Struggling With Car Loan Repayments? Your Options in Australia
If you are worried you cannot make your next car loan repayment, the single most important step is to contact your lender before the payment is due, not after. Under Australian credit law you have a right to ask for a financial hardship variation, and your lender must consider it. Free, confidential help is also available through the National Debt Helpline on 1800 007 007. You are not the first person to be in this position, and there are practical options that can keep your car and protect your credit.
This guide walks through what to do first, your legal rights, what a lender can offer, where to get free help, and what happens if things escalate to default or repossession.
What to Do First if You Can't Make a Repayment
The worst thing you can do is ignore it. Missed repayments do not disappear, and staying silent removes the options that are easiest to arrange early. Lenders deal with hardship every day and generally prefer a workable arrangement over the cost and hassle of chasing arrears or repossessing a car.
Contact your lender as soon as you know a payment will be hard, ideally before you miss one. Most banks and finance companies have a dedicated hardship or financial assistance team, and you can find their contact details on your statement, in your loan contract, or on the lender's website under "financial hardship" or "financial difficulty".
Before you call, it helps to have a rough picture of your income, your essential expenses, and how much you could realistically pay each month for now. You do not need perfect figures. The point is to show the shortfall is temporary or manageable and to propose something you can actually sustain.
Your Right to a Financial Hardship Variation
In Australia, consumer car loans are covered by the National Consumer Credit Protection Act and the National Credit Code. Under the hardship provisions of the National Credit Code, if you tell your lender you are unable, or expect to be unable, to meet your repayments, you can ask them to vary your credit contract on the grounds of hardship, and the lender is required to consider your request and tell you their decision.
Common grounds for hardship include illness or injury, job loss or reduced hours, a relationship breakdown, the death of a partner, a new baby, or another unexpected drop in income or rise in expenses. You do not need to prove permanent difficulty, only that you are struggling now and have a realistic path to getting back on track.
How to Apply for a Hardship Variation
You can request a hardship variation by phone, in writing, or through your lender's online hardship form. Ask them to note the date of your request. According to ASIC's Moneysmart, lenders should assess your individual circumstances rather than applying a one-size-fits-all answer. It is reasonable to expect the lender to look at your specific situation.
When you apply, briefly explain what changed, when you expect your situation to improve, and what you can afford in the meantime. Keep copies of everything.
What a Lender May Offer
If your hardship request is accepted, the variation is tailored to your circumstances. Common arrangements include:
- A temporary pause or deferral of repayments for a set period, giving you breathing room to recover.
- Reduced repayments for a few months while your income is lower.
- Extending the loan term so each repayment is smaller, spreading the balance over a longer period.
- A repayment plan to catch up arrears gradually on top of your normal repayments.
- A temporary interest-only period, depending on the lender.
Each option has trade-offs. A pause or a longer term lowers your immediate repayments but usually means more interest over the life of the loan. That can still be the right call if it keeps you afloat and protects your credit file, but it helps to see the numbers. A car refinance calculator can show how a lower rate or a longer term would change your monthly repayment, so you can weigh genuine relief against the extra interest before agreeing to anything.
Free Help Is Available
You do not have to work this out alone, and you should never have to pay for basic debt help. The National Debt Helpline offers free, confidential, independent financial counselling on 1800 007 007 (weekdays), with a live chat option at ndh.org.au. Financial counsellors are not salespeople. They can assess your situation, explain your options, and even negotiate with your lender on your behalf, all at no cost.
ASIC's Moneysmart website (moneysmart.gov.au) also has clear, government-backed guidance on problems paying your debts, dealing with lenders, and what to do if you receive a default notice. Free legal help is available too, through community legal centres and the Financial Rights Legal Centre.
Reaching out early is a sign of taking control, not of failure. A financial counsellor can often spot options you would not think of and can take pressure off the conversation with your lender.
