Can you get a personal loan if you are on Centrelink?

Can you get a personal loan on Centrelink payments?

Credit providers in Australia are legally required to lend money responsibly, which means they can’t lend you money if they think you won’t be able to make the repayments. Providers typically look at various criteria, which can include your income, expenses, credit history and credit score, to determine your suitability for a loan.

If you’re receiving Centrelink payments, some traditional lenders (like banks and credit unions) may still consider you for a personal loan if you meet their overall lending criteria and can prove you’ll be able to make regular payments on time.

There are also specialist lenders who may offer personal loans specifically marketed towards those with a low credit score or who have a limited repayment history. This could potentially include those receiving Centrelink payments. However, these lenders may charge higher interest rates and fees compared to traditional lenders.

It’s also important to consider whether taking out a loan is a good idea for you and your personal circumstances, or if there are other options available that may suit you better.

For larger amounts, you might only be able to get a secured personal loan. This would mean you’d need to offer an asset (like a car) as security which the lender could sell to recoup their money if you became unable to repay the loan. You should be particularly careful when considering loans with no credit checks, as these products can be riskier and more expensive. It’s worth researching the fees, interest rates, contract terms and risks involved before proceeding with these types of loans.

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What Centrelink payments are eligible as a form of income?

Although some lenders accept Centrelink payments as proof of genuine income on a loan application, you might find that not all Centrelink payment types are considered.

For example, Youth Allowance and Austudy payments may not be accepted as they’re considered to be temporary sources of income. Your eligibility to receive these types of payments is dependent on your circumstances not changing. Some lenders may also not offer loans to those receiving JobSeeker as their sole form of income.

However, Age Pension, Family Tax Benefit, Disability and/or Carers payments may be eligible. It’s a good idea to check with the lender directly to see what forms of Centrelink payments are accepted as a form of income.

A good first step could be to identify what type of benefit you’re receiving and how much of your income it makes up, then use this information to help find out if you could qualify for a loan. It could be worth seeking professional financial advice or counselling before you apply for any particular loan, as an unsuccessful application could negatively affect your credit score, making it more difficult for you to access other credit products in the future.

You can check your credit score for free with Canstar or via the Canstar App.

Who is eligible for personal loans for people on Centrelink?

Generally, to be eligible for a personal loan you’ll need to be:

• 18 years of age or older,

• an Australian citizen or permanent resident,

• and be receiving an ongoing, eligible source of income (like the Centrelink payments mentioned above).

What documents do you need when applying for a personal loan?

When applying for a personal loan you’ll generally need to provide:

• Valid photo ID such as a drivers licence or passport

• Proof of income, typically in the form of pay-as-you-go (PAYG) payslips from your employer or your Centrelink payment summary, to show that you earn a regular income that is above your lender’s minimum requirements. For contractors and self-employed people, you will usually be asked for your most recent personal tax return

• Proof of savings, generally in the form of bank statements, to give the lender a better idea of how you manage your finances

• Details of your current employment (if you’re currently employed)

• A list of any assets you own, such as vehicles and property

• A list of any debts you may have, such as other personal loans or a home loan, credit card debts, outstanding buy now pay later (BNPL) balances etc.

• A list of your general living expenses, including groceries, utilities, streaming services, rent, medical and transport costs, school fees and so on.

What should I look for when comparing loan options?

When researching and comparing personal loans, it’s a good idea to first make sure you meet a lender’s eligibility criteria before submitting a formal application. For example, some lenders might specify a minimum annual income, or they might explicitly state that Centrelink income recipients are unable to apply for some or all of their loans.

It may be worth calling the lender/s you’re considering and enquiring about your eligibility before you apply. If there’s a chance you might be rejected because of your income source, then you may want to consider other options. Each time you apply for a loan, it’s recorded on your credit history. If you make multiple applications within a short period of time, this could negatively affect your credit score as it may be viewed by lenders as you being desperate for credit.

