Just because you receive a pension doesn’t mean you can’t take out a loan.
If you receive Centrelink payments, including the pension, and are looking for a loan, you may find your options somewhat limited. Lenders have stricter criteria for those receiving disability support pension (DSP) carer's pension or the age pension.
It’s important to know that there are loan and financing options out there. It’s even more important to know how to compare these options so you find the right product for you. Read on to see what’s available, compare your options and find out how to apply.
If you’re experiencing financial hardship and would like to speak to someone for free financial counselling, you can call the Financial Counsellors hotline on 1800 007 007. It is open from 9:30am to 4pm, Monday to Friday.
Some of the brands that consider pensioners for a loan
|Brand||Can pensioners apply?||What conditions are there?|
|Cash Converters||Your loan repayments cannot exceed 25% of your income from the pension.|
|Cash First||You also need to be employed.|
|Cash Stop||You're able to apply.|
|ClearCash||You're able to apply, applications are handled on a case-by-case basis.|
|Credit24||At least 50% of your income needs to come from outside of Centrelink payments.|
|DollarsDirect||You need to be currently employed.|
|Ferratum Loans||You need to earn 50% of your income from outside of Centrelink payments.|
|Good to Go Loans||You're able to apply, applications are handled on a case-by-case basis.|
|Max Finance||You're able to apply, applications are handled on a case-by-case basis.|
|Nimble||You need to be employed and your primary source of income can't be from Centrelink.|
|Rapid Finance||You're able to apply, applications are handled on a case-by-case basis.|
Banks that may consider you for a loan
|Brand||Can pensioners apply?||What conditions are there?|
|ANZ||You need to earn $15,000 p.a.|
|Aussie||You need to earn $24,000 p.a.You need to be in regular, paid employment|
Centrelink is a valid form of supplementary income
|Bank of Melbourne||Age pension and DSP are accepted|
You'll need to provide a letter from Centrelink detailing your pension payments.
|BankSA||You're able to apply, applications are handled on a case-by-case basis.|
|Bank Australia||You're able to apply, applications are handled on a case-by-case basis.|
|bankmecu||You're able to apply, applications are handled on a case-by-case basis.|
|Bankwest||DSP and parenting payments are accepted.|
You'll need supplementary income to be able to apply.
|Bendigo Bank||You need to be in regular, paid employment.|
Centrelink payments are accepted with supplementary income.
|Citibank||You need to earn $35,000 p.a.|
Age pension is accepted.You can apply if your pension income is taxable.
|Commonwealth Bank||You need to earn $14,000 p.a.|
Parenting payments, DSP and carer's pension are accepted.
|NAB||Some Centrelink income is considered.|
You need to demonstrate you can afford the loan repayments.
|St.George||Parenting payments and DSP are accepted.|
|Westpac||You need to earn $15,000 p.a.DSP is accepted.|
What loan options do pensioners have?
The right loan will depend on your financial situation and also the type of pension you receive. Here are a few options that people on the pension can consider:
- Your existing bank. If you've held an account with your bank or credit union and have good history with them, this may be a good place to start. You can visit in-branch to discuss your options and find out what loans might be available.
- Low doc loans. These loans are designed for self-employed applicants or for borrowers whose incomes are tied up in investments. If this describes your situation, it might be an option to consider. tKeep in mind these loans usually come with higher interest rates and will normally only let you borrow up to 80% of the property price.
- Short-term loans. As these loans are smaller and repaid in the short term, they have more flexible lending criteria than what is set by banks and other lenders. You can usually borrow between $100 and $2,000 for a period of 16 days to one year. Many lenders understand the pension payment varies from each pensioner to the next. Your income and expenses will be verified before your loan is potentially funded.
- Bank loans. Some banks, such as those listed in the table above, consider applicants receiving the disability pension or age pension. You will usually need to meet a minimum income criteria to be approved.
- Loans for retirees. If you receive the age pension, are a self-funded retiree or are a pensioner, there are loans specifically designed for you and lenders that will consider you. Follow the link below to find out more about retired loans.
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- Loan Amount: $1,900
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- Must be 18+
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Here are some loans that pensioners could apply for
*The cost may change and this is dependent on any other fees and charges applied by the lender at the time of your loan repayment
Warning about Borrowing
It can be expensive to borrow small amounts of money and borrowing may not solve your money problems.
Check your options before you borrow:
- For information about other options for managing bills and debts, ring 1800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor
- Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan
- If you are on government benefits, ask if you can receive an advance from Centrelink: Phone: 13 17 94
The Government's MoneySmart website shows you how small amount loans work and suggests other options that may help you.
