Can I get a car loan if I am on disability benefit?

Not every lender will accept pensions or government benefits as income when assessing loan applications, though some lenders will. Borrowers on disability benefits can still apply for a car loan, though it’s important to calculate if you can comfortably afford the loan before you apply. 

What income types do lenders prefer?

Before a credit provider will accept a loan application, they’ll want to be confident that the borrower can afford the repayments. This means that borrowers who can provide proof of consistent income (e.g. payslips from their job) are generally more likely to see their loan applications approved than those who earn less consistent incomes (e.g. freelancers and contractors).

With this in mind, many lenders don’t consider temporary benefits from Centrelink (e.g. Youth Allowance or JobSeeker) to be acceptable income to help a borrower service a loan. However, some lenders may consider longer-term benefits to be more consistent, including disability support pensions and National Disability Insurance Scheme (NDIS) payments.

Different car finance providers may have different income requirements for potential borrowers, and these may vary further, depending on your personal financial situation. Before making a car loan application, consider contacting a lender to confirm whether they’ll accept disability benefits as income.

Can you afford a car loan?

To get an idea of whether you can afford a car loan on your disability benefit, a car loan calculator can help you work out how much the repayments could cost, based on the loan size, the interest rates, and the loan term.

You can compare the results of your calculation to your income (including your disability benefits and any other sources) and expenses to work out how a car loan may fit into your household budget.

What’s your credit score?

It’s also important to consider your credit score when you apply for a car loan. Based on your history of borrowing and repaying money, these scores are generated by credit bureaus and used by lenders to get a better idea of the risk involved in lending you money.

If you’ve successfully applied for and repaid loans and credit cards in the past, you’re more likely to have good credit, which may help improve your chances of being approved for a car loan.

But if you have missed repayments or defaults in your credit history, you’re more likely to have bad credit and may find it harder to get a car loan approved.

You can check your credit score for free to get a better idea of how a lender may see you as a borrower, and whether you may need to take extra steps to improve your car loan application’s chance of approval.

What types of car loans can be compared?

As well as comparing car loans with fixed interest rates (which have consistent repayments but may offer less flexibility) or variable interest rates (where the interest charged on your loan may rise or fall), you can also choose between a secured car loan and an unsecured car loan.

Secured car loans use the value of the vehicle as collateral to guarantee the loan, reducing the lender’s risk so you’re more likely to enjoy a lower interest rate. However, you may be limited to certain models of newer cars to ensure they retain enough value to secure the loan, and you risk losing the car if you default on your repayments.

Unsecured car loans don’t require you to provide collateral, so they may be used to purchase a greater variety of car types and you don’t risk losing your vehicle, However, you’re more likely to pay a higher interest rate for an unsecured car loan.

It’s important to compare a variety of different car loan options from a range of potential lenders to get a better idea of which offers may best suit your financial situation and personal needs. A car loan broker may be able to help you narrow down the available options further, and also manage the application process to help get you approved.

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