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What if I have a bad credit score?

Even if your credit score is low, some lenders might be prepared to offer you a loan provided you meet their overall lending criteria. However, in many cases personal loan lenders choose to reserve their cheapest rates for borrowers with a high credit score, meaning you could end up paying more if your score is lower.

You may also want to be wary of any providers willing to lend you money without an income or credit check, as these types of loans often involve fairly high interest rates or fees, meaning you could end up taking on and accumulating more debt than you can afford. One example of this is so-called short-term or payday loans, which the Federal Government’s Moneysmart website warns involve very high fees even though most lenders can’t charge interest on them.

If you want to increase your credit score, you could consider:

• Paying your existing loans or bills on time

• Thinking carefully before applying for new sources of credit (e.g. personal loans, credit cards etc.)

• Checking your credit history for any inaccuracies

• Lower your credit limits (if you have a credit card or other line of credit).

How much could I realistically afford to pay?

If you think you might be eligible for a particular loan, you might like to use our Personal Loan Repayment Calculator to help you work out how much your loan repayments are likely to be. You can then weigh this up against your income and other expenses to decide whether you could realistically afford the loan. The calculator doesn’t factor in any upfront or ongoing fees that may apply, so you’d need to consider these as well.

What other lending options might be available for Centrelink recipients?

Before applying for a personal loan, it’s worth exploring other options you may have available to you, and whether they meet your needs.

Centrelink advance payment

You may be eligible to receive an advance payment from Services Australia, either all at once or in two instalments.

How much you can get will depend on the type of payment you currently receive. For example, according to Services Australia, if you’re on JobSeeker, Youth Allowance or Austudy, you may be able to get an advance of between $250 and $500.

Services Australia says you will need to repay the advance each fortnight and this is normally deducted from the payment amount you would normally receive—although you can choose to repay it early if you prefer.

Home Equity Access Scheme

You might be eligible for a non-taxable loan under this scheme if you or your partner is of Age Pension age, you receive or are eligible to receive a qualifying Centrelink or Services Australia pension (including the Age Pension) and own property in Australia that you can use to secure your loan.

Under the scheme, you can get a loan of up to 1.5 times the maximum payment rate of your pension each fortnight. Compound interest is charged at a set rate on the outstanding loan balance until it’s paid in full. Check out the full eligibility requirements and current interest rate on the Services Australia website.

No Interest Loans (NILs)

No interest loans (NILs) can provide credit to eligible individuals and families with a Health Care Card or Pension Card, those who have suffered from family or domestic violence in the last 10 years, or those who earn less than $70,000 a year before tax ($100,000 for couples or those with dependants) and show they can repay the loan.

However, applicants must show that they can repay the loan amount. Loans are available for up to $2,000 for essential goods and services, such as to purchase a fridge or a washing machine, repair a vehicle or pay for a medical procedure or dental services. $3,000 loans are available for bond and rent advances, council rates and recovery from natural disasters. A NILS loan is not a cash loan though and cannot be used on other expenses such as food, or repaying other debts.

Payday loans

Some payday lenders may consider your Centrelink payment as eligible income, but it’s important to be aware of the risks and expenses involved. These include high fees, as well as the terms and conditions that may apply. According to Moneysmart, most payday lenders charge an establishment fee of 20% and a monthly service fee of 4% of the loan amount. This means you can end up paying back a lot more than you borrowed.

It’s important to compare the total loan costs and criteria of a short term loan (payday loan) against regular personal loans and other available alternatives to help you determine if there are cheaper and less risky ways to borrow money.

What other support is available to help me with my finances?

Whether your Centrelink payment is your full or partial income source, it may not automatically stop you from accessing credit. However, it’s important to also consider alternative options, such as government and community schemes, that could be cheaper or better suited to your unique situation and needs.

If you’re experiencing financial difficulty, you can contact the National Debt Helpline on 1800 007 007 to speak to a confidential, independent financial counsellor for free.