Code of Responsible Borrowing

This Code is for anyone thinking about taking out a loan or entering into a credit contract.

82% of New Zealand families have debt of some kind, and collectively we spend more than we earn. This Code of Responsible Borrowing will help you avoid penalties, repossession, stress and heartache. It establishes minimum expectations for New Zealanders considering a loan or credit contract.

The Code of Responsible Borrowing is made up of these five concepts:  

Work out your budget A responsible borrower is sure they can afford the repayments. Your budget lists your income and expenses, and shows if you have a deficit or a surplus. It includes both regular and occasional items. By making a budget showing your current income and expenses, you can see if there's any room for additional expenses like loan repayments. If your current budget shows a deficit, then a loan is not the answer.  

Look at all your options A responsible borrower considers whether there are other ways to meet their needs. A loan might not be the right answer. For example, if you want to buy a car, think about: other forms of transport, rescheduling your appointments, or a smaller vehicle like a scooter. Think
about these all things before buying a car on credit. Another example: If you want to buy something that's not urgent, think about saving up and buying it later. Work and Income will sometimes advance small amounts to people on a benefit, to cover essential items. They recover the advance slowly, without

Find out more about it A responsible borrower knows what they're signing. You might need someone else to help explain it to you - a translator or budget adviser, for example. Look out for details on the total cost of the loan, including administration fees and what penalty fees could apply.  

Provide real information A responsible borrower provides all the information the lender needs to make an informed lending decision. A responsible lender will ask you questions about your ability to repay, and may ask for things like bank statements, payslips, proof of debts, etc. A responsible borrower will not hide relevant information from the lender, or mislead them in any way.  

Keep them informed Unexpected life events can make repayments difficult. Talk to your lender when this happens. You might need to ask about their hardship provisions and talk to a budget adviser about your options.

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The Code of Responsible Borrowing.pdf