Financial Rights Legal Centre
Call the National Debt Helpline
on 1800 007 007.
Financial Hardship

This fact sheet is for information only. It is recommended that you get legal advice about your situation.

Covid-19 and Financial Hardship

For up-to-date information on Financial Hardship and Covid-19:


Joe had a car loan and a home loan with a bank. Joe had been working as a salesperson but the store shut down. Joe started looking for another job but he knew he would not be able to make his next few repayments on his loans. Joe was confident he would get another job but he needed some breathing space. At first the lender was helpful and postponed his payments for 3 months, but is now refusing to help any further.


Financial hardship is difficulty in paying the repayments on your loans and debts.

This factsheet explains what your options are if you could afford the loan at the start, but your circumstances changed after getting the loan.

IMPORTANT:   If you could not afford to pay the loan from the very start, ring our Legal Advice line on 1800 844 949 for advice immediately.

If you are in financial hardship with a home loan see our Mortgage stress fact sheet.


Consumer credit and business loans are regulated differently.

  1. For consumer credit – like credit cards, personal loans, car loans or home loans – you have a legal right to ask for hardship assistance, under the National Credit Code (the Code).

You must be having (or will have) trouble making your loan repayments because of any reasonable cause (such illness, family breakdown or unemployment).

You are entitled to request financial hardship even if the other co-borrower does not agree or cannot be contacted.

Your lender must generally be in a free complaint service such as the Australian Financial Complaints Authority (AFCA,, which can consider whether your lender is being reasonable in its response to hardship, and put in a hardship arrangement for you.

  1. For loans for business purposes, there aren’t the same legal protections but if your lender is bound by the Code of Banking Practice (banks), the Customer Owned Banking Code of Practice (credit unions / building societies) or a member of the Mortgage & Finance Association of Australia then those lenders have obligations to work with you if you are in financial hardship.

Your lender may also be in a free complaint service such as the Australian Financial Complaints Authority (AFCA, which can look at hardship requests as part of Code obligations and general good business practice.

You should still contact the lender to explain your situation. If the lender will not agree to a change in repayments, get advice. If there are court proceedings, you must get legal advice immediately.


You can call or write to the lender straight away requesting a repayment arrangement. For consumer loans, we have a Request for Hardship Variation sample letter (you can also use this as a guide for business loans, but should delete the reference to the National Credit Code in the first sentence).

Keep a copy of the letter you send. If you ask for it over the phone, keep notes on what was said.

When asking for a hardship variation, you should:

  1. Explain why you are in hardship – for instance, if you lost work or are ill.  Your lender may sometimes request evidence of this – for instance, a doctor’s certificate
  2. Be reasonable about what you are asking for.  Think about whether you can realistically afford any payments while in hardship.
  3. Your lender may send out a money plan (or income/expenses form) for you to complete.
  4. Do not commit to repayments you cannot afford.

TIP: If you need help working out what you can afford, or need help with filling out a money plan, you can see a free financial counsellor. For a referral, please call 1800 007 007 or visit our financial counsellor search tool.


Some options you can consider:

  1. Postponing repayments on your loan temporarily, until you are back on your feet
  2. Reducing repayments to something you can realistically afford
  3. Allowing you to return to normal repayments at the end of the hardship period by extending the term of the loan and adding arrears to the end of the loan (otherwise you may need to pay extra to catch up)
  4. Reducing or freezing the interest rate for a period of time.  Your lender can’t be forced to agree to this, but they may consider this for unsecured debts like credit cards and personal loans.  Lenders generally will not agree to this for secured loans like home loans or car loans
  5. Waiving default fees and other enforcement expenses.  Your lender may not agree, but you can ask.  If the lender added on fees or costs unfairly (for instance, after you made a reasonable request for hardship) – you should get legal advice about whether you can challenge this
  6. Time to sell an asset (like a car secured by the loan), to reduce the loan balance so you can then afford to repay the residual in instalments over time.  You must get your lender’s permission to sell a secured asset (it is an offence not to), and make sure they remove their security listing otherwise they can still repossess the car and you can be sued by the new owner.

REMEMBER:    You can ask for any type of repayment arrangement as long as it will reasonably repay the loan.


Hardship is generally short-term.  Most lenders will agree to 3 to 6 months initially, and often will review whether a further 3 to 6 month extension is required.

You are entitled to ask for more hardship if new events arise.  So for instance:

  1. If you lose your job because of the coronavirus lockdowns in 2020, but then you lost your job again in mid-2021 due to a new lockdown – you would be entitled to a new hardship variation because it is a new event.
  2. If however you lost work in 2020, and remained unemployed throughout 2021, your lender may view it as a longer-term situation – but you can argue different events still occurred over that time that impacted on your ability to find a job.

