Centrelink Car Loan and Finance Options

car finance for those on centrelinkMany people receiving Centrelink payments wonder if they can purchase a car even though they receive benefits. The answer to that question isn’t simple, as it depends on the type of payments being received and a few additional factors as well. To help you better understand your options, here is an overview regarding obtaining a car loan while receiving Centrelink payments.

Do Your Centrelink Payments Qualify as Income
Not all Centrelink payments are viewed as income by lenders. For example, the Youth Allowance and Newstart Allowance are generally not considered as income as lenders see these payments as short-term. Since most car loans are repaid over the course of a few years, lenders can’t be sure that you will have the required payment amounts over the life of the loan.


 
There are a variety of Centrelink payments that are typically viewed as income. For example, Veterans payments and allowances for disabled persons and carers often qualify. Parenting payments, family payments, and rent assistance may also be considered depending on your individual situation.

Pensioners also typically have options when seeking loans, though their entire financial situation also has to be reviewed before a decision will be rendered.

Each lender has its own acceptance criteria, always ask what forms of benefits are accepted before applying to save time and disappointment should they not accept benefits as income.

Challenges When Seeking a Car Loan
Regardless of whether you receive Centrelink payments, most low-income people face the same problems when it comes to securing a loan. First, the lender must assess whether you can reasonably be expected to repay the loan based on your current financial situation. This includes an assessment of all of your income sources as well as certain debt payments you owe.

Second, you will need to have a suitable credit rating based on the lender’s standards. Typically, there will be a minimum score that a person must hold in order to qualify regardless of income. It is also important to understand that, even if you are eligible, lower credit scores often mean having higher interest rates associated with the loan.

A car loan may be easier to obtain that certain other forms of financing, such as a traditional personal loan, as the vehicle serves as collateral against the debt. However, no one is guaranteed to be approved by a lender until their application is fully assessed.

In certain circumstances you may qualify for a free car through charitable organisations. Whilst this is not a common occurrence, it is not unheard of.


 
Options for Getting a Car Loan
As a Centrelink payment receiver, you do have the option of applying for a car loan from lenders who consider benefits a form of income. However, you may also have better luck being approved if you find a suitable cosigner to be listed on the loan.

A cosigner who receives income from employment may provide the lender with the assurances they need to feel secure in providing the funds. It is important to understand that the cosigner will become legally obligated should you fail to repay your debt, and not everyone is comfortable entering into such an arrangement.

Before you consider getting a car loan, review your financial situation to determine if you can truly afford payments. It is also wise to review your credit report to determine your odds of being approved with or without a cosigner.

For lower car finance amounts ($7k or lower), there are a few other Centrelink car finance options from specialist lenders and non-profits. If however the vehicle you are after is over $10k, speak to your bank first or look to a cosigner.

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