Finding a quick fix for your financial issues is challenging, especially if you urgently need financial assistance. If you are struggling with finances, you will look for ways to manage your expenses.
Thankfully, today’s financial system provides sample choices to help you out of the crisis.
There are many options available if you consider borrowing a certain amount of money for a stipulated period.
For example, you can take a personal loan, you can use your credit card, approach your employer for a payday advance, or can ask your friends and family to help you out. A budgeting loan is one such option that you can consider.
Even though most people feel taking a loan is not a great option as it puts a sort of monthly financial burden on your expenses.
However, if you have the need, smart planning, and proper research can help you get a loan that will not only help you out of the crisis but will not put any extra burden on you.
So, if you are planning to take a budgeting loan, this article will provide everything you need to know about it. Let us dig deeper to find out more about this loan.
Representative Example If you borrow £20000 over 72 months, your representative APR will be 22.90% APR. Your monthly repayments will be £488.36 and the total amount repayable will be £35,161.92. Representative Example If you borrow £20000 over 72 months, your representative APR will be 22.90% APR. Your monthly repayments will be £488.36 and the total amount repayable will be £35,161.92. Representative Example: Loan Amount: £30,000.00, Loan Term: 120 Months, Interest Rate: 20.98% PA (variable), Monthly Repayments: £633.03, Total Amount Repayable: £75,963.60. This example includes a Product fee of £3,000.00 (10% of the loan amount) and a Lending fee of £675.00. Representative Example: Loan Amount: £30,000.00, Loan Term: 120 Months, Interest Rate: 20.98% PA (variable), Monthly Repayments: £633.03, Total Amount Repayable: £75,963.60. This example includes a Product fee of £3,000.00 (10% of the loan amount) and a Lending fee of £675.00. Representative example: If you borrow £3000 over 36 months at a Representative rate of 47.8% APR and an annual interest rate of 39.7%, you would pay 12 monthly installments of £143.84. The total charge for credit will be £2178.24 and the total amount payable will be £5178.24. Representative example: If you borrow £3000 over 36 months at a Representative rate of 47.8% APR and an annual interest rate of 39.7%, you would pay 12 monthly installments of £143.84. The total charge for credit will be £2178.24 and the total amount payable will be £5178.24.
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Representative Example If you borrow £20000 over 72 months, your representative APR will be 22.90% APR. Your monthly repayments will be £488.36 and the total amount repayable will be £35,161.92.
Representative Example: Loan Amount: £30,000.00, Loan Term: 120 Months, Interest Rate: 20.98% PA (variable), Monthly Repayments: £633.03, Total Amount Repayable: £75,963.60. This example includes a Product fee of £3,000.00 (10% of the loan amount) and a Lending fee of £675.00.
Representative example: If you borrow £3000 over 36 months at a Representative rate of 47.8% APR and an annual interest rate of 39.7%, you would pay 12 monthly installments of £143.84. The total charge for credit will be £2178.24 and the total amount payable will be £5178.24.
What is a budgeting loan?
A budgeting loan can be taken to pay for unforeseen expenses if you are on a low income. These are interest-free loans that you can borrow if you already get certain means-tested benefits.
Rather than paying a high-interest rate on personal loans, you can borrow an interest-free loan from the Social Fund.
A budgeting loan is different from other loans because you don’t need to pay any interest on the money you lend. A certain amount of money is automatically deducted from your means-tested benefits.
This means that you only need to repay the amount you borrow and nothing extra, as with other kinds of loans.
Budgeting loans can be availed by those who have been getting income-related benefits for six months. And you must still be receiving those benefits during the time of applying for this loan.
The UK budgeting loan is not welfare funds. The Department issues them for Work and Pensions, which must be paid back within 104 weeks or 2 years.
Who can apply for a budgeting loan?
Unlike other loans that anyone can apply for in the UK, budgeting loans have somewhat different prerequisites.
You can avail of a budgeting loan if you receive any of the following benefits:
- Income support
- Pension credit
- Income-based jobseeker’s allowance
- Income-related employment and support allowance (ESA)
The government provides additional provisions to those seeking budgeting loans.
So, if you have recently shifted to pension credit from universal credit, the amount of time you received the universal credit can be added to the six-month requirement to be eligible for the budgeting loan.
This works well for those in immediate or urgent need of money, as you can utilise any of the time spent during your universal credit period.
Who is not eligible to apply for a budgeting loan?
If you are currently drawing benefits from universal credit, then you will not be eligible for applying for a budgeting loan.
That apart, you will not be eligible for a budgeting loan if:
- You already have another budgeting or crisis loan, and you are £1,500 short of paying it off
- You are participating in any kind of industrial strike action
- You are receiving a ‘new style ESA or jobseeker’s allowance and not an ‘income-based’ allowance
What can a budgeting loan be used for?
A Budgeting loan is used for a variety of household necessities and also to pay for existing consumer debt, such as:
- Advance rent for a new home
- Clothing or footwear
- Maternity expenses
- Essential travelling expenses
- Furniture and household equipment
- Home maintenance, security, and improvement
- Funeral expenses
- Removal expenses to new accommodation
- Hire purchase payments
- Expenses due to getting or starting a new job
How does a budgeting loan work?
