Get a reducing mortgage
a high-paying savings account). If you’re                                                                                                      more in interest so you need to work
paying a mortgage at 9 per cent interest,    With a table mortgage you pay mainly
                                                                                                                                               out if its worth it to you. Consider how
for example, and you’ve got cash in a        interest in the early years – later you
                                                                                                                                               often you are likely to ‘redraw’ your
savings account earning 6.7 per cent         start repaying the principal. But with a
                                                                                                                                               money, before deciding whether this
interest, your cash is losing 2.3 per cent   reducing mortgage, the principal is split
                                                                                                                                               feature suits you.
per annum. You’ll also be paying income      into even amounts that you repay each
                                             month from the very beginning. This           • may impose fees and charges for
tax on your savings account interest,
which makes your loss even greater.          means repayments start high because             the offset facility.                              Refinancing
You’ll usually be better off paying the      you’re making monthly repayments off          Offset accounts only work while cash                Be careful about claims that
savings into your mortgage first.            your principal as well as paying interest     sits in your account, and the savings               refinancing will help you repay your
                                             on what’s outstanding. But as time goes       can be relatively small.                            loan faster. You can really only repay
If you do place all your savings or          on, your remaining principal gets smaller                                                         loans faster by paying more money.
spare money into your mortgage it’s          – and so does the interest payments.           Case study – mortgage offset                       Only refinance if you are sure the
important to have a redraw facility, or a                                                   Lisa had a mortgage with monthly repayments        savings will outweigh the costs.
buffer for unseen expenses.                                                                 of $675. (Roughly what she paid for $100,000
                                             Mortgage offset                                borrowed at 6.5 per cent for 25 years.) To earn    By checking the market, you may find
Similarly, if you have a financial           A mortgage offset facility in some             one extra monthly repayment of $675 each           a better deal than you currently have.
windfall or have spare money from a          circumstances can save interest on             year from her offset account, she would have       If so, make sure you will be better off
tax refund, consider using it to repay       your loan. Your mortgage is linked to a
                                                                                            to deposit $10,384 and leave it untouched
                                                                                                                                               after taking into account the costs
your mortgage. Check with your lender                                                       for a full year (assuming she would get a full
                                             savings account into which your salary         offset, earning interest at the same rate as she   associated with switching your loan.
first whether there are any penalties for    and other cash can be deposited and            was charged interest on her home loan).            These may include:
additional or higher repayments.             from which you withdraw to pay bills,                                                             • termination or break fees for exiting
Keep repayments high when rates              credit card, etc. when these debts            Redrawing equity                                        your current loan early. For fixed rate
go down                                      become due. For as long as money sits                                                                 loans in particular, such fees may
                                                                                           A redraw facility on your loan allows
                                             in the account, it is ‘offset’ against your                                                           be high. You usually have to pay the
You may not have any spare cash to                                                         you to withdraw the extra repayments
                                             loan and so reduces your interest bill.                                                               lender’s legal fees for discharging
increase your mortgage repayments now                                                      you have made if you need them.
                                                                                                                                                   the mortgage over your property; and
– but next time interest rates go down,      However, you should keep in mind that
                                                                                           A redraw facility means you can put                 • fees and costs associated with the
keep your repayments at the same level       mortgage offset loans:
                                                                                           all your ‘rainy day’ money in your                      new loan such as application fees,
to repay your mortgage faster.               • usually charge a higher rate                mortgage, knowing you can get it out                    stamp duty on your new mortgage,
Shorten the term                               of interest;                                again if you have to. Or you can use it                 valuation and legal fees.
                                             • may not fully offset the rate of            to save money for a specific purpose,
Take the shortest mortgage period you                                                                                                          If you are planning to refinance:
                                               interest on your loan. A 100 per cent       such as buying a car.
can – you’ll pay interest over fewer                                                                                                           • ask if your current lender can match
                                               offset means your cash earns the
years and pay less in the long run.                                                        Competitively-priced loans with redraw                  the best deal you can find, or offer
                                               same rate of interest as you pay on
                                                                                           facilities are increasingly common, but                 you a better loan than your current
Make repayments more often                     your loan. Many offsets are partial.
                                                                                           you may still end up paying more.                       one. This may allow you to avoid
                                               For example, if the offset account
Pay fortnightly – with 26 fortnights in                                                                                                            some of the refinancing costs;
                                               only attracts 3 per cent interest           Redraw facilities often:
a year, you’ll make the equivalent of                                                                                                          • ask if the new lender will waive fees
                                               while your loan attracts 7 per cent,        • charge a fee for each withdrawal;
one extra monthly repayment a year.                                                                                                                to get your business; and
                                               then your interest reduction will be        • set a minimum amount for each
Homeowners can save hundreds or
                                               less than half; and                            redraw; and
even thousands of dollars over the life

20                                                                                                                                                                                      21
• ask if you qualify for a discount            Lines of credit:                                   Reverse mortgages                            Terms and conditions vary between
  on your loan (sometimes called a             • charge a higher rate of interest than            A reverse mortgage allows you to borrow      lenders so it is wise to shop around.
  ‘professional package’).                        a standard loan;                                money against your home, without             There is usually a condition for you
                                               • may charge a fee to operate; and                 having to make regular repayments. They
Steer clear of any sales staff, brokers                                                                                                        to maintain the home. If you don’t,
                                               • credit your loan with the full interest          are often promoted as a means of giving
or loan minimisation ‘experts’ who try                                                                                                         you may lose your home early. Think
                                                  you pay.                                        older homeowners access to extra cash.
to pressure you into switching loans                                                                                                           carefully whether you can maintain the
or use other aggressive sales tactics          If you are already having problems with            Unlike a normal loan, you don’t have         home if you become disabled, infirmed
like cold-calling. Some of these people        your credit card, or if you think it will be       to make any repayments until you sell,       or sick for a period of time.
may try to ‘churn’ you into a new loan         hard for you not to dip into your line of          move out of the home or die. The total       Before signing a contract for a reverse
in order to earn them a commission,            credit for daily living or luxuries, then          amount you owe must then be paid             mortgage, carefully weigh up the
rather than making you better off.             a line of credit does not suit you. You            back to the bank, usually from the sale      advantages and disadvantages of
                                               might never fully own your home and                of the house.
There are some operators who will                                                                                                              this type of loan. It is important you
                                               still face a large debt when you retire.
charge you up to $5,000 for advice on                                                             Your debt will be considerably higher        understand how it will affect your
loan minimisation. Investing that money        You may be able to negotiate useful                than the original amount you borrowed,       financial position in the long-term.
into repaying your mortgage instead            features without paying a higher rate              as each year the fees and interest           Independent advice from a financial
would be a better way to take years off        of interest. Beware, that paying even              accumulate and are added to the loan.        advisor or solicitor is essential in
your loan. If you need some advice on          an extra 0.5 per cent in regular interest
                                                                                                  If you are a joint owner of the house,       helping you make an informed decision.
your mortgage, ask your existing lender,       repayments may cost you far more than
a mortgage broker, a financial advisor         any savings these features might offer.            the loan will be in both names and will      Disadvantages of reverse mortgages are:
or financial counsellor, but remember to                                                          continue as long as one owner lives in       • the loan rate is often higher than
                                               For many people, a cheaper loan and                the house.
check if they charge fees for their advice.                                                                                                       the standard home loan rate;
                                               making extra repayments will be the
                                                                                                  Some lenders allow you to draw down          • fees and interest charged on the
Also check out free online multi-loan          better solution.
                                                                                                  amounts as needed rather than taking            loan (compound interest) will
calculators available from ASIC’s
                                                Case study – lines of credit                      a lump sum upfront. Check if this               accrue throughout the term of the
www.fido.asic.gov.au and Cannex
                                                                                                  option exists.                                  loan. It is highly probable that the
Rates and Infomediaries from                    Dianne was deciding whether to use an offer
                                                for a line of credit. She would have to pay an                                                    amount you owe could double in
www.cannex.com.au                                                                                 The lender may periodically re-assess
                                                extra 0.5 per cent interest on her $100,000                                                       less than 10 years and the lender
                                                loan, which amounted to $500 per year. If she     your home to ensure its condition has           may end up owning a large part of
Line of credit                                  paid 7 per cent interest on the loan instead of
                                                her existing 6.5 per cent rate for the sake of
                                                                                                  not deteriorated and that the loan has          your house;
A line of credit is like a giant credit card    a mortgage offset or line of credit, she would
                                                                                                  not exceeded the value of the property.      • the value of your estate will be
secured against your home, and not like         need to find an extra $7,100 to deposit for the   You will be kept up-to-date with the            considerably reduced for those who
a standard home loan. You get a limit,          full year just to make up the difference.         state of your loan via regular statements.      will inherit your estate;
and so long as you pay the interest                                                               While historical data and trends             • if you relocate (either by choice or
charged, you may repay as much or as                                                              indicate that your property is likely to        necessity) the loan must be repaid
little of what you borrowed as you like.                                                          continue increasing in value for the life       at that time. This could limit your
You could bank all your pay into this                                                             of your loan, this is not a certainty. Nor      options, as you may be left with
account, like a mortgage offset.                                                                  are you likely to be able to predict how        limited money after the sale of
                                                                                                  long you will live in your home. There          your house;
Because of the extra costs, a line                                                                                                             • if you are the sole owner of the
of credit tends to suit investors and                                                             is a possibility that the loan could
                                                                                                  eventually equal or exceed its value. If        house and you relocate or die,
businesses better than owner-occupiers.                                                                                                           anyone else who lives with you may
                                                                                                  this happens, the lender may then ask
                                                                                                  you to commence repayment.                      not be able to stay in the home;


