When you’re currently receiving Centrelink payments, you are usually eligible for small loans from a variety of lenders. You also might be eligible for additional government and community assistance.
Because those who receive Centrelink payments typically earn a lower income, you have to be careful when getting a loan. There are a lot of lenders who practice predatory lending, and you also need to ensure you know just what you’re agreeing to. Like with any loan, you’ll need a long-term debt payoff plan so you can make progress on your own financial goals. Let’s dive deeper into the dos and don’ts of getting a loan on Centrelink payments.
What Types of Loans Are Available?
First, you need to know what types of loans on Centrelink payment are available to you. They will all depend on your specific financial situation, job status, and Centrelink program. Always review eligibility requirements before applying to avoid wasting your time. When in doubt, talk to a professional.
Generally, you have these options from a variety of lenders:
- Personal loans – The most common option is a personal loan. You can get a personal loan from a bank, credit union, or another lender even if you’re receiving payments from Centrelink. However, these types of loans usually have a minimum income requirement, and not all types of Centrelink income are allowed.
- Car loans – Many car loan lenders accept Centrelink applicants. Your payments are used as security for your loan, and this means you usually get a lower interest rate.
- Payday loans – The type of loan that’s often promoted to Centrelink recipients is payday loans. A payday loan is a short cash loan usually up to $2,000. These can be predatory if you’re not careful, and many find themselves trapped in the payday lending cycle.
- Centrelink cash advance – You might be eligible for a cash advance on your existing Centrelink payments. This typically can only happen once a year, but it’s a great alternative to a loan.
- Overdraft – If you’re in good standing with your current bank, you might be approved for overdraft facility. This means you can draw up to a certain limit from your account even if you have a low (or no) balance. These are typically only for emergencies.
The Dos of Getting a Loan on Centrelink Payments
Now that you know what types of loans are available, let’s talk about what to do and what not to do. There are many advantages to getting a loan on Centrelink.
First, you might be able to put this cash towards consolidating or paying down existing debt. All of this could help you achieve your financial goals. In addition, a loan might help you out of a tricky situation. However, before signing on that dotted line, make sure you’ve considered these dos below.
Do read the fine print.
Before agreeing to any type of loan, read the fine print. Some loans, especially payday loans, have ridiculously high-interest rates. Even if it seems good at first glance, you could find yourself unable to pay back your loan at all. If it’s too good to be true, it probably is.
Do build an emergency fund.
Always build your emergency fund. Many people turn to loans on Centrelink payments to afford something unexpected, like a car repair or other emergency. An emergency fund is any money put aside to protect you against these unexpected costs.
Do understand Centrelink payments.
Finally, make sure you understand your Centrelink payments and their limitations. Not all lenders accept these types of payments. For example, the Youth Allowance is not accepted as a form of income. Learn more about your Centrelink payments and what’s possible.
The Don’ts of Getting a Loan on Centrelink Payments
Finally, there are a few things you need to be aware of to avoid hurting yourself financially. While loans can be a great tool when used responsibly, they also can become a slippery slope into even more debt. Follow these don’ts below to ensure you’re taking every step seriously.
Don’t skip a payment.
When you miss a loan payment, you might find yourself subject to fees and penalties. In addition, you’ll pay more in interest over time. This adds up to greater spending over the life of your loan.
Don’t forget about your budget.
How does your new loan fit into your existing budget? If you’re on Centrelink payments, you need to be mindful of your expenses and income. You don’t want to commit to more than you can afford.
Don’t expect an automatic guarantee.
Approval for a loan on Centrelink payments is often complicated. Even if your lender does accept Centrelink income, that doesn’t mean your application will be approved. When in doubt, work with a professional.
Find the Right Loan for You
It’s easy to think Centrelink income limits your ability to get a loan. In reality, you have many options from personal to car loans. However, like any loan, you need to be careful. You should never enter into a loan agreement without fully considering your long-term and short-term goals.
If you need help identifying the best loan for you, contact the experts at Debt Busters on 1300 368 322. We have over 15 years of experience helping Australians find freedom from their debt one step at a time. We’re here to help!