Yes, it may be possible, as Universal Credit is also considered income through benefits. Although you can apply and qualify for loans, there is no guarantee of approval. It will be decided based on the various eligibility and affordability checks conducted by the loan provider.
Since you are dependent on benefits, it is not enough to prove that you are ineligible to get loans. Again, it does not strengthen the chances of loan approval either. Income is one of the crucial elements in the eligibility criteria set by the lender.
However, you can get loans for people on Universal Credit based on your overall financial circumstances. This requires validation of income, affordability, existing financial commitments, and credit history. Here, instead of emphasising the income stream only, the loan provider will be more interested in knowing if you have a consistent source of income.
Based on that, they can assess the possibility of getting repayments from you within the given duration. Therefore, the type of income cannot decide whether or not you should get loans. To get a deeper understanding of what can influence the lender’s decision in reality, go through this blog.
Is Universal Credit considered as income when getting a loan?
Yes, benefits income is usually accepted by most lenders. However, it would be better to check with an individual lender before proceeding with the loan offer. You might have earnings through benefits, pension, wages, self-employment, or any other regular income means.
This will be assessed as a part of your overall financial ability. You must provide valid information in the application so that the lender can process your details properly. Prevent yourself from overstating your earnings.
This is not going to work, as lenders will evaluate everything about your financial condition. Moreover, you cannot escape just by saying that you earn so and so. You must produce the necessary documents at the same time.
For this reason, lying about your current earnings status will not help, but will backfire. However, you should not hesitate to disclose any part-time source of income which you have besides benefits.
What will the lender check when you apply?
The process of evaluation remains more or less the same for every borrower. This is about the phase of pre-qualification where the main focus of the lender will be on your repayment ability. This will take you through a soft analysis of your financial background.
However, once you decide to proceed with your full application, the lender will perform hard checks. Then, the information will be imprinted on your credit profile and will be visible to other lenders.
Therefore, it is critical for you to understand what the lender will evaluate once receiving your loan request.
Your overall income
Your income via Universal Credit is shown in the form of payments received. You can also establish other means of income via which you might be earning money as well.
Affordability
This is crucial and can be determined by understanding your disposable income. This is the amount which remains from your benefits income and other earnings (if any) after deducting your expenses and ongoing financial commitments.
Credit history
The lender will go through your credit report to understand your previous borrowing. On-time payments will establish you as a responsible borrower and vice versa. However, low credit scores are not always a reason behind loan rejections. Different lenders will interpret this information in different ways.
Loan amount and term
When you are dependent on benefits income, a larger loan amount will be unsuitable for you. This is because repaying it will become difficult, as the amount will grow bigger after the inclusion of interest rates. At the same time, choosing a longer term will increase the overall cost of borrowing. The lender will analyse all these before deciding on your application. It would be better for you to choose the amount and term smartly.
Current condition
Your overall financial condition should show that you have enough to manage usual necessities. It should not show that you have to sacrifice your usual payments in order to be able to repay loans. Ideally, enough money should be left from your earnings to cover loan payments.
Will applying for loans affect my credit scores?
It depends on the stage your application form is going through. For pre-qualification, the lender need not have to conduct any hard search on your credit profile. An affordability assessment, i.e., a soft search, will be enough to make sure whether or not you can repay loans on time.
Usually, when you are pre-qualifying for loans, your credit scores will not be affected. Once you submit the full application, hard checks will be conducted. This will be recorded in your credit reports, and your credit scores will drop for the time being.
Is it possible for me to get a loan with a guarantor?
Yes, very much possible. In fact, you can qualify to get a loan without a guarantor as well. When you earn from Universal Credit, the amount you receive might just be enough for your basic requirements.
Now, to qualify for loans, you must establish other sources of income as well. This can help in establishing that you can repay loans as per the specified duration. When this is not possible for you to demonstrate, you can consider producing a guarantor.
That person can be anyone from your family or friends. It is crucial that they must be willing to support you to repay loans if you cannot make it to repayments finally.
Most importantly, they should have the financial stability and income strength to help you in this situation. They should have stellar credit profile, which will testify to their responsible financial behaviour. Finding such a person may be difficult, but if you can, it will help you to get loans on favourable terms and conditions.
The bottom line
When you are a Universal Credit recipient, some loan options will be accessible to you. To find out, you must explore options first.
Otherwise, you will not be able to understand that there is some possibility. Moreover, check what the lender needs you to demonstrate at the time of getting loans.