Not many people know of budgeting loans. However, these can be lifesavers for individuals with low income that face unexpected expenses. Generally speaking, budgeting loans can only be accessed by individuals that are on a low income, regardless of what benefits they receive.
One of the biggest advantages of these loans is the fact that you do not have to pay any interest. Furthermore, very few restrictions apply to what you can do with the loan. For example, a budgeting loan could be used to buy clothing, furniture, household electronics, maternity or funeral expenses, and you can even use the money to pay for travelling expenses or advance rent. From a practical point of view, a budgeting loan is similar to a personal loan, with the exception that the latter requires you to pay interest.
This having been said, not everyone can access this type of loan, and there are also a few small restrictions that must be taken into consideration. Here is what you need to know:
Who can get a budgeting loan?
Access to budgeting loans is restricted to individuals who are receiving one of the following benefits:
- Income support;
- Income-based Jobseeker Allowance;
- Income-related Employment and Support Allowance;
- Pension Credit;
Furthermore, you must have received one of these benefits for a minimum of 26 consecutive weeks or with a maximum break of 28 days. So in some cases, it might be more beneficial to look at payday loans instead.
It is also important to keep in mind that while the minimum loan is of £100, the upper limit will depend on your personal circumstances. For example, if you are single, you will be able to get approx. £380. The amount grows to around £460 if you are part of a couple, or to over £800 if you have children.
How can you apply for a budgeting loan, and how will you repay it?
Applying for the loan is fairly easy. You will need to either go online and download Form SF500 from the GOV.UK website and submit it, ok ask for information and help at a Jobcentre Plus. The review and approval process may take up to one week.
Once you get the money and use it, repaying it is a hands-off process. Essentially, the amount of money that you’ve borrowed will be deducted from the benefit that you are receiving. Having been said, it will not be deducted all at once. Depending on the terms that you agree to, you can repay the loan in up to two years, which means that a very small amount of money will be taken out of your benefit each month.
Keep in mind that if you stop receiving the benefit while you are still repaying the loan, you will have to go to your local Jobcentre Plus and find another way to return the money.
The biggest advantage of a budgeting loan and why you should take advantage of this deal
Unlike most standard loans, budgeting ones do not have any interest rates attached to them. This effectively makes them free. You will still have to return the money. However, you will only pay what you borrowed.
Furthermore, the fact that you can return the money throughout two years period means that you can spread the payments so that you will barely feel that you are making them.
Budgeting loans are easy to get and even easier to repay. They are a great choice if you are receiving benefits and need a larger amount of money to pay for a medical procedure or home repairs.