Quick answer
A financial hardship refinance means moving or restructuring existing debt when life events such as illness, job loss, separation or a business downturn have made repayments hard to meet. Options vary with the security, the arrears and your income. Ownright Custom Finance looks at hardship situations Australia-wide and can often point to a workable structure.
Key points
- Talk to your current lender about hardship first; refinancing is one option, not the only one
- Lenders look at why things slipped and whether the plan is realistic
- Security, equity and a clear income picture widen the options
- Early action usually leaves more choices than waiting for a default notice
- Suits
- Borrowers whose circumstances changed and who need a more sustainable structure
- Security
- Usually property, sometimes a vehicle or business assets
- Structures
- Refinance, consolidation, interest-only periods, private lending
- Australia-wide
- Yes
What does financial hardship mean for a loan?
Financial hardship is the point where meeting your repayments on time has become genuinely difficult because something outside the ordinary has happened. Common causes include illness or injury, redundancy, reduced hours, a separation, a business slowdown or a sudden jump in household costs. It is not a judgement about character. Lenders see it often, and most have a process for it.
A hardship refinance is one possible response. Rather than staying in a loan that no longer fits, the debt is moved, combined or restructured so the repayments match what is realistically coming in. It sits alongside other responses, such as asking your current lender for temporary relief, and the best choice depends on the detail.
Should you speak to your current lender first?
In many cases, yes. Lenders have hardship teams, and official guidance on MoneySmart explains how to approach them and what to expect. Changed repayments, a short pause or an extended term may solve the problem without a new loan at all. Free, independent help is also available through financial counsellors, reached on the National Debt Helpline.
Refinancing comes into the picture when that route does not go far enough, is not offered, or the current lender has lost confidence. It can also make sense when several debts are pulling in different directions and one structure would be simpler. Our page on mortgage arrears help covers the home loan side in more detail.
What do lenders look at when you are in hardship?
Lenders want to know three things: what happened, where things stand now and how the plan works from here.
- The cause. A one-off event, such as a medical issue that has resolved, reads differently from an ongoing shortfall.
- Current income. Recent payslips, bank statements or business figures. If income is lower than before, the lender assesses the lower figure.
- The security. Property with solid equity gives lenders more comfort. See what LVR means for how that is measured.
- The arrears position. How far behind, for how long and whether any formal notices have been issued.
- The recovery path. A new job, a returning contract, a sale of an asset or a settled dispute all help.
Refinance options for hardship situations
| Option | How it can help | Trade-off |
|---|---|---|
| Hardship arrangement with current lender | Temporary relief without a new loan | Usually time-limited; may not fix the structure |
| Refinance to a more flexible lender | Reset the loan on terms that match current income | Depends on arrears, equity and income |
| Debt consolidation | Several repayments become one | Longer terms can mean more owed over time |
| Private or specialist facility | Can suit tight timeframes or credit marks | Priced on circumstances; often intended as a bridge |
| Sell or downsize | Clears debt and frees cash | Not always desired or timely |
Our page on secured debt consolidation explains how combining debts into one facility works, and mortgage debt consolidation looks at rolling other debts into the home loan. Where credit marks are part of the picture, see credit impaired loans.
When time is short
Sometimes the problem is not just the monthly repayment but a deadline: a default notice, a court date or a sale process. In those cases the first question is how much room you have. If a lender has begun enforcement, a short-term private solution may be worth examining, provided the security is strong and there is a credible way out of the new loan. Read about stopping a mortgagee sale and urgent mortgage refinance if that sounds familiar. Speed depends on the lender, the security and how quickly documents arrive, so start gathering paperwork early.
How Ownright approaches hardship refinancing
Trevor Scott has spent more than forty years in finance, and a lot of that time has been spent with people who thought their options had run out. The team starts by listening. We ask what happened, what is owed, what is coming in and what a good outcome looks like for you, then work backwards.
Because we work Australia-wide, we can look beyond the lenders most people know about. Some specialist lenders are comfortable with arrears, credit marks or irregular income when the security and the plan are strong. Others will want to see a few more months of recovery first. Part of our job is telling you honestly which category you fall into, and what could move you from one to the other.
We also keep the conversation practical. If the better answer is to approach your current lender first, we say so. If a short-term facility followed by a move to a standard lender later is the sensible route, we map that out.
An illustration
Illustrative scenario only. A self-employed tradesperson was off work for several months after an injury. Business income dropped, a home loan fell behind and two other debts carried on. Now back at work, income is recovering but the lender is no longer comfortable. A broker might look at whether a specialist lender would refinance the home loan and fold the other debts in, with a repayment structure that fits the recovering income and a plan to review the position once the business is steadier.
Mistakes to avoid
- Ignoring letters. Notices carry deadlines. Opening them early gives you more choices.
- Applying everywhere at once. Multiple applications can leave marks on your credit file. Our guide on why applying for loans everywhere hurts explains why.
- Taking the first offer without reading the structure. Short-term solutions can be useful, but you want to know the exit before you start.
- Hiding the full picture. Lenders find out. A complete, honest summary builds confidence.
- Borrowing to cover a deeper problem. If the budget does not work at any level of debt, a financial counsellor can help alongside any lending.
What to have ready
Recent bank statements, latest payslips or business income evidence, details of every debt and its balance, and any lender letters. If you are unsure what to gather, our guide on what documents you need for a loan and the loan-ready checklist lay it out. You can also use our loan calculator to get a feel for how different structures change repayments, and see our wider range of difficult loans.
Ready to see what is possible?
Sounds like you’re looking for a financial hardship refinance. We’re the lending experts in turning hard situations into workable structures, so click through and see if you qualify. If Ownright can’t find the solution, no one can.
How it works, step by step
- 1
Step 1
Tell us what changed, what you owe and who you owe it to. A plain account is all we need to start.
- 2
Step 2
We separate what is urgent from what can wait, and check what your current lender may already be able to offer.
- 3
Step 3
We look for lenders comfortable with the story, the security and the recovery plan.
- 4
Step 4
The new facility pays out the old debt and gives you a repayment pattern you can live with.
Frequently asked questions
What is a financial hardship refinance?
It is a refinance arranged because your circumstances have changed and the existing loan no longer fits. That might mean moving to a lender who understands the situation, combining debts, or restructuring repayments. It is not a single product. The right approach depends on the security, how far behind you are and your current income.
Should I ask my current lender for hardship help first?
Usually it is worth doing, because lenders have hardship processes and may agree to changed repayments or a pause. Official resources such as MoneySmart explain how to ask. A refinance is a next step if that arrangement is not enough or is not offered. We can talk through both paths.
Can I refinance if I am already in arrears?
Sometimes. Mainstream lenders often hold back when arrears are showing, while some specialist and private lenders will consider them, particularly where there is good equity in the security. Expect more questions about the cause and the plan. Earlier is generally better than later, so get in touch before a sale process begins.
Will refinancing out of hardship cost more?
It can. Specialist and private options are priced on the individual situation and may carry different fees and costs from a standard loan. Sometimes the structure is meant to be temporary, giving you room to recover and move to a standard lender later. We explain the trade-offs before you decide.
Can I refinance if my income has dropped?
Possibly, though lenders will assess the income you have now and how stable it looks. Some are more flexible when there is strong equity or a clear recovery path, such as a new contract or return to work. Bring recent bank statements and any evidence of what is coming in.
What if a mortgagee sale has already been threatened?
Time matters. Written notices set deadlines, and some solutions, such as a short-term private facility, may fit a tight window if the security and exit are sound. Send us any notices you have received straight away. We can look at whether stopping the process is realistic. See our page on stopping a mortgagee sale.