Budgeting Loans - Alternatives to Payday Loans | Debt Help

What is a budgeting loan?

A budgeting loan is an interest-free debt that the Social Fund extends to individuals with low income so they can cover essential or unforeseen expenses.  Budgeting loans serve as extra reserves of money on top of income related benefits a borrower is already receiving.

Though interest-free, budgeting loans and budgeting advances still need to be repaid. However, unlike payday loans, budgeting loans do not come with additional charges, fees or interest. Therefore, they can serve as a more viable alternatives to payday loans  for borrowers who claim benefits and are in desperate need of money to cover expenditure.

What are budgeting advances?

If you are claiming Universal Credit, you cannot claim a budgeting loan. You must apply for a budgeting advance instead. A budgeting advance is extra amount of Universal Credit that can help you pay for certain expenses. It may be helpful to think of budgeting advances as budgeting loan equivalents for people on Universal Credit. Like budgeting loans, budgeting advances also need to be repaid- usually within a 12-month term.

How do budgeting loans work?

You can obtain a budgeting loan or a budgeting advance to pay for a wide variety of essential and unexpected expenses. Typical budgeting loans cover:

  • Clothes or footwear
  • Furniture and household appliances including white goods
  • Advance rent
  • Costs associated with switching residence
  • House maintenance, improvement and security costs
  • Domestic travelling expenses (travel costs within United Kingdom)
  • Costs linked to finding employment or starting a new job
  • Maternity expense
  • Funeral costs
  • Hire purchase loan repayment
  • Repayment of loans obtained to cover aforementioned expenses

Who can apply for a budgeting loan?

You qualify for a budgeting loan if you or your partner have been claiming one or more of the following benefits for at least 26 weeks (over 6 months) consecutively or with a break of no more than 28 days:

  • Income support
  • Income-based Job Seekers Allowance (JSA)
  • Income-related Employment and Support Allowance
  • Pension Credit

 

*If you switched from Universal Credit to Pension Credit, any time you spent claiming Universal Credit will count towards the 6 months period.

You do not qualify for a budgeting loan if:

  • You are presently claiming Universal Credit. You may want to look into <budgeting advances> instead.
  • You are involved in industrial action (a strike, walkout or lockout)
  • You owe a total sum of £1,500 or more for Crisis loans and Budgeting loans
  • You or your spouse have over £1,000 in savings (if you are aged 63 or above, this threshold increases to £2,000)

If you meet this rudimentary criterion, you can go ahead and apply for a budgeting loan. However, relevant authorities have the final say in this matter. The decision on whether you will get a budgeting loan is contingent on the following factors:

  • Your circumstances
  • Your savings
  • Your ability to repay the granted debt
  • Whether you have any existing budgeting loan you owe

Budgeting Advances:

In order to qualify for a budgeting advance, you must:

  • Have been getting Universal Credit for at least 6 months
  • Have earned less than £2,600 if you are single (the threshold for couples is £3,600) in the past six months
  • Not have an outstanding budgeting advance

How much can I get and how long will it take?

Budgeting loan amount:

If you qualify for a budgeting loan, you can apply to borrow between £100 and £1,500. The maximum threshold depends on the number of people in your household. You could get up to:

  • £348 if you are single
  • £464 if you have a partner
  • £812 if you or your partner get Child Benefits

Apart from that, the following factors determine how much you could get as a budgeting loan:

  • How much you can afford to repay in the given timeframe
  • Your outstanding debts to the Social Funds
  • Whether you are already in the process of repaying an existing budgeting or crisis loan
  • Savings- your grant will generally be reduced by the amount of any savings you or your spouse have over £1000 (£2000 if one or both of you are over 63)

Budgeting loans may be a convenient option but it is useful to remember that the following factors have no bearing on the amount granted:

  • The urgency of your need
  • Any health problem or medical conditions you or your family might have

Budgeting advance amount:

There is a minimum threshold to how much you can borrow when it comes to budgeting advances. The smallest amount you can apply for is £100. The maximum limit varies according to your household circumstances. You can borrow a maximum of:

  • £384 if you are single
  • £464 if you are part of a couple
  • £812 if you have children

Budgeting loan time:

The time it takes for Social Fund to process your application depends on the nature of your application but generally, it takes about 3-6 weeks. The average breakdown is given below:

  • You can expect to hear from Department for Work and Pension (DWP) after 2 weeks of your application- DWP usually takes 2 weeks to follow up with an acceptance or rejection.
  • It may take 1 week or more for the money to get cleared by the bank and show in your personal bank account.

