Budgeting loans are part of the social security system that currently exists in the UK. These loans are designed to help those living in poverty and they are an interest-free. They are given to people by the social fund. Only people who claim a certain type of income-related benefit are entitled to receive a budgeting loan and if a person has previously claimed Job Seeker’s Allowance and has been transferred over to Universal Credit, they will no longer be allowed to receive a budgeting loan.
What Should my Loan be Used For?
Budgeting loans are just a sum of money but they have been designed to pay for specific things for the person that receives it. Things like furniture or household items, clothes and footwear and rent in advance are all things that will be accepted when it comes to using your budget loan. Other essential payments that the loan should be used for are any essential maintenance works that need to take place in your home, such as building or plumbing or costs linked to moving house if this was needed instead. There are a few other ways that you can spend your loan and all the ways it helps are listed on the Government website. Usually, if it is essential, you will be able to use your loan to pay for it, if you qualify for one. It is worth noting that the budgeting loan can also be used to cover maternity costs.
Am I eligible?
You will only be eligible for a budgeting loan if you have been on certain benefits for six months. These benefits include Income Support, Job Seeker’s Allowance (Income Based), income related employment and support allowance or pension credit. If you are not in receipt of the above-listed benefits then you will not be entitled to help in the form of a budgeting loan. You will also not be able to get a budgeting loan if you are involved in industrial action (strikes or walkouts in the workplace) or you already owe more than £1,500 in total for either a budgeting loan or a crisis loan already. A crisis loan is a similar sort of concept to the budgeting loan and are given to those that cannot afford the essentials. The rules of eligibility do differ slightly in Northern Ireland so if you are in that location, please check before you apply. Some benefits have been updated and a lot of people now receive Universal Credit rather than any of the available options listed above. If you have been changed over to Universal Credit, you can still apply for the Budgeting Loan but it will need to be done through your local Job Centre Plus. The best way to do it is to visit your local Job Centre and speak to an advisor there. If you have read this and are still unsure about whether you are eligible to apply, then please visit your local job centre. If you are in receipt of benefits and are struggling to get by, there will be options of help that are available to you, it is just a case of finding out what and how much.
How Much Will I Get?
Once you have established that you are eligible for a budgeting loan, you can go ahead and apply for one. The amount you get will depend entirely on your circumstances – there are different amounts of loan that are available, some smaller and some larger amounts. The lowest amount available to borrow is £100 but this increases significantly if you are looking at getting the maximum amount. The maximum amount will differ depending on your marital status and living situation. If you are single, you can borrow a maximum of £348. If you have a partner, the amount rises to £464 and if either you or your partner are currently claiming child benefit the most you can borrow is £812. How much you can get can also depend on other factors such as whether you have the means to repay the loan, have savings of over £1000, or savings of over £2000 if you or your partner is over the age of 63 years or whether you are currently paying back a different budget or crisis loan (as mentioned above). Every situation and circumstance are different so it would be a case of your application being viewed and your personal circumstances assessed before an amount was to be decided. There is not a set amount for a certain type of person. The Job Centre has a fixed amount of money they can give away in the form of a budgeting loan, which is why there is a limit on the maximum amount of budget loan – because they need to make sure that their budget is not in any way overspent. There is also room for the limit to go up or down, depending on how many people are applying for the loan in that year. If you already have an existing budgeting loan debt, then, the size of the second loan you get will, of course, depend on what you already owe as a budgeting loan customer. The total amount cannot equal more than the maximum budgeting loan allowable.
How Do I Repay the Loan?
The Budgeting Loan is designed to help those that need it most and so because of this it is completely interest-free, meaning there will be no extra to repay – just the amount that you have borrowed. You will not, however, be able to dictate when and where you can make your repayments, they will onhealthy.net simply be deducted from your benefits at a suitable time. As the norm, you will be expected to repay the loan within 2 years (104 weeks) from when you first received it. This will be taken from your benefits, but if you stop getting them within this time, it will be down to you to find other means of repayment. Other means of repayment are often by cash, cheque, postal order or you can set up a direct debit from a particular bank account. Alternatively, you can pay the money back in a lump sum rather than paying it in instalments. Of course, there are support lines available if you feel you are struggling to give the money back. Repayments of your loan are made weekly from your benefits and the higher the benefit you receive, the more that will be deducted from your weekly payments. You can find the official figures for this on the Government website but as an example, if you are receiving a weekly benefit of £73.10 and your loan amount was the lowest (£100) then you will pay a weekly deduction of £3.66 until your loan is repaid. If you receive a fortnightly benefit payment, then the amount will be deducted fortnightly instead, to ensure that you can keep up with payments. If you receive a fortnightly benefit, the amount is generally twice as much as it would be if you received it weekly so you will repay twice as much. It is all relative and it is unlikely that you will struggle to repay anything with the way the system works. The loan system also takes into consideration each individual case and will consider factors such as how much debt you are in before they demand you to repay things that they know you cannot.
There are different rates at which you might be expected to make the repayments, depending on your circumstances. If you are currently repaying no other debts, you will be expected to make the repayment at 12% of the benefits that you receive. If your benefit is making some form of other debt payments such as fuel arrears or you owe rent then you will pay back at a rate of 10%. There is also a 5% repayment rate for those that are struggling further and are also having to pay off other large debts.
What if I am Struggling to make Repayments?
If you have agreed on a repayment rate but are struggling to make ends meet then there might be ways to help the situation. Your repayment period could be extended (beyond the 104 weeks) which will, in turn, reduce your weekly payment rates. Your local Job Centre Plus should be contacted for advice if you do find yourself in this situation. If you are age 61 or over then you will also be entitled to advice from the pension service, so you should get in touch with them ASAP.
How Long Does a Decision Take?
If you have applied for a budgeting loan, you will need to wait until a decision is made about your application which usually takes around a week. If you are successful and are offered a loan, then you might be offered three different options which will all be explained in the letter that you receive. You will be given three different loan amounts with different rates of repayment and you will usually be able to choose which one suits you. You will then be asked to sign the letter saying that you agree to the terms and conditions of the loan before you lend it. Once the letter has been signed, you will receive the loan in full and the repayments will likely begin from your next payment of benefit. You will be paid one lump sum of the loan into the bank account that you provided details for when you applied for the loan.
Why has my Application been Refused?
There are a few reasons as to why your application for a budgeting loan might have been refused, such as the fact that you haven’t been receiving a qualifying benefit for the required total of 26 weeks, you may have excess savings or you may already owe too much in debt – these are the main reasons. If a decision has been made and you are unhappy about the result and feel that you have been done an injustice, then you can ask for a review and the decision might be overturned. You can ask for a review if you feel that a decision was made without all of the facts being taken into consideration, you have proof that the wrong decision was made or a mistake was made in your case or even more seriously, you feel that the law was used wrongly to come to a decision. The best way to ask for a review and to get your case looked at again is by writing a letter to the Job Centre Plus. This must be sent within 28 days of receiving your decision letter. If the Job Cente is unable to change their decision to the one that you want then you can be offered an interview which gives you a chance to further explain your case and anything you thought was done wrongly in the decision making process. After your interview, the case will be reviewed again and if the decision is changed, a new letter will be sent. If there is no way the decision can be altered, you will receive a letter explaining why this is the case.