22                                                                                                                                                                                     23
• if you want to repay the entire loan     A vendor finance, wrap loan or rent/buy      Example of vendor finance ad:               Although you can go without paying
  early you may have to pay an early       scheme is an agreement where the                                                         anything towards each semester’s
  termination fee, which can be            owner of a property (the seller, often              FAST FINANCE                         subjects through this system and
  considerable; and                        called a ‘wrapper’) offers finance to the          HAD GOOD/BAD CREDIT?                  let the debt accumulate, there are
• the loan may affect your eligibility     buyer. The buyer never legally owns the            Problems getting Finance?             advantages to repaying as much as
  for age pension payments                 property until all the money owing to                No fuss quick approval              you can as you go, with discounts of
  from Centrelink.                         the seller has been paid.                                CALL NOW!                       up to 20 per cent available for up-front
Be wary of any financial institution       The interest rate is usually about two or
                                                                                               $2,000 – $2,000,000                  payments of all or at least $500 of that
                                                                                                     Conditions Apply               semester’s subjects cost.
that accepts an application without        three per cent higher than the standard
discussing the advantages and              home loan rate, and there may also be                                                    There are also discounts of up to 10
disadvantages or will not provide you      a premium over the purchase price of        Student loans                                per cent available if you make bulk
with information.                          the property payable to the seller.                                                      repayments of over $500 to your loan
                                                                                       Student loans are a great idea but           later on.
Older consumers in the USA and the UK      Because the buyer is not the owner,         think carefully about the trade-offs.
have actually lost their homes through     they have limited rights. If the            The interest rate of many student loans      Whilst HECS-HELP loans are very low
similar schemes. Lenders in Australia      ‘wrapper’ has borrowed to finance the       is indexed to the CPI, so while it may       interest compared to personal loan
have claimed they will cover the loss if   property and they default on that loan,     be low when you take out your loan,          rates, it is still best to repay the loan
the debt is eventually greater than the    the buyer still loses possession and        it could easily increase (since 1990,        as quickly as you can, as these loans
value of the house (Choice June 2004)      any possibility of ownership or refund      the CPI has varied from -0.1% to 8%).        are considered to be debts and will be
but ensure this guarantee is covered in    of any monies paid, even though the         As many students will also graduate          considered when you apply for other
the mortgage agreement.                    buyer is not the one in default.            with a HECS debt (also indexed to the        loans in the future.
An alternative for older homeowners        Approach vendor finance contracts with      CPI), think carefully before taking out      For more information on HECS-HELP,
is Centrelink’s Pension Loan Scheme        extreme caution. The consequences           a student loan or you could spend            visit www.goingtouni.gov.au.
for people who are ineligible for the      if you default can be very harsh. If        your first years of working life servicing
pension under the income or asset          you fall behind on repayments – even        huge debts.
test. This loan is similar to a reverse    one repayment – you risk losing the         Many student unions offer interest-free
                                                                                                                                    Credit cards
mortgage but with lower interest rates.    property. This means you risk losing        loans, but these usually must be repaid      Credit cards are a type of loan. Credit
However, you may not be able to            your house, any repayments already          within the academic year otherwise           card interest rates are usually higher
borrow as much money as offered from       paid and your credit rating.                academic results may be withheld.            than personal loans, housing loans
other lenders.
                                           In addition to the monetary risks of                                                     and motor vehicle loans. The interest
                                           vendor finance, there are also big          Higher Education Contribution                rates charged for credit cards vary from
Vendor finance/wrap loans                  disadvantages in that the buyer is                                                       provider to provider, so shop around
                                                                                       Scheme (HECS)/Higher Education
If you are a first home buyer, don’t       not able to alter, extend or rent the                                                    for the best deal. Account fees and
                                           home without the seller’s approval.         Loan Programme (HELP)                        transaction fees may be charged.
let the dream of owning your own
home influence you to sign a contract      If the buyer does spend money on            If you are eligible, HECS-HELP
you might regret. Vendor financing         the property, they have no right to         helps you pay for your university
arrangements may seem like an easy         compensation for it if they are evicted.    studies. HECS-HELP is a loan from
solution, especially if you are having                                                 the Australian Government for all or
                                           The Office of Fair Trading strongly         part of your studies. You do not need
trouble obtaining finance elsewhere,       recommends anyone considering vendor
but they have the potential to deprive                                                 to start repaying your HECS-HELP
                                           finance as a way of purchasing a home       debt until your repayment income
you of your hard-earned savings and        should seek expert and independent
leave you with nothing.                                                                is above the minimum threshold for
                                           legal advice before signing anything.       compulsory repayment.

24                                                                                                                                                                         25
It is illegal in Australia for a bank or     Offers to increase your                    Ask yourself if you can really afford the   spending limit – that is, you are free
financial institution to send you a credit   credit limit                               extra debt. See ‘Debit cards’ (page 28)     to spend as much as you can afford
card unless you ask for one.                                                            or ‘Credit alternatives’ (page 27).         to repay. However, most charge card
                                             Lenders sometimes increase the
                                                                                                                                    providers require proof of resources
Credit cards are one of the easiest          amount you are able to borrow
                                                                                        Repaying your credit card debt              and security. If you use a charge card,
ways to get yourself into debt. It is very   (credit limit) without asking about
                                                                                                                                    you’ll be sent a bill each month which
easy to buy on impulse and you are           your current income and other              The faster you can repay your credit card   you usually have to pay in full – so
only obliged to make a small minimum         commitments. Just because your credit      debt, the less money you will pay in the    again, this isn’t a credit card. You will
repayment each month.                        limit increase is approved or offered      long run. Delaying repaying the debt will   generally be charged an annual fee.
Many credit cards have interest-free         by the lender does not mean you can        only make it bigger in the future when it
periods. For example, your credit card       afford to borrow that amount.              skyrockets from high interest rates.
contract may say that you have a 55-         Be careful about such offers as they       To manage an existing credit card debt:     Credit alternatives
day interest-free period for purchases       are often based on your past payment       • try to pay the balance in full each
with the credit card. Paying your entire     history, not your ability to repay            month, or at least pay more than the     It’s easy to get carried away
credit card balance off by the due date      higher amounts.                               minimum monthly repayment;
means you do not pay any interest and                                                                                               Stores tempt us with special offers,
                                                                                        • ask your bank to reduce your limit;
                                             Work out whether you can afford                                                        store cards, interest-free periods (see
that’s smart. Not paying the whole                                                      • use alternatives to credit cards such
                                             the repayments before accepting an                                                     page 13) and credit deals because they
amount owing means you will pay                                                            as cash or lay-by;
                                             offer to increase your credit limit (see                                               want to generate sales and increase
interest on the outstanding amount. On                                                  • if in trouble, talk to your bank
                                             ‘Working out your budget and what you                                                  their profitability. It is very easy to buy
some cards, you will lose your interest-                                                   about re-negotiating terms for
                                             can afford to borrow’ on page 3).                                                      when offered interest-free credit or ‘buy
free period completely on past and                                                         repayment; and
future purchases until the account is                                                                                               now, pay nothing for twelve months’
                                                                                        • do not use your card again until you
paid in full.                                Benefits of using a credit card                                                        deals. Sometimes stores offer a
                                                                                           have paid off the balance.
                                                                                                                                    discount or ‘free’ gift if you sign a credit
Interest is also charged immediately         There are advantages to using credit
                                                                                                                                    or loan agreement immediately.
on cash advances obtained from the           cards when buying by mail order or on      Store cards
bank or ATM. Usually an annual fee is        the internet. If your goods or services                                                It is a good idea to think twice before
                                                                                        Issued by stores or retail groups,          rushing into anything. Ask yourself:
charged to your card.                        are misrepresented or don’t arrive, you
                                                                                        store cards offer a form of credit. You     • What is the real cost if I buy it
                                             may get a refund from the card issuer.
Some stores choose to charge                                                            can use the card to buy goods at the             with credit?
                                             Other benefits include points schemes
additional fees for the use of credit                                                   store and will be sent a monthly bill.      • Is it really the bargain it seems?
                                             although you often have to spend
card facilities. This fee will usually be                                               Repayment terms vary from store to          • Can I get it cheaper somewhere else?
                                             thousands of dollars to earn rewards,
a percentage of the total value of what                                                 store. Some cards demand a minimum          • If ‘interest-free’ credit is offered, is
                                             or have trouble collecting your rewards.
you are charging to your credit card.                                                   monthly repayment and others a fixed             the price of the goods higher
The amount of the percentage and                                                        repayment by standing order or direct            than elsewhere?
therefore the value differs between                                                     debit. You will normally pay interest if    • Can I afford the repayments?
stores. Before you charge items to your                                                 you don’t pay back all you owe each
credit card ask if you will be charged                                                  month, and there are often fees and
extra fees and what that is in dollar                                                   charges. Interest rates on store cards      Paying cash
figures. If you pay by cash you will                                                    tend to be higher than credit cards.        The advantages of paying with cash are:
avoid these fees.                                                                                                                   • you can often negotiate a
                                                                                        Charge cards                                   cash discount;
If using a credit card overseas, make                                                                                               • you will pay less because you won’t
sure you understand how foreign                                                         Unlike credit cards, charge cards              incur interest or other charges;
exchange charges will apply.                                                            generally have no maximum pre-set

