Benefit scheme could give you £812 lump sum if you’re struggling with bills

Households struggling to keep up with essential payments, rent, household emergencies or even commuter fares could apply for a little known scheme called a Budgeting Loan to tide them over.

The money can help pay for essential bills and even repairs and is in place to stop people turning to rip-off payday lenders or illegal loan sharks for money in desperation.

The loan is similar to a Universal Credit advance payment, and is offered to claimants interest-free, with the money to be repaid within two years.

You’re only eligible for a Budgeting Loan if you’ve been on certain benefits for six months – such as Income Support, income-based Jobseeker’s Allowance, income-related Employment and Support Allowance and Pension Credit.

If you’ve been switched onto Universal Credit from Pension Credit, any time spent claiming for it will count towards the six months.

However, you cannot get a Budgeting Loan if you are currently claiming Universal Credit (that’s where advance payments come in), you’re involved in a strike or you already owe more than £1,500 in total for Crisis Loans and Budgeting Loans.

How much you could get

The lowest amount you can borrow is £100. However, this rises to £348 if you’re single, £464 if you have a partner and £812 if you or your partner claims Child Benefit.

How much you could get depends on whether you can pay the loan back, have savings of more than £1,000 (£2,000 if you or your partner are 63 or over) or are paying back an existing Budgeting Loan or Crisis Loan.

How does it work?

A Budgeting Loan is interest free so you only pay back what you borrow.

The repayments will be taken automatically from your benefits. The amounts you repay are based on how much benefit you get and what you can afford.

You normally have to repay the loan within two years (104 weeks).

What does it cover?

A Budgeting Loan can help pay for:

• furniture or household items (for example, washing machines or other ‘white goods’)
• clothes or footwear
• rent in advance
• costs linked to moving house
• maintenance, improvements or security for your home
• travelling costs within the UK
• costs linked to getting a new job
• maternity costs
• funeral costs
• repaying hire purchase loans
• repaying loans taken for the above items

How do you pay it back?

A Budgeting Loan is interest free so you only pay back what you borrow over the course of two years.

The repayments will be means-tested and taken automatically from your benefits.

After you apply for a Budgeting Loan, you’ll get an email, text or letter telling you if you’ve been offered a loan. This explains how much your weekly repayments will be if you accept the loan.

You normally have to repay the loan within 2 years (104 weeks). If you stop getting benefits, you’ll need to arrange another way to repay.

If you took out a Budgeting Loan during the Covid outbreak, you will have been offered a payment holiday.

This has now ended and payments have returned to normal.

The Department for Work and Pensions (DWP) it is writing to people explaining this – along with the date repayments will restart.

If you usually make repayments through a bank standing order, bank giro credit or by online banking, contact your bank to restart your repayments at the same rate as before.

How to apply for help

If you match the above criteria, you can apply online or by post. You must use the paper form if you’re applying on behalf of someone else.

Alternatively, find out how you can apply online, here.

After you apply, you’ll get a letter telling you if you’ve been offered a loan within seven days if you applied via email or text or 21 days if you applied by post.

If accepted, you’ll have to sign and return an agreement letter or respond to the offer. Your money will then be deposited into your bank, building society or credit union account within 21 days.