How to Get a Loan if You Are on Benefits
There are many types of loans for all people irrespective of their financial status, including people on benefits. This means that you can still get extra financial assistance apart from the regular benefits you are currently receiving.
Getting a loan despite your benefits can help you meet your immediate necessities like food, clothing or even use it to finance your education, travel costs and other costs which are not covered by the benefits.
What Are My Borrowing Options If Am On Benefits?
- Secured loans – secured loans allow you to acquire a loan by giving out one or more of your assets to be used as collateral if your default. This loan is therefore not for the fainthearted. However, if you have a car, home or tangible property, you can opt for it. The lenders use the asset to cover their risks.
- Guarantor loans – by seeking out guarantor loans, you must have a guarantor who will be legally obliged to repaying your debts if you fail to do so.
- Credit builder credit cards – these are mostly aimed at the borrowers who have poor credit ratings or low income. However, the credit limits are generally lower than the regular credits cards, but the APR is usually high.
- Vehicle finance loans – this is a type of secured loan which you use to purchase a vehicle. The cost is split into bi-monthly repayments, and the interests added. The car you intend to buy is used as the collateral.
- Payday loans – these are short-term loans which take less than 24 hours to be approved. Their interest rates are astronomically very high as compared to the other loans.
- Specialist lenders – some lenders give out loans to the borrowers with a poor credit rating or low income. They, however, have a relatively higher interest rate than the normal ones.
How To Get A Loan When You Are On A Benefit
The process of getting a loan when you are on benefits can be quite frustrating to some borrowers. However, the following tips will help you have a smooth process.
- Proper Budgeting. These loans are supposed to provide additional financial help and not to cause more troubles. You should, therefore, ensure that you are comfortable with the loan repayments method before the loan gets approved.
- Check Your Credit Record. You can check your current credit history directly from the credit bureaus like Equifax, Experian, etc. This will help you to know how the lenders view you.
- Compare Different Lenders. Research on various lenders who provide these types of loans, and compare their terms and conditions. Then settle for the one which favors you.
- Apply. The best way to apply is to use the lender’s website. The lender will request for your details and information including your name, contacts, and financial information.
A failed credit application might harm your score further; hence it’s essential to be wise when choosing your products.
7 Facts About Loans For People On Benefits
- Loans for people on benefit do not affect the remuneration that you are already receiving. You will continue receiving your jobseekers allowance or income support even when you get the loan.
- You can only get this loan if you have been getting benefits for more than 26 weeks. Some of these benefits may include disability benefits, housing allowance, job seeks allowance, support allowance, income support, pension credit or even working family tax credits.
- The qualification of these loans is affected by the credit history rating. If you have a poor credit score, your lender may disqualify you, or charge you a higher interest to create an allowance for the poor credit rating.
- Although loans for people with benefits are meant for everyone, it sometimes becomes tricky for the unemployed people or those who don’t have assets which can be used for collateral. However, if you have other income sources despite your employment status, you will have a chance of getting the loans.
- The loans are only paid through bank accounts; this means that you can receive the money deposited into your account.
- Just like the other loans, you must repay the loan according to the terms and conditions of the agreement. The legal action follows your default.
- You should only consider these loans as the last resort of financial aid.
Pros and Cons
You still have options if you are currently receiving benefits and you are looking for a loan. However, it’s essential to compare the various options that you have before you apply to be sure that you will meet the lender’s requirements. Failure to do that may lead to a declination of your loan, and thus complicate your efforts for the credit.
- Provide additional sources of income to the people on benefits.
- Most of them take less than 24 hours to be approved.
- Can affect your credit score if you don’t pay in time.
- High-interest rates especially if you opt for the payday loans, or if you have a poor credit rating.