There are many different ways in which you can budget for your life. If you are in need of financial assistance you could be permitted to apply for a budgeting loan or similar through the Social Fund. Alternatively, some people might be in a comfortable enough overall financial position to know that they can take out a payday loan from a responsible lender, and be able to pay it back first time without it having a long-term negative impact on their finances and life.
For the purposes of clarity, this article will look at the alternative to a payday loan in the form of a budgeting loan. A budgeting loan is available to some people who are already receiving certain types of benefits. It is awarded in the form of an interest-free budgeting loan from the Social Fund, and you could apply if you are on Universal Credit. With the recent news of big payday loan companies going into administration, it is important that those people who would usually look to that sector understand that there are viable alternatives, but also that there are still responsible lenders within the payday loan sector.
A budgeting loan can help you pay for those items in your life that are essential, and those that might be unexpected and leave you short of cash. If you are on low income, these types of expenses can cause all sorts of problems. Items such as furniture, clothing and footwear, advanced rent or removal fees when moving home, travel, maintenance or repair of your home, and maternity or funeral expenses, can all be helped with a budgeting loan.
A person can apply for a budgeting loan if they are already receiving Pension Credit, Income Support, Income-based Jobseeker’s Allowance, Income-related Employment and Support Allowance. A person claiming for a budgeting loan must have been on one of the above benefits for at least 26 weeks (this 26-week period can be consecutive weeks or include one break of no more than 28 days).
You can apply for a minimum of £100, with a maximum of £384 for single people, £464 if you are part of a couple, and £812 if you have children. The application will be affected by any savings that you hold, and any existing Social Fund loans you may have already received. It is a simple process to apply for a budgeting loan, as you can do so through the Gov.uk website. Alternatively, you can print out a form from the website, or ask for it at your local Jobcentre.
A budgeting loan is attractive to low income people on benefits because the repayments do not include interest, and you know from day one exactly how much you will pay back over the course of the repayment period (which is within two years in most cases). The repayments are easy to manage, as they are automatically taken from your benefits before those are paid to you. If you end up stopping benefits during the repayment period, you can arrange for a different way to pay the money back.