What is a budgeting loan?
Budgeting loans are interest-free loans that can be claimed if you are on a low income and in receipt of an income-based benefit.
A budgeting loan can be claimed to help towards the cost of an item for which it is difficult to budget.
You will only have to repay what they have borrowed.
Am I eligible?
To be eligible for a budgeting loan you need to be on a qualifying benefit when your claim is determined and must have been getting this benefit for at least 26 weeks prior to making the claim.
The qualifying benefits are listed below:
- Income Support (IS)
- income-based Jobseeker's Allowance (JSA)
- income-related Employment and Support Allowance (ESA)
- pension credit
You will not be able to get a budgeting loan if any of the following apply to you or your partner (if you have one):
- you are involved in any trade dispute(s)
- you are disqualified from getting Jobseeker's Allowance (JSA)
- you owe more than £1,500 in total to the DWP for Crisis Loans and/or Budgeting Loans when you apply
If you are getting Universal Credit
You cannot get a Budgeting Loan if you are getting Universal Credit - you will have to apply for a Budgeting Advance instead.
You can find out more about Budgeting Advances by visiting the DWP website.
What is covered by a budgeting loan?
You can get a budgeting loan to help towards the costs of the following items only:
- furniture or household items
- clothing and footwear
- home improvements, maintenance or security
- rent in advance or removal expenses to secure fresh accommodation
- travelling expenses within the UK
- expenses connected to looking for or starting work (including childcare costs)
- repaying hire purchase (HP) or other debts that have been taken out to pay for any of the above
- funeral or maternity expenses
You don’t have to say what item(s) you need but you must say how much money you want to borrow.
If you need the money for a reason other than one of those listed in the general categories above you will not be able to claim a budgeting loan.
How much can you get?
It is up to the DWP to decide who can get a budgeting loan and how much they should get. The minimum amount you can borrow is £100 and the maximum is £1,500.
The maximum debt you can have to the DWP for budgeting loans is £1,500. For example, if you already have a loan for £500 that has not been repaid yet, the maximum you can get would be a further £1,000.
How much you will be able to borrow depends on the following factors:
- how much you request
- whether you are single or part of a couple
- whether you have any children
- whether you are likely to be able to pay the loan back
- how much capital do you have
Who pays it?
Budgeting loans are paid by the DWP.
How do I apply?
You can apply online by visiting the DWP website.
If you are unable to make the claim online you can call the DWP Social Fund on 0800 169 0140 and ask for a claim form to be posted to you.
This form is known as an SF500. You can fill this out and hand it in to your local Job Centre.
It can take up to two months for you to receive your loan. It’s quicker to apply online.
The loan is normally paid into the same bank account that your qualifying benefit(s) are paid into.
Any age limits?
You need to be on one of the qualifying benefits and therefore must be at least 16.
Is it means-tested?
The amount of loan you will get will be reduced, on a pound-for-pound basis, by any savings you or your partner have over £1,000. This figure is increased to allow for savings of up to £2,000 if you or your partner are aged 61 or over.
How long does it last?
The loan period will be agreed by the DWP and normally the entire loan needs to be repaid within a maximum of 104 weeks (2 years).
Any effect on other benefits?
No.
Is it taxable?
No.
Is it payable out with the UK?
No.
How do I pay back the loan?
The repayments will be taken automatically from your benefits. The amount you repay is based on your income and what you can afford. It is interest-free so you only pay back what you borrow.
After you apply for a Budgeting Loan, you’ll get a letter telling you if you’ve been offered a loan.
This letter should explain how much your weekly repayments would be if you accept the loan.
Can I challenge the decision?
If you disagree with a budgeting loan decision you cannot formally appeal the decision but you can ask the DWP for an explanation or ask them to look at the decision again.
If you are still unhappy you may have the decision looked at by the Independent Case Examiner's office. You can find out more about this by visiting the DWP website.
