The Department for Work and Pensions (DWP) has introduced a new £812 loan to provide additional support for benefits claimants. Known as Budgeting Loans or Budgeting Advances, these interest-free loans are designed to help with one-off expenses such as replacing household appliances or repaying hire purchase loans for essential items.
Eligibility for a Budgeting Loan requires claimants to be receiving certain benefits, including Income Support, Income-based Jobseeker’s Allowance, Income-related Employment and Support Allowance, or Pension Credit. Applicants must have been claiming these benefits for at least six months. Repayments are automatically deducted from future benefit payments, with the amount based on the claimant's income and what they can afford.
In his spring statement and Budget in March, Chancellor Jeremy Hunt announced changes to make these loans more affordable. From December 2024, the repayment period for new Budgeting Advance loans will increase from 12 months to 24 months, reducing monthly payments. Hunt stated that nearly one million households on Universal Credit take out such loans for emergencies like boiler repairs or job-related costs.
The DWP emphasises that the loan is interest-free, meaning borrowers only repay the amount borrowed. After applying, claimants will receive notification via email, text, or letter detailing the offered loan amount and weekly repayment schedule. For those on Universal Credit, repayments result in reduced monthly payments until the loan is fully repaid.