26                                                                                                                                                                           27
• you won’t have to worry about           • the total price of the goods;            It is now fairly common banking               the business (with a copy to your bank/
  keeping up repayments;                  • deposit paid;                            practice to allow customers to overdraw       financial institution) asking them to stop
• if the value of the goods drop, you     • time intervals for payment (every        debit card accounts – however, a fee          the payments. If you still owe money to
  are not left paying interest on a         week, or every second week);             is charged each time this occurs. If you      the business you will need to negotiate
  higher amount;                          • maximum length of the lay-by; and        have not made an arrangement with             an alternative payment method. Please
• you know you have the money; and        • cancellation process or charges.         your bank for an overdraft, these fees        refer to page 41 for a sample letter.
• you know you own it.                                                               may be quite large, particularly if you
                                          Breaking your lay-by agreement                                                           For more information on direct debits,
                                                                                     are only overdrawn by a few dollars.
                                                                                                                                   get the free ‘Direct-debit pitfalls’ fact
                                          If you break the lay-by agreement, you
Lay-bys                                                                                                                            sheet from the Office of Fair Trading
                                          may lose the money you have already
Paying for goods gradually through                                                   Direct debits                                 by calling 13 13 04 or visit
                                          paid, plus the goods. If the business
lay-by is a handy alternative to saving                                              Direct debit may be a convenient way          www.fairtrading.qld.gov.au
                                          breaks the lay-by agreement, you are at
or using credit cards, and many stores    least entitled to get your money back.     of paying your bills without having the
have these schemes.                                                                  hassle of physically doing it yourself, but
                                          The retailer can only cancel a lay-by if
                                                                                     it does have risks and disadvantages.         Managing debt
A lay-by sale is an agreement between     you don’t honour your agreement by
a customer and a business for the         missing payments.                          By allowing a business to take money
purchase of goods at a fixed price to                                                directly from your account (either your       What are your debts?
be paid over a certain period of time.    Credit unions                              general, savings or cheque account,           Sort out your priorities for repayment.
There is usually a small administration                                              or your credit card) you are approving        Make a list of all the people and
                                          Credit unions offer loans for as little    them to take money from that account
fee and you are not able to take the                                                                                               organisations you owe money to (they
                                          as $200 with terms starting at three       until you cancel the direct debit. It
goods until you have paid the purchase                                                                                             are called your ‘creditors’) noting what
                                          months. They assess consumers’             can be difficult to stop direct debit
price in full.                                                                                                                     you owe each one.
                                          repayment ability and lend to those on     payments from your credit card.
When you take out a lay-by, you enter     welfare benefits.                                                                        If you are having difficulties making all
into a contract that requires you to                                                 You have to monitor the balance of your       your repayments, tell the lender you
abide by the conditions set by the                                                   account to make sure there is enough          are having trouble – you may be able to
                                          Don’t forget the sales                     money to cover the amount being
trader. Because there are no lay-by                                                                                                get more time to pay. Be sure to ask the
laws in Queensland, conditions differ     Shop smart by planning ahead for           deducted, or you may have to pay              lender if this will cost you extra.
from store to store. Get the terms and    expensive items. When regular sales        dishonour fees by the bank and/or the
                                          come along you can save money,             business, or overdraw fees and interest       This list will help you:
conditions in writing from the business
before you lay-by the item.               especially if you can pay cash instead     if the business overdraws your account        Rent
                                          of using credit.                           or exceeds your credit card limit.
The written lay-by agreement                                                         Monitoring your account to make sure          If you get into arrears and
                                                                                     there is enough there for the regular         don’t do anything about
The lay-by agreement usually includes:
• a description of the goods;
                                          Debit arrangements                         repayments can be especially hard if          it, you could be evicted. Even if you
                                                                                     the amount varies for each payment            abandon your home, you will still owe
                                                                                     (e.g. a phone bill).                          the money.
                                          Debit cards
                                          Debit cards allow you to withdraw          You need to check your account                Tell your real estate agent as early as
                                          money directly from your bank account.     statements to make sure the direct            possible if you are having difficulty
                                          They are not credit cards but are an       debit is being made and is for the            paying and they will help you work out
                                          alternative to cash or writing a cheque.   correct amount, and address any               a payment plan.
                                          Linked to your bank account, debit         problems as soon as they arise.
                                          cards also work in ATMs, EFTPOS and        If you decide to cancel a direct debit,
                                          internet purchases.                        you should do so by writing a letter to
28                                                                                                                                                                         29
Mortgage                                        in regard to:                               Struggling with debt                        Borrowing more money to get yourself
If you can’t meet your mortgage                 • payment in full;                          Dealing with debt is a serious and          out of debt can get you into deeper
repayments, speak to your bank as               • payment by instalments; or                stressful matter. If someone says that      trouble. Get expert advice from a
soon as possible. If you need further           • conversion to a community                 you owe them money, the law says            financial counsellor.
assistance, enquire about a Mortgage                service order.                          they can:
Relief loan through the Department              A community service order allows you        • write you a letter or ring you to         Budgeting when you’re in debt
of Housing (see ‘Useful Contacts’ on            to work off the amount owed under               demand payment;
page 43).                                                                                                                               Take a look at your budget
                                                supervision in an approved community        • take you to court to recover
                                                service or agency.                              their money;                            Work out how you can get more money
A Mortgage Relief loan provides short-                                                                                                  coming in than going out. This is
term assistance to people experiencing                                                      • take and sell any property over
                                                Child maintenance                               which they have taken a mortgage        the only way you will be able to start
difficulties with their home loan                                                                                                       repaying any debts.
repayments as a result of an unforeseen         Talk to the Child Support Agency if you         or other form of security; and
change in their circumstances. These            are having difficulty with paying the       • only visit your home at a                 Ask yourself some hard questions
changes may be due to unemployment,             amount you are supposed to for your             ‘reasonable time’ such as between       and accept that you will have to make
accident, illness or some other crisis          children. Contact the Child Support             7:30 am and 9 pm.                       sacrifices. See page 4 and 5 for planner.
and there are a number of conditions            Agency on 13 12 72.                         Under the law they cannot (unless
                                                                                                                                        Can you spend less?
that need to be met.                                                                        you obtained the credit under false
                                                Gas, electricity, water, telephone                                                      Find ways to spend less, for example:
Mortgage Relief is not a grant but              and mobiles                                 pretences):
                                                                                            • have you sent to jail;                    • Can you spend less on
a loan to be repaid in future and is            Contact your supplier quickly so you                                                       entertainment?
available for short-term assistance.                                                        • take and sell any property over
                                                can negotiate payments you can afford.                                                  • Do you really need that mobile
Applicants are encouraged to seek                                                              which they do not have a mortgage
                                                For telephone/mobiles:                         or other form of security unless they       phone? If you do, have you got the
advice from a financial counsellor                                                                                                         most cost-effective plan?
about other options to resolve long-            • place limits, for example on long            have an order from the Court; and
                                                    distance calls; and                     • threaten, intimidate or harass you        • Are you spending more than
term financial commitments.                                                                                                                necessary on snack food, clothes,
                                                • mobile – pre-paid credit.                    (see ‘Harassment From Creditors’ on
Income tax                                                                                     page 36).                                   shoes, CDs, books, etc?
                                                Credit or store card
If you are self-employed and do not pay                                                     Take action as soon as possible once        Look carefully at all the things you buy
your income tax on time, the Australian         If you cannot make the minimum                                                          that are not essential. Cutting back on
                                                                                            you realise you can’t pay all your bills.
Tax Office will charge interest on what         monthly repayments, stop using the                                                      essentials like food or heating is not
you owe. Tell the Tax Office if you can’t       card. Return it or cut it up, so that you   Do:                                         a good idea unless you are spending
pay and ask for advice.                         can’t use it. Then                          • contact the people you owe money          more than you need. For example,
                                                agree to a repayment                           to and tell them you have a problem;     take-aways and ready-made meals
For business tax inquiries, call                plan with the store.                        • use the budget planner in this            from the supermarket cost more than
13 28 66 or write to GPO Box 9990,                                                             booklet (see pages 4 and 5) to           home cooking.
Brisbane, 4001.                                 Credit agreements                              help you take control of your
Court fines and court orders
                                                If you are buying
                                                                                   4           finances; and                            Can you increase your income?

