Loans For People On Benefits

Finding a suitable loan for your financial situation can be difficult, and the process could be harder if you’re on benefits.
We understand how confusing and stressful it can be to apply for a loan when you are receiving benefits and don't know where to turn in the event of a financial emergency.
To help point potential borrowers in the right direction, we have compiled this short guide to loans for people on benefits, which addresses some key questions and looks into alternative options.

Alternatives to loans for people on benefits

Taking out a short-term loan isn’t a suitable solution for everyone, and it’s always important to consider how a loan could further impact your finances.
Depending on your situation, there may be other options that you could think about before you make an application for a loan.

• Very few of us enjoy dipping into our hard-earned savings, especially to cover something as mundane as a new washing machine or unexpected car repairs. While using your savings rather than applying for a loan could feel disheartening, this is a decision that could save you money on interest in the long run.


• If you need money urgently, could a trusted family member or friend help you out? Before borrowing money from somebody you know, you should both agree on a repayment plan; it might be a good idea to get this in writing.


• If you’ve been receiving certain benefits for six months, you could check your eligibility for a Budgeting Loan, which could help pay for advanced rent, maternity and funeral costs, and security or necessary maintenance for your home.
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• In 2024, an estimated £23 billion worth of benefits went unclaimed in the UK. The free, Turn2Us Benefits Calculator will show you the help that you’re eligible for. It may be worth checking even if you’re already in receipt of benefits; you might be entitled to some additional help that you’re not aware of.

Can I get a loan if I’m on benefits?

You may be eligible for a loan if you receive benefits. Some lenders may be willing to consider certain benefits as a form of regular income, although your options could be somewhat limited and, if approved for a loan, you could be offered a higher interest rate.

You should think very carefully and weigh up any other options that could be available to you before you apply for a loan on benefits.

Which benefits could count as income when applying for a loan?

Some lenders could class the following benefits as income when assessing your application for a loan, although please be aware that every lender will have their own requirements and eligibility criteria.

• Working Tax Credit.
• Universal Credit.
• Personal Independence Payment (PIP), formerly known as Disability Living Allowance (DLA).
• Child Tax Credit.
• Child Benefit.

Which benefits do not count towards my income?

There are some benefits that lenders are less likely to consider eligible income. While this will vary from lender to lender, commonly excluded benefits could include:

• Housing Benefit.
• Income Support.
• Job Seeker’s Allowance.
• Pension Credits.

Can I get a loan on PIP?

As discussed, some lenders may class PIP as a regular source of income when considering your loan application.

Can I apply for a loan on Universal Credit?

If you’re in receipt of Universal Credit and need money to help pay for an urgent expense, you might be interested in researching a Budgeting Advance.
A Budgeting Advance is a loan issued by the government, designed to help cover emergency costs, such as a replacement for a broken essential household item. The money you owe will be taken out of your monthly Universal Credit payments.

You can find out more about a Universal Credit Budgeting Advance and check your eligibility here.

How can I apply for a loan on benefits?

If you receive benefits, the process of applying for a loan is not much different than for people who get income from regular employment, although you may have to provide some additional details and documents relating to the kind of benefits you receive.

As a reputable credit broker authorised and regulated by the Financial Conduct Authority (FCA), Little Loans work with a panel of lenders who consider applicants from with broad range of situations, including those who receive certain benefits.

You can use our eligibility checker to see how likely you are to be approved for a loan by one of our lenders. Checking your eligibility is free and will not impact your credit score.*

*If our checker reveals that you could be eligible for a loan and you choose to make a full application directly with a lender, a creditworthiness assessment will be caried out. This will include a hard search or Open Banking. A hard search will remain visible on your credit file for up to 12 months, and multiple hard searches within a short period of time will damage your credit score.

Can I search for a loan with Little Loans?

You are welcome to search for a loan if you are in receipt of benefits. However, you may find it more difficult to be matched with a loan, as only a small number of our lending partners will consider applicants with these circumstances.

We will only show your application to these lenders.

In order to search for a loan with Little Loans, you must:

• Be over the age of 18;
• Be a UK resident;
• Have a UK bank account and valid debit card; and
• Have a regular source of income paid into your bank account. As discussed, in certain circumstances, this could include some types of benefits.

What are the repayment terms for a loan?

The repayment terms available to you will depend on the amount of money you need to borrow. The lenders on the Little Loans panel make it possible to search for a loan with a repayment term ranging from 3 to 60 months.

I want to apply for a loan on benefits; how much can I borrow?

With Little Loans, you can search for a loan between £100 and £10,000. Exactly how much you’re approved to borrow will depend on your financial circumstances and your ability to repay the money.

You should only apply to borrow money if you are confident that you can comfortably afford your monthly repayments.

Do I need a guarantor to apply for a loan on benefits?

A guarantor loan is when somebody you know, usually a family member or close friend, agrees to step in and make your repayments if you’re unable to. While you should never apply for a loan unless you’re certain that you’ll be able to make your repayments on time each month, a guarantor could provide an extra layer of security in the event that your financial situation unexpectedly changes.
If you have bad credit, or no credit history at all, a guarantor loan could be something you wish to research.

Some lenders willing to consider loan applications for people on benefits may require you to apply with a guarantor, whereas others might not. This will depend entirely on the lender’s terms and conditions.

Please be aware that Little Loans does not currently work with any guarantor lenders.

I need debt advice; who can I speak to?

If you're struggling financially, it’s important to consider how taking out a loan could affect you. If you’re concerned about coping with your levels of debt and financial commitments, the organisations listed below can provide you with free and impartial advice.

• StepChange
• MoneyHelper
• National Debtline
• Citizens Advice

If you need money in an emergency – for example, for food or energy – please visit StepChange’s guide here.