* This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.
Government assistance schemes
The Government has established a few schemes and support options for people who are receiving the pension.
- Pension Loans Scheme
This loan is for people who are of pension age but are ineligible for the Age Pension due to assets or income. Using this scheme you can access capital tied up in your assets to provide extra income. You are able to receive up to the maximum amount of the Age Pension, with payments made each fortnight.
- No Interest Loans Scheme (NILS)
This scheme offers loans of up to $1,200 to people on low incomes to buy essential household items, health items or to pay for car repairs in some cases. To be eligible you must hold a pension card and be willing to repay the loan within 12 or 18 months.
- Centrelink Cash Advance
If you regularly receive pension payments you may be eligible to receive one of your payments in advance. Whether you are eligible depends on the type of payment you receive, how long you’ve been receiving it and the amount you receive.
Case study 1: Sharon and Greg
As a couple, Sharon and Greg receive $1,154.80 through the disability support pension after Greg had an accident at work. This is their only source of income. They are renting an apartment and their budget is stretched tight, not leaving any room to purchase any large items. Their fridge breaks down and they look to see if they have any loan options to purchase a new one.
They work out that they need $800 to buy a new fridge, have it delivered and have the old one taken away. They are not eligible for a personal loan from most of the larger banks because their income is not sufficient. They consider their payday loan options, which will allow them to borrow the money and make repayments to coincide with their Centrelink payments. But they find out that they would have to pay back the loan within 50 days with the payday lender they are looking at and this will not be manageable on their budget.
They then take a look at the StepUP program and realise they will be able to borrow $800, or more should they need it, because they are using it to finance an essential household item. They can choose to pay the loan back over two or three years and their payments can be as low as $20.15 a fortnight. They decide that this level of repayment is manageable on to their budget. The loan also comes with a low fixed rate of 5.99% p.a. and is more affordable than some of the other loans they were considering.
All rates, fees and repayments correct at the time of writing
Community financial assistance programs
If you have successfully repaid a NILS or StepUP loan then you are eligible for a matched savings plan. Once you have $300 saved the bank will put in a dollar for every dollar saved, up to a limit of $500.
- Saver Plus.
This program helps families and low income earners to improve their finances by developing savings plans and building assets. As you save you will be matched dollar for dollar up to a limit of $500.
- Good Money.
Operating out of Victoria, this community finance hub helps people access no- or low-interest personal loans, such as NILS, to purchase household goods. They also help people to better manage their money and improve their finances.
- NAB StepUP program.
This program offers low-rate personal loans for amounts between $800 and $3,000 to buy essential household items. There are no fees and charges and the interest rate is fixed.
Case study 2: Linda and Grant
As a couple, Linda and Grant receive $1,270 in super repayments every fortnight. They’ve paid off their house and have a small source of additional income from a rented-out investment property. While their payments are enough to support their lifestyle, they don’t have the means to make additional larger purchases. When their car stops working, they want to take out a personal loan to buy a replacement.
They are currently with the Commonwealth Bank and want to take out a loan with them. They look and see that they can borrow $5,000 at an interest rate of 9.49% p.a*. Calculating the repayments they can afford, they see they can make repayments of $125.59* per month and repay the loan within four years. They find out that Commonwealth Bank requires a car to be less than five years old, but they can only afford an older car. They look at the unsecured loan option but it is outside of their budget.
They then consider an unsecured loan option from ANZ, but see that they will have to pay fees every quarter that will cost them money over the life of the loan. They then see a loan option, the Citibank Ready Credit, that will let them borrow $5,000 for a fixed rate of 8.99%* p.a. for a term of four years. They like the fixed rate because it will let them plan for their repayments and the competitive rate on offer seals the deal for them. All they have to do is prove they have a taxable income of $35,000 per annum and they can buy the car they had in mind.
All rates, fees and repayments correct at the time of writing
How pensioners can apply for loans
The table above will give you a good starting point to find a pensioner loan. You can click through to the page to find out more about the personal loan options available, and you can click "Go to Site" to submit your application. If you have questions regarding your eligibility it would be best to contact the brand directly.
Every loan application you make will be listed on your credit file and making too many applications within a short space of time will not look good to a prospective lender. If you would like to see if your bank would approve a loan for you, have a chat to them over the phone, online or in a branch to see what they say before you apply.
To apply, you will need to provide personal information including your name and contact details, as well as financial information regarding your pension payments, assets, debts and open credit accounts.
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