What to do if you’re experiencing Financial Hardship

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What is Financial Hardship?

Recent inflation and cost of living pressures have resulted in more people finding it difficult to stay on top of repayments, and we wanted to share some important steps to take if you find yourself experiencing financial hardship.

Financial Hardship occurs when someone is unable to make repayments on debt they may have. For example, credit card or loan debt. People can experience financial hardship for a number of reasons including:

  • Unemployment
  • Critical illness or injury
  • Natural disasters such as floods or bushfires
  • Rise in cost of living and rate of inflation
  • Business cash flow issues
  • You couldn’t afford a loan when you committed to it (or can no longer afford it due to the reasons above)

It is important to note that despite how difficult your situation is, the best thing you can do is act straight away and ask for help – don’t ignore it!

But, the solution isn’t a one size fits all approach and will depend on why you’re experiencing financial hardship and the amount of debt you have.

“What do I do if I’m experiencing financial hardship?”

Talk to your lender

All lenders have systems in place if you’re experiencing hardship and you should always talk to your lender first to discuss their options. If you reach out to them, they have an obligation to offer you hardship assistance, assess your situation and find ways to help. These options can include setting up a payment plan or adjusting your loan repayments.

You can also ask your lender for a ‘hardship variation’, but this is only if you can afford to keep paying off some of the loan and your financial hardship will only be short term.

Your lender may ask for information such as the reason for your financial hardship, your income and current debts/expenses.

Note: If a mortgage is involved, you should always talk to your mortgage broker to see what you can expect when working through the financial hardship process.

If you think your financial hardship will apply to you in the long term, you should contact a financial and debt counsellor.

Talk to a financial counsellor

Financial counsellors work with people who are in debt and can’t pay their expenses and bills.

Once you engage with a financial counsellor, they will:

  • Prioritise your debts by level of importance.
  • Create budgets and set goals for your future finances.
  • Discuss the different options you have.
  • Access Government grants and payments.
  • Negotiate with lenders and organisations you’re involved with.
  • Get legal help if you need it.

Financial counsellors do not charge a fee for their services and do not receive payments from third parties. They also operate under a licensing exemption with the Australian Securities and Investments Commission (ASIC).

Research Government payments and grants

There are numerous Australian and Victorian Government payments and grants available for those experiencing financial hardship.

Here are some of the main ones:

  • Crisis payment: An individual payment for each incident or extreme circumstance based on specified criteria.
  • Income support payment: An amount given to help with cost of living expenses. These can include the Age Pension, Austudy, Jobseeker Payment and Parenting Payment.
  • A No Interest Loan from Good Shepherd.
  • Rent Assistance: A payment given if you pay rent and get certain payments from Services Australia already.

If you already receive a payment from the Government, you may be eligible for an Advanced Payment, a weekly payment option (instead of fortnightly) and/or Centrepay.

How to keep your debt under control once you’ve received help

Maintain a budget

When you’re experiencing financial hardship, it is hard to keep track of money coming in and effectively organise your finances. This is where budgeting can help!

Budgeting can help you assess your finances and identify how much money is coming in (income), how much money is needed for expenses and bills, and then how much money you can use to pay off any debt you may have.

To learn more about budgeting, click here.

If you need assistance budgeting with a family, check out our top tips for creating a successful family budget.

Set financial goals

Alongside your budget, you should set some realistic short and long term goals to help keep your debt under control and pay it off sooner.

Some goals could include: keeping up with credit card payments, paying bills on time or paying your loan repayments regularly.

Pay off debt

Once you’ve got most of your debt under control, it is important to continue prioritising any debt that you accumulate to make sure it doesn’t get out of hand again.

If you’re experiencing financial hardship, there are many ways you can alleviate the pressure and turn things around, but you must act quick and contact your lender as soon as you’re aware that there is a problem.

Contact our Aintree Group Finance team today if you’re struggling to pay your mortgage repayments – we are more than happy to help you get back on track!