Get a Loan on Benefits – Complete Step-by-Step Guide, FAQs & More

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 bag up a loan when on benefits, and the best loan to get in such a situation.  

Let’s begin.

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, disable, or ill. 

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

The question is that is it possible to avail 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. 

Get a Loan on Benefits

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 England, 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 extremely 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 than the standard APR. 

It might be an efficient option to manage your immediate cash needs, but unless and until you are facing serious money problems, I would not recommend it due to the high-interest rate. 

Specialist Benefit Loans and Grants

The government of the UK 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

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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 advance. 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

Can I get a payday loan on benefits?

I will not sugarcoat my answer, payday loans for people on benefits might be really difficult to grab because payday loans are built for people who work on a monthly salary basis. A better option for you might be the budgeting loan. 

Can I apply for a crisis loan?

Crisis loans are not available anymore, their replacement is the budgeting loans which I have mentioned in complete detail above. 

What other options do I have other than a benefit loan?

There are several loans for people on benefits, you might look for direct lending. Direct lending works as a financial opportunity, it involves no third party. The borrower and the lender are in direct contact, hence, you can alter the terms and conditions according to your needs. 

If you are looking for loans for purchasing assets, such as a house or a car, you might be able to find a mortgage. But to be honest, applying for a mortgage when you are on benefits might not be a good idea

The advance budgeting loans are also a good option to apply for!

Can I get a loan from a child benefit?

Many private sector companies, as well as the government of the UK, lends out for child benefit. These lendings are to ensure that you are fully able to take care of your child.

Can I get a loan if I’m on disability?

Yes. You can easily avail of a loan if you are a disabled person, there are quite a few other programs by the government of the UK, specially designed for disabled people. 

These programs include the DLA (Disability living allowance), tax cuts, ESA (Employment support allowance), and many more. 

Can I borrow money with no job?

Yes! If you have a good credit score and do not have a job, you might be able to borrow money. Please keep this mind that it might be hard to find a lender because, without a constant source of income, nobody would like to lend you money as it increases the risk of default. 

It is possible but might require extra effort.

How long can it take to get a loan on benefits?

The standard time after which you can apply for loans on benefits is 6 months. After the submission of application, it might take 30-90 to process the request and grant you a loan. 

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. If you need further assistance, please feel free to reach us out.


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