Budgeting Loans
- Who can get a Budgeting Loan?
- Needs covered by a Budgeting Loan
- How applications for Budgeting Loans are decided
- Repaying the Budgeting Loan
- How to apply for a Budgeting Loan
- How you are paid your Budgeting Loan
- If your application for a Bugeting Loan is refused
- Effects of Budgeting Loans on other benefits
- Taking on further loans
A Budgeting Loan is an interest-free loan for people who have been on Income Support, income-based Jobseeker’s Allowance, Employment and Support Allowance (income-related), Pension Credit or payment on account of one of these benefits, for at least 26 weeks. It is intended to help spread the cost of certain one-off expenses over a longer period. The amount you get is decided by the decision maker at Jobcentre Plus.
Who can get a Budgeting Loan?
To get a Budgeting Loan:
- you or your partner must not be disqualified from getting Jobseeker’s Allowance under section 14 of the Jobseekers Act 1995 (trade disputes)
- you must be getting Income Support, income-based Jobseeker’s Allowance, Employment and Support Allowance (income-related), Pension Credit or payment on account of one of these benefits or entitlements
- you must also have been getting Income Support, income-based Jobseeker’s Allowance, Employment and Support Allowance (income-related), or Pension Credit for the last 26 weeks, or have been the partner of someone getting Income Support, income-based Jobseeker’s Allowance, Employment and Support Allowance (income-related), Pension Credit or payment on account of one of these benefits or entitlements, for you for 26 weeks, or a combination of them. If at any time during that period you or your partner stopped getting Income Support, income-based Jobseeker’s Allowance, Employment and Support Allowance (income-related), Pension Credit or payment on account of one of these benefits or entitlements, any gaps of up to 28 days will be ignored.
It is up to the decision maker to decide who should get a Budgeting Loan and how much they should get.
Needs covered by a Budgeting Loan
You can get a Budgeting Loan if you need help with:
- furniture or household items
- clothing and footwear
- rent in advance or removal expenses to secure fresh accommodation
- home improvements, maintenance or security
- travelling expenses within the UK
- looking for or starting work (including childcare costs)
- repaying hire purchase (HP) or other debts that have been taken out to pay for any of the above.
- funeral or maternity expenses
You won’t need to list individual items or services that you need or explain why you need them. But you will need to say how much money you want to borrow.
If you need money for any other reason than the general categories above, we will not be able to pay you a Budgeting Loan.
How applications for Budgeting Loans are decided
Personal circumstances
We look at exactly the same circumstances for everyone when deciding how much we can pay you. These are:
- whether you are single
- whether you are a couple
- whether you are single or a couple, with children
There is a set maximum amount of Budgeting Loan at any given time for each of these three circumstances. Your award will be based on the maximum Budgeting Loan that fits your particular circumstances of the three.
At the time your application is decided, you will have the same maximum Budgeting Loan amount available to you as everyone else has in your circumstances.
Priorities for Budgeting Loans
Jobcentre Plus has a fixed amount of money in its Social Fund budget to give out as loans. In order to ensure that this budget is not overspent, there are limits on the maximum amounts of Budgeting Loan allowable for the three different personal circumstances. These limits may go up or down depending on how much all Social Fund loan customers are applying for throughout the year.
The limit on the maximum amount of Budgeting Loan is first set for a single person, and then rules laid down by the Secretary of State give the limit for couples without children and one for families (including lone parents) with children. These are:
- a couple will get one and one third times a single person amount
- some-one with children will get two and one third times a single person amount
Because these limits on maximum amounts can be revised at any time, the amount appropriate to your particular circumstances can only be confirmed when your application is processed.
How much you can have
Your circumstances and the current overall state of the loan budget determine the maximum amount of Budgeting Loan you are allowed to have. But the actual amount awarded will also depend on whether you have existing Budgeting Loan debt.
If you have no existing Budgeting Loan debt you may be able to have a Budgeting Loan up to your maximum allowable amount.
However, if you do have existing Budgeting Loan debt, the size of any further Budgeting Loan you can have will depend on what you already owe. We can only consider a new Budgeting Loan for the difference between your maximum allowable amount and the amount you already owe (where this is a lesser amount).
