Managing loan repayments amid financial stress

At a time when everything from the price of fuel to the cost of groceries seems to be going ever higher, managing loan repayments becomes even tougher.

Whether you have a personal loan, car loan or home loan, or perhaps one of each, the financial strain is real, and it’s being felt across the country.

The Reserve Bank of Australia has already raised interest rates twice in 2026, with Roy Morgan data showing a quarter of Australians are at risk of mortgage stress. According to Australian Bureau of Statistics data, Australians also borrowed more than $9.3 billion in fixed-term personal loans in the 2025 September quarter, with an average unsecured personal loan interest rate of 13.87 percent. Then there is the whopping $40-odd billion in credit card debt we have accrued, with average interest rates over 18 percent.

Despite all this, a third of Australians say they would not seek financial hardship assistance from their bank, in many cases because they do not know how to do so. Let’s take a look at some common loan issues and your rights with loan repayments.

 

 

Common loan issues

Your repayments and charges should match what is set out in your loan contract. If your direct debit changes without notice, or if a payment you made hasn’t been applied correctly, contact the bank immediately.

A payment can bounce due to insufficient funds, a bank processing delay or lender error. Missed payments can trigger default notices and damage your credit score if they aren’t caught quickly. If you miss a loan repayment, you have 14 days to catch up; after that, it will be noted on your credit report.

One of the most common complaints from borrowers to the Australian Financial Complaints Authority (AFCA) is lack of communication. Lenders who issue automated demand letters or send default notices without warning are falling short of their obligations, adding to financial stress.

If you suspect something isn’t right with your loan repayments, don’t wait for the lender to rectify it.

• • Check your loan contract and ensure the agreed interest rate, repayment schedule and fees tally with what you are being charged.
  • Ask the lender for a full transaction history to compare your contract and records.
  • Use a loan calculator, such as Moneysmart’s personal loan calculator, to ensure the interest charges line up.
  • Check your credit report to ensure defaults or missed payments haven’t been incorrectly recorded, as this can affect your ability to borrow in the future.

 

 

Managing loan repayments

From the cumulative effect of interest rate rises to the increasing cost of living or an unexpected large bill, there are many reasons why loan repayments can suddenly feel unmanageable. It is important to take practical steps to prevent everything from spiraling out of control.

Revisit your budget. Map everything coming in and going out. Apps such as Pocketbook or Moneysmart’s Budget Planner can help give a clear picture of where your money is going and where you can free up cash. Work out what loan repayments you can afford to make before calling your lender.

Contact your lender. It is important to do this before you miss a payment, as they can make an arrangement before you go into arrears. You can request any type of repayment arrangement so long as it will reasonably repay the loan, for example, a short-term reduction in repayments or a permanent change to the repayment schedule. Some lenders may also offer payment deferrals, extensions, fee waivers or interest freezes for borrowers in genuine financial hardship.

Avoid high-cost credit. A short-term payday loan can seem like a quick fix but it can just as quickly trap you in a cycle of debt. It is far better to talk to your lender and arrange a realistic repayment plan than find out the real cost of payday loans.

 

 

Applying for financial hardship support

Under section 72 of the National Credit Code, any Australian holding a regulated contract, be it personal, car, credit or home, has the right to request a hardship notice.

There were more than 280,000 hardship notices across the country in the last financial year, yet many Australians in financial stress still aren’t reaching out for assistance.

The Australian Securities and Investments Commission (ASIC) even started an awareness campaign, Just Ask! Hardship Help is Available, through Moneysmart to encourage Australians to reach out.

“For many Australians the path to seeking help feels daunting, confusing and challenging,” ASIC Commissioner Alan Kirkland said at the time. “The message for Australians experiencing financial stress is that banks or lenders have a responsibility to support customers”.

To apply for financial support, contact your lender and use the words “financial hardship” clearly so that you speak to that team rather than general customer support. You will generally need to provide:

• • A written explanation of your circumstances and why you’re struggling
  • Evidence of the hardship, such as a redundancy letter or medical certificate
  • Recent bank statements showing your income and expenses
  • Payslips or Centrelink statements that support your income claims
  • A proposed repayment amount that you can manage

The lender must respond to your request for a repayment arrangement within 21 to 30 days, depending on whether they need further information from you. If they say no, they must tell you about your right to have that decision reviewed by AFCA.

 

 

Knowing your consumer rights

When you’re under stress, it’s hard to see a way out. Knowing you have rights can help ease the worry. Under the National Consumer Credit Protection Act and the Banking Code of Practice, your lender must:

• • Assess your ability to repay a loan before approving it
  • Disclose all fees and charges clearly in your credit contract
  • Respond to hardship requests genuinely and in good faith
  • Suspend any collection or recovery action once a complaint has been registered with AFCA

AFCA received more than 100,000 complaints for the second year in a row in 2024-2025. While banking and finance complaints dropped by 9 percent, the authority said the data showed financial firms still needed to do more to resolve complaints early and fairly.

If your lender is ignoring you, has made an error on your loan they are refusing to fix, or has refused a hardship request without a good reason, you don’t have to accept it. Know your rights and fight for them.