Hardship variation to a loan
If you are having difficulty making repayments on a loan (for example a credit card or mortgage) because of illness, unemployment or another good reason, you may be able to ask the credit provider for a hardship variation.
A hardship variation results in changes to the terms of a loan contract. A credit provider is a business that loans a person money. Who can apply for a hardship variation You can apply for a hardship variation if:
- you entered into a loan between the 1st of July 2010 and the 28th of February 2013 and the loan amount was less than $500,000; or
- you entered into a loan on or after the 1st of March 2013.
If you entered into a loan before the 1st of July 2010, you can only apply for a hardship variation if the loan amount was below a certain amount, known as a threshold. You can contact the Australian Securities and Investment Commission (‘ASIC’) or search ASIC’s Moneysmart website to find out the threshold amount that applies to you.
How to apply for a hardship variation
You can ask a credit provider for a hardship variation verbally, but it is a good idea to put your request in writing. This is called giving a hardship notice. You should do this as soon as you realise you are having difficulties making repayments.
What to ask for
- It is a good idea to explain to the credit provider why you are having difficulty making repayments, and the type of change to the contract you are seeking.
- This might be asking for:
- the term of the loan to be extended, allowing you to make smaller repayments; or
- the term of the loan to be extended and repayments suspended (delayed) for a
- period of time, for example three months; or
- repayments to be suspended for a period of time without extending the term of the loan; or
- any combination of the above.
It is important that you are able to meet the changes to the contract that you suggest and agree to.
When the credit provider can ask for more information
The credit provider can ask you for more information to help them decide whether you are not able to make your repayments, or how to change the contract. You may be asked to provide a statement of financial affairs setting out your income, expenses, and any assets or property you own. You need to provide the information within 21 days of being asked.
The credit provider must tell you in writing whether or not they agree to change the terms of your contract. The credit provider must inform you of their decision:
- within 21 days of receiving the hardship notice if you were not asked to provide further information; or
- if you were asked to provide further information, within 21 days of receiving the additional information you supplied.
The credit provider does not need to agree to change the contract if they do not think there is a good reason that you are unable to make the repayments, or where you would not be able to make the repayments even if the contract was changed.
If the credit provider agrees
If the credit provider agrees to change the contract, in most cases they must give you a written statement within 30 days of agreeing to the change, setting out what the changes are.
If the credit provider does not agree
If the credit provider does not agree to change the contract, they must provide you with reasons and give you with the details of an external dispute resolution service you can complain to. You can also apply to a court to have the terms of the contract changed.
Darwin Community Legal Service
Phone: (08) 8982 1111
Freecall: 1800 812 953
Australian Securities and Investments Commission
Freecall: 1300 300 630
Somerville (Financial Counselling)
Phone: (08) 8920 4100
Freecall: 1800 007 007
Darwin Community Legal Service 2015: Non-profit community groups have permission to reproduce parts of this publication as long as the original meaning is retained and proper credit is given to DCLS, as the publisher.
Disclaimer: The information contained in this publication is a guide to the law in the Northern Territory. It is not a substitute for legal advice. You should talk to a lawyer about your particular legal issue. The information contained in this factsheet is current as at September 2014.