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If you’re a casual or part-time employee, you can still secure a personal loan. But there are a few things you should know first.
Regardless of whether you’re employed on a casual or part-time basis, you’re likely to run into the same issue: it can be harder to be approved for a personal loan. Unfortunately, if you’re not a full-time employee, lenders can see you as a higher risk borrower - even if you’re working full-time equivalent (FTE) hours. However, it’s still possible to secure a personal loan as a casual or part-time worker.
In this article…
- What’s the difference between casual and part-time employees?
- Why is it harder to get a personal loan as a casual or part-time worker?
- How much do you need to earn?
- Tips to strengthen your application as a casual employee
- Tips to strengthen your application as a part-time employee
- How to apply for a personal loan as a casual or part-time worker
- What if you can’t get a personal loan?
What’s the difference between casual and part-time employees?
Despite seeming like similar terms, there are technical definitions separating the two.
What is a casual employee?
If you’re a casual employee, this means you have no guaranteed hours - even if you always work the same shifts every week. Contractually, they’re not locked on like they would be if you worked a more permanent job. Casual workers are usually paid at a higher hourly rate than part-time and full-time employees, but are also not entitled to sick leave, annual leave or any other type of leave. Essentially, if you don’t work, you don’t get paid.
What is a part-time employee?
If you work part-time, you’re very similar to a full-time employee - only you work fewer hours. Working full-time generally means working at least 38 hours per week or 7.5 hours a day. When you’re a part-time employee, you usually work less than 38 hours per week, but you have set work days. You’re entitled to the same benefits as full-time employees (sick leave, annual leave, other leave) but on a pro-rata basis. This means your benefits will be reflective of the hours you work.
Why is it harder to get a loan as a casual or part-time worker?
There are a few main reasons casual and part-time employees may have more trouble finding a personal loan. It’s mainly to do with your hours and whether you’re entitled to leave (or enough of it).
When you work on a casual basis, you don’t have secured hours each week. This means that your income could potentially fluctuate, which can raise the risk factor for your lender. For part-time workers, if you’re not working enough hours (and therefore not earning enough money) to pay off the loan you applied for, you can run into trouble.
You need to show that you have a consistent income when you apply. This is because when they assess your application, they need to make sure that you can afford to make your weekly/monthly repayments. If your work hours are unstable/aren’t sufficient, your lender might not be able to approve your application.
Paid leave (or lack thereof)
Another risk for the lender is if you get sick and need time off work, or even go on a holiday. If you’re a casual worker, no work = no pay. This can be troublesome if you have a personal loan you need to pay off, because even if you don’t work one week, you’ll still need to make your regular repayment.
Even though you’re entitled to some benefits as a part-time employee, depending on how much you’re working/earning, you may not have much leave saved or available. If you need to take unpaid leave, you may struggle to make your personal loan repayment/s. This possibility can see your lender raise an eyebrow.
How much do you need to earn to take out a personal loan?
With most of the risks being around your income, you may be wondering how much you actually need to earn to apply for a personal loan. Minimum income requirements can vary from lender to lender; some may require you to earn $30,000 per year while others don’t have a minimum requirement at all. But it should be noted that lenders without an income requirement are likely going to charge higher interest, or assess applictions on a case-by-case basis.
How much you need to earn will also be influenced by how much you want to borrow. Basically, your lender needs to make sure that your repayments are affordable. This is what they will do when they assess your application; they look at your income, expenses, assets, liabilities and so on to calculate your borrowing power. Your income is just one part of the equation.
Tips to strength your personal loan application as a casual employee
You can still apply for a personal loan as a casual employee, and there are things you can do to better your chances of approval. The crux of the issue is minimising the risk for your lender - here are some ways to do that.
Work there for a while
One way to put the lender's worries to rest is to be in the job for a significant amount of time - say, a year. This way, they can look at your income over a longer period of time and (hopefully) see that it remains pretty consistent. They can also see how you manage your income and expenses over a year, and that you don’t plan on leaving any time soon.
Get an employer recommendation
It could also be helpful to get a letter from your employer stating how many hours you usually work per week, your hourly rate, and any other helpful information for your lender to consider. Maybe get them to put in a nice word about you too - that can never hurt.
Manage other credit products well
One thing lenders love to see is that you have responsibly handled financial products in the past. For example, if you have a credit card, be sure you always make your repayments on time. Or if you use buy now, pay later (BNPL), always make sure you’re paying the instalments on time. Your lender will look at all of this financial behaviour on your bank statements, and may feel more comfortable lending to you if you’ve been a responsible borrower in the past.
