What Are Your Rights If You Cannot Make a Loan Repayment?

Are you worried there will not be enough money in your account for your next loan repayment?

A missed repayment can feel stressful, but you do not have to ignore the problem or wait until your account falls behind before asking for help.

In Australia, if your consumer credit contract is covered by the National Credit Code, you may be able to give your credit provider a financial hardship notice when you cannot, or expect that you will not be able to, meet your repayment obligations.

Your credit provider must consider the notice in accordance with the applicable rules. You are not automatically entitled to the particular repayment arrangement you ask for. However, you have the right to have an eligible hardship request considered and, in many circumstances, to receive reasons if an agreement cannot be reached.

In this guide, we explain how financial hardship assistance works, what information you may be asked to provide, how hardship can affect your credit report and what you can do if you are unhappy with the response.

Your Rights if You Cannot Make a Loan Repayment

For a consumer credit contract covered by the National Credit Code, you can give your credit provider a hardship notice if you believe you are, or will be, unable to meet your obligations.

You can generally give that notice verbally or in writing, so you do not necessarily need to wait until you have already missed a repayment.

Depending on your circumstances, your rights may include the right to:

• Tell your credit provider that you cannot meet your repayment obligations.
• Have your hardship notice considered.
• Receive a response within the applicable legal timeframe.
• Receive reasons when you and your credit provider do not agree to a change, subject to relevant exceptions.
• Use your credit provider’s internal complaints process.
• Complain to the Australian Financial Complaints Authority, or AFCA, if the issue remains unresolved.
• Be treated fairly and without unlawful harassment or coercion during debt collection.

These rights do not mean your debt is automatically cancelled.

A hardship arrangement will generally change how or when you meet your repayment obligations rather than remove the amount you owe. The exact position will depend on your credit contract, the type of debt and the arrangement agreed.

What Is Financial Hardship Assistance?

Financial hardship generally refers to a situation in which you are having difficulty making a credit or loan repayment.

Moneysmart explains that hardship assistance can involve changing repayments or setting up a payment plan. Depending on your circumstances, an arrangement may be temporary or permanent.

There are many reasons you might experience financial hardship, including:

• Losing your job or having your working hours reduced.
• Illness, injury or unexpected medical costs.
• Separation or relationship breakdown.
• Family or domestic violence.
• A natural disaster.
• Reduced income.
• An unexpected increase in essential expenses.
• Another major change in your financial circumstances.

A possible hardship arrangement might involve temporarily reducing or deferring repayments, changing your repayment schedule, varying your loan or agreeing on a payment plan.

The appropriate option will depend on your circumstances and your credit provider’s assessment.

Most importantly, only agree to repayments you can realistically afford. Moneysmart recommends agreeing to an amount you can manage and contacting your credit provider again if you later find that you cannot maintain the arrangement.

How to Ask for Hardship Assistance

1. Contact Your Credit Provider as Early as Possible

You do not need to deliberately miss a payment before raising financial hardship.

Contacting your credit provider before the due date can give you more time to explain the situation and understand the options that may be available.

When you get in touch, explain:

• That you are experiencing financial hardship.
• Why you are having difficulty making the scheduled repayment.
• Whether the difficulty appears temporary or ongoing.
• How much you believe you can currently afford.
• When you expect your circumstances may change, if you know.

You could say:

I am experiencing financial hardship and do not think I can make my repayment due on [date]. I would like you to treat this as a financial hardship notice and discuss an affordable arrangement with me.

Under the National Credit Code, a hardship notice can generally be given orally or in writing. Keeping a written record, such as an email or support request, can still be useful.

2. Provide Relevant Information When Requested

Your credit provider may ask for information to help assess your circumstances.

That could include information about your:

• Current income.
• Essential living expenses.
• Other debts.
• Recent changes in employment or income.
• Significant medical or other necessary expenses.
• Proposed affordable repayment amount.
• Expected duration of your financial difficulty.

Under section 72 of the National Credit Code, information requested after a hardship notice must be relevant to deciding whether you are or will be unable to meet your obligations or how the contract could be changed.

Provide information as accurately as you can and respond within any applicable timeframe.

You should also consider essential expenses such as housing, food, utilities and medication before agreeing to a new repayment amount.

3. Keep a Record

Keep copies of important information relating to your hardship request, including:

• When you contacted your credit provider.
• Who you spoke with.
• What you explained.
• Documents you supplied.
• Any case or reference number.
• Emails or letters.
• The terms of any proposed arrangement.

Good records can make it easier to clarify what was requested or agreed if a dispute later arises.

How Long Does a Credit Provider Have to Respond?

For hardship notices covered by section 72 of the National Credit Code, the timeframe depends partly on whether more information is required.

