When you invest in a term deposit, you invest on the basis that your money is locked in for a set term at a fixed interest rate. If you want to withdraw your funds before the term ends, you are generally required to give 31 days' notice (where the term deposit is not an “at call” but an “advance notice” term deposit).
You may also face a “prepayment adjustment” also known as early break costs or early withdrawal costs. These are an agreed reduction in the funds you receive back based on how long you’ve held the term deposit.
However, if you’re facing proven financial hardship, early break costs may be waived by your term deposit provider, and you also may be able to access your term deposit sooner than the standard notice period. This article discusses what constitutes financial hardship, and the general process of requesting early withdrawal from your term deposit.
Key topics covered
- What constitutes financial hardship?
- Requesting early withdrawal
- Withdrawal options
What is financial hardship?
Broadly, financial hardship includes when someone temporarily can’t meet their financial obligations, like paying bills or debts, due to unexpected events or significant changes in their life. This could include struggling to cover basic needs such as housing, food, medical care, or education for themselves and their family due to loss of employment or ill health. Whether someone is experiencing financial hardship will depend on their particular circumstances.
Examples of financial hardship may include
- Losing a job or income source
- Natural disasters
- Family changes (like divorce or the loss of a loved one)
- Medical issues, including illness or disability
- Large, unexpected expenses
Requesting early access to your term deposit
If you need to access your term deposit early due to financial hardship, here are some steps you may need to take
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Contact your term deposit provider. As soon as you know you’re in a difficult situation, get in touch with your authorised deposit-taking institution (ADI). Many ADIs have dedicated teams that can help you navigate the process.
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Submit evidence required by your ADI. You may need to fill out a hardship form and provide documents or other evidence that show your financial difficulties, such as pay slips, medical bills, funeral expenses or other relevant paperwork.
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Wait for a review. Once you submit your request, the ADI will review it, within the timeframe they’ve advised you. They’ll assess your situation and let you know what options are available for early access to your funds. You may be asked for additional evidence.
Early withdrawal options
If you're facing proven financial hardship and your request for early access is granted, you typically have two options: a full withdrawal or a partial withdrawal if you want to leave some funds in the term deposit.
However, not all term deposit providers allow for a partial withdrawal, and this is usually at the discretion of the ADI. If a partial withdrawal is permitted, to keep the term deposit active, you'll still need to maintain the minimum required balance (which varies between ADIs).
This flexibility allows you to access the funds you need while still keeping part of your savings intact, though it’s important to check with your specific ADI on their policies regarding hardship withdrawals and any applicable fees or adjustments.
What if my request for early access due to financial hardship is denied?
You may be able to request an internal review of the decision by your ADI. If you're still unsatisfied after the internal review, you can lodge a complaint with the Australian Financial Complaints Authority (AFCA). AFCA is a free, independent external dispute resolution scheme that can review the ADI's decision.
Receiving your funds
If your early withdrawal request due to financial hardship is approved, the ADI will transfer your funds to your nominated account within the timeframe they agree with you. Funds are typically transferred to your nominated account shortly after approval, but the exact time frame will depend on your chosen provider.
Important Information
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Before acting on any Information, you should consider whether the Information is appropriate for you having regard to your objectives, financial situation and needs. You should seek independent financial advice and read the relevant terms and conditions and relevant product documents before acquiring any product.