How Does Financial Hardship Assistance Work?
By Sunshine Loans
Find out how financial hardship assistance works, when you can ask your lender for help and what to expect if you are struggling to make a repayment.
Are you worried that you may not be able to make an upcoming loan repayment?
A drop in income, illness, separation, an unexpected expense or a change in employment can make an existing repayment arrangement harder to manage.
Financial hardship assistance gives you a way to tell your lender that you are, or expect to become, unable to meet your repayment obligations and ask them to consider what assistance may be available.
It is important to understand that financial hardship assistance does not automatically cancel your debt. Your lender will consider your circumstances, assess what assistance it can reasonably provide and explain the outcome.
What Is Financial Hardship Assistance?
Financial hardship generally refers to a situation in which you are unable, or expect that you will be unable, to meet your obligations under a credit contract.
For credit contracts covered by the National Credit Code, you can tell your credit provider verbally or in writing that you are unable to meet your obligations. This is known as giving a hardship notice.
Financial hardship assistance may involve changing how or when repayments are made. Depending on the circumstances and the credit product, this could include temporarily reducing repayments, postponing payments or setting up another repayment arrangement.
You do not necessarily have to wait until you miss a repayment before asking for help. Moneysmart recommends contacting your lender as early as possible when repayments are becoming difficult.
How Does Financial Hardship Assistance Work?
The exact process can vary between credit providers, but these are the main steps you can generally expect.
1. Contact Your Lender About Financial Hardship
Tell your lender that you are experiencing financial hardship or expect to have difficulty meeting an upcoming repayment.
When you contact them, clearly explain that you are asking for financial hardship assistance rather than making a general account enquiry.
Under the National Credit Code, a hardship notice can be given verbally or in writing. Keeping copies of emails, letters or notes from phone conversations may also make it easier for you to keep track of what has been discussed.
2. Explain What Has Changed
Your lender may ask what has caused the repayment difficulty and whether you expect the situation to be temporary or ongoing.
Circumstances that can contribute to hardship include:
- Reduced working hours or loss of employment.
- Illness, injury or medical expenses.
- Relationship separation.
- Natural disasters.
- Unexpected increases in necessary expenses.
- Interruptions to your usual income.
You should provide enough relevant information for your lender to understand why your existing repayments are no longer manageable.
You generally do not need to provide unrelated personal information that is not relevant to assessing your request.
3. Provide Relevant Financial Information
Your lender may need information about your financial position before deciding what assistance may be appropriate.
This could include:
- Your current income.
- Your essential living expenses.
- Other loans or significant financial commitments.
- The amount you believe you can realistically afford.
- How long you expect the difficulty to continue.
Any information you provide should be accurate and realistic.
It can be tempting to offer the highest repayment you think you might manage, but agreeing to an amount that leaves you unable to meet essential living costs may create further financial pressure.
4. Your Lender Assesses the Request
Your lender will consider your circumstances and decide whether it can change your credit contract or offer another type of assistance.
Making a hardship request does not mean your lender must accept the exact repayment arrangement you propose.
The outcome can depend on your financial circumstances, the type of credit involved, how long the difficulty is expected to continue and whether a proposed arrangement appears sustainable.
5. Review Any Proposed Arrangement Carefully
Before agreeing to a hardship arrangement, make sure you understand what will change.
Check:
- The repayment amount.
- When payments will be due.
- How long the arrangement lasts.
- Whether interest or fees continue to apply.
- What happens to repayments that are postponed or reduced.
- Whether the loan term changes.
- Whether the arrangement could change the total amount you pay.
- What happens when the hardship arrangement finishes.
A lower repayment may give you useful breathing room, but extending a loan or postponing repayments can sometimes increase the amount payable over time.
Ask questions about anything you do not understand before agreeing to a new arrangement.
6. Keep Your Lender Updated
Once an arrangement is in place, try to follow it and keep records of your payments and communications.
If your circumstances change again and the arrangement is no longer affordable, contact your lender promptly rather than simply missing the agreed payments.
You can explain what has changed and ask whether your situation can be reassessed.
What Types of Hardship Assistance May Be Available?
The assistance available will depend on your credit contract, lender and individual circumstances.
Possible Option | How It May Work | What to Check |
Temporary repayment reduction | Your repayments are reduced for an agreed period | Whether the unpaid amount must be repaid later |
Payment deferral | One or more repayments are postponed | Whether interest continues and when the postponed amount becomes due |
Payment plan | Overdue or upcoming amounts are divided into agreed instalments | Whether those instalments are genuinely affordable |
Extended loan term | The repayment period is lengthened, which may reduce regular payments | Whether extending the term changes the total amount payable |
Permanent contract variation | Your repayment obligations are formally changed | How the change affects your remaining balance, repayments and term |
Moneysmart notes that hardship assistance may involve changing loan terms or temporarily pausing or reducing repayments. The right option will depend on the individual situation.
In most cases, hardship assistance changes the timing or structure of repayments. It does not automatically remove the debt you owe.
How Long Does a Lender Have to Respond?
For credit contracts covered by the National Credit Code, specific response periods apply.
If the credit provider already has enough information to assess your hardship notice, it generally has 21 days after receiving the notice to tell you its decision.
If more information is needed, the credit provider has 21 days after receiving the hardship notice to request relevant information from you.
When you provide the requested information, the credit provider generally has 21 days from receiving that information to respond.
If you do not provide the requested information, different timing applies. ASIC states that the credit provider generally has 28 days from the date it requested the information to respond.