Although you do not have to repay the loan with interest, you will have to pay it back anyway.
While borrowing the loan and depending on the amount you borrow, you will get a maximum of 2 years to repay the loan.
The repayment amount is automatically deducted from the benefits that you receive.
And if you stop getting benefits in between, you will have to work around finding another way to make the repayments.
If you are expecting your first child or more than one child and already have children, then you can claim up to £500 under Sure Start Maternity Grant.
You are not required to pay back this money, but this offer is only for people outside of Scotland.
How much budgeting loan can I get?
Like most other loans, there is a defined minimum and maximum limit to the amount you can borrow through a budgeting loan.
While the minimum you can draw through a budgeting loan is £100, you can draw more money, depending on your household circumstances.
- Borrow £348 if you are single
- Borrow £464 if you are part of a couple
- Borrow £812 if you have children
What is the Budgeting Loan number?
The Budgeting Loan phone number is 0800 169 0140. You can use the Budgeting Loan number to request an SF500 or to ask questions regarding the progress of your Budgeting Loan application
It is also very closely monitored whether you can repay the total loan amount from your monthly benefits.
If the amount of budgeting loan exceeds the amount you can spare from your income from benefits, you might not be considered.
Also, if you and your partner are above the age of 63 and have savings of £1,000, your limit will increase to £2,000.
If you already have a budgeting or crisis loan, you may not get a loan at all.
If you are made an exception, considering your circumstances, the allotted sum will be comparatively low.
How long does it take to get a budgeting loan?
Most processes related to providing financial assistance in the UK have been made extremely proficient. So, loan allotment and disbursal is a quick and easy process.
However, the processing of a budgeting loan varies depending on how you have applied.
A postal claim can take up to 31 working days; a text message usually takes 7 working days and 25 days if you apply online but accept the loan offer by post.
Since many people in the UK are provided with additional benefits, an equal number of people are applying for budgeting loans. This makes getting this loan a tad bit difficult.
Also, budgeting loans are not always guaranteed, and they may be delayed due to eligibility requirements or administrative backlogs.
If you prepare your file well and keep things sorted, you might not face any hassle in approval and disbursal.
Be sure to submit all necessary documents promptly and correctly to receive your budgeting loan as soon as possible.
Additionally, contact your local authority regularly and inquire if anything else is needed from you. Following up with the authorities is important in ensuring that your work is done.
Due to the workload, your application may get delayed. If you keep following up, you can speed up the process.
Are budgeting loans still available?
Yes, budgeting loans are still available, and you can apply for them online.
Crisis loans are no longer available. This loan doesn’t count as an income; hence, it will not impact other benefits you are on.
You must provide your national insurance number and other important information in the claim form. Usually, it takes around 5-6 weeks for a budgeting loan to be sanctioned and disbursed.
What are some other ways to deal with debts?
- Financial troubles or the need for money due to a particular reason take your mental peace away.
- It is a challenge to find the right resource and a trustworthy partner who understands your needs and will lend you money on time.
- While loans are the most popular and common way people borrow money, they are not the only way you can deal with your debts. There are certainly other options as well that can help you in trying times.
- If you are knee-deep in debt and do not know the total amount you owe, it’s best if you contact free debt advice services like Money Advice Service. They will be able to help you get through this situation.
- They may ask you how much you owe about your assets and income. Through the information they gather, they can figure out your requirements and provide proper guidance about how much you must borrow and what way to go about it.
- If you think you can make timely repayments on a personal loan, you can also consider this option.
- However, please note that the interest rate on these loans is high compared to budgeting loans.
- And you should only opt for this loan if you can make all the repayments on time and in full.
- Of course, there are benefits of taking a personal loan, an unsecured loan being the best one, but it sure comes with certain pitfalls as well. So, weigh your options before going for a personal loan.
- A safety net helps you when you need money for unexpected expenses. Try to save some portion of your monthly income so that you do not have to panic when the situation arises.
- Also, plan and draft a monthly budget to help you get through the month without hassle.
- A monthly budget is essential if you are struggling with your finances every month.
- Proper financial planning can protect you from landing in a situation where you have no other option but to borrow money.
Can I Get a Loan If I Am Getting Disability Benefits?
- Getting a loan if you are getting disability benefits might be difficult, but it is possible.
- You can apply for a loan even if you have a disability or long-term health condition.
- However, it is good to explore credit unions’ government benefits loan options.
- You can get a loan while receiving disability benefits if that is your only income. Disability incomes like Personal Independence Payment (PIP), Disability Living Allowance, Universal Credit Employment and Support Allowance (ESA), Incapacity Benefit Industrial Injuries Disablement Benefit are counted as your income.
- Most lenders will look at your credit score and the ability to make payments as major considerations for giving you the loan, and they will not be able to refuse you the loan since you are getting the disability benefits.
- However, they would look at if you will have leftover money after your usual outgoings for the repayment.
