Recent research highlights that 47% of Australians equivalent to 5.8 million people have struggled with debts and repayments in the past 12 months. These findings, from ASIC’s Moneysmart report, reveal the financial strain caused by rising cost-of-living pressures, reduced incomes, and unexpected expenses.

Despite the challenges, many Australians remain hesitant to seek help. Instead, they resort to alternative measures like selling belongings (42%) or taking on second jobs (40%), rather than approaching their lenders for financial hardship assistance.

The Reluctance to Seek Help

According to ASIC, 30% of Australians in financial distress avoid seeking hardship assistance from their banks or lenders. Common barriers include:

• Lack of Awareness: Over half (55%) are unaware they can request help from lenders.

• Emotional Challenges: Anxiety and stress (51%), shame (40%), and feelings of failure (40%) prevent people from reaching out.

• Credit Score Misconceptions: Nearly one-third (32%) incorrectly believe that requesting financial hardship assistance negatively impacts their credit score. While a Financial Hardship Indicator (FHI) appears on credit reports for a year, it does not affect credit scores.

What is Financial Hardship?

The Australian Financial Complaints Authority (AFCA) defines financial hardship as a temporary inability to make repayments on debts such as credit cards, home loans, or personal loans. This can result from various circumstances, including:

• Reduced income or unemployment.

• Rental or mortgage stress.

• Major life events.

• Illness or injury.

• Emergencies like natural disasters.

• Domestic violence or abuse.

In such situations, a hardship variation is a temporary arrangement with a lender to ease the burden and help borrowers return to their regular repayment schedule.

Options for Financial Hardship Assistance

Hardship arrangements vary but may include:

• Payment deferrals or extensions.

• Loan restructuring, such as moving to fixed rates or extending loan terms.

• Switching to interest-only payments temporarily.

• Waiving fees and charges.

• Debt consolidation or customized repayment plans.

• Accessing hardship grants or assistance programs.

Each lender assesses hardship applications on a case-by-case basis, tailoring solutions to individual circumstances.

ASIC’s “Just Ask!” Campaign

To address the reluctance to seek help, ASIC has launched the “Just Ask!” campaign, encouraging Australians to contact their lenders if they’re facing financial hardship. As ASIC Commissioner Alan Kirkland explains:

“Australians experiencing financial hardship should reach out to their bank or lender and ‘Just Ask’ for help. Seeking financial hardship assistance is a right, and lenders are required to respond to every request.”

Why Seeking Help Matters

Turning to quick financial fixes like payday loans can often worsen financial troubles. According to NAB research, 10% of Australians facing hardship accessed payday loans in 2022, only to encounter steep hidden costs. Instead, experts advise contacting lenders or using professional financial services.

Resources for Financial Assistance

Australians in financial difficulty can access a range of support services, including:

• National Debt Helpline: 1800 007 007

• Small Business Debt Helpline: 1800 413 828

• Find a Financial Counsellor: Locate a professional in your area.

• MoneySmart Budget Planner: Tools for better financial management.

• Australian Banking Association: Contacts for financial hardship support.

Moving Forward

Financial hardship is a temporary setback, and help is available. By raising awareness and encouraging Australians to seek assistance, initiatives like ASIC’s campaign aim to provide a clearer path to financial recovery. If you're struggling with debt or repayments, remember: you have the right to ask for help and support is just a call away.