Pause Loan Payments? Here's How to Find Relief (2026)

Life can sometimes throw unexpected challenges your way, and when those challenges affect your finances, you might find yourself wondering, "Can I pause my loan payments?" Whether it's due to a temporary setback like a medical emergency, job loss, or another unforeseen event, the ability to pause loan payments could provide much-needed relief. But is it possible, and if so, how does it work? This guide will walk you through everything you need to know about pausing your loan payments in Australia in 2026.

Understanding Loan Payment Pauses

Pausing loan payments, also known as a financial hardship arrangement or loan deferral, allows borrowers to temporarily stop or reduce their payments. This can be a lifeline during difficult financial times, but it's essential to understand the implications. The most common types of loans that offer payment pauses include mortgages, personal loans, and car loans.

When you pause your loan payments, interest generally continues to accrue on your outstanding balance. This means that while you might get temporary relief, the total cost of your loan could increase over time. It's crucial to weigh the short-term benefits against the potential long-term costs.

Current Rates, Requirements, and Options

In 2026, the Australian financial landscape offers various options for borrowers considering a loan payment pause. The interest rates for personal loans typically range from 6.49% to 12%, while mortgage rates can vary from 4.75% to 8.25%, depending on your lender and financial situation.

Eligibility for pausing loan payments generally depends on demonstrating genuine financial hardship. Lenders might require documentation such as medical certificates, termination letters, or other evidence of financial distress. It's important to note that each lender has its own criteria, so it's advisable to check directly with your lender or a mortgage broker like Esteb and Co, who can access 83+ lenders and provide personalised advice.

Steps to Pause Your Loan Payments

If you're considering pausing your loan payments, follow these steps to ensure a smooth process:

1. Assess Your Financial Situation: Determine if a payment pause is necessary and how long you might need it.
2. Contact Your Lender: Reach out to your lender as soon as possible to discuss your situation. Be prepared to provide evidence of financial hardship.
3. Understand the Terms: Ask about the terms of the deferral, including how interest will be treated and any fees involved.
4. Consider Alternative Solutions: Explore other options like extending your loan term or switching to interest-only payments.
5. Formalise the Agreement: Once terms are agreed upon, ensure you receive written confirmation of the arrangement from your lender.

Tips and Considerations

Here are some expert tips to consider when pausing your loan payments:

• Communicate Early: The sooner you contact your lender, the more options you may have available.
• Beware of Accrued Interest: Remember that interest continues to accumulate, which can increase your total loan cost.
• Review Your Budget: Use this time to reassess your budget and spending habits to prevent future financial strain.
• Consider Professional Advice: Consulting with a financial advisor or a mortgage broker like Esteb and Co can provide clarity and help you make informed decisions.

Frequently Asked Questions

1. Can I pause my loan payments indefinitely?
   No, loan payment pauses are typically temporary and must be negotiated with your lender.
2. Will pausing my payments affect my credit score?
   Entering a formal hardship arrangement should not affect your credit score, but failing to communicate with your lender could.
3. What happens if I can't resume payments after the pause?
   You should contact your lender immediately to explore additional options, such as refinancing or further deferrals.
4. Is there a cost involved in pausing my loan payments?
   While some lenders may charge fees, others might not. It's essential to understand any potential costs involved.
5. What if my lender refuses my request to pause payments?
   If your lender denies your request, consider seeking advice from a financial counsellor or a mortgage broker who can negotiate on your behalf.
6. Are there any government assistance programs for borrowers in financial hardship?
   Yes, there are government programs available, and it's worth exploring these options if you're experiencing financial difficulties.