The most important thing is to show your lender you have a realistic plan for getting back to normal repayments.  So for instance, you work in an industry that is likely to be recruiting shortly, or you are retraining and expect to get a job in a new field where you will be able to go back to normal repayments.


IMPORTANT:   Even if the lender is demanding unrealistic repayments, keep paying whatever you can afford during negotiations.

This will help show your lender that you want to get back on track and your lender will be less likely to take legal enforcement action.  It can also help reduce any interest being added on

For consumer loans, if you request hardship:

  1. Your lender can request further information within 21 days.
  2. You must provide any relevant information requested.
  3. The lender must then respond in writing within 21 days stating whether the lender agrees to your hardship request.
  • If the credit provider does not agree, they must tell you:
    • Their reasons,
    • the contact details for their own complaints section (“internal dispute resolution (IDR)”
    • your right to complain to the Australian Financial Complaints Authority (AFCA)

If the lender does not agree to your hardship request, you can apply to AFCA, a free complaints resolution scheme, for the requested change: see our Dispute resolution fact sheet.  They have the power to force your lender to agree to a reasonable hardship arrangement.

If you are unsuccessful in AFCA, or your lender is not a member, you still have the option of going to court but get legal advice before you do this.


We have a detailed factsheet on the impact of hardship on your credit report here:

There is some uncertainty in this space, but what we suggest if you are going to fall behind on payments is:

  1. Request hardship (in writing if possible) as early as possible;
  2. Make an affordable repayment arrangement as quickly as you can and stick to it;
  3. Ask your lender how payments will be recorded on your credit report during your arrangement and after it is finished;
  4. Lodge in AFCA within 14 days if your request for hardship is refused. You should also lodge a dispute if the lender intends to report you as late on your repayments (or you find out later that they have done so).

Note: Getting a hardship variation will not fix any late payments that have already been reported to the credit reporting agency before you contacted your lender about hardship. These late payments will remain on your credit report for 2 years from the time of listing.

The above applies to consumer credit reports.  There are also commercial or business credit reports. We provide limited advice to small businesses in NSW – if you have questions, please ring us for advice on 1800 844 949.


If you have received a default notice and/or the lender is threatening court, you need to act urgently.

You should immediately:

  1. Send a letter to the lender requesting a variation of your contract on the grounds of hard­ship (if you have not sent one). If this is not possible, ring the lender and ask for a variation on the grounds of financial hardship.
  1. If possible, lodge an application online with the Australian Financial Complaints Authority (AFCA). All consumer lenders and some business lenders are members.  The quickest and easiest way is to lodge through their online complaint form here:  You can also lodge a complaint by phone if you have no internet access: 1800 931 678

IMPORTANT:     The lender cannot start court action against you while you have an open complaint with AFCA.  You need to make sure you check your emails/post for communications from AFCA – you should receive an immediate email confirmation if you lodge online.

  1. Get legal advice by calling 1800 844 949.


  1. In NSW you have 28 days to respond to a statement of claim. After the 28 days has passed, the lender can apply for judgment. If your lender is in AFCA, we recommend you lodge with AFCA rather than file a defense in Court. You must lodge with AFCA before the lender gets judgment, so lodge with AFCA as soon as possible. (See point 2 above).
  2. If you lodge online with AFCA you will immediately get an acknowledgment that the dispute has been lodged.
  3. Once you have lodged, the lender must not get judgment while your AFCA complaint is open.
  4. If the lender is still threatening to get judgment, let AFCA know by calling 1800 931 678 and get legal advice by calling 1800 844 949.


Hardship is intended to be short-term assistance, where you will be either able to return to normal repayments, or pay out the loan within a reasonable timeframe.

If your financial difficulties are likely to be long term, it is recommended you get a financial counsellor to assist you by calling 1800 007 007.

If your lender does agree to a long-term repayment arrangement, you should make sure you understand how long it will take you to repay the debt, and if interest will still be adding on.

If you have already been making payments for years, but your debt is barely reducing or even increasing, you should get legal advice by calling 1800 844 949.


If you are in financial hardship with a home loan see our Mortgage stress fact sheet.

If you are in financial hardship with Buy now, pay later services (including Afterpay, Humm, Zip, Klarna, Openpay), see our Buy now, pay later fact sheet.

See our Getting help fact sheet for a list of additional resources.

Last updated: November 2021