Can I get a loan if I’m on benefits?
You could get a loan if you receive benefits, although this will depend on some factors, including the type of benefit(s) you receive and the lender you apply with.
While not every lender is willing to consider applications from people on benefits, some may classify certain types of benefits as a source of income.
Why could being on benefits affect my chances of being considered for a loan?
When you apply for a loan, your income plays an important role.
When a lender looks into your financial situation, they want to be confident that you have a steady, consistent income which will enable you to make your repayments without leaving you short each month.
A responsible lender will not approve a loan that the customer cannot afford. If you were to take out a loan that you can’t afford, you could fall into difficulty making your repayments. A late or missed repayment will damage your credit score, which could negatively affect your chances of being considered for credit in the future. In addition to this, you could also be charged a fee by your lender.
Many lenders do not classify benefits as a source of income.
I’d like to apply for a loan on benefits; which benefits could count as income?
Benefits that could be considered a form of income include:
- Personal Independence Payment (PIP).
- Universal Credit.
- Working Tax Credit.
- Child Tax Credit.
- Child Benefit.
- Fostering allowance.
It’s essential to remember that not every lender will consider applications from people in receipt of benefits, regardless of the type.
Are there any benefits that don’t count as income when applying for a loan?
Again, this will vary between lenders, but generally speaking, the following benefits could be excluded as forms of income when applying for a loan:
- Job Seekers’ Allowance.
- Income Support.
- Pension Credits.
- Housing Benefit.
Do I need a guarantor to apply for a loan for people on benefits?
A guarantor loan is when you apply for a loan and someone – typically a family member or friend – acts as your ‘guarantor’.
This type of loan works in the same way as a standard loan in that you will be expected to make your repayments in full and on time each month. The difference is that if unexpected circumstances prevent you from being able to make your repayments, your guarantor will step in and make them on your behalf.
You don’t necessarily need a guarantor to apply for a loan for people on benefits, although it could be an option you may wish to research further.
Lenders willing to consider applications from people on benefits could approve your request without a guarantor.
Could CashLady help me search for a loan on benefits?
CashLady is a credit broker, and we work with over 30 Financial Conduct Authority (FCA) authorised and regulated lenders who offer short-term personal loans between £100 and £10,000. The repayment terms available to you will vary depending on the amount of money you apply to borrow and range from 3 to 60 months.
A small number of lenders on our panel could be willing to consider applications from people on benefits.
You can search for a loan with CashLady if you:
- Are over the age of 18;
- Are a UK resident;
- Have a UK bank account and a valid debit card; and
- Have a regular source of income paid into your bank account.*
*As discussed, some lenders could classify certain benefits as a source of income, although this will depend on the individual lender; the benefit(s) you receive; your credit score; and your affordability.
CashLady Representative 79.5% APR
Could I search for a loan with CashLady if I have bad credit?
If you match the eligibility criteria and you’re confident that a bad credit loan could be a suitable choice for you, you’re welcome to use our credit broking service to look for a loan.
Several of the lenders on the CashLady panel specialise in loans for people with bad credit, although as mentioned, if you’re in receipt of benefits, the range of lenders available to you could be limited.
Please be aware that a bad credit loan could come with a higher interest rate, and this will affect your monthly repayments and the overall cost of borrowing. You’ll need to be certain that this is affordable for you before you sign a credit agreement.
Repaying a loan should never leave you in a position where you struggle to cover the cost of your essential outgoings.
What happens if I can’t afford my loan repayments?
If you’re worried about an upcoming repayment, you should contact your lender.
They will talk you through any available options that could help you navigate this difficult period.
Loans for people on benefits: think very carefully before you apply
A loan is a serious financial commitment for any borrower, regardless of their income status and credit score.
Here are a few questions you should ask yourself before making an application:
- Is this expense urgent? Could I wait and save up instead?
- Can I afford to repay a loan?
- If I can afford the repayments based on my current situation, have I considered what I’d do if my circumstances were to suddenly change?
- Do I understand how a loan could affect my credit score?
- Have I explored all potential options available to me?
Alternatives to loans for people on benefits
If you’ve been hit with an unexpected expense and you’re unsure if a loan for people on benefits is right for you, you may wish to explore some of the following options.
- Use your savings. Of course, not everyone is fortunate enough to have savings to fall back on, but if you do have some funds set aside, using this instead of applying for credit will save you money on interest.
- Speak to friends and family. Could anyone lend you the money you need to help tide you over?
- Look into a Budgeting Loan. If you’ve received certain types of benefits for a minimum of 6 months, you might qualify for a Budgeting Loan. A Budgeting Loan could help to cover the cost of expenses such as household goods, security or maintenance on your property, and advanced rent. Repayments are taken from your benefits. You can check your eligibility for a Budgeting Loan and make an application through the Gov.uk website.
- You can’t get a Budgeting Loan if you claim Universal Credit. However, you could be eligible for a Budgeting Advance instead. You can find out more about a Budgeting Advance here.
I need help with money; who can I talk to?
Money shouldn’t be a taboo subject. Many of us will experience financial worries at some point in our lives, and this is absolutely nothing to be ashamed of.
If you need an impartial and confidential ear to share your concerns with, please consider reaching out to one of the following charities for free advice: StepChange, MoneyHelper, Citizens Advice, and National Debtline.
Good to know: the Turn2Us Benefits Calculator can help you work out whether you’re claiming all the benefits that you’re entitled to.
