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Car Loans on Centrelink

Are you receiving Centrelink payments and looking for a car loan? Savvy can help.

Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
Our authors
, updated on July 22nd, 2024       

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Receiving Centrelink payments shouldn't hold you back from owning a car. Contrary to popular belief, many lenders offer car loans for people on Centrelink benefits – even with a lower income or bad credit.

Whether you're a single parent receiving Centrelink payments or a recipient of a disability pension, you can explore your options right here with Savvy. Our lender partners have experience with people in a variety of circumstances and understand your unique needs. Get started today with a quick online quote today!

Can I get a car loan on Centrelink payments?

If you receive a pension or benefits from Centrelink, you may be able to get a car loan, even if Centrelink payments are your sole source of income. However, whether you will be approved and how much you can borrow depends on several factors. Anyone applying for a loan in Australia must meet certain eligibility criteria, namely being at least 18 years old and an Australian citizen or permanent resident. Other considerations include:

  • Income and affordability: one of the major eligibility criteria for any loan product is having a regular income that meets the lender’s minimum threshold. 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.
  • Type of Centrelink payments: not all Centrelink payments are treated the same for car loans. Fixed payments like Family Tax Benefits, Parenting Payments, Disability Support Pension, Aged Pension, Service Pension and Carer Payments are seen as regular income due to their consistent nature. However, temporary payments that stop once you find employment, such as the Youth Allowance and JobSeeker Payments are not typically viewed as income.
  • Lender: some lenders may view Centrelink payments as income, while others will not – even if you meet their minimum income requirement with your Centrelink benefits. In such a situation, talking to a car loan broker can help you find a lender willing to work with people on Centrelink payments, searching different products to find one that’s suitable for you. This not only increases your chances of approval, but also may give you access to more options, features, and more competitive interest rates.

How do car loans work for Centrelink recipients?

Car loans for Centrelink recipients work in just the same way as they do for anyone else. If you don’t have the money to pay for a car upfront, a car loan allows you to purchase a vehicle by borrowing money from a lender. When you apply, the lender will assess your situation to determine your eligibility. If approved, you will receive money to pay for the car. Here are some common features of car loans:

  • Secured: car loans are typically secured, meaning the car acts as collateral. While this can mean lower interest rates, if you fail to make your loan repayments, the lender has the right to repossess the car.
  • Interest: the interest rate is essentially the cost of borrowing the money. It's a percentage of the loan amount that you pay to the lender on top of the amount you borrowed.
  • Fees: there may be fees attached to the loan, such as application fees and potentially early repayment penalties. The specific fees and their costs can vary depending on the lender so it's crucial to inquire about all fees upfront and factor them into your total loan cost comparison when choosing a lender.
  • Loan term: this is the period over which you’ll repay the loan, typically between two and seven years. A shorter loan term typically comes with higher monthly payments but less total interest paid.
  • Down payment: putting down some money towards the car's price can significantly reduce your loan amount and consequently, your monthly payments.

When taking out a car loan, the car itself will also have to meet the lender’s requirements – typically the vehicle will need to be below a certain age (often 15 or 20 years old) and in good working condition.

Can I get a car loan on Centrelink with bad credit?

Getting a car loan on Centrelink payments with bad credit is possible, but it will require some extra effort. Your credit score is a factor that many lenders consider when assessing your eligibility for a loan. This provides a snapshot of your past borrowing behaviour and ability to repay debts. A higher score indicates a lower credit risk, while a lower score suggests a higher risk. In Australia, credit score ranges for the three main credit reporting agencies are as follows:

Equifax
Below average
0 – 459
Average
460 – 660
Good
661 – 734
Very good
735 – 852
Excellent
853 – 1,200
Experian
Below average
0 – 549
Fair
550 – 624
Good
625 – 699
Very good
700 – 799
Excellent
800 – 1,000
illion
Zero
0
Low
1 – 299
Room for improvement
300 – 499
Good
500 – 699
Great
700 – 799
Excellent
800 – 1,000

Source: What is an Average Interest Rate on a Car Loan? – Savvy. Information correct as of April 2024.

You can apply for a free copy of your credit report every three months, which is usually accessible online or by email or post.  

Having a good credit history can improve your chances of approval or getting a more competitive car loan interest rate. However, even if you have a poor credit rating, you may be eligible for a bad credit car loan if you can fulfil other criteria. 

Can I get a no-interest car loan on Centrelink?

Good Shepherd Australia New Zealand offers No Interest Loans (NILs), which is a scheme providing low-income households and individuals with short-term loans to cover essential expenses. A pilot program has been run for loans up to $5,000 for the purchase of vehicles but, as of July 2024, it’s on hold. Good Shepherd says that this program will reopen once their backlog is cleared, so you may be able to take out a NIL for your car.

In the meantime, you can still apply for interest-free loan through Good Shepherd’s NILs for Essentials program, which allows you to borrow up to $2000 for essentials such as car repairs and registration costs. These loans have no credit checks, but you will need to provide details about your financial situation and information on any existing debts.

How can I improve my chances of getting a car loan while on Centrelink?

