Can’t pay your loan
This fact sheet is for information only. It is recommended that you get legal advice about your situation. See the Fact Sheet: Getting Help.
What can I do if I can’t pay my loan?
This will depend on the type of contract you have, whether the debt is secured (there is a mortgage over a car or house for example) or unsecured (no mortgage), the reason you cannot pay. The quicker you act the easier it is to come to an arrangement with the lender.
If court proceedings have started you need urgent legal advice. See Fact Sheet: Getting Help.
What can I do if I know I can’t pay and/or I have received a “default notice”?
As soon as you receive a default notice threatening legal or enforcement proceedings you should take action. Do not ignore any default notice.
Some options to consider:
• Pay the amount you owe
• Negotiate a one-off variation in repayments
• Negotiate a permanent change to repayments
• Make a hardship variation
• Apply for mortgage assistance
• Negotiate a postponement of enforcement
• Refinance the loan
• Sell goods to repay the loan
• Voluntary surrender of mortgaged goods
• Bankruptcy
Get help – get legal advice
1. If you can, pay the amount owing on the default notice (and your normal repayment) before the end of the time period set out in the default notice. If you do this, the lender cannot proceed with the repossession of any mortgaged property that is securing the loan, such as your house or car, or commence legal proceedings.
2. Negotiate a variation in repayments: If the lender agrees to postpone or vary repayments for a period of time, send a letter to the lender confirming this change. See Sample Letter: Confirming a Repayment Arrangement.
3. Negotiate a permanent change in repayments with your lender: If you are not going to be able to make your repayments for a long time you may be able to negotiate a permanent change in repayments with your lender. If the lender agrees to this, you need to confirm the changes in writing. Check that you will still repay the loan within a reasonable time.
4. Make a Hardship Variation: If your loan was for personal rather than business purposes you may be entitled to apply for a hardship variation even if the lender does not want to negotiate — for more information see Fact Sheet: Financial Hardship.
6. Apply for Mortgage Assistance: Details can be obtained by ringing 1800 806 653 .
7. Refinance the loan: Just ensure you are getting a comparable or better deal on the new loan.
8. Sell your home/car/goods: (the security for the loan) and pay this amount against the contract.
WARNING:
• To sell the mortgaged goods you will need to get the written consent of the lender, or the consent of the court.
• In the case of car/goods – the sale of the goods is very unlikely to cover the whole of the loan amount owed;
• Check if there are any fees for repaying early.
• Alternatively, you could sell other goods or property you own.
9. Voluntary surrender: You can give your home/car/goods to the lender and ask them to sell it. This is likely to achieve a lower price than if you sold your home/car/goods yourself.
10. Bankruptcy: This is an option of last resort with serious consequences. See Fact Sheet: Bankruptcy
Need some more help? See Getting Help for a list of additional resources.
