People on benefits are individuals who get help from the state. This comes in the form of allowances. These aids are meant to help them sustain themselves. The aids received by them are their only source of income.
Even if they do earn, the income may be too less to meet the living costs. These men are either unemployed or unable to work. The allowances ensure that they can live a decent life until they have a decent source of income.
You would think that it would be impossible for these men to get into debt. After all, their income is too low. But that is not true. There are numerous loaning options for such individuals. We will look deeper into these alternatives. Keep reading to know more.
What Is a Loan for People on Benefits?
Today, the living costs are through the roof. So, these aids are not enough for men to survive. Sometimes men have to take a loan to support themselves. Here are some of the loaning alternatives that these men can avail of:
- Payday Loans: These are short-term unsecured debts and have high dividend rates.
- Finance Loans: These can be availed by families that have received aid over a long time. They can get this credit to meet living costs. These debts have high dividend rates l need to be repaid weekly.
- Budgeting Loans: These debts can be claimed by individuals who get allowances. They should have received them for a year. This credit is dividend free.
- Home Equity Loans: Home equity credit can be claimed by the applicant if they have a house to offer as a mortgage.
- Low Income Loans: Some banks offer credit facilities to men who have low incomes. They need to meet certain criteria to qualify. These debts need to be repaid weekly.
What Are Terms of Loan on Benefits?
The terms of these debts vary from applicant to applicant. Each applicant fills out a form for credit. They provide details on their finances. This helps in establishing the terms. A soft search is conducted into their financial background. This is done to check whether the applicant is telling the truth or not.
You can borrow a higher amount if your monetary status allows it. The lenders can offer you a lower amount too. This happens when they think your income is not enough. The repayment terms vary from 3 months to 5 years. You can choose the period over which you repay the debt.
A guarantor is not needed to claim the debt. Once your application is approved, you can get the loan without any of those hassles. A private creditor has high dividend rates. Public lenders have a lower rate of interest.
Is It Possible to Get a Loan on Benefits?
Men think that they cannot get a loan if they get state allowances. Getting aid from the government is not a reflection of bad credit. Individuals don’t have a bad credit score if they get benefits from the state. And a good credit score is a basic requirement for a loan to be approved. So they can get credit very easily.
Financial institutions check the sources of income before granting credit. This is to ensure the repayment of the debt. Long-term benefits like PIP and DLA are considered income. Therefore, there is no need to worry. Individuals can get loans even if they get allowances. Their debts are easily approved if they have a good credit score.
What Do I Need for a Benefits Loan?
There are many basic human necessities. These are things that every human needs. They help them to live a respectful life. People do not stop having basic human needs. Even if they get aid from the government.
But these allowances might not cover all the living costs all the time. So, you might need loans to support yourself. In some cases, a debt might be required to carry out a sudden new expense.
When these men need a loan, they don’t need much to start the process. All they need is:
- A document to prove that they are citizens of the country
- A bank account to receive the money in.
They also need to provide some information regarding their finances. This helps lenders to decide whether to approve the debt or not.
What Benefits Are Accepted as Income?
Usually, lenders look for long-term benefits to approve a debt. It is because that ensures that the loan can be repaid in time. Unemployment allowance or severance pay are short-term benefits. They are only paid for a month or a few. It would be difficult to get a loan approved if your earnings are solely made up of these allowances.
The reason is simple. Creditors always want their money back. If the borrower does not earn much, there is no guarantee of repayment. Once the period of the benefit payment is over, how would the applicant repay the money? But most lenders treat long-term benefits as sources of income.
These include aids received for disability or low wages. Here are the most commonly accepted benefits:
|Disability Living Allowance
|If a person cannot work due to physical disability or mental illness, they get this benefit
|Working Tax Credit (or Universal Credit)
|If a person receives low wages, they will get this benefit to meet the living costs.
|Child Tax Credit
|If a person earns very less but has children to support, they will get this benefit. The amount is increased for children with disability
|If a person has children below the age of 16 but cannot support them with his wages, they will get this benefit.
|If a person wants to raise foster children, they will get this benefit
|If a person cannot work for 28 weeks due to a physical disability, they will get this benefit.
|Industrial Injuries Disablement Benefit
|If a person has been disabled from an accident at work, they get this benefit
How Much Can I Borrow?
The amount offered by benefit payments is usually not very large. Thus, the need for a loan is not surprising. The borrowable amount range is between $50 to $10,000, but it varies from lender to lender.
At the end of the day, it is the lender who decides everything. How much you can borrow depends on your capability of returning the amount. This is the reason that creditors try to conduct a soft search into your credit history.
How to Apply for a Loan on Benefits?
A lot of lenders give loans to those who get benefits payments. Just follow the steps listed below.
- Fill up the application form to request a loan.
- State the amount you will borrow.
- Fill in the information regarding the repayment terms.
A ‘soft’ search is done into your credit file. This is to verify the information. Make sure you fill in the correct information in the form.
Alternatives to Loans for People on Benefits
There are many men who get aid from the state. They might need to take out a loan in cases of emergency. But a loan comes with its terms and conditions. It would be better to look into other alternatives too. A loan should be the last option.
A loaner will ask for a high rate of dividend. In some cases, the dividend is higher than the borrowed amount. Everyone cannot repay these large amounts. It will be more difficult for individuals who are receiving aid from the state. Here are a few alternatives to loans:
Government Budgeting Loans
The state gives budgeting loans. These can be used to meet household expenses. These are dividends-free. The terms for repaying the loan are flexible. The lender looks into the finances of the borrower. The terms are set accordingly.
There is one condition to receive Budgeting Advances. Individuals need to get Universal Credit. This will help them to cover sudden large expenses. Universal credit is given to individuals who have a very low income.
One thing is clear. Everyone can receive loans. It does not matter if you receive benefit payments from the state. Today, living costs are soaring higher and higher. These benefit payments, in turn, are barely enough to make ends meet. After all, these allowances are derived from public taxes. So, there is a limit to these funds.
Everyone requires debts at some point. It does not matter if you receive benefit payments or not. Debts are easily available for everyone. Individuals looking for credit just need to fill up some forms to avail of these facilities.