Overview of Loans for People on Benefits in United Kingdom 2023

Living on benefits in the United Kingdom can be a challenge, particularly when unexpected expenses arise. In such circumstances, taking out a loan could be an option. However, people on benefits often find it difficult to obtain a loan due to their limited income and lack of collateral. Fortunately, there are some loans available specifically for people on benefits.

What are loans for people on benefits?

Loans for people on benefits are designed to help those who are living on welfare to access much-needed funds. These loans are typically available to people who are receiving benefits such as Disability Living Allowance, Personal Independence Payment, or Universal Credit. They are usually offered by specialist lenders who understand the unique financial circumstances of people on benefits.

Types of loans for people on benefits

  1. Guarantor Loans: A guarantor loan involves a person with a good credit history co-signing the loan agreement. The guarantor is responsible for repaying the loan if the borrower defaults. Guarantor loans are typically available to people on benefits, but the guarantor must have a good credit score and be able to meet the lender's eligibility criteria.

  2. Secured Loans: A secured loan involves putting up collateral, such as a car or property, to secure the loan. Secured loans may be more accessible to people on benefits who own a valuable asset.

  3. Payday Loans: Payday loans are short-term loans that are designed to be repaid on the borrower's next payday. These loans are often available to people on benefits, but they come with high-interest rates and can lead to a debt spiral if not managed carefully.

  4. Credit Union Loans: Credit unions are not-for-profit financial cooperatives that offer loans and other financial services to their members. Credit unions may offer loans to people on benefits, often at lower interest rates than other lenders.

Things to consider before taking out a loan for people on benefits

Before taking out a loan, it's important to consider the following:

  1. Interest Rates: Loans for people on benefits may have higher interest rates than standard loans. It's essential to compare rates from different lenders and ensure that the loan is affordable.

  2. Repayment Terms: Ensure that the repayment terms are manageable within your budget. If you are unable to make repayments, you could be charged additional fees and interest, which can make the loan unaffordable.

  3. Eligibility Criteria: Different lenders have different eligibility criteria for loans for people on benefits. Check that you meet the criteria before applying to avoid disappointment.

  4. Alternative Options: Consider alternative options before taking out a loan. You may be eligible for government grants or charitable assistance that could provide financial support without the need for a loan.


Loans for people on benefits can provide much-needed financial support in times of need. However, it's essential to consider the costs and risks associated with borrowing money. If you're struggling financially, it's worth seeking advice from a financial advisor or debt charity to explore your options.