Financial Hardship: Your Rights Before You Miss a Payment
ADS Team
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July 26, 2026
about 2 months ago
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In short: If you are struggling to meet repayments you can ask your lender for a hardship variation, and under the National Credit Code and the Banking Code of Practice the lender must genuinely consider it. You do not need to be in arrears to apply — applying before you miss a payment gives you the widest range of options and protects your credit file.
Key takeaways
- You can apply for hardship assistance before defaulting, and it is generally better to do so.
- Options include a repayment pause, a term extension, a temporary switch to interest-only, or capitalising arrears.
- A lender must respond to a hardship notice within the timeframes set by the National Credit Code.
- Free, independent financial counselling is available through the National Debt Helpline on 1800 007 007.
What can you actually ask for?
| Option | What it does | The trade-off |
|---|---|---|
| Repayment pause (moratorium) | Pauses repayments, usually 1–6 months | Interest still accrues and is added to the balance |
| Term extension | Spreads the balance over more years, lowering repayments | More total interest |
| Interest-only switch | Removes the principal portion temporarily | Higher repayments later; no equity built meanwhile |
| Capitalise arrears | Adds missed payments to the balance | Slightly higher ongoing repayment |
| Reduced repayment | Agreed lower amount for a set period | Shortfall accrues |
How do you apply?
- Contact the lender's hardship team directly — most publish a dedicated number, separate from general enquiries.
- Explain the cause and the timeframe. Illness, job loss, reduced hours, separation or a business downturn are all recognised. Say whether it is temporary and when you expect to recover.
- Propose what you can pay. A specific, realistic offer is far more effective than a general request for help.
- Get the arrangement in writing, including how interest is treated and what happens at the end.
The lender must respond within the statutory timeframe. If it declines, it must give reasons and tell you how to complain.
What if the lender says no?
You have escalation rights that cost nothing:
- Internal dispute resolution — every lender must have a complaints process with defined response times.
- AFCA — the Australian Financial Complaints Authority handles disputes free of charge, and its determinations bind the lender. A lender generally cannot begin enforcement while an AFCA complaint is open.
- Financial counselling — the National Debt Helpline (1800 007 007) is free, independent and confidential, and counsellors negotiate with lenders regularly.
Context matters here: 421,725 households across 80 postcodes were recorded in mortgage stress in June 2026, up 18% year on year. Hardship teams are dealing with this at scale, and asking early is neither unusual nor a mark against you.
Frequently asked questions
Will applying for hardship damage my credit score?
A hardship arrangement can be recorded as a financial hardship indicator on your credit file for a limited period, but it is far less damaging than missed payments or a default, which remain visible for years.
Can the lender repossess while a hardship request is being considered?
A lender generally cannot begin or continue enforcement proceedings while a hardship notice or an AFCA complaint is properly on foot. Get the request lodged formally and keep written records.
Does hardship assistance cost anything?
Lenders do not charge to consider a hardship request, and financial counselling through the National Debt Helpline is free. Be cautious of businesses charging fees for "debt help" that a counsellor would provide at no cost.
Related reading
- Stress-Testing Your Own Budget at +3%
- Break Costs on Fixed Loans: How They Are Calculated
- Refinancing in a Rising Market: When It Still Pays
Sources
- National Credit Code, hardship notice provisions — Federal Register of Legislation
- Banking Code of Practice — Australian Banking Association
- Problems paying your mortgage — ASIC Moneysmart
- Mortgage stress research, June 2026 — Roy Morgan
Information current as at 2 September 2026.
General advice warning: This article contains general information only. It does not take into account your objectives, financial situation or needs, and it is not personal credit or financial advice. Consider whether it is appropriate for you and seek advice from a licensed credit representative before acting.
Any interest rate shown is an example only and is not an offer of credit. Where a rate is quoted, the applicable comparison rate is available from the relevant lender and should be considered alongside it.
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