Households struggling to keep up with everyday expenses could get help from a little-known scheme called a Budgeting Loan to tide them over.
The loan can be used for essential bills, like rent, commuting costs, and even repairs and is in place to stop those in need resorting to rip-off payday lenders or illegal loan sharks in desperation.
It is similar to a Universal Credit advance payment, and is offered to claimants interest-free, with the money to be repaid within two years, reports the Mirror.
Those eligible for a Budgeting Loan must have received certain benefits for six months - such as Income Support, income-based Jobseeker's Allowance, income-related Employment and Support Allowance and Pension Credit.
If you've been switched onto Universal Credit from Pension Credit, any time spent claiming for it will count towards the six months.
However, a Budgeting Loan cannot be obtained by anyone currently claiming Universal Credit or those already owing more than £1,500 in total for Crisis Loans and Budgeting Loans.
The lowest amount you can borrow is £100. However, this rises to £348 if you’re single, £464 if you have a partner and £812 if you or your partner claims Child Benefit.
How much you could get depends on whether you can pay the loan back, have savings of more than £1,000 (£2,000 if you or your partner are 63 or over) or are paying back an existing Budgeting Loan or Crisis Loan.
How does it work?
A Budgeting Loan is interest free. Repayments are means-tested and automatically deducted from benefits, based on affordability.
It is normally repaid within two years (104 weeks).
What does it cover?
A Budgeting Loan can help pay for:
- furniture or household items (for example, washing machines or other ‘white goods’)
- clothes or footwear
- rent in advance
- costs linked to moving house
- maintenance, improvements or security for your home
- travelling costs within the UK
- costs linked to getting a new job
- maternity costs
- funeral costs
- repaying hire purchase loans
- repaying loans taken for the above items
How to apply for help
Find out how to apply online, here.
After you apply, you’ll get a letter telling you if you've been offered a loan within seven days if you applied via email or text or 21 days if you applied by post.
If accepted, you'll have to sign and return an agreement letter or respond to the offer. Your money will then be deposited into your bank, building society or credit union account within 21 days.