                                                                                  O 0%
                                                something on credit                         • get free help and advice from             You might be able to get more money
Tell the court or your solicitor if you can’t
pay money that a court has ordered
                                                and can’t keep up the
                                                repayments, the store
                                                                                   FF          the experts.                             coming in, either regularly or as a one-
you to pay. If your circumstances               might be able to get a court          !!    Don’t:                                      off. For example:
                                                                                                                                        • If you are not working, can you get a
have changed, the amounts might be                                                          • ignore or throw away letters or
                                                order that allows them to take                                                              part-time job?
reconsidered. Contact the State Penalties                                                     demands for payment; or
                                                the goods back. Talk to them
Enforcement Registry on 1300 365 635,                                                       • make promises about repayments
                                                before that happens.
                                                                                              that you can’t keep.
30                                                                                                                                                                            31
• Are you receiving all the benefits you   them what you are doing to reduce your         You are not responsible for your            Home loans, car loans and other
  are entitled to? Contact Centrelink      spending and/or increase your income.          partner’s debts just because of your        joint loans
  on 13 10 21 to make sure.                They will want to see that you are doing       relationship, whether you are married       Notify the lender of the separation and
• Are you getting all the maintenance      your best to clear your debts.                 or de facto. However, you may have          of the arrangements for repaying the
  you should be? Contact Child                                                            become liable for his or her debts          loan. Arrange for statements to be sent
  Support Agency on 13 12 72               Bad response from creditors?                   because you signed a loan contract          to your new address. If your home loan
  for advice.                              If you get a poor response at first, don’t     as a joint borrower or guarantor, or        has a redraw facility or is linked to a
• Are you paying too much tax? Ask         give up:                                       because you were a director of a family     credit card account, instruct the bank in
  your human resource department           • make the repayments you have                 company or a partner in a business.         writing to stop this, send the letter by
  to check.                                    offered, even if the creditor says it is                                               registered mail and keep a copy.
• Do you own anything you could sell                                                      In most cases, you will not be able
                                               not enough;
  to raise cash?                                                                          to get out of loan contracts you have
                                           • keep copies of all the letters you                                                       Credit cards
• If you are a student, can you get a                                                     made in the past, but you should get
                                               send and the replies you receive;                                                      If you have a joint credit card or your
  larger student loan or an emergency                                                     legal advice about this. Financial/
                                           • make notes about phone calls                                                             ex-partner has a second card on your
  payment? Ask at the students’                                                           property settlements can be used to
                                               with the date and the name of the                                                      credit card account, close the account
  union or student services office.                                                       assist with splitting property and debts.
                                               person you spoke to. If they are                                                       and pay what is owed. If you cannot
It is also worth considering insurance         unhelpful, ask to speak to someone         The following checklist has a number of     pay the account in full, write to
policies you might be able to claim on –       higher up; and                             steps to help take control of your credit   the lender informing them of the
do you have Consumer Credit Insurance      • if you agree to something on the             and stop your financial situation from      separation and ask that no further
or income protection insurance?                phone, write a letter setting out          getting worse.                              credit be given on the account. Keep
                                               what you agreed, so you and the                                                        a copy of all correspondence.
Don’t be tempted to obtain more                company have a written record.
income through gambling, gambling                                                         To protect your financial position
                                                                                                                                      Utility bills
software, ‘get rich quick’ schemes,        If you think you have been treated             when you separate, think about:
                                           unfairly, you can lodge a complaint.                                                       If telephone, electricity, gas and water
investment seminars, dubious work-                                                        Bank accounts
                                           If the company belongs to a trade                                                          accounts are in your name and you are
from home schemes that cost you
                                           association (there should be a logo            Close any joint bank accounts. Limit        moving out, transfer or disconnect them.
money for information, or psychic/
lotto guarantees.                          on the company’s letterhead), contact          your liability and cancel joint credit
                                                                                          cards, etc. If possible, discuss with       Rent and bond
                                           the association or call the Office of Fair
Make an action plan                        Trading on 13 13 04 for help.                  your ex-partner how you will repay          If you are moving out of a rented
                                                                                          joint debts.                                premises, negotiate with the lessor to
Now you have worked out what money
                                           Getting deeper into debt?                                                                  be released from the rental agreement.
you have coming in and going out, how
                                           Don’t do nothing and hope things will                                                      Otherwise you could still be liable for
much you owe and what debts you
                                           get better – they won’t. See the ‘Getting                                                  rent after you leave. You may also have
should tackle first, you need to work
                                           Help’ section (page 34). Get free,                                                         to apply to get your bond returned
out what you can afford to pay to each
                                           independent advice – see the section                                                       or transferred.
creditor and when you will be able to
make the repayments. Remember, it          ‘Useful Contacts’ (page 43).                                                               Keep copies of letters and documents
is better to make small repayments                                                                                                    and get advice
regularly than to promise larger amounts
and then not be able to keep them up.      Relationship debt                                                                          Get legal advice about your children,
                                                                                                                                      any family business and property
Contact your creditors (or ask your        The end of a relationship often leads                                                      settlements. If you are having problems
representative to) and tell them how       to financial hardship, especially if you                                                   with debts or dealing with banks, see
you plan to repay what you owe. Send       have joint debts which your partner is                                                     a financial counsellor. You may be
a copy of your budget planner and tell     unwilling or unable to help you repay.                                                     able to apply for changes to your loan

