The DWP’s Social Fund offers interest-free loans to people on qualifying benefits. Here is who qualifies, what the money can pay for and how repayments work.
Need to know
- Budgeting Loans and Budgeting Advances are interest-free loans from the DWP’s Social Fund, so you repay only what you borrow and nothing more.
- You must have been on qualifying benefits for 6 months. People on Universal Credit apply for a Budgeting Advance instead of a Budgeting Loan.
- The money covers essentials such as furniture, household items, moving home costs and getting a new job, not general spending.
- Repayments are taken from your benefits at a level you can afford, normally within 2 years for a Budgeting Loan.
- You cannot get a Budgeting Loan if you claim Universal Credit or owe more than £1,500 to the Social Fund for Crisis Loans and Budgeting Loans.
When a washing machine fails or a move to a new home brings costs you cannot cover from one benefit payment, a payday loan is not the only option. The Department for Work and Pensions (DWP) runs the Social Fund, which offers interest-free loans for exactly this kind of expense: Budgeting Loans for people on older benefits and Budgeting Advances for people on Universal Credit.
What Budgeting Loans and Budgeting Advances Are
The Social Fund exists to help people with needs that are difficult to meet from regular income. A Budgeting Loan is a discretionary payment, which means an official decides based on your circumstances. Budgeting Advances work in a similar way for people on Universal Credit.
Both are loans, not grants, but both are interest-free. You repay only the amount you borrow. A Budgeting Loan does not count as income and will not affect the other benefits you receive.
Who Qualifies
To get a Budgeting Loan, you or your partner must have been receiving one or more qualifying benefits continuously for the past 6 months (26 weeks). If you moved from Universal Credit to Pension Credit, time spent claiming Universal Credit counts towards those 6 months.
You cannot apply if you currently claim Universal Credit, New Style Jobseeker’s Allowance or New Style Employment and Support Allowance. You are also excluded if you owe more than £1,500 in total for Crisis Loans and Budgeting Loans. Crisis Loans no longer exist, but debts from them still count. In Northern Ireland, the application process is different; nidirect has the details.
For a Budgeting Advance, you can apply if you need the money to get or stay in work, such as train tickets for an interview. For any other purpose, you must have claimed Universal Credit for 6 months or more. You must also have earned less than £2,600 in the 6 months before applying, or £3,600 if you live with a partner. You or your partner cannot still be repaying a previous advance.
What You Can and Cannot Use the Money For
Budgeting Loans can help pay for:
- furniture or household items, such as washing machines and other white goods
- clothing and footwear
- home improvements
- advance rent and removal costs when moving to a new home
- travelling costs within the UK
- costs linked to finding or starting a new job
- repaying loans or hire purchase agreements taken out for any of the above
The loan is tied to these specific purposes, so it is not extra money for general spending.
How Much You Can Borrow and How Repayment Works
The smallest Budgeting Loan is £100 and you can apply to borrow up to £1,500. What you are offered depends on the number of people in your household, any money you already owe to the Social Fund and your ability to repay.
Budgeting Advances also start at £100. The maximum depends on your circumstances and is up to £812 if you are responsible for children or qualifying young people. If you have more than £1,000 in capital, the amount is reduced by the excess, so someone with £1,250 in savings would see the advance cut by £250.
Repayments are worked out when the loan is agreed, based on your income and what you can afford, and are taken automatically from your benefits. You normally repay a Budgeting Loan within 2 years (104 weeks). A Budgeting Advance is repaid through reduced Universal Credit payments, normally over 24 months if you requested it on or after 4 December 2024, and over 12 months before that. If you stop getting benefits, DWP Debt Management will write to you about paying in full or setting up regular monthly payments.
Applying online gives the fastest decision and payment. Postal applications get a decision within 21 days. Once you accept an offer, the money is paid within 7 days if you applied online, or within 21 days by post. Do not submit a second application while waiting; contact the Social Fund Enquiry Line if you need to change a detail.
Helpful step
Owing more than £1,500 in total to the Social Fund for Crisis Loans and Budgeting Loans will stop a new Budgeting Loan application, so check any old debts before you apply.
How the Cost Compares With a Payday Loan
A payday loan is a high-cost short-term loan, usually repaid from your next wage. The terms look very different from Social Fund borrowing.
| Budgeting Loan or Advance | Payday loan | |
|---|---|---|
| Cost | Interest-free; you repay only what you borrowed | Interest and fees, limited by the FCA price cap |
| Repayment | Deducted automatically from benefits, based on what you can afford | Collected by the lender, often from your debit card |
Even with the Financial Conduct Authority’s price cap limiting charges, a payday loan costs more than an interest-free loan of the same size. See the FCA price cap on payday loans for how the limits work. The trade-offs of Budgeting Loans and Advances are the qualifying benefit rules, the restriction to specific purposes and the wait for a decision.
What to Do if You Are Not Eligible
If you do not meet the benefit or income rules, there are other routes to consider:
- If you are still waiting for your first Universal Credit payment, you can ask for an advance payment instead. This is an interest-free loan of up to a month’s entitlement, repaid through deductions.
- Check whether you are entitled to other benefits, and to help such as a council tax discount or the Warm Home Discount, worth £150 off electricity bills for those who qualify.
- Credit union loans are a lower-cost way to borrow for people outside the Social Fund rules. Our guide to credit union loans explains how they work.
- Borrowing from family or friends can cover a gap if the terms are agreed clearly and put in writing.
For a fuller picture of the options before any short-term borrowing, read our guide to alternatives to payday loans.
Your questions answered
Q: Can I get a Budgeting Loan if I claim Universal Credit?
A: No. You would apply for a Budgeting Advance instead, which is repaid through reduced Universal Credit payments, normally over 24 months if you requested it on or after 4 December 2024.
Q: How much can I borrow?
A: Budgeting Loans start at £100 and go up to £1,500, depending on your household, any existing Social Fund debt and your ability to repay. Budgeting Advances start at £100 and reach up to £812 if you are responsible for children or qualifying young people.
Q: How long does a decision take?
A: Online applications get the fastest decision, and money is paid within 7 days of accepting an offer made online. Postal applications receive a decision within 21 days, with payment within 21 days of acceptance.
Q: What happens if I stop getting benefits while repaying?
A: DWP Debt Management will write to you explaining how to repay. You can pay back the loan in full or set up regular monthly payments.
This guide is general information, not financial advice. Late repayment can cause you serious money problems. For help, go to moneyhelper.org.uk. We don’t arrange loans or work with lenders. Before borrowing, check the lender is authorised on the FCA register, and consider free debt advice from MoneyHelper, StepChange, National Debtline or Citizens Advice.