Can I get a loan if I'm on benefits?

Getting a loan while you're on benefits can be worrying. In this guide, we will clearly explain the types of benefits lenders may accept. We will also cover the loan options available and safe borrowing tips.

Can I get a loan if I'm on benefits?

For many people in the UK who rely on benefits, borrowing money through a loan may seem like a lifeline in tough times. The good news is that it is possible to get a loan while on benefits. However, the process can be more complicated, the options more limited, and the cost of borrowing can be higher.

Lenders, particularly those on the high street, tend to prefer borrowers who have stable, regular employment. They look for consistency in income, a good credit score, and a proven history of responsible borrowing.

However, some lenders do consider benefits as part of your regular income and will include them in their affordability calculations. However, you may find that you are only able to borrow smaller amounts and that the loan comes with higher interest rates. Even then, lenders may accept some benefits while they may not count others at all.

What types of benefits do lenders usually accept as income?

Specialist lenders look at benefits as a form of income, provided they are regular and reliable. They may accept these types of benefits:

  • Universal Credit, including housing support
  • Personal Independence Payment (PIP) or the old Disability Living Allowance (DLA)
  • Child Benefit
  • Child Tax Credit
  • Working Tax Credit
  • Employment and Support Allowance (ESA)
  • Incapacity Benefit

The types of benefits counted as income can vary from one lender to another. You should contact the lender directly to learn which ones they accept.

What types of benefits are less likely to count as income?

Lenders do not value all benefits equally. They consider some benefits more stable or long-term and may count them as your income. Others, however, are less likely to be accepted. It is often because they’re designed for short-term support or change depending on your circumstances.

Benefits that are less commonly accepted include:

  • Housing Benefit
  • Income-based Jobseeker’s Allowance (JSA)

These payments typically aren't enough on their own to meet lenders’ income requirements, especially if you have no other earnings. However, this doesn’t automatically disqualify you from getting a loan. Lenders usually consider the bigger picture, including any other benefits, part-time earnings, savings, or assets you may have.

You should remember that each lender has its own criteria. While one may reject an application based on these benefits, another might still be willing to look at your overall affordability. That’s why you should check directly with the lender before applying.

What types of loans are available if I’m on benefits?

Secured loans

Secured loans use something valuable—usually your home—as collateral. Secured loans often have lower interest rates than unsecured loans, and you may borrow more. However, if you can’t keep up with repayments, the lender may repossess your property. This is why it's essential to borrow only what you can manage. To learn more, read our guide on the pros and cons of secured loans.

Unsecured personal loans

Unsecured loans don’t need collateral like your home, but they’re based on income and credit history. Interest rates can be higher than secured loans as lenders risk more. You’ll need to show stable benefit income and proof that you can repay monthly. To learn more, read our guide on the difference between secured and unsecured loans.

Guarantor loans

If you don’t qualify alone, someone else like a friend or family member can act as a guarantor. They assure to settle the loan if you default on payment. This helps you access loans without perfect credit. You should make sure your guarantor fully understands and trusts the arrangement.

Budgeting loans or advances

If you’ve received certain benefits for at least six months, you might be able to get a budgeting loan or advance. These are interest-free and are paid back automatically from your future benefits. They assist in covering necessary expenses without damaging your credit score.

What do lenders check when I’m on benefits?

Some specialist lenders will consider loans for people on benefits. They understand how benefits work and can offer appropriate loan products. To determine your loan eligibility, they evaluate several important factors:

Type and amount of benefit

Lenders need to know exactly what kind of benefit you get and how much. Some lenders only accept certain benefits. They also might have limits on how much benefit income you need to earn to be eligible.

Credit history

Your credit history shows if you’ve borrowed money before and made repayments. If you have a good history—like paying bills or rent—lenders see that as a sign you’re responsible. If you’ve missed payments, they might say no or offer a higher interest rate. However, some lenders offer loans for bad credit, so you should always check each lender's eligibility criteria. To learn more, read our guide to credit scores.

Affordability check

Lenders need to ensure you can repay. They look at your benefit money and bank statements to see how much you spend on food, bills, rent, and other costs. They check if, after all that, you still have enough left to cover the loan payments. To learn more, read our guide: What does mortgage affordability mean?

Equity

If you apply for a secured loan, lenders consider your home’s worth and how much equity you have. They need assurance that if you fail to make payments, the property's value will be sufficient to cover your debt.

How can I borrow responsibly?

Follow these steps to borrow smartly and safely when applying for a loan:

  1. Check your benefit type to see if it counts as eligible income
  2. Create a monthly budget to see what you can afford
  3. Explore budget-friendly options like government budgeting loans
  4. Compare private lenders that accept benefit income
  5. Read the agreement carefully– check APR, term, monthly repayments, plus any fees

Conclusion

You can get a loan with benefits in the U.K. However, it depends on your benefit type, how much you need, and whether you can afford repayments. If you do opt for a loan, make sure it’s affordable and helps you, not puts you further into stress.

If you'd like to explore secured loans or just need advice, Central Trust is here to help. We offer secured loans for people on benefits. Call us free on 0800 980 6273, or fill out our quick enquiry form and we’ll call you back when it suits you.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON YOUR HOME, THE LENDER MAY REPOSSESS IT.