What if Your Lender Refuses or You Are in Dispute
If your lender declines your hardship request, offers nothing workable, or fails to give you reasons, you can take the matter further. First, ask for the decision in writing and lodge a complaint through the lender's internal dispute resolution process.
If that does not resolve things, you can complain to the Australian Financial Complaints Authority (AFCA), the free, independent ombudsman service for financial disputes in Australia. AFCA handles financial hardship and financial difficulty complaints, and importantly, once you lodge a complaint your lender is generally required to pause collection or recovery action while AFCA looks at it. You can contact AFCA at afca.org.au.
If You Default: The Repossession Process
If repayments are missed and no arrangement is in place, a loan can go into default, but repossession is not immediate and there is a legal process the lender must follow. Understanding it helps you act in time.
Before repossessing a car under a secured loan, a lender generally has to send you a default notice giving you at least 30 days to catch up on the arrears. If you receive one, do not ignore it. You can still request hardship, contact the National Debt Helpline, or get free legal advice during this window, and acting fast gives you the best chance of keeping your car.
Crucially, selling the car may not clear the debt. If it sells for less than your loan balance plus costs, you still owe the shortfall. For example, if the balance and costs come to $25,500 but the car sells for $20,000, you would still owe $5,500. Your hardship rights continue to apply throughout this process.
When Refinancing, Paying Out or Selling Might Help
Hardship assistance is the first port of call, but for some people other options are worth exploring once the immediate pressure eases.
Refinancing to a lower rate or a longer term can reduce your repayments if your credit position allows it, though it is not a fix-all and should never be a rushed decision under stress. If your repayments are simply unaffordable long term, selling the car yourself often achieves a better price than a lender's auction. To do that you need to know your exact payout figure, the amount required to clear the loan. A car loan payout calculator helps you estimate the balance so you can see whether selling would clear the debt or leave a shortfall to plan for. Always confirm the official payout figure with your lender before you commit to a sale.
The Bottom Line
Falling behind on a car loan is stressful, but you have real protections and real support. Contact your lender early, use your right to request a hardship variation, and lean on the free National Debt Helpline and Moneysmart. If a lender refuses, AFCA is there. The sooner you act, the more options you keep.
This article is general information, not financial advice. It does not take account of your personal circumstances. For advice tailored to your situation, speak to a free financial counsellor via the National Debt Helpline on 1800 007 007, or seek independent professional advice.
Frequently Asked Questions
Will asking for hardship hurt my credit score?
Requesting a hardship variation itself is not the same as defaulting. Missed repayments and defaults can affect your credit report, which is exactly why acting early matters. Arranging a variation before you fall badly behind is generally far better for your credit position than staying silent and missing payments. A financial counsellor can explain how your specific arrangement may be recorded.
Can my lender refuse a hardship request?
Yes, a lender can decline, but under the National Credit Code they must genuinely consider your request and tell you their decision. If they refuse, offer nothing workable, or give no reasons, you can complain through their internal process and then to AFCA, the free financial ombudsman. Collection action is generally paused once an AFCA complaint is registered.
How much does the National Debt Helpline cost?
Nothing. The National Debt Helpline (1800 007 007) provides free, confidential, independent financial counselling. Counsellors can assess your situation, explain your options, and negotiate with creditors on your behalf at no charge. You should never pay for basic debt help.
How many repayments can I miss before my car is repossessed?
There is no single fixed number, but repossession is not instant. A lender generally must send a default notice giving you at least 30 days to catch up before repossessing a secured car. Use that time to request hardship, get free advice, or arrange a payment plan.
If my car is repossessed and sold, is the debt cleared?
Not necessarily. If the car sells for less than your outstanding loan balance plus costs, you still owe the shortfall. This is one reason selling the car yourself, at a likely higher price, can be worth considering, and why knowing your payout figure matters.
What if I have already missed a payment?
Contact your lender's hardship team straight away and explain your situation, and call the National Debt Helpline on 1800 007 007 for free guidance. It is never too late to ask for help, and acting now gives you more options than waiting for the arrears to grow.