32                                                                                                                                                                          33
arrangements under the Hardship              First, talk to your creditors and tell them   need to file your defence in court.          You may repay less each month, but
provision of the Consumer Credit Code.       you want to sort things out – you will                                                     you will carry on repaying and being
                                                                                           See page 46 for details of organisations
Please refer to page 35 for further          probably find them helpful provided                                                        charged interest for years. And if you
                                                                                           offering dispute resolution services.
information on hardship variations to        you have a reasonable proposal about                                                       miss repayments you could end up
loan repayments.                             how to manage the problem. After all,                                                      even deeper in debt. Look out for extra
                                             they want their money and it is in their      Hardship variations to                       costs associated with consolidation
Property settlements                         interest to help you, however long            loan repayments                              loans such as application fees,
                                             it takes you to repay what you owe.           If you are unable to make your               termination fees, etc. These extras
A property settlement is an agreement        The earlier you let them know there                                                        might end up costing you more than
registered in a court between a couple                                                     loan repayments due to illness,
                                             is a problem, the easier it may be to         unemployment or any other reasonable         the interest on your original loans.
who have separated or divorced, about        arrange a solution.
how their property should be divided                                                       cause, you may apply to your lender or       Some seemingly easy repayment
between them. If a couple cannot come        If you don’t want to talk to your creditors   the court for a hardship variation to your   schemes are really Part IX Debt
to an agreement, a court has the power       yourself, you can get free help from a        loan agreement. However, to make this        Agreements, which are legally binding
to make an order about how property          financial counsellor. Many are based          application you need to be suffering         under the Bankruptcy Act 1966.
should be divided.                           in non-profit community organisations         only a temporary inability to repay and
                                                                                           be able to prove that you will ultimately    These agreements are alternatives
                                             such as Lifeline. They can also help you
Property settlements or court orders                                                       be able to repay the entire loan.            to official bankruptcy for low to
                                             to identify which are your most serious
can be made between couples who                                                                                                         middle income earners. Under these
                                             debts and prioritise your repayment plan.     A hardship variation cannot change
were married or couples who were in a                                                                                                   arrangements, you pay a third party
de facto or same sex relationship.           Alternatively, contact one of the             the interest rate, but can alter the loan    administrator one payment per fortnight
                                             organisations in the ‘Useful Contacts’        agreement in the following ways:             or month, then they repay your creditors
Although a court has the power to            section at the back of the booklet.           • extend the length of the contract;         for you. Of course additional fees and
divide property, it does not have the                                                      • postpone the dates of                      charges can be, and often are charged
power to divide debts or change your                                                          repayment; and                            by the third party for such arrangements.
contract with a lender (whether as the       Dispute resolution schemes                    • extend the length of the loan and          Be very careful of these agreements as
borrower or guarantor).                      You may be able to resolve an ongoing            postpone payment during a                 a Debt Agreement will affect your credit
                                             dispute with your lender or their debt           specified period.                         rating for seven years and be on the
Ideally, a property settlement will end
                                             collector using an independent body,                                                       bankruptcy records for life. If you cannot
all financial ties between you and your                                                    You can apply for a hardship variation
                                             such as an independent dispute                                                             pay as you said you would, you cannot
ex-partner and all outstanding joint                                                       to a loan by writing to your lender
                                             resolution scheme.                                                                         terminate the agreement without your
debts will be repaid, or refinanced in                                                     and asking for the desired variation
the name of one partner only.                There are independent dispute                 arrangement as soon as you become            creditors’ approval.
                                             resolution schemes for the banking,           unable to pay. Many lenders will agree.
Important – if you are the director                                                                                                      Example of a debt consolidation
                                             telecommunications and utilities
of a company or you have signed a                                                          If the hardship variation is agreed to by     loan ad:
                                             industries. These schemes are available
contract of guarantee, get legal advice.                                                   your lender, you must be provided with
Tell your legal advisor about all loans,
                                             free of charge, and scheme members
                                             must comply with their decisions.             a written notice setting out the details      REDUCE YOUR DEBT!
contracts of guarantee and family                                                          of the change of information required.              Are multiple debts
business arrangements.                       Make sure you refer your dispute                                                                 becoming too heavy?
                                             without delay. Generally, legal
                                             proceedings cannot be started against
                                                                                           Borrowing to get out of debt                        A debt consolidation loan could be
Getting help                                 you while a matter is being considered        (consolidation)                                 the solution. Turn multiple debts into one!

                                             by one of these bodies.                       Beware of advertisements offering                           Call now!
If you feel you are in over your head with
                                                                                           loans to repay your debts (these are         Take the time to find out about the fees
debt, there are people who can help.         If legal proceedings have started and
                                                                                           sometimes called consolidation loans).       for a loan.
                                             you wish to dispute the debt, you may

34                                                                                                                                                                                       35
Get independent financial advice.           the Property Agents and Motor Dealers      If you are being harassed by a creditor,      payment in lieu of the whole debt and
Some loan companies offer advice but        (Commercial Agency Practice Code of        you are within your rights (and it is         then once you’ve paid, put you up for
may charge you for it and it might be an    Conduction) Regulation 2001.               strongly recommended) to request that         the full amount.
offer of another expensive loan.                                                       all future contact be in writing. This will
                                            The guideline states:                                                                    If a collector demands payment of an
                                                                                       also help you verify what happened
If you put property up as security for      • you can be contacted by phone only                                                     old debt (i.e. over six years since the
                                                                                       should you end up in court.
a loan, you risk losing it if you cannot       between the hours of 7:30 am and                                                      last payment was made):
keep up the repayments.                        9 pm on weekdays and 9 am to 9          Businesses can sell their debtor list         1. write to the collection agent
                                               pm on weekends, unless you are          to collection agencies so you may be                and request a copy of all
No interest loans                              not available during those hours;       contacted by a company you’ve never                 documentation, including a
                                            • you should not be contacted more         heard of about an old debt.                         copy of any court judgement
A ‘No Interest Loan Scheme’ (NILS) is run      than three times in any week and                                                            they may have;
by a number of community organisations                                                 Find out who they are, contact details
                                               ten times in any month without                                                        2. seek legal advice to understand
around Australia. NILS organisations                                                   and record the times and dates when
                                               your permission;                                                                            how to defend the payment
provide loans to people on low incomes                                                 they contacted you. Again, it is your
                                            • you should be contacted by phone                                                             request;
to buy essential household goods such                                                  right to ask for this information in
                                               where possible, not in person,                                                        3. ask that all future correspondence
as a fridge or medical appliance.                                                      writing from the debt collection agency.
                                               especially for the first contact;                                                           be in writing if a judgment exists
Most NILS loans are for amounts under       • you should not be contacted at work      If you think you are being harassed, you            and if a judgment does not exist to
$800 and are repaid over 8-15 months.          unless there is no other alternative;   can complain. Contact the ACCC or ASIC              please stop contacting you; and
As the money is repaid, it is lent out      • your financial affairs cannot be         office, the police or an advice agency        4. assert that you will make a
again to others. Loans are generally           discussed with your employer,           (see ‘Useful Contacts’). If you feel you            complaint to the appropriate
made to people on a government                 colleagues, neighbours or               have been threatened or abused, or                  regulator (ACCC if it is a general
benefit, pension or allowance or               other associates;                       a debt collector refuses to leave your              debt; the ASIC for credit and
anyone who holds a Commonwealth             • you, your friends and family should      home or workplace, call the police.                 insurance matters; or Office of Fair
Health Care Card and who has the               not be abused or threatened in                                                              Trading generally) or the police for
                                                                                       Some lenders might threaten to
capacity to repay the loan. See the            any way;                                                                                    harassment if:
                                                                                       prosecute you in the criminal courts
‘Useful Contacts’ section on page 43        • creditors cannot threaten any action                                                         a) they continue contact where
                                                                                       if you do not pay your debts. Don’t
for further information.                       they do not intend to take, such as                                                               no judgment exists and the
                                                                                       worry, they cannot do this because
                                               threatening to take you to court when                                                             last payment was more than
                                                                                       being in debt is not a criminal offence
                                               they have no intention of doing this;                                                             six years ago; and
Harassment from                             • you can have someone else act for
                                                                                       in Queensland.
                                                                                                                                           b) the judgment exists and
                                                                                       They can sue you and get a Money
creditors                                      you provided you give the collectors
                                               a written authority for that person     Order against you. This is a court order
                                                                                                                                                 they fail to contact you
                                                                                                                                                 using the specified mode
Creditors may remind you to bring your         to do so. That person must be           that says you owe the money. It gives                     of preferred contact.
payments up to date but they are not           able to respond to the collectors       the creditor/collector the right to ask
allowed to cause you alarm, distress           in a reasonable time frame,             the court to order an amount of your
                                                                                                                                     Being taken to court?
or humiliation.                                approximately two weeks; and            wages to be redirected to pay the debt
                                            • if you have a repayment                  or to order the sale of some of your          Most creditors only take people to
The Australian Competition and                 arrangement in place, you should        assets to pay it.                             court as a last resort. If you talk to your
Consumer Commission (ACCC) and the             not be contacted unless the collector                                                 creditors, work out an action plan and
Australian Securities and Investments          has a proposal to benefit you.                                                        then make the repayments you have
Commission (ASIC) have issued a                                                        Collection of old debts                       offered, you are unlikely to face court.
guideline on debt collection to protect     For a copy of the guideline, contact       If you make a payment on an old debt,
                                            ASIC or the ACCC (see page 44 to 45)                                                     But, if you do get a summons to appear
consumers from harassment. This                                                        you reactivate your liability. Some debt
                                            for further details.                                                                     in court:
guideline is legally enforceable under                                                 collectors suggest they’ll take a small

