If you are receiving Centrelink or Newstart benefits, getting a personal loan can have its challenges. Most mainstream lenders or banks have very strict lending criteria which can make things difficult for borrowers whom don’t have a full-time job and good credit.
Generally it’s the payday loan operations or similar businesses that will provide loans to individuals with irregular income or bad credit. In certain instances these types of service may benefit the borrower, but in many cases, they end up in a worst position. The charges and fees for these types of loans are generally very high. In addition, if you miss your repayment, expect to be slugged with a very high fee and increased interest rate. Just make sure you read their terms carefully and fully understand what you are signing up to. As mentioned above, these types of services may be beneficial in certain circumstances.
If you are in need of a personal loan and rely solely on Centrelink or Newstart for an income, there are options available to you albeit not as many as if you had a job. Below are a range of options which will help you access funds if welfare is your sole method of income.
POSSIBLE OPTIONS INCLUDE:
Microloans – If you are in desperate need of $100 – $5000 dollars, this may be the option for you. One of the benefits of a microloan is the speed in which you can receive them (generally within 48 hours). If you are in need of cash immediately, this may be an option for you. As mentioned above, make sure you are aware of the terms and all fees that may be involved.
Specialist Lender – If you are having trouble qualifying with the banks, try a specialist lender. These businesses provide different loan options for people on Centrelink, low incomes, bad credit and other circumstances or criteria that may be unfavorable for the banks.
StepUP – Is a program that allows for small personal loans up to $3000. These loans come with a low fixed rate and have no fees or charges attached to them. These loans are typically for everyday living needs, such as a second hand car, household goods (fridge, washer, dryer, etc…), medical treatments, etc…
Centrelink – Current users of Centrelink may be unaware of low income concession cards. This is for a lesser amount than above but can help with certain circumstances. In addition, if you are currently receiving a Centrelink payment, you may be able to receive an advanced payment. An Advanced Payment is a process where you can obtain a part of your normal payment in advance as a lump sum. You can learn more about this service on the Human Services website under “Advanced Payments”.
Community initiatives – In certain states and cities, there are different types of non-profits or community centres that may provide local residence with micro loans to help with different financial troubles. One good place to start is with your local non-profit financial counsellor, they may be able to provide you with more assistance, beyond a loan.
Banks/Building Societies – In certain circumstances banks run different initiatives that provide loans for people on Centrelink or on a low income. These programs come and go with the different banks so it is worth asking as they may have a product that suits. Don’t just apply for any random loan that has great rates and favourable terms as you may not qualify based on income source. Make sure that you talk to the banker/lender and discuss your background and ask them about possible products that would work. Do be mindful of your credit score, if you apply for loans to multiple lenders in a short period of time, this may have a impact on your credit score in a negative way.
Alternative Cash flow – There are alternative methods beyond loans for people on Centrelink to create savings or increase disposable income. Look at addressing your current bills and family budget. A reduction in monthly costs across your home and living services can go along way. Avoiding taking out a loan by creating savings through budgeting!
Finding loans for people on Centrelink can be difficult, however there are other ways beyond a loan to access money. In addition to the options above, think about selling unwanted items on eBay or having a garage sale. If you don’t want to sell items, perhaps use a pawn broker. These options are great as you are obtaining money without a loan, potentially keeping you out of further debt.
Picking up part-time work is another great option opposed to applying for a Centrelink loan.
If you know of any additional loan options for people on a low income or collecting benefits, please provide details in our comments section. As general options are limited any help in giving readers more choice is welcomed and encouraged.
Below are other non loan options for people on Centrelink or in financial hardship and need government assistance.
Whilst the Australian government provides numerous financial services for those experiencing money problems, many Australians are unsure of what these services are. Recently the government updated their websites and introduced some new finance related sites to help Australians manage their money better. These changes are excellent in letting Aussies know what services are available and how to qualify. If you are currently on Centrelink, and the before mentioned concession card or advanced payments are of no use, look into the income management service. It’s essentially budgeting assistance and rearranges how you receive your current payments to make sure you are on top of your bills.
If you currently are not on Centrelink and are in serious financial hardship, look into the special benefits service. This is for those who are unable to earn a income to provide for their family or themselves do to circumstances outside their control.
For more government services, visit www.humanservices.gov.au/customer/information/centrelink-website or for information on managing money visit www.moneysmart.gov.au/
COMMON QUESTIONS ABOUT LOANS FOR PEOPLE ON CENTRELINK BENEFITS
1. Why do so many payday loan businesses target people on Centrelink?
Many banks and mainstream lenders tend to view borrowers on welfare as a risk. This generally has to to with their financial situations and ability to make repayments although there are other factors considered as well. Payday lenders have lending criteria that may be a bit more flexible making it easier to qualify. However the cost associated with these loans are typically high and if the borrower is unable to make the repayments, fees can quickly get out of hand. Because of the high costs associated with these types of loans, they have received a decent amount of negative press in the past.
2. Does applying for a loan when on Centrelink affect credit?
Yes it can, if you are applying for multiple loans in a short period of time this can have a negative impact on your credit rating. Watch out for lenders that state they can approve anyone, make sure you do your due diligence on them. In the end they may be just giving you false hope. If you are desperate for money, please look at some of the options listed above which are provided by the government or non-profits.
3. How can I improve my chances for getting approved for a loan whilst on Centrelink?
There are a few things that a person can do. Try having a co-signer who has a stable job and good employment history apply for a loan with you. There are possible secure loan options where by you use some sort of asset as collateral (like a car, boat, home, etc). One of the best things you can do is talk to the potential lender and give them your complete background and ask them if based on your situation if its work applying. As mentioned above, applying to multiple lenders can have a negative impact on your credit rating.
4. Why are my small loan applications getting denied, I have good credit?
If you your sole income is from Centrelink, most providers will not approve your loan request as they generally require some form of employment in addition to the welfare benefits. If you have a mixed income and the majority of it is from Centrelink, a good rule of thumb is that the repayments on the loans should not exceed 20% of your total income. Do note that this is just one aspect of lenders approval criteria and does not guarantee a successful outcome.
If you are on a low income and/or collecting Centrelink, there are additional things you can do to manage your money better. Here is a list of immediate actions you can take to improve your financial situation without taking on a loan.
- Budgeting: This is obvious and is one of the most important things you can do to take control of your finances. The government even has professional services to help you get this done for free, regardless if you are on Centrelink or not. Visit Financial Information Service (FIS) to get help with budgeting or with retirement planning if you are a senior. Also contact the free financial counselours who can also get you on the right track. Lastly if you are on Centrelink you can get help with your bills via bill smoothing through Centrepay.
- Make sure you getting all the benefits you are entitled to: Review Centrelink calculators to see if there are any additional benefits you may qualify for. Also, visit the Family Assistance website if you have a family to learn about more financial grants and benefits.
- Bank accounts: Make sure you are on the best deals available. This is a simple change which will save you money. Check to make sure your account doesn’t have account keeping fees, monthly statement fees, atm fees or any other costs or fees in general. Some banks have a tendency to hide different costs or fees in the fine print or have sneaky criteria that you must follow to receive free services.
- If you do need a loan, avoid payday lenders and look at the Centrelink loan options provided above.