Already slogging under the sky-high interests and need an immediate cash influx? Budgeting loans might be your saviour! An interest-free budgeting loan helps you deal with an unexpected cash emergency while you are already low on funds.
How Do Budgeting Loans Work?
A budgeting loan is like an extra top-up while you are already deriving benefits from other credits. A budgeting loan can help you sail through the below exigencies:
- Advance rent payment
- Home security and maintenance
- Maternity expenses
- Expenses while seeking a new job
- Repayment of Hire Purchase loans
- Buying furniture or other household essentials
- Funeral Costs
- Travelling costs within the UK
- Clothing and shoes
Am I Eligible For A Budgeting Loan?
Anyone who is drawing one or more of the below-mentioned benefits is eligible for a budgeting loan:
- Pension credit
- Income Support
- Income-based Job Seeker’s allowance
- Income-related Employment and Support Allowance
The catch here is, you can only get the budgeting loan while claiming a universal credit on the day of application of the loan, and on the day the loan is approved.
What Is The Qualifying Period For A Budgeting Loan?
The minimum qualifying period for the above benefits is 26 weeks wherein intermittent breaks of up to 28 days are permissible. This applies to the recipient of these benefits or their partner. The time spent in claiming the benefits for universal credit is also counted towards the 26 weeks window. The waiting period can be marginalised if your job is on hold or you cannot go to work unless the loan is granted.
Who Cannot Get A Budgeting Loan?
While we are already clear on the application criteria, let’s set the record straight for those who shouldn’t be seeking a budgeting loan.
- If you have been involved in any form of Industrial actions such as a Strike or a lockout
- If you are single and have earned more than £2,600 in the last six months
- If you and your partner have together earned more than £3,600 in the last six months
- If you already owe more than £1,500 towards crisis loans and budgeting loans
In case you are claiming universal credit, it is always advised to go for a budgeting advance instead of a budgeting loan.
How Much Budgeting Loan Can I Get?
The minimum loan amount that you can borrow is £100. The amount sanctioned is based on the following criteria:
- Your ability to repay the loan
- Any outstanding loans/advances
- Immediate savings
You will not be sanctioned a full budgeting loan if you and your partner have more than £1,000 towards savings (£2,000 if you or your partner are 63 or over). The maximum loan amount is £348 for singles, £464 for couples, and £812 for couples claiming child benefits. The loan amount offered is solely at the discretion of the DWP, and it may be less than what you had applied for.
What Documents Do I Need To Apply For A Budgeting Loan?
Just like other uk loans, you need to provide your National Insurance number along with your bank statements for clarity on savings and current debt payments. Additionally, details about partners and children if any also need to be furnished while applying for a budgeting loan.
How Do I Apply For A Budgeting Loan?
Although an exact reason need not be furnished while submitting a budgeting loan request, DWP needs to be informed about the category of the expense along with the loan amount.
People residing in England, Scotland and Wales can either apply online or get in touch with an adviser at the local Jobcentre Plus.
If you are applying for a budgeting loan in Northern Ireland, you can always ask for a claim form from a Social Security or Jobs and Benefits Office.
How Much Time Does It Take For The Budgeting Loan To Get Processed?
If the documentation is complete, it usually takes 5-6 weeks for the budgeting loan to get processed. The time frame is calculated from the day DWP received your application for the loan.
How Do I Repay The Budgeting Loan?
The repayment of the budgeting loan commences only after the full repayment of any previous outstanding loans. As it is an interest-free loan, you only owe the principal amount. The reimbursement is debited automatically from the benefits, and in case you stop receiving benefits midway, another alternative needs to be settled. In ideal circumstances, you must repay the loan within two years.
How Do I Challenge A Budgeting Loan Decision?
If you feel that the budgeting loan decision with regards to your application was incorrect or unfair, you hold the right to challenge the decision by writing to Jobcentre Plus within 28 days and ask for a review. Having said that, you also need to provide your arguments on why you think that the decision was wrong.
If you are not satisfied even post the review, you may ask the office of the Independent Case Examiner to review the decision.
Can I Apply For More Than One Budgeting Loan?
You might have a question: how many budgeting loans can i have in a year? If you do not have an already running budgeting loan, you are fully eligible to apply for another loan up to a maximum allowable amount. However, in case there is any outstanding loan debt, the size of the next budgeting loan will depend on the amount you owe from the previous loan. Your claim may be denied if DWP feels you may not be able to repay any further debts.
What If I Need Help While Waiting For My First Benefit Payment?
You can always seek help from Jobcentre Plus in case any financial assistance is needed while waiting for the first benefit payment due to some change in circumstances or a health emergency that was not taken into account earlier.
A short term benefit advance might be the need of the hour in such scenarios, and you can claim within five weeks of the original claim stating the exact reason along with bank statements. You can apply either online or in-person at the local Jobcentre Plus office.
The fact that a budgeting loan is interest-free doesn’t rule out its direct impact on your credit score. So don’t make any rash financial decisions until you think it through and only borrow if you really need to.