Get a Loan on Benefits – Is It Possible?

If you are on government benefits and thinking about getting a loan, you’re not the only one. However, to avail a loan on benefits, you need some technical assistance and information. 

I am going to tell you all about how you can access a loan when on benefits, and some of best loans to get in such a situation.  

Let’s begin.

Don’t worry, here’s what to do!

There are several debt solutions in the UK that can be used to improve your finances. Choosing the right way to tackle your debt could save you time and money, but the wrong one could cause even more harm. 

It’s always best to find out about all your options from a professional before you take action.

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Can You Get Loans on Benefits?

The UK benefits system exists to cater to people who require help or support. Being a welfare state UK tends to give out certain benefits to its citizens who are either jobless, retired, disabled, or ill. 

The benefits might include financial help, costs cut out, and other monetary aid to sustain a standard able lifestyle.  

The question is, is it possible to get a loan when you are on benefits? 

The short answer to this question is Yes. You can apply for a loan even when you are getting certain monetary aid from the government.

However, it depends on your situation and many other factors that determine whether you can grab a loan or not. 

Loans to Get When on Benefits – Possible Options

Many short-term, as well as long term loans for people on benefits, are available in the market. I have listed some of the major loan options that are viable and practical for people across the UK, who are in serious money problems.

Secured Loans

There are many banks and other lending institutions that provide secured loans. In this kind of loan, the borrower has to provide a collateral for the loan. If the borrower fails to repay the money to the lender, the lender can retrieve the money through the collateral provided.

Collateral may include any asset, such as property, car, or machinery. The collateral that needs to be submitted should have a value around the amount of the loan taken out. 

This kind of loan is extremely suitable for people on benefits and people who have a bad credit score. The unsecured lending also comes at a comparatively lower APR rate. 

Guarantor Loans

Guarantor loans are also a feasible option for people around the UK who are having serious money problems and have bad credit, these loans are relatively easier to get if compared to unsecured or secured loans. 

The guarantor loans require a third person who acts as a guarantor for the borrower. If the borrower is somehow unable to pay back the loan, the guarantor will be held responsible for the payment. 

Finding a guarantor might be a difficult task but it can be anyone from your relatives who has a good borrowing score or a friend. A brokerage company might also work as a guarantor at times.

Credit Card

While discussing loans for people on benefits, I can not exclude credit cards. A Credit card might work best as a short term credit availing option. The interest rates on credit cards are surely high, making it an expensive option. 

The pros of credit cards are that long term loans for people on benefits might not be a good option at times, sometimes you need a quick and easy fix, and they provide you with that. 

Their swiftness makes them a priority among many people. 

Payday Loans

Payday loans are useful to manage your monthly cash shortfall. They are short-term, high-interest-rate loans. If you need emergency cash and your monthly payment from your job is far ahead, you can use this borrowing option. 

Usually, they offer low amounts which are repayable within 2-3 weeks. The interest rate on them is usually double the standard APR. 

It might be an efficient option to manage your immediate cash needs, but unless you are facing serious money problems, it’s probably not the best idea due to the very high-interest rate. 

Specialist Benefit Loans and Grants

The government has a separate budget for grants, in extreme cases people who need financial help, the government is there to bail them out. 

Recently due to the COVID19 situation, the UK has given out grants and financial aid to many NHS workers and people affected by the virus. 

You can apply for medical and crisis grants. The procedure to avail them might require a lot of formalities and legal documentation, but these grants and specialist benefits lending do exist. 

I have listed the lending programs which are authorised and regulated by the financial conduct authority of the UK and I assure you they are completely practical and feasible. 

Get loans when on Universal Credit

If you are on Universal Credit, loans might be a tricky task to achieve, but universal credit loans do exist. 

Apart from several other credit loans, the best loans for universal credit users is the Budgeting loan. The government of the UK provides you with a credit loan. The budgeting loans are eligible for people on benefits but you must be availing the aid for at least 6 months.

In this lending system, you will only have to pay the principal amount back to the government. The credit amount shall be deducted from your benefits payments. This lending is a short-term credit and the amount can be used for rent-paying and routine expenses, etc. 

These loans are known as Budgeting advances. They are a good option to manage any unexpected or unforeseen expense. It does not affect your credit rating in any way because the payments will automatically be extracted for the aid payout you receive.

Check out what benefits are available by clicking here. 

FAQs

Final Thoughts

The UK, being a welfare state, provides extreme assistance and help to people who need it. I am sure if you refer to the government help while being on benefits, they will try their best to aid you.

Apart from that, many lending institutions deem it as their CSR (Corporate social responsibility) to help people in need, you can utilize those as well.