Loans for people on benefits
What is a loan for people on benefits?
There are a lot of people that are living on benefits. There are also various types of benefits in United Kingdom like benefits for disabled people, retirement benefits, housing benefits, unemployment benefits and many more. These benefits differ in size and purpose. However, usually they are not substantial enough to guarantee a comfortable living for the people. Planning living expenses from one benefit payments to another can be very frustrating. What is more, sometimes unexpected situations occur and create unplanned expenses. For example, people get ill and need to buy medicine or a car breaks down and a person needs to pay mechanic for the services. All these above mentioned circumstances can be solved by taking out a short-term loan to cover living expenses. Nevertheless, there are some things that have to be considered before taking out a loan.
It can be very hard for people living on benefits to borrow at a reasonable rate. Since these people belong to high-risk group the interest rates required from them can be a lot of times higher than the rates applied to the people that have a stable wage.
There is a very high likelihood that people living on benefits will have to borrow from subprime-lenders. These lenders specialize in providing loans for people that face financial difficulties and as a result ask for very high interest rates. For example, average APR of the subprime-lender is about 2000%. Subprime loans are very expensive but usually people on benefits are not eligible to apply for loans from high street lenders.
Credit history is an important factor determining whether the insured person will get a loan and what will be the terms of that loan. Default notices from the companies and court orders to pay the debt stay on the credit history for 6 years and are visible for the lenders. Credit history limits the maximum amount that is possible to borrow. What is more, it also sharply reduces the number of banks and other credit institutions that can agree to lend the money for the borrower.
The easiest way to find out the information about ones credit history and credit score is to visit a website that offers credit history evaluation services. For example, a website http://www.experian.co.uk/ allows people to calculate their credit history. Usually these websites charge money for such services. However, having the detailed credit information can help people save time and money and it is really worth spending a couple of pounds for such a service.
Some lenders do not ask people for their credit history. A good example is payday lenders. These lenders offer people an opportunity to get the loan online during 24-hour term. Although such loans may seem like a very tempting option from the first sight, they have a lot of drawbacks. First of all, these loans have the highest interest rates. As a result, people should consider taking out payday loans only in the case of emergency or when there is a very big urge for money. Otherwise, other cheaper option should be considered.
Options worth considering
There are a couple of options how to lower the interest for people on benefits. First of all, the most popular alternative is to get a secured loan. This means that a person has to provide collateral for the lender in order to get the loan. Since the collateral reduces the risk the credit institutions take, interest rates are also lower. Borrowers usually use cars as the collateral. However, other possessions like jewelry or financial securities can also be used. The main drawback of this lending alternative is the danger to loose the collateral. If the borrower fails to repay the loan, the lender can simply sell the collateral in an auction. As a result, it is extremely important for the borrower to evaluate financial situation and his ability to repay the mortgage on time.
Another option is to find a guarantor. Guarantor is the person that promises the lender to repay the mortgage in case the insured person fails to do that on time. Guarantor can be any person that is able to take the risk. As a result, usually close friends or family members agree to become guarantors for people on benefits. The person that decides to become a guarantor must have a job, decent income and good credit history. People on benefits that have found a guarantor can contact guarantor loan lenders and considerably lower the interest rates of the loan. The main drawback of this alternative is that it is possible to ruin good relationship with the person that agrees to become a guarantor. For example, if the person on benefits fails to repay the loan, the guarantor has to repay the money instead. As a result, it is no secret that unsolved financial problems can ruin even very tight bonds between people.
The third option is to find a person with stable income and good credit history and ask him to get a loan in their name. After that person gets the loan, he can lend this money to another person. The reason behind this alternative is that a person with good credit rating can borrow from high street lenders at a very low and reasonable rate and can re-lend the money for the person on benefits at a slightly higher rate. In this situation everyone wins because the lending person is able to earn a small profit from the rate difference and the borrower is able to get the loan at the interest rate that is quite low. However, this option also entails likelihood to damage the relationship.
Figures and facts
The sum of loan for people on benefits varies from approximately £1,000 to £25,000. The repayment period would vary from 1 to 10 years. The amount lies with your power to pay back or asset which you mortgage. These loans are in both types: secured and unsecured. If you want to get a secured loan, you have to put some of your property in pledge but the interest rate of this loan is lower. Another optione to apply for an unsecured loan for people on benefits. Interest rate of this type of loan is a bit higher though.
How much could I borrow?
You could apply for any loan for people on benefits loan amount up to £25,000, for example £1000, £1500, £2000, £2500, £3000, £3500, £4000, £4500, £5000, £5500, £6000, £6500, £7000, £7500, £8000, £8500, £9000, £9500, £10000, £11000, £12000, £13000, £14000, £15000, £16000, £17000, £18000, £19000, £20000, £21000, £22000, £23000, £24000, £25000.
How to apply for a loan for people on benefits?
If you want to apply for a loan designed for people on benefits, please fill the form on the top of the page. It is quick and easy to make an online application. Just take a few minutes to complete the form so we can get a clear view of you, your finances and your needs. Our network of loan brokers will assess your situation and get back to you with no obligation loan quote. It is up to you to take it or not.
A Selection of UK Loan Providers
View a selection of UK loan providers below. If you like to receive a personalized loan quote from one of our network of loan brokers, please fill the form above.
- Our network of regulated brokers have a TYPICAL APR of 9.8% (variable). This means 66% of customers get their second charge mortgage at this rate or better. We have a range of rates up to 47.2% APR allowing us to help customers with many different credit circumstances.
- Unsecured loans are also available with a Representative 12.6% APR (variable). Representative Example: If you borrow £11,000 over 6 years at an annual rate of 8.9% (variable) you will repay £230.63 per month & total amount payable £16,605.36.
- Loans may be secured on your home. Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayment on a mortgage or any other debts secured on it.
- If you are thinking of consolidating existing borrowing you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.