Budgeting Loans explained

Simon Ward
by Lovemoney Staff Simon Ward on 27 January 2014  |  Comments 3 comments

If you receive benefits and you need to borrow some money to pay for everyday things, you could be eligible for a Budgeting Loan.

Budgeting Loans explained

If you’re short of money to pay for essentials such as rent, furniture, clothes or debt repayments and you are on income-related benefits, you could be eligible for an interest-free Budgeting Loan.

Budgeting Loans are offered by the Government as part of its Social Fund, which also provides Maternity Grants and Cold Weather Payments.

Who is eligible for a Budgeting Loan?

You can apply for a Budgeting Loan if you have been receiving one of these benefits for at least 26 weeks:

  • income Support;
  • income-based Jobseeker’s Allowance;
  • income-related Employment and Support Allowance'
  • Pension Credit.

What can I borrow it for?

You can use a Budgeting Loan to pay for:

  • rent;
  • clothing or footwear;
  • furniture or other household equipment;
  • things to help you look for or start work;
  • improving, maintaining or securing your home;
  • travelling expenses;
  • removal expenses if you’re moving home;
  • maternity or funeral costs;
  • repaying debts (such as hire purchase agreements) you used to pay for any of the above.

How much can I borrow?

You can borrow between £100 and £1,500, depending on whether you have children, are living on your own, have any savings or if you already owe money to the Social Fund (for example if you’ve already had a Crisis Loan).

When does it need to be repaid?

Budgeting Loans need to be repaid within two years.

How can I apply?

If you live in England, Wales or Scotland, you need to fill out form SF500 (which you can download here) and send it to your local Jobcentre Plus.

If you live in Northern Ireland, you need to download a different form SF500 (which you can download here) and send it to your local Jobcentre Plus.

What if my application is rejected?

If you think your application for a Budgeting Loan has been unfairly rejected you can ask for a review. To do this, you need to write to your local Jobcentre Plus within 28 days explaining why you think the decision is wrong.

If the review agrees with the original decision you can ask for another review by a Social Fund Inspector. This should take no longer than 12 days.

You can download a leaflet from the GOV.UK website to find out more about this second review.

This article is regularly updated

More on what to do if you're in debt

Where to get free debt advice

Borrowing money from family and friends: how to do it right

The best alternatives to payday loans

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Comments (3)

  • Mike10613
    Love rating 626
    Mike10613 said

    This advice could be useful to some of the 1 million people each month that turn to the parasitic pay day loan companies.

    Report on 07 November 2012  |  Love thisLove  0 loves
  • rick184
    Love rating 3
    rick184 said

    Many credit unions offer budgeting accounts with very affordable interest rates. They also encourage their members to save which can help break the cycle of debt. Visit your local credit union or search online to see what they have to offer.

    Report on 07 November 2012  |  Love thisLove  1 love
  • EllenMac
    Love rating 0
    EllenMac said

    The Social Fund system is changing from April 2013. The following information is from the DWP website:

    Budgeting Loans will continue to be available until Universal Credit is fully rolled out. As people migrate across to Universal Credit they will have access to a new system of Budgeting Advances that will replace Budgeting Loans for Universal Credit recipients.

    Crisis Loan alignment payments and other Crisis Loans paid due to issues with benefit will be replaced by a new national scheme of Short Term Advances. This will be administered by the Department for Work and Pensions.

    Community Care Grants and Crisis Loans for general living expenses (including rent in advance) will be abolished from April 2013 and replaced by new local provision. The new provision will be administered by local authorities in England and the devolved administrations in Scotland and Wales.

    Exactly how it will be administered is questionable given that I understand the money will not be ring-fenced.

    Report on 07 November 2012  |  Love thisLove  0 loves

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