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Can I Apply for a Loan if I am on Benefits?

By August 18, 2022October 18th, 2022No Comments

Yes, you can apply for a payday loan even if you are a recipient of government benefits. However, being accepted for the loan is a different issue altogether – especially if you have a low income too.

This is because loan lenders may be unsure of your ability to pay back the loan if your income appears to be unstable.

Some loan lenders may actually offer loans to those claiming benefits, asking them to first complete affordability checks which can in turn then result in a loan approval.

 

Which Lenders Will Accept You if You are Claiming Benefits?

 

There are a number of lenders who will offer loans to those on benefits, even if they are on low incomes or with a poor credit history. These lenders differ from typical high street lenders in that they will accept loan applications from people in a range of financial situations.

Typically, it is only short-term loan lenders that will accept you if you are claiming benefits, and they may require a guarantor. If you are claiming benefits, you may not be able to borrow a large loan without a guarantor.

 

How Can I Apply for a Loan if I am Claiming Benefits?

 

Applying for a loan if you are claiming benefits is a similar process to that of someone who is not claiming benefits. You will need to apply directly to a lender or through a broker, and they will then consider your application against their eligibility requirements. Prior to putting in an application, it is worth having a read of their requirements to check whether you would be eligible.

If the loan application is approved, your lender or broker will provide the funds and arrange to collect the repayments on the agreed dates.

Often, if you are claiming benefits, you may find that you will be offered a loan but with a higher interest rate on the repayments. This is because you may appear as a risk to the lender if your income or ability to repay on time appears unstable.

 

Will I Be Accepted for a Loan if I am Claiming Benefits?

 

While there is no guarantee that your application for a loan will be approved if you are claiming benefits, a strong credit history will increase your chances of being accepted.

Lenders will require you to complete both a credit and affordability check before they make their final decision. If you are claiming benefits and also have a poor credit history, have previously been declared bankrupt or have applied for multiple lines of credit then it is likely that you will be accepted for a loan.

 

Can I Apply for a Loan if I am on Benefits?

 

What Loans Can I Get if I am Claiming Benefits?

 

If you are claiming benefits then you may qualify for the following types of loans:

 

  • Doorstep Loans

A doorstep loan, also known as a home credit loan, is personal and operates face-to-face. A loan agent will make regular visits to your home, as well as visit to collect your repayments each week at an agreed time.

 

  • Secured Loans

A secured loan, such as a title loan, allows you to borrow money with repayments tied to an asset – such as your property or car. Typically, secured loans have lower interest rates as the risks to the lender if you are unable to repay the loan are minimal.

As such, the lender can use your assets as a last resort if you cannot afford the monthly repayments.

 

  • Guarantor Loans

A guarantor loan is where someone else, typically a friend or a family member, will co-sign your loan. This means that they are also essentially responsible for making any repayments if you are unable to.

In these instances, your guarantor will also be required to pass the same eligibility and credit checks, and it will usually help if they are employed and not claiming any benefits.

 

Do I Need a Guarantor for a Loan if I am Claiming Benefits?

 

No, you do not necessarily need a guarantor for a loan if you are claiming benefits. Some lenders will still accept your loan application if you meet their eligibility criteria, as well as pass their credit and affordability checks.

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