Loans for People on Benefits
We all need a little extra cash at times, and that’s especially true if you are receiving government benefits, so it can be encouraging to know that loans for people on benefits are available. If you’re surviving on state benefits, sudden and unexpected expenditure can be a source of real worry.
A broken cooker or washing machine, or an unexpected bill, can cause unnecessary stress if you don’t have the savings to pay for it. If you’ve had credit problems in the past, this can seem like even more of a problem, as many banks and building societies may not want to lend to you. However, there are companies out there that specialise in loans for people on benefits with bad credit.
The types of loans available
There are a number of different types of loans for people on benefits. Some are broadly similar to an unsecured personal loan you’d get from any bank, while others might be marketed as short-term or ‘emergency’ loans.
As with any type of borrowing, it’s important to look at your circumstances and the costs of different loan types. As a rule, the shorter the borrowing term, the higher you should expect the interest rate to be — this will be quoted as an ‘APR’ or Annual Percentage Rate. Short-term loans will often have quite a high APR, while an unsecured loan taken over a year or longer will be lower.
Secured loans may also be available to you if you are a home-owner, and interest rates will likely be lower than for unsecured lending. With a secured loan, the borrowing will be secured against your home. For some people, this can be the ideal solution, but it’s important to consider your options carefully before taking out a secured loan — if you are unable to keep up your loan repayments, you could lose your home.
Look into the costs
If state benefits are your only source of income, or if you have had credit problems in the past, you will have to be prepared for the interest rate lenders will charge you to be higher than you would expect if you took a ‘normal’ loan from a high street bank or building society.
This is because the pricing of loans is tied to the lender’s perception of the ‘risk’ involved of giving the loan. If you don’t have a regular salary and a good credit history, the loan represents a higher risk to the lender, and their products will be priced accordingly.
Some lenders may also apply up-front fees or charges for taking out a loan, however on some loans for people on benefits no fees are charged. By dealing with an independent broker or financial adviser, you can be sure of finding the deal that best suits your individual circumstances.
For people on benefits, the loan is often needed to deal with unexpected or emergency expenditure, so time may be a factor. For some loans for people on benefits same day decisions might be available, and in some cases you may even receive the loan funds on the same day. If you are thinking about securing the loan against your property, you should be prepared for the loan to take a little longer to process. Whatever your circumstances, by considering the full range of loans for people on benefits, you are more likely to find the right loan to fit your needs.