Budgeting Loans and Crisis Loans - What Are They?
According to Direct.gov budgeting loans are for those on a low income who require assistance for important expenses such as furniture, clothing, rent and so on. Budgeting Loans are given to eligible applicants by the Social Fund, which is administered through Jobcentre Plus.
Qualified applicants may borrow between £100 and £1,500 and are not required to pay interest. However, in order to be approved, you must meet basic the basic requirements of a Budgeting Loan. This type of loan is offered to anyone, or their partner or civil partner, who has been claiming on income support, income-based Jobseeker’s Allowance, or pension credit for at least 26 weeks, approximately 6 to 7 months.
Budgeting Loans are designed to help those on a low income with basic needs for:
- Buying furniture
- Clothing
- Help with rent
- Travel expenses
- Equipment, clothing or supplies to help you when seeking employment
- Home improvements - to help make your home more accessible or secure
- Paying off debts - if you paid for any of the above and have accrued debt as a result
The amount you are eligible to borrow will depend on: how long you have been on benefit, how many people are in your household, if you already owe money to the Social Fund, your ability to repay the loan, the amount of money in your savings account.
Once you are approved for a budgeting loan, the money will be deposited in either your bank account or any account that accepts Direct Payment. This type of loan may be helpful to those needing to pay for basic necessities but do not have the current means. As a budgeting loan is not counted as income, income tax is not required and it will not affect other forms of benefit one may receive.
Another type of loan offered by the Social Fund is a Crisis Loan.
Crisis loans, like a Budgeting Loan, are interest and income tax free and do require you to repay the loan. This type of funding is to help those with an immediate financial need due to an emergency or as a result of a disaster. Unlike a Budgeting Loan, one does not need to be on benefit to apply for a Crisis Loan.
You may be eligible for a Crisis Loan if you are:
- Aged 16 or over
- Unable to meet the day to day expenses to support your family as a result of an emergency or disaster
- In need of short term financial assistance to protect you and your family from any threat to health or safety
The amount you receive will be dependent on how much you have in savings and your personal circumstances. Depending on the Social Fund’s budget, there is generally no set limit to the amount you can borrow for a Crisis Loan. When repaying this loan you will need to discuss an affordable repayment schedule with a Jobcentre Plus adviser. If you are on benefit, part of the loan is paid back out of your weekly benefits.
For more information please visit Jobcentre Plus
Published on October 23, 2007
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