The loan contract

Expect your lender to:

• Give you a copy of important information about your loan that is clear and understandable – if it isn’t, let the lender know. Giving you this information is called disclosure and consumer credit law requires it.
• Help you understand the contract, especially what will happen if you miss a payment or two. Your lender must also ensure you are aware of any insurance on offer, and whether you have to buy insurance, or can choose not to.
• Provide you with key information about the loan in the same language the loan was advertised in.
• Tell you about the interest that will be charged and the fees that are payable under the contract.
• Explain what can happen if you don’t meet your repayments. They may be able to take assets that you have listed (security) such as your car, some household items or your house.
• Not take security over essential household goods like beds, fridges, washing machines, cooking or medical equipment, unless you are borrowing the money to buy those things. The lender also can’t take security over your travel documents, bank cards or identification documents (like passports or driver licences).
• Not make you pay your loan until they have given you all the proper disclosure.
• Explain their financial hardship and complaints process, including giving you their external dispute resolution scheme’s name and contact details as part of your loan contract.

Be prepared to:

• Ask the lender to fully explain the key information and sections of the documents that your lender draws your attention to and what you need to do.
• Check whether you need insurance to secure the loan. Credit related insurance is usually optional. If you need or want it, determine how much it will cost (including the cost of financing it), what it does and doesn’t cover, and what you need to do to lodge a claim.

Top tips

• If you see an ad for a loan in any language (for example, Samoan), you can ask for key information about the loan in that language.
• When deciding whether to take out the loan, make sure you consider not only the regular payment amount but also the total cost of the loan, including the amount you are borrowing, plus any fees and interest. These additional costs can add up and it might be worth shopping around for a different deal.
• It’s a good idea to take the contract away to get some advice. You don’t have to sign it immediately.