How To Get A Car Loan On Centrelink Payments

Are you receiving Centrelink payments? Need a car loan? We can help.
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, updated on July 4th, 2023       

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How To Get A Car Loan On Centrelink Payments

Centrelink Payments and Car Loans – what you need to know

Our guide to car loans, applications, and approvals when on Centrelink benefits or payments

People who receive Centrelink benefits or payments can get a secured car loan, even if Centrelink payments are their sole source of income. Many lenders may not approve a car loan for people on Centrelink payments, though using a broker with a wide panel of lenders increases your chances of approval. Your Centrelink payments may reach a certain income threshold used by lenders to determine if you are able to service (pay back) a loan without getting into further financial trouble.

Centrelink payments can qualify as income – among some lenders

One of the major eligibility criteria for any loan product – be it a mortgage, car loan, or personal loan – is having a regular income. Some lenders may view Centrelink payments as income, while others do not.

For example, some payments such as JobSeeker or the Youth Allowance are not viewed as income as these are temporary assistance programs. Once you find a job or move into the workforce, you are no longer eligible for these payments.

Other people receiving Centrelink payments such as Veterans payments, the age pension, carer’s payments, family tax benefits, rent assistance, and those on the National Disability Insurance Scheme (NDIS) may receive regular fixed payments and are seen as regular income.

If you get over the income hurdle, you may also get approved based on your credit history. If you have a good credit history, low debts, and a good financial standing, this can further improve your chances of approval or even getting a more competitive car loan interest rate.

Talking to a broker can help you find lenders who are willing to lend to people on Centrelink payments. Car loan brokers can look through many different lender products to find one that’s suitable for you. It can save you time on research and speed up the application process.

Additional options and avenues for getting car loan approval on Centrelink payments

If you are finding it difficult to get approved for a car loan on Centrelink payments, you may increase your chances by finding 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. You need 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.

Other alternatives are getting an advance from Centrelink on your payments. However, these are small amounts and usually only cover emergency expenses such as replacing an appliance, urgent travel, higher than normal bills, and the like.

Age pensioners can also apply for a loan using the government Pension Loans Scheme. This requires you to own or have equity in a real estate asset and may be affected by any mortgage, reverse mortgage, or outstanding liabilities on the property. This is also paid in instalments (up to 1.5 times your usual pension payment) instead of a lump sum.

Credit history and Centrelink – Centrelink does not mean bad credit

If you get Centrelink payments, this does not necessarily mean you have bad credit or a low credit score. Bad credit car loans are loans for people who have low credit scores; they may have defaulted on a bill or payment in the past, which is then recorded on their history for at least seven years.

If you are on Centrelink payments or pensions and do not use your credit card often and pay back the balance within the interest free period or do not have many outstanding loans, your credit score may be above average. If you have a good financial standing with utilities bills and phone plans, this may also mean your credit score could be above average.

The misconception is that your credit history is holding lenders from approving you for a car loan. It is more likely you do not clear the hurdle requirement of income rather than creditworthiness. Responsible lenders must look at your complete financial situation before deciding on whether to approve you for a car loan.

On your current income, you may be able to comfortably pay back a low amount but run into trouble with higher amounts such as those needed for new or new cars. This depends on how your prospective lender sees income; they may not count your Centrelink payments as opposed to payments from work.

No matter if you receive Centrelink payments or not, you should always figure out how much you can afford to pay back each month on top of registration, fuel, maintenance, and insurance costs.

The steps to get a car loan on Centrelink payments​

Frequently asked questions about car loans and Centrelink payments

Can I get a car loan on Centrelink payments?

Yes, however, you may be subject to restrictions based on income and credit history tests. Talking to a broker that specialises in finding car loans for people on Centrelink may be able to help.

I am an age pensioner; can I get a car loan?

Yes, in certain circumstances. If you have equity or ownership in assets, you may be approved for a car loan based on this aspect of your financial standing.

I am on JobSeeker payments, can I get a car loan?

Unlikely. Lenders see JobSeeker or Youth Allowance payments as temporary measures. They will be reluctant to approve a loan for people on these types of payments. You may need to find a guarantor to gain approval.

I’m on single parent or carer payments, can I get a car loan?

Yes, you may be approved for a car loan under certain conditions. Ask a broker for more information.

What is a guarantor?

A guarantor is a trusted person who signs on to your loan, taking responsibility for the loan if you fail to make repayments. They are on the hook for the loan as much as you are but can improve your chances of approval.

What is a credit score?

A credit score is a ranking of your creditworthiness or ability to pay back a loan expressed as a number between 0 and 1200 (or 1000.) This is calculated by credit reporting bureaus based on the number of credit checks, your credit card limits and how often you pay back the balance, loans outstanding, and defaults or non-payment of bills or loans. The higher the credit score the less of a risk you are to lenders, which means greater eligibility for car loan approval and more competitive interest rates.

How do I check my credit score?

You can check your credit score for free once per year using one of Australia’s credit reporting bureaus.

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