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What Loans Can I Get While on Universal Credit?

Money Savings Advice What loans can I get while on Universal Credit

If you’re on Universal Credit, in receipt of benefit, your options for loans may be limited. There are still many lenders that offer loans for benefits claimants, though the terms might be a little different.

What Loan Are Available When on Universal Credit?

Your loan options are limited if you are receiving Universal Credit, as most lenders require a steady source of income and proof of affordability. You may only be able to get a crisis loan or a payday loan, but these have high-interest rates.

Universal Credit can have an impact on your chances of loan approval. Being on benefits is a sign that you’re on low income or no employment income at all.

If you’re out of work or not earning enough to cover your living costs, lenders will often assume that they’re unlikely to get their money back.

Read on to learn more about Universal Credit and the loans that you can get when you’re on it.

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Loans: What Is Universal Credit?

If you’re in receipt of Universal Credit, it helps to know what this benefit covers. Universal Credit has replaced several older benefits including Child Tax Credit, Income Support and Housing Benefit. Income-Based Jobseeker’s Allowance (JSA), Employment and Support Allowance (ESA) and Working Tax Credit are also under this umbrella.

With Universal Credit covering so many different benefits, lenders can’t tell exactly why you’re getting money from the government. They need to make some assumptions, though they’ll typically assume that you’re not earning much money and may rely on your benefits for living costs.


Overpayments help you to clear your debt earlier than you otherwise would have. Loans where you can make overpayments usually come in two forms. With some loans, overpayments come without additional charges and can reduce the interest that you pay.

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Loans Available on Universal Credit

Being on Universal Credit, having low income or no income at all, will have an impact on what loans you can apply for. You’ve likely got a poor credit rating, which will add to your problems finding loans.

In most cases, if you’re in receipt of benefits, you’ll need to look for bad credit loans. Approval rates are lower and interest rates are higher, so if you manage to get a loan it’ll probably be very expensive.

Applying for a loan on Universal Credit isn’t particularly difficult. In place of proof of employment income, you’ll be asked for your benefits statements. Just as with any other loan application, you’ll need to show that your income is higher than your outgoings.

To improve your chances of approval, you should spend some time looking over your budget. Cut your costs and outgoings wherever you can. You may not be able to increase your income, but you can reduce the money going out.

Risks of Loans on Universal Credit

When you borrow money there are always risks involved. Anyone can find that their income drops or stops. Anyone can face a financial emergency that takes away their money unexpectedly.

We all think we can keep up with loan repayments, but many get a shock if their car breaks down or the washing machine stops working. There are many things in life that we struggle without and might need to replace fairly quickly.

If you miss loan payments, you’ll damage your credit rating. You may be chased for the debt and your costs will begin to mount up. Your debt gets higher and higher, making it harder to manage.

If you’re on Universal Credit, your income is dependent on the Universal Credit system. This adds an extra challenge, as you’re not in control of when your money reaches your bank account. Universal Credit payments can change without much warning, so you should be sure that you can repay your debt even if your income is delayed. You’ll also have less disposable income, which means paying for these hardships can be trickier to arrange even with support.

Loan Types on Universal Credit

If you’re in receipt of Universal Credit, you’ll probably need a short-term loan for a relatively small amount of money. Bad credit loans and payday loans are probably the first loans you’ll think of.

Bad credit loans, and payday loans, are some of the easiest to get. These are unsecured loans, so your other belongings aren’t at risk. Payday loans have high interest rates, though the industry is regulated so you’ll never pay back more than double what you borrowed in the first place. Also, many payday loan providers will require proof of a stable income.

You might also like to look into crisis loans, specifically for people on benefits. Even better, skip the loans completely and see if you’re eligible for any kind of emergency grant. For people on benefits, financial support could come in non-repayable forms.

A Budgeting Advance, provided by the government, could help with emergency costs. These can be used to buy appliances, clothes or costs linked to applying for jobs. They can also cover other costs like moving house, paying rent or emergency travel.

These government loans don’t have interest added, so you’ll only pay back what you borrowed and it’ll be repaid through your Universal Credit. It may be best to use a Budgeting Advance to clear other outstanding debts elsewhere.