Have a good credit score
This should be a consequence of the last point we made; make sure you have a good credit score - or at least an above-average one. Your credit score is a representation of your reliability as a borrower. If you have a good credit score, it means you have managed credit products well in the past. If you have a bad credit score, it means the opposite. You can also attain a reasonable credit score by having a ‘thin’ credit file, meaning not many applications for credit are featured.
Lenders use your credit score when assessing your application; some lenders even have minimum credit score requirements. If you don’t have a credit score, make sure this isn’t a deal breaker with the lender before you apply.
Have savings to show
Another good way to prove you’re responsible with money is to have savings. Showing you’re able to save money can make the lender feel more comfortable about lending to you. This way, even if you had a slower work week, you have money to fall back on.
Tips to strengthen your personal loan application as a part-time employee
While you may struggle less to secure a personal loan as a part-time worker, there are still things you can do to increase your chances of approval. Some of these tips apply to both casual and part-time employees.
Check for minimum income requirements
Make sure you’ve double checked whether there’s a minimum income requirement for the loan you’re applying for. More importantly - make sure you at least meet if not surpass this requirement. This way, your income shouldn’t be called into question on your application.
Be in your job for a few months
There might be no need to be in your job for a year or more, but it can be helpful to be in your gig for at least three months. Some lenders may require this upon application while others won’t. Either way, it can still strengthen your application to show that you have a stable income. It’s also helpful if you’re not on probation.
Stay on top of other debts
Again, managing credit products in the past will make a lender more inclined to lend to you now. Be sure to use all credit products - including BNPL - responsibly.
Have a solid credit history
Another point we’ve already mentioned is having a good credit score. This can help with getting approved as well as snagging a good interest rate.
Demonstrate savings habits and history
Lastly, and again we’ve already mentioned this - have savings to show. This shows you’re responsible with your money.
How to apply for a personal loan as a casual or part-time worker
The process of applying for a personal loan as a casual or part-time employee should be the same as applying for a personal loan as a full-time employee. To apply, you’ll need to head to your lender’s website and apply there. Alternatively, if you’re applying with a bank, you could go into your local branch. Either way, you’ll need to be sure to meet the lenders' eligibility criteria and supply the relevant supporting documents if you want a chance of securing the bag (literally).
Eligibility criteria will vary from lender to lender, but you can generally find you’ll need to meet at least the following:
- Be at least 18 years old
- Be an Australian citizen or permanent resident
- Have a proven consistent income
You may also need to meet certain credit score requirements or even income requirements - but this will come down to the lender. Be sure to double check before you apply.
You can also expect to supply documentation including:
- Proof of ID (drivers licence, passport, Medicare card)
- Proof of address
- Proof of income (bank statements, payslips)
If you’re applying for a secured personal loan, you’ll also need to provide proof of collateral. For example, if you’re using your car as security, you’ll need to prove that you possess the car and how much it is currently worth. Your lender may need to value the car - again, this will depend on the lender.
What if you can’t get a personal loan as a casual or part-time employee?
Maybe you haven’t been employed for very long or maybe you don’t meet the income requirements. Whatever your reason, if you can’t apply for a personal loan as a casual or part-time worker, you still have other options you can consider. Some may work, others may not - at the end of the day, it will come down to you and your personal situation.
You may find it easier to secure a credit card as a casual or part-time employee. You may not need to have a certain income, and you may not need to be in your current role for as long. But you’ll need to prove you can manage your credit card repayments - so you’ll probably still need to provide proof of income.
A credit card may be a suitable option, but it’s important to differentiate the two credit products. A credit card is known as a revolving form of credit - as in, you can continue to spend up to a certain limit indefinitely. With a personal loan, you’ll be given one lump-sum payment with a set timeframe to pay it back.
Depending on what you’re using the credit product for, a credit card may not be a suitable option. If you plan on paying it off over a longer period of time, it may become costly as credit cards generally charge higher interest rates than personal loans.
Ultimately, it can be helpful to do some calculations and see whether a credit card is a viable option for you as a casual or part-time employee.
Get a guarantor
Another option you could consider if you want to take out a personal loan is getting a guarantor. A guarantor will essentially act as security on the loan for you, as they are legally responsible for meeting your personal loan repayments if you’re unable.
Having a guarantor can allow the bank or lender to see you as a less risky applicant. However, a guarantor loan isn’t something that should be taken on lightly.
If you missed repayments or defaulted on the loan, you wouldn’t just damage your own credit score - you would also damage your guarantor’s. Your guarantor also need to be ready to pick up the slack if you can’t make your repayments on their own, which is a big responsibility.