Struggling to make ends meet on a low income can be really tough. Paying everyday expenses with the cost of bills and food on the rise can seem impossible, let alone budgeting for emergency expenses! However, you might find you could qualify for a loan from the Social Fund.
The Social Fund is a government fund that provides emergency payments for different purposes. There are also grants and loans which you may be able to claim in certain circumstances, such as:
- Community Care Grant (CCG) – to meet, or help to meet, a need for community care
- Budgeting Loan (BL) – to meet, or help to meet, an intermittent expense
- Crisis Loan (CL) – to meet, or help to meet, an immediate short term need
If you are in need of cash after an emergency or disaster, it’s worth seeing if you can apply for a Budgeting or Crisis Loan, rather than paying high interest charges for borrowing from payday or doorstep lenders.
Who is eligible for the Social Fund?
Each Social Fund loan has different rules about who qualifies – just because you qualify for one loan doesn’t mean you’ll be able to claim a different one.
- currently receive either Pension Credit, Income Support, income-based Jobseeker’s Allowance or income-related Employment and Support Allowance (ESA);
- have been claiming for at least 26 weeks, either consecutively or with a break of no more than 28 days; and
- have less than £1,000 in savings (£2,000 if you’re over 61). Your loan will be reduced by the excess over this limit.
A Budgeting loan can be used for a wide range of expenses, such as:
- furniture or household equipment
- clothing or footwear
- advanced rent for a new home
- things to help you look for or start work
- improving, maintaining or securing your home
You do not need to be receiving any benefits to claim a crisis loan but there are other conditions you must meet:
- you must be aged 16 or over
- you must be without enough money to pay for the immediate short-term needs of you and your family
- you cannot have applied within the previous 12 months, unless your circumstances have changed (28 days previously in Northern Ireland)
- you are not eligible if you are under 19 and in full time education (unless you are getting Income Support, income-based Jobseeker’s Allowance or income-related Employment and Support Allowance)
A crisis loan can be used for a number of specific costs, including:
- living expenses
- rent in advance for new accommodation (payable to the landlord)
- charges for board and lodging accommodation and hostels (but not deposits)
- travel expenses if you’re stranded away from home
- repaying emergency credit on a pre-payment fuel meter
Do I ever need to repay the money?
Loan repayments are interest free and worked out at the time your loan is agreed. They are usually automatically taken out of your benefits and paid back within two years. If you\’re not getting benefits, you will have to agree on another method to pay it back.
How do I apply?
If you think you might qualify for one of these loans, you’ll need to complete an application form, which you can get from your local Jobcentre Plus.
Borrowing from a Credit Union
Credit unions are a cross between a co-operative and a bank. They are set up by people with a common interest, such as where they live or work, and offer low-interest loans, savings, and sometimes bank accounts. They’ve been around since the 1940s but, in recent years, have become increasingly popular among both savers and borrowers.
What are credit unions?
There are over 40,000 credit unions in 80 countries around the world. In Ireland, over 70% of the population belongs to a credit union.
Credit unions are community organisations run by and for their members. There are several key features of a credit union:
- People who save or borrow through one must have a common bond. That means they may live in the same area, for the same employer or have the same profession. They can also be members of the same church or trade union.
- They are run on a ‘not for profit’ basis. Instead of paying a profit to shareholders, they use money they make to reward their members and improve their services.
- They can be large or small – some have thousands of members, while others are much smaller.
- They are regulated by the Financial Services Authority, which means they have to abide by certain rules and, if you have savings with them, your money is protected up to a limit of £85,000 should the credit union fail.
Why go to a credit union?
Credit unions operate with three main aims:
- to encourage all members to save regularly
- to provide loans at low rates
- to help members in need of financial advice and assistance
Credit unions act in the interests of all members. They try to ensure they don’t let their members take out loans they cannot pay back by assessing their income and, in some cases, how much they’ve been able to save. There’s also a cap on the amount of interest they can charge on their loans of 2% a month.
You will need to be a member of a credit union before you can get a loan from them, and some will require you to build up some savings first.
Most credit unions will charge you an average of 1% interest a month as you pay off the loan. Some will charge less, others will charge more although, by law, they can’t charge more than 2% a month (or 26.8% APR).
There are no hidden charges with credit union loans and no penalties if you repay the loan early. As with any lender, you will be expected to repay your loan as agreed.
Credit unions also include free life insurance at no extra cost so, if you die before repaying the loan, the balance will be paid off for you.
Most credit unions can lend for up to five years on an unsecured loan and up to ten years on a secured loan (where they will lend against something like your property or car). However, some can lend for up to 25 years on a secured basis.
Contact Pennine Community Credit Union to find out what sort of loans and interest rates are available on 01282 691 333 or email firstname.lastname@example.org