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

Sub Editor · 9 August 2021
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, although not necessarily impossible, to get approved for a loan.

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.

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Credit providers in Australia 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, which can include 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 will be able to make regular payments on time without entering financial hardship. There are also specialist lenders who may offer personal loans specifically marketed towards those with a low credit score or a limited repayment history, which could potentially include some people 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 would mean you’d 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 involved with this in mind before proceeding. 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 proof of genuine income on a loan application, 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 also not offer loans to 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. It could be worth seeking professional financial advice or counselling before you apply for any particular loan, as an unsuccessful application could affect your credit score, making it more difficult for you to access other loans in future.

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 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 for some or all of their loans.

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.

What if I have a bad credit score?

Even if your credit score is low, some lenders might be prepared to lend you money provided you meet their overall lending criteria. However, in many cases personal 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 other costs, 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 regulator ASIC’s Moneysmart website warns involve very high fees even though most lenders can’t charge interest on them.

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. Bear in mind the calculator doesn’t factor in any upfront or ongoing fees that may apply to your loan, so you’d need to consider these in your decision-making as well.

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, 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 are 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.

Pension Loans Scheme

You might be eligible for a reverse mortgage-style loan under this scheme if you or your partner is of Age Pension age, you get or are eligible to get a qualifying Centrelink or Services Australia pension (including the Age Pension) and you 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 the loan payments under this scheme are non-taxable. Check out the full eligibility requirements and current interest rate on the Services Australia website to see if this is an option worth considering for you.

The No Interest Loan Scheme (NILS)

The No Interest Loan Scheme (NILS) can provide credit to eligible 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. However, bear in mind that a NILS loan is not a cash loan and cannot be used on other expenses such as food, rent or repaying other debts.

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 or have moved onto them since March 2020. Loans up to $3,000 are available to put towards rent and utility bills. To be eligible, prospective borrowers have to meet certain eligibility criteria, which include an income cap.

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.

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

Canstar also has a number of articles on budgeting and saving you may find helpful.

Image Source: TK Kurikawa/

Additional reporting by Tamika Seeto and Kelly Stone.

This content was reviewed by Sub Editor Jacqueline Belesky as part of our fact-checking process.

Tom holds a Bachelor of Arts (French and International Relations) and a Bachelor of Laws (Honours) from The University of Queensland, and previously spent six years as a quality assurance manager at Pacific Transcription, a global transcription company.

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