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Can I get a car loan whilst receiving Centrelink benefits?

Jan 13, 2022 | Insights

Yes, you may be eligible to apply for a Car Loan when you are receiving a pension or regular Centrelink payments. Centrelink benefits come in many forms, and lenders may consider several of them in assessing your eligibility to apply for a Car Loan.

Regular government and Centrelink payments that may be considered when assessing your suitability for a Car Loan include:

  • Parenting Payment;
  • Family Tax Benefit;
  • Aged Pension;
  • Disability Pension; and
  • Carer’s Pension.

Each of these Centrelink payments can be regular and long term. So, many lenders may view them as a regular income source. Make sure to check out your own Centrelink details to be certain you know what type of payments you are receiving or are eligible to receive.


What Centrelink payments won’t lenders consider as income when applying for a Car Loan?

While many types of Centrelink payments may be considered as a regular source of income when applying for a Car Loan, JobSeeker and Youth Allowance payments can be a little more complicated. Both of these payments are considered to be temporary assistance programs and technically a form of unemployment benefit, so lenders may not regard them as regular income. With that being said, if you receive additional income on top of these Centrelink payments, such as regular Family Tax Benefits, you may be eligible to apply for a Car Loan whilst receiving Centrelink benefits — it really comes down to your personal circumstances.


Applying for a Car Loan while receiving Centrelink payments

When applying for a Car Loan while receiving regular Centrelink benefits, there are some extra steps you may be able to take to help ensure you can afford the car finance (and to hopefully help get your application over the line!).

Find the right lender
Finding a lender that is willing to consider regular Centrelink payments as a source of income can be an essential piece of the puzzle. A good lender should be flexible and willing to discuss your options with you to work out the best deal for you. Make sure you take your time in talking to a lender to help find the right option for your circumstances.

Know your budget
Speaking to a lender about conditional pre-approval for finance can give you a good idea of how much money you may be able to apply to borrow. With a realistic budget and dollar figure in mind, you should be able to find the perfect car for your needs (and your back pocket!). A lender is legally prohibited from providing you with a car loan that you cannot afford to repay, so if you’ve been given pre-approval for car finance, the repayments should fit nicely into your budget — even if regular Centrelink benefits are your only source of income.

Use the right type of finance
When deciding between a Car Loan and a Personal Loan, your unique situation and needs will likely dictate what you are eligible to apply for, and the best option for you. If you’re looking to purchase a car and use additional funds to make vehicle modifications, a Personal Loan may be more appropriate, if you are eligible to apply. This may be because the amount financed under a Car Loan is based only on the car’s purchase price and does not cover additional expenses that you may incur in the future (like new roof racks or some rims).

If you are eligible for one, a Personal Loan can be taken out for a lump sum, which can help cover the vehicle’s costs and the modifications you’re planning to make. Keep in mind that Personal Loans can be more expensive than Car Loans, so you’ll need to be clear on what components of your purchase you need funds for (e.g. just the car, or the car plus upgrades) and then weigh up the pros and cons. You will also need to check what you are eligible to apply for, when it comes to Car Loans and Personal Loans.

Clean up your finances
If you’ve got some time to spare, it might be useful to clean up your spending habits. While not absolutely necessary, it may help your case if you take a break from gambling and stick to a budget for a few months to show that you can manage your money well.


Car Loans for Centrelink Benefits vs Car Loans for Bad Credit

Receiving regular Centrelink benefits doesn’t impact your credit score. However, it can be harder to get a Car Loan with some lenders if your main income source is government benefits (just like how it can be harder to get a Car Loan with some lenders if your credit score is bad).

The major components lenders look at when deciding whether to lend you money are:

  • your credit history and how likely you are to repay the credit; and
  • your regular source of income and whether you can afford to repay the credit.

People receiving regular Centrelink payments may struggle to convince some lenders that they can afford their repayments. In contrast, people with a bad credit history might find it difficult to prove to some lenders that they are likely to make their repayments in accordance with their Loan Agreement. But that doesn’t mean it’s the end of the line for these applicants.

If you have a bad credit rating and want to improve your chances of getting a loan, check out our tips on how to improve your credit score.

At Finance One, we can consider applicants who receive regular Centrelink payments and have poor credit. So, if you tick one or both of those boxes, we may be able to help! With good banking habits, there could be a chance to have your loan approved.

Apply for a Finance One Loan

Finance One is a non-bank lender that provides opportunities for everyday Australians to rebuild their credit and improve their lifestyle. If you’re having trouble getting a loan through a bank or larger lender, get in touch to find out how we may be able to help. Normal lending criteria, terms & conditions and fees & charges apply.

Disclaimer: The information above is of a general nature only and does not consider your personal objectives, financial situation or particular needs. You should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your particular circumstances. We do not accept responsibility for any loss arising from the use of, or reliance on, the information.

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Makala Elliott

Makala is the Marketing Manager at Finance One. She has worked in the Finance and Lending industry for over 10 years, gathering a wealth of experience. She is passionate about helping Australians get back on track with their finances by passing on her knowledge.

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