Financial Goal Guide

Attain Your Financial Goal

What is a Budgeting Loan?

Budgeting loans provide interest-free advances to help cover essential costs. They’re paid back through an automatic reduction in your universal credit payments over two years.

Your borrowing limit depends on your household circumstances, such as whether or not both of you have savings of at least PS1,000.

What is a budget?

Budgets are estimates of future income and expenses used by governments, businesses, and individuals of all income levels to stay within their means and avoid debt. Their goal is to gain control over spending while saving towards goals such as purchasing a house or car, finishing an educational degree program or traveling the world.

Start by assessing what income you earn (income) and subtract out fixed expenses such as utilities, rent/mortgage payments, debt payments and car loans. Next, identify variable expenses like entertainment, groceries and gas; finally note any unplanned or emergency expenses and savings you might need to consider.

NerdWallet’s free online budgeting tool can provide an effective starting point. The app tallys daily expenses, pinpoints areas for cost reduction and shows ways to make more money – perfect for both beginners and experienced budgeters alike. Some may use it in place of pen-and-paper budgeting techniques while for others it may supplement traditional practices.

How do I make a budget?

Establishing and sticking to a budget are among the most vital steps you can take to manage your financial situation. By taking time and care in creating and following it, a budget will help ensure you spend no more than you earn, reduce debt and save for future goals.

Start by tallying up all of your income sources – such as salary, tips, Social Security disability income or investment income – then list out fixed expenses (such as rent/mortgage payments, cell phone/utility bills and auto insurance premiums) each month.

Next, identify your variable expenses which change each month, such as food, entertainment, gifts and clothing. Try to estimate them as accurately as possible by consulting past credit card and bank statements as a resource. It may also help if you divide these into needs versus wants; this way you can focus on areas where cost savings could be made.

How much can I borrow?

Budgeting loans offer you flexible borrowing, depending on your ability to repay (how much can be saved from means-tested benefits), savings of over PS1,200 per person in your household (or PS2,000 if aged 63 or over), existing budgeting loans or crisis loans that you owe, and your ability to repay. Budgeting loan repayments will automatically deducted from universal credit payments; should these stop in between repayments you’ll need another way of repaying them back. You have two years from when repayments start until finalisation (when all repayments will have to be arranged). Repayments may automatically deducted automatically deducted from universal credit payments; should universal credit payments stop coming through in between repayments you’ll need another way of paying back the money due or find another means of repaying what’s owing is due.

If you are on a low income and need help meeting essential expenses, borrowing money under the Social Fund scheme might be possible. A budgeting advance loan from universal credit can provide interest-free funding that’s paid back directly out of universal credit payments; your work coach will evaluate your application to decide the amount available for borrowing.

How do I pay back a budgeting loan?

Budgeting loans and advances from the Department for Work and Pensions (DWP) may provide interest-free loans that can help cover essential expenses on a low income. You’re usually reimbursed through an automatic reduction in your Universal Credit payment.

If the decision on your budgeting loan application was unfair, you can request for it to be reconsidered (“reviewed”). For best results, do this within 28 days and explain why it was unjust.

DWP Debt Management will write to you with an estimate of how much money is still owed, so that you can contact them and arrange another way of repaying. If you’re having difficulty paying off what is owed to us, try using our debt advice locator to locate free and confidential advice near you, or speak to an advisor at your local Jobcentre Plus for advice.