36                                                                                                                                                                            37
• don’t panic – you will be                If you believe you do not owe the debt,      Writing letters to debt collectors - for a debt less than six years old
  treated fairly;                          you should write to the lender asking        The following is an example of a letter you can send if you are being hassled to pay
• fill in the forms and return them as     for proof that the debt is yours. If after   money you believe you do not owe. The letter will help you to find out about the
  quickly as possible to the court or      receiving a reply you believe you still do   debt claimed to be yours.
  creditor, as instructed. Get help if     not owe the debt, lodge a defence, but
  you need it (see ‘Useful Contacts’);     seek advice first. The defence must be       Sample letter to debt collector - for a debt less than six years old
• if you think your credit charges are     lodged with the court before the time
  highly inflated and unreasonable,        given to respond expires.
  the court might re-open your                                                             (Your title)
                                           If you receive a “Claim and Statement
  original agreement;                                                                      (Your name)
                                           of Claim” respond with the two forms            (Your postal address)
• if you are going to the Small Claims
                                           called “Notice of Intention to Defend”          Your reference: (as per their letter to you)
  Tribunal, you can have a ‘lay
                                           and “Defence”. If you receive a “Minor          Date: (date for this letter)
  representative’ to speak for you, that
                                           Debt Claim” you will need to file and           Demander’s details (lawyer, debt collector)
  is someone who isn’t a lawyer; and
                                           service a single “Notice of Intent to           Dear Sir/Madam,
• you might be able to get legal aid
                                           Defend and Defence” form.                       [Insert details of the account (name, account, etc)]
  and be represented in court.
                                                                                           I request the following information in relation to the above alleged debt:
  Call Legal Aid Queensland on             If you do nothing, the court will make          1. The date of any loan agreement if any;
  1300 651 188.                            orders that you owe the debt, so make           2. The nature of the original loan;
                                           sure you get legal advice quickly.              3. A statement showing the calculation of the current amount alleged to be outstanding and
If the court orders you to pay back a                                                           the date of the last payment made;
certain amount, you must do so.            What can the court do to make                   4. The date of judgment if any including the location of the court in which the judgment was
                                                                                                obtained and the quantum of judgment;
The court process                          me pay the money?                               5. Details of any enforcement action taken subsequent to judgment, if any.
How do you know when the lender has        If the court makes orders that you              Please advise on what basis you say that I am legally obliged to pay any amount to you.
commenced legal action?                    do owe the money, it can do any of              I ask that all further communication be in writing and addressed to me personally at the
                                           the following:                                  address listed above.
You will know you are being taken          • garnish your wages or bank account            If you do not communicate with me as specified above, or, if you harass me to pay money when
to court if you receive a “Claim and            if you are working by a reasonable
                                                                                           you have no entitlement to do so then I will draw your conduct to the attention of the Office of
Statement of Claim” for amounts under                                                      Fair Trading (or to ASIC if the debt has arisen from credit or insurance products).
                                                amount (after all expenses and             I await your reply within 14 days.
$50,000 or a “Minor Debt Claim” for             liabilities are accounted for). This
amounts under $7,500.                                                                      Yours faithfully
                                                means they can take money from             (Your name)
What to do next                                 your bank account or out of your pay
                                                to cover your debt. They cannot take
If you have received either a “Claim
                                                basic household items or a car that
and Statement of Claim” or a “Minor
                                                is worth less than $5,000;
Debt Claim”, you usually have 28 days
                                           • force you to become bankrupt if
to respond from the date you receive it
                                                the debt is for more than $2,000,
(NOT 28 days from the date on the legal
                                                although this is extremely unlikely
document). The Claims document will
                                                in a consumer client matter; or
tell you how long you have to respond.
                                           • examine you in court about your
A “Claim and Statement of Claim” and            assets and liabilities.
a “Minor Debt Claim” are important
                                           If you are not sure what to do, get
documents. Do not ignore them – seek
                                           advice from a financial counsellor
legal advice immediately.
                                           or solicitor.

38                                                                                                                                                                                            39
Writing letters to debt collectors - for a debt more than six years old                                   Sample letter to cancel your direct debit arrangements
The following is an example of how to write to a creditor when you are being
hassled to pay a debt when the last payment was made over six years ago. Make
sure you keep copies of all letters you send and receive.                                                   (Your name)
                                                                                                            (Your postal address)
Sample letter to a debt collector - for a debt more than six years old                                      Date: (date for this letter)
                                                                                                            Dear Sir/Madam,
                                                                                                            I would like to cancel my direct debit arrangements with your business. My contract ended on
     (Your name)                                                                                            (insert relevant date) and I would like you to stop direct debiting payments from my account
     (Your postal address)                                                                                  (your account details).
     Your reference: (as per their letter to you)                                                           I have sent a copy of this letter to my bank (your bank) so they are aware I have cancelled my
     Date: (date for this letter)                                                                           direct debit arrangements with your business.
     Demander’s details (lawyer, debt collector)                                                            Please contact me on (your phone number) if you need any further information.
     Dear Sir/Madam,                                                                                        Yours faithfully
     I received a phone call on (Date of call from xxx) claiming that I was indebted to xyz for the sum     (Your name)
     of $......
     I have not received any previous communication about any outstanding money which might fit
     the description you gave since (date last contact about loan/debt) despite the fact that I have
     been at all times readily locatable. As I had no communication about this matter since then I
     assumed and acted on the basis that the matter was at an end. If you have a judgment against
     me, please supply a copy of same otherwise I would be grateful if you refrained from contacting
     me further unless you can specify in what way I am legally liable to respond to your demands.
     I ask that all further communication be in writing and addressed to me personally at the
     address listed above.
     If you are unable to provide a copy of a court order or judgement then please supply copies
     of any original contracts/loan documentation and statements of repayments and balance to
     enable me to identify the alleged debt and obtain legal advice as to my liability if any.
     If you do not communicate with me as specified above, or, if you harass me to pay money when
     you have no entitlement to do so then I will draw your conduct to the attention of the Office of
     Fair Trading (or to ASIC if the debt has arisen from credit or insurance products).
     Yours faithfully
     (Your name)




40                                                                                                                                                                                                           41
Glossary                                       be calculated on lesser amounts.
                                             • Debtor/Borrower – person who
                                                                                       • Variable interest – when the lender
                                                                                         can change the interest rate up or
                                                                                                                                 Useful contacts
Here is a useful list of many of the terms     borrows money (a loan) and owes           down. It is not possible to calculate
                                                                                                                                 Office of Fair Trading
lenders use, and their definitions:            money to another person/party.            in advance the total amount you will
                                             • Fixed interest – a set interest rate      pay on a variable interest loan.        The mail, email and fax contacts for these
• Bill of sale – a document which                                                                                                offices are listed below. Regional offices
                                               which does not change over the
  allows one person to possess and                                                     Acronyms                                  change locations from time to time.
                                               term of the loan.
  use goods while another person                                                                                                 Telephone: 13 13 04
                                             • Fees & charges – these are amounts      • ACCC – Australian Competition and
  (e.g. a finance company) retains                                                                                               Or visit:  www.fairtrading.qld.gov.au
                                               you may pay in addition to interest,      Consumer Commission.
  ownership of the goods until such
                                               for example, establishment fees,        • ASIC – Australian Securities and        For Deaf/Hearing Impaired,
  time as the goods are fully paid for.
                                               monthly account keeping fees and          Investments Commission.                 Telephone: (07) 3246 1588 TTY
  Many creditors take Bills of Sale
                                               late fees (default charges).            • ATM – Automatic Teller Machine;
  over goods including cars to secure
                                             • Interest – the extra money you          • EFTPOS – Electronic Funds Transfer      Brisbane
  personal loans.
                                               repay in addition to the money            Point Of Sale; and                      Email: brisbaneOFT@dtftwid.qld.gov.au
• Comparison rate – a tool to help
                                               you borrowed.                           • HECS – Higher Education                 Level 21, State Law Building,
  consumers identify the true cost of
                                             • Interest-free – credit agreements         Contribution Scheme.                    50 Ann Street, Brisbane
  credit. It is a rate which includes
                                               where you do not pay interest on                                                  GPO Box 3111, Brisbane, QLD, 4001
  the annual percentage rate (interest
                                               the loan for a set period of time.                                                Facsimile:   (07) 3246 1589
  rate) of a loan as well as fees and
                                               After this time however, you are
  charges related to the loan. For
                                               liable to pay interest.                                                           Cairns
  example, a bank’s advertised
                                             • Interest rate – the amount of                                                     Email: cairnsOFT@dtftwid.qld.gov.au
  interest rate may be 5.49 per cent
                                               interest you will pay expressed as                                                10-12 McLeod Street, Cairns
  and its comparison rate might
                                               a percentage rate – for example 12                                                PO Box 3067, Cairns, QLD, 4870
  be 6.75 per cent. Comparison
                                               per cent per annum. Put simply, this                                              Facsimile:   (07) 4042 3388
  rates apply to fixed-term credit.
                                               means that for every $1,000 you
  Comparison rates are required by
                                               borrow you will have to pay back                                                  Mackay
  law for loans that are primarily for
                                               $120 extra each year. Most loans are                                              Email: mackayOFT@dtftwid.qld.gov.au
  personal, domestic, or household
                                               more complicated than this.                                                       Level 1, Post Office Square,
  purposes and fixed-term consumer
                                             • Lender – person or organisation                                                   Sydney Street, Mackay
  credit (loans that must be repaid
                                               that lends money.                                                                 PO Box 146, Mackay, QLD, 4740
  within a specific time period). They
                                             • Secured loan – when the lender                                                    Facsimile:   (07) 4969 3007
  are not required for continuing
                                               has taken a mortgage over property
  credit products such as credit cards.                                                                                          Maroochydore
                                               such as a car or house. If you cannot
• Compound interest – refers to the
                                               repay the loan, the lender can take                                               Email: maroochydoreOFT@dtftwid.qld.gov.au
  way in which interest is calculated
                                               and sell the property over which                                                  Unit 5, WIN Television Centre,
  on your loan. Most loans calculate
                                               they have the mortgage without                                                    Cnr Baden Powell Street & Maroochydore
  interest on a daily basis, and add
                                               taking you to court first.                                                        Road, Maroochydore
  this to the balance of your loan                                                                                               PO Box 870, Maroochydore, QLD, 4558
                                             • Unsecured loan – when there is
  at predetermined periods (i.e:
                                               no mortgaged property. A lender                                                   Facsimile:   (07) 5430 8988
  monthly). This means you effectively
                                               cannot take and sell your property
  end up paying interest on your
                                               if you do not pay an unsecured loan
  interest. Compounding interest can
                                               unless they take you to court first.
  be reduced by paying weekly or
  fortnightly because your interest will

