Car loans for single parents
Life can be tough as a single parent, you’ve got to do everything and be everywhere at once. And having a car for many single parents is a necessity to meet some of the ever-mounting demands of family life.
Unfortunately, some single parents find it tricky to procure car finance, as single parents are often:
- Reliant on a sole income
- Working part-time in order to care for their children
- On PPS (Parenting Payment Single, also known as parenting pension payments)
- On Centrelink payments
- In debt and have bad credit
According to ACOSS (Australian Council of Social Service) “less than half of sole parents on social security payments get child support from their former partners”. Relying on credit cards, Centrelink and PPS payments is a necessity for many single parents and having bad credit is often the result of this.
Can I get a car loan as a single parent with bad credit?
There are a number of lenders who specialise in bad credit car finance, so if you’re struggling to be accepted for a loan as a single parent because of your credit history, there may be options available for you. Unfortunately, bad credit car loans often come at higher interest rates, and if you are a supporting a family on your own, you may find that you struggle to meet the repayments.
Be careful not to over-apply for loans, as being rejected from multiple applications will negatively impact your credit score.
Can I get a car loan if I am a single parent?
There are car finance options available to you if you are a single parent struggling to be accepted for a standard car loan. Relying on one income can make being accepted for a car loan tricky, particularly if that income is smaller than average due to part-time work or is subsidised by Centrelink payments or PPS.
How do car loans for single parents work?
If you depend on a single income, perhaps from a part time job, and also look after the family, it can be worrying when you realise you do not meet the financial requirements that some lenders set. You may be surprised and pleased to learn that several different types of car loans for single parents are available from a number of lenders.
For example, if you are already receiving government funds from Centrelink and have a regular income, you may be eligible for a loan. You may be able to apply for no-interest loans if you are borrowing for goods or services deemed essential. With a regular income, you may be in a position to choose a short term or a secured loan to purchase a car. There are also charitable organisations that partner with banks to provide finance for single parents and families on low incomes for a range of purposes.
Can I get a car loan on Centrelink payments?
Lenders will generally consider your employment status as an indicator of how likely you are to be able to meet the repayments, and not default on the loan. Some factors that may improve your chances of being accepted for a loan when you receive Centrelink or PPS payments are:
- Having a part-time job
- Being an Australian resident
- Have an income or benefits of over $400 a week
Can I get an unsecured car loan as a single parent?
Car loans are often secured by the vehicle, but unsecured car loans are provided by some lenders. Lenders tend to be more willing to lend out smaller sums of money to applicants, so single parents with lower earnings are probably more likely to be accepted for a loan for a cheaper, second-hand vehicle rather than from a new car, and some used cars do not meet certain criteria that allows them to secure a loan. With RateCity you can compare loans specifically for used cars.
The downside is that secured car loans often have the benefit of having lower interest rates, because the security of the car reduces the risk to the lender, so while you may be paying less for the vehicle, you might find that you end up paying more for the loan.
But there are some used car loans that do use the car as security. Alternatively, you have the option of finding a guarantor for your loan.
Can I get a guarantor car loan as a single parent?
An option for financing a car as a single parent is to get a car loan with a guarantor. This might be particularly helpful for single parents who are looking to buy a second-hand car that a lender isn’t willing to use as security on the loan, because a guarantor in some cases can use their own vehicle as security. This security reduces the risk to the lender and may mean that they are willing to accept the loan at a lower interest rate.
What are the features?
Interest rates may be fixed or variable, and some lenders offer flexible repayments, which means you may be able to make extra payments when this suits and repay your loan early without incurring penalties. Loan terms refer to the length of time you will have to repay the sum you have borrowed. These vary enormously and it’s usually possible for you to negotiate terms with your lender that suit your income level and cash flow. Often terms for variable loans are slightly longer than those for fixed rate loans.
At some point there are fees payable for arranging a loan, however some lenders charge more than others. You may be charged an application fee upfront, and then nothing further. Conversely, your loan may be awarded without paying a fee, but there may be monthly accounting charges to pay. Sometimes lenders offer additional features, such as a redraw facility or an extended warranty.
What are the pros and cons of car loans for single parents?
Getting help when you need it to purchase a car is obviously beneficial for you and your family. With the right deal, you can make the most of car ownership at an affordable price.
Be vigilant and aware, as sometimes lenders that are less than reputable will hike up fees and charges so much you will have difficulty meeting your financial commitments. Always check your eligibility with a potential lender before making a car loan application.
Who can help me get a car loan as a single parent?
Single parents may find that the big banks are less likely to lend to them and looking towards smaller lenders could be beneficial. Single parents could also benefit from getting in touch with a car finance broker, as a broker is likely to have knowledge and access to options that are suited to their needs.
There are two main advantages with using a broker:
- Generally, finance brokers don’t charge for their services, as they receive commission payments from lenders
- Approaching lenders directly means they will only recommend their own products. A broker will be able to recommend car loans from a range of lenders and find you the best deal for your circumstances
Finance brokers are qualified professionals who are required to follow the National Credit Code and to observe responsible lending practices.
Other options for help with a loan as a single parent
If you are a single parent who is really struggling to make ends meet, there are low cost financing options available to people in certain circumstances. You can try to contact Good Shepherd Microfinance, who provide no interest loans (NILs) to people on a case by case basis.
For more support managing your personal finances, check Moneysmart, or contact the National Debt Helpline on 1800 007 007.