If you’re struggling to keep on top of your personal loan repayments, you’re not alone.
Your bank is ready to listen and consider possible solutions that are right for you.
It’s important to be open and realistic when talking about your financial position.
If you hold multiple loans or finance packages from different credit providers, you should contact each of the providers as well.
Help to improve your situation
Taking a closer look at your budget could help you to get your finances back on track.
You’ll need to consider your income, expenses, the debt you’re managing and any savings and investments you have. Are there any changes you could make to reduce your expenses and consolidate debts?
Doing this will give you a better understanding of how much you can save, or where you could make cuts in your spending to improve your financial health.
For assistance with budgeting, you could use the online Moneysmart budget planner.
This is also a good step to take as your bank may ask about your income, expenses, and any changes you intend to make when discussing options to help you.
If you can, keep making repayments, even if they’re smaller. This will help reduce the level of any arrears.
What are some of your other options?
Your bank will have a dedicated customer support team ready to assist you during tough times. They can provide you with tools to help you manage your budget and better understand your situation.
Some other options your bank may be able to offer include:
- Temporarily postponing or deferring repayments
- Agreeing an alternative arrangement repayment plan.
In exceptional circumstances, your bank may be able to reduce or waive your unsecured personal loan debt on a case-by-case basis and on compassionate grounds.
This is at the bank’s discretion. Your bank will take into account your individual circumstances, whether you’re unable to meet your payments now and in the future, whether the hardship is genuine and caused by factors outside your control, and commercial considerations.
If your bank doesn’t allow you to change the terms of your loan, they need to tell you why in writing and give you details about where you can complain.
What happens if you can’t make loan repayments?
Stay in contact with your bank and remember they will try to find a workable solution.
If you continue to miss your loan repayments, it’s essential to keep talking to your bank because avoiding them may lead to your bank taking further action, including charging you late fees.
You could also call the National Debt Helpline on 1800 007 007 and speak with a financial counsellor.
How missed payments affect your credit rating
Your credit report shows whether you have made your loan or credit card repayments on time for each account over the past two years. In normal circumstances, missing or making a late payment on one of your accounts will reduce your credit score. A lower credit score may affect your ability to receive finance in the future.
If you are experiencing financial difficulty and are not able to make your loan or credit card repayments on time, it is important to get in touch with your bank. Depending on your circumstances, you and your bank may agree to a financial hardship arrangement.
One benefit to entering a financial hardship arrangement is that your credit report will show that you have made your repayments on time for the period of the arrangement. This is provided you meet any terms agreed with the bank, such as making lower repayments for a period of time.
Your credit report will also include information that indicates you are in a financial hardship arrangement. This information will stay on your credit report for one year and then disappear. Credit reporting bodies do not use financial hardship information to calculate your credit score, so entering an arrangement will not result in a lower score.
Avoid companies offering to repair your credit rating. You are entitled to one free copy of your
credit report every three months through the Australian credit reporting agencies, which are Equifax, Experian and illion.
Steer away from companies offering to ‘save’ you money by negotiating reduced repayments. These companies charge high upfront and ongoing fees and could leave you worse off. Speak to a free, independent, and confidential financial counsellor instead.
Take care of yourself and seek help
Please reach out if you feel you are in over your head. You could also contact the National Debt Helpline on 1800 007 007 and speak with a financial counsellor. Financial counsellors are qualified professionals who provide free, independent, and confidential information and advice to people in financial difficulty.
Charities and community organisations can also provide urgent help with food, housing and bills as well as emotional support.
You could also contact Beyond Blue on 1800 512 348 who offer a wellbeing and mental health support service.
If you have debts with multiple banks, Way Forward Debt Solutions may be able to help you manage your debt.
Moneysmart is another useful resource to help you.
What if you’re not happy with your bank’s response?
If you’re not happy with your bank’s response, you can make a complaint. You can find more information here.
In many cases, the complaint will be resolved internally between you and your bank with no further action required.
However, if your bank still doesn’t resolve the complaint to your satisfaction, you can take your complaint to the Australian Financial Complaints Authority (AFCA).
AFCA is an independent complaints scheme that is free for consumers. It provides an accessible way of resolving disputes, without having to go to court. The decision of the AFCA is binding on the bank.
You should only go to the AFCA after you have tried to resolve things with your bank, as AFCA will not deal with your complaint unless you have first given the bank the chance to help you.
If you want some support in making a complaint, a financial counsellor may be able to assist you. Call the National Debt Helpline to speak with a financial counsellor 1800 007 007.