Published: June 17, 2026

Why is understanding credit is important?

Understanding credit, and the legal protections available to borrowers, allows workers to help community members make safer, informed financial decisions, and prevent long-term financial harm.

Credit and other money issues can compound other difficulties people face, and make it more difficult for people to address other areas of their lives. many community members will feel like they don’t have any options to improve their financial position or to resolve their money issued.

This is often not the case. You may be able to help a community member to access the various legal protections that exist or to negotiate practical solutions that improve their financial postions.

An important starting point is understanding credit and the legal protections that exist. You can also talk through some of the key things to know about credit and debt with a community member, so they are better informed to make decisions about their money.

Financial hardship and homelessness

While the causes of homelessness and housing insecurity are complex, lack of financial resources is a core factor. Put simply, financial hardship leads to homelessness.

• The housing and cost-of-living crises are pushing more Queenslanders into homelessness.
• Community members who are under financial stress may struggle to afford basic essentials, which affects housing stability, health, relationships, and long-term goals.
• For low-income renters, any increase in living expenses or debt repayments can lead to eviction and ultimately homelessness.

Even community members not immediately at risk of homelessness, financial hardship can impact their well-being, relationships, and ability to make positive decisions about their life.

Risky use of credit

Community members with low income often cannot access mainstream credit and may rely on high-cost, high-risk credit products. Common types of higher-cost credit include short term (payday) loans, consumer leases, Buy-Now-Pay-Later, and high-cost personal loans.

These products, and other forms of high-cost lender, frequently target marginalised communities and consumers who are already experiencing financial hardship. To meet repayment obligations, community members may go without food, medicine, clothing, and other essentials which creates further financial and personal stress.

Given the significant impact credit can have individuals and the community, the government has created different legal protections that aim to minimise harm and promote safe lending practices. Understanding these protections can offer better outcomes for community members in financial hardship.

Unsafe lending practices

Unsafe lending practices may involve unfair, deceptive, or irresponsible lending that negatively impacts vulnerable borrowers in financial hardship.

Lenders may charge excessive interest rates, hide fees, or approve unaffordable loans, trapping community members in cycles of debt. Some lenders use aggressive sales tactics or exploit a community member’s lack of understanding of financial transactions.

These practices often target low-income or financially inexperienced individuals, causing long-term financial harm.

Red flags that unsafe lending has occurred

Workers may notice warning signs that a community member is the victim unsafe lending. Red flags include:

• Large amounts of money being lent to low-income community members from one or multiple lenders.
• Loans that have extremely high interest rates and repayments, including repayments that make up a large portion of the community members income or Centrelink payment.
• Where community members were not required to provide bank statements or other financial documents that show they could afford to repay the money they borrowed.
• Loans which are approved despite community members having limited income or high existing expenses.
• Community members with multiple other loans or debts.
• When the community member has multiple collection agencies pursuing them but they are still approved for further credit.
• The community member had a below-average credit rating at the time of borrowing.
• The community member was already in financial hardship when obtaining the loan.

Conclusion

Understanding credit is critical when supporting community members in financial hardship.

Community members are often at risk of unaffordable debt, unsafe lending, and long-term financial harm, which can impact housing, health, and wellbeing.