No interest loans: What are they?

For those experiencing financial hardship, credit can feel like the only option when times are tough.

Credit cards and payday loans are fraught with danger, ​​and people doing it tough often have a poor credit score, which can make it harder to access mainstream finance – like a personal loan – when they need it most.

Read Also: Personal loans vs payday loans: Which is right for you?

However, there are alternatives, such as no interest loans. No interest loans can help with essential expenses without piling on interest and fees, which is often what tips a short-term problem into a long-term debt spiral. So how do they work?

What is a no interest loan?

In Australia, the best-known “no interest loan” is the No Interest Loan Scheme (NILs), run by Good Shepherd Australia New Zealand with loan capital provided by NAB and supported by government funding.

NILs are designed to help eligible people pay for essentials with no interest and no fees. Basically, you repay only what you borrow.

There is no credit check required when applying, and the loans are available via 170+ community organisations in 600+ locations. 

How much can you borrow with a no interest loan? 

NILs allows people to borrow funds whose maximum amount depends on what the money will be used for. 

• Up to $2,000 for essentials (like household items, car repairs, a laptop, or medical and dental costs).
• Up to $3,000 for specific needs such as a rental bond or recovery from a natural disaster.
• Up to $5,000 through NILs for Vehicles (for essential day-to-day transport, through participating providers).

How does NILs work?

NILs runs on a “pay it forward” model through a process called “circular community credit”. As borrowers repay their loans, those funds can be recycled to help someone else.

You’ll usually provide a quote or invoice, and the provider pays the supplier directly (it’s not a cash loan). 

Standard NILs repayments are set at an affordable level by the provider over up to 24 months. Vehicle loans can have longer repayment periods up to 4 years (48 months) through the vehicles program.

1. Savings.com.au’s two cents

NILS loans can be a lifesaver for people who need to cover essentials without getting stung by fees and sky-high interest rates. They’re also likely to be a far safer alternative to payday loans and other high-cost credit.

However, even with 0% interest, it’s important to be realistic about repayments. Make sure the repayment plan will fit your budget, so you don’t add extra stress on top of an already tough situation.

Who is eligible for a no interest loan?

Eligibility can vary slightly by provider, but the core requirements are typically:

You may be eligible if you:

• Have a Health Care Card or Pension Card, or
• Earn less than $70,000 (before tax) as a single, or
• Earn less than $100,000 (before tax) if you have a partner or dependents, or
• Have experienced family or domestic violence in the last 10 years (and can show you can repay)

And you generally need to:

• Have lived at your current address for at least three months, and
• Show you have the capacity to repay the loan (your provider will talk through your income and expenses with you).

What can and can’t you buy with a no interest loan?

NILs is designed for essentials, not day-to-day spending or debt consolidation.

What you can use NILs for

Common approved uses include:

• Household essentials (e.g. fridge, washing machine, furniture)
• Car repairs
• Medical, dental, wellbeing and other critical life expenses
• Technology (e.g. computer/laptop for work or study)
• Education and employment costs (e.g. uniforms, fees, licences, equipment)
• Rental bond (under the $3,000 NILs category)
• Natural disaster recovery costs (under the $3,000 NILs category)

What you can’t use NILs for

NILs generally can’t be used for:

• Cash
• Bills
• Rent payments
• Debt repayments

1. Take note: A rental bond is a specific exception under the NILs bond/disaster category. It’s different to using the loan to pay ongoing rent.

How do you apply for a no interest loan?

The process is usually straightforward, but you’ll need to be ready with paperwork.

1. Check your eligibility

Start by checking whether you meet the eligibility criteria (income threshold/concession card/other pathways), and whether you can comfortably make repayments.

2. Find a local provider and make an appointment

NILs is delivered through a network of community organisations around Australia. You can locate a provider via Good Shepherd’s NILs website, or call 13 6457 (13 NILS).

Depending on the provider, you may be able to apply in person, over the phone, or online.

3. Bring your documents

Many providers will ask for things like:

• 100 points of ID
• Proof of income (payslips and/or Centrelink statement)
• Banking details and/or bank statements
• An estimate of your regular expenses
• Details of any existing debts (including BNPL, payday loans, rent-to-buy)
• A quote or invoice for what you need to purchase (including supplier details)

4. Assessment and decision

During your appointment, your provider will talk through how much you need, what it’s for, what repayments would look like, and whether it’s affordable for you.

In some cases, approval can happen quickly. However, timing varies between providers and depends on how complete your documents are.

1. Quick tip: Watch out for scams. If you’re applying for NILs, make sure you’re dealing with an official provider listed through Good Shepherd’s service locator, and be cautious of unofficial websites or social media accounts claiming to offer “NILs” loans.

Other alternatives to no interest loans

If NILs isn’t the right fit, or you need help beyond what a no interest loan can cover, there are other pathways worth considering. 

Personal loans

If you need a larger amount (often $5,000+), a personal loan might come into the picture. Note, however, that it usually comes with stricter eligibility checks and higher costs than NILs. 

If your credit score is already under pressure, it’s worth being extra careful about taking on a higher-interest loan that could strain your budget further.

In the market for a personal loan? The table below features unsecured personal loans with some of the lowest interest rates on the market.

Loan duration

5 years

Loan amount

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Lender	Car Loan	Interest Rate	Comparison Rate*	Monthly Repayment	Interest Type	Secured Type	Early Exit Fee	Ongoing Fee	Upfront Fee	Total Repayment	Early Repayment	Instant Approval	Online Application	Tags	Features	Link	Compare	Promoted Product	Disclosure
MoneyMe	MoneyMe Personal Loans	6.24% p.a.	6.95% p.a.	$389	Variable	Unsecured	$0	$10	$495	$23,334						More details	Compare
NOW Finance	NOW Finance No Fee Personal Loan (secured) (5 Years)	5.95% p.a.	5.95% p.a.	$386	Fixed	Unsecured	$0	$0	$0	$23,171						More details	Compare
Harmoney	Harmoney Unsecured Personal Loan (Excellent credit) (5 Years)	5.76% p.a.	5.76% p.a.	$384	Fixed	Unsecured	$0	$0	$275	$23,066					Simplified Borrowing - 100% online process makes it easy to apply for a loan anytime, anywhere Personalised Rates - Get a fair interest rate that’s personalised to you	Go to site	Compare

Matched savings programs and community support

Some people may be better suited to programs that build savings and financial resilience (rather than taking on any debt at all), or services that connect you with emergency relief and budgeting support. 

Saver Plus, for instance, is one of the best-known national matched-savings programs consistently promoted by the Australian government and major delivery partners.

Run by the Brotherhood of St Laurence and ANZ, Saver Plus helps eligible Australians save for about 10 months for education costs like computers, uniforms, books and TAFE/VET fees, with savings matched up to $500 (subject to program rules).

Meanwhile, the Department of Social Services outlines emergency support pathways and food relief funding that support providers delivering help to people in need.