Finding a loan can be very difficult nowadays, considering the economy’s state, and the process tends to be considerably tough when you’re on benefit.
Getting new aid when you’re on benefit might seem impossible, but there are various ways to go about it and receive the aid while receiving the government’s support.
With the current situation of the economy, many individuals on benefits tend to wonder how they can save themselves from financial crises. Doing this without knowing, they can acquire loans especially made for people on benefits. So if you wonder how people on benefit can get a loan, Here are important things you need to know.
What Is Loan For People On Benefits?
A loan for people on benefit is a very easy-to-get loan available to individuals who have received support from the state; it is available for eligible applicants who are on benefit and have a regular income source to repay the loan, unlike payday loans.
Loans for people on benefits are usually available from specialist lenders rather than the known high street banks and lenders; they consider several things according to their criteria before deciding on the application.
The lenders will then proceed to check the credit score and credit record in their decision-making process. However, the main key to successfully acquiring a benefit loan is the ability to repay what you borrow.
Fees and Terms of Loan On Benefits
Most loans on benefits work like regular offers. However, the lender can be considerate of the branded offer. Depending on where you apply, you can get some reduction in fees or extend the repayment terms to suit your needs. You won’t be charged origination or processing fees. But the APRs depend on your preferred lender.
Once you meet the requirements, you should be able to secure it between $100 to $10,000. You can choose the amount you wish to borrow within this range. You can also choose the repayment term. But it largely depends on how much you borrow.
For example, your repayment might be able to climb up to 12 months if you borrow less than a thousand dollar. You can repay between 1-3 years if you borrow between $1,000 to $2,500 equity. You can bid for three years or more if your loan is above $2,500 to $10,000 equity.
Requirements of Benefits Loan
Benefits loan has other requirements besides having a regular source of income, though the ability to repay what you borrow is the main requirement.
- You must be aged 18 or above
- Be a United Kingdom resident
- Possess an active UK bank account
As the requirements to be considered varies between lenders, there are certain things popularly considered by the lenders. Above are the requirements of a benefit loan. Being 18 or over is highly considered in the application, as it shows the applicant is mature enough to understand what they’re applying for and can take responsibility for their actions.
One of the requirements to get loans for people on benefit is to live in the UK. You can only get it if you are a UK resident. It’s also required to process a UK bank account before applying to receive loans for people on benefits.
Benefits Accepted As Income
The kind of benefit you receive could influence your chance of getting approval for a benefit loan. Some lenders will consider the approval of applications from individuals with long-term benefits, while some are willing to go for a wider range of benefits.
Some benefits that can be considered accepted as income to qualify you for a benefit loan include:
- Universal Credit
- Industrial Injuries Disablement Benefit
- Fostering Allowance
- Child Tax Credit
- Incapacity Benefit
- Employment and Support Allowance
- Personal Independent Payment (PIP)
For benefits to be accepted as an income, the lender makes the major decision. So it’s best to contact the lender directly about what they will consider income. Long-term benefits, like PIP or DLA, might be highlighted by lenders as providing a steady income much closer to how salary might work than short-term benefits.
Read Also: How to Get Help Paying Medical Bills
Non-income Types Of Benefit
Non-income types of benefits are the type of income that needs to be considered sufficient by most lenders to get a benefit loan. It is not advisable for someone trying to apply for Benefit loans to receive any of the incomes that fall under this type of benefit. Non-income benefit tends to be excluded by most. They include:
- Housing Benefits
- Job Seeker’s Allowance
- Pension Credit
- Income Support
These benefits are generally excluded by many lenders, so getting them won’t have any effect when applying for loans for people on benefits. But, you still need to be more self-sufficient to make the lenders approve your loan.
How To Get A Loan On Benefits
Getting a loan on benefits typically begins with an online broker, but before that, you’ll need to state the amount you want to borrow, the term of your repayment, and how you intend to spend the loan.
The next step is to provide your details, benefits, employment status, income, and outgoings to allow a broker to conduct a soft check on your credit history and check if any lender is available to offer you a loan.
When you are cleared available for a loan, proceed to fill the lender’s application form. It also requires you to grant the permission for a hard credit.
Decide on Loan Amount
Provided that you’ve understood the process to apply for the benefit loan, you’ll need to decide on the amount you want to borrow. But before making that decision, you must first realize how much you need.
What triggers the intention to apply for loans is mostly based on the need to acquire something. Knowing the price of that commodity will determine the amount you’ll apply for.
So, to decide on the amount, you’ll have to ascertain why you’re applying for the loan, which will make you realize the amount you need. You’ll then use the amount you need to decide on the loan amount you’ll request.
Check What Your Benefits Accepted As Income
There are different types of benefits, as we’ve listed above. Some benefits are accepted as income, and some are not. This brings about the reason to check and understand whether your benefits are accepted as income.
