Car Loans – Hope When on Workers Comp (2026)

Finding yourself on workers' compensation can be a challenging time, especially when financial obligations, like needing a new car, arise. You might be wondering whether it's possible to secure a car loan while on workers' compensation. The good news is, it is possible, although it may require navigating some specific hurdles. This guide will provide you with everything you need to know to make an informed decision.

Understanding Car Loans on Workers' Compensation

When you're on workers' compensation, it means you're receiving payments due to a work-related injury or illness. These payments are intended to cover your living expenses while you're unable to earn your usual income. However, many lenders view workers' compensation as a less stable form of income compared to regular employment. This perception can impact your ability to secure a car loan. The key here is understanding how lenders view your situation and what you can do to improve your chances of approval.

Car Loan Rates, Requirements, and Options

As of 2026, car loan interest rates in Australia typically range from 6.49% to 12%, depending on various factors, including your credit score, the loan term, and the lender's policies. When applying for a car loan while on workers' compensation, lenders will generally look at the following criteria:

• Credit Score: A higher credit score can improve your chances of getting approved and securing a favourable interest rate.
• Income Stability: Lenders will assess the stability and duration of your workers' compensation payments.
• Debt-to-Income Ratio: This is a measure of your monthly debt payments compared to your income. A lower ratio is preferable.
• Loan Amount: The amount you wish to borrow and the value of the car can also influence approval chances.

Here's a comparison of potential options based on current market offerings:

How to Secure a Car Loan on Workers' Compensation

Though it might seem daunting, securing a car loan while on workers' compensation is achievable with the right approach. Here’s a step-by-step guide to help you through the process:

1. Review Your Credit Report: Obtain a free copy of your credit report and ensure all information is accurate. Address any discrepancies before applying.
2. Gather Documentation: Prepare documents that prove your workers' compensation income, such as statements and letters from your insurer or employer.
3. Calculate Your Budget: Determine how much you can afford to borrow and repay each month. Consider other living expenses and existing debts.
4. Research Lenders: Look for lenders who are open to alternative income streams. Esteb and Co, with access to over 83 lenders, can assist in finding the right match.
5. Apply for Pre-Approval: Consider getting pre-approved for a loan to understand your borrowing capacity and strengthen your negotiation position.
6. Negotiate Terms: Once you have pre-approval, negotiate the terms with your chosen lender to secure the best possible deal.
7. Finalise the Loan: After agreeing on terms, complete the necessary paperwork to finalise the loan and purchase your vehicle.

Tips and Considerations

Here are some expert tips to keep in mind as you pursue a car loan while on workers' compensation:

• Be Realistic: Consider buying a less expensive car to keep your loan amount lower, making it easier to manage repayments.
• Build Your Credit: If you're not in a hurry, focus on building your credit score by paying off existing debts and managing credit responsibly.
• Explore Co-Signing Options: Having a co-signer with stable income and good credit can significantly boost your loan application.
• Consult a Broker: A mortgage broker, like those at Esteb and Co, can provide personalised advice and access to a wide range of lenders tailored to your needs.
• Stay Informed: Keep abreast of market trends, as interest rates and lending criteria can change.

Frequently Asked Questions

1. Can I get a car loan with a low credit score while on workers' comp? It's possible but may involve higher interest rates. Improving your credit score before applying can increase your chances.
2. Do all lenders accept workers' compensation as income? No, not all lenders do. It's important to seek lenders who are open to considering alternative income streams.
3. How does the loan amount affect my approval chances? A lower loan amount could improve your chances as it poses less risk to the lender.
4. Can a co-signer help my application? Yes, a co-signer can enhance your application by providing additional security to the lender.
5. Is it better to apply through a broker? Applying through a broker can give you access to a wider range of lenders and tailored advice, which can be beneficial if you're on workers' compensation.
6. What if my workers' comp ends before my loan term? Lenders will consider the stability of your income. Discuss potential scenarios with your lender or broker to ensure you can meet repayments.
7. Are there any specific lenders that specialise in this area? Some lenders are more flexible with income types, and a broker can help identify these lenders from a panel of over 83 options.