According to research, 1 in 3 Australians struggles and feel overwhelmed because of money issues. This number constitutes a significant percentage of the population. There are times when the struggle becomes overwhelming, indeed, and you find yourself unable to meet financial obligations related to loan repayments. When such happens, you have the option of applying for a hardship variation.
What is Hardship Variation
Hardship variation is a claim submitted to the lender, proofing hardship and thus asking that the terns of the loan should be amended to make it more comfortable for you to pay the debt. If the application is accepted, the loan terms would be changed.
Many factors could be responsible for why you are struggling with your debt. It could be ill health, unemployment, or unexpected change in your financial circumstances. Whatever reason you have would be stated in the application.
What is Hardship Threshold
Hardship Threshold is the maximum amount you can claim hardship for. This amount has been subject to changes over time. Below is a breakdown of the threshold.
- March 2013 – Date: For any credit contract entered on or after March 1, 2013, the hardship threshold is the value of the loan itself.
- July 2010 – February 2013: For any credit contract entered between July 2010 and February 2013, you can only claim for hardship variation if the loan value is $500,000 or less. However, for contracts entered before July 2010, the threshold may still apply for some states. For contracts entered in ACT, Victoria, New South Wales, the Northern Territory, South Australia, and Tasmania, the date starts from July 20 2005. For contract in Western Australia, the date starts from December 31 2004.
- June 9 2010 – June 30 2010: For any credit contract within this period, the value of the loan must be $375,830 or less.
- May 12 2010 – June 9 2010: For any credit contract within this period, the value of the loan must be $361,790 or less.
- April 12 2010 – May 12 2010: For any credit contract within this period, the value of the loan must be $336,270 or less.
- March 10 2010 – April 12 2010: For any credit contract within this period, the value of the loan must be $350,240 or less.
- February 10 2010 – March 10 2010: For any credit contract within this period, the value of the loan must be $374,330 or less.
- January 12 2010 – February 10 2010: For any credit contract within this period, the value of the loan must be $354,530 or less.
The list goes on till November 4, 2004, where the threshold for any loan on or before that day is set at $125,000. You can find the full list on the ASIC website.
How to Apply
Here are the steps for applying for hardship variations:
- Contact your credit provider or lender to speak with the hardship officer
- Give all information about your loan
- Ask to change the loan repayment terms
- Explain your difficulties and hardship, how long it would last and the amount you can afford to repay
Where your hardship application is not accepted, and you’re not satisfied with the reasons, you can complain to the Australian Financial Complaints Authority or the Lender.