Loan for people on benefits are limited because many lenders usually don't consider benefits as forms of regular income. In the United State, benefits are employment benefits or government assistance programs, depending on the context. Let's base this article context on social security benefits.
Therefore, the real question will be "can I get a loan if I’m on social security (SSA) benefits?" This article will walk you through everything you need to know about getting loan while you're on benefits as a source of income.
Related: How to Apply for Social Security Benefits.
There are four (4) different types of social security benefits in the United States: Social Security Retirement Benefits, Social Security Disability Insurance (SSDI), Social Security Survivor Benefits, and Supplemental Security Income.
However, there are numerous types of benefits in the United Kingdom. The UK benefits are categorized into those for working age and those for retirement age, and also including disability and housing benefits.
Some popular examples include Universal Credit, Jobseeker's Allowance (JSA), Employment and Support Allowance (ESA), Child Benefit, Pension Credit, Housing Benefit, Personal Independence Payment (PIP), and Carer's Allowance.
While these benefits can also be sub-categorized into different groups, the loan offers you can qualify for will also depend on the types and categories of benefits you're receiving.
For instance, if you've been receiving benefits for the past six (6) months, you could be qualified for budgeting loans that can actually help sort out your house rent payments, and other small utility bills.
However, if you're receiving income from both employment and benefits, you could get a higher loan offers and a good interest rate. But if you are only on benefits, you could get approved for a loan, but the lender may impose a higher interest rate.
So, getting a loan while on benefits can be seamless or difficult—depending on your benefits types, additional source of income, age, current assets like properties, debt-to-income Ratio (DTI), loan type and amount, credit score, and collateral/co-signer.
Quick Hints: Debt-to-Income Ratio (DTI) measures how much of your monthly income goes toward debts. The formula for calculating DTI is DTI= Total monthly debt payments ÷ Total monthly income.
Any lenders that's willing to give you loan while on benefits will have to put all these factors into consideration to decide the type of loan and amount that'll be offered to you. In some cases, if you don't really meet these factors enough, no loan will be provided to you.
Loans FAQs for People on Benefits
Can I Get a Loan if I’m on Benefits?
Yes, you can get a loan if you're on benefits but the type of loans you can get depends on the benefits you're receiving. For example, people receive disability benefits can always get Budgeting Loans from Government Scheme in the United Kingdom (U.K.).
However, if you're looking to get loan in bank or from private financial company, you may be eligible but your options maybe limited and, if approved for a loan, you could be offered a higher interest rate.
It's also important to note that the loan amounts you'll get depends on the amount of monthly benefits you're receiving and other factors like debt-to-income Ratio (DTI). Nevertheless, loan amounts for people on benefits usually ranges from £150 to £10,000.
Can I Get a Loan on Personal Independence Payment (PIP)?
Personal Independence Payment (PIP) is a UK government benefit—not U.S—given to people who have a long-term illness, disability, or mental health condition, and people who need help with daily living activities or mobility. In other words, PIP is not income-based—it depends on how your condition affects your daily life, not your earnings.
Yes, it’s possible to get a loan while receiving PIP, but it depends on your total income, credit score, affordability, loan type, and stability of your PIP. However, While it's important to note that PIP can be used as part of your income, relying on loans while on benefits should be done carefully, as it can lead to debt problems.
Which Benefits Count as Income for Loan Applications, and Which Don’t?
When applying for a loan, some lenders may count certain government benefits as part of your income to assess your ability to repay. Commonly accepted benefits include Working Tax Credit, Universal Credit, Personal Independence Payment (PIP)—previously known as Disability Living Allowance (DLA)—along with Child Tax Credit and Child Benefit.
These benefits are often seen as more stable or consistent sources of income, though it’s important to remember that every lender has their own criteria and may evaluate applications differently.
On the other hand, some benefits are less likely to be considered by lenders when calculating your income. These typically include Housing Benefit, Income Support, Job Seeker’s Allowance, and Pension Credits. Many lenders view these forms of assistance as temporary or tied to specific circumstances, making them less reliable for long-term loan repayments. Ultimately, it’s best to check with individual lenders to understand their specific policies before applying.