42                                                                                                                                                                        43
Rockhampton                                    Queensland Government                          Australian Securities and Investments             Commonwealth Ombudsman
Email: rockhamptonOFT@dtftwid.qld.gov.au                                                      Commission (ASIC)                                 Assists the Australian community by
                                               Department of Housing                          ASIC is the consumer protection regulator         resolving complaints and fostering
Ground Floor, 209 Bolsover St, Rockhampton
PO Box 303, Rockhampton, QLD, 4700             For information on Mortgage Relief Loans.      for financial services. It protects investors,    good government administration. The
                                               Telephone: 1300 654 322                        superannuants, depositors and insurance           Ombudsman considers and investigates
Facsimile:   (07) 4920 6688
                                               Or visit:  www.housing.qld.gov.au              policy holders. It also regulates and             complaints from people who believe they
                                                                                              enforces laws that promote honesty and            have been treated unfairly or unreasonably
Southport
                                               Legal Aid Queensland                           fairness in financial products and services,      by an Australian Government department
Email: southportOFT@dtftwid.qld.gov.au                                                                                                          or agency. The Ombudsman tries to
                                               Legal Aid Queensland provides free legal       in financial markets, and in Australian
7 Short Street, Southport                                                                     companies. You can also contact ASIC              resolve complaints impartially, informally
                                               assistance to financially and socially
PO Box 2565, Southport, QLD, 4215                                                             for an up-to-date list of financial counselling   and quickly. The service is free and
                                               disadvantaged Queenslanders on family,
Facsimile:   (07) 5581 3388                                                                   organisations.                                    investigations are private.
                                               criminal, and civil law matters. Head office
                                               is in Brisbane and 13 regional offices         Telephone: 1300 300 630                           Telephone: 1300 362 072 (toll free)
Toowoomba                                      in Queensland.                                 Or visit:  www.fido.asic.gov.au                   Or visit:  www.ombudsman.gov.au
Email: toowoombaOFT@dtftwid.qld.gov.au         Telephone: 1300 651 188
                                                                                              Australian Taxation Office (ATO)                  The Consumer Credit Code
137 Herries Street, Toowoomba                  Or visit:  www.legalaid.qld.gov.au
PO Box 841, Toowoomba, QLD, 4350                                                              Information and assistance with Federal Tax       Outlined in full on www.creditcode.gov.au
Facsimile:   (07) 4637 6040                    Queensland Ombudsman                           and GST obligations.
                                                                                                                                                Office of the Federal Privacy
                                               Investigates complaints about the actions      Telephone: 13 28 61
Townsville                                     and decisions of Queensland’s state and        Or visit:  www.ato.gov.au                         Commissioner
Email: townsvilleOFT@dtftwid.qld.gov.au        local government agencies or their staff.                                                        For information and advice on your privacy
                                               Telephone: (07) 3005 7000
                                                                                              Centrelink                                        rights, or to complain if you feel your privacy
First Floor, State Government Building,                                                                                                         has been breached including consumer
Cnr Stanley & Walker Street, Townsville,       Or visit:  www.ombudsman.qld.gov.au            A government agency responsible for
                                                                                              delivering a range of Commonwealth                credit reporting and other credit worthiness
PO Box 2009, Townsville, QLD, 4810                                                                                                              information.
                                               State Penalties Enforcement Registry           services.
Facsimile:   (07) 4753 2288                                                                                                                     Telephone: 1300 363 992
                                               Telephone: 1300 365 635                        Telephone: 13 10 21
                                               Or visit:  www.sper.qld.gov.au                 Or visit:  www.centrelink.gov.au                  Or visit:  www.privacy.gov.au
Hervey Bay
Email: herveybayOFT@dtftwid.qld.gov.au                                                        Child Support Agency
                                               Australian Government (Federal)                                                                  Industry and
Ground Floor, Brendan Hansen Building,                                                        Information to help manage your child
54 Main Street, Pialba, QLD, 4655                                                                                                               other Organisations
                                               Australian Competition and Consumer            support responsibilities including working
PO Box 3408, Hervey Bay, QLD, 4655                                                            out, registering and collecting child support.
                                               Commission (ACCC)                                                                                Australian Consumers Association
Facsimile:   (07) 4197 9805                                                                   Telephone: 13 12 72
                                               Offers consumer protection in areas                                                              A not-for-profit organisation publishing
                                               including harassment from debt collectors,     Or visit:  www.csa.gov.au                         Choice magazine to keep consumers
Disclaimer
                                               credit cards, ecommerce and scams and                                                            informed about products and services. They
The contact details listed below are                                                          National Association of Community                 campaign on behalf of consumers, research
                                               can take complaints about misleading and
subject to change over time. Some of                                                          Legal Centres (NACLC)                             important issues, lobby governments and
                                               deceptive conduct.
these organisations and government                                                                                                              work with industries, so they can speak on
                                               Telephone: 1300 302 502                        Look under “CLC Directory” on the
services may change or discontinue their                                                                                                        behalf of consumers.
                                               Or visit:  www.accc.gov.au                     NACLC website for details of
operation. These details were current at the
                                                                                              Queensland’s 36 legal centres.                    Telephone: (02) 9577 3399
time of printing. The Office of Fair Trading
recommends that you attempt to search for                                                     Telephone: (02) 9264 9595                         Or visit:  www.choice.com.au
any changes to details through telephone                                                      Or visit:  www.naclc.org.au
directories and internet searches.




