When you are on Centrelink, it can be challenging to find the financial products you need to actually access credit or cash. And, when you have bad credit, it can feel like the task is impossible. However, there are options for these situations, as long as you know where to look.
To help you discover your options for loans and other financial help, here are some steps to get you started.
Why You Need a Loan
First, you need to be clear on what the loan will be used for, this is because pursuing a personal loan is different from exploring options for a secure loan like a car. Car loans are collateralised, as the value of the car is taken into consideration during the lending decision. Often, loans that involve collateral have more flexible requirements and can make it easier to obtain a loan even if you are on Centrelink benefits and have bad credit.
However, a regular personal loan without collateral may also be an option depending on your unique circumstances. This is where understanding which specialty lenders provide what type of loans is important.
Loan options based on need
Opportunities for loans are available based on having a suitable income level (even if the income is from Centrelink benefits) and can be available to borrowers with bad credit as long as the repayment terms can be met. Often, these loans will come with higher interest rates, as this compensates the lenders for assuming the increased risk level represented by your credit.
However, it is also important to understand that not all loan types are the same. For example, there are government and non-profit based terms, which are low cost and help those who need essential household living items. These loans however are not flexible in terms of what you can use the cash for; it has to be for household items. Other short-term specialty lenders may have a higher cost to them however have no restrictions on how you use the money.
Below are some excellent solutions to consider
Centrelink Advance Payments – For those collecting benefits and need a short bridging advance to help with cash flow troubles, this is a great option. It’s an advance on your normal payments and does not come at a cost. You will have to be mindful of lower future payments until the advance is paid back.
Review a list of Centrelink based loan options here.
Specialty Lenders – For those who need actual cash for unexpected expenses without purchase restrictions, this may be the option for you. Loans are generally up to $5000 with fairly flexible qualification criteria when compared to banks. They do come at a cost, which is the tradeoff for accessing cash when having poor credit and collecting benefits. Note: if Centrelink payments is your only source of income, you will have a hard time qualifying and it’s worth calling to discuss before applying.
NILS & StepUp – These are non-profit based loans and come with a no or a low interest rate and zero fees. These loans can go up to $3000 but have restrictions on what they can be used for. The money needs to be spent on essential living need items and cannot be used for items such as debt consolidation, paying bills, entertainment or travel.
Qualifying for bad credit loans
When applying for a loan, your monthly income will be a major consideration, as the loan must be considered generally affordable before it will be approved. Additionally, based on having bad credit, your interest rate will likely be much higher than those provided to borrowers with more favorable credit.
Once you have an idea regarding the size and type of loan that may suit your needs, it is important to research potential lenders. Most lenders let you know upfront regarding whether applicants can be receiving Centrelink benefits and still potentially be approved. Additionally, many lenders are open regarding whether they may be willing to work with borrowers with bad credit.
If you can’t find the information you need online, then feel free to contact the lenders before applying. While they cannot guarantee your approval with a simple phone call, they may be able to provide information regarding typical requirements.
By researching lenders before applying, you can choose potential lenders based on their ability to meet your borrowing needs, as well as your likelihood of approval. Just concentrate your efforts on lenders who are willing to work with situations like yours. Those options are out there, so start your research today.