Financial difficulty

When you are unable to meet your repayment obligations on your loans and credit cards, this is called financial difficulty or financial hardship.

If you continue to be financially impacted by COVID-19 and cannot meet your repayment obligations, you should talk to your lender as soon as possible to discuss your options for hardship assistance.

Most lenders continue to offer a range of support for customers who are in financial hardship because of the pandemic.

This may include reducing your repayments for a period of time, switching to an interest only loan for a period of time, restructuring your debts or other options that are suitable for your situation.

Mortgage hardship repayment options

If you are temporarily unable to meet your normal repayments, you have the right to ask your bank for hardship assistance, regardless of whether your hardship is caused by COVID-19 or not. Depending on your circumstances, your lender may be able to offer options that will help to reduce your repayments for a period of time for example:

• Extending the length of the loan so that your repayments are lower
• Converting the loan to interest only payments for a period of time
• Reducing your repayments to the minimum monthly repayment amount
• Accessing money you may have available in any redraw and/or offset account of your loan
• Consolidating debt for example: personal loan, credit card and home loan so that your total repayments are lower
• A combination of these and other measures.

If you temporarily cannot afford to make any repayments, for example for three months, your lender may consider a repayment deferral if you can demonstrate you will be able to resume normal repayments at the end of the deferral period.

Your credit report score should not be affected as long as you stick with the agreed arrangement, but check this with your bank.

If you have entered into a deferral arrangement, or another form of hardship arrangement, you should contact your bank before your arrangement ends to discuss next steps if you do not think you can restart full repayments.

If your financial hardship is not temporary and you will not be able to reasonably repay the loan, you can ask for time to sell your home. Sometimes selling your home might be the best option.  If you are in this situation, call and speak to one of our financial counsellors on 1800 007 007 to independently explore your options.

When negotiating with your bank/lender

• Contact your lenders’ hardship department. This is a dedicated customer support team which specialises in helping people experiencing financial hardship.
• Tell them how you have been affected by the pandemic.
• Tell them if you are receiving the Pandemic Leave Disaster Payment, JobSeeker payment or other government support.
• Ask them about what hardship assistance options they are offering.
• If you have multiple forms of credit with the same lender or creditor, one option may be to restructure or consolidate these debts and switch to interest only repayments.
• Only make a repayment arrangement you can afford. You can always make higher repayments if your circumstances improve while you are still in a repayment arrangement. It is in your interests to pay as much as you can, so you don’t fall too far behind.
• Consider how much time you will need the repayment arrangement to be in place, for example, 3 months, 6 months, 12 months.  Usually, the longer the arrangement, the more information your lender or creditor may need from you.
• Agree the timing of the repayments, for example, if you are paid fortnightly then you could schedule your repayments to be fortnightly as well.
• If negotiating a hardship arrangement with your lender is taking some time, keep making repayments you can afford in the meantime.

What to ask for when you negotiate a repayment arrangement

Try to negotiate the following as part of any agreed repayment arrangement:

• Affordable repayments
• Late fees and default/legal fees not to be charged
• A reduction in the interest rate
• To deal with any arrears by extending the term of the loan (people usually do not exit financial hardship with money for higher repayments)
• Ask that your credit report is not affected. You can do this by asking that your payment history information is marked as paid and that no default is listed while you keep to any agreed repayment arrangement (Note that your credit report score should not be affected if you enter into a repayment arrangement, as long as you meet the new arrangements).
• Ask for confirmation of any agreement in writing, particularly if it is for three months or longer.

If your lender will not agree to a repayment arrangement

If your lender is threatening legal action or is not being reasonable with your request for hardship assistance, call and speak to one of our financial counsellors immediately on 1800 007 007 for advice.
If your lender will not agree to a repayment arrangement for your home loan, you can also have that decision reviewed by the Australian Financial Complaints Authority. This is a free and independent dispute resolution service. You can contact AFCA on their significant event hotline 1800 337 444 or on 1800 931 678.