Dealing with financial hardship
How to cope when you're experiencing money trouble.
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Many Australians stress about money, but those experiencing financial hardship are under severe pressure to make ends meet. There are numerous situations that can put you in financial hardship. These include: losing your job, having to deal with large medical expenses, experiencing a relationship breakdown, struggling to meet debt repayments or just finding it hard to deal with everyday expenses.
This guide will take you through examples of financial hardship and explain what you can do about it.
If you are experiencing financial hardship as a result of COVID-19
Job loss. If you have lost your job as a direct result of the coronavirus pandemic, there may be some options available to you. See our guide on how you can get help if you've lost your job.
Debt concerns. If you're worried about how you're going to pay off your debt because of financial concerns due to COVID-19, there are resources being implemented by banks and lenders that may be able to help. Check out our guides on getting help with your personal loan debt or car loan debt.
Difficulty paying utility bills. If you can't pay your utility bills because of financial hardship caused by the current pandemic, find out how different providers are taking measures to help their customers.
Struggling business. If you're a small business owner and your company is suffering because of the impact of COVID-19, there are various measures in place to help. Check out the tax relief measures in place that could help you, or the interest-free business loan options that are available to you.
Something else. Find out more about the stimulus packages being offered by the government at this time, and whether they could benefit you.
What is financial hardship?
Financial hardship is when you are unable to, or are finding it extremely difficult to, pay your bills and everyday expenses. Financial hardship usually occurs after a change in your personal circumstances. This can include losing your job, a personal relationship breaking down, the death of a loved one or having to cover unexpected medical expenses.
When you experience financial hardship, you may find yourself struggling to pay rent or mortgage payments, credit card or loan bills, or even everyday expenses like food and transport.
What do I do if I'm experiencing financial hardship?
If you are experiencing financial hardship, it's important to utilise the services that are available to you. For instance, if you have any type of credit contract with a lender, such as a home loan, a personal loan or a credit card, you can apply for hardship variation.
Check the date that you signed your credit contract before you call your lender. If you entered into your credit contract before March 2013, your credit provider only has to consider your hardship application if the amount that you borrowed is less than the threshold that applied on the date you signed your contract. You can check these thresholds on the ASIC website.
If you entered into a credit contract on or after March 2013, you can apply for a hardship variation whatever the value of your loan.
How to apply for hardship with your bank or lender
Banks and lenders have hardship programs in place to help you if you are experiencing financial hardship. Here's how these processes work:
- You notify the bank about your financial hardship. This can be done verbally or in writing, and it simply involves telling the bank you cannot, or you think you cannot, afford your repayments.
- The bank will ask you for information. This may include a statement on your financial position (income, expenses), details of your employment and income and evidence of your medical circumstances, if relevant.
- The bank will assess your application. It will take into account the reason for your hardship, your finances, your ability to rectify your circumstances and whether or not you have received hardship in the past.
- You will be notified of the outcome in writing. If the bank agrees to provide hardship assistance, you will need to comply with the terms of the agreement. In the case that your hardship application is not approved, your credit contract will not be altered.
- If your application isn't approved. The bank may suggest alternatives such as accessing early release of your super, government support programs or financial counselling.
What to do if you can't pay your utility bills
If you're struggling to pay your electricity, phone or gas bills, you need to contact your utility supplier. Similar to your credit provider, your utility provider will have a hardship process in place.
When you call your provider, ask to speak to a hardship officer. The officer may help you work out a plan to pay the bill in instalments or help you apply for emergency utility bill vouchers. These vouchers can help you meet the minimum payments. There is also the option to consider calling a financial counsellor. Alternatively, you may consider an option referred to as bill smoothing, whereby you make fortnightly or monthly payments to a future energy bill to make it easier to manage.
If you are not happy with the response of your utility company to your application for hardship, you can lodge a complaint with your state ombudsman.
What happens to your credit score?
During your discussion with the hardship officer, ask how the creditor will report your repayment history if you enter into a hardship variation and request that it is not listed as a default or overdue payment on your credit report.
If your creditor rejects your request for an arrangement, they can only list a default 14 days after the rejection.
In the case that the lender agrees to the repayment arrangement, but does not agree to not list your hardship variation as a default, you can take further action by reporting it to the Australian Financial Complaints Authority. If the creditor agrees to an arrangement and you are making the agreed-upon payments, you are not considered to be in default and it should therefore not be reflected on your credit report.
Alternatives to applying for financial hardship
If your application for financial hardship isn't accepted, or you don't want to apply for it just yet, there are alternatives to consider. These include:
- Financial counselling. If you're unsure what to do about your finances, you can make a free call to a financial counsellor. You can call the National Debt Hotline on 1800 007 007 between 9:30am and 4:30pm Monday to Friday.
- Free legal advice. If you're in debt and are also experiencing legal issues, you can access free legal help in every state.
- No interest loans. The no interest loan scheme (NILs) is an initiative of community organisation Good Shepherd Microfinance. You can apply for a loan of between $300 and $1,200 for 12-18 months. These loans are for people on low incomes or who receive Centrelink payments. They are designed for purchasing essential goods and services.
- Early release of super. There are certain situations in which you can access your superannuation early. Find out everything you need to know in this guide.
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