Can You Get a Short-Term Loan While on Benefits?

Many people in the UK rely on benefits such as Universal Credit, ESA, PIP, Housing Benefit or Child Benefit. When an unexpected expense appears — a broken appliance, urgent travel, or a car repair — the question often is: “Can I get a short-term loan while on benefits?”

The short answer is: yes, it’s possible, but approval depends on affordability checks, income stability, your credit history, and the lender’s own criteria. Below is a clear, safe, and up-to-date guide to how it works.

Can You Get a Short-Term Loan While on Benefits?

Yes. Some UK lenders do consider applications from people receiving benefits. However:

• Benefits cannot always be counted as income

• Many lenders will ask for proof of a stable, regular income stream

• You must pass an FCA-required affordability assessment

Lenders must ensure the loan is affordable, even on a low or variable income.

Which Benefits Can Count as Income for a Loan?

Not all benefits are treated the same. The following are sometimes accepted by certain lenders, depending on their policies:

Benefits commonly accepted as income:

• Universal Credit

• Child Benefit

• Child Tax Credit

• Working Tax Credit

• Personal Independence Payment (PIP)

• Employment and Support Allowance (ESA)

• Carer’s Allowance

  
  

Benefits less likely to be counted:

• Jobseeker’s Allowance (JSA) — due to uncertainty of duration

• Housing Benefit — usually paid directly for rent

• One-off or emergency benefits

Lenders want income that is predictable and ongoing, regardless of the benefit type.

What Do Lenders Look At When You’re On Benefits?

1. Affordability (most important)

Under FCA rules, the lender must check you can repay without hardship. They’ll look at:

• Total monthly income

• Essential outgoings (rent, food, energy, bills)

• Existing credit commitments

• Bank statements showing spending habits

• Proof of benefits received

  
  

2. Credit Score

A good credit score helps, but some short-term lenders will consider applicants with:

• Fair or poor credit

• Limited credit history

• Past defaults (depending on how recent)

  
  

3. Stability of Income

Lenders prefer:

• Regular benefit payments

• No major fluctuations in recent months

• Evidence that payments will continue

  
  

4. Bank Statements

Most lenders ask for 1–3 months of statements to verify affordability and spending behaviour.

Types of Short-Term Loans Available to People on Benefits

1. Short-term personal loans (1–12 months)

Some lenders offer small loans (£100–£1,500) repaid over a few months.

2. Credit union loans

A safer, often cheaper option than high-cost short-term credit.

3. Budgeting Loans (DWP)

If you receive certain benefits, you may qualify for a DWP Budgeting Loan — interest-free.

4. Guarantor loans

A guarantor with stable income can improve eligibility and reduce cost (though these are becoming less common).

Alternatives to Short-Term Loans While on Benefits

Before borrowing, consider lower-cost or free UK options:

1. DWP Budgeting Loan

Interest-free and repayable automatically through benefits.

2. Local Welfare Assistance

Offered by some councils for urgent needs (e.g., furniture, food, fuel).

3. Credit Unions

Community-based, responsible lenders with much lower rates.

4. Charities & Grants

For emergency situations — e.g., Turn2Us maintains a grant finder tool.

These options are generally safer and cheaper than private short-term loans.

How to Improve Your Chances of Being Approved

• Check your credit report for errors

• Apply to lenders that state they consider benefit income

• Only borrow what you can realistically afford

• Avoid multiple applications in a short time

• Have recent bank statements ready

• Use lender eligibility checkers (soft search only)

Risks to Be Aware Of

Short-term loans are expensive and not suitable for ongoing financial difficulties. Risks include:

• High APR compared to mainstream credit

• Late payment fees

• Negative impact on your credit score

• Borrowing more to cover previous loans

Always check the total cost, not just the monthly repayment.

Conclusion

You can get a short-term loan while on benefits in the UK, but it depends on the lender and your financial situation. Affordability, stable income, and responsible borrowing matter far more than the type of benefit you receive.

If you’re unsure, start with credit unions or government loans, as they are usually cheaper and safer than high-cost short-term credit.

FAQs

Can I get a loan on benefits with poor credit?

Yes — some lenders will consider it, but rates may be higher and affordability must still be proven.

Can Universal Credit be used as income?

Often yes, if it’s regular and stable.

Do lenders run credit checks?

Most will run at least a soft search, followed by a hard search if you proceed.

Can I get same-day payout while on benefits?

Some lenders offer same-day decisions, but it depends on affordability checks.

Are Budgeting Loans better?

Yes — they are interest-free and more affordable if you qualify.