Being a Single Parent on Benefits Needing a Loan, Get the Facts Here

Flexy Loans Being a Single Parent on Benefits Needing a Loan, Get the Facts Here
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Providing for your child on one income can be challenging. Getting a loan if you’re a single parent can also be difficult, especially if benefits make up most or all of your monthly income.

This article looks at borrowing options if you’re a single parent on benefits, what kind of loans you may be approved for and what to do if you’re struggling to make ends meet.

Can You Get a Loan as a Single Parent on Benefits?

Yes, though it may be difficult to get a good deal. Your eligibility to get a loan is based on your income and outgoings, credit history, and whether you can afford monthly repayments.

Single parents may find it more difficult to be approved for credit for a few different reasons:

  • You may have lower household income as only one source of income
  • You’re more likely to work reduced hours due to greater childcare responsibilities
  • You likely have less disposable income due to lower income and essential expenses
  • You’re more likely to have a more complicated financial situation with the potential of wages, maintenance, benefits and tax credits to take into consideration

Unfortunately, this can make some lenders think twice about letting you borrow money.

How Can You Get a Loan if You’re a Single Parent on Benefits?

Step 1: Work Out Your Affordability

The golden rule with any loan is that you should never borrow more than you can afford to pay back. So before you apply for a loan, think about:

  • How much you need to borrow
  • How long you need to borrow the money for
  • How much you can afford to pay back every month

This is where it’s important to be accurate and realistic. You should always borrow as little as you can, and never more than you can afford. Let’s look at how to work this out.

Start by Drawing Up a Budget

You need to have a good idea of how much money you have coming in and going out on a regular basis. Creating a budget that tracks all of your ingoings and outgoings is a good place to start. There are plenty of free budget templates available online.

Don’t be tempted to guess or estimate. Look at bills, statements and receipts to make sure your numbers are as accurate as possible. Don’t forget to account for one-off expenses too: holidays, new school uniforms and presents should all go into your budget.

Check You’re Getting All of the Support You’re Entitled To

If you’re a single parent, whether or not you’re on a low income, you may be entitled to certain child benefits, tax credits and help paying for things like housing or medical payments. You can use independent benefit calculators such as EntitledTo to check if you’re eligible to make a claim and get further information on how to apply.

Work Out What You Can Afford To Borrow

Before you start shopping for loans, work out how much of your monthly budget could go towards your new loan. As a rough rule, some experts recommend keeping this number below 35% of your monthly income (before tax) to give you some breathing space. 

Once you have a number, you can use an online loan calculator or a broker to see how much you can borrow and how long it would take you to pay it all back. Only borrow as much as you need and can afford. Lenders often offer more attractive rates if you borrow more or borrow over a longer time period, but this often means you’ll pay much more interest overall.

Step 2: Check Your Credit Score

Your credit history is what banks use when deciding whether or not to loan you money. Negative markers in your credit history, such as late or missed credit payments, can stick around for up to six years and may make lenders less keen on letting you borrow money.

How Do You Check Your Credit Score?

You can check your credit score for free online using a credit reference agency such as Experian, Equifax or TransUnion. This table shows how credit scores are rated.

Credit RatingExperianEquifaxTransUnion
Very Poor0 – 5600 – 2790 – 555
Poor561 – 720280 – 379561 – 565
Fair721 – 880380 – 419566 – 603
Good881 – 960420 – 465604 – 627
Excellent961 – 999466 – 700628 – 710
Credit scores correct at the time of writing. For more information, see Finder.com.

Can You Get a Loan if You’re on Benefits and Have Poor Credit?

Poor credit isn’t looked at in a positive light by lenders. Having poor credit means there are red flags in your credit history that indicate you may be a risky borrower. Some lenders find this off-putting, and it makes borrowing from them much harder or more expensive for you.

Poor credit can be caused by a range of things:

  • A history of late, incomplete or missed bills, loans or credit card repayments
  • Already owing a large amount of money on loans or credit cards
  • Bankruptcies, CCJs or debt solutions such as IVAs and debt management plans
  • Not having a credit history at all due to being young or recently moving to the UK

If you have poor credit, regardless of if you’re a single parent or not, it’s more difficult to be approved for a loan. It’ll be even more difficult if benefits are your main source of income, as this often limits the number of lenders that would be willing to give you a loan.

Step 3: Consider the Consequences of Getting a Loan

Taking out a loan isn’t a decision to take lightly. If you’re relying on loans or credit cards to cover your regular expenses, then borrowing more may not solve the problem. It can get you into more financial trouble if you can’t afford to pay back what you owe. 

