If you happen to be receiving state benefits for whatever reason, it can be frustrating trying to obtain a loan. Payday loans, such as the ones offered by Wizzcash, are a sound option in a financial emergency, but Wizzcash does not offer payday loans to anyone on benefits. Our loan criteria state that the applicant must be in employment, taking home a minimum of £750 per month. In this blog, we will discuss some options for those people on benefits, who need help securing a short-term injection of cash.
Is my Credit Score Affected by Receiving Benefits?
Receiving benefits from the government does not affect your credit score, as these payments do not show on your credit report. However, being eligible for government benefits almost always means that you are experiencing issues surrounding your income or your financial circumstances. Lenders will assess your income by way of a credit and an affordability check, and if they believe you may struggle to meet your monthly repayment obligations, your application will likely not be accepted.
What are my Credit Options on Benefits?
Guarantor loans – A guarantor is contractually obligated to repay your debt arrears if you fail to make your monthly repayments. If you decide to nominate a guarantor, lenders will generally (though this of course varies) be more comfortable in approving an applicant with a low monthly income. In looking for a guarantor loan, you might find that you now have access to deals and loans that would not have been possible without a guarantor.
Secured loans – A secured loan allows you to offer up an asset as collateral against any late or missed repayments. This helps to mitigate any risk lenders might recognise in assessing your eligibility for credit. For example, if you own your own home – even if it has a mortgage attached to it– then you may be able to offer this property as collateral. However, failure to make your loan repayments could put your home at risk.
Credit builder credit cards – These are credit cards that are tailor-made for applicants with low income and/or a bad credit rating. They typically come with a lower credit limit than conventional credit cards and usually have a very high APR. That said, the criteria for eligibility are far less stringent than other cards. This can, therefore, be a good option for individuals who are currently on benefits, if they need to improve their credit score.
Vehicle finance plans – These are secured loans that are used to buy new vehicles. They involve dividing the cost of the purchase into monthly repayments, with interest added on top; the vehicle itself is commonly used as collateral.
Specialist lenders – These are lenders who specialize in the provision of loans for those with low income or bad credit history. However, these loans almost always come with higher interest rates than those offered by traditional lenders, so make sure to check that you can meet the monthly repayments before you apply.
Payday loans – Although Wizzcash has a policy of not lending to people on benefits, some other payday loan companies do not have such a policy in place.
Getting a Loan on Benefits
The first, and probably the most important step that you need to take is to assess and analyze your budget. You need to be certain that you can afford the monthly repayments of a loan. Loans are there for you when you need financial assistance in an emergency. You can view your credit score with a free check from Experian or TransUnion, this will give you an idea of how risky lenders will deem you. Bear in mind that a failed credit application will harm your credit score, so choose wisely. Make sure you compare lenders by using a reliable comparison service and don’t submit multiple credit applications all at once.
It is unfortunate that people on benefits can struggle to get access to traditional loans. Nevertheless, if you find yourself in this situation it’s helpful to remember that there are alternative forms of credit out there. By following the tips outlined above and considering your options carefully, you may be able to find a solution that is suitable for your needs.