Do benefits count as income for loans?

You cannot avoid certain situations regardless of unstable finances. It could be an unprepared accident, a bill, or a repair. You may not have cash every time a need arises. Moreover, situations like unemployment and business loss make it even worse. You have nowhere to go.   

You may be leveraging some government benefits for survival. However, they may not prove sufficient at times. What would you do in such a situation? Can you get a loan against the benefits? The answer may vary according to the purpose and the amount required.  

What do you mean by benefits income?  

Benefits are the income that a person receives from government assistance. It launched a program for the unemployed, disabled, pensioners, and other individuals with genuine issues. If you lose your job with no crime of your fault, you may be legally entitled to it.  

You must apply to the respective authority to get sustenance cash.  The amount you receive as benefits income is low. It is only viable to meet just “essential needs” like food, shelter, medicines, etc.  

You may get different types of income. It depends on the type of benefit you leverage. For example, a job seeker allowance is ideal for an individual who has recently been redundant. Alternatively, you may get Disability Allowance (if your physical health prevents you from getting a job).  

What types of benefits can you check and benefit from? 

There are different types of government benefits that you can check.  Each differs in purpose and the amount you get. Here are the benefits that individuals with low or no income may check:   

• Personal Independence Payment (PIP) 

• Disability Living Allowance (DLA) 

• Universal Credit 

• Working Tax Credit 

• Child Benefit 

• Fostering Allowance 

• Incapacity benefit 

• Industrial Injuries Disablement Benefit 

Why may you need a loan on your benefits income?  

Every individual’s financial circumstances differ.  Some hold handsome pay with well-maintained debt payments. Alternatively, others struggle to repay monthly dues timely due to low income.  You can skip one or two; however, you cannot do it with every payment. What if you must bridge the pending rent to avoid eviction?  

Here, loans for people on benefits may help. You may get instant cash support if you have any of the above-mentioned benefits. It may help you counter the issue without literally affecting your finances. The flexibility to choose repayments, payment terms, and re-scheduling makes it a go-to thing for emergencies. Here are other reasons that you might need a loan on your benefits income:  

1. You lack a regular income source 

When an urgent need appears, you don’t care about how much you earn but about the money. Here, loans for people on benefits may help you. You may qualify more easily if you hold an alternative income, like a part-time one, apart from just the benefits income.  

2. You cannot delay the cash requirement. 

Yes, sometimes, you need the cash regardless of the situation. For example, you had an accident and need urgent cash for dressing. Would you wait until you get a minimum income? No, you seek immediate solutions. So, here a loan for people on benefits earnings may help.  

3. You lack someone who may guarantee the loan 

Generally, it is required that one provide additional security if one does not meet the affordability criteria. It generally appears in the form of a guarantor.  A guarantor helps the borrower with limited income and poor credit get instant approval.  

However, not every individual has someone to rely on with personal finances. Here, individuals with a basic income may get no guarantor loans for their requirements. You just need to meet the affordability standards. If you can repay the loan timely without defaulting, you qualify. Make sure you get the agreement and the repayments. It will help you plan the payments or set direct debits. 

Can you get a mortgage on benefits income?  

While getting a mortgage with benefits is difficult, it is not impossible. Some specialised loan providers deal with profiles that wish to apply for a mortgage on benefits. This is because not every loan provider considers benefits as valid income for a loan. They analyse certain parameters to know your affordability and risk level. Therefore, you must have any other valid income form to qualify for a mortgage on benefits.  

Alternatively, check whether you can provide a high deposit on the mortgage to get a loan. Usually, you must provide 10% of the new property price that you want to purchase. However, identify your finances and proceed only if it does not hamper your basic expenses. 

Here is how you can get a mortgage on benefits income:  

1. Provide details of your total income 

Yes, you must provide details of every income source. It should be a genuine one and easy to verify. It may include benefits income, part-time earnings or any new job offer letter ( if you have any). You must have valid bank statements to support your proof. 

2. Provide a deposit 

Identify the deposit or upfront money that you can pay on the loan. If you have low savings, use your existing debts. Consolidate your pending payments with unsecured personal loans online. It helps you fetch better interest rates and reduces your liabilities. You can use the amount that you get as interest savings towards the loan deposit. 

3. Try to improve earnings and credit record 

It is one of the best ways to wait until finances improve. It is a financially savvy approach to buying the most important thing- your sweet home. Wait and work on the credit report. Counter and inform about the delinquencies. Alternatively, reduce expenses and work on increasing income. Explore the ways to get a good job to support your dreams.  

Bottom line 

Thus, yes, you can get a loan on benefits. However, it depends on other ways you can repay the dues. It may include income from other sources, if not employment primarily. In some loans, like a mortgage only, you may need to provide a guarantor if your income is not valid. You can tap short-term loans for benefits to meet basic emergency expenses. You may get one with a basic income.