Loans for people on benefits

For people on benefits, getting a loan can be a frustrating process. But there are specialist lenders who could step in when a mainstream source can't help.

Find lenders that will say Yes

See your personalised rates

Good or bad credit histories considered

Fast funding with no hidden costs

Late repayments can cause you serious money problems. See our debt help guides.

What are my loan options if I’m on benefits?

Some lenders are reluctant to take applicants receiving benefits, deeming them too risky to lend money to. But there are some lenders who will consider you if you’re getting benefits.

  • Guarantor loans. A guarantor, who is contractually obliged repay any debt if you’ve failed to do so, helps to make lenders feel comfortable approving applicants on a low income. By seeking out guarantor loans, you therefore might be able to access deals that would otherwise have been out of your reach.
  • Secured loans. Not for the faint-hearted, a secured loan lets you put up an asset as collateral against late repayments. This also helps lenders see you a less of a risk when assessing your creditworthiness. If you have a home – even with an existing mortgage – you may be able to offer property equity as collateral. However, your home would be at risk if you fail to make repayments.
  • Credit-builder credit cards. These credit cards are aimed at applicants with low income and poor credit ratings. The credit limits are typically lower than traditional credit cards and the APR is often very high. Nevertheless, the eligibility criteria are much looser than those of other cards, so it could be a useful credit option for people on benefits.
  • Vehicle finance plans. This is a secured loan used to buy a new vehicle. The cost of the purchase is split into monthly repayments with interest added on top, and the vehicle itself is used as collateral on the loan.
  • Specialist lenders. Some lenders specialise in offering loans to people who have a low income or a poor credit history. These loans do have higher interest rates than those on offer from traditional lenders though, so ensure you can meet the monthly repayments before applying.
  • Payday loans. These short term loans are easy to be approved for, but the interest rates are astronomical. Consider these a last resort once all other avenues have been explored.

Does receiving benefits affect my credit score?

The benefits you receive from the government do not appear on your credit record and therefore have no direct impact on your eligibility for loans.

However, the fact that you’re eligible for government loans nearly always means that you have some sort of difficulty with your income.

Your regular income will be assessed by lenders, and if it’s believed there’s a risk of you struggling to meet your monthly repayments, your application will be rejected.

If you agree that meeting the repayments will be difficult, you shouldn’t apply in the first place. However, for many recipients of benefits, this isn’t the case at all.

How to get a loan while receiving benefits

  • Budgeting. Perhaps the most important step is ensuring you can afford the monthly repayments on any loan you’re approved for. These loans are meant to provide additional financial assistance, not cause more troubles.
  • Check your credit record. Order a free credit check from the likes of Experian, TransUnion (formerly Callcredit) or Equifax. This will give you an idea of how risky lenders are likely to deem you. Remember, a failed credit application will harm your credit score further, so choose the products you apply for wisely.
  • Compare lenders. Use the comparison tables on finder.com to compare the lenders.
  • Apply. The easiest way to apply is through the lender’s website. The lender will want some personal details, financial details and to run a credit check. The outcome of your application will be revealed within seconds, and you could have the money in your account that same day.

Dos and don’ts

Do:

  • Compare the best lenders with finder.com
  • Check the lender’s eligibility criteria before applying for a loan
  • Ensure you meet your monthly repayments on time

Don’t:

  • Accept a loan with repayments you’ll struggle to repay
  • Submit multiple credit applications in a short time period

What about a broker?

As long as you bear in mind that it’s unlikely to check the whole market, but instead subsection of lenders with whom it has an arrangement, then a broker can take the strain out of finding suitable lenders. Brokers find the best rate available to you from their panel of lenders, taking into account your individual circumstances. Generally this service is free, because the broker will earn a referral fee from the lender.

Some brokers or “matching services” can now run soft searches with a range of lenders in seconds, meaning that without any impact on your credit score you’ll be able to get realistic rate quotes for loans you’re likely to be approved for. This can be a smart way to avoid disappointment, protect your credit score and focus on lenders likely to approve you.

The bottom line

It’s unfortunate that people on benefits have more difficulty accessing traditional loans, as they’re often among the people who need them the most. Nevertheless, if you’re in this situation, it’s worth remembering that there are many alternative forms of credit and by following the tips above and comparing options using the finder.com comparison tables, you should be able to find a great deal for your needs.

We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you. Most of the data in Finder's comparison tables has the source: Moneyfacts Group PLC. In other cases, Finder has sourced data directly from providers.
Chris Lilly's headshot
Written by

Head of publishing

Chris Lilly is Head of publishing at finder.com. He's a specialist in personal finance, from day-to-day banking to investing to borrowing, and is passionate about helping UK consumers make informed decisions about their money. In his spare time Chris likes forcing his kids to exercise more. See full bio

Chris's expertise
Chris has written 598 Finder guides across topics including:
  • Loans & credit cards
  • Building credit
  • Financial health

More guides on Finder

  • Find the best emergency loan

    If you need to borrow funds in a hurry to cover an unforeseen expense, this guide explores your options.

  • Wollit review

    Wollit is a credit building service that aims to help improve your credit score by reporting your monthly plan payments to the UK’s 3 major credit reference agencies.

  • Abound personal loan (formerly Fintern loans) review

    Abound (formerly Fintern) is a UK lender that promises to offer borrowing “reinvented”, with affordable tailored loans.

  • JN Bank personal loans review

    JN Bank offers personal loans with a focus on flexible repayment options, but what rate can you expect?

  • Methodology for personal loan ratings

    You’ll find customer satisfaction star ratings on some of our personal loans provider reviews. Here’s how we came up with them.

  • Gambling statistics: How many people gamble in the UK?

    44% of Brits have gambled at least once in 2023. We unpacked the latest statistics to see what we are gambling on and how much we spend.

  • Loqbox review

    Looking to build your credit score at no cost? Loqbox is an innovative new service designed to do just that.

  • United Trust Bank secured loans review

    United Trust Bank offers second-charge and ‘mini’ mortgages of £10,000 to £1 million repayable over 2 to 30 years. See how other lenders compare.

  • The best personal loan rates in the UK

    Looking for a personal loan? Read the definitive guide to find out how to compare interest rates, fees and features to find the right loan for you. There’s a range of loans available to apply for – we’ll help you find the right one.

  • Get a £25,000 personal loan with the best rate

    Compare live rates, fees and eligibility criteria from a range of lenders to get the right loan for your needs at the lowest overall cost.

Go to site