Written by , updated on July 5th, 2023
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Find out the facts about getting a car loan on disability benefits with our comprehensive guide.
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If you are on disability benefits from Centrelink or as part of the National Disability Insurance Scheme, there are some ways to get approved for a car loan. Some lenders will consider loan applications from those on disability or carer’s allowances as benefit is classified as income. Lenders may impose caps on how much you can borrow determined by your credit history and credit score.
When looking for car loans while receiving disability pension benefits from Centrelink, you should look for a lender that acknowledges your pension or allowance as an income. Some lenders do not consider payments or benefits income and may refuse to progress your application beyond the verification stage.
Some car loans for disability pensioners may come with an upper limit on how much you can borrow. Check with your lender or broker if there is a cap on how much you can apply for, as you may need to change your budget accordingly.
Lenders see the below types of benefits as payments (though this list may vary):
Lenders do not generally see Youth Allowance or JobSeeker (formerly Newstart) payments as income, as these are temporary measures or time-limited.
Before applying for any type of loan, you must figure out how much you can afford to pay back each month or repayment period (fortnightly or weekly) on top of your existing expenses. The easiest way is to line up your income and usual expenditures (rent, groceries, utilities, etc.) and see what is left over. You may have to do two separate calculations – before the car and after. Having a car may increase your income as you can travel to work, for example. However, car ownership also means you need to pay for fuel, registration, insurance, and upkeep.
Once you’ve got this figure, you should use a car loan calculator to see what type of loans fit your budget. You will need an interest rate and the loan term to complete the calculations. Remember that base interest rates do not give you a complete figure of how much your loan may cost. A comparison rate, which includes most fees and charges expressed as a percentage, will give you a clearer overview of how much you can expect to pay each month. At this stage, you should also do a check on your credit history to see your creditworthiness.
Before applying, you’ll have to get together all your supporting documents. This can speed up the process of your application from your end. Documents can include (but aren’t limited to)
These are necessary documents your lender will need to process your application.
If you are having trouble finding a lender that specialises in car loan lending for disability pensioners, you could save time and money by going to a broker. A broker can find multiple loans across a range of lenders which not only increases your chances of approval, but also may give you access to more options, features, and more competitive interest rates.
If you have bad credit and are applying for a car loan on disability payments, make sure you know where you stand by conducting a free credit check on yourself before applying. You can make an application at one of Australia’s credit reporting bureaus. Just because you are on disability payments does not mean you have bad credit.
If you do have bad credit, you may have to accept the fact your loan will be secured (tied to the value of the car) and/or have higher than normal interest rates.
Other options someone on disability payments can explore is to get an advance payment on Centrelink benefits. You can apply for this once each year. However, this may only be enough to cover short-term expenses such as emergency travel, appliance replacement, or an urgent bill.
Another way to help approval is to apply for a joint loan with someone else with good credit and financial standing. Both parties will be equally responsible for the loan repayments and may share ownership in the vehicle. This means if you default on payments, both parties credit scores are penalised.
Calculate your income and expenses to figure out how much you can afford each month in repayments. Get an idea of how much a loan will cost you using a car loan calculator.
Check your credit history if you have not in the past six months for free to figure out your creditworthiness.
Using a broker can take the hassle and stress out of finding a car loan lender that accommodates people on disability payments.
Having your ID, financial statements, and other documents together to submit to your lender can speed up the process.
Make your application for a car loan online to begin the process.
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Quantum Savvy Pty Ltd (ABN 78 660 493 194) trades as Savvy and operates as an Authorised Credit Representative 541339 of Australian Credit Licence 414426 (AFAS Group Pty Ltd, ABN 12 134 138 686). We are one of Australia’s leading financial comparison sites and have been helping Australians make savvy decisions when it comes to their money for over a decade.
We’re partnered with lenders, insurers and other financial institutions who compensate us for business initiated through our website. We earn a commission each time a customer chooses or buys a product advertised on our site, which you can find out more about here, as well as in our credit guide for asset finance. It’s also crucial to read the terms and conditions, Product Disclosure Statement (PDS) or credit guide of our partners before signing up for your chosen product. However, the compensation we receive doesn’t impact the content written and published on our website, as our writing team exercises full editorial independence.
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© Copyright 2024 Quantum Savvy Pty Ltd T/as Savvy. All Rights Reserved.
© Copyright 2024 Quantum Savvy Pty Ltd T/as Savvy. All Rights Reserved.
Quantum Savvy Pty Ltd (ABN 78 660 493 194) trades as Savvy and operates as an Authorised Credit Representative 541339 of Australian Credit Licence 414426 (AFAS Group Pty Ltd, ABN 12 134 138 686). We are one of Australia’s leading financial comparison sites and have been helping Australians make savvy decisions when it comes to their money for over a decade.
We’re partnered with lenders, insurers and other financial institutions who compensate us for business initiated through our website. We earn a commission each time a customer chooses or buys a product advertised on our site, which you can find out more about here, as well as in our credit guide for asset finance. It’s also crucial to read the terms and conditions, Product Disclosure Statement (PDS) or credit guide of our partners before signing up for your chosen product. However, the compensation we receive doesn’t impact the content written and published on our website, as our writing team exercises full editorial independence.
For more information about us and how we conduct our business, you can read our privacy policy and terms of use.
