5 Things You Need to Know About Financial Hardship Schemes

Rising debt can cause inordinate amounts of stress, especially when you cannot afford to keep up with your payments. Thankfully, assistance is available. If you are experiencing financial hardship due to health issues, unemployment, sudden major expenses or any other change in income, you can apply for a financial hardship variation. 

1.   Financial Hardship Variation Defined

A financial hardship variation is a change to a credit contract that includes temporary adjustments aimed at easing your burden and keeping your credit in good standing until your financial situation improves. 

2.   Variation Qualifications

To qualify for a variation, you must be experiencing verifiable financial hardship. This can be due to a sudden drop in income and/or a dramatic increase in expenses. Common examples include illness, unemployment, large medical bills, loss of a spouse (due to separation/divorce or death) and unexpected home or automobile repair costs. 

There are also threshold regulations in place that limit the amount of debt a variation can relieve. If your credit contract started between July 2010 and February 2013, the maximum amount you can claim hardship on is $500,000. If you entered into a contract after February 2013, you can apply for a financial hardship variation no matter how much you owe. The Australian Securities & Investments Commission (ASIC) provides a helpful table that lists thresholds for contracts that began before July 2010. 

3.   The Application Process

The application process is fairly simple. You should contact your lender by phone or in writing. If you call, ask to speak with a hardship officer or the hardship department. Provide the customer support person with pertinent information about your loan - such as the loan number, full name on the account, payment amounts and due dates, etc. Explain that you need to restructure your loan payments due to financial hardship. Offer details about your hardship, including the reason for the issues, how long you expect the problems to last and how much you can afford to pay monthly right now. 

The National Consumer Credit Protection Act (NCCPA) requires lenders to follow certain regulations with regard to working with consumers who experience financial troubles. If you apply for a variation, your credit provider must respond with a decision within 21 days. If your request is denied, you must be given a clear reason. You can challenge the decision by contacting an external resolution provider, such as Financial Ombudsman Service Australia

4.   Financial Arrangement Types

A financial hardship variation typically includes one or more of the following provisions:

  • Longer loan timeframe (more time to pay and smaller payments)
  • Interest only payments (for a set period of time, you are not required to pay the principal)
  • Postponement of payments (you don't have to make any payments for an agreed upon number of months)
  • Temporary freeze on interest (you only pay the principal)
  • Additional adjustments that change your payment terms until your financial situation improves

5.   Financial Hardship Variation Pros and Cons

The benefits of financial hardship arrangements can include short-term relief from monetary stress, more time to pay off debts, freed income to pay other bills and decreased risk of going into default or harming your credit score. 

There are, however, a couple of factors you need to consider before applying for a variation. Because of the extended loan timeframe, you may pay a higher total by the end of the term agreement. Also, these arrangements are temporary - so you cannot receive permanent relief from the debt until you have paid it. 

If you are having money issues, it is important that you contact your credit provider to discuss your options and explain your situation immediately. A financial hardship variation may be the best solution for lessening your financial burden and keeping you in good standing with your lender. 


Australian Securities & Investments Commission. Trouble with Debt. Link: https://www.moneysmart.gov.au/managing-your-money/managing-debts/trouble.... Accessed 4/22/2015.

Australian Securities & Investments Commission. Hardship Threshold. Link: https://www.moneysmart.gov.au/managing-your-money/managing-debts/trouble.... Accessed 4/22/2015.

Financial Ombudsman Service Australia. Home Page. Link: http://fos.org.au/homepage/. Accessed 4/22/2015.