A repayment deferral is a pause on your home loan repayments that the lender agrees to while you work through a difficult patch. It is one of several hardship arrangements open to Australian borrowers, and the National Credit Code sets rules the lender must follow when you ask. Here is how those rules work, what a pause really costs, and where to turn if you cannot agree.
What a repayment deferral actually is
When a lender defers your repayments, the loan does not stop. Interest is still charged every day on the balance, and the repayments you skip are usually added to the loan. At the end of the pause the lender either recalculates your repayments on the higher balance or extends the term so you pay for longer. A deferral moves the cost into the future rather than removing it, which can still make sense while your income recovers, but go in with clear eyes.
Your right to ask for help under the National Credit Code
Section 72 of the National Credit Code lets a borrower who cannot meet their repayments give the lender a hardship notice, verbally or in writing. It covers consumer credit such as home loans, car loans, personal loans and credit cards. Once you have given notice:
- A decision within 21 days. If the lender has enough information, it must tell you within 21 days whether it agrees to change your contract.
- Requests for information. If it needs more detail it must ask within 21 days, and you then have 21 days to supply it. If nothing arrives, it has 28 days from the request to respond.
- Reasons if it refuses. A lender that declines must give its reasons and the contact details of the Australian Financial Complaints Authority.
What to tell the lender, and when
Every lender has a hardship team, and Moneysmart, the Australian Banking Association and financial counsellors all give the same advice: call before you miss a repayment, not after, because early contact keeps more options open. Have this ready:
- Why you are in hardship: illness, injury, job loss, reduced hours, separation or a business downturn.
- How long you expect it to last.
- What you can afford to pay in the meantime, even if it is a small amount.
- Your plan for returning to normal repayments, such as a start date for a new job.
- Evidence the lender may ask for: payslips or a termination letter, bank statements or a medical certificate.
Get the arrangement in writing and keep a copy of every email or chat.
Repayment pauses, reduced payments and other arrangements
A full pause is only one option. The lender may instead offer:
- a temporary reduction in repayments;
- a period of interest-only repayments, so the balance does not grow;
- extending the loan term and adding missed repayments to the end;
- capitalising arrears you have already fallen behind on;
- waiving default fees, or allowing time to sell the property on your own terms.
Before you accept, ask the lender to show the balance, repayment and total extra interest before and after. A reduced repayment you can sustain often costs less over time than a full pause, and our repayment calculators can help you test the options.
What it means for your credit report
A hardship arrangement is recorded on your credit report as financial hardship information. Moneysmart advises it does not affect your credit score and is removed after 12 months. Repayments missed before the arrangement was agreed can stay on your repayment history for two years, another reason to speak up early.
Financial counselling at no cost to you
The National Debt Helpline on 1800 007 007 (weekdays, 9.30 am to 4.30 pm) connects you with a not-for-profit financial counsellor who is independent of lenders, does not sell anything, and can review your budget, prepare your hardship request and negotiate with the lender on your behalf. The service is confidential. Aboriginal and Torres Strait Islander people can also call Mob Strong Debt Help on 1800 808 488.
If you cannot agree: AFCA
If the lender refuses or offers something you cannot manage, make a formal complaint to the lender first and use the word “complaint”. If that does not resolve it, take the matter to the Australian Financial Complaints Authority on 1800 931 678. AFCA is independent and costs you nothing, and while a hardship complaint is open the lender generally must hold recovery action, although interest keeps accruing. Act early: once a default notice is issued you have 30 days to fix the default before the lender can call in the whole loan and begin court action.
Where a broker fits in
Oakwood Finance Pty Ltd arranges credit as Credit Representative 561236 of Finsure Finance & Insurance Pty Ltd, Australian Credit Licence 384704. We do not decide hardship applications; your lender does. We can help you understand how your home loan is structured, prepare for the conversation with your lender and, once your income is stable again, review whether refinancing makes sense; a new lender assesses your current position, so that step usually comes later.
If you are worried about your repayments and want to talk it through, book a consultation or contact our team. This article is general information only and does not take your objectives, financial situation or needs into account.