Related: Forbearance vs Deferment: Definition, Meaning and Similarities.
Loans for People on Benefits
People receiving benefits in the UK, such as Universal Credit, Personal Independence Payment (PIP), or Disability Living Allowance (DLA), have several loan options available for them.
Although, these loans options may require borrowers to meet certain eligibility criteria/requirements and the loans may have some limitations such as higher interest rates. Nevertheless, let's dive into the list.
1. Personal Loan
Personal Loans are unsecured loans that don’t require collateral. These types of loan are often used to sort out small expenses bills like essential purchases. People on Benefits often get personal loan from lenders like Little Loans, Pounds to Pocket, Fair Finance, and some high street banks.
These lenders often accept Universal Credit, PIP, Child Benefit, Working Tax Credit, and Child Tax Credit Benefits as regular income. They'll also check your credit score to assess affordability and ability to repay. In some cases, a stable income and, a debt-to-income ratio are also considered.
2. PayDay Loan
Payday Loans are short-term—at the same time are high-cost loans—specially designed for people on benefits. The loan allows people on benefits to get a loan with ease but they need to payback the loan by their next benefit payment. The payment can be scheduled per month or paid fully at once in next benefits payments.
Popular lenders that give this type of loans are Wage Day Advance and Pounds to Pocket. These lenders focus on affordability rather than credit history.
This simply implies that your income source must be stable to be able to secure a payday loan while receiving benefits. You may also be required to have additional source of income to increase your chances of becoming eligible.
3. Guarantor Loans
These are the loans where a friend or family member agrees to repay if you cannot. People on Benefits who have bad credits are always considered with this loan. However, the guarantor’s financial standing and creditworthiness will be checked to determine disbursement.
4. Budgeting Loans
Budgeting Loans are interest-free loans from the UK government for people on certain benefits: people on income support, income-related Employment and support allowance, pension credit benefits. Borrowers must have been receiving any of these benefits for at least 6 months to become eligible.
However, it's important to note that if you're on Universal Credit, you'll not be eligible for budgeting loan. Instead, you can apply for a Budgeting Advance. In addition to that, Budgeting Loans amounts are limited and repayments reduce future benefit payments.
5. Budgeting Advance (Universal Credit)
An interest-free advance for Universal Credit claimants to cover one-off expenses like emergency repairs. The amount—up to one month’s Universal Credit payment, e.g., ~£250 for a single person under 25—is repaid over 12 months via benefit deductions. However, it's important to note that this loan is available to Universal Credit recipients facing financial hardship. You can apply through your Jobcentre or online Universal Credit account.
6. Credit Union Loans
These are loans from not-for-profit credit unions. The loans usually come with lower interest rates than payday lenders. People on Benefits can get this type of loans from Credit unions like Clockwise. However, you may need to be a member or save with the union for a short period to become eligible.
How to Apply for Government Crisis Loan
A government crisis loan is a type of financial assistance provided by the government to individuals who are facing an emergency or unexpected financial hardship. These loans are typically interest-free or low-interest and are meant to cover essential living costs in urgent situations—such as needing money for food, rent, utility bills, or emergency travel.
Examples of government crisis loans are budgeting loan, and budgeting advance (universal credit). Previously, it's called the Crisis Loan under the Social Fund. Now, it's been replaced by local welfare assistance or Budgeting Advances under Universal Credit.
In the United States, there's nothing called "crisis loan." The equivalent can be an emergency disaster loans from FEMA or temporary cash assistance programs. Common situations where you can be granted a crisis loans include: sudden job loss, natural disasters, family emergencies, domestic violence situations requiring relocation, or unexpected medical expenses.
In the UK, you can apply for government crisis loans through your Jobcentre or online Universal Credit account. This means that you must be a beneficiary under the Universal Credit scheme.
Final Note
In conclusion, while there are several loan options available for people on benefits in the UK, it’s essential to approach borrowing with caution. Options like personal loans, guarantor loans, and credit union loans can provide much-needed financial support, but they often come with strict eligibility checks and higher interest rates. Government-backed options such as Budgeting Loans or Budgeting Advances are usually safer, as they’re interest-free and specifically designed to help with essential expenses.