For example:
- If your maximum allowable Budgeting Loan is £700
- and your existing Budgeting Loan debt is £500
- and you apply for a further loan of £300
a further loan of only £200 could be considered. This is because the amount already owed (£500), plus any further loan (£300) cannot be more than the maximum amount of Budgeting Loan allowable (£700). In the same example, if the existing Budgeting Loan debt were £400 or lower, a further £300 loan could be considered.
The figures above are used only to show how awards are calculated.
Further adjustments to the final amount of a Budgeting Loan are made based on;
Any savings you have
Rules about minimum and maximum amounts of loan debt
How much you can afford to repay
If you have any savings
The amount of loan you will get will be reduced, on a pound for pound basis, by any savings you or your partner have over £1,000 (£2,000 if you or your partner are aged 61 or over).
Minimum and maximum amounts
The minimum you can be paid as a Budgeting Loan is £100. Your maximum debt to the Social Fund, including both Budgeting Loan and Crisis Loan debt, cannot be more than £1,500. So, after deciding how much you can have as a new Budgeting Loan using all the preceding tests above, we may restrict this loan in order to keep your total debt within £1,500.
Repaying the Budgeting Loan
How much you can afford to repay
We will look at your total debt to the Social Fund. When looking at paying back a new loan, total debt means the new loan and any previous Budgeting Loans and Crisis Loans (that you took out before 1 April 2013) which you still owe.
We will consider:
- how much income you have
- what debts or other commitments you have.
We will normally take into account all of your Income Support, income-based Jobseeker’s Allowance, Employment and Support Allowance (income-related) or Pension Credit except additions for housing costs. We will also take into account any Child Benefit or Child Tax Credit you are getting.
Your total debt to the Social Fund (both Budgeting Loan and Crisis Loan debt) must normally be repaid within 104 weeks (2 years).
How the loan is repaid
Before you get a loan, you will be asked to agree the amount of the weekly repayments. Repayments will be made by deductions from your or your partner’s Income Support, income-based Jobseeker’s Allowance, Employment and Support Allowance (income-related) or Pension Credit, as long as you get enough Income Support, income-based Jobseeker’s Allowance, Employment and Support Allowance (income-related) or Pension Credit to allow this. If you or your partner stop getting Income Support, income-based Jobseeker’s Allowance, Employment and Support Allowance (income-related) or Pension Credit, deductions can then be made from any of the following:
- Contribution-based Jobseeker’s Allowance
- Employment and Support Allowance (contributory)
- Maternity Allowance
- Incapacity Benefit
- Severe Disablement Allowance
- Industrial Injuries Disablement Benefit
- Industrial Disablement Pension
- Industrial Death Benefit
- Reduced Earnings Allowance
- Carer’s Allowance
- State Pension (including non-contributory State Pension)
- Widowed Mother’s Allowance
- Widowed Parent’s Allowance
- Widow’s Pension
- Bereavement Allowance
- Graduated Retirement Benefit.
If you stop getting any of these, or if you are not getting enough for deductions to be made, other arrangements will be made with you for repayment. These might be by cash, cheque or postal order, or by direct debit from a bank account you have. You can also pay off all the money you owe in a lump sum, if you become able to do so.
Repayment terms
Repayment terms are made up of the time within which the total debt has to be repaid (repayment period) and the weekly amounts you have to pay back (repayment rates).
Repayment period
The total debt should normally be repaid in 104 weeks (2 years).
Repayment rates
There are three standard repayment rates which apply. These rates depend on your existing financial commitments.
The rates are equivalent to 12 per cent, 10 per cent and 5 per cent of your weekly
- Income Support available income (and including Child Benefit and Child Tax Credit where appropriate)
- or Jobseeker’s Allowance available income (and including Child Benefit and Child Tax Credit where appropriate)
- or Employment and Support Allowance available income (and including Child Benefit and Child Tax Credit where appropriate).
- or Pension Credit (and including Child Benefit and Child Tax Credit where appropriate)
excluding any housing costs.
Repayment at 12 per cent rate
If you have no other debts to repay, you will be expected to pay an amount equal to 12 per cent of your weekly
- Income Support available income (and including Child Benefit and Child Tax Credit where appropriate)
- or Jobseeker’s Allowance available income (and including Child Benefit and Child Tax Credit where appropriate)
- or Employment and Support Allowance available income (and including Child Benefit and Child Tax Credit where appropriate).
