Financial Hardship – How To Apply For Hardship

Financial hardship can result when you suffer a major change in your circumstances. While it can be a scary time, there’s no need to panic. There are steps you can take to manage the situation. Keen to know more? Monzi’s here to guide you through the financial hardship process. Let’s go.

Please note, Monzi does not offer advice. This article presents only general information. Consider seeking professional financial, taxation, legal or other advice to check how the information and ideas presented on this website relate to your unique circumstances.

What is financial hardship?

In short, hardship simply refers to a situation in which you are unable to reasonably afford your contractual loan repayments. Typically, this situation will arise from a change in circumstances. This could include job loss, injury or illness.

While it may seem like a stressful time, luckily, there are options for you. Lenders are experienced in dealing with hardship applications and will usually have process in place to help you.

If your application is successful, then revised terms may be implemented to ensure that you can still repay your debts.

While that covers the basics, there’s so much more to know. Read on and we’ll breakdown all the key information you’ll need to know if you find yourself experiencing financial difficulties. Let’s go.

Can I access my super in financial hardship?

Yes.

If you experience hardship then you may be eligible for a one-time, annual super release. This release can range from $1,000 and $10,000.

Typically, these funds can only pay for your reasonable living expenses. This can include rent, utilities, bills or payments that are in arrears. As a result, they cannot cover expected future expenses or debt repayments.

Finally, there are tax and retirement considerations that you must account for in deciding if an early withdrawal is the right choice for you. However, we’ll provide more on that a little later. Seek professional financial advice before making a decision regarding your super.

Am I eligible for a superannuation hardship withdrawal?

Typically, you cannot access your super until you’ve reached your preservation age. That is, the age at which you can access your super if you are retired. However, as we’ve already mentioned, there are some cases in which you can access your super early.

As a guide, in order to access your super early, you will need to meet one of the following criteria:

  • Experiencing severe hardship: unable to meet immediate living costs and have been receiving an income support payment (e.g. Centrelink benefit payment) for at least 26 weeks in a row.
  • Have a terminal illness.
  • You are a temporary resident
  • Have less than $200 in your super account
  • Meet compassionate grounds (e.g. ongoing medical care costs)

In saying this, consult with your super fund to determine if you are eligible as well as the options available to you. That way, you can make an informed decision as to whether this is the right choice for you.

Super funds that allow early release for financial hardship

There may be a number of super funds that allow hardship withdrawals. In order to determine if your fund is one of them, you will need to consult their terms and conditions. Alternatively, you may be able to call or email them to get an answer that way.

In any case, if your super fund does not allow for early releases then there may still be an option for you. You may be able to transfer your funds to a different super fund that does allow early releases. From there, you can then make the withdrawal you need. However, this may not always be possible.

Should I access my super if I experience financial hardship?

Accessing a lump sum super payment may be an option to alleviate your current hardship. However, before doing so, you must consider the implications.

Firstly, super is a long term investment. As a result, any money that you take from it today, will cost you in the long-run (e.g. retirement). While we cannot calculate the exact costs, a $10,000 payment today could cost you double or triple that in lost returns over the coming decades.

In addition to this, there may be relevant tax impacts that must be considered. If you are under 60 years of age then any payment may be added to your taxable income, resulting in additional tax. However, seek qualified financial advice to determine exactly how your tax may be impacted.

Financial hardship super: lump sum or income stream?

With an early release, you’ll often have the choice between a lump sum or an income stream.

Obviously, with a lump sum you’ll get your cash in one, single payment. On the other hand, an income stream divides your funds into a series of regular repayments.

The right choice will depend on your situation. For example, if you’ve got a major expense to cover then a lump sum could be the better choice for you. However, this may not be the case for everyone. As a result, Monzi is unable to say which option is better.

Financial hardship Centrelink

If you’ve lost income then there may be a number of Centrelink benefit payments that you can apply for. In short, these payments can help tide you over until you’re back on your feet.

Unfortunately, Monzi cannot say which payments you will be eligible for. After all, this will depend on your financial situation (e.g. employment status, income and assets). As a result, you will need to do your own research.

The good news is that if you are suffering from severe hardship then your waiting period may be waived and you can begin receiving payment immediately. However, for this to be possible, you will need to meet a number of criteria.

Financial hardship two hands holding with white background

Applying for hardship

So, you’ve suffered a change in your financial circumstances that have left you unable to meet your repayment requirements, what now?

You’ll need to submit a financial hardship application with your lender. While the exact details of the process will vary among lenders, the steps are usually similar. Lenders are well-versed in hardship applications and often have dedicated departments in place to assist you.

Generally, the process will go as follows:

  1. Contact your lender and they will outline what’s required from you.
  2. You will then need to submit an application including supporting evidence and an estimate of what you can afford to pay.
  3. Your lender will conduct an assessment on your application.
  4. You’ll receive an outcome.

What happens if my application is approved?

If your application is successful, then the lender will implement a hardship variation. In short, this is a change to your current loan structure to make it more affordable for you.

Examples of hardship variations may include:

  • Extending your loan term by reducing your regular repayments and adding arrears to the end of your loan.
  • A reduced interest rate for a period of time.
  • Waiving of various fees and charges (e.g. late fees).
  • A repayment holiday: you won’t need to make repayments for a period of time.

Your lender will determine which option is relevant to your situation as part of their assessment. As a result, Monzi cannot say how your repayments may be modified. Your existing terms will remain in place if your application is denied

Finally, keep in mind that a financial hardship application is not a ‘get out of jail free card.’ Your debt won’t be cancelled and you will still need to repay any money that you borrow.

What information do I need to provide?

