It is quite possible that a borrower will encounter a significant change in their financial circumstances at least once during a loan.
Financial hardship may be caused by increases in interest rates or changes such as family break-up, death of a spouse, workplace injury, unemployment or illness.
This Guide provides some basic information about what you can do if you are in financial hardship.
What should I do if I’m in financial hardship?
If you are finding it difficult to meet your loan payments or if you have received a default notice from your lender, you should contact your lender as soon as possible to discuss your situation. Your lender usually has more options when approached early.
You can ask your lender to vary your loan payments and “stay” (hold or postpone) legal proceedings when you are in financial difficulties. However, you should make what payments you can in the meantime.
You should also seek advice from a qualified and experienced source.
What can a lender agree to?
The lender may agree to:
extend the term of your loan and reduce your payments;
postpone your payments for some time;
extend the term of the loan and postpone some payments;
convert your loan to an interest-only loan for a period of time;
reduce the interest rate on your loan for a period of time; or
any other reasonable proposal that enables you to eventually repay the loan.
If your lender offers you a payment arrangement that you are not sure you can afford, be very careful about accepting it. If you do and then can not meet the new payments, it may be difficult to later ask your lender for another payment arrangement.
What if the lender has declined my application for financial hardship assistance?
If the lender declines your application:
it must write to you and set out its decision and the reasons for its decision; you can lodge a complaint with the Financial Ombudsman that all lenders must be members of.
We are able to advise you on what you may be able to achieve with a Hardship Application.
We are able to act for you and communicate with your creditors in regard to a Hardship Application.