- While applying for a loan when on disability benefits, things like working tax credit, child tax credit, child benefit, or fostering allowance might also be considered.
How to Check the Status of Your Budgeting Loan?
- If you wish to find out the status of your budgeting loan, you can call the Social Fund and check its status.
- However, you can only do it after 14 days of applying online and 21 days after posting your application.
- Once you have applied for the loan or received the approval and wish to change your decision, you can do it too.
- You can reconsider your decision if your loan application is rejected or the approved amount is not what you wanted.
- This can be done by writing a letter explaining why the loan authorities’ decision is incorrect and why you wish it to be reconsidered.
- This letter can be sent to the address that appears on your decision letter.
- The authorities should receive this within 28 days of you receiving the letter.
- The letter will not be entertained if you get it later than that.
- If the concerned authorities do not accept your letter, you will have another chance to get your application reviewed.
- You can do this by asking the office of the Independent Case Examiner to review it further. This should also be done within 28 days.
How to Pay Back Your Budgeting Loan?
- Budgeting loans are automatically deducted from your benefit payments every week.
- You are expected to repay everything within a period of two years, so how much money you borrow will determine the monthly instalment that gets deducted from your benefit income.
- If your instalment gets too big and you start to find it challenging to manage your finance, you can either get in touch with Jobcentre Plus or seek advice from your local job centre.
- If your benefits income gets over and you stop receiving those benefits, you will have to find another way to repay this loan.
How Often is it Possible to Apply for a Budgeting Loan?
- There is no official limit to the times you can apply for a budgeting loan.
- However, every time you apply for one, your financial circumstances will be assessed, and the authorities will look into your ability to repay the total amount.
- Every application is assessed on a case-to-case basis, and the total amount of the approved loan will depend on several factors, like if you have any other budgeting loan or crisis loan that you are paying back.
- You will not be given any more loans if you already owe £1,500 under some other Social Fund loans.
What is Budgeting Advance?
- Budgeting Advances are loans you receive as part of Universal Credit to cover certain expenses.
- A budgeting advance is an interest-free loan you can get to meet some essential financial obligations.
- It is similar to a budgeting loan, with some minor tweaks in the rules.
- If you choose to get a budgeting advance, if your budgeting advance is approved, you will get reduced universal credit payments until the total amount of the loan is repaid.
- This amount should ideally be paid within 12 months.
What Can Budgeting Advances be used for?
Budgeting advances can be utilised for:
- Paying for a one-off thing like repairing or replacing something
- Paying for work-related expenses like buying uniforms, tools, etc.
- Regulating unexpected expenses
- Repairing your house
- Covering travel expenses
- Paying for maternity expenses
- Funeral expenses
- Shifting or moving costs or paying rent deposit
- Purchasing for essentials
You can avail of a budgeting advance if you need the money to get a job or stay in one, like travelling for an interview or purchasing items to remain in a job.
If you seek budgeting advance for other reasons, then you must have claimed any one of the following benefits:
- Universal Credit
- Means-tested Jobseeker’s Allowance
- Means-tested Employment and Support Allowance
- Income Support Pension Credit
Your income should be less than £2,600 in 6 months before you apply for budgeting advance. This loan amount can go up to £3,600 if you live with a partner. If you already have another budgeting advance loan you are paying for, you will not get another one.
The smallest amount that can be approved is £100, while how much is ideal for you will mainly depend on your circumstances.
This amount can be:
- £348, if you are single and have no children
- £464, if you are a couple without any children
- £812, if you have children
You can apply for budgeting advance over the phone by calling 0800 328 5644, 0800 328 1744 (Welsh language), and 0800 328 1344 (Textphone).
- You can also apply for budgeting advance at your local job centre and by updating your universal credit account journal.
- To apply for budgeting advance, you must be ready to discuss details with your work coach.
- They might want to know about your income, savings, and outgoings to assess if you are eligible for the loan and how much can be disbursed to you.
- Once you apply, your status will be conveyed to you within the same day.
- If you wish to apply for budgeting advance, you can do it through your universal credit account journal.
- However, completing the application process online is impossible as you will have to discuss the details with your work coach physically.
- Your budgeting advance loan should be repaid within 12 months, which is done through an automatic reduction in your monthly universal credit payments.
- Suppose your benefits change while you still make the budgeting advance payments.
- In that case, the payment for those benefits will be deducted by the same amount as the original deductions when you were paying for budgeting advance.
- If your benefits stop, the DWP Debt Management Contact Centre will notify you, explaining how you can repay the amount. You can then pay back the loan in full or in the form of regular monthly instalments.
- And unlike budgeting loans, you can get only one budgeting advance at a time.
- You will not be eligible to apply for another one until you have paid off your previous loan amount.
- So, whether you get a budgeting loan or budgeting advance, both are useful options for fulfilling your financial requirements.
- However, you must ensure that you clear your financial position to the lenders and ensure that the amount you apply for is practical enough to leave you with some extra money from your benefit income.
- This way, you will not over-burden your monthly finance and have enough to spare to enjoy other pleasures of life.