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COVID personal loan repayments: What to do if you’re struggling

If coronavirus is affecting your ability to make personal loan repayments, there are some relief measures in place to help.

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Coronavirus (COVID-19) has had a huge financial impact both in Australia and around the world. If you've been affected by the pandemic and have trouble making personal loan repayments, lenders have hardship measures in place to assist you in this time of need. These measures can include fee waivers and loan restructuring.

Woman wearing face mask sitting on a bus coronavirus

What can I do if I can't meet my personal loan repayments as a result of COVID-19?

If you're facing financial hardship as a result of COVID-19, your first step is to contact your creditor. Most creditors have hardship measures in place to help people who can't meet their repayments. Some of the common reasons people face financial hardship include unemployment or reduced working hours, illness or injury, reduced income, relationship breakdowns, domestic violence or financial abuse, natural disasters and gambling. More recently, it also includes financial difficulties caused by COVID-19.

Are banks offering relief for personal loan customers during COVID-19?

Yes, banks are offering financial hardship assistance during COVID-19 for affected customers. These measures may differ from what the bank initially offered when the pandemic started.

Hardship assistance measures can include:

  • Reducing your interest rate
  • Waiving fees
  • Extending loan terms
  • Restructuring debt
  • Payment deferrals
  • Reducing payments for a period
  • Referrals to financial counsellors or other support services

Once you contact your provider, it will assess your financial situation and advise you accordingly. You'll need to provide information about your income and expenses, bank statements, and where applicable, a medical certificate or letter from your employer. You'll also need to provide information about the financial products you hold.

If your application for financial assistance has been approved, most banks may not report your repayment history information to credit reporting agencies. This means that your credit history may not be affected. It's best to check with your bank to be certain.

Which banks are offering repayment deferrals as a result of COVID-19?

The following banks offer personal loan repayment deferrals as a direct result of COVID-19:

  • Bank Australia
  • Bank of Queensland
  • HSBC
  • IMB Bank
  • ING
  • Suncorp
  • Westpac

While you won't have to make repayments during the deferral period, your loan may accrue interest and fees all the same. This will be added to your balance amount, and you will have to pay it back. This is called "interest capitalisation". As a result of interest capitalisation, your repayments, once they resume, may be higher than before you applied for assistance. You should speak to your lender and confirm if interest capitalisation will apply to you.

What if my bank doesn't have a coronavirus relief plan?

Even if your lender doesn't have a coronavirus relief plan, it will have existing hardship measures in place to help with unforeseen circumstances. You should get in touch with it directly and look into how it can help you.

If you're unable to come up with an arrangement that suits you, you can make a complaint with the Australian Financial Complaints Authority (AFCA). AFCA can also help if your lender has declined your request for financial hardship, if you've been given a default notice and if the lender has failed to respond to your hardship request, among other issues.

What other options do I have if I'm facing financial hardship?

If you're facing financial hardship, there are a number of ways to get financial support. Depending on your circumstances, you can get help with:

  • Rent. You can ask your landlord or real estate agent to reduce or defer your payments for a month. There is also a household relief loan that offers an interest-free loan up to $3,000 to help you pay for rent and utilities.
  • Bills. If you're having trouble paying your utilities bills, you should contact your service provider immediately. It can help you find an option that includes applying for a utility rebate or voucher, a payment extension and a payment instalment plan. Utility providers are legally required to help you.
  • Government payments. While the federal government no longer offers Job Keeper payments, you could still be eligible for some form of payment depending on your circumstances. This includes the government Pandemic Leave Disaster Payment. This is a payment for those who cannot earn income while self-isolating, quarantining or caring for someone.
  • Insurance premiums. If you're having trouble paying insurance premiums, you should contact your insurer. It may be able to provide you with payment options.
  • Council rates. Contact your council if you're having trouble paying your rates. It will provide you with payment options including a waiver on interest for overdue rates. You may also be eligible for a concession rate.
  • Fines. Contact your state debt recovery agency if you have trouble paying your parking, speeding or littering fines. It can provide you options such as extensions and payment in instalments.
  • Financial counselling. No matter what kind of money problems you're having, you can talk to a financial counsellor for free. They will assess your financial situation, give you advice and help negotiate with creditors on your behalf.
  • Legal advice. You can also get free legal advice from community legal centres and Legal Aid agencies.
  • Emotional support. If your financial difficulties are affecting your mental health, you can contact Beyond Blue for support.

Can I take out a personal loan if I'm struggling from financial hardship as a result of COVID-19?

If you're facing financial difficulties, it may be better to consider other options before taking out another loan. However, there are some loans designed for financial assistance. These include the no interest loan scheme for low income earners. There is also household relief, which can help you with rent and utilities. While these loans don't charge interest, they are still loans and you will be expected to pay them back. You should look into whether you'll be able to repay the loan in the first place before applying.

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NOW Finance No Fee Unsecured Personal Loan Fixed, 18 Months - 7 Years, $5,000 - $50,000
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