What are the universal credit benefits? How does it work to get loans in the UK?

Universal Credit is the most dependable source of funds in the UK for those on low or no income. It combines several benefits that help people pay for their basic expenses. You can understand it better if you have ever lived on this benefit. However, this government-backed support may not be sufficient, and beneficiaries may need additional funds. This is where the concern of getting loans while living on universal credit takes shape.   

The guide below reveals the aspects that talk about the practicability of borrowing funds while living on universal credit.  

What is universal credit? 

Universal Credit is a financial benefit offered by the government of the UK to those living on a low income or who have no earnings.  

The benefit comes with the following features –  

• Money through Universal Credit is paid once a month into your bank account.  

• The amount granted depends on your living arrangements, income or unemployment circumstances, disability status, number of children, and housing costs.  

• You need to update your claim regularly, informing about the changes in your circumstances.  

• Waiting period of five weeks usually apply for your first payment.  

Universal Credit is designed to be responsive to the needs of the beneficiaries. As your income increases, the money from Universal Credit reduces gradually.  

Advantages and disadvantages of getting universal credit 

Pros	Cons
Multiple benefits can be combined together	They can be obtained once in a month, and budgeting can be hard
Automatic adjustments happen if your income increases or decreases	You might have to wait to get the first payment
It encourages you to keep working	Payments might be cut on certain occasions

What does universal credit cover?  

You will receive a monthly amount that is meant to help you manage the ongoing living costs. Use it to manage your basic necessities as per your situation. 

Standard allowance as per the latest 2025 rules  

This is a social security allowance that is intended to help an individual whose earnings are not sufficient to support the family’s necessities. It is not provided only when you earn low but also when you are jobless. Universal credit includes different types of allowances, such as: 

• Income support 

• Employment support and allowance 

• Jobseekers allowance 

• Child tax credit 

• Housing benefit 

You can get an amount depending on your age and marital status. The variety of options available as benefits has widened opportunities for people facing financial problems, whether or not they earn money.  

Possible additions 

There are provisions letting you borrow money as a benefit to take care of the first two children.  You can even take advantage of allowances available for a disabled child. In case of your disability or inability to work and earn money, you can claim some allowances as well. 

How does universal credit affect loans and borrowing ability? 

Despite receiving universal credit, you might face some surplus necessities. This could be because of the sudden emergence of an unexpected payout. A limited amount of money is coming in and thus, you are spending money in limited ways. 

An unplanned expense will be enough to test your management skills. Then, you will have to look for a suitable loan option. However, there are a few things on which the possibility of borrowing will depend. 

• Affordability checks: The lender will be aware of your financial situation. Their only concern will be to analyse how you are managing expenses with these limited resources. Besides, they would like to ascertain the scope of further savings. 

• Income: Loans come with the obligation of repayment. This will be impossible if you do not earn. Thus, having even a part-time source of income besides receiving benefits will be critical.  

• Credit score: Since the loan provider will assess your overall creditworthiness, credit scores will not be overlooked. This combined with your employment history and debt-to-income ratio should seem to be suitable according to the lender. Then, qualifying for loans will be possible for you. 

What are loans available for people living on universal credit? 

Despite receiving benefits, some funding gaps can still exist. It would be great if you can increase your side job earnings. However, if this is not possible right now, you can check out some of the ways to get a loan. 

Direct lending loans  

You can apply for loans for people living on benefits. They have been made available by direct lenders. Thus, you can expect some flexible features with these loans. 

Here, your benefits will be seen as an income source. Now, it is on you to plan how to manage expenses and take out money for loan payments. 

Budget advances 

You can opt for Government loans that do not come with the baggage of interest rates. Consider this option when you are facing an emergency. At the time of repayment, the designated amount will automatically debit from Universal Credit. 

Credit union loans  

If you find it difficult to qualify to get loans from a bank, you can approach a Credit Union. They can understand your problem and might get ready to offer help at affordable rates. 

Secured loans  

If you think that you can pledge collateral, getting loans will become easier for you. This asset will be the security that a lender would look for. In case of defaults, they can at least use the asset to recover the loan amount you have borrowed. However, the fear of losing asset forever will be there.  

Credit cards 

If you have a credit card, you can utilise it to take out some advances. However, you should be careful about the rates of interest you will have to manage at the time of paying back. Use it as an option if some of the given options are inaccessible to you.  

Conclusion  

After considering the facts and information above, it is clear that getting loans with universal credit is possible. You need to take care of do’s and don’ts to qualify for funds.  

Alternative lending is the primary platform to get a loan. Direct lenders are the most promising type of alternative lenders with flexible policies. Hence, getting funds is possible through a rational and planned approach. But repayment ability is the decisive factor. Also make sure you are repaying funds on time avoiding worst case scenario in future due to missed payments.  

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