How to get a car loan if you're retired or receive a pension.
It can be hard to get a loan if you're on a pension, but you still have plenty of loan options to choose from.
If you're a pensioner, read our guide to find out how to finance your car and compare loans below.
Can I get a car loan if I am retired or on a pension?
Yes. You don’t have to be working to get a car loan, as long as you still have some kind of income, such as income from investments or other assets, Centrelink payments, a disability pension, age pension or another kind of pension. However, your range of options will generally be more limited than someone who is still in full-time employment. To save time and avoid application fees, you’ll want to make sure you're eligible for a loan before applying.
There are two possible ways to start:
- Find out how much you can borrow and then find a car to match. If you want to know how much you can borrow and then pick out a car based on that amount, you can be pre-approved for a car loan. If this sounds suitable for you, find out how to get pre-approved car loans here.
- Decide what kind of car you want, then find a loan to match. This will often help you save money overall, because you might end up borrowing less, having lower repayments and finding a more competitive offer. Read on if you’re interested in doing it this way.
How do car loans work if you're retired or receiving Centrelink benefits?
Generally, you’ll need to demonstrate that you’ll be able to keep up with repayments. A lender will look at how much you earn from your pension, any Centrelink payments or other income, then compare it to the repayment amounts.
This means your application is generally much more likely to be accepted when you’re borrowing smaller amounts. It might be a good idea to look at buying a used car rather than a new one and putting your savings towards the cost of the car so you don't need to borrow as much.
If you only need to borrow a smaller amount, such as under $3,000, you may want to consider a short term personal loan rather than a car loan.
This is because:
- Car loans usually have higher minimums. Depending on the provider, you might not be able to get a car loan for amounts less than $3,000 or $10,000. You would then end up borrowing more than you need and paying more in interest than you should.
- Car loans are usually secured. This means that if you can’t keep up with repayments, the car might be repossessed, leaving you out of pocket and without a car. You can also find unsecured car loans, although they have higher interest rates and sometimes have stricter requirements.
What criteria will I need to meet if I'm retired or on a pension?
Applications are handled on a case-by-case basis and different lenders will have different criteria that you will need to meet to be eligible for a loan. Generally, you’ll have to be able to prove to the lender that you can keep up with repayments. This mostly involves looking at the difference between your incoming payments and outgoing expenses and seeing if your budget also has enough room to cover the cost of your repayments.
Some lenders also have specific requirements in addition to this. These are:
|Lender||Eligibility criteria||Review the loan|
What should I look for in pensioner car loans?
A car loan can be with you for a long time, often over five years, so it’s worth making a careful choice and considering the costs.
- Secured or unsecured? You might be able to find better rates with a secured loan, but an unsecured loan might be less hazardous if your circumstances change and you fall behind on payments. It is generally easier to be approved for a secured loan, as it represents less risk for the lender.
- What is the interest rate? Generally, the lower the interest rate, the lower the size of your repayments. However, you should also factor in any fees and charges to determine the true cost of the loan.
- Fixed or variable rates? Fixed rates will stay the same over your loan term, while variable rates may change over the course of your loan. In favourable conditions, this means you may end up with a rate that decreases during your loan, but you also risk rates rising and having to pay more for your loan. If you’re on a pension, a fixed rate loan may be more suitable than a variable rate loan as it provides certainty around the size of your repayments.
- What are the fees and charges? If you’re not sure you’re eligible for a loan, you might want to watch out for high application fees. Generally, fewer and lower fees are better, but you might find a loan that offers more value for money in the long run, at the cost of higher initial fees.
- How much can I borrow? What are the minimum and maximum amounts you can borrow with different loans?
- How long is the loan term? How long will you be making repayments? You will generally pay more in interest over a longer loan term, but the size of your regular repayments will be smaller. Lenders will also generally offer better rates to those who can pay off the loan in a shorter period of time.
When you apply for a loan, a provider might suggest loan terms to suit your financial situation. For example, a car loan for pensioners might be more likely to come with a longer repayment period and as a secured rather than an unsecured loan.
What if I have bad credit?
If you're a pensioner with bad credit, it's still possible to get a car loan, although your options may be more limited. You're more likely to be approved for a secured car loan, as this type of loan represents less of a risk for the lender. If you fail to make your repayments, the lender can take ownership of the vehicle to cover the cost of the loan.
You will also generally receive a lower rate on a secured car loan than on an unsecured loan, which means you may be more likely to make your repayments. However, many lenders now offer personalised interest rates based on your financial history and credit score. If you have bad credit, you may be offered a higher rate than someone will good credit.
You can also compare car loans for people with bad credit, though you may not be eligible if your primary source of income comes from your pension or Centrelink.
How to apply for a pensioner car loan
It’s important to make sure you fully understand all the terms, conditions and obligations before signing up for a loan.
You can compare car loans in the table below and select different loan amounts and repayment periods to see how much you’ll be paying back each month. This can help you work out whether you’re going to be able to keep up with repayments and whether your application might be accepted by different providers. It can also help you put the interest rates in more concrete terms and work out how much you’ll be repaying per month.
Once you've found a loan that is right for you, you can apply by clicking "Go to site" and following the instructions. You will generally need to provide personal and financial information as part of your initial application, as well as proof of your pension and other income, assets or liabilities.