When you need a financial hardship arrangement


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From students to families, people across Australia are finding themselves in a position of financial hardship as rising interest rates and an increase in the cost of living begin to bite into hip pockets.

If you find yourself in financial difficulties, the most important thing is to speak to your lender about whether a financial hardship arrangement is the right option for you.

But what does this type of arrangement mean and how should you go about organising it?

financial hardship arrangements

What is a financial hardship arrangement?

Put simply, a financial hardship arrangement is an agreement between a customer and their lender to adjust a customer's loan repayment obligations because something has happened which has an impact on their ability to repay.

A payment deferral or a period of smaller repayments because of a loss of employment, an unexpected death, or a natural disaster are common circumstances where a financial hardship arrangement may be worthwhile. These arrangements are typically for a short period of time but can be longer if the customer needs to extend the term of their loan to reduce monthly repayments.

How do I apply for hardship assistance?

The most important thing to note is that if you are finding it difficult to make repayments on your credit accounts, or if you have experienced a change in your circumstances, you should speak to your lender as soon as possible.

Lenders have well-established programs to assist Australians experiencing financial difficulty. Remember that financial hardship can affect anyone, and lenders are experienced in helping their customers get back on track.

Your lender will discuss arrangement options with you, which consider the type of loan or credit you have, the reasons you are struggling to make repayments and how long you may need hardship assistance. It is important to work with your lender to find a solution. Keep in mind that your lender is not required to agree to a financial hardship arrangement - it will depend on their assessment of your financial circumstances and why you are struggling with repayments.

When should I seek assistance?

Getting help early can ease the pressure for you and can help avoid late fees or other charges for missed payments. Lenders will do what they can to help you through tough times, and work with you until your finances are back on track. Agreeing to a financial hardship arrangement can also help protect your credit report as it will avoid showing missed payments which have a negative impact on your credit report.

Just remember, the sooner you ask for help, the sooner you can find a solution.

Is a hardship arrangement better than a negative payment history?

Absolutely. If you are struggling to make your payments, it is important to recognise that a history of repeated missed payments can make it harder for you to get credit in the future. If missed payments continue, it could even result in a default being recorded on your credit report.

A financial hardship arrangement will help you avoid having missed payments recorded because your repayment history will reflect whether you have met the reduced repayments required under the hardship arrangement (rather than the higher payments that are normally required).

Will a hardship arrangement reduce my credit score?

No, a hardship arrangement will not reduce your credit score. Under the law, financial hardship information cannot be used by a credit reporting body to calculate a credit score.
Seeking financial hardship assistance also does not exclude you from applying for credit in the future.

If your credit report has financial hardship information, a potential lender may ask you for more information about your current situation to understand whether you are still experiencing hardship and if you can afford the loan or credit account.

No matter what has happened over the last 12 or 24 months, making your agreed repayments on time now will help you look better to other lenders in the future. Financial hardship information will remain on your credit report for 12 months after the final repayment is made under the arrangement.

What happens to my credit report if my lender and I do not agree to a financial hardship arrangement?

If you do not request a financial hardship arrangement or are unable to agree to a financial hardship arrangement with your lender, and you do not meet your monthly repayments, your credit report will show missed repayments. Your repayment history will continue to show that you are behind, until you are up to date.

Repayment history is shown as a number that reflects whether you are up to date with your payments and, if not, for how long this has occurred.

So, no matter what has occurred, take confidence in knowing that help and support is available. Speak to your lender about a hardship arrangement and work towards a solution, so that you can get your finances back on track.

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Elsa is the CEO of the Australian Retail Credit Association (ARCA). Appointed to this role in August 2022, she was previously the regulatory executive director, and has played a pivotal role in the initial drafting and ongoing variations to the Credit Reporting Code, the development of an industry code for data exchange and the review and operation of the Australian Credit Reporting Data Standard. Previously, Elsa worked at the Financial Ombudsman Service and, prior to that, worked in private practice as a legal practitioner focusing on general and civil litigation. She holds a Bachelor of Arts and a Bachelor of Laws from the University of Queensland.