What loans can you get when on benefits?
There are several options available for benefit loans today if you need funds in a hurry. Below are some of the choices you may want to consider. Remember that if you have been on certain benefits for more than six months, you may also be eligible for Budgeting Loans from the government. Check with your local JobCentre Plus or the Gov.co.uk website to see if you meet the criteria for this type of borrowing.
- Guarantor Loans - A guarantor is someone who signs onto the loan agreement with you. They will be contractually obligated to pay the debt if you fall behind on the monthly repayments. Lenders are generally more comfortable with approving people on benefits for loans if they select a guarantor who has a good credit history.
- Secured Loans - A secured loan means you are securing an asset that can be used as collateral if you fail to make the repayments on a loan. This helps lenders mitigate any risk of lending to someone on benefits. A secured loan could be a great choice if you own your own home. However, it's important to note that if you do secure a loan against your property and start to miss payments, there is a risk that the lender repossesses your home.
- Credit Card - There are a whole host of credit cards that specifically help those with lower incomes or bad credit ratings. These cards will usually have a lower credit limit and higher APR's because of the risk involved with lending. That being said, the eligibility criteria are much more relaxed than other highstreet bank’s credit cards. Therefore, these can be a good option for anyone who is currently on benefits and could help to improve your credit score too.
- Finance Plans - If you need to buy a new home appliance or an expensive essential item, you may be able to get it on finance from sites like Very. Each month you will be expected to make a payment on the item as well as cover any interest they charge as well. It’s important to read the small print on your contract before you buy anything on finance to make sure you can afford the repayments.
- Specialist Benefit Grants and Loans - There are specialist lenders who provide loans only to those with low incomes. If you are currently in receipt of benefits, you would be classed as low income. However, this type of lending often comes with higher interest rates than a traditional loan from a bank. Before you apply for benefits loans online, you should work out a realistic monthly budget to ensure that the repayments are affordable for you.
- Payday Loans - This is a type of short term borrowing solution that you can pay back to the lender the next time you receive your benefits.
How to get a loan on benefits?
At Choose Wisely, we can pair you with a list of lenders who are willing to provide loans for those on benefits. This could be for any type of borrowing, such as payday loans for unemployed people on benefits. Our step by step process is easy to apply for online. We work with a variety of lenders who may be willing to lend money to people who receive benefits.
One of the most important things to consider when looking at benefit loans is how urgent your need to borrow actually is. If you are receiving benefits, it may be difficult for you to cover the cost of the repayments on the loan, leaving you in a worse financial situation than before.
Our application process is easy to find loans for benefit claimants. We will need the following information from you in order to apply:
- Your personal contact information.
- Your UK bank account information.
- Proof that you have had a UK address for a three year period.
- An estimate of your monthly incomings and outgoings.
- Details about your salary as well as the benefits you receive.
- Any monetary contributions you make towards rent or mortgage payments as well as utility bills and other monthly expenses e.g. food and transport.
Can you get a payday loan on benefits?
It's a common misconception that people on benefits cannot apply for payday loans. However, there are now a growing number of lenders who are willing to help benefit recipients.
The biggest focus any lender will have when someone applies for a loan is whether that person can afford the monthly repayments in a set amount of time. Just because you're on benefits and have been declined for other types of loans does not mean that specialist bad credit and low-income lenders won't give you a payday loan.
What loans can you get when on Universal Credit?
If you have been on Universal Credit and need to cover a specific expense, then you may be eligible for a budgeting loan or a budgeting advance. You can find more information on these loans below.You may also be able to access a loan from a credit union.
- These loans come directly from the government and allow you to pay for things such as:
- Broken home appliances like fridges and ovens
- Work-related expenses such as buying uniforms or tools
- Repairs around the home
- Unexpected bills
- Maternity expenses
- Travel expenses
- Funeral expenses
- Rent deposits or moving costs
- Essential items such as clothes and food
When you receive a Universal Credit loan, you will receive reduced benefit payments until the amount you borrowed is paid off in full. This will typically be over a 12 month period.
Budgeting loans are only for people in receipt of certain benefits and who have been receiving these for at least six months. You will also have to have earned less than £2,600 in the six months prior to making your application.
The smallest amount of money you can receive from a budgeting advance is £100. The maximum amount will depend on your current circumstances, going up to £812 for a couple who has children.
Can I borrow money if I am unemployed?
Even if you are unemployed, you can still get a loan. Lenders consider all kinds of criteria to see if you are eligible. The approval of a loan depends on whether you can prove that the monthly repayments will be made on time. Your chances of being accepted on a loan application may be higher if you have a family or friend who can act as your guarantor.
Some of the criteria a lender looks at if you are unemployed are:
- Your income - Those who are currently unemployed still need to show they have a regular source of income. This can be the income you receive from benefits.
- Your credit history - Lenders will want to look at if you have had credit in the past and if you have been able to keep up with repayments.
- Your credit score - A good credit score will definitely help you when applying for a benefits loan.
What are the alternatives to benefit loans
There are a number of alternative options if you are struggling to be accepted for a benefit loan. The first thing to do for anyone in receipt of benefits is to check on the government website for additional funding you may be eligible for. You may also consider borrowing from friends and family or sticking to a tighter budget to help pay for unexpected expenses.
How do I apply for a crisis loan?
The UK government no longer accepts applications for crisis loans. Since the introduction of Universal Credit, benefits claimants have to apply for a budgeting loan instead. You can only apply for this type of loan through the government if you have been in receipt of Universal Credit or other income-based benefits for more than six months.
At Choose Wisely we want to make your loan search journey as easy as possible. Answering just a few questions could help you get the loan you need if you are on benefits. Use our Loan Search journey to see if you can apply to one of our lenders today.
Benefit Loans FAQs
Crisis loans are no longer available from DWP. Instead, you have to apply for a budgeting loan. These are for claimants who have been on certain benefits for a six month period. With a budgeting loan, you only have to pay back the amount you borrow with no interest added. Repayments are taken automatically from your benefits.
It all depends on the lender you choose to apply for a loan with. For example, at Choose Wisely, if your application is successful, then your loan could be paid into your bank account in under an hour.
You can use your child benefit payments as proof of regular income when applying for a loan. However, in order to receive a budgeting advance from the government, you will need to be in receipt of other benefits such as Income Support, Jobseeker's Allowance, Universal Credit, or Pension Credit.