Written by
Cara Bradley
5 min read
Updated: 27/02/2024
Are you in receipt of benefits and need help to cover the cost of a financial emergency?
You may be curious to find out more about what your options are.
Our guide answers some common questions about loans for people on benefits.
Alternatives to benefit loans
A loan isn’t necessarily the right option for every situation.
If you’ve received certain benefits for 6 months or longer, you may be eligible to apply for a Budgeting Loan from the government. Budgeting Loans can help to cover the cost of a variety of expenses, including travelling fees within the UK, household items such as white goods, clothing, and rent.
You won’t be charged interest on a Budgeting Loan and repayments are taken automatically from your benefits.
You can find out more about Budgeting Loans on the Gov.uk website.
Can I get a loan if I’m on benefits?
Some lenders are willing to consider applications from people claiming certain benefits. This could include:
- Working Tax Credit/ Universal Credit.
- Personal Independence Payment (PIP).
- Incapacity Benefit.
- Employment and Support Allowance (ESA).
- Industrial Injuries Disablement Benefit.
- Child Tax Credit.
- Child Benefit.
- Fostering Allowance.
Which benefits do not count towards income?
The following benefits are unlikely to be accepted by lenders as regular income:
- Pension Credits.
- Job Seekers’ Allowance.
- Income Support.
- Housing Benefit.
Will taking out a loan affect my benefits?
Depending on the type of benefit(s) you are in receipt of, there is a chance that taking out a loan could affect your payments. You might want to check if this is the case.
You can find more information about what changes you need to report here.
Before you apply for a loan
Regardless of your situation and income, there are a range of important things to think about before you apply for a loan.
Ask yourself the following:
- Can I afford to take out a loan?
- Am I confident that I can make the required monthly repayments?
- Do I fully understand the risks of falling behind on or failing to make my repayments?
- Can I use any savings to pay for the expense rather than taking out a loan, or can I wait until I have saved up some money?
Lastly, you must ensure that the lender or credit broker you decide to use with is authorised and regulated by the Financial Conduct Authority (FCA). You can check if a company is on the FCA register here.
Can I search for a loan with Viva Money?
You are welcome to search for a loan with Viva Money if you:
- Are over the age of 18;
- Are a UK resident; and
- Have a UK bank account and valid debit card.
Lenders also state that you must have a regular source of income paid into your bank account. As we talked about earlier, some benefits could be considered a source of income.
How much money can I borrow, and for how long?
Viva Money is a credit broker. We work with a panel of trusted lenders, authorised and regulated by the Financial Conduct Authority (FCA), who offer loans from £100 to £10,000.
Repayment terms range from 3 to 60 months, depending on how much money you apply to borrow.
How can I search for a loan with Viva Money?
Our straightforward form can be completed online.
Step one
Select your ideal loan amount and term and fill out the form. You will be asked questions such as how long you have been on benefits, how much money you receive in benefits per month, and how often you receive payment.
Be sure to complete the information to the best of your knowledge.
Step two
In just 60 seconds, we will run a soft credit search using the information you have provided and scan our panel of lenders for a suitable loan.
Step three
If we’ve found you a match, you’ll be directed to the lender’s website, where you’ll undergo some additional checks, including a hard credit search. You could be asked to provide further details about your benefits.
Step four
If the lender is happy with the outcome of their checks, you will be sent a loan agreement, which you will need to read carefully before signing.
Some lenders are able to transfer money on the same day your application is approved, although the time it takes for the funds to show in your account will depend on your bank’s policies and procedures.
What happens if I default on my loan repayments?
If you fall behind on or fail to make your loan repayments, you risk being charged late fees. You should refer to your terms and conditions for full details.
It’s also possible that you will notice a decline in your credit score.
A low credit score could negatively impact your chances of being approved for financial products in the future.
I took out a loan that I can no longer afford to repay. What can I do?
Sometimes, our circumstances change, and lenders understand that. Rather than ignoring the problem and hoping it will go away, it’s important to reach out and speak to your lender as soon as possible.
There are things they may be able to do to help ease the pressure.
I’m struggling with my finances – who can I turn to?
Sadly, talking about money can sometimes feel like a taboo. This shouldn’t be the case. Many of us will experience money worries at some point in our lives, and the reasons are often out of our control. There is absolutely nothing to be ashamed of.
We understand that opening up can be difficult, which is why we’re proud to have teamed up with charity StepChange to create a free, online Money Health Check quiz. The answers you provide will generate advice on the next steps you can take to get back in control.
The quiz is confidential and will not affect your credit score in any way.
You can also access free, impartial advice on a range of money and debt management topics by visiting sites such as Citizens Advice, National Debtline, and MoneyHelper.
