Can I Get Budgeting Loan in the UK?
What is a budgeting loan?
This funding arrangement is meant to help individuals facing a hard time because of low incomes. They can get these loans to manage unexpected expenses. Usually, you do not have to pay any interest for these loans as they have been provided by Government agencies in the UK.
Table of Contents
- How much can be borrowed through budgeting loans?
- Are there restrictions on who can apply?
- What expenses can budgeting loans cover?
- Can budgeting loans cover rent in advance or moving costs?
- How should repayments be made?
- How do budgeting loans differ from salary advance loans or personal loans?
- What are the main advantages of a budgeting loan?
- How to apply for a budgeting loan?
- How long to get a budgeting loan decision?
- What advice can a direct lender provide to budgeting loan applicants?
- What other options do applicants have if they do not qualify for these loans?
- FAQs
How much can be borrowed through budgeting loans?
| Your financial situation will decide the amount of the loan you can apply for. |
| Budgeting loan minimum amount is £ 100 |
| Budgeting loan maximum amount is £ 812 (when you or your partner is responsible for a child), £ 464 (when you are a couple), and £ 348 (when you are single) |
| The amount you have in a cash reserve can influence the amount of loan you can borrow. |
Are there restrictions on who can apply?
The eligibility for a budgeting loan will vary based on the type of benefits you are receiving. The benefits of qualifying for budgeting loans are:
- Income support
- Income-based Jobseeker’s Allowance
- Income-related Employment and Support Allowance
- Pension Credit
- Other parameters of deciding the eligibility for these loans are:
- Your affordability should confirm that you can repay loans
- More savings than £1000 can help downsize the amount you can borrow
- The condition of existing debts determines how you can repay loans
- Your residency should be according to the lender
What expenses can budgeting loans cover?
- Budgeting loan allowed expenses are ways you can use them while facing a financial crunch.
- Repairing, maintaining, or ensuring the security of your home
- Budgeting loan to manage furniture and household expenses (fridge, washing machine, or cooker)
- Maternity and funeral expenses
- Clothing and footwear
- Expenses related to travelling
- Managing funds to find and get a job
Can budgeting loans cover rent in advance or moving costs?
Yes, you can have a budgeting loan for rent or moving costs when you are moving to a new home. At the same time, you must make sure that you receive a specific form of benefit. Thus, you can pay the money that the landlord demands before you move in. Besides, they can be used to purchase some important furniture or appliances before finally moving in. The cost of hiring a van to shift things from the previous home to the new home can be included in the expenses meant to be covered with these loans.
How should repayments be made?
Budgeting loan repayment terms can extend up to 2 years, depending on the amount you borrow. The repayment amount will be deducted from the benefits you receive. Therefore, the amount of benefit will reduce until you clear up loan payments. You might go through a situation when you stop receiving benefits. In that case, you will have to find an alternate way of repaying the loans. Payments should not pause or stop at any point.
How do budgeting loans differ from salary advance loans or personal loans?
You might be curious to understand the difference between a budgeting loan and a salary advance. The first one has been provided by the Government agencies, while the second one is financial assistance arranged by private lenders. Now, when you talk about budgeting loans Vs personal loans, the same point stands true here in this case. Thus, you must check how these three financial products differ from each other.
| Budgeting loans | Salary advance | Personal loans |
|---|---|---|
| Provided by Government agencies | Provided by your employer | Provided by direct lenders |
| They are interest-free in nature | The employer charges no interest, but they can carry interest if provided by a private lender | They carry competitive rates of interest |
| Eligibility will depend on the type of benefit you receive, credit scores, etc. | You need to prove that you are salaried individual | You must qualify according to the given eligibility criteria |
| Useful for unplanned exigencies | Useful for managing short-term and urgent needs | Useful for a wide variety of purposes |
| No impact on credit scores | No influence on your credit history | Late repayment will cause damage to credit scores |
What are the main advantages of a budgeting loan?
Some of the crucial advantages, like interest-free nature and the types of uses that can be managed with these loans, have already been discussed. The additional ones that must also grab your attention are:
- No validation of credit scores
These loans are offered based on your benefit history. Thus, your credit scores will play no role in influencing the lending decision. Even borrowing will not leave any imprint on your credit scores.
- Repayment flexibility
There is no need for you to bother about manually paying loans. The amount will automatically be deducted from your benefits credit. Thus, you can adjust your expenses so that you can survive on the lesser amount you will receive as benefits.
- No risk of being trapped in a debt cycle
You will have to deal with zero interest rates. Thus, the amount you are supposed to repay will not increase with time. You can easily manage and repay loans on time and avoid the accumulation of debts.
How to apply for a budgeting loan?
There is an online arrangement made to help you apply for these loans online. You will have to enter details accordingly and wait for some time to receive a reply from the other end. On the other hand, you can get a budgeting loan paper form SF500 for the application. Provide valid details and send the completed form by post.
How long to get a budgeting loan decision?
You will be able to know the ultimate decision regarding approval through email or text within 7 days. However, the confirmation in writing will be sent to you via a letter. You will have to wait for 21 days to receive it.
What advice can a direct lender provide to budgeting loan applicants?
There are some common suggestions that you will get to hear from the direct lender. They are:
- You must not exceed the safe borrowing limit
- Checking the eligibility conditions is unavoidable
- You must fill out the application correctly with valid details
- Break down the repayment conditions and terms for better understanding
What other options do applicants have if they do not qualify for these loans?
You do not have to worry if these loans do not suit you. There are other alternate loan options you can consider based on your necessities.
| Loan Type | Description |
|---|---|
| Loans for bad credit | If you want a slight bigger amount, but have poor credit, these loans are for you. |
| Unsecured loans | You want to borrow money without keeping your assets at stake. This option is for you. |
| Same day loans | At times, you are in a hurry, but the traditional process disappoints you. Reach out for this loan option. |
| Joint loans | If your financial situation is up to the mark, get a partner and borrow money for a common reason with these loans. |
FAQs
| Question | Answer |
|---|---|
| Can people on Universal Credit apply for budgeting loans? | No, if anyone is currently on Universal Credit, they are not eligible to apply for these loans. It might also happen that you have recently switched from this benefit to some other option. In that case, a specific duration that also includes the tenure you have been on the previous benefit will not be considered. |
| What documentation is required for the application? | No documents are required in the application procedure. Some of the very basic things, like bank statements, proof of savings, and proof of identity and address, will be required. Some information related to existing loans and debts with valid documents should be produced. |
| Which major UK cities have access to budgeting loans and alternative loans from direct lenders? | Budgeting loans are available in London and Manchester, while direct lender loans are available in Birmingham. In addition, there is a possibility of applying for budgeting loans in Glasgow and Leeds. You can also avail of support for budgeting loans in Liverpool and Edinburgh. |
John Milton is an experienced financial writer and personal loan expert with years of experience identifying the right category for people. He has been Chief Financial Expert at LoanChester in the UK and provides insights on the big deals of the lending institution. He is known for transforming the loan policies as per the unique needs of different borrowers. First, he focuses on what the borrowers require according to their favourable and adverse financial stances, and then he focuses on making a variety of personal loans affordable. John writes well-researched content on personal loans and also guides borrowers regarding their unique financial conditions. John holds a Ph.D. degree in banking and finance.
