Most people ask this question because they have an extreme need for cash. If you relate, then this blog is for you. Yes, you may get a loan despite leveraging benefits. Some direct lenders deal with profiles leveraging some kind of benefits. The most common of these benefits is universal credit. It is for individuals facing unemployment challenges. These people on universal credit may be eligible for a loan. It is ideal if the existing savings fall short of the requirement. 

Generally, you receive £67/week as a universal benefit. It is too low to reveal as a monthly income. You can get a loan against it only if you hold additional income. The blog lists many facts apart from secondary income to consider before getting the loan for benefit income. If you are undergoing a tough financial phase, the blog may help.

7 Aspects to Consider While Considering Benefits Loan

As the name suggests, the loan helps you get up to 5000 for emergencies. It is for individuals leveraging some sort of benefits that the government provides. It is an unsecured loan that helps meet needs with same-day funding. It is essentially for short-term and critical cash needs. Individuals with basic proof of benefits may qualify. Here are other things to consider before choosing a loan for your needs:

1)     Analyse the types of benefits considered

The government of the country provides certain relief to low-income individuals. It takes the shape of benefits. Some benefits qualify for the loan, while some do not. Here is the list of benefits that meet the loan criteria. If you hold any of these, you may get loans for people on benefit income:

• Universal Credit
• Child benefit
• Child tax credit
• Incapacity benefit
• Disability living allowance
• Personal Independence payments
• Severe Disability Allowance

In tune with these benefits, the lender checks the affordability. It reveals your borrowing capacity.

• Govt. benefits that lenders don’t consider

As mentioned above, not every benefit falls under the borrowing criteria. Here are some benefits that lenders don’t consider while providing loans:

• Job seeker’s allowance
• Pensioner credits
• Housing benefits
• Income support

Loan providers may not consider these because they reveal an individual’s inability to meet minimal needs. For example, an individual claiming housing benefit struggle with rental payments. Thus, such a person may have serious debts. This inability to reveal affordability makes the application redundant.

3)     Part-time income is a must

Individuals having a part-time income despite redundancy or unemployment may win. Qualifying for immediate cash relief options like loans for benefits demands stability. Part-time earnings provide critical proof of affordability. It reveals the person can manage to settle dues within time. Alternatively, relying solely on government benefits may not help.

You may encounter a hard deal getting instant cash for help. Thus, check on the best ways to boost the income possibilities. You may get a part-time income for the time being. It grants you more flexibility on the financial front. Moreover, it adds depth to your loan application.

For example, if you need £2500 for an emergency, given £4000/month income, you may qualify. Alternatively, simply receiving a monthly benefit of £800 may not get sincere help.

4)     Understand the eligibility criteria

Just like other loans, you must meet the basic criteria to get finance against benefits income. The basic requirements to meet include:

• You must be a permanent citizen of the country
• You should be 18 or over to apply
• You must hold a part-time income apart from benefits income
• You should be leveraging any government benefits (eligible ones)

If you meet the above conditions, you may qualify. However, the conditions may differ according to the provider. Thus, other conditions should be analysed before applying.

5)     Exercise flexibility to choose a repayment term

Usually, the loan providers ensure flexibility on the repayment tenure. They grant borrowers the freedom to choose the term according to their comfort. Thus, analyse your finances, the loan amount, interest payments and missed fees before choosing the term.

 It will help you choose a term within which you can comfortably pay the loan. Moreover, the term does not affect the present budget.  Individuals facing financial difficulty might choose a term with 12-36 months of repayment.

However, spreading the payments over the long term means more interest costs. Thus, the present situation and future income should be checked. It is if you are actively seeking a job or have an offer letter. These things may help you pay the dues quickly. In this condition, choose a shorter-duration loan. It reduces your interest liabilities incredibly.

6)     Credit check does not impact the score

Most direct lenders conduct basic credit assessments before approving a loan. It helps them analyse the affordability against the pending debts and financial engagement. A credit score is no longer a bar here. It is because individuals struggling with income have debts. This affects the credit score drastically. Thus, the loan providers deal with individuals with low credit profiles.

If you need a direct lender for a bad credit loan, don’t worry. The initial credit assessment would not affect your credit score. It only helps them understand whether you may or may not pay the dues.  If your finances seem promising, you may get one. However, be regular with payments. Non-repayment or skipping one may lead you to trouble. It may affect your credit score drastically. Thus, a rule of thumb is to take only what you can afford. Don’t forget the interest payments while seeking a loan amount.

7)     You may need a guarantor

It reveals one of the extremely rare cases. Usually, getting these loans does not require a guarantor. However, if you rely solely on benefits and need a high borrowing amount, consider one. The guarantor is a family member who helps you get the needed funds. With a guarantor, you may qualify for a better amount.

Bottom line

These are some tips to consider before approaching loans for people of benefits. It is a short-term loan designed for individuals leveraging extra income- benefits. These loans may act as a buffer for emergencies or short-term needs. The blog lists the criteria to qualify. Check whether you meet it and the terms. It will help you understand the best deal.

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