Responsible Borrowing

Before seeking a SACC (small amount credit contract) or a MACC (medium amount credit contract), it is important to consider what is required from you as a borrower and what is required by the lender. Lenders need to carry out their “responsible lending obligations” to you when you apply for a small amount or a medium amount loan. But it is equally important that you approach your loan application with an appreciation for your “responsible borrowing obligations”.

Information you will need

As part of the lender’s “responsible lending obligations” to the applicant, during the process of application assessment, the lender will need to confirm a number of financial details with you such as:

  • evidence of your regular income;
  • residential status;
  • bank statements;
  • information on other loans; and
  • other financial commitments to ensure you have the disposable income to service the requested loan.

If you do not have the means to service the credit you are requesting, NCPA Members will not approve a loan. After assessment of your situation, a loan provider may be prepared to offer a reduced and more appropriate level of credit in line with your disposable income or refer you to seek credit counselling advice. This is all part of their responsible lending obligations to you.

Be truthful in what you say in your application

From your point of view, an applicant must also practise responsible borrowing in that they must be truthful in what they tell the lender. You must take care to truthful supply such information as correct income details, regular expense commitments, any other loans that you currently have, and whether you have had past defaults for previous loans.

Also, as part of your responsible borrowing obligations, you must accept that all credit comes with a cost and smaller loans (SACC) come with a higher cost of borrowing compared to other forms of credit usually because of their convenience (often available within a few hours or less) and ease of access. For this reason, it is important to remember that these loans should only be used for short term cash flow problems and not be used as a continuing source of credit.

If problems develop

If you have problems managing your finances or meeting your debt obligations, you should first talk to your credit provider and then consider seeking advice from a financial adviser or credit counsellor.  Your lender must provide assistance to you through their Internal Dispute Resoltuion (IDR) process so speaking to your lender when problems first develop is the best approach to getting those problems sorted.

If you have already spoken with your lender’s IDR section and you feel the dispute has not been settled then ask your lender for the name of their External Dispute Resolution entity.  This entity will either be: Financial Ombudsman Service (FOS), or Credit and Investment Ombudsman (CIO) .  You may also wish to contact a financial counsellor.

Click here for Financial Ombudsman Service (FOS)

Click here for Credit and Investment Ombudsman (CIO)

Click here for helpful links and counsellors.


Why do people use SACC – Small Amount Credit Contracts?

When you need it in a hurry

When faced with a short-term cash flow problem due to an unexpected bill, a SACC loan can be a convenient and efficient option. SACC lenders can often quickly assess a loan request and make funds available within a matter of hours.

Accessing a SACC loan through an internet loan provider can make these loans very suitable for arranging loans quickly with ease of access 24/7 compared to a shop front lender. Some internet lenders also now enable the use of mobile phones to access their website for a loan.

Know exactly how much you will pay

These loans are usually taken out by a borrower for a specific purpose. They come with a set completion date and set repayment amounts to pay the loan out on time which many borrowers find helpful with managing their budget.

In some cases the small cost of borrowing a few hundred dollars for a matter of weeks can help customers navigate a period of unexpected outgoings and avoid potential penalties for late payment on utility bills, urgent repair bills, or other time-sensitive payments.

Cost is usually higher

It is important to remember though that SACC loans do come at a higher cost than (say) a larger personal loan through a bank. This higher cost means that such loans should only be used for emergency cash flow problems and not used as a continuing source of credit.

Occasional short term use

SACC loans (Small Amount Credit Contracts) are designed for occasional, short-term use. They are designed for the situation where you wish to borrow a small amount of funds and usually in a hurry to meet some payment deadline. These loans are not intended to be used continuously, or for long-term large dollar value items. MACC loans (medium amount credit contracts) usually are less expensive than SACC loans and are for larger amounts and over a longer time.

You must be able to afford to repay the loan

NCPA Members follow rigorous procedures under their “responsible lending obligations” to ensure customers borrow only within their means to repay the loan. NCPA Members may assess a loan application in different ways depending on whether they are shop-front lenders or internet-only lenders. But all lenders must ensure that the applicant’s level of disposable income will be sufficient to cover the loan.

SACC lenders offer “right-sized” loans to customers so they only borrow what they need and can afford, even down to amounts as small as $100. In contrast, most major lenders such as banks will only consider loans of $5,000 or more. Often any bank ‘loan’ is in the form of a credit card which many people find difficult to manage and end up accruing more debt. Credit cards come with a suggested monthly repayment amount which does not cover a principal and interest amount to pay out the credit card balance by a certain date. Whereas, with a SACC loan, the amount of repayments must be set to cover the principal repayment and fees by a certain date.

High cost loans?

Although sometimes described as “high cost” loans, this is misleading when applied to the actual cost of a SACC loan. SACC loans for example are only taken out for a matter of weeks, therefore applying an annual interest rate formula is not an accurate indicator of the real cost. The total cost of credit is what is important, not the interest rate. However, it usually is best to consider SACC loans as a source of emergency funds and not used continuously.

All NCPA Members must clearly explain the total cost of credit, including all charges and fees, in clear dollar amounts so customers always know the complete cost before proceeding with any SACC (or MACC) loan.

If you find yourself using SACC loans on a regualr basis, you might want to consider independed financial counselling advice to see if you can better manage your money.

Click here to find information about financial counsellors and other helpful links.

Appropriate use of SACC

Always look for the NCPA logo to ensure you are dealing with a trusted lender who is a Member of National Credit Providers Association.