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

31 August 2020
When you apply for a personal loan, one factor lenders will look at is your income. If you rely on Centrelink benefits for all or part of your income, you may find it more difficult to get approved for a loan.

The number of Australians receiving unemployment payments doubled from December 2019 to July 2020. In July, there were about 1.62 million people receiving JobSeeker payments and Youth Allowance. The Federal Government estimated that around 3.5 million workers were on the JobKeeper payment in May.

Depending on your personal circumstances and the type of payment you are receiving, it may be possible to get a loan if you are on Centrelink. However, it’s important to carefully consider whether this is a good idea for you and whether there are any other options available that may be more suitable.

In this article:

Credit providers are legally required to lend money responsibly. This 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 including your income, expenses, credit history and credit score to determine your suitability for a loan.

If you are 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 can make regular payments on time without entering financial hardship. There are also specialist lenders who offer personal loans specifically for those on Centrelink payments. However, be aware that these types of lenders may charge higher interest rates and fees compared to traditional lenders. For larger amounts, you might only be able to get a secured personal loan. This means you would need to offer an asset (like a car) as security for the loan, which the lender could sell to recoup their money if you became unable to repay the loan.

You should be particularly careful in considering applying for any personal loans with no credit checks. These products can be riskier and more expensive, and you should research the fees, interest rates, contract terms and risks with this in mind. You might also like to seek professional financial advice or free financial counselling if you are in financial difficulty.

Although some lenders may accept Centrelink payments as genuine income, you might find not all Centrelink payment types are considered. For example, Youth Allowance and Austudy are payments that lenders may not necessarily accept as part of your income because they are considered to be temporary income, and your eligibility to receive these payments is dependent on your circumstances not changing. Some lenders may accept applicants who are receiving JobKeeper but may not assist those receiving JobSeeker as their sole form of income. It’s a good idea to check with the provider directly to see what applies.

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 qualify for a loan.

Personal Loans on Centrelink

Source: ArliftAtoz2205 (Shutterstock)

The table below displays some of our referral partners’ unsecured personal loan products for a three-year loan amount of $20,000 in NSW. The products are sorted by Star Rating (highest to lowest) followed by comparison rate (lowest to highest). Use Canstar’s personal loan comparison selector to view a wider range of products on Canstar’s database. Canstar may earn a fee for referrals. Read the Comparison Rate Warning.

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 basic eligibility criteria before submitting a formal loan application. For example, some lenders might specify a minimum annual income, or they might explicitly state that Centrelink income recipients are unable to apply.

It may be worth calling the lender or lenders 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, this is recorded on your credit history. If you make multiple applications within a short period of time, this could negatively affect your credit score and potentially make it harder to get credit in future.

Check your credit score

What if I have a bad credit score?

Even if your credit score is low, some lenders might be prepared to loan you money provided you meet their overall lending criteria. However, you may want to be wary of any providers who are willing to lend you money without an income or credit check, as these types of loans often involve fairly high interest rates or other costs, meaning you could end up taking on and accumulating more debt than you can afford.

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 and decide whether you could realistically afford the loan.

What other lending options might be available for Centrelink recipients?

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

Centrelink advance payment

You may be eligible to receive an advance payment from Centrelink. How much you can get will depend on the type of payment you currently receive. For example, according to Services Australia, if you are on JobSeeker 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 deducted from the payment amount you would normally receive.

Pension Loans Scheme

You might be eligible for a loan under this scheme if you or your partner are of Age Pension age, you get or are eligible to get a qualifying 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. According to Services Australia, compound interest is charged at a set rate on the outstanding loan balance until it’s paid in full. Services Australia says any payments you receive are not subject to income tax. Check out the full eligibility requirements and current interest rate on the Services Australia website to see if this is an option for you.


StepUP is a low-interest loan for people on low incomes who have difficulty accessing credit from a bank. It is a community-focused initiative of Good Shepherd Microfinance and NAB. To be eligible for a StepUP loan, you must have a Health Care Card or Pensioner Card, or receive Family Tax Benefit A, and have been at your current address for more than three months. StepUP loans range from $800 to $3,000 with up to three years to pay it back. Loans are offered with a fixed interest rate of 5.99% p.a. on an unsecured basis, but StepUP says you can expect a credit check as part of your application. StepUP says there are no fees charged on its loans.

The No Interest Loan Scheme (NILS)

Similar to StepUP but without any interest charges, the No Interest Loan Scheme (NILS) can provide credit to individuals and families with a Health Care Card or Pension Card, or those who earn less than $45,000 a year after tax ($60,000 for couples or those with dependants). Applicants must show that they can repay the loan amount, and have lived at their current or previous address for at least three months. Loans are available for up to $1,500 and can be used for essential goods and services, such as to purchase a fridge or a washing machine, or pay for a medical procedure or dental services.

Household Relief Loans

No interest Household Relief Loans are also available for eligible people who have been financially impacted by COVID-19, including those who are on Centrelink payments after March 2020. Loans up to $3,000 are available to put towards rent and utility bills.

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, including any fees and interest rates, as well as the terms and conditions that may apply.

According to Moneysmart, most payday lenders charge an establishment fee of 20% of the loan amount 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 payday loan against regular personal loans and other available alternatives to help you determine if there are cheaper and smarter ways to borrow money.

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.

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

If you are experiencing financial difficulty, you can contact a financial counsellor for help. Call the National Debt Helpline on 1800 007 007 to speak to a financial counsellor for free.

Canstar also has articles on Saving and Budgeting you may find helpful:

Budgeting Planner Calculator

This article was reviewed by our Sub Editor Jacqueline Belesky and Finance Editor Sean Callery before it was published, as part of our fact-checking process.

Additional reporting by Tamika Seeto.

About Kelly Stone

Kelly Stone is an experienced content writer with a Bachelor of Journalism, a Graduate Certificate in Communication at Griffith University and a Postgraduate Certificate in Business (HR) at the University of Southern Queensland. She’s long been the go-to writer for accountants and financial planners who need help making complex stuff, like finance, more enjoyable and accessible for their readers using simple, punchy words with zero jargon. Kelly is now a corporate writing and recruitment marketing specialist at Craft My Content.

Follow her on Twitter or LinkedIn.


Image Source: TK Kurikawa (Shutterstock).

Similar Topics:

Share this article