loans for people on benefits

Can I Get a Loan if I’m on Benefits?

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As per national statistics, about 20 million citizens of the UK were claiming the DWP benefits by August 2019. Of this, two thirds (about 13 million) are claimants of the State Pension Age fund, whereas, 2.7 million were Universal Credit claimants.

Regardless of age or benefit plan, people claiming benefits may need additional financial assistance at some point. It may be for a home improvement project or a car that needs a quick fix or some other unplanned expense. But is there a way for benefit claimants to secure some extra cash through a loan?

In this article, we will discuss loan options for people on benefits and how they can apply for one.

Can you get a loan if you’re claiming benefits?

The UK Government has rolled out several benefits for the welfare of citizens. You can apply for loans even if you’re an existing claimant, but there are a number of factors that you need to take into account. Below is a break-down of the most common scenarios where benefit claimants may or may not get approved for a loan:

  • Low income with benefits: 

    Suppose you are someone with a low income, on a sickness or disability benefit. Your income might weaken your chances of getting a loan from a major bank. When it comes to borrowing loans, it is essential to weigh the pros and cons of each offer. You will want to look at the APR for your loan offers. Loan sharks tend to give loans to people on a low income, but charge exorbitant interest rates. Some APRs might even be higher than 200%. In such a case, the best thing to do would be talking to a financial advisor to help you plan out your expenses. Or perhaps, take some financial help from a friend or family member to get you through the rough patch.

  • Taking a loan because your benefit payment is late: 

    Systems can break-down and servers can crash. Such a mishap might delay your benefits payment. If you’re struggling to tide over, there are several options to choose from, other than high-cost short terms options like payday loans.

  • Seek assistance from your local welfare scheme
  • See if you can get a short-term advance from the Jobcentre
  • Look for an interest-free budgeting loan from the Social Fund
  • Borrowing to cover an unforeseen expense: 

    If an unexpected expense like a medical emergency has burdened you, a budgeting loan may ease your problems. People on income-related benefits can make use of an interest-free budgeting loan. Alternatively, you can contact your local credit union for a short-term loan with low-interest rates.


  • Taking out a loan to adapt your home: 

    If you’re looking to make home improvements to make it more accessible, reach out to a local authority for assistance. They may be able to help your secure a Disabled Facilities Grant. Homeowners seeking income-related support may be eligible for help with interest payment on their loans. These can be loans for home repairs and adaptations, as per your needs.

How to apply for a loan if you’re on benefits?

Applying for a loan is a pretty straight-forward process. Once you file your loan application, the lender will assess it to determine your creditworthiness and make a decision. Below are the steps to apply for the various loan options available for people on benefits:

Budgeting Loan: A budgeting loan is a means by which benefit claimants can avail of interest-free credit. This loan is a smarter choice to opt for than payday or doorstep loans since there no interest is levied on the cost. If you’re a low-income claimant trying to bridge a financial gap, opt for a budgeting loan. A budgeting loan can solve a variety of purposes, such as:

  • Furniture or household equipment
  • Footwear and clothing
  • Removal expenses or advance rent for a new home
  • Home improvement, maintenance
  • Maternity or funeral expenses
  • For sustenance during your job search period
  • Traveling expenses

Eligibility: To qualify for a budgeting loan, you must be claiming one or more of the following benefits for the past 26 weeks:

  • Income Support Benefit
  • Income-based Jobseeker’s Allowance (JSA)
  • Income-related Employment and Support Allowance
  • Pension Credit

You must also fulfill the following pre-requisites:

  • You are a Universal Credit claimant
  • You have a history of involvement in Industrial action (a strike, a walkout/lockout)
  • You already owe a debt of over £1500 (in total) towards Crisis Loans and Budgeting Loans

If you were formerly a Universal Credit claimant and recently moved to Pension Credit, time spent claiming the Universal Credit will count towards the 6-month eligibility criteria.

The minimum loan amount for this loan is £100 but they’re capped at certain figures based on your financial circumstances:

  • £384 if you’re single
  • £464 if you’re part of a couple
  • £812 if you’re a parent
  • Credit Union Loan: A Credit Union is a self-help co-op wherein members pitch in a part of their savings to lend to another member in need. The functioning of a Credit Union is similar to that of any other financial institution, but the interest rate on loans is minimal – up to 3%. To get a Credit Union Loan, you need to be a member, sharing a common bond with the other members like the same living or working area or same employer. Find a Credit Union near you to apply for this loan.


  • Disabled Facilities Grant: A disabled person can avail of the Disabled Facilities Grant from the council if they need to make changes in their home. These changes cover, but are not limited to the following:
  • Improve accessibility by installing ramps and widening doors
  • Improve access to rooms and facilities – stair-lifts or leveled bathrooms
  • Installation of heating systems
  • Adapt heating and lighting controls for their convenience

A Disabled Facilities Grant will have no impact on your ongoing benefits.

  • Mortgage
  • Loans were taken out for home repairs and improvements

This grant is termed as a Support for Mortgage Interest (SMI). It is a loan that you’ll need to repay with interest when you sell or transfer ownership of your home. You usually need to be getting or treated as getting, a qualifying benefit to get SMI. There’s no guarantee that you’ll get SMI for a mortgage or loan you take out.


The benefits system exists to provide practical help and financial support for those who are unemployed and looking for work. It also provides people with assistance if their earnings are low, if they have a disability, are bringing up children, are retired, care for someone, or are ill. However, being on benefits doesn’t mean all your needs are met. A benefit claimant can require additional financial support. But remember to weigh an offer based on its merits and demerits.