Your rights when your circumstances change and you find you can no longer make your loan payments.

Changing the terms of your credit contract

You can ask your lender to change the terms of your credit contract if you are having trouble paying your loan because of some unforeseen hardship or change in your circumstances.

Unforeseen hardship includes events such as illness, injury, loss of employment or the end
of a relationship.

If you don’t make your payments in time or otherwise breach the terms of your credit contract and you do nothing, the lender may be able to repossess any items you bought on hire purchase or listed as security for a loan.

See also:

Separating from your partner: If you enter into a credit contract together with your partner, and you and your partner separate during the term of the contract, the type of contract will determine who is responsible for the debt.

Joint liability: if you both signed a credit sales contract for products, you are each equally liable for the debt. If you default on payments, the lender can pursue either you or your partner for the whole amount. However, the lender can also cut one of you from the contract and they can then pursue the remaining borrower.

Several liability: this must be specified in the credit sales contract. Both of you can be separately held liable for half the debt each. If you separate, one of you may agree to keep the products and continue making the payments. But if you stop paying, your partner can only be pursued for half the amount.

Change of address: let your lender know your new address; otherwise you may be in default or breaking the terms of your credit contract.

See also:

Know your rights

If you can’t make payments on your consumer credit contract, contact the trader or finance company immediately or you will be breaking your contract.

In these situations, you have different options:

  • claim under your credit-related insurance if you have it and you are covered, eg for injury, unemployment, sickness, disability or death
  • ask the lender to change your repayment arrangements
  • make a hardship application
  • ask the trader to take the products back and cancel the credit sales contract, ie voluntary repossession.

Ask to rearrange payments

Anyone can negotiate with their lender over changes to their payments. The lender may agree in writing to spread the payments over a longer period. This means:

  • the total amount you will have to pay increases, as you will pay more interest
  • the contract will last longer.

You may apply for a payment holiday if you get behind in your payments due to an unexpected event.


Applying for hardship

You can also apply in writing to the lender to change the credit contract on the grounds of unforeseen hardship under the Credit Contracts and Consumer Finance Act (CCCFA). You need to set out your reasons for the unforeseen hardship and include supporting information, such as a letter advising redundancy or a doctor’s certificate.

You can apply to:

  • extend the contract term, so that each payment amount is reduced
  • postpone the dates on which payments are due
  • extend the contract term and postpone payments.

You can’t apply to reduce the annual interest rate or the unpaid balance of your contract. The lender can agree to other changes, but this is their decision.

When considering your hardship application, the lender must comply with the Lender Responsibility Principles. This includes considering your hardship application in a careful, diligent and skilful way, and treating you reasonably and in an ethical manner.

Responsible Lending Code

Lenders must meet certain deadlines to process your application and make a decision:

  • 5 working days to acknowledge receipt of your application in writing
  • 10 working days if they need to request further information
  • 20 working days to agree to your request or decline it

If the lender agrees, they must give you specific information about the change before it takes effect. If the lender does not agree to the changes, they must advise you of the reasons for the decision and a clear summary of your rights to apply to the courts to change the terms of the credit contract.

If you apply for hardship once, you have to wait for four months under the same credit
contract before you can apply again, unless:

  • the lender agrees to consider a new application
  • the reasons for the new application are very different from the previous application.

You can’t make a hardship application if you have missed payments for:

  • two weeks or more after receiving a repossession warning notice or a Property Law Notice
  • four or more consecutive payments on the due date
  • two months or more.

If you get your payments up to date, you can then apply for hardship.

The lender also doesn’t have to consider your request if you could reasonably have foreseen the hardship when you entered the contract. In this situation, a lender must still comply with the Lender Responsibility Principles.

See also:


Voluntarily returning products bought on credit

You can ask the lender or trader to take the products back and cancel the credit sale contract, if this is allowed by the credit contract (voluntary repossession). If they agree, the products will be sold. You will still owe the lender any amount unpaid under the contract after the sale.

The lender can’t charge you for the costs of repossession, unless you ask them to collect the products. However, they can charge you for costs they incur after repossession, eg preparing them for resale. These costs must be set out in a notice after the products are repossessed and again after sale. If you cancel your credit sale contract through voluntary repossession, the lender has to follow the rules of repossession.

Read Repossession to find out more.

If you have a problem, your options depend on whether:

  • you are struggling with your loan repayments
  • a term of the loan contract is too harsh, or the lender acted unfairly
  • you were given incomplete or inaccurate information before or during the contract.

Contact the finance company

Contact the finance company as soon as possible to vary or cancel the contract under the Credit Contracts Consumer Finance Act (CCCFA) if any of these situations apply.

If you qualify on grounds of hardship, the lender can agree to:

  • reduce the amount of each payment by spreading payments over a longer period
  • let you take a payment holiday until a future date when you can start paying again.

See also:


Next steps

If you are unable to resolve your issue directly with the finance company, our Resolve It tool has information to help you take the next steps. These may include going to the Disputes Tribunal or District Court.

Resolve it: Banking, finance and insurance


Need more help?

Contact us for more guidance.

The Insolvency and Trustee Service(external link) and Federation of Family Budgeting Services(external link) may also be able to help if you are in financial difficulty.

Common situations

Letter of default

Mark defaults on his fortnightly mortgage payments and does not get in touch with the bank after he loses his job, as he is embarrassed. After four weeks in default, the bank tried to contact Mark but he avoids their phone calls. He is sent a letter of demand by the bank and he finally contacts the bank to negotiate a payment holiday. As he has a good credit record with the bank they are happy to assist him.

Hardship application

Janice applies for a mortgage payment holiday to cover the three months she will be off work recovering from an operation. The bank considers her application and the medical report from her GP and agrees to grant the holiday.