When you apply, you’ll need to provide document evidence. In short, you must prove that a change in circumstances has left you unable to meet your current loan repayment obligations.

As a guide, you may be asked to provide one or more of the following:

  • Proof of income
  • Proof of termination
  • Medical certificates and evidence
  • A breakdown of your current expenses (e.g. rent, utilities, food, etc.)
  • An estimate of what you can afford.
  • Any other relevant information.

What are some reasons that I may need to apply for financial hardship?

A major change in your income can arise from a variety of situations. As a guide, common examples of hardship include:

  • Illness
  • Injury
  • Job loss
  • Natural disasters
  • Divorce.

Do I qualify for financial hardship?

In short, we are unable to say. Financial hardship simply refers to situations in which you are unable to meet your repayment obligations tied to a loan that you’ve taken out.

Given this, your eligibility will depend on your repayments and financial situation. Obviously, if your income has been significantly reduced then your application may be approved.

Ultimately though, it will come down to your lender and their criteria. They will assess your application to determine if revised terms should be implemented.

Is there help available when I’m in hardship?

Yes.

While your lender may be there to assist you through the troubling financial times, there is additional help available too.

Various financial advice and counselling services exist on both a state and national level. They may be able to provide free financial and debt management advice so you can develop a plan on how to manage your current situation.

Simply call the National Debt Hotline on 1800 007 0077 between the hours of 9:30am and 4:30pm, Monday to Friday. They may then put you in touch with counselling services based in your area.

My application was denied, what can I do now?

If your application was denied then your existing terms will remain in place. However, if you are unhappy with this outcome, then there are steps that you can take to contest the decision.

In short, you will need to apply to the Australian Financial Complaints Authority (AFCA). From there, your situation will be investigated further and a resolution may be reached.

I’m going to miss an upcoming repayment?

While you may not be suffering financial hardship, if you cannot afford an upcoming repayment there are options for you.

First and foremost, you will need to contact your lender and let them know. Lenders will charge a fee for late or missed payments. However, with advanced warning, your lender may work with you to develop a plan to manage the situation.

Although, in order for this to be possible, you must be proactive. Contact your lender ASAP, don’t just wait until the day your payment is due.

Lenders are often understanding of the fact that things can go wrong and are usually willing to help you. However, they cannot do this if you fail to communicate. As a result, it’s up to you.

Financial hardship: wrapping up

Losing your income can be a stressful time. Whether you’ve lost your job, fallen ill or suffered an injury, you can feel like your financial life is in ruins. However, it’s important to understand that there are options available to you.

Lenders are often understanding of your situation and may work with you to manage the situation. Although, it’s up to you to be proactive. Contact your lender ASAP and provide as much detail as you can. From there, your lender can potentially work towards implementing a plan that works for you.

Monzi Personal Loans

So, what does Monzi do? Well, we’re one of the best lender-finder services in the game. In short, we aim to match everyday Aussie consumers with a potential lender. Moreover, the lenders we work with are potentially able to offer the following:


Personal loanAmount (AUD)Loan termSecured?
Small loan$300 to $2,000Up to 12 monthsNo
Medium loan$2,001 to $4,60013 to 24 monthsYes
Large loan$5,000 to $10,00013 to 24 monthsYes

Bear in mind, lenders may vary in the terms they offer. Therefore, repayment terms may vary from what we present above, depending on the lender.

We may be able to provide you an outcome if you apply during normal business hours. Alternatively, you may only receive an outcome the following business day if you apply outside of these hours.

Finally, please note that we do not offer loans ourselves. Instead, we try to match you with a potential lender. If you have any questions about our lender-finder service, reach out to us at hello@monzi.com.au.

Factor In

Costs

Two credit cards
Two credit cards

You won't use a penny to apply for our lender-finding service, but here's some costs you could expect from a lender

Loan amount

$300 - $2,000

Terms

12 months

Costs

20% upfront establishment fee

+ 4% monthly fee

Example

Loan Amount of $1,000 over 6 months repayable weekly (25 weekly repayments). $1,000 (Principal Amount) + $200 (20% Establishment Fee) + $240 (fees based on 4% per month over 25 weeks) = $1,440 total repayable in 25 weekly installments of $57.60.

Under the current legislation, most small personal loan providers don’t charge an annual interest rate (you’ll know this as an APR) %. The maximum you will be charged is a flat 20% Establishment Fee and a flat 4% Monthly Fee. The maximum comparison rate on loans between $300 and $2000 is 199.43%. This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate

Loan amount

$2,001 - $4,600

Terms

13 months

24 months

Costs

48% annual percantage rate

67.41% comparison rate p.a.

Example

Loan Amount of $3,000 over 18 months repayable weekly (78 weekly repayments). $3,000 (Principle Amount) + $400 (Establishment Fee) + $1,379.06 (reducing interest) = $4,779.06 total repayable over 18 months with weekly installments of $61.27.

The Interest Rate for Secured Medium Loans is 48%. The Typical Comparison Rate is 67.41% p.a. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate with the lender that finances your loan. Click here to see a worked example.

Loan amount

$5,000 - $10,000

Terms

13 months

24 months

Costs

21.24% annual percantage rate

48% comparison rate p.a.

Example

Loan Amount of $10,000 over 24 months repayable weekly (104 weekly repayments). $10,000 (Principle Amount) + $5,577.12 (Interest) = $15,577.12 total repayable over 24 months with weekly installments of $149.78.

The Interest Rate for Secured Large Amount Loans is 48%. Maximum Comparison Rate is 48% p.a. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate with the lender that finances your loan. Click here to see a worked example.