If you’re ill or disabled and living on a low income, there may be times when you need to borrow money. Here’s how to avoid expensive credit or risky loans in these situations.
- Your legal rights
- You’re working and need a loan
- You’re on a low income and need to borrow money
- Paying overdue bills without getting a loan
- Borrowing because your benefit payment is late
- Borrowing to cover an unexpected expense or bill
- Borrowing so you can adapt your home
- How to avoid borrowing in the future
Your legal rights
The fact that you are ill or disabled should not prevent you from getting a loan.
Banks and other lenders must treat you the same as their non-disabled customers.
Anti-discrimination rules might apply to you, even if you don’t think of yourself as a disabled person.
For example you have a physical health condition such as cancer, MS or HIV; or a mental illness such as depression.
You’re working and need a loan
If you’re working, you have a regular income, and your credit rating is in good shape, then you should have several borrowing options.
But before you apply for loans or other forms of credit, follow these three steps:
- Check whether you can afford a loan. Can you afford to borrow money?
- Work out the best and cheapest way of borrowing the money you need. Deciding on the best type of credit for you.
- Work out how and when you’re going to pay the money back. Working out a repayment plan for your borrowing.
You’re on a low income and need to borrow money
If you’re on a low income and claiming sickness or disability benefits, then you probably won’t be able to get a loan from a major bank.
Don’t borrow from any of the lenders who come up when you do an internet search for ‘loans for people on benefits’ or ‘loans for disabled people’.
While you might be expecting an interest rate of say 10%-20%, the APR (Annual Percentage Rate) on loans offered by these lenders is more likely to be anywhere between 500% and 4,000%.
Some will be even higher.
Here are suggestions for what to do in common situations when you might need to borrow money.
Paying overdue bills without getting a loan
Get free independent advice
Would you like to speak to an adviser? Call our Money Advice Line on 0800 138 7777. Or use our webchat service.
If you’re struggling to pay household bills and other essentials, then taking out a loan is definitely not the answer.
This is especially true if some of your bills are already in arrears or you have other debts.
Borrowing money you won’t be able to pay back will only make things worse.
Instead, talk to everyone you owe money to and see if you can agree a repayment plan.
If you’d like someone to do this on your behalf or some expert debt advice, there are lots of organisations that can help with free, confidential advice.
Borrowing because your benefit payment is late
If your benefit payment is late, don’t be tempted to take out expensive credit like payday loans, to tide you over.
Even if you have priority bills to pay or other essential expenses.
Instead you should speak to the people you need to pay and explain the situation.
Then look into other ways of making ends meet such as:
- Help from your local welfare scheme
- A short-term advance from the Jobcentre
- An interest-free Budgeting Loan from the Social Fund
- To find out about these options, see Support while waiting for benefit payments
Borrowing to cover an unexpected expense or bill
Applying for an interest-free Budgeting Loan
If you’re getting income-related Employment and Support Allowance or Income Support, you might be able to apply for a Budgeting Loan.
These are interest-free and you repay them out of your future benefit payments.
If you’re claiming Universal Credit you’ll need to apply for a Budgeting Advance rather than a Budgeting Loan.
Apply to your local credit union for a loan
If you’re not eligible for a Budgeting Loan, see if there’s a credit union in your area that might offer you a loan.
They specialise in providing loans at low rates, and helping members who are in need of financial advice and assistance.
You’ll probably need to save a small amount with the credit union for a few months to become eligible for a small, low-cost loan; but not always.
Avoid payday lenders
If you’re tempted to take out a payday loan, stop and consider your options.
Although it might feel like an easy option, a payday loan can quickly turn into a problem debt.
It can also affect your future credit rating even if you pay it off on time.
Borrowing so you can adapt your home
Apply for a Disabled Facilities Grant
If you need to get some work done on your home to make it accessible, you might be able to apply to your local authority for help.
They might be able to award you a Disabled Facilities Grant.
These grants are means-tested unless you’re applying for a disabled child under the age of 17.
So your local authority will take into account any income and savings that you and your partner have. You won’t need to pay the money back.
Government help with interest on loans for home adaptations
If you’re a homeowner claiming income-related Employment and Support Allowance or Income Support, you might be able to get help with interest payments on loans you take out for repairs or adaptations to make your home more suitable for your needs.
This help is called Support for Mortgage Interest. It can also help towards your interest payments on your mortgage.
From April 2018, the interest payments will also be a loan and no longer a benefit payment. Find out more about how this will work in our guide to Support for Mortgage Interest.
Talk to your Jobcentre about applying for this help. Your lender will need to fill in some forms confirming the details of your loan.
How to avoid borrowing in the future
Needing to borrow money might be a sign that you’re living beyond your means.
The only way to get back on track is to put together a household budget.
Once you’ve done this you can work out possible areas for cutting back or opportunities to save money.
This article is provided by the Money Advice Service.