Although some are not aware of these two financial products, they are vital to individuals who have difficulties earning enough money to pay for their monthly expenses. Both of them are offered from the Social Fund and are designed for those who are already getting certain benefits. As a result, they are considerably more affordable than loans from banks, pawnbrokers or doorstep lenders.
This having been said, the fact that budgeting loans and budgeting advances are both designed for specific individuals prevents them from getting the exposure required to also make them popular amongst the individuals that would need them. Today, we’ll look at both budgeting loans as well as advances and establish who can access them and how much more affordable, they are when compared to those offered by banks.
What Are Budgeting Loans?
These loans are designed to help individuals who have low income pay for essential or emergency expenses such as:
- Clothing or footwear;
- Maternity or funeral costs;
- Travelling costs;
- Advance rent or removal expenses, when moving to a new home;
- Furniture, household electronic equipment and basic home security systems;
Budgeting loans can also be used in order to pay for products and services that can help you find a new job or start work, such as equipment, clothes, and basic personal care products.
In order to apply for a budgeting loan, an individual must get pension credit, income support, income-based jobseeker’s allowance, or income-related employment and support allowance. Those interested must have been claiming any one of these benefits for a minimum of 26 weeks, consecutively or with a maximum break of 28 days.
The minimum amount that can be borrowed is £100 and the maximum:
- For single individuals – £384;
- For part of a couple – £464;
- For those with children – £812;
You can apply for a budgeting loan through the GOV.UK website which also hosts the Form SF500 that you will have to fill out. Alternatively, it is possible to ask for guidance at a Jobcentre Plus.
Repaying a Budgeting Loan
The repayment procedure is fairly simple. These loans are interest-free, which means that you will only have to return the money that you’ve borrowed. In most cases, the term for the loan is two years and the repayments will be automatically deducted from the benefits that you are receiving. Keep in mind that if you stop getting the benefits, you will have to establish another way to repay the loan.
What are Budgeting Advances?
Budgeting advances are the equivalent of budgeting loans, however, they can only be accessed by individuals that are claiming universal credit. The conditions for getting a loan are:
- Having received Universal Credit for at least 6 months, or making a case that you need the money in order to keep or find a job;
- Earning under £2,600 as a single individual, or less than £3,600 as part of a couple, per month, for the past 6 months;
- Not repaying another budgeting advance;
Repaying the advance starts with the next Universal Credit that you will receive and will be deducted on a monthly basis. The entire advance must be repaid in 12 months.
As with the budgeting loans, the minimum amount that can be borrowed is £100. The maximum amounts are identical to the ones from the loan. However, unlike the loans, a budgeting advance can only be claimed directly from a Jobcentre Plus.
Both the Budgeting Loan, as well as the Budgeting Advance are designed for low-income individuals and families. As a result, their use is restricted to them. While the terms and conditions are drastically better than those offered by banks and private lenders, they do still need to be repaid and you should give applying for one a lot of thought before submitting your request.