I Can’t Pay My Personal Loan Repayments: What Can I Do?

If you’re stressed about debt, you’re not alone. Canstar breaks down what you can do if you’re struggling with your personal loan repayments.

There’s no doubt plenty of Kiwis are feeling the financial repercussions of coronavirus. Fewer than half of New Zealanders are confident in their own financial stability amid the COVID-19 crisis, according to new research. A two-stage study commissioned by New Zealand research firm Penrose Data compared consumer attitudes before and after the first week of Level 4 lockdown. The research found 55% of Kiwis were lacking confidence in their financial stability. More than 90% of NZ consumers said they’d delay making at least one major purchase due to COVID-19.

In response to this financial stress the pandemic has put on New Zealanders, some banks have introduced relief measures to support customers who have been financially impacted by the crisis. There are other sources of support available from the government to people who are concerned they won’t be able to meet their financial responsibilities.

If you find yourself in this position, it’s important to seek support as early as possible. If you don’t and you end up missing scheduled repayments, you risk being charged a late payment fee by your bank. Beyond that, your bank can also send you a default notice and eventually start proceedings against you if you do not make your repayments or come to another arrangement.

If you have a secured personal loan (like a car loan), your bank can also seize the assets that are listed as security. But generally speaking, lenders want to work with customers before things get to this stage.

So, what kind of steps can you take if you need support?

1. Contact your bank

The first thing is to contact your bank straightaway if you think you are going to have difficulty making payments. People are often worried about talking to their bank, or they are not sure how it’s going to be received. But banks are having these conversations every day and even more so at present; it’s become their new normal. Call the hardship team of your bank if you can. It’s a good idea to prepare before you make the call: have a clear idea about what income you’ve got, what your essential expenses are and what you have to put towards payments.

2. Discuss your hardship options

A representative from your bank can talk you through the options that are available to you. For example, your bank may reduce your minimum payment to an amount you can afford, give you a repayment pause or stop charging you interest for a period of time. Here are a few examples of what relief three banks are offering to personal loan customers who have been financially impacted by the pandemic:


The bank’s site states: “If your income has been impacted by COVID-19, you may have interest-only and repayment deferral options.” You can apply via the online form here.


Kiwibank says it’s committed to helping its customers through the COVID-19 outbreak and in supporting those who may be impacted. If you’re concerned about the ability to repay your loan, they recommend you get in touch as soon as possible.


If you qualify for financial hardship, Westpac says it may be able to help relieve the financial pressure you’re feeling on your home loan, personal loan or credit card in a number of ways, including:

  • Reducing loan repayment amounts
  • Restructuring your loan
  • Taking a payment holiday

There are no hard-and-fast rules as to what hardship options may be available to you, as arrangements are made on a case-by-case basis. You might ask your bank to potentially freeze payments and/or interest, fees and charges, or ask for your loan term to be extended.

If you’ve a personal loan or a car loan, for example, it might be that the bank recalculates the loan over an additional 12 months, which would have the effect of reducing your regular monthly repayments. Obviously, it may result in you paying more interest, but it’s a valid option if you’re looking to reduce your payments for a while.

3. Make a plan to reduce your debt

If you have multiple loans, you could consider taking out a debt consolidation loan. This is when you roll all your debts into one loan. While this may be a good way to make your debts more manageable, it’s important to weigh up the potential benefits and drawbacks of doing this.

Before taking out a consolidation loan, compare the total cost of the loan (including repayments, interest and fees) against the cost of your existing loans (including any early repayment fees that may apply). Be careful of switching to a loan with a longer term, as you may end up paying more interest. You can compare personal loan rates for free with Canstar by clicking the button below:

Compare personal loans with Canstar

If you’re eligible, you could consider making a hardship withdrawal from your KiwiSaver and using the funds towards repaying debt. The KiwiSaver scheme exists to help build comfortable retirements, and applying for a hardship withdrawal should be a last resort. That is why the government will ask for considerable evidence that you’ve explored all other reasonable avenues. If you are thinking about doing this, it’s important to be aware of the long-term costs of your actions, including that you’ll have less money at retirement.

4. Get help if you need it

If you are finding it difficult to manage your personal loan or other debt, you can contact a community service that will help you manage your finances. You can contact MoneyTalks, a free financial helpline for advice and support from trained financial mentors. MoneyTalks can also connect you with services in your community. There’s also options such as face-to-face help from a financial mentor.

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