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Click here to be directed to CashPal ️When personal loan repayments start to squeeze your budget, things can spiral out of control very easily. You’re not the only one dealing with it. Australians are borrowing a lot through personal loans, with new personal lending hitting about $9.3 billion in the September 2025 quarter and the average unsecured personal loan interest rate sitting around 13.87% per year. At those rates, even a small income shock can make repayments feel impossible.
We want you to know there are real options, legal protections and free support in Australia if you cannot afford your personal loan repayments. The worst move is to go quiet. The best move is to act early and use the systems that exist to help you.
Financial stress doesn’t come out of nowhere. It can be because you started putting loan repayments on a card. Or maybe you’ve let other bills slide, and started cutting back on groceries. If you’ve been feeling a knot in your stomach every time your banking app sends you a notification, it’s a sign to take a pause, not beat yourself up.
Grab a piece of paper and list down your income sources. Audit essential costs such as rent, food and utilities, and every debt with its limit. Consider the balance and repayment amount of each debt as well. Once you can see everything in one list, it becomes much easier to work out what you can realistically afford and what needs to change.
If you can see trouble coming, do not wait until you are already in arrears. Lenders and regulators like ASIC and the National Debt Helpline consistently say the same thing. Contact the lender early and be upfront.
What To Do If You Have Already Missed Personal Loan Repayments
If a repayment has already bounced, you still have options. Open every letter and email from your lender so you know where things stand. Late fees may start to appear, but these can sometimes be waived or adjusted once a formal hardship arrangement is in place.
Seek advice from a financial counsellor or community legal centre once you receive a default notice. Free financial counselling through the National Debt Helpline is available for anyone who is in financial hardship and struggling to pay off their debts.
In the event that you’re in financial hardship due to an illness, loss of your job, relationship breakdown or another valid reason, you can ask your lender for a hardship variation on your personal loan. Give them accurate details of your income, expenses and debts so they can assess it properly.
Should they approve your request, the new terms will be in writing and the hardship flag only stays on your credit report for about 12 months while your repayments are treated as up to date. If they refuse they must explain why and tell you that you can take your complaint to the Australian Financial Complaints Authority.
There is no single hardship template. Lenders can adjust different parts of your contract to make repayments more manageable.
If your problem is short term, you might be offered a temporary arrangement. That could include smaller repayments for a set period, interest only payments, or a short payment pause while you recover. During that time, your credit file shows that a hardship arrangement exists, but if you stick to it, your repayment history is still marked as up to date and the notation drops off after 12 months.
If your income has changed for the long term, a permanent variation may make more sense. This can include extending the remaining term so each repayment is smaller or capitalising arrears into the balance so the loan is brought back to order. You should always ask for a comparison of the total interest payable before and after the change. Lower stress now is useful, but not if the structure becomes unsustainable later.
In some situations, such as temporary unemployment or a medical event, a lender may defer payments entirely for a short period. Interest usually keeps accruing, which will increase the balance, so you want a clear written explanation of what repayments will look like once the deferral ends.
At MeLoan, we view these tools as ways to keep a customer on track, not as punishment. If we can adjust a repayment schedule on a small personal loan so you can breathe again and still clear the debt, that is a good outcome for everyone.
Debt consolidation can help when you are juggling several debts, like personal loans and credit cards. One new loan pays out your existing balances so you make a single repayment at one interest rate, and with the average new personal loan around $22,643 at about 13.87% interest, even a small rate cut can noticeably reduce your monthly costs.
It only works in your favour if the new debt consolidation loan has lower interest and lower fees, and you avoid running up new balances on cleared accounts. If the new loan is more expensive or stretches the term too far, you can feel better month to month but pay much more interest overall, so you must compare the full cost of your current debts with the full cost of the new loan, including any early payout fees.
MeLoan offers small personal loans and debt consolidation loans, and our focus is on structures that leave you better off over time, not just for the next repayment. If consolidation will not genuinely improve your position, we will be clear about that so you can look at other options that make more sense.
