Regular loans aren’t available for pensioners, although there are some other ways for pensioners to receive a financial helping hand if they need one.
Why aren’t pensioner loans available?
Many investors and lenders are unwilling to assist pensioners with personal loans for several reasons. They fear that the pensioner, depending on their age and health, may die before the loan is paid off and no one else will be able to pay the outstanding debt. Also, a pensioner’s income level isn’t likely to increase. This means if a pensioner get into financial trouble, there are no additional funds which may arrive through pay rises to help them pay the loan off. Many retirees often have a low fixed income and some could possibly have impaired credit.
Who can help me?
The No Interest Loans Scheme (NILS) was designed by the Australian government for people on welfare benefits who need a way to access credit. The scheme can offer loans usually up to $1200 for terms of 12 - 18 months for people on low incomes. A NILS loan also has no interest charges or fees.
You can use NILS to purchase the following;
- Essential household goods e.g. fridges, computers, washing machines, computers or furniture
- Health items such as medicine, wheelchairs or asthma pumps
- If you live in an area where there is little or no public transport, you can use the NILS to pay for car repairs
NILS providers are based in local organisations and community centres around Australia and can be found though the Good Shepherd MicroFinance site. To be eligible, you need to show that you can repay the loan within 12 to 18 months and have a Centrelink Health Care or Pensioner Concession Card.
What are my options?
- ANZ Personal Loan. ANZ do offer personal loans to people on an aged pension, but you have to prove that you can service the debt by meeting the minimum income criterion. To prove your worthiness to purchase a home, you need to present yourself as financially stable. If you have an active credit and a regular source of income, the bank might see you as someone eligible for a personal loan. If you own properties of any kind, you can use these as a security towards the loan.
- Low Documentation Loans. If you’re worried that your bank will see your income as a disqualifier, you can apply for a low doc loan. This means that you only need to provide very little documentation in order to be approved for a home loan. However, low doc loans only let you borrow up to 80% of the security offered up, and generally have a higher interest rate.
- stepUP Loans by NAB. NAB and Good Shepherd Microfinance have teamed up to offer personal, unsecured loans between $800 and $3000 for individuals and families on a low income. The interest rate is offered at 3.99% and can provide credit for the purchase of essential goods and services. Recipients are also mentored by a microfinance worker through the loan term. To be eligible you need to hold a current Centrelink Health Care Card or Pensioner Concession Card, and have lived at your current address for more than three months. You must be able to attend a face to face interview at one of these locations.
- Payday Loans. Sometimes you may just want a loan to get you by while you are waiting for money to come in. These loans are called payday loans and can help you survive the short term. The main advantage of a payday loan is the ease of application and the fact you can get exactly the amount you need, instead of having to deal with a minimum or maximum amount. In regards to disadvantages, a payday loan can have expensive fees.
Centrelink Cash Advance - Age Pension and Disability Support Pension
If you already receive Centrelink payments, you may be eligible to receive part of your payment in advance as a single payment, called an advance payment. The rules differ according to the type of payment you receive, how long you have been receiving it and the amount you receive.
For those on an age or disability support pension, the number of advance payments that can be taken over any given six months are;
- one advance payment at the maximum amount
- one or two advance payments greater than the minimum amount, or
- three advance payments each at the minimum amount.
What amount is available to me (regular pension)?
|Advance amount||Single pension customer||Partnered pension customer|
Pension Loans Scheme.
If you’re of age pension age but don’t receive the pension for whatever reason or receive it a reduced rate, you can access the capital in your assets to provide extra income. The Pensions Loan Scheme provides financial support in the form of a loan for a short time, or indefinite period. It is paid in regular fortnightly non-taxable repayments and you can nominate an amount up to the maximum age pension payment. To be eligible, you need to have real estate in Australia to use as security for the loan, and meet the age pension residence requirements. The total amount of your loan depends on the equity you have in the property you offer, and the loan may also be repaid from your property after your death. To claim a pension loan, you can register an ‘intent to claim’ with Centrelink - this will help you get paid from the earliest possible date.
Case Study - Using a credit card and due diligence
Mandy currently receives the disability pension through Centrelink after experiencing back problems from her old job. She applied for a GE Credit Line credit card and purchased $1000 worth of furniture at Harvey Norman, where the maximum interest free period applied. While GE kept sending her minimal credit increases, Mandy never did any cash advances on her card and made all her repayments on time via direct debit.
By being disciplined in her repayments and knowing exactly what purchases had interest free periods, Mandy could budget for her new furniture.
Before you choose a personal loan from just any lending institution, you should do your homework. First, find the institutions that offer personal loans for pensioners. Then, compare the various loans against each other to determine which one offers the best deal. You’ll want to pay attention to the interest rate you’re being charged, along with any hidden charges and fees. You should also make absolutely sure you never borrow more than you can comfortably afford to repay.
Applying for a loan
A personal loan for pensioners may not be easy to access or available to many, but it could help you get your head above water - as long as you are able to pay back the loan and you’re smart with the money. Listed below are a few loan options available to pensioners, but like with any financial product, there is an eligibility criteria and a product disclosure statement that needs to be addressed.
Warning on Payday Loans
If you are going to apply for a payday loan, then make sure you have done your reasearch. Do you really need to borrow the money?