There is support available if you’ve fallen into a cycle of borrowing money to support your family. If this sounds familiar, you may want to get in touch with the following organisations:

  • Debt advice charities. Charities such as StepChange or the Money Advice Service offer free debt advice and can help you take steps towards becoming debt-free.
  • Citizens Advice. The Citizens Advice website or your local centre may be able to offer support and advice for making a budget and getting your finances under control.
  • The creditor themselves. If you’re struggling to meet the repayments you’ve agreed to – such as your utility bills, rent or mortgage – get in touch with the company and explain your situation. They may be able to pause, reduce or extend your payments.
  • Charitable organisations. Some charities such as Turn2Us offer grants to help single-parent families get through hardships. These grants are often to help make payments for housing, utilities or other living expenses and rarely have to be repaid.

However, if your financial situation is more comfortable and you’re confident that you could make the required monthly repayments, then a loan may be a good option for you.

Step 4: Borrowing Options for Single Parents on Benefits

Budgeting Loans

If you’ve been on benefits for over six months, you may be eligible for a budgeting loan or budgeting advance from the government. This can be used on a range of expenses, including furniture, clothes or footwear, rent advances and home maintenance. You only pay back what you borrow, and repayments are taken directly from your benefits payment.

Personal Loans

Some lenders accept benefits, student loans or other less traditional forms of income in loan applications. Others prefer income from regular employment only. Getting a loan as a single parent on benefits can be more tricky, but it’s not impossible. Bear in mind that loans offered may come with higher interest rates or unappealing repayment terms attached.

Guarantor Loans

It’s possible you will be offered more reasonable rates if you use a guarantor. A guarantor is someone who agrees to make your repayments on your behalf if you miss them. This can tempt lenders towards offering lower interest rates as it makes the loan less risky for them.

Secured Loans

Putting forward your car or house as security can also encourage a lender to offer better rates. But this does come with more risk for you. If you can’t make your repayments, you risk losing your car or home as the lender will repossess them to reclaim their losses.

Peer-to-Peer Loans

Peer lending is a less traditional option. A peer lending website connects people looking to borrow money with those willing to lend it. You still have to pay back everything you owe with interest, but the repayment terms may be more flexible than with high-street lenders.

Step 5: Compare Loan Options Available to You

Always shop around and see what different providers can offer you. Use an online loan comparison site or a broker to see which one will give you the best deal. There are lots of different things to compare, including:

  • How much you can borrow overall
  • The APR interest rate and whether it’s fixed or variable
  • Your monthly payment amount
  • How long it’ll take to pay the full amount back
  • The total amount you would need to pay back
  • If there are any penalties for late or incomplete repayments

It’s always a good idea to read the small print. A loan with a lower interest rate may take much longer to pay off, meaning it’s actually more expensive to you overall. Also, check if there are any extra fees involved such as late fees or charges for paying it back early.

Step 6: Check Eligibility and Apply for the Loan

Applying for a loan is the easy part. You can use online loan brokers or comparison sites to compare deals and see if you’re likely to be accepted before you apply. This is important as being rejected for credit over and over again damages your credit history.

To apply for a loan, most lenders will ask for basic information such as proof of your address and details of your income and outgoings. Depending on the lender and the type of loan, money can often be in your bank account on the same day.

Getting a Better Loan as a Single Parent on Benefits

If you don’t need to borrow money straight away, there are changes you can make that may make for better loan deals. Improving your credit score and boosting your disposable income are two ways you can put yourself in a better position for passing affordability checks.

Boosting Affordability Before Taking Out a Loan

Before you take out a loan, you might want to consider:

  • Switching to the best energy deal you can find and cashing in any welcome bonuses
  • Downgrading expensive phone, TV or internet packages if you can
  • Temporarily pausing non-essential subscriptions such as Netflix or Amazon Prime

These may not make a huge difference, but they can reduce your outgoings and boost your disposable income. A lender may see this as a positive sign as the bigger the gap between your living expenses and your income, the less risky a borrower you’re considered to be.

Improving Your Credit Score

The best way to boost your chances of being approved for a loan is to improve your credit score. You’ll probably find that you’ll be able to access better deals too. There are a few different ways you can improve your credit score:

  • Check the main credit reference agencies such as Experian, TransUnion and Equifax have your details correct.
  • Make bill or debt repayments on time and in full where you can – this proves you are a reliable borrower and will build your credit rating over time.
  • Keep the amount you borrow to a minimum – the more debt you have outstanding, the less appealing it is for a lender to loan you more.

Summary

It might be more difficult to get a loan as a single parent on benefits, but it’s not impossible. If you’ve worked out your affordability, checked your credit score and understand the pros and cons of different borrowing options, then a loan may be a good option for you.

How Can Flexy Loans Help?

Here at Flexy Loans, we have partnered with some of the UK’s leading Lenders.

They have already helped thousands of people get loans already, and they can do the same for you.

Choosing a loan broker like us (we don’t charge any fees) means our application process matches you with the best loan available to you.  All lenders we recommend are regulated by the FCA, which gives you an additional layer of protection.

To apply and see what loan is available to you, click on the below and answer the question

Laura Broad
Laura Broad
Laura is a professional content writer and learning designer, passionate about empowering people through straightforward, jargon-free content. When she's not reading or writing about all things personal finance, you can find her in the gym, barbell in hand.
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