You do not have to figure this out on your own. Financial counsellors provide free, independent and confidential advice across Australia. The National Debt Helpline handled close to 170,000 contacts in 2024, with a 12% rise in calls as more people struggled with mortgages, credit cards and personal loans in a high interest environment.
A counsellor can help you:
You can contact the National Debt Helpline on 1800 007 007 or via web chat. ASIC’s MoneySmart site also offers clear guides on financial hardship, credit reports and managing debt, along with calculators you can use while you talk to lenders.
Your credit report records whether you pay on time each month and whether any debts go into default. A payment that is more than 14 days late can be marked as a missed repayment in your repayment history. If an amount of at least $150 remains overdue for 60 days or more and the lender has followed the correct notice process, they can list a default. That default can stay on your credit file for up to 5 years, even if you later pay the debt in full.
Credit reporting agencies Equifax, Experian and Illion each keep their own version of your report. You are entitled to a free copy from each agency every year. If you see an error, you can ask the lender to fix it. If they refuse, you can take the matter to AFCA.
The key point is that proactive hardship arrangements are treated very differently from simple non payment. A correctly recorded hardship variation shows that you are working with your lender and does not by itself harm your credit score.
Most lenders will work with you when you are upfront about financial hardship, but not all experiences are positive. AFCA’s recent annual review shows it received about 100,745 complaints in the 2024 to 2025 year, with more than 60,000 of those relating to banking and finance products. Personal loans are part of that picture.
If your lender is not engaging fairly:
Lodge a written complaint through their internal dispute resolution process. State what happened, what you have asked for and the outcome you want.
If you do not get a response within the required timeframe or the outcome is not reasonable, escalate your case to the Australian Financial Complaints Authority. AFCA is a free external dispute resolution scheme and can require member financial firms to fix problems.
Work out what you can realistically afford, then contact your lender early and ask to talk to the hardship or customer care team before arrears build up.
No, a correctly recorded financial hardship arrangement does not affect your credit score and the notation normally disappears after 12 months if you meet the new terms.
Repayment history usually shows up to 2 years of on time or late payments, and a default can remain on your credit report for up to 5 years even after the debt is paid.
Some lenders will offer short payment pauses or reduced payments under hardship, but interest often keeps accruing, so you need to understand how this changes future repayments.
Should I take out another loan to pay my existing personal loan?
Only if the new loan is part of a genuine debt consolidation plan that lowers your total interest and fees and fits your budget, not just to buy time.
Ask for the refusal in writing, then consider lodging a complaint with AFCA and talking to a financial counsellor about your next steps.
Yes, if it simplifies your repayments and reduces overall costs, but you should compare the total cost of your current debts against the proposed consolidation loan.
You can contact the National Debt Helpline for free financial counselling and use ASIC’s MoneySmart resources to understand your rights and options.
A collection agency may add costs and a default is likely to be recorded, which can affect your ability to borrow for years, so it is better to act early and negotiate before it reaches that stage.
When should I consider bankruptcy or a formal debt solution?
Only after detailed advice from a financial counsellor or specialist legal service, once all other realistic options like hardship and consolidation have been explored.
Sources
https://moneysmart.gov.au/managing-debt/financial-hardship
https://ndh.org.au/
https://www.afca.org.au/make-a-complaint/credit-finance-and-loan-complaints
https://www.money.com.au/personal-loans/personal-loan-statistics
https://www.financialcounsellingaustralia.org.au/big-increase-in-people-reaching-out-to-the-ndh/
https://www.equifax.com.au/personal/what-default
https://www.oaic.gov.au/privacy/your-privacy-rights/credit-reporting/what-stays-on-a-credit-report
https://www.commbank.com.au/support/credit-reporting.html
https://www.creditsmart.org.au/financial-hardship/temporary-financial-hardship-arrangement
With years of experience under our belt, we can provide some tips & tricks to help you save
