Car loan hardship help exists for exactly the moment when repayments stop fitting your budget. If you are struggling to keep up with a car loan, the law gives you the right to ask your lender to change your repayments, and the lender must consider your request and answer within set timeframes. This guide explains how a hardship request works, what it means for your credit report and how to avoid repossession.
It is a timely question. The Reserve Bank lifted the cash rate three times in 2026, in February, March and May, taking it to 4.35%, where it has held since. The RBA's next decision is due on 29 September. Moneysmart, ASIC's consumer site, says there were more than 280,000 hardship notices across Australia in the 2024/25 financial year, so asking for help is far more common than many borrowers assume.
What car loan hardship means
Moneysmart describes financial hardship simply: it is when you are unable to make a credit or loan repayment. Financial hardship assistance is an arrangement with your lender to alter your repayments or set up a payment plan.
The most common reasons people claim hardship, according to Moneysmart, are:
- overcommitment
- reduced income
- medical reasons
- unemployment
- separation
You do not need to have already missed a payment to ask. The earlier you contact your lender, the more options are usually on the table.
Your right to ask: the hardship notice
Under section 72 of the National Credit Code, a borrower can give their credit provider a hardship notice, verbally or in writing, saying they cannot meet their obligations under a credit contract. ASIC confirms the notice does not have to be in a particular form. A phone call to the lender's hardship team counts, although following up in writing gives you a record.
When you ask for help, Moneysmart says your lender must consider you for financial hardship assistance. Search for "hardship" on your lender's website to find the right team. Many lenders let you start by phone, email or online chat.
The 21 day response rule
The National Credit Code sets firm timeframes for the lender's answer. ASIC explains them this way:
- If the lender has enough information, it has 21 days to tell you its decision.
- If it asks you for more information and you provide it, it has 21 days from receiving that information to respond.
- If it asks for more information and you do not provide it, it has 28 days from the request to respond.
If the lender says no, it must tell you that it does not agree to change the contract, give its reasons and provide contact details for the Australian Financial Complaints Authority (AFCA). AFCA offers free, independent dispute resolution if you cannot reach an agreement with your lender.
What to have ready before you call
Moneysmart says your lender will not ask for your life story. Typically it will want to know:
- why you are seeking help
- your current income and major expenses, including other loans
- what repayments you can realistically afford
- how long you expect the difficulty to last
Before you call, list your income and essential spending so you can name a repayment you can genuinely keep. Our car loan repayment calculators can help you see what a lower repayment or a longer term might look like. Moneysmart warns against agreeing to an amount you cannot afford. If the new arrangement stops working, tell your lender straight away, keep paying what you can and negotiate again.
Hardship options lenders may offer
What is available depends on your lender and your circumstances. Moneysmart says a hardship arrangement can be temporary, such as deferring a payment, or permanent, such as varying the loan. Common forms include:
- extra time to pay
- a payment plan based on what you can afford
- a temporary pause or reduction in repayments
- a change to the loan terms, such as a longer term
A longer term or a pause usually means paying more interest over the life of the loan, so ask the lender to explain the total cost of any change. If your situation is unlikely to recover, Moneysmart notes you can also talk to your lender about voluntarily surrendering the car, which can avoid some repossession costs. You would still owe any shortfall if the sale price is less than the loan balance, a risk covered in our guide to negative equity on a car loan.
Will a hardship arrangement hurt your credit score?
This is the question that stops many people from asking. The Office of the Australian Information Commissioner (OAIC) says financial hardship information is a marker next to a repayment on your repayment history, showing a temporary or permanent hardship arrangement is in place. Two protections apply:
- A credit reporting body cannot use financial hardship information to calculate your credit score.
- The information is kept for only 12 months. For a temporary arrangement, the markers are removed one year after the arrangement's final repayment. For a permanent variation, the marker is removed one year after the arrangement started.
Lenders assessing a future application may still see the arrangement while it is on your report. Missed payments and defaults tend to do more lasting damage, as our guides on how your credit score shapes your car loan rate and getting a car loan with a default explain.
Car loan hardship and repossession
Most car loans are secured against the car, so falling behind can put the vehicle at risk. Moneysmart sets out the key protections:
- Generally, a lender cannot repossess without a court order if you owe less than $10,000 or 25% of the loan, whichever is lower.
- Above that, the lender must first send you (and any guarantor) a default notice giving you 30 days to pay the overdue amount, and that time must pass without payment, an arrangement or a request to postpone.
- A lender cannot come onto your property to take the car without your written consent or a court order.
- Within 14 days of repossession, the lender must send you a notice with the estimated value and costs. It cannot sell the car for 21 days after that notice.
If a default notice arrives, do not ignore it. Asking for a hardship variation at that point can still help, and free legal advice is available from community legal centres and Legal Aid.
Free help and your next steps
A financial counsellor can help you prepare a hardship request or negotiate with your lender for you. The National Debt Helpline on 1800 007 007 offers free, confidential financial counselling, Monday to Friday, 9:30am to 4:30pm.
If you are keeping up but repayments feel tight, it may be worth checking whether your current rate is competitive. You can compare current car loan rates, browse lenders we have reviewed or read how refinancing a car loan works. Refinancing depends on your credit profile and income, so it is not an option for everyone in hardship. For the rate backdrop, see why car loan rates do not simply follow the cash rate and how rising living costs affect what lenders check.