If you are considering a car loan on Centrelink payments, there are steps you can take to improve your chances of approval:

  • Meet the income threshold: if your current Centrelink payment falls short, consider alternative income sources or look for lenders specialising in lower-income borrowers.
  • Improve your credit score: make consistent payments on existing debts, avoid taking on new ones and consider credit-building tools.
  • Save for a deposit: a down payment demonstrates financial responsibility and reduces the loan amount needed, potentially leading to better loan terms.
  • Choose a cheaper car: the cheaper your car is, the less you will have to borrow and pay back. Rather than overstretching yourself, look at used cars and smaller models.
  • Shop around and compare lenders: not all lenders view Centrelink payments the same. Some may be more open to them, especially with a larger deposit or a co-signer with good credit.
  • Consider a car loan broker: brokers have access to a wider range of lenders and can help find options suited to your situation, saving you time on research and potentially finding you better terms.

Are there alternatives to getting a car loan on Centrelink payments?

If you are finding it difficult to get approved for a car loan on Centrelink payments, it may be helpful to use a guarantor.

A guarantor is someone with a good financial standing and credit history that “guarantees” the loan by shouldering the responsibility for the loan in the event you are unable to pay it back. A guarantor becomes legally bound to pay off the loan or suffer any effects of defaults such as it being recorded on their credit history.

You can ask anyone over the age of 18 and an Australian citizen to become your guarantor. However, it is vital to inform your guarantor of what they are liable or responsible for when it comes to guaranteeing a car loan.

The added effects of having a guarantor may be a more competitive interest rate than if you applied without a guarantor. It may also entitle you to borrow more money.

If you do not need a car immediately, you may also consider saving up and then buying it outright. This might take time, but it eliminates the need for a loan and interest payments. Create a budget and set aside a regular amount from your Centrelink payments to reach your goal. Remember, smaller used cars are generally cheaper to buy, insure and maintain, making them a budget-friendly option that reduces your financial burden in the long run.

Steps to get a car loan on Centrelink payments​

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Frequently asked questions about car loans and Centrelink payments

Can the type of car I choose affect my chances of getting a car loan on Centrelink?

Lenders may have preferences or restrictions on the age, condition and type of vehicle they are willing to finance. Generally, lenders prefer financing newer cars with lower mileage as they are seen as less risky investments. Older or high-mileage vehicles may pose greater reliability issues, increasing the lender's risk. Additionally, luxury cars may be harder to finance, especially for individuals with limited income sources like Centrelink payments.

What happens if I miss payments on a car loan while receiving Centrelink payments?

Defaulting on loan payments can result in late fees, penalties, and ultimately repossession of the vehicle by the lender. This can further impact your financial situation and credit score, making it even more challenging to secure loans in the future. It's essential to communicate with your lender if you're facing financial difficulties to explore potential options for repayment plans or assistance programs.

Can I get a car loan with existing debts?

It's possible to get a car loan while on Centrelink with existing debts, but it may affect your eligibility and loan terms. Lenders assess your debt-to-income ratio to determine your ability to manage additional debt responsibly. If your existing debts consume a significant portion of your income, lenders may view you as a higher risk borrower and offer less favourable loan terms, such as higher interest rates or lower loan amounts.

Can I get a car loan with no credit check?

No. All reputable lenders in Australia will perform a credit check when you apply for a car loan. These checks help lenders assess your financial responsibility and the risk of you defaulting on the loan. Be wary of lenders that advertise no credit check loans.

How do I check my credit score?

You can access a free copy of your credit report every three months from one of the major credit reporting agencies in Australia (Equifax, Experian or illion). These reports include your credit score and details of your credit history.

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.

Can I get a car loan if I am on disability benefits?

Yes, if you are on disability benefits from Centrelink or as part of the National Disability Insurance Scheme, there are ways to get approved for a car loan. To improve your chances of approval, you should look for a lender that acknowledges your pension or allowance as income and set a realistic budget for repayments and overall costs to ensure you don't overextend yourself financially. 

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.

Am I able to apply for a car loan as a single parent on JobSeeker?

Yes – but only alongside your existing family payments. JobSeeker isn’t considered a stable stream of income by lenders on its own, as you can easily become ineligible for further payments should you find employment. Similarly, Youth Allowance, Austudy and Abstudy aren’t accepted forms of income.

Are car loans still available to casual-working single parents?

Yes – we can arrange financing for casual workers, provided you’re earning a relatively stable income and meet our lenders’ minimum requirements relating to annual earnings.

Am I eligible for a car loan if I've just started a new job?

Yes – if you’re moving from full-time employment to another full-time job, we partner with lenders who can approve applications as soon as you start at your new workplace. Part-time employees will need to have been in the same job for at least three months, while casual workers will require a minimum of six months of consistent income from the same job. All of this is related to job stability and the potential for your income stream to dry up: if you’ve completed your probationary period, or have stayed in the position for a sustained period, it’s less likely that this will happen as a general rule.

Can I use my car loan funds for any other household expenses?

No – your car loan can only be used to cover the cost of your car and any on-road expenses such as stamp duty, rego, car insurance and extended warranties. If you want to use loan funds to cover other expenses in your life in addition to the car, you can take out a secured personal loan (with your car acting as security if acceptable) or unsecured personal loan to consolidate debts, fund renovations or pay for any other personal costs.

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