Your StatusHow much you could get
SingleUp to £348
Living with a partnerUp to £464
If you or your partner claim child benefit Up to £812
Source: Gov.uk – help with benefits

The amount you’re eligible for with a Budgeting Advance also takes into account which benefits you’ve been receiving, any savings you have, how much you’ve earned in the last 6 months (it must be less than £2,600 as a single applicant or £3,600 as a couple) and any existing Budgeting or Crisis loans.

Other loan options are available on Universal Credit. You might be eligible for logbook loans, but these are secured against your car. Don’t be tempted to take on a logbook loan if you need your car for the school run or getting to work.



Guarantor Loans on Universal Credit

If you’re on benefits but have someone that can help, you could get a guarantor loan. Guarantor loans are backed by someone else, so you could find a friend or family member that is happy to support you.

If you can’t pay back your guarantor loan, your chosen guarantor becomes responsible for the debt. They’ll need to pay the money back on your behalf, so you’ll need someone that trusts you to keep up with the repayments.

Guarantors usually need to be homeowners as well as having regular income. This might be a role for your own parents or a friend that’s more financially secure.

Credit Union Loans on Benefits

Credit Unions usually provide loans for their members. These aren’t available as commercial loans for everyone, but come with several benefits for anyone that might be eligible. Credit Unions will often consider individual circumstance, basing their decisions on more than just a computer calculation.

Instant Decision Loans on Universal Credit

You might need money quickly. Often when people apply for loans it’s because there’s a financial emergency. You may not have prepared for extra expenses that seem to have suddenly appeared.

Some lenders will offer instant decisions based on the provided information. Computers will check your loan application and decide to reject or approve it. These loan decisions may not need any human input at all.

If you’re in receipt of Universal Credit, instant loans aren’t often available. Lenders will want to see proof of your benefits and may not make a same-day deposit. That said, there are still many lenders that can approve your loan and send money within 48 hours.

Improving Your Credit Rating

Even on Universal Credit, improving your credit score can give you more borrowing options.

You might like to apply for a prepaid debit card to help you stay on top of your spending, or see if you can get a credit builder card and always make repayments straight away. Read our guides to learn more about loans, borrowing money and budgeting on a low income.

Quick Loan FAQs


Your credit score is an important tool in the loan application process. A good credit score opens doors, improving your chance of approval. With a bad credit score, your options are going to be limited. Applying for a loan can be particularly scary if you know that your credit rating’s poor.

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Guarantor loans have risen in popularity through recent years. Despite feeling new, these loans fall back on old traditions of vouching for the people you know. To apply for one of these loans, you’ll need someone that trusts you to manage your money.

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A logbook loan is secured against the value of your vehicle, a logbook loan provides a way to borrow even if your credit score is poor. Lenders are more likely to approve applications because your vehicle is offered as security.

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Quick loans can be very helpful. If you need money quickly or want a fast decision, it’s great to have that option available. But, be aware that quick loans often come with higher interest rates.

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Though they may be tempting, fast loans are often more trouble than they’re worth. Dangers include getting yourself deeper into debt, ruining your credit rating and opening yourself up to potential fraud and loan sharks.

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How Can Money Savings Advice Help You With Getting a Loan?

Here at Money Savings Advice, we have partnered with some of the UK’s leading loan broker companies. They have already helped thousands of people get the best loan that suits their needs, and they can do the same for you.

Choosing an independent loan broker means they won’t proceed with an application unless they are sure it is in your best interests. They are also regulated by the FCA, which gives you an additional layer of protection.

If you would like to speak to one of these loan brokers who can help you get a loan, then click on the below and answer the very simple questions.

Len Burgess

Len Burgess is a professional financial writer who over the last five years has written hundreds of articles for all financial sectors. Len founded Money Savings Advice with the aim of helping consumers navigate their way around the financial world by providing easy to understand financial information and matching consumers with the best financial advisor based on their personal information.

Len Burgess

Len Burgess is a professional financial writer who over the last five years has written hundreds of articles for all financial sectors. Len founded Money Savings Advice with the aim of helping consumers navigate their way around the financial world by providing easy to understand financial information and matching consumers with the best financial advisor based on their personal information.

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