44                                                                                                                                                                                         45
Baycorp Advantage                             Townsville Community Legal                     Financial Co-operative Dispute                    Lifeline
(Credit history details)                      Service Inc                                    Resolution Scheme Inc (FCDRS)                     A free accredited financial counselling
Write to obtain a free copy of your           Offers free and confidential legal advice      The FCDRS can help resolve disputes               service providing information, options and
credit record:                                and provides a financial counselling           between customers and Scheme                      assistance on issues about debt, budgeting,
Baycorp Advantage, Public Access Division     service for people experiencing debt and       participants (credit unions and building          negotiating with creditors, insolvency,
PO Box 964, North Sydney, NSW, 2059           credit problems. Free service for the North    societies) in relation to financial products      harassment and debt agreements. Face-to-
Telephone: (02) 9464 6000                     Queensland region. Open Monday to              or services provided, such as:                    face counselling as well as phone and email
Or visit:  www.baycorpadvantage.com           Thursday by appointment.                       •   withdrawal or deposit errors;                 services are provided.
                                              Telephone: (07) 4721 5511                      •   unauthorised transactions;                    Telephone:
Consumer Law Advice Clinic                                                                   •   ATM or EFTPOS malfunctions;                   •   Chermside       (07) 3359 9115;
Provides free legal telephone assistance      Dispute Resolution and                         •   incorrect application of fees                 •   Springwood      (07) 3209 3622;
and advice on consumer financial matters                                                         and charges;                                  •   Cairns Region   (07) 4050 4955;
to low income and disadvantaged
                                              Ombudsman Services                             •   delays and other contractual issues;          •   Maroochydore    (07) 5443 5366;
Queenslanders. Assists with consumer                                                         •   breaches of privacy or confidentiality; and   •   Gympie          (07) 5482 7742;
                                              Banking and Financial Services                 •   breaches of relevant Codes of Practices
credit issues including personal and                                                                                                           •   Hervey Bay      (07) 4124 3839;
home loans, credit cards, debt collection,
                                              Ombudsman                                          and the EFT Code of Conduct.                  •   Maryborough     (07) 4122 2144;
bankruptcy, insurance and related legal       Helps individual bank customers sort out       Telephone: 1300 139 220                           •   Bundaberg       (07) 4153 2000;
transactions. Telephone appointments are      unresolved complaints with their banks.        Or visit:  www.fcdrs.org.au                       •   Toowoomba       (07) 4632 2615; and
booked in every half hour from 9:30 am to     It is an independent, non-Government                                                             •   Ipswich         (07) 3281 8688.
12 pm on a Thursday each week.                scheme with equal numbers of consumer
                                              and bank reps.                                 Counselling Services                              Or visit:    www.lccq.org.au
Telephone: (07) 3012 9773
Or visit:  www.qpilch.org.au                  Telephone: 1800 337 444                        Central Queensland Financial                      Mackay Regional Financial
                                                         (toll free)                         Counselling Service Inc                           Counselling Service
Goodna Neighbourhood House                    Or visit:  www.bfso.org.au
                                                                                                                                               Provide support, information, options and
                                                                                             Assistance for people suffering credit and
Information on No Interest Loan Schemes                                                      debt problems. Free service to Central            advocacy to individuals, families and small
for whitegoods in Queensland. Open first
                                              The Credit Ombudsman Service
                                                                                             Queenslanders.                                    business operators experiencing personal
Wednesday of each month                       Limited (COSL)                                                                                   financial difficulties. Free service to the
9:30 am to 11:00 am.                          Previously known as the Mortgage Industry      Telephone: (07) 4922 5924
                                                                                                                                               Mackay region.
Telephone: (07) 3288 5839                     Ombudsman Service Limited (MIOS), is
                                                                                             Financial Counsellor’s Association of             Telephone: (07) 4957 2626
                                              a free and independent External Dispute
                                              Resolution scheme. Provides consumers          Qld Inc
Logan East Community                                                                                                                           Salvation Army
Neighbourhood Centre                          with an alternative to legal proceedings       Free financial counselling service offering
                                              for resolving disputes with COSL Members       options for people in debt.                       The Moneycare line is a financial
Information on No Interest Loan Schemes       operating in the Credit marketplace.                                                             counselling service, suggesting options
for basic and essential household items                                                      Telephone: (07) 3321 3192                         for people facing financial problems. They
open Thursdays from 10 am to 12 pm.           Telephone:   1300 78 08 08                     Or email:  fcq@optusnet.com.au                    can help if you have difficulty in repaying
Appointments are essential.                   Or visit:    www.creditombudsman.com.au                                                          your debts, budgeting problems, are being
Telephone: (07) 3808 4529                                                                                                                      harassed by creditors or debt collectors,
                                              The Credit Union Dispute                                                                         problems regarding car repossession or
           or (07) 3808 4530                  Resolution Centre                                                                                eviction from your home, have been served
Queensland Law Society Solicitor              Provides free access to participating credit                                                     with legal or court documents regarding
Referral Service                              union members. Assists with resolution                                                           debts, or are in financial difficulties or
                                              of disputes including those concerning                                                           crisis.
Find a solicitor or use their free referral   the Credit Union Code of Practice and the
service – you can also search by language                                                                                                      Telephone: (07) 3222 6621 (Brisbane)
                                              Electronic Funds Transfer Code of Conduct.                                                                  or (07) 4999 1999
and region.
                                              Telephone: 1300 780 808                                                                                     (Rockhampton)
Telephone: (07) 3842 5842                     Or visit:  www.cudrc.com.au                                                                      Or visit:  www.salvos.org.au
Or visit:  www.qls.com.au

46                                                                                                                                                                                       47
St Vincent De Paul Society                    Index
Free budget advice service available in
selected areas of the state.
                                              B                                                                       L
Telephone: (07) 3217 3700
Or visit:  www.vinnies.org.au                 Brokers, finance/mortgage ..................11–12, 22                   Lay-bys ........................................................4, 28
                                              Budgeting                                                               Lines of credit ............................................22–23
The Smith Family                                Budget planner ............................. 3–4, 31–32               Loans
                                                When in debt .........................................31–32              Car.........................................................14, 33
Offers MoneyMinded, an adult financial                                                                                   Home........................................See Home loan
education program that improves financial     C
                                                                                                                         No interest loan .....................................36, 46
knowledge and builds confidence in how to     Cards                                                                        See also Interest free loans
manage your finances in the future. It aims     Charge .........................................................27       Personal ...................................... 4, 17, 25, 42
to equip people with the knowledge and          Credit.... 13, 20–22, 25–28, 33–34, 42, 44–45                            Redrawing....................................................21
skills to successfully manage day-to-day        Debit ...........................................................28      Refinancing............................................19, 21
                                                Store................................................27–28, 30           Student .................................................25, 32
and longer-term financial matters.
                                              Consolidation, debt .............................18, 35–36
Telephone: (07) 3257 1311                     Consumer Credit Code ......... 1, 10, 14, 16, 34, 45                    M
Or visit:  www.smithfamily.org.au             Contract .....1, 2, 6, 16–17, 23–25, 28, 33–35, 40                      Mortgages .....................................11, 18–22, 42
           www.moneyminded.com.au             Court, being taken to .................................37–38             Offset ....................................................19–22
                                                                                                                       Redrawing...................... See Loans: Redrawing
                                              D
                                                                                                                       Refinancing.................. See Loans: Refinancing
                                              Debt                                                                     Reverse..................................................23–24
                                                 Budgeting when in ...................See Budgeting:
                                                   When in debt                                                       N
                                                 Collection of old debts .................................37          No interest loans .............................................36
                                                 Consolidation ............. See Consolidation, debt
                                                                                                                      O
                                                 Harassment from creditors ...........................36
                                                 Relationship .................. See Relationship debt                Offset, mortgage ................. See Mortgage: Offset
                                              Direct debit ................................................10, 27     P
                                              G                                                                       Payday loans ...................................................16
                                              Glossary ..........................................................42   Property settlement ...................................33–34
                                              Guarantor, going ........................... 10–11, 33–34               R
                                              H                                                                       Rating, credit .........................................6, 24, 35
                                              Harassment ...................................36–37, 44, 47             Refinancing, mortgage ..... See Loans: Refinancing
                                                See also Debt: Harassment from creditors                              Relationship debt ............................................32
                                              Hardship variations .........................................35         Rent-to-buy ......................................................24
                                              HECS-HELP.................................................25–26         S
                                              Help, getting ....................................................34
                                              Home loan ...................11, 18–19, 21–24, 33, 46                   Settlement, property ....... See Property settlement

                                              I                                                                       V

                                              Insurance, credit ........................................10, 32        Vendor finance ..........................................24–25
                                              Interest-free credit/loans .....................13, 25, 27              W
                                              J                                                                       Witnessing.......................................................11
                                              Joint borrowers, loan........................................10         Wrap loans ......................................................24




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© The State of Queensland (Office of Fair Trading, an office of the Department of
Tourism, Fair Trading and Wine Industry Development) 2006.
The Queensland Government supports and encourages the dissemination and
exchange of information. However, copyright protects this document. The State of
Queensland has no objection to this material being reproduced, made available
online, or electronically but only if it is recognised as the owner of the copyright and
this material remains unaltered.
    For more information:
Marketplace Strategy Division
    Office of Fair Trading
       GPO Box 3111
    Brisbane QLD 4001


                                November 2006
                                          0427

								
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