Extramile Finance

The UK lending landscape has made borrowing flexible in many different ways. Despite this, many of you may still have questions regarding qualifying for loans for people on benefits in the UK.

It is true that your status as a benefit’s recipient will influence lender’s assessment. However, it does not mean a straightaway rejection from the lender. You can borrow money even when you are not earning money directly from a job.

This guide explains the qualifying criteria for borrowers living on benefits, the working procedure of loans and many other aspects.

Key Takeaways

• Apply for loans even when you are receiving benefits in the UK.
• Affordability checks will be done by most of the lenders
• Benefits like Universal Credit, PIP, child benefit, state pension, etc., may be considered as earnings
• Good credit scores make borrowing easy, but some lenders will also accept poor credit applications
• Borrow that much you can pay back comfortably
• Compare pre-approved loan offers obtained from multiple lenders for affordable rates

What are loans for people on benefits?

A loan on benefits is a personal loan that has been designed to help applicants whose income comes partly or entirely from Government benefits. The lender places greater emphasis on whether you can afford the loan repayments.

These loans can be used for covering essential expenses like:

• Sudden medical expenses
• Emergency car or home repairs
• Replacing the boiler urgently
• Urgent travel cost
• Paying off rent arrears or utility bills, etc.

How to qualify to get a loan when you are living on benefits?

You should fulfil the eligibility criteria set by the lenders. At the same time, you will have to provide required documents as asked by the lender. You may rest assured that paperwork is going to be minimal for these loans.

• Who can qualify?

There are some standard requirements which interested loan applicant should meet. Therefore, you should be:

• Be at least 18 years old
• Be a permanent UK resident
• Have a valid bank account
• Have a regular source of income
• Able to meet affordability requirements
• What documents will be required?

Having necessary documents ready by your side can actually speed up processing of your applications. Lenders will need:

• Proof of identity like driver’s license or passports
• Proof of address like utility bills
• Proof of income like benefits award letter, payslips, etc.
• Bank statements of recent months

Can I get a loan while receiving Universal Credit?

Yes, you can apply for Universal Credit loans once meeting the eligibility criteria set by the lender. These benefits are seen as your income source. Therefore, you do not have to worry about facing rejection from lender because of this factor.

The loan provider will assess a few aspects which can strengthen your loan application. They are:

• Total monthly earnings
• Important household expenses
• Ongoing debt commitments
• Credit scores
• Ability to pay back loan within the given term

To be able to convince the lender, you must demonstrate that repaying on time can be comfortably managed.

How to apply for a loan while living on benefits?

Once you have weighed your options and decided to go ahead with your online application, you will have to go through a structured process comprising the following steps.

1. Enter details online: You need to fill out the online form with a few personal and financial details. Submit the form once you have re-checked it carefully.
2. Go through assessments: Affordability checks will be conducted at this step. Your income and expenses will be examined carefully by reviewing the respective documents.
3. Receive an offer: If lenders have pre-approved your request, you will receive an online offer. It will unveil the interest rates, repayment term, monthly payments, total repayable amount and fees.
4. Accept and sign: If the given terms and conditions seem acceptable, you can sign the loan agreement, after carefully reviewing it. Only proceed if repayment schedule is flexible for you.
5. Disbursement of funds: Once the lender receives the agreement, they release funds immediately. You can expect to receive funds in your bank account within a short span.

Is it possible for me to get a loan with bad credit while on benefits?

Yes, but approval can never be promised, as it is subject to various checks conducted by the lender. Still, there are lenders who can offer bad credit loans for people on benefits. Therefore, instead of worrying about defaults, missed payments or low credit scores, you must try applying for these loans.

Here are a few ways to work on for improving the chances of getting approval for these loans.

• Keep your credit report accurate

You must review your credit file from time to time to look for incorrect information, duplicate accounts, outdated balances, etc. By correcting these errors, you can take one step towards improving your credit scores.

• Borrow an affordable amount

You should apply for a loan amount that you can afford to repay on time. Ideally, smaller amounts are easier to pay back and they are helpful in downsizing the overall borrowing cost. Check monthly payments, total interest and overall repayable amount.

The bottom line

Showing an improved credit profile is almost impossible without elimination of debts. You will have to try in every possible way to reduce as much pending payments as possible. Then, you will be able to free up cash that can be shown as the amount available for repaying loans for people on benefits within the given time.

FAQs

Is it possible to get a loan when benefits are my only income?

Yes, usually most lenders will accept your application if you can show benefits as your primary income source. The approval decision will be made based on affordability and eligibility criteria.

Which benefits may be accepted as income?

The different benefits like Universal Credit, Personal Independence Payment (PIP), Disability living allowance (DLA), Employment and support allowance (ESA), child benefits, pension credit, child tax credit (if applicable), working tax credit (if applicable), etc., are usually considered by lenders.

Will receiving benefits affect my credit scores?

No, your credit history will face no impact when you are a benefit claimant. Credit scores mainly depend on payment history and the way you manage credit. There will be no influence of your benefits income.

How much can I borrow?

The loan amounts will depend on the borrowing range provided by your lender. You should borrow an amount that fits your budget so that repayment will be easier for you.

Will lenders check my bank statements?

Some lenders may ask for your bank statements at the time of carrying out affordability checks. These documents are usually required to review your spending behaviour and how much you receive as benefits.

Can I repay loans early?

You should ask your respective lender about early repayment charges. In most cases, no additional fees will be charged if you want to repay loans in advance. Check if you can afford to pay the full amount at once ahead of time.

How long does it take to receive a lending decision?

The time will depend on the lender with whom you will apply for these loans. Initial decision may come shortly so that you can decide and accept the offer for full assessment. Usually, it does not take longer to get a decision from online lenders.