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People who are on benefits can also access financial assistance by loan lending companies. If you are already receiving some benefits or pension, getting a loan is possible for you. You can use the loan to spend for some necessities. These necessities may include clothes, furniture, food, and others that you may feel important to your continued existence. No matter what your needs are, benefit loans are readily available for you.
What are benefit loans, and why you might need one
Benefit loans are credits that are specifically designed for those that receive or rely on benefits as their source of income.
While such benefits or pensions are great, you can’t count on them for all your basic necessities. Sometimes, unforeseen circumstances may make it difficult to go by on benefits alone. It’s undeniable that such benefits are not enough. You would need benefit loans at some point to have an adequate resource to meet up with your needs.
You also need benefit loan to cover other needs such as paying for your rent, repaying store cards or credit cards, medical expenses, home renovation or emergency expenditures.
You may need the benefit loan despite your benefits to finance your education if you are training for a different career, travel expenses, and take care of your car. You can use it for other needs that cannot be adequately covered by your benefits.
In the UK, many lenders have loans for people on benefits in their plan. You may find one who will meet all your needs, and offer you a benefit loan that you can repay over a period at a monthly repayment amount that is affordable for you.
Qualifying for benefit loans
As you would probably think, finding a loan while on benefits is going to be more difficult than if you had an income from a regular employment. However, many benefit loans lenders that consider applicants on benefits.
Eligibility criteria for a benefit loan varies from lender to lender. However, as a minimum requirement, you’ll need to be at least 18 years old and be able to how that you can comfortably afford the repayments each month. Your ability to make repayments the loan is a big factor.
Other qualification for this loan is determined by some factors such as the borrower having been receiving the benefits for at least 26 weeks. Examples of benefits include income support, disability benefits, working family tax credits, housing allowance, support allowance, jobseeker’s allowance, and some pension credit.
The type of benefit loans you are receiving will affect the type of loan you can apply for and the loan amount you are allowed to borrow.
Another factor that may influence your benefit loan eligibility is your credit history. If your credit score is low, you may find it hard to get a lender who is willing to give you a loan. If you fortunately find one, the interest rate is likely to be high to make allowance for your poor credit rating.
Your employment status is another crucial factor you cannot overlook when looking for benefit loans. If you are unemployed, it becomes a huge effort to get a willing lender for fear of repayment. If you have other sources of income such as house rental despite your unemployed status, you still have a high chance of getting a lender who is ready to go all the way to lend you a loan.
Types of benefit loans
If you’re on benefits and looking for a loan, a guarantor loan is a worthy option to consider. You will have to have someone to co-sign your loan to support it and he or she will be expected to cover your repayments if you’re unable to do so. However, in return you will receive an APR of around 40-50%, which although more expensive than that offered by the banks and other traditional lenders, is considerably lower than many other options available to you.
High cost short-term loans
Many high cost short-term loan lenders will consider applicants who are receiving benefits. As the name suggests, high cost short-term loans are designed for a one off emergency and not for long-term or sustained financing. These loans are also known as payday loans or quick cash. Although advertised rates are often over 1000%, interest is capped at 0.8% per day.
Doorstep loans are also called home credit. Doorstep lenders generally pay you in cash, and deliver the loan to your doorstep. Likewise, they will collect repayments from your home. When applying for a doorstep loan, you will be assigned to a personal agent that will decide whether to grant you the loan or not. Due to the personal nature of this product, they are typically more lenient towards your credit history. Saying this, doorstep loans are an expensive form of credit and should be considered as your last resort.
Is a loan really the answer?
Only you can answer this question. Never take out loans or any sort of credit if there is a chance you won’t be able to afford or make the repayments on time. That will only make worse whatever financial difficulty you’re experiencing at the moment and make things more difficult for you in the long run. This will also further damage your credit record.
If you find yourself in the position where you’re struggling to afford basic living costs, then borrowing is not the answer. Instead, find a debt charity, as they are abundance around, which will be able to assist you. Or, you can approach your friends and family for financial assistance.
If you’re receiving benefits and looking for a loan, then you must know you still have a number of options. It’s extremely important that you compare your options before you apply to ensure you’re meeting the lender’s requirements. Failure to do so will result in you being declined, damaging your credit score, and making your search for a loan even harder. Take your time to compare benefit loans among different lenders before jumping into any loan offer.
305.9% APR. £400 borrowed for 90 days.
Total amount repayable is £561.92 in 3 monthly instalments of £187.31.
Interest charged is £161.92, interest rate 161.9% (variable)
Loanora is NOT a lender – we are a licensed broker working with the most popular direct lenders in the market to find you the most suitable short-term loan plan. Our FREE quoting service compares more than 40 lenders quickly and finds you a lender with the lowest rate that they are willing to lend to you today.
Rates from 45.3% APR to 1575% APR – we provide a no obligation quote, your APR will be based on your personal circumstances