Hardship variation to a loan
If you are having difficulty making repayments on a loan for a consumer credit (for example a credit card or mortgage) due to a reasonable cause such as illness or unemployment, you may be able to ask the credit provider for a hardship variation.
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 $500,000 or less; 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 website to find out the threshold amount that applies to you.
How to apply for a hardship variation
Although you can ask a credit provider for a hardship variation verbally, 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
You should explain to the credit provider why you are having difficulty making repayments, and the type of change to the contract you are seeking. You may ask 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.
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 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 will usually need to provide such information within 21 days of being asked.
The decision
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. They might not change the contract if they believe:
• you are able to make the repayments;
• your reason for being unable to make the repayments is unreasonable; or
• you would not be able to make the repayments even if the contract was changed.
If the credit provider agrees
In most cases, if the credit provider agrees to change the contract, 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 changing the contract, they must provide you with reasons for their decision. They must also give you 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.
Useful contacts
Darwin Community Legal Service
Phone: (08) 8982 1111
Freecall: 1800 812 953
Australian Securities and Investments Commission
Freecall: 1300 300 630
Website: www.moneysmart.gov.au
Somerville (Financial Counselling)
Phone: (08) 8920 4100
Freecall: 1800 007 007
Financial Rights Legal Centre
Ph: 1800 007 007
Website: https://financialrights.org.au/factsheets/financial-hardship
To download the HARDSHIP VARIATION TO A LOAN factsheet
© Darwin Community Legal Service 2022: 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 of January 2022.