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To understand how one can apply for a budgeting loan, we first need to know what it is, who provides it, who can claim a budgeting loan, etc. So let’s get right into it.
What is a budgeting loan?
A budgeting loan is a social security benefit provided by the Government of the United Kingdom. It is a form of interest-free debt that individuals can claim on a low income. However, people can use a budgeting loan only for paying for specific necessities and consumer debts.
This service is provided by the Department of Work and Pensions. These specific necessities are as follow:-
- Furniture or household expenses
- Traveling expenses
- Clothing and footwear
- Maternity or funeral expenses
- Improving, securing, or maintaining your home
- Funds to start work
- Advance rent or removal expenses for a new house
An individual can only claim a budgeting loan if they have access to any of the other beneficiary schemes such as pension credit, income support, income-based jobseeker’s allowance, or income-related employment and support allowance, for you to be further eligible for the budgeting loan you need to ensure that you have been obtaining one of the above benefits for at least 26 weeks.
If those criteria are not fulfilled, then make sure that there is not a gap of more than 28 days between these benefits.
When are you not eligible?
You cannot avail of a budgeting loan if you are currently benefiting from the Universal Credit scheme. If you get a universal credit at the moment, you will have to apply for a budgeting advance instead. Some other conditions in which you will be disentitled for a budgeting loan are as follows:-
- You have a pending crisis and budgeting loans of over £1500
- You are involved in some industrial action like a strike or walkout or a lockout
- You currently avail of the ‘new style’ jobseeker’s allowance or ‘new style’ employment and support allowance.
How much can you borrow?
An individual can borrow a minimum amount of £100, and the maximum amounts are decided upon the household situation of the borrower. If the borrower is single, the maximum loan amount is £384. If the borrower is a part of a couple, the loan amount jumps up to £464. If the individual also has kids, the maximum debt is £812. Some other criteria on which the loan amount depends are:-
- the borrower’s existing social fund loans
- Suppose the borrower has a savings of more than £1000. In the case of a senior citizen, the savings account should not exceed £2000.
- Your ability to repay the budgeting loan
- Some budgeting loan that you already owe
How to apply for a budgeting loan?
You can apply for a budgeting loan online from the Government of the United Kingdom website. The website you have to go to is www.gov.uk, and after checking your eligibility, you may apply.
If you apply online, you can choose how you wish to receive the decision of your loan. You can get it through an email, text message, or a letter.
You can also apply for the loan offline using a paper form. You can download and print form SF500 from the website and apply, or you can call the Social Fund Enquiry and ask them to post the form to you. You can expect the form to arrive in around 7 to 8 days.
You will get a decision after the loan application, depending on what medium of application you have chosen. In the case of an online application where you chose the email or text option, you will hear back within seven days, and if you have selected the letter option, it may take more time.
Generally, it takes around 21 days to hear back. An offline application through the post also will get a decision within 21 days.
How to accept the loan?
If your application is accepted, you will get an offer from the Department of Work and Pensions. For availing of the loan, you need to send an acceptance. Acceptance has to be sent through the same medium of application.
For accepting an offer online, you need to follow the instructions provided in the email or text.
When an application is made through the post, you will also obtain the acceptance letter by post. Make sure to sign the acceptance letter and send it back to the address.
Questions about your application
In case you have any questions about making an application or your current application, you can call the Social Fund Enquiry Line and get clarity.
It is advised by the Social Fund Enquiry website to wait for at least 14 days or two weeks before calling with a purpose of inquiry in case of an online application and 21 days or three weeks if you made the application through the post.
Disagreement with the decision or an offer
You can send a request to the authorities to look through your application again because either your application was not passed or you are unsatisfied with the amount granted to you. For this, you will need to write to the address given at the top of your decision letter, or you can call the Social Fund Enquiry line for more details.
You will be required to add some personal details to the letter such as your name, national insurance number, your address, and your phone number. You will also have to clearly state the reason for your dissent towards the decision. You are supposed to send this letter within 28 days of getting your letter.
After a while, you will receive a letter on whether your request has been approved or not, with proper reasoning from the Social Fund Enquiry Line. You will most likely get a reply to the letter within 28 days.
Since a budgeting loan is interest-free, you are only required to repay the principal amount. Generally, you should pay it within two years. The repayments are directly deducted from future benefits, and the repayment amount is based on factors like income and credibility.