Can you get a loan if you receive benefits?
Maybe yes.
That’s the short answer, but in truth, it’s impossible to say for sure if someone can get a loan. When lenders review a short-term loan application, they consider a number of things before making a decision. Each lender has a different set of acceptance criteria and while some won’t lend money to people applying for benefits, others have a much less restrictive approach.
The key to any successful loan application is the ability to repay what you borrow. Lenders want you to have a regular source of income, whether it’s from a job or some other source. They will then look at your credit score and financial history, but these factors are often less important than having enough income to pay your loan.
Some lenders are even willing to recognize certain forms of benefits as income. Long-term benefits such as Personal Independence Payment or Disability Living Allowance are considered much the same as a 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 loan approval. Some lenders are only willing to accept applications from people seeking long-term benefits, while others will consider a wider range of benefit types.
In many cases, the lenders on our panel are willing to recognize the following benefits as a regular form of income:
- Disability Living Allowance (now replaced by PIP – Personal Independence Payment)
- Employment and Support Allowance
- Labor Tax Credit (now replaced by Universal Credit)
- Child tax credit
- Family allowances
- Incapacity benefit
- Investment allowance
- Work Injury Disability Benefit
Lenders are less likely to consider housing assistance, income support, pension credits or jobseeker’s allowance as regular forms of income – although this varies from company to company .
Can you get a loan on Universal Credit?
Maybe you can. Some lenders consider Universal Credit 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 you will need to meet 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?
If you meet the conditions listed above, you could be accepted for a loan of between £100 and £5,000. In addition to choosing the amount you want to borrow, you can also select a repayment term that suits 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 £1000.
- If your loan is between £1,000 and £2,500, you can choose to pay it back 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 a word, no.
Although some businesses 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 on our panel, so if we feel one of them is the right lender for your situation, you may be asked to find a guarantor.
Collateral loans are often used by people who have struggled with bad credit 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 be approved without needing a guarantor.
How to Apply for a Benefit Loan
Although it’s often difficult to find a loan when you’re on benefits, CashLady makes it easy to apply for the money you need.
Simply complete our quick application form, select the amount you wish to borrow and choose a repayment term that suits your needs. We will then do a ‘soft’ search of your credit file to see if any of the lenders on our panel are likely to accept your loan application. It won’t leave a mark on your credit report or affect your credit score.
If your request 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 to borrowers. This means that you will still need to submit to a credit check, but remember that the lenders on our panel are more interested in your current financial situation than any mistakes you may have made in the past.
Once the application process is complete, the money could arrive in your account within minutes* of your loan application accepted!
Alternatives to loans for social recipients
Short-term loans aren’t for everyone, and asking for additional financing may not be right for you. Although the internet seems to be filled with payday loan offers for people on benefits, the reality is that many people are better off considering other forms of financial support.
One option is to apply for a budget loan from the government. These loans are available for people who have received 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 expenses. You can find out more about loan budgeting by visiting the government website here.
If you have Universal Credit, you may also want to know more about budget advances. Money from a budget advance can help you meet unexpected one-time costs. Reimbursements are then deducted directly from future tranches of Crédit Universel. To find out more, go to the page dedicated to the Budgetary Advance on the Government website here.
Where to go for debt advice
If you are collecting benefits and having difficulty with your finances, taking out loans could have a serious impact on your situation. If you are concerned about rising debt levels or are worried about your finances, the organizations listed below may be able to help you with free, unbiased advice:
