How a Pensioner Can Qualify for a Car Loan

If you are a senior on a pension, it can be challenging to find a suitable car loan. Whether you are a recipient of the aged pension, disability support, or another pension scheme, certain financial institutions may be hesitant to work with you.

If you receive Centrelink payments and are looking for a car loan, here are some things that can help you qualify.

Consider Your Primary Bank First

Often, a regular bank or credit union will have more favorable interest rates than some specialty alternative lenders. If you have a solid relationship with your current bank or credit union, they may be able to offer financing if they are able to factor in your previous account activities. However, certain minimum requirements may exist, and those restrictions may limit their ability to offer a loan. While your previous relationship does not guarantee you will qualify, it is often wise to check here first.

Loans for Retired People

Retired persons receiving the age pension, disability pension, or carer’s supplement, may qualify for special financing options, through a variety of financial institutions, designed specifically for their personal situations. The fact that a car loan is secured by the value of the vehicle helps lower the risk to the financer. This can help them create offerings designed to work with your income restrictions while still offering favorable rates.

Find a Reasonably Priced Vehicle

One way to improve your odds of obtaining financing is to locate a vehicle with a lower sales price. Since the price of the car is lower, the financing institution is assuming less risk than a higher priced vehicle. It will also lower the monthly payment, making the payment more affordable. Many institutions will want your payment to fall below a certain threshold when compared to your income. For example, a lender may want your car payment to be no more than 25 percent of your income.

Cars with higher resale value can also be appropriate for obtaining financing. Vehicles that depreciate slowly provide additional security to the lender should you default as their resale value remains higher over the course of the loan.

If you are looking at a low cost second hand car, there are a few non-profit and government based opportunities available – review possible Centrelink lending options and pensioner specific loans here.

Have a Down Payment

Placing a down payment on the car is also a favorable move. Not only will this lower the amount being financed, it also makes the debt to value ratio more favorable in the eyes of the lender. This can help lenders feel more comfortable with funding the loan as the car is valued higher than the amount remaining on the loan.

In some cases, a down payment may be required as part of the financing arrangement. While other institutions may be willing to finance the entire value of the vehicle, having a down may help you secure a lower interest rate while also keeping your monthly payments low.

The Bottom Line

Financing options for pensioners do exist, though they are not offered by every financial institution. Before you begin the process of finding a new car, contact a few lenders to find out what minimum qualifications are in place. That way, you can prepare in advance and increase your odds of obtaining the financing you need.

Alternative Transportation Help

If you can get by without having a car, there are other subsidised transportation options available for Australian seniors. In many cases, these can be better solution as you do not have to deal with the ongoing costs and maintenance of owing a vehicle. See a full breakdown of actual ownership costs of a vehicle in addition to other potential low income car loan options.

 
Potential transport alternatives:

– Taxes or Uber can be a great alternative to occasional trips to various places.
– Utilise different seniors cards to get great discounts for public transport.
– Senior support services, many communities have senior support services, which includes transportation to and from medical appointment, grocery shopping and general social outings. Check with your local counselor or church to learn about services in your area.
– Car pool with friends, reaching out to your local network can be a great way in getting occasional help for different outings.

The above options are the main types of assistance available for seniors in need of a car or general transportation. As a pensioner on a fixed income, it can be hard to find genuine financing. Reviewing the above will provide a great starting point to help keep you on the road.