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Your Options if you Cannot Afford your Loan Repayments due to COVID-19
March 19, 2021●
3 minute read●
2020 left a lot of Australian’s feeling financial pressure like never before. J.D. Power conducted a market research study that concluded that almost ¾ Australian’s are experiencing financial repercussions as a direct result of the coronavirus pandemic. In response to the pandemic, many banks introduced relief measures for people unable to make their loan repayments.
Customers were allowed to defer their loan repayments for six months at no cost; however, this period has come to an end for a lot of people. If you are currently searching, ‘I can’t afford my loan repayments, what should I do?’, this article discusses some of your options.
Get in touch with your bank/lender immediately
Most banks and other lenders have introduced coronavirus-centred departments to deliver customer support. Contact this department as soon as possible to explain your situation and your bank/lender should be able to provide you with some helpful assistance.
It will be beneficial to have a clear idea of your current income, your essential expenses and how much you can reasonably afford to put towards repayments. With this information, they will do their best to find a solution that suits both parties.
Discuss your hardship options
Your bank/lender will talk you through your options with regards to paying off your loan. They may be able to reduce your minimum payment to an amount within your price range, offer you a repayment pause or stop charging you interest for a selected period of time.
The Australian Banking Association has outlined three key stages of repayment for people that have reached the end of their six-month deferral period. These options are:
- You can pay in full: You restart paying your loan as per normal
- You can partially pay: If you’re still experiencing some financial difficulty, you may be able to restructure your loan to allow you to continue paying off your loan
- You cannot pay: If at the end of your deferral, you cannot afford your repayments, your bank’s financial hardship process will be introduced to find your best long-term solution
Plan to reduce your debts
If you have multiple loans that you are struggling to keep track of, consider taking out a consolidation loan. This will compile all of your existing loan repayments into one payment. This can be an effective way to make your debts more manageable and trackable, as it avoids needing to worry about multiple payments due on different dates. You can also save money on different interest rates and loan fees.
Before doing so, you should compare the total cost of your loan against your existing loans. If switching loans to a consolidation loan is going to end up costing more in interest and fees, it may not be worth it in the long run.
You may be eligible to withdraw some of your superannuation early to put towards repaying your debts. The Australian Prudential Regulation Authority has reported that over 2.6 million people have applied to access their super early; however, it is important to consider the implications of withdrawing your super, including the impacts on your retirement funds.
Get help from a financial counsellor
You can speak with a financial counsellor for free through the National Debt Helpline on 1800 007 007. There are also some community organisations, community legal centres and government agencies that offer free financial advice.
Jacaranda Finance’s COVID-19 response
Jacaranda Finance has pledged to support our customers through the COVID-19 pandemic. If you have a personal loan with Jacaranda Finance and have been impacted by coronavirus, we ask you to get in touch by sending an email to email@example.com.
Alternatively, you can ring us on 1300 189 823 or get in touch via our contact page.
If you are looking to remove a default from your credit report, there are options you may wish to consider. If you are investigating what influences interest rates, you may wish to read our blog on the cash rate affecting personal loan interest rates.
Written by Jacaranda Team