If the credit provider decides not to change the contract, it must notify you of the decision, explain its reasons and provide information about your right to complain to the Australian Financial Complaints Authority, or AFCA.
Does Financial Hardship Assistance Affect Your Credit Score?
Financial hardship information can appear on your credit report, but there are important protections around how it is used.
The Office of the Australian Information Commissioner states that a credit reporting body cannot use financial hardship information to calculate your credit score. Your credit report also does not show the reason you needed hardship assistance or the detailed terms of your arrangement.
A temporary hardship arrangement may be shown using an “A” indicator against repayments made during the arrangement. A permanent variation may be shown using a “V” indicator.
These hardship indicators are removed after the applicable 12-month reporting period.
This is different from simply missing repayments without an agreed hardship arrangement. Other repayment history or default information may be recorded separately when the relevant credit-reporting rules allow it.
What Should You Say When Requesting Hardship Assistance?
You do not need complicated legal or financial language.
A simple request could be:
I am experiencing financial hardship and I am concerned that I will not be able to make my upcoming repayment. My income has reduced and, after paying my essential expenses, I can currently afford $___ per week. I would like you to assess my circumstances for financial hardship assistance and explain the options available.
It can help to include:
- Your name and relevant account or contract details.
- What has changed in your circumstances.
- Whether you expect the problem to be temporary or ongoing.
- What you can currently afford.
- Your preferred method of contact.
Before proposing an amount, review your essential expenses so that the repayment you suggest is realistic.
You also do not need to agree immediately to an arrangement you do not understand. Ask the lender to explain how a proposal will affect your repayments and debt.
What if Your Hardship Request Is Refused?
Start by asking your lender to explain the decision.
There may be additional information you can provide, or another arrangement may be available.
If you disagree with the outcome, you can use the lender’s internal complaints process.
If the issue is not resolved, AFCA provides free and independent dispute resolution for eligible complaints about financial firms. This can include complaints about declined hardship requests, failure to respond to a request and some debt-recovery action taken after assistance has been requested.
Where Can You Get Independent Help?
You may want to speak with a financial counsellor if you have several debts, are unsure what repayments you can afford or would like support communicating with your creditors.
A financial counsellor can help you understand your financial position, prepare a budget, prioritise essential expenses and consider your available options.
The National Debt Helpline provides free and confidential financial counselling. You can call 1800 007 007 from 9:30 am to 4:30 pm on weekdays. Its live chat service is currently available from 9:00 am to 8:00 pm on weekdays.
Be cautious about paying a business for debt-management, financial counselling or credit-repair services without first understanding what free assistance may be available to you.
The National Debt Helpline confirms that accredited financial counselling is free and confidential.
How We Can Help if You Have a Current Loan With Us
If you have a current loan with us and are experiencing financial hardship, please contact us rather than applying for further credit to make your existing repayments.
You can call our hardship and complaints team on 07 5646 5969. Our current contact information is available on our Contact Us page, and you can also submit a support request online.
Tell us what has changed and provide any relevant information we request so that we can assess your circumstances.
When discussing repayments with us, only propose an amount you genuinely believe you can maintain after meeting your essential living expenses.
As with any hardship request, contacting us does not guarantee that a particular variation or arrangement will be approved. We need to assess your circumstances and the options available under your contract.
Frequently Asked Questions
Can I Request Hardship Assistance Before Missing a Payment?
Yes. For credit contracts covered by the National Credit Code, you can give a hardship notice when you are unable to meet your obligations.
You do not need to wait for the situation to become more serious before contacting your lender, and Moneysmart recommends seeking help early.
Does a Lender Have to Approve Financial Hardship Assistance?
A lender must deal with a hardship notice in accordance with the applicable requirements, but this does not mean it has to accept the exact arrangement you request.
If it decides not to change a regulated credit contract after receiving a hardship notice, it must explain its decision and tell you about your right to complain to AFCA.
Will Financial Hardship Assistance Remove My Debt?
Not automatically.
Most hardship arrangements change when or how you make repayments rather than cancelling the debt.
Before accepting an arrangement, ask whether interest or fees will continue, whether your loan term will change and what repayments will be required when the arrangement finishes.
Do I Need Documents to Ask for Hardship Assistance?
You can initially give a hardship notice verbally or in writing.
Your lender may then ask for relevant information it needs to assess your situation, such as information about your income, expenses or affordable repayment amount.
Can I Change a Hardship Arrangement if It Becomes Unaffordable?
Contact your lender as soon as possible and explain what has changed.
Ask whether your circumstances and existing arrangement can be reassessed. Avoid agreeing to a repayment amount that would prevent you from covering essential living expenses.
Where Can I Complain About a Lender’s Hardship Decision?
Start with the lender’s internal complaints process.
If you remain dissatisfied, you may be able to lodge a complaint with AFCA. AFCA’s service is free for consumers and can consider a range of disputes involving financial hardship.
Take the Next Step
The sooner you tell your lender that repayments are becoming difficult, the sooner your circumstances can be considered.
Before agreeing to a hardship arrangement, review your budget, understand how the proposed change affects your repayments and make sure the arrangement is realistic for you.
If you have a current loan with us and are having difficulty making repayments, please contact our hardship and complaints team on 07 5646 5969 or submit a support request so that we can assess your circumstances.
The information provided in this blog is for general informational purposes only and does not constitute financial or legal advice. It is not tailored to the specific circumstances of any individual. Before acting on the information, you should consider whether it is appropriate for you, having regard to your objectives, financial situation and needs.