Everything You Need To Know About Loans for People on Benefits
It may seem like you can’t get a loan if you’re getting benefits, but there are many ways to borrow money and still get help from the government.
One option is to look into what are called benefits loans. But before you do that, you should make sure you have all the facts and give this decision a lot of thought.
Most of the time, it’s best to look into other options, like zero-interest loans or doorstep cash loans with no credit checks. The government makes it available to people who need help.
Here you can find everything about loans for people who get benefits and the options open to you.
Can I Get A Loan On Benefits?
You can get a loan even if you get benefits. You won’t have as many options if you get it from a lender. Plus, the interest rate will probably be higher than if you got a personal loan.
When you look for loans for people on benefits, you will find that they are usually only offered by specialized lenders. They offer loans such as no credit check or a pound 10000 loan for bad credit with no guarantor for people on benefits.
Usually, banks and other lenders on the high street do not offer loans on benefits. This is because specialist lenders know that people who get benefits have special needs.
Whether or not you get a loan will depend significantly on how well you can show that you can pay back the money you want to borrow. This may be challenging if you rely on benefits. This is why average annual percentage rates on loans for people who get benefits are usually so high.
What Are The Eligibility Criteria For A Benefits Loan?
It seems likely that the same rules usually apply to other types of loans in the UK. Most of the time, this means the following:
- You must be at least 18 years old, live in the UK, and have a bank account in that country.
- You must show the lender that you can repay the loan. It is because the criteria that are looked at in this area vary from lender to lender. Your application for a loan could be turned down by one lender but accepted by another.
- Most lenders will check your credit before lending you money. Lenders want to know that you have a steady income that can be used to pay back what you owe after you’ve paid your regular bills. But there are more important things they want to hear.
- In the case of a traditional personal loan, this would usually come from a job. However, in the case of loans for people on benefits, lenders may consider certain benefits to be enough income to pay back a loan in certain situations.
Can Universal Credit Help Me Get A Loan?
If you apply for a loan while getting Universal Credit, you may find that some lenders are willing to take it into account, and others are not.
You are getting Universal Credit and need a short-term loan to help you pay some necessary expenses. Apply for budgeting advances instead, a loan from the government that doesn’t charge interest.
Can I Get A Loan On PIP?
Personal Independence Payments (PIP) and the Disability Living Allowance, which it is replacing, are both types of benefits that could be counted as income and help you get a loan on benefits. You can get a loan on benefits if you get either of these types of payments.
Because both of these benefits are long-term and give a steady income, lenders may be more willing to accept them as a source of income than they would be if you were getting other benefits that could be seen as lasting less time.
How To Apply For A Loan On Benefits?
An internet broker will usually be used to apply for a loan based on benefits. Depending on the broker, the application process can be a little different. But in general, to get started, you’ll need to say how much money you want to borrow, how long you want to pay it back, and what you plan to use the money for.
You will also have to give personal information, like how much money you make and what benefits you get. Most of the time, this will allow a broker to do a “soft search” of your credit history.
This won’t hurt your credit score, so check to see if any lenders will give you a loan. Be aware that if there is no sign of a soft search, a hard search may be done. This could affect your credit score and will show up on your credit report.
If you are eligible for a loan and want to move forward, you must fill out the lender’s application form. You also need to give permission for a hard credit search to be done (if one hasn’t already been done).
If these last checks show that you will actually get formal approval for a loan, you will be able to take the offer. Depending on what time this is done, the money may be put in your account the same day or the next.
Do I Need A Guarantor For A Benefit Loan?
Some lenders won’t ask you to have a guarantor, but others will. A guarantor is a friend or family member willing to promise to pay back what you owe to a lender if you can’t. If you have bad credit, a lender may be more likely to require a guarantor before giving you a loan.
Alternatives To Loans For People On Benefits
Before taking out a loan, people who get government aid are always required to think about it carefully, and not everyone will be able to use this method of borrowing. Before you apply for a benefits loan, you might want to consider the following other ways to get money:
Credit Union Loan
Members of a credit union might want to look into the lending options these not-for-profit organizations offer. The annual percentage rate (APR) for credit union loans is capped at 42.6% in England, Scotland, and Wales.
This is the same as 3% per month. The maximum APR in Northern Ireland is 12.68%, the same as 1% per month. This rate could be lower than the interest rate you would pay on a loan if you were getting benefits.
Child Benefit Loans
If you are eligible for child benefits, you should find out if a credit union offers family or child benefit loans.
In exchange for having your child’s benefit paid directly into an account at a credit union, you can apply for a loan that might have a lower interest rate and cost less than other loans that people on benefits can get.
Family And Friends
Before you take out a loan, ask close friends and family members if they can help you financially. Even though this is usually one of the easiest and cheapest ways to borrow money, everyone needs to know the terms of the loan and how it will be paid back.
Getting a loan might seem like your last option if you are having trouble making ends meet with the help of benefits. On the other hand, plenty of banks and credit unions are willing to lend money to people who get benefits. You must look at your options and pick the best one that fits your needs. You can get the money you need to make ends meet if you do a little research.
Ailsa Adam is the Editor-in-Chief and former content head at Hugeloanlender. She has been a valuable member of the content strategy team since 2017 due to her abundant experience in the finance sector. Passionate about helping individuals navigate the world of loans and personal finance, she has dedicated herself to acquiring extensive knowledge on various financial products. Before her role at Hugeloanlender,
Ailsa worked as a seasoned journalist and writer, specialising in creating informative blogs and articles on diverse loan types. She is known for her meticulous research and commitment to delivering accurate and engaging content. She holds a degree in MBA Finance and has a keen interest in creative writing and art.