If you are on a low income and face a one-off essential cost, you may be able to borrow from the benefits system through a Budgeting Advance or a Budgeting Loan. These are interest-free and repaid from your benefits, making them a much cheaper option than commercial credit. This guide explains how Budgeting Advances and Budgeting Loans work, who can get them, and how to apply.
What they are
A Budgeting Advance is for people on Universal Credit, and a Budgeting Loan is for people on certain older benefits such as Income Support, income-based Jobseeker's Allowance or Employment and Support Allowance, or Pension Credit. Both let you borrow a lump sum for an essential cost and repay it gradually from your benefits, with no interest. They do the same basic job, but which one you apply for depends on which benefit you receive.
What they can be used for
You can use a Budgeting Advance or Loan for essential one-off costs, such as furniture or household equipment, clothing, costs related to starting work or staying in work, rent in advance or moving costs, or repairs and replacements for essential items. They are meant for genuine essential needs rather than everyday spending. If you have an unavoidable cost you cannot meet from your usual income, this kind of help can be a lifeline.
How much you can get
The amount you can borrow depends on your circumstances. Generally, the most you can get is higher if you have children or a partner than if you are single. The amount is also affected by any savings you have, with savings above a certain level reducing what you can borrow. There is also an overall limit on how much you can owe in Budgeting Advances and Loans at once, so existing debts of this kind can reduce a new award.
How repayment works
The key feature is that you repay the money gradually from your benefits, with the amount taken off your regular payments until the advance or loan is cleared. There is no interest, so you only repay what you borrowed. For a Budgeting Advance, repayment is usually spread over up to 24 months. Because repayments come out of your benefits, it is worth making sure the amount taken each time still leaves you enough to live on.
Who can get a Budgeting Advance
To get a Budgeting Advance on Universal Credit, you usually need to have been receiving Universal Credit, or certain benefits before it, for at least six months, unless the money is to help you start work. You also need to have earnings below a set level, and your savings affect how much you can get. You must be likely to be able to repay it, as it has to be paid back from your future benefits.
Who can get a Budgeting Loan
To get a Budgeting Loan, you usually need to have been receiving a qualifying older benefit for at least six months. As Universal Credit has now largely replaced these older benefits, Budgeting Loans are mainly relevant to people still on them, such as some pensioners on Pension Credit. If you are on Universal Credit, you would apply for a Budgeting Advance instead, which works in a very similar way.
How to apply
If you are on Universal Credit, you apply for a Budgeting Advance through your online account, by phone, or by speaking to someone at the Jobcentre. For a Budgeting Loan, you apply to the DWP using a form. In both cases you explain what you need the money for and your circumstances. It is worth applying as soon as you know you have an essential cost, and getting advice if you are unsure whether it is the right option.
How it differs from other advances
It is worth not confusing a Budgeting Advance with the advance you can get at the very start of a Universal Credit claim, before your first payment. That new claim advance is to tide you over during the initial wait, while a Budgeting Advance is for a specific essential cost once your claim is established. Both are repaid from your benefits, but they serve different purposes, so make sure you are asking for the right one.
Make sure repayments are affordable
Because a Budgeting Advance or Loan is repaid by deductions from your benefits, it reduces your regular payments until it is cleared, so it is important to think about whether you can manage on the lower amount. If money is already very tight, taking on a large advance could leave you struggling. Borrow only what you need, and if the suggested repayments look too high, ask whether they can be spread over a longer period.
A cheaper option than commercial credit
The big advantage of these advances and loans is that they are interest-free, which makes them far cheaper than borrowing from a commercial lender, and much safer than high-cost credit or doorstep lenders. If you are facing an essential cost and would otherwise have to borrow expensively, a Budgeting Advance or Loan is almost always a better option. It is one of the ways the benefits system can help you avoid falling into costly debt.
When it is the right choice
A Budgeting Advance or Loan is most useful when you have a genuine one-off essential cost that you cannot meet from your income or savings, and where the alternative would be expensive borrowing or going without something you really need. It is not designed for ongoing costs or non-essentials. Thinking clearly about whether the cost is truly essential, and whether you can manage the repayments, helps you decide whether it is the right choice for you.
Get advice if you are in debt
If you are considering a Budgeting Advance because you are struggling with debt more generally, it is worth getting free debt advice as well, as there may be better solutions than borrowing more. A debt adviser can look at your whole situation, help you deal with priority debts, and make sure you are getting all the income you are entitled to. Tackling the underlying problem is often more helpful than a one-off advance alone.
In short
Budgeting Advances, for people on Universal Credit, and Budgeting Loans, for those on certain older benefits, let you borrow a lump sum for an essential cost and repay it interest-free from your benefits, usually over up to 24 months. The amount depends on your circumstances and savings. Apply through your Universal Credit account or to the DWP, and make sure the repayments are manageable.
A safer way to borrow
The key point about Budgeting Advances and Loans is that, used sensibly, they are a far safer and cheaper way to meet an essential cost than high-cost credit. Borrowing only what you need, for something genuinely necessary, and making sure the repayments are manageable, lets you deal with an unexpected expense without falling into expensive debt. If you are on a low income and face such a cost, it is well worth considering this help first.
Where to get help
Citizens Advice can help you decide whether a Budgeting Advance is right for you. See our guides to Universal Credit advances and help from your council.