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Elements and Performance Criteria

  1. Identify and discuss the role of credit in society
  2. Identify and discuss the range of credit options available
  3. Identify and discuss costs of using credit
  4. Analyse and discuss the effective use of consumer credit
  5. Manage personal credit rating and history

Required Skills

Required skills

communication skills to

clearly explain debt and credit implications

use questioning to develop clear understanding

liaise with others share information listen and understand

use language and concepts appropriate to cultural differences

numeracy and IT skills to

calculate credit costs and payments

use a calculator

use internet information

literacy skills for interpreting relevant information

learning skills to maintain knowledge of credit issues and management

Required knowledge

principles of lending and credit

role of credit in society

the role of financial institutions regulatory bodies credit reference agencies and consumer advisory bodies that are involved in the provision and management of credit

Evidence Required

The Evidence Guide provides advice on assessment and must be read in conjunction with the performance criteria required skills and knowledge range statement and the Assessment Guidelines for the Training Package

Overview of assessment

Critical aspects for assessment and evidence required to demonstrate competency in this unit

Evidence of the ability to

analyse and clearly explain the role of credit within the community

analyse and clearly explain the different types of consumer credit options currently available

analyse and clearly explain the associated implications and risks of the various credit schemes available as well as the implication of establishing a poor credit reference history

Context of and specific resources for assessment

Assessment must ensure

competency is demonstrated in the context of the the range statement

access to and the use of a range of common office equipment technology software and consumables

access to internet to source information

Method of assessment

A range of assessment methods should be used to assess practical skills and knowledge The following examples in combination are appropriate for this unit

evaluating an integrated activity which combines the elements of competency for the unit or a cluster of related units of competency

verbal or written questioning on underpinning knowledge and skills

setting and reviewing simulations or scenarios

group discussion to determine and confirm understanding

Guidance information for assessment

Range Statement

The range statement relates to the unit of competency as a whole. It allows for different work environments and situations that may affect performance. Bold italicised wording, if used in the performance criteria, is detailed below. Essential operating conditions that may be present with training and assessment (depending on the work situation, needs of the candidate, accessibility of the item, and local industry and regional contexts) may also be included.

The role of consumer credit includes:

enabling approved applicants the ability to purchase items (goods and/or services) where the cost of the item exceeds current savings available.

Advantages and disadvantages of credit may include:

advantages:

obtain and can use purchased item immediately

minimises the need to carry cash or write cheques

allows for instalment payments on expensive items

convenient form of payment when travelling, especially overseas

disadvantages:

may increase cost of items purchased due to interest accrued

usually attracts other fees such as account servicing fees

can lead to compulsive buying habits

creates a false sense of wealth.

Consumer credit facilities may include:

fixed:

personal loans

leases including mobile phones, cars, business premises, office equipment including personal computers

hire purchase

'buy now, pay later' schemes

revolving:

credit cards

store cards

overdraft.

Differences between unsecured and secured loans include:

a secured loan is supported by an underlying asset while an unsecured loan is not

unsecured loans attract higher interest rates due to increased risk to the lending institution.

Implications of default on secured loans include:

any shortfall in sale of repossessed asset against outstanding loan amount must be paid by borrower

repossession of the underlying asset by the lending institution.

Fees and costs associated with different credit options may include:

account servicing fees

credit purchase fees

late payment fees

loan establishment fees

withdrawing from a foreign Automatic Teller Machine (i.e. the ATM of a lending institution other than your own).

Fees and costs may be analysed and compared using:

manually, comparing fees and costs drawn from tables and charts provided by financial institutions and analysed using a calculator

online, web-based, calculation tools

software applications such as spreadsheets.

Ways to compare advertised interest rates may include:

informing the client of the 'comparison rate' which includes all associated fees and charges.

Strategies to minimise fees on credit may include:

consolidating savings and credit facilities with the one institution where account servicing fees can be cancelled out

knowing how many free transactions come with the card

paying the minimum monthly instalment on time.

Ways to avoid credit card fraud include:

not disclosing Personal Identification Number (PIN) to anyone

selecting a PIN only the card holder would know

signing the back of the credit card.

Credit reference reports refers to:

reports established and maintained by credit reference agencies which record all negative events (i.e. defaults) listed by creditors against debtors.

Implications of establishing a poor credit history may include:

higher interest rate penalties

inability to obtain finance in the future

may disadvantage applications for rental accommodation

necessity to obtain guarantor in future loans.

Methods of obtaining own credit reference file may include:

writing, emailing or telephoning the relevant agency requesting a copy of your file, having provided relevant details to identify self.