A budgeting loan helps people on low incomes to pay for an unexpected expense or essential items. This type of loan is only available to people who meet certain criteria, which we will go through later on in this post.
A budgeting loan is interest-free, making it a much cheaper payday loan alternative for those on low incomes.
What can a budgeting loan be used for?
Budgeting loans can help borrowers with a variety of different things such as:
- Repaying purchase hire loans
- Maternity costs
- Funeral costs
- Rent in advance
- Moving house associated costs
- Travel costs in the UK
- Security in the home
- Home improvements
- Home maintenance
- Costs that are linked to getting to a new job
- Household items such as washing machines
- Clothes or footwear
Who can apply for a budgeting loan?
As previously mentioned, borrowers need to meet certain criteria in order to be applicable for a budgeting loan.
You will need to be a recipient of one of the following benefits:
- Income support
- Income-based Jobseeker’s Allowance
- Pension credit
- Income-related Employment and Support Allowance
If you are a recipient of one of these benefits, you also need to make sure that you have been claiming it for a minimum of 26 weeks. You don’t necessarily need to be receiving this benefit consecutively, but there cannot be a break of more than 28 days in total.
How much can I borrow with a budgeting loan?
In terms of the minimum amount you can borrow with a budgeting loan, this is £100. Regarding the maximum budgeting loan amount, this will be dependent on your individual circumstances. For example:
- If you are single, the maximum amount you can borrow is £384
- If you are part of a couple, the maximum amount you can borrow is £464
- If you have children, the maximum amount you can borrow is £812
There can also be additional factors impacting your budgeting loan amount. These include:
- If you have existing Social Fund loans
- Are paying an existing budgeting loan
- If you have savings over £1,000 (this rises to £2,000 if you are aged over 63)
How do I pay back a budgeting loan?
With a budgeting loan, you will only need to pay back what you owe, with no additional fees to pay.
These loan repayments will be taken out of your benefits automatically. The deducted amount will be calculated on an individual basis. This includes taking into account the benefits you receive, current income and what you can realistically afford to pay.
In the majority of cases when budgeting loans are granted, you are required to pay it back within 2 years.
How can I apply for a budgeting loan?
To apply for a budgeting loan is a relatively straightforward process. Once you have ensured you meet the relevant criteria for a budgeting loan, apply online via the GOV.UK website. Make sure you have documents ready to prove you are an eligible applicant.
You can also download and print the Form SF500 from their website, or ask for the form at any local Jobcentre Plus in the UK.