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If you can’t meet repayments, waiting is what makes it worse. Early action can reduce extra fees, limit collection pressure, and give you more workable options. In Australia, you can ask your lender for hardship help, and if it isn’t handled properly, you can escalate to AFCA.
Start with your next 7 days, not your next 7 months. Write down what cash is coming in and what has to go out to keep you safe and stable. Don’t guess. Use what your bank account and bills show.
If you can pay something toward the loan, even a smaller amount, note what that figure is. The goal is to propose a payment you can actually stick to.
If money is tight, you need to keep a roof over your head, keep the lights on, and keep food and transport sorted. A loan repayment matters, but you can’t fix a financial problem by sacrificing essentials and then collapsing a week later.
It’s common to try to patch one repayment with another loan. That can create a cycle where fees and repayments stack up faster than your income can handle. If you’re short this week, the better move is to ask for a hardship arrangement and stabilise, not add another repayment.
Under the National Credit Code, if you can’t meet repayments because of a reasonable cause, you can ask your lender to change your repayments for a period. This is commonly called a hardship notice or a hardship variation. It applies to regulated consumer credit like credit cards, personal loans, car loans, and many home loans.
The key is being specific. “I can’t pay” isn’t enough on its own. You want to say what changed, what you can pay now, and what you need to get back on track.
You’re not asking for a favour. You’re proposing a short-term plan that gives you breathing room and improves the chance the loan returns to normal repayments.
Common requests include:
Keep your request realistic. If your income has dropped by $600 a fortnight, don’t offer a repayment that assumes that drop disappears next week.
If you don’t have documents ready, tell them when you can provide them. Don’t ignore the request. Lenders usually need enough information to understand your new cash position. Expect questions about income, expenses, and what caused the change. They may ask for evidence such as:
If you raise hardship early, it can reduce the chance the situation escalates into default notices and collections pressure. Consumer advocates note that when a hardship notice is given, enforcement steps are generally paused while the lender considers the request, with important exceptions such as where a court judgment is already in place.
Different loans behave differently in hardship. The goal is the same, though: stop the situation from compounding.
Credit cards can feel manageable because minimum repayments look small, but interest and fees can keep the balance stuck. A hardship arrangement can involve reduced payments, a pause, or in some cases a structured repayment plan. Ask for a plan that stops the balance growing while you stabilise.
Personal loans have fixed terms and fixed repayments, so missing payments usually triggers default fees and collection contact. Hardship arrangements often focus on a short pause or reduced payments, then a step-up plan.
Car loans can become urgent because the car may be security for the loan. If you need the car to work, hardship should be raised immediately. Ask for an arrangement that protects transport while you recover.
Small amount credit is designed around short terms and frequent repayments, which can bite hard when income drops. If you’re struggling, act fast. Ask for hardship and get free financial counselling support early. Avoid borrowing again to cover a shortfall, because repayments can stack quickly.
Mortgage stress can escalate quickly once default notices start. The earlier you propose a realistic plan, the more chance you have of keeping the loan stable while you recover. If you receive a default notice or legal action is threatened, you should get advice and consider escalating to AFCA early.
If the lender refuses your hardship request or offers a plan you can’t meet, ask for the decision in writing and request escalation to internal dispute resolution (IDR). Keep it factual. State what you asked for, what you can afford, and why the offer doesn’t work.
AFCA is the external dispute resolution scheme for most consumer lenders. If hardship isn’t being handled properly, you can lodge a complaint. AFCA can require the lender to pause certain actions while the complaint is being considered, depending on the case and timing.
For higher-stakes situations like mortgages, the timing matters. If legal action is underway, you generally want to escalate before a court judgment.
A default notice is a warning that the lender believes you’re in default and may take further action if it isn’t fixed. Don’t ignore it. Do three things immediately: contact the lender’s hardship team, put your proposal in writing, and get free support from a financial counsellor if you’re unsure how to respond.
Debt collectors and lenders have to follow rules about contact and conduct. If you’re being harassed, threatened, or contacted in unreasonable ways, you can document it and raise it through IDR or AFCA.
Write down dates, times, who you spoke to, what was said, and what you agreed to. Save emails and SMS messages. If you need to escalate, this evidence helps.
Financial counsellors can help you build a workable budget, negotiate with lenders, and understand your rights. The National Debt Helpline is a reputable starting point. MoneySmart also sets out practical hardship steps and what to expect in the process.
If you’re dealing with a mortgage and the lender is pushing enforcement, Legal Aid resources can help you understand the stakes and the timing of escalation.
Phone version:
State your name and loan details. Explain what changed and when. Say what you can afford right now and for how long. Ask to apply for a hardship arrangement under the National Credit Code. Ask what documents they need and confirm the timeframe for a decision.
Email version:
Keep it short. Include your loan reference number, the cause of hardship, the repayment you can afford, the timeframe you’re requesting, and your preferred contact details. Ask for the response in writing.
Use a two line snapshot that matches your bank reality: total income per pay cycle, essentials per pay cycle, then what’s left for loan repayments. If the “left” number is negative, your hardship request should be a pause or a reduced plan, not a normal repayment.
Bring evidence that supports your story, then offer it once, rather than drip-feeding it across multiple calls. That reduces delays.
Contact the lender early and ask for hardship. Propose a realistic repayment you can meet, even if it’s temporary. Document the request, keep copies, and avoid taking on new quick credit to cover the gap.
You can ask for a temporary change to repayments, such as reduced repayments, a short pause, or a step-up plan. You can also ask about fee relief linked to the hardship period. The lender may propose alternatives, but the plan has to be something you can actually meet.
If the lender has enough information, it generally must respond within 21 days. If it needs more information, it must request it within 21 days, then respond within 21 days of receiving it. If you don’t provide the information, it must respond within 28 days of requesting it.
It can, depending on the product and how the account is managed. The bigger risk is missed repayments and defaults that remain unmanaged. If you’re worried about credit reporting, ask the lender how your account will be recorded during the arrangement and get the answer in writing.
If the lender refuses your request without a workable alternative, stalls beyond required timeframes, or continues enforcement pressure while you’re trying to resolve hardship, escalate. If a mortgage is at risk and legal action is moving, lodge early.
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