You can hasten the process by hand delivering your documents to your local Jobcentre Plus. This would save you at least one week of waiting time. Make sure that you have filled out your budgeting loan application completely and accurately in order to save time and steer away from procedural delays.

*Note that the DWP pays the loan through an intermediary- it may pay into a bank, building society or another account provider.

 

How do I repay my budgeting loan?

Unlike other forms of debt, you do not have to repay your budgeting loan with interest or any additional surcharges. This means that you only repay the original principle (amount) that you borrowed from the Social Fund.

Usually, the repayments span over a period of 104 weeks, so you have to repay a budgeting loan within 2 years of obtaining it. Repayments are deducted directly from your benefits.

Your weekly repayment terms are determined at the time your loan is agreed. The amount you repay is based on your income, the benefits you receive and what you can realistically afford to pay. However, if you stop getting benefits, you will have to rework your repayment plan and arrange for another way to pay.

If you already have a loan but can no longer afford to repay it on the agreed terms, it is important that you revisit your repayment agreement. For that, you would need to visit the office that paid you the loan, share your circumstances with them and work out a more manageable repayment plan. It is crucial that you do not get stuck into a debt trap while trying to repay a budgeting loan.

How can I apply for a budgeting loan?

In order to obtain a budgeting loan, you can either fill out an online application on the GOV.UK website or use a paper form (Form SF500).  If you are applying as an appointee on behalf of a borrower, you are required to use the paper form.

If you need to apply using the paper form, you can do so by obtaining a copy of Form SF500 and then filling it out. You can get Form SF500 by:

  • Downloading and printing the form here
  • Requesting it at your nearest Jobcentre Plus
  • Calling the Social Fund and asking for a form to be posted at your address- this will take approximately 5 working days

You can submit the completed form at your local Jobcentre Plus or send it to Social Fund via post.

What if my budgeting loan application is rejected?

If you think you have been unfairly denied a budgeting loan, you can apply for a review with Jobcentre. All you need to do is write to your local Jobcentre Plus within 28 days of receiving the rejection letter and explain why you think the decision was wrong or unfair.

If the JobCentre Plus review does not satisfy you, you can approach a Social Fund Inspector and request a second review. To request an in-depth review from an Independent Case Examiner (ICE), you need to write to them within 28 days of the JobCentre Plus review at the following address:

Postal Address:

The Independent Case Examiner
PO Box 209
Bootle
L20 7WA 

Fax: 0151 221 6601

*Read more about the second review here

Contact Details for Social Fund:

Telephone: 0800-169-0140
Welsh language: 0800-169-0240
NGT text relay (if you cannot hear or speak on the phone): 18001 then 0800 169 0140
Monday to Friday, 8am to 6pm

Postal Address:

  • For London, the South and South East, North East and North West England:

 Freepost DWP BUDGETING LOANS

 

  • For West Midlands, South West England and Scotland:

Freepost DWP BUDGETING LOANS 1

  • For East Midlands, Yorkshire and Humberside, East Anglia and Essex:

 Freepost DWP BUDGETING LOANS 2

  • For Wales:
    • For Cwmbran, Newport and postcodes CF3, 5, 10-11, 14-15, 23-24, 31-48, 61-64, 71-72, 81-83, LD7, LL and SY:

Freepost DWP BUDGETING LOANS 1

  • For postcodes CF4, 6-9, 12-13, 16-22, 25-30, 49-60, 65-70, 73-80, LD1-6, LD8 and SA: Freepost DWP BUDGETING LOANS 2