FNS40815 Certificate IV in FINANCE & MORTGAGE BROKING

FNSCRD301 Process applications for credit

Assessment 1 - Knowledge

FNS40815_ FNSCRD301 Assessment 1 Knowledge Document Owner: Released February 2022

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Activity 1

Refer to your Learner Guide and the guide ‘Money Smart - Types of Credit’, located in the Additional
Resources folder and respond to the following:

Your supervisor has asked you to provide information to clients about different credit products.
Compete the table below to demonstrate to your supervisor your understanding of credit products
and their application.

(List the features of credit products and their application requirements)

Activity 1 Answer

Type of Credit Explanation Advice that you should provide to the

client about the product

Car loan A loan used for the purchase of
a new or used car. Always fixed
rate.
Personal loans A loan for something you need
or want to do such as travelling,
fixing things in the home and
the loan term is typically
between 12 months to 5 years.
 Advise them of the fixed rate
 Advise them of the fees and
charges involved
 Advise them of fees and charges
 Unsecured personal loans tend to
have a higher interest rate due to
the risk.

Credit cards You can use this to buy things
up to a certain limit (credit limit)
and you will then have to make
monthly repayments on funds
owed.
Consolidation A loan which consolidates
loan all/some loans and debts into
one loan.
Telling them that the fees, charges,
interest and such costs associated with the
Credit Card can become very expensive.
 Might get lower interest rate
 Only one repayment each month
 Fees and charges
 Possibility of paying your debts for
a longer period of time.

V1.0 REAA Released February 2022

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Activity 2

Refer to your Learner Guide and the guide ‘Money Smart - Types of Credit’, located in the Additional
Resources folder and respond to the following:

You have asked the following questions to check a client’s level of understanding and knowledge
regarding credit application processes:
 What types of credit are available in Australia?
 Do you know the costs associated with credit?
 Do you know what a debt collector is?

Now complete the table below by describing how you can assist the special needs and requirements
of a client according to the level of knowledge and understanding they have demonstrated when
answering the above questions.

(Identify ways of obtaining and checking relevant information from applicants)

Activity 2 Answer
Level of Understanding Description of action or assistance that should be
provided

Level 1: No or a limited  Showing them the translated photo story

understanding  Let them listen to the audio story
 Give client a fact sheet
Level 2: Some level of  Show them the photo story to review the
understanding topic
 Level 2 activities and stories in the kit.
 Provide them with a fact sheet
Level 3: A higher level of  Do Level 3 advanced activities with the client
understanding  Provide client with a fact sheet

V1.0 REAA Released February 2022

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Activity 3

Explain the key features of a financial services provider’s credit assessment policy based on the
principles of responsible lending.

(Explain key features of organisational policy and procedures that relate to credit assessments,
security and customer service)

Activity 3 Answer
The AUSTRAC website states that the responsible lending obligations are;
 Making reasonable inquiries about the consumer’s financial situation, and their
requirements and objectives.
 Taking reasonable steps to verify the consumer’s financial situation.
 Making a preliminary assessment or final assessment about whether the credit contract is
“Not unsuitable” for the consumer.
Key features of credit assessment policy should cover all points listed above so as to confirm with
the ASIC guidelines of Responsible Lending. The key features in this instance would be;
 Genuine need to borrow
 Capacity to make repayments/avoid hardship from this contractual obligation
 Demonstrated understanding of products, contractual obligations, etc.

V1.0 REAA Released February 2022

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Activity 4
The purpose of the National Credit Code is to provide protection for consumers who enter into credit
contracts for personal purposes. How does the legislation identify whether a loan is for personal
purposes, as opposed to business purposes?

(Explain the key purpose of relevant credit legislation, statutory requirements and codes of practice,
covering: consumer credit; personal property securities; privacy)

Activity 4 Answer
The legislation identifies whether a loan is personal or not by stating that credit is for a personal
purpose if more than half the credit is intended to be used for a personal purpose OR the goods
and services obtained with the credit are to be used for personal purposes mostly. Credit
legislation, statutory requirements and codes of practice employ the key purpose of protecting
the consumer, their property and privacy.

V1.0 REAA Released February 2022

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Activity 5
When taking out a business loan a lender will often want to secure the loan in the form of an asset.
This security is intended to minimise risk exposure in the event the applicant is unable to repay the
loan.

Describe the main types of ‘security’ that may be required to obtain a small business loan.

(Explain types of security)

Activity 5 Answer
Mainly property is used as security. Some lenders may also accept balance sheet assets such as
cars, equipment, etc. Some lenders also accept the value of the business as security.

V1.0 REAA Released February 2022

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