Can I borrow from the government when I’m out of work?

At Savvy, we believe there shouldn’t be barriers to borrowing simply because you’re unemployed – here’s how we can help.

Loans for Unemployed

Being between jobs doesn’t mean your finances stop. The everyday brings unexpected events and expenses, and life doesn’t play by your cash flow. It’s essential you’re able to access emergency funds when the unplanned occurs, so what options do you have? In this guide to loans for unemployed people, we’ll talk you through what’s available.

Centrelink offers a cash advance between $250 and $500 to people on JobSeeker in certain circumstances. Your eligibility gets assessed based on a few different factors:

  • You’ll need to have been receiving JobSeeker for at least three months
  • You can only apply for a cash advance once in any twelve-month period
  • You are still repaying an advance received more than a year ago
  • You are in debt to any Australian government department
  • You are unable to repay the advance within six months
  • You are outside Australia when you apply

If you’ve been on Centrelink payments for a while and you find a job, Centrelink also offer the Special Employment Advance. This option provides sums between $50 and $500. It’s intended to help people when their Centrelink payments reduce due to gaining employment. If you get a job for a minimum six-week duration and your income support drops by at least 50%, you can apply. You can also apply for the Special Employment Advance when you find a job, but you can’t afford to buy an item you’ll need to start work. With any Centrelink advance, your regular benefit payments will reduce while you pay back the loan.

Some non-profit organisations offer low or no-interest loans to people receiving Centrelink payments. You’ll need to meet the eligibility criteria, which will differ from lender to lender, in order to apply.

Are personal loans available for the unemployed?

When you’re out of work, it can be frustrating. The fact of the matter is, however, that there’s a higher turnover of jobs and employees these days. Employment culture has changed. More of us work on temporary contracts. Many of us likely will find ourselves between jobs at one time or another. Whether your income is in the form of a paycheque or benefits, at times, you’ll need to access loan products.

Many providers offer personal loans for unemployed people. You can apply for sums between $300 and $5,000 online, with repayment periods ranging from 16 days to 24 months. Responsible lending guidelines assess your ability to repay – not so much your employment status. That makes smaller personal loans a fast, convenient option when you’re out of work. You will need to prove some form of regular income – which can be Centrelink payments. You’ll also have to be an Australian resident or citizen, at least 18-years of age.

How can I make sure I don’t over-borrow?

When it comes to ount, it’s essential not to over-borrow. No matter how good a product, every loan costs money. While it often makes sense to spread costs and take on some debt, it pays not to take on too much. Before you apply for any loan, it’s a great idea to sit down and work everything out on paper. Figure out how your loan payments will fit around your regular monthly expenses. Take your day-to-day living and bills during the repayment period into account. Make sure to allow for the change in your cash flow while you pay your loan back.

It’s also important not to under-borrow – it’s not helpful to take out too many loans in any set period. Every time you apply for a loan, lenders check your credit report and leave a visible impression. Loan providers don’t like to see excessive impressions. Responsible lenders also won’t approve too many loans all at once. The best way to avoid the problems connected with too many applications is to plan ahead. While you just can’t predict every expense and purchase, you can cover as many bases as possible. For instance, if you need to repair your car right now, might you have additional cash flow issues in a month or two? If so, borrow enough to cover both. That’s going to save you taking out two loans instead of one.

Fee caps on personal loans below $5,000 mean costs are easy to calculate. You’ll pay a maximum 20% of the original loan amount in set up fees. Then you’ll be charged a maximum of 4% on each repayment. In addition to fee caps, a ‘debt spiral cap’ also protects consumers against excessive default and late payment fees. Regulations dictate that you will only ever have to pay back 200% of the original loan amount. That means, if you do experience difficulty during the loan repayment period, you won’t fall deep into debt.

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