A credit provider generally has 21 days after receiving the hardship notice to request relevant additional information. The request can require that information to be supplied within 21 days.

There is an important qualification. The National Credit Code contains an exception to the usual decision-notice requirement when the parties agree to a change that defers or otherwise reduces the borrower’s obligations for no more than 90 days.

These rules apply to hardship notices under the National Credit Code. Different requirements can apply to debts or products that are not covered by the Code.

Does Your Credit Provider Have to Approve Your Hardship Request?

Your credit provider must deal with an eligible hardship notice in accordance with the applicable rules, but that does not mean it has to accept the exact arrangement you suggest.

It may:

• Agree to the proposed change.
• Discuss another arrangement with you.
• Ask for further relevant information.
• Decide that the proposed change is not workable.
• Decline to agree to a change.

When the relevant decision-notice requirement applies and you and your credit provider do not agree to change the contract, the notice must state the reasons and provide information about AFCA and your rights under the AFCA scheme.

Before agreeing to a hardship arrangement, consider asking how it will affect:

• Your repayment amount.
• Payment dates.
• Interest.
• Any applicable fees.
• The length of the loan.
• The overall amount payable.
• What happens if you cannot maintain the new arrangement.

A temporary repayment reduction or deferral may make the immediate payment more manageable, but it can also affect how long it takes to repay your debt or the amount of interest payable, depending on the terms of the arrangement.

What Happens if You Simply Miss the Repayment?

The consequences of missing a loan repayment depend on your contract and what happens afterwards.

Possible consequences can include:

• A failed-payment or default fee when your contract allows one.
• Continued interest.
• Contact from your credit provider.
• Arrears accumulating.
• Repayment-history information being recorded.
• A formal default process if the debt remains unpaid.
• Debt collection activity.

Missing one repayment does not prevent you from asking for financial hardship assistance.

However, contacting your credit provider early can help you understand your options before further payments become overdue.

Cancelling a direct debit also does not remove your underlying repayment obligation. If you cannot make a scheduled payment, contact your credit provider and explain your circumstances.

Can a Hardship Arrangement Affect Your Credit Report?

A financial hardship arrangement can appear on your credit report, but Moneysmart states that having a financial hardship arrangement does not itself affect your credit score.

Your report may show the months in which a temporary hardship arrangement applied or, for a permanent arrangement, the month in which your loan was varied.

It does not include detailed information about the circumstances that led you to request hardship assistance.

Moneysmart also states that, while you comply with the agreed arrangement, your payments are shown as up to date and the hardship listing is removed after 12 months.

This is different from simply allowing repayments to remain unpaid without an agreed arrangement. Repayment history can record missed payments, and defaults can have separate credit-reporting consequences.

You Have the Right to Fair Debt Collection Conduct

Having an overdue debt does not remove your rights.

A credit provider or debt collector may contact you about money you owe, but debt collection activity must comply with Australian law.

The ACCC states that debtors should be treated with fairness, respect and courtesy and that contact should be for a reasonable purpose and only when necessary. Physical force, coercion and undue harassment are illegal. Misleading or deceptive conduct can also breach the law.

For example, a debt collector must not use unlawful threats, coercion or harassment to make you pay.

You should still respond to legitimate contact about your debt when appropriate.

If you disagree with the amount claimed or believe the way you are being contacted is inappropriate, consider putting your concerns in writing and obtaining free financial counselling or legal assistance.

What to Do if Your Credit Provider Refuses to Help

Ask for the Decision and Reasons

When applicable, review the written response and the reasons provided.

Check whether your credit provider has correctly understood your income, expenses, circumstances and the assistance you requested.

Make an Internal Complaint

If you believe your hardship request has not been handled appropriately, you can use your credit provider’s internal dispute resolution process.

When making a complaint, explain:

• When you requested hardship assistance.
• What information you supplied.
• What response you received.
• Why you believe the issue remains unresolved.
• The outcome you are seeking.

Keep copies of your complaint and any supporting documents.

Contact AFCA

If the complaint is not resolved, you may be able to take the matter to AFCA.

AFCA provides free, independent financial dispute resolution. It can consider financial hardship complaints involving issues such as:

• A declined hardship request.
• Failure to respond.
• Some default-notice disputes.
• Certain debt-recovery activity after a hardship request.

You would generally contact your financial firm first so that it has an opportunity to address your complaint.

AFCA can be contacted on 1800 931 678.

Getting Free Financial Counselling

You do not have to work through financial difficulty by yourself.

A financial counsellor may be able to help you:

• Understand what you can afford.
• Prepare a hardship request.
• Communicate with creditors.
• Consider your debts.
• Understand your complaint options.