- or Pension Credit (and including Child Benefit and Child Tax Credit where appropriate)
excluding any housing costs.
Repayment at 10 per cent rate
If you have some other payments to make from your benefit, such as rent or fuel arrears, the repayment rate may be lowered to 10 per cent of your weekly
- Income Support available income (and including Child Benefit and Child Tax Credit where appropriate)
- or Jobseeker’s Allowance available income (and including Child Benefit and Child Tax Credit where appropriate)
- or Employment and Support Allowance available income (and including Child Benefit and Child Tax Credit where appropriate).
- or Pension Credit (and including Child Benefit and Child Tax Credit where appropriate)
excluding any housing costs.
Repayment at 5 per cent rate
If your commitments are larger (for example, you have higher payments to make from your benefit or are repaying several personal debts) the repayment rate will normally be 5 per cent of your weekly
- Income Support available income (and including Child Benefit and Child Tax Credit where appropriate)
- or Jobseeker’s Allowance available income (and including Child Benefit and Child Tax Credit where appropriate)
- or Employment and Support Allowance available income (and including Child Benefit and Child Tax Credit where appropriate).
- or Pension Credit (and including Child Benefit and Child Tax Credit where appropriate)
excluding any housing costs.
If you can repay your total debt within 104 weeks (2 years) at one of the above standard repayment rates, we will make you one offer. If you cannot repay your total debt within 104 weeks, we may give you another choice based on the standard repayment rate. We may offer you a lower amount of new loan which can be repaid at a standard repayment rate in 104 weeks.
Non-standard repayment terms
We may offer you either the full amount of your new loan or a lower amount of new loan at a non standard repayment rate. This rate can be any weekly rate, up to a maximum of 20 per cent of your Income Support, income-based Jobseeker’s Allowance, Employment and Support Allowance (income-related) or your Pension Credit (including Child Benefit or Child Tax Credit where appropriate) excluding housing costs. Again we may give you choices, based on recovery of your total debt in 104 weeks (2 years).
You may receive up to three different offer choices, from which you can choose the best one for you.
Budgeting loans
If you are having difficulty making the repayments
If you cannot make the repayments at the rate originally agreed we may be able to help, for example by extending the repayment period to reduce your payments. You should contact your Jobcentre Plus office for advice. If you are aged 61 or over, you may wish to seek advice from the Pension Service.
How to apply for a Budgeting Loan
Contact Jobcentre Plus to apply.
- Jobcentre Plus – who to contact (GOV.UK)
If you are aged 61 or over you may wish to contact The Pension Service.
- The Pension Service – who to contact (GOV.UK)
What happens when a decision is made
Once we have made a decision about your application, which will usually be within a week, you will be sent a letter telling you the decision. If you are offered a loan, the letter may give you up to three choices of different loan amounts, each with a different rate at which to repay. You will be asked to sign this letter, indicating which one of the offer choices you want to accept and showing that you understand the repayment terms and that you have to repay the loan. When you return the signed letter, you will be paid the loan and deductions will probably start with your next payment of benefit.
How you are paid your Budgeting Loan
Budgeting Loans will usually be paid in one lump sum into a bank, building society, or other account provider account which you have nominated.
You can have your Budgeting Loan paid into someone else’s account if you wish. For example, you could choose to have it paid to the person who looks after your money.
If your application for a Budgeting Loan is refused
There are several reasons why your application may be refused. You may not be eligible for a loan because you have not been getting a qualifying benefit for 26 weeks. You may have excess savings, already owe too much in existing social fund loans, or you may not be able to repay a loan.
If you are dissatisfied with the decision
If you are unhappy about the decision, you can ask for a review.
Effects of Budgeting Loans on other benefits
Normally, you will repay your Budgeting Loan by deductions from your weekly Income Support, income-based Jobseeker’s Allowance, Employment and Support Allowance (income-related) or Pension Credit until the loan has been repaid. Other than this, there will be no effect on any other benefit from having a Budgeting Loan. But see ‘Repaying the loan’ if your Income Support, income-based Jobseeker’s Allowance, Employment and Support Allowance (income-related) or Pension Credit stops before your repayments have finished.
Taking on further loans
If you already owe money to the Social Fund from a previous loan, you may get another one but we will consider, as part of your circumstances, the Budgeting Loan debt you already have and if you can afford to repay a further loan.
