Loans for people receiving social benefits
Can you get a loan if you get allowances?
That’s the short answer, but in truth, it’s impossible to say for sure if someone can get a loan. When lenders review an application for a short term loan, there are a number of factors that they consider before making a decision. Each lender has a different set of acceptance criteria and while some will not agree to lend money to people claiming benefits, others have a much less restrictive approach.
The key to any successful loan application is the ability to pay back what you borrow. Lenders want you to have a regular source of income, whether it’s from a job or elsewhere. They will then look at your credit score and financial record, but these factors are often less important than having income that will allow you to pay off your loan.
Some lenders are even willing to recognize some form of benefits like income. Long-term benefits such as personal independence payment or Disability Living Allowance are considered in the same way as salary, while many other forms of benefits can be considered.
What benefits count as income?
The type of benefits you receive could affect your chances of getting approved for a loan. Some lenders are only willing to accept applications from people claiming long-term benefits, while others will consider a wider range of types of benefits.
In many cases, the lenders in our panel are willing to recognize the following benefits as a form of regular income:
- Disability Living Allowance (now replaced by PIP – Personal Independence Payment)
- Employment and support allowance
- Labor Tax Credit (being replaced by the Universal Credit)
- Child tax credit
- Family allowances
- Incapacity allowance
- Foster family allowance
- Disability compensation for work-related accidents
Lenders are less likely to view housing allowances, income assistance, pension credits, or jobseeker’s allowance as regular forms of income, although this varies from company to company .
Can we get a loan from Crédit Universel?
You might be able to. Some lenders view universal credit as a regular source of income, so it could help support your loan application.
Although some lenders offer loans specifically to people receiving benefits, your borrowing options may be more limited than if you were employed and had a higher income.
What are the eligibility criteria?
Even if you have a regular source of income, there are still other criteria that you will need to meet in order to be approved for a short term loan. These are:
- you must be 18 years or older
- you must be a UK resident
- you must have a UK bank account
How much can you borrow?
Provided you meet the conditions listed above, you could be accepted for a loan between £ 100 and £ 5,000. In addition to choosing the amount you want to borrow, you can also select a repayment period that works for you. The repayment options available will depend on the amount you choose to borrow, for example:
- 3, 6 or 12 months if your loan is less than £ 1,000.
- If your loan is between £ 1,000 and £ 2,500, you can choose to pay it off between 12 and 36 months.
- For loans over £ 2,500, you can choose to repay between 12 and 60 months.
Will I need a guarantor?
In short, no.
Although some companies require a guarantor to approve short term loans, you cannot apply for a guarantor loan through CashLady. However, we have a small number of guarantor lenders in our panel, so if we believe that one of them is the right lender for your situation, you may be asked to find a guarantor.
Secured loans are often used by people who have had credit problems in the past. The lenders on our panel are more interested in your current financial situation than your credit score, which means you could still get approved without needing a guarantor.
How to apply for a benefit loan
While it is often difficult to find a loan when you are receiving benefits, CashLady makes it easy to apply for the money you need.
Simply complete our quick application form, select the amount you want to borrow, and choose a repayment term that suits your needs. We will then perform a “soft” search of your credit report to see if any of the lenders on our panel are likely to accept your loan application. This will not leave any traces on your credit report and will not affect your credit score.
If your application is provisionally accepted, we will introduce you to the direct lender. From there, you can choose to complete their full application. The Financial Conduct Authority (FCA) requires all licensed and regulated UK lenders to verify that the loans they offer are affordable for borrowers. This means that you will still need to undergo a credit check, but remember that the lenders on our panel are more interested in your current financial situation than in any mistakes you may have made in the past.
Once the application process is complete, the money could arrive in your account within minutes* that your loan application be accepted!
Alternatives to loans for beneficiaries
Short-term loans are not for everyone, and requesting additional financing may not be appropriate in your situation. While the internet seems to be teeming with payday loan offerings for people on employee benefits, the reality is that many people might be better off to consider other forms of financial support.
One option is to apply for a government budget loan. These loans are available for people who have been receiving benefits for at least 6 months. The money comes in the form of interest-free credit and can be used for household items, rent, and other essential costs. You can read more about budgeting for loans by visiting the government website here.
If you receive universal credit, you may also want to learn more about budgeting for advances. Money from a budget advance could help you deal with unforeseen one-time costs. Repayments are then taken directly from the future installments of Crédit Universel. To find out more, visit the page dedicated to the budget advance on the government website here.
Where to go for debt advice
If you are on benefits and are having financial difficulties, taking out a loan could have a big impact on your situation. If you are concerned about increasing debt levels or worried about your finances, the organizations listed below can help by providing free, unbiased advice: