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What is a budgeting loan

What is a budgeting loan
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If you’re in serious financial trouble and you’re struggling to get any form of credit, a budgeting loan can help. Provided by the Government, these loans are designed for those who need help with essential items.

Here you will find out everything you need to know about what a budgeting loan is and how you can get one.

What is a budgeting loan?

When you’re struggling to pay for essentials such as rent, clothes or furniture, a budgeting loan is a short term, small amount loan that can help. Taken from the Social Fund, the minimum you can borrow is £100 and they are typically paid back within 104 weeks. The maximum you can apply for is £1,500.

One of the main advantages of this type of loan is the fact that it is interest free. This means you never have to repay more than you borrow. If you are accepted, the money will be paid into your bank account.

As the loan isn’t classed as income, it will not have any effect on any other benefits you receive.

Am I eligible?

In order to receive a budgeting loan, you need to meet various criteria. You and/or your partner need to be in receipt of a specific type of benefit. These benefits include income support, state pension credit, income based job seekers allowance and income related employment and support allowance.

How much will I get?

What is a budgeting loanThe amount you are awarded will depend upon your personal circumstances. It is worth noting that just because you are applying for a certain amount, it doesn’t mean you will get it.

After checking your personal circumstances it could be decided that you can receive a lower amount. For example, if you apply for £500, an assessment could show you would only be able to repay £250. There are quite a few things that are looked into including:

  • If you already owe money to the Social Fund
  • How many people live in your home
  • How likely it is you can repay the loan
  • If you have any savings

You may find it surprising to learn that your actual need for the loan isn’t taken into account. If you or your family suffer health problems that also won’t be looked into.

How do I repay the loan?

Repayments for a budgeting loan tend to come directly out of your benefits. The actual repayment term will be determined before the money has been transferred. It won’t usually exceed 104 weeks.

How can I apply?

Applying for a budgeting loan is simple. You can contact your nearest job and benefit office and ask for a SF500 claim form. This will then need to be filled out and sent off. Alternatively, you can download the form online.

If you don’t receive the decision you as hoping for, you do have the right to ask for the case to be reviewed. It is important you write to the jobs and benefits office within 28 days if you do want to challenge the decision.

Generally speaking, a budgeting loan can be extremely useful if you are on benefits and need help with essential purchases.

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About Jemma Porter

About Jemma Porter

Jemma Porter is an experienced content creator who has written for a number of online publications. A self-confessed penny pincher; she's often found seeking out the best personal finance deals.

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