There are many different types of consumer loans such are secured, unsecured, lines of credit, home loans, etc. However, the majority of consumers opt for one of two options; known as short-term or personal loans. These are SACC’s (Small Amount Credit Contract) and MACC’s (Medium Amount Credit Contract).
A SACC loan is a regulated product under the National Consumer Credit Protection Act, which was introduced in 2009. A SACC loan varies in length from 16 days to 1 year, up to $2,000. The fees associated with a SACC loan will typically entail a 20% establishment fee and a 4% monthly fee depending on the amount and duration of the loan term.
These loans are designed to help meet unexpected expenses and are a convenient and economical way to manage a temporary cash flow problem, such as an unexpected car repair bill, household repairs or a number of different unforeseen expenses that happen in everyday lives. It is important to remember that these loans are only for short-term pitfalls and are not suited for long-term or ongoing financial needs.
Government regulation requires that your loan provider must carry out “responsible lending obligations” to ensure that you can afford the loan you are asking for. Lenders should not lend without first confirming you have sufficient disposable income to service your loan amount over a time-frame that meets your specific requirements. Different lenders have different ways of carrying out these checks when you apply for a loan.
All SACC loans are unsecured, which means that you don’t have to pledge any asset that you own such as a vehicle or your home to take out the loan.
If you are experiencing problems in meeting your loan responsibilities, your loan provider will most likely agree to a change your loan repayments under its financial-hardship responsibility to you. It is best to contact your loan provider as soon as you start experiencing problems to ensure you do not incur any other charges such as late payment fees. If you have ongoing problems meeting your financial needs or debt obligations, you should first talk to your loan provider. Please remember, a SACC loan should be seen as a “one-off” loan for an emergency, and should not be used continuously as a source of credit.
MACC loans vary in length from 16 days to 2 years and can be from $2,001 to $5,000. These loans are generally used to meet larger expenses such as replacing white goods, car purchase, rental bonds, doctor’s expenses, unexpected or emergency travel, etc.
Your MACC loan provider must carry out their “responsible lending obligations” to ensure that you can afford the loan and the repayment timeframe. Different loan providers may have different ways of assessing your ability to repay the loan you are applying for.
Some customers prefer to use a MACC loan rather than a bank credit card or a personal loan for a similar amount through a bank or building society. With any type of credit, it is important to remember that there are fees and charges attached to the product and this may make the product more suitable for an emergency.
“Unsecured” means that you don’t have to pledge an asset as security to take out the loan. “Secured” means that you have to pledge an asset that you own, such as a vehicle or a home, to take out the loan. If you fail to pay the loan out, the lender is entitled by law, to repossess your asset as payment towards the unpaid loan amount. If the sale of your loan security does not pay out the loan, you are liable for the shortfall. As long as you pay out your loan completely as per the terms of the loan contract, then there is no problem with a secured loan. By law, lenders cannot take security of home assets such as beds and essential white goods such as a fridge or washing machine.
Please consider before taking out a MACC loan that moving forward you will be able to meet your loan commitments, your loan provider will most likely agree to a change in your loan repayments schedule or amount under its financial-hardship responsibility to you. This is the case whether your MACC loan is secured or unsecured. It is best to contact your loan provider as soon as you start experiencing problems to ensure you don’t incur any other charges such as late payment fees.
It can be expensive to borrow small amounts of money and borrowing may not solve your money problems.
Check your options before you borrow:
The Australian Government's MoneySmart website shows you how small amount loans work and suggests other options that may help you.*This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.