What usually happens first
If a repayment is missed, most lenders will typically contact you soon after, often by phone, SMS or letter, to let you know the payment wasn't received and to arrange for it to be made up. A single missed payment that's promptly rectified usually doesn't have serious consequences, though it may still be recorded internally by the lender. Late payment fees can sometimes apply, depending on your loan contract. If the missed payment isn't addressed, lenders generally escalate contact over subsequent weeks, and it's usually in your interest to respond early rather than avoid communication, since lenders typically have more options available to assist earlier in the process.
Default notices
If repayments remain overdue for a longer period, commonly around 90 days for credit reporting purposes, though contractual default notices can be issued earlier under the loan terms, the lender may issue a formal default notice. This is a legal notice that sets out the amount owing and gives you a period, generally around 30 days, to rectify the default before the lender can take further action, which could include listing a default on your credit file or, in more serious and prolonged cases, beginning steps towards repossession for a secured loan. Receiving a default notice is serious and it's important to act on it promptly, either by paying the overdue amount or contacting the lender to discuss options.
Hardship variation requests
If you're experiencing financial difficulty, Australian credit law generally allows you to request a hardship variation from your lender, which can involve temporarily reducing or pausing repayments, extending the loan term, or restructuring the debt to make it manageable. Lenders are generally required to consider hardship requests and respond within set timeframes. It's usually best to contact your lender's hardship team as early as possible, ideally before missing a payment if you can see difficulty coming, since lenders typically have more flexibility to assist before a loan falls significantly into arrears. Financial counsellors, who provide free and independent advice, can also help you prepare a hardship request.
Credit reporting consequences
Repayment history information, showing whether a payment was made on time, is generally reported to credit reporting bodies on an ongoing basis, meaning a missed payment can appear on your credit file even before it reaches default stage. If a payment remains unpaid for a longer period, typically around 60 days after a default notice period has passed for many credit types, it may be listed as a formal default on your file, which can significantly affect your ability to obtain credit in the future and generally remains on file for a set number of years. Correcting the situation as soon as possible, and keeping records of any hardship arrangement, can help if you need to explain the situation to future lenders.
Steps to take if you're struggling
If you're at risk of missing a repayment, contacting your lender before the due date is usually the most effective first step, since it opens the door to arrangements such as a short-term repayment pause or restructure. It's also worth speaking with a free financial counsellor, who can help review your budget and negotiate with lenders on your behalf if needed. Avoiding contact or ignoring notices generally makes the situation harder to resolve and can lead to more serious consequences, including credit file impacts or, for secured loans, the possibility of the lender enforcing their security if the situation isn't resolved.
Key points
- Contact your lender early if you think you'll miss a repayment
- A default notice gives a set period to rectify the overdue amount
- Hardship variations can adjust repayments if you're struggling financially
- Missed payments and defaults can be reported to your credit file
- Financial counsellors provide free, independent help with hardship requests
Frequently asked questions
Will one missed payment ruin my credit file?
A single missed payment that's quickly rectified is usually less serious, but repayment history is generally still reported, so it's best avoided where possible.
What is a hardship variation?
It's a temporary or ongoing change to your loan arrangement, such as reduced repayments, granted when you're experiencing genuine financial difficulty.
How long before a default is listed on my credit file?
Timeframes vary, but a formal default is generally not listed until a payment has been significantly overdue and a default notice period has passed.
Can a lender repossess my property for missed payments?
In serious, prolonged cases of default on a secured loan, a lender can take steps towards repossession, though this is usually a last resort after other options are exhausted.
Is financial counselling free?
Yes, financial counselling services in Australia are generally free and independent, and can help with hardship negotiations.