To have a successful application for the loan, you need to be sure your benefit is among the listed benefits accepted as income.
However, in a case where your benefits are not accepted as income. You can consider alternative loan options like a Budgeting Loan from the government, which is approved for individuals who have received benefit for 6 months. The offer comes in the form of interest-free credit.
Choose the Best Loan
Before you choose a lender to process your application, there are some qualities you need to consider choosing the best lender. Here is what to do exactly.
- Pay attention to loans details. A good lender is expected to provide detailed information on their loan, especially the hidden fees, to enable you to make an informed decision. Conduct a thorough check on the details provided by the lender to choose the best loan.
- Consider сustomer service. One of the essential qualities of a broker is to have a good customer service team that assists prospective borrowers before and after taking the loan. The untold secret to finding the best lender is to find the one with the best customer service.
Although there are other options to consider in choosing the best loan, these are the most essential.
Getting loans goes beyond finding a broker and providing the necessary details. Some conditions need adequate attention before filling in an application. Loan conditions mostly determine your chance and the possibility of getting approved for the credit.
Therefore, it is important to check the conditions to make an informed decision on its applications. Conditions like repayment terms should be checked. The repayment term varies between lenders, so you need to consider it to know the time you have to repay the loan.
To properly check conditions, you need to analyze the application process, your eligibility for the loan, the possible amount you can borrow, and the repayment term, as it ranges from 3 to 60 months for larger sums.
Apply And Get The Loan
After selecting a broker, analyze the conditions, decide the amount you want to borrow, and other procedures for getting aid for people on benefits. The last step to take in getting the loan is applying for it.
Completing the lender’s application form by providing personal information, employment status, and typical outgoings to conduct checks for verification is the final step. After you’re found eligible and accredited, you’ll get a formal approval for your loan amount.
There is a high possibility of receiving the money in your account the same day you complete the application or the following day. Generally, to get loans for people on benefits and other loans, the last step is to apply to the lender to get your loan.
Guarantors – Are They Necessary For Benefits Loan?
A guarantor is a friend or relative who acts as a backup in case you can’t make timely payment. The person usually has to agree to pay back what you owe a lender if you don’t. The lender will likely request a guarantor if you have bad credit or poor repayment history.
Many benefit loan applicants tend to wonder whether they’ll need a guarantor among the requirements for applying and getting the benefit loan. However, the necessity of a guarantor is based on the lender’s conditions.
Some lenders are more interested in your current financial circumstances than your credit score, which means you can be approved for a loan without a guarantor. Still, generally, you may be asked to source a guarantor if you’ve struggled with bad credit in the past.
Will The Loan Come Out Of My Benefits Directly?
One of the most rewarding perks of a benefit loan is that you’ll only have to repay your debt without interests incurred on your account. However, you might have to pay interest rates if you apply for a loan for people with benefits.
The loan is deducted from your provided income channel. So the amounts deducted monthly will be from your bank account. So, if that’s the account you receive your benefits with, then it will come out from here.
Most lenders will request your source of income during your application. So you can expect the money to come out of this account. Otherwise, some government loans might take repayments directly from your benefits.
Alternatives To Loan For People On Benefits
Borrowing loans is only suitable for some; taking out short-term loans is not a credible solution to your cash crises, especially if you are on benefit. Despite the various online lenders’ offer of payday loans to people on benefits, sourcing for alternative forms of monetary support might be the appropriate option for most people.
There are various alternatives to apply for. One of the alternatives is Government Budgeting Loan and Budgeting Advances.
Government Budgeting Loan
Available for individuals who have received support from the states for six months or more. It’s an interest-free credit covering essential payments like household goods, rent, etc.
Budgeting Advances: Good alternative if you receive Universal Credit. Repayment for Budget Advances will be taken directly from future Universal Credit installments.
There’s always been skepticism regarding loan collection for people on benefits. Because many people on benefits don’t have a steady source of income, it can be tasking to find a lender willing to overlook the zero revenue source.
However, as long as you receive funds through benefits. You can use this revenue as an income source for your loan applications. Either way, you must be older than 18 and a citizen of the US with a bank account. You don’t always need a guarantor and you can pay off your loan directly with your benefit money.
Sources Used in Research for the Article:
- Budgeting Loans, GOV.UK, https://www.gov.uk/budgeting-help-benefits
- Introduction to Budgeting Loans, GOV.UK, https://assets.publishing.service.gov.uk/media/627e3c61e90e0721b6f1733b/introduction-to-budgeting-loans-easy-read.pdf
- How to Apply For a Budgeting Loans, GOV.UK, https://assets.publishing.service.gov.uk/media/627e3c80d3bf7f0539ff75f0/how-to-apply-for-a-budgeting-loan-easy-read.pdf