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Can I Get A Car Loan If I Am On Disability Benefits?

Find out the facts about getting a car loan on disability benefits with our comprehensive guide.

No obligation. It won't affect your credit score.
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, updated on July 5th, 2023       

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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.

What should I look for in car loans when on disability benefits?

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.

What payments do lenders see as income?

Lenders see the below types of benefits as payments (though this list may vary):

  • Disability Support Pension
  • Carers Pension
  • Partnered Parenting Payment
  • Family Tax Benefits Part A and B
  • Aged Pension

Lenders do not generally see Youth Allowance or JobSeeker (formerly Newstart) payments as income, as these are temporary measures or time-limited.

How to apply for a car loan on a disability benefit

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)

  • 100 points of government approved ID
  • Centrelink or NDIS income statements – you can access these documents using the MyGov portal
  • Other work payslips or income documents
  • Financial statements including information on other outstanding debts
  • Residential history (if applicable)

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.

Bad credit and applying for car loans on disability payments

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 to explore

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.

Steps towards getting a car loan on a disability benefit

Get answers to questions about car loans on disability payments

I work part-time and am on carer payments. Can I get a car loan?

In most cases, yes. Part-time work, depending on the level of income, can qualify you for a car loan. How much you can borrow may vary.

I have good credit. How come I am having trouble getting approved?

Your credit score or history is only one way lenders determine your suitability for car loans. Some lenders may not count your disability payments as income and might reject your application.

What is a credit score?

A credit score is a number out of 1200 (or 1000) indicating your ability to pay back a loan. Higher scores means a higher ability; lower scores means you may have difficulty. This is all interpreted by banks and other lending institutions.

I do not have a deposit. Can I get a car loan?

Yes, but this may depend on your credit score and income level. Ask your loan consultant for more information.

What is a secured car loan?

A secured car loan, distinct from an unsecured car loan, is a loan that is backed by the value of the car you purchase. This means you are responsible for paying off the loan on time or be at risk of default. In return, you are given a lower interest rate than a comparable unsecured car loan.

What if I encounter financial hardship?

It’s best to notify your loan consultant as soon as possible to request a hardship variation or alternate arrangements for paying back your loan.

What is the eligibility criteria?

You need to be at least 18 years of age and an Australian citizen or permanent resident. You must also demonstrate payments of at least $400 per week are made into your bank account.

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