Financial counselling through the National Debt Helpline is free, confidential and independent. You can call 1800 007 007.

Aboriginal and Torres Strait Islander peoples can also contact Mob Strong Debt Help on 1800 808 488 for free assistance with money matters.

Be cautious about commercial businesses that charge for services described as debt management, credit repair or debt assistance. Free financial counselling is available.

What to Do if You Are Having Trouble Repaying a Loan With Us

If you have a loan with us and believe you may be unable to make a scheduled repayment, please contact us as early as you can.

Our current Contact Us page provides a dedicated number for financial hardship or complaints:

• Phone: 07 5646 5969

You can also submit a request through our support service or contact our Customer Support team.

Telling us that you are experiencing financial hardship does not guarantee that a particular arrangement will be available or approved. It allows us to understand your circumstances and consider your request in accordance with the requirements that apply.

If you have a formal complaint, our Credit Guide also lists the following internal dispute resolution contact:

• Email: complaints@sunshineloans.com.au

If your complaint is not resolved to your satisfaction, you may be able to lodge a complaint with AFCA, whose service is free to consumers.

Sunshine Loans Pty Ltd holds Australian Credit Licence number 390556 and ACN 092 821 960.

Understanding the Costs of Your Existing Loan With Us

If you already have a loan with us, it can be useful to understand the original terms and the potential effect of any hardship arrangement.

We currently offer unsecured Medium Amount Credit Contracts with:

Amounts above $2,500 are limited to eligible returning customers who have successfully completed two loans with us on time.

These details describe our current published product terms. Your own contract and account will determine the amounts that apply to you.

Review our current Loan Costs information.

When we discuss a hardship arrangement with you, make sure you understand how the proposed change may affect your repayments, interest, fees, loan term and overall amount payable before agreeing to it.

Practical Steps You Can Take Today

If you are concerned about an upcoming repayment:

1. Check the repayment date and amount.
2. Review what you can realistically afford after essential expenses.
3. Contact your credit provider as early as possible.
4. Clearly explain that you are experiencing financial hardship.
5. Provide relevant and accurate information if requested.
6. Ask how a proposed arrangement may affect interest, fees, repayments and the loan term.
7. Keep a written record of your communications.
8. Contact a free financial counsellor if you need independent help.
9. Use the internal complaints process if you believe your request has not been properly handled.
10. Consider contacting AFCA if the complaint remains unresolved.

Before taking out new credit to meet an existing loan repayment, carefully consider the additional costs and whether doing so could increase your financial pressure.

You may wish to discuss your options with a free financial counsellor first.

Frequently Asked Questions

Can I Ask for Financial Hardship Help Before Missing a Repayment?

Yes. For credit contracts covered by the National Credit Code, you may give your credit provider a hardship notice if you consider that you are or will be unable to meet your obligations.

You do not have to deliberately miss a payment first.

Can I Request Hardship Assistance by Phone?

A hardship notice under the National Credit Code can generally be given orally or in writing.

Keeping a written record or following up in writing can also help you document the request.

Will Financial Hardship Assistance Cancel My Debt?

Not generally.

A hardship arrangement usually changes how or when your repayment obligations are met rather than automatically cancelling the debt.

Ask how any proposed arrangement will affect your repayments, interest, fees, loan term and total amount payable.

Can Interest Continue During a Hardship Arrangement?

It can, depending on your credit contract and the arrangement agreed.

A repayment deferral does not necessarily mean that interest stops accruing. Ask your credit provider to explain the financial effect of an arrangement before you agree to it.

What if I Cannot Afford the Proposed Repayment Plan?

Do not agree to a repayment amount you know you cannot maintain.

Explain what you believe you can realistically afford after essential expenses and provide relevant financial information when requested.

A free financial counsellor may be able to help you work through your budget and communicate with your credit provider.

Can I Complain if My Credit Provider Does Not Respond?

Yes. You can use the credit provider’s internal complaints process.

AFCA may also be able to consider financial hardship complaints when a financial firm fails to respond to a request for assistance.

Will Asking for Hardship Assistance Affect My Credit Score?

Moneysmart states that a financial hardship arrangement itself does not affect your credit score.

The arrangement can appear on your credit report, and the hardship information is generally removed after 12 months.

Ask for Support Before the Problem Grows

If you cannot make a loan repayment, taking early action can help you understand your options.

Contact your credit provider, explain your circumstances honestly and ask what financial hardship assistance may be available. Only agree to a repayment arrangement you believe you can realistically maintain.

If your loan is with us, you can contact our support team about an upcoming or missed repayment and review our hardship and complaints information.

Contact us about financial hardship or your existing loan.

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.