Budgeting loans can be provided by the government so long as the claimant meets certain criteria. To receive a budgeting loan, the claimant must have been getting at least one of the following benefits for the previous six months:
- Income Support
- Income-based Jobseeker’s Allowance
- Income-related Employment and Support Allowance
- Pension Credit
For those who have moved onto universal credit from a previous benefit, any time spent claiming universal credit will count towards the six months time frame.
However, new claimants of universal credit will not be able to receive a budgeting loan, they must apply for a budgeting advance instead.
It is also impossible to receive a budgeting loan if the claimant is involved in industrial action such as strikes, walkouts or lockouts.
If the claimant owes more than £1,500 in total for crisis loans (which are no longer available) and budgeting loans than it will not be possible to receive further help.
The amount received will vary on the individual claimant’s circumstances.
The lowest amount that can be borrowed is £100. However, it is possible to receive up to £348 for single people, £464 for claimants in a partnership or £812 if the claimant or their partner receives child benefit.
Aside from these parameters, the amount given could also depend on certain financial factors.
The government detail that the amount lent could vary due to the claimant’s ability to pay the loan back, if they have savings of more than £1,000 or if they are paying back an existing budgeting loan or crisis loan.
The rules concerning repayments appear to be relatively relaxed.
Any budgeting loan is always interest free, meaning that only what is borrowed is paid back.
The repayments themselves will be taken automatically from whatever benefits the claimant is receiving. The actual amount repaid is based on the claimant’s income and what they can afford.
The repayments occur weekly and will be explained in a letter provided after the initial application. The loan is usually repaid within two years and if the claimant comes off benefits, they will be expected to arrange alternative repayment options.
These rules are slightly different to a similar offering under universal credit. Universal credit claimants can receive advances on their initial claim which is in the form of a loan.
While there is also no interest paid on these advances, the repayment time frame is tighter. The advances must be repaid within 12 months, meaning the repayments will likely need to be higher as the time to stretch them out is limited.
There have been issues with the advance procedure within universal credit.
The time between the advance and the first payment can be as high as five weeks, which has led to some claimants falling into troubling debt spirals.