STRUGGLING Brits on Universal Credit can get a loan to cover unexpected costs in the new year.
Claimants can apply for the money worth up to £812 – but will have to plan for paying it back over the coming months.
GettyCash after Christmas can be tight but there’s help you can get[/caption]
The Budgeting Advance is designed to help cover emergencies and other costs that come out the blue when on Universal Credit.
What is a Budgeting Advance?
You can borrow from as little as £100 and up to £812 if you’re a household with kids, but you should only apply to borrow what you need.
The cash could help you cover a one-off cost, like replacing a broken fridge or cover the cost of moving house or a rent deposit.
While this can help you cover larger costs in the short term if you don’t have savings to fall back on, you will still be expected to pay the money back in the long term.
The amount you borrow will be repaid over 12 months usually, so the amount of benefit payments you get over the following months will be less.
If you stop getting Universal Credit, you’ll have to agree another way to repay the loan.
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You’ll only repay the amount you borrow though, as the loan is interest-free.
You can apply for a budgeting advance to cover things like:
A one-off item – for example, replacing a broken fridge
Work-related expenses – for example, buying uniform or tools
Unexpected expenses
Repairs to your home
Travel expenses
Maternity expenses
Funeral expenses
Moving costs or rent deposit
Essential items, like clothes
It’s worth checking first if there’s other help you can get that you don’t have to repay.
For instance you could be eligible for vouchers, grants or cash through your local council’s Household Support Fund.
What are my other options for emergency cash?
If you’re struggling and need cash to cover a on-off costs, or for everyday living costs then make sure you check these options before applying for an advance.
Firstly, it’s worth checking that you’re getting all the benefits you’re entitled to in the first place – you can use a benefits calculator to check.
As well as the Household Support Fund, councils have other welfare support cash to give out.
Different emergency funding is available depending on where you live in the UK, so you’ll need to contact your council for more information.
You may also be able to apply for certain charity grants if you end up in financial difficulty.
Turn2Us is a charity that helps people in financial difficulty access grants and support services.
Jonathan Chesterman, debt advice policy manager at debt advice charity StepChange, said: “If someone has no money for essentials, like food, then a food bank might be an option to consider – the ‘advantage’ being that they won’t have to pay anything back and will continue to get the full UC payment.
“Equally, if they have some money, but have to decide between, heating and eating for example, then a foodbank might be a short-term option.”
You could ask to borrow cash from family or friends, but remember you’ll still have to pay this cash back too.
Be clear with them about what you are going to pay back when so you’re on the same page, as disagreements can often arise when money is involved.
Borrowing money through a Budgeting Advance is interest-free and if you borrow through a loan or credit card then you’ll usually have to pay interest.
But you may be able to get a credit card that offers zero interest.
You’ll need to check your eligibility and make the minimum repayments each month, and pay off the full amount before the interest-free period ends.
Otherwise you’ll pay back more on top of what you borrow and interest rates after the end of the zero period can be as much as 20%.
You should check interest rates to make sure you’re getting the best deal by using comparison websites like Uswitch or MoneySuperMarket.
Top rates, however, are usually only available to those with perfect credit scores. To check if you’re eligible for the cards with the best rates, MoneySavingExpert has a credit card eligibility calculator you can use.
If your credit score isn’t great, then you could consider getting a loan from a credit union.
These are locally-based organisations where members pool their savings to lend to one another – which often allows them to offer low cost products.
Jonathan adds: “It’s really important to note that borrowing from short-term lenders is not appropriate because of the cost of these loans and the likelihood of these quickly spiralling out of control.”
If you’re concerned about debt you can get free and friendly advice from a number of organisations:
National Debtline – 0808 808 4000
StepChange – 0800 138 1111
Citizens Advice – 0808 800 9060
How much can I get through a Budgeting Advance?
You can borrow a minimum of £100 through the Budgeting Advance and the maximum depends on you needs and your circumstances.
Up to £348 if you’re single
Up to £464 if you’re part of a couple
Up to £812 if you have children
You won’t be able to borrow the money if you have a certain amount of savings though.
For any savings over £1,000, your loan amount will be reduced by £1 for every £1 you have over it.
If you have cash saved it’s more often than not better than borrowing money.
Who is eligible for a Budgeting Advance?
You can apply for the Budgeting Advance if you’re on Universal Credit and a number of other benefits Citizens Advice says, including:
means-tested Jobseeker’s Allowance,
means-tested Employment and Support Allowance
Income Support
Pension Credit
You ‘ll need to have been claiming benefits for at least six months to apply for a Budgeting Advance, unless it’s to cover costs associated with getting work or staying in work, like travel.
You’ll also need to have earned less than £2,600 in the previous six months before your application, or £3,600 if you live with a partner.
If you’ve previously taken out a Budgeting Advance and are still paying it off you won’t be able to get the loan.
How do I apply for a Budgeting Advance?
If you think a Budgeting Advance is the best option then you need to call to apply.
The Universal Credit helpline is 0800 328 5644 and calls are free from landlines and mobiles.
You can also contact your local Job Centre Plus or through your online Universal Credit account.