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Published January 27, 2023

How No Interest Loans (NILs) Work

The No Interest Loans Scheme (NILs) allows some Australians to borrow up to $2,000 for essential purchases with an interest-free loan.

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Very few no-interest loans are truly interest-free. Some will charge you interest after an initial zero-interest period, while others will apply it retroactively — like the loan was never interest-free — if you miss a payment or cannot repay the entire balance within a set term. 

Additionally, “no interest” doesn’t mean no cost. With buy now, pay later arrangements, for example, you’re not charged any interest, but there are monthly fees.

That said, low-income earners can potentially access special no-interest loans as part of a community credit program for essential items or when unexpected expenses pop up.

What is a no-interest loan?

One of Australia’s oldest charities, Good Shepherd Australia New Zealand, provides no-interest loans (NILs) in partnership with local community organisations, which are designed to help low-income individuals and families pay for essential goods and services.

NILs are cheaper than payday and bank loans because they are free from fees and interest for life. Since borrowers are only required to pay back what they borrow, these loans may suit people on a tight budget. Moreover, NILs can be used for various purposes, from car repairs and household essentials to medical and dental services.

How a no-interest loan works

Like other credit arrangements, you need to apply for a no-interest loan, and the provider will assess your application. If approved, the provider will then pay the vendor directly for the cost of the goods or services you need. Generally, loans can’t be used for cash, bills or debts, and repayments are arranged over 12 to 18 months. 

When a borrower repays their no-interest loan, the funds become available to someone else in the community, which is known as the ‘circular community credit’ concept. 

How much can you borrow?

You can borrow up to $2,000 on a no-interest loan for essential purchases.


While there are no credit checks, you’ll need to meet the following requirements to be considered for a loan:

  • Be at least 17 years or over
  • Be an Australian citizen, a permanent resident or have a visa that expires after the loan finishes
  • Either:
    • Have a Healthcare Card or a Pension Concession Card, or
    • Earn less than $70,000 gross annual income as an individual or $100,000 yearly gross income as a couple or person with dependants, or
    • Have experienced family or domestic violence over the past ten years.

You must also show the capacity and willingness to repay the loan within the required timeframe.

Can you get a no-interest loan from Centrelink?

NILs are not offered by Centrelink, though you may be eligible for this type of loan if Centrelink assesses you as eligible for a Pension or Healthcare card.

What can you get a NILS loan for?

Here are some examples of goods and services you can pay for with a no-interest loan:

  • Household essentials such as a fridge, washing machine, computer or furniture
  • Medical and dental services
  • Items related to education or employment, such as school activities, uniforms or tablets
  • Urgent home repairs 
  • Car repairs, tyres and registration 

Since you’re only repaying the purchase price of the goods or services you need, your total repayment will likely be cheaper than renting items (in the case of goods) or getting a cash loan to buy them.

How to get a no-interest loan

It will be helpful to have documents to prove your financial situation and identity before applying.

Where to apply

Good Shepherd works with hundreds of local community organisations to provide NILs to those in need. You can find a community service provider near you on their website.

How to apply

There are a couple of ways to get started. You can call the Good Shepherd’s No Interest Loan Team on 13 64 57 or contact your local community service provider directly to arrange a meeting.

The meeting will allow you to ask questions and to let the community organisation work out what you can afford to repay. As part of the application process, NILs providers might look at your finances more broadly to see if other services might assist you.

How long does it take to get approved for a no-interest loan?

The loan assessment typically takes between 45 and 90 minutes. However, approvals can take up to two weeks, depending on the provider. Some might grant same-day approval if you bring all your paperwork to your appointment.

Once approval is finalised, payment will be made directly to the vendor or supplier — you won’t receive any money in your bank account.

Other types of financial support available during a crisis

If you need a vehicle, the NILs program also provides no-interest loans in amounts between $2,000 and $5,000 to assist low-income earners in purchasing cars, scooters, mobility scooters, motorcycles and boats for essential use. These loans are often called NILs for vehicles and require a credit check. 

If you need emergency relief, Ask Izzy is a free and anonymous service you can use to find support for meals, housing, healthcare, counseling, legal advice and more.

If you are a student, the Higher Education Loan Program (HELP) provides interest-free loans from the Australian government to eligible students. These loans are interest-free, but they are indexed annually to keep their real values in line with the changes in the cost of living. Discover more ways to finance your education.

Frequently asked questions

Is a credit check required for a no-interest loan?

A credit check is not required for goods and services, but a credit check for a vehicle is required.

Can you use a no-interest loan for education?

NILs can be used for materials required for education purposes but won’t be enough to cover tuition fees.

Are there any loans that you don’t have to pay back?

Some community organisations offer small grants for sudden financial crises, such as unexpected medical costs, so check what type of support is available within your local community if you need urgent help.

About the Author

Kristie Kwok

Kristie Kwok is a personal finance expert and former contributing writer at NerdWallet Australia. She has covered personal and business finance for almost 10 years. She is a qualified chartered…

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