UK interest-free government loans: £100 to £812

When someone on benefits faces a one-off cost — a broken washing machine, a deposit on a new home, a funeral to pay for — there are two interest-free loans from the state in the UK. Which one applies depends entirely on which benefit the person is on.

What is the difference between a Budgeting Loan and a Budgeting Advance?

Only the benefit you come from. A Budgeting Loan goes to people who have had one of four older benefits for at least six months: Income Support, income-based Jobseeker's Allowance, income-related Employment and Support Allowance, or Pension Credit. Anyone on Universal Credit cannot get a Budgeting Loan at all and applies for a Budgeting Advance instead.

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The amounts are the same for both. The smallest is £100. The most is £348 if you are single, £464 if you have a partner, and £812 if you have children — for the Budgeting Loan, if you or your partner claim Child Benefit. Crisis Loans no longer exist.

What can the money be used for?

The GOV.UK list is specific: furniture and household items, including washing machines and other white goods; clothes or footwear; rent in advance and the costs of moving house; maintenance, improvements or security for your home; travel within the UK; costs linked to starting a new job; maternity costs; funeral costs; and repaying hire purchase or loans taken out for any of the above.

The Budgeting Advance list is close to identical and adds essential family items such as mobility aids and child safety products, with a television allowed only in some circumstances.

What is it not allowed to cover?

For the Budgeting Advance the exclusions are spelled out: not ongoing costs such as food, not household bills such as gas or electricity, not rent, and not paying off debts. The loan is for a one-off purchase, not for a gap in the monthly budget.

Who gets refused?

A Budgeting Loan is refused if you get New Style Jobseeker's Allowance or New Style Employment and Support Allowance, if you are involved in industrial action such as a strike, walkout or lockout, or if you already owe more than £1,500 in total for Crisis Loans and Budgeting Loans. The amount also depends on savings: more than £1,000, or more than £2,000 if you or your partner are 63 or over, reduces it, as does an existing loan still being repaid.

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The Budgeting Advance has two thresholds of its own. You are not eligible if you have earned more than £2,600 in the past six months (£3,600 for a couple), or if a previous Budgeting Advance is unpaid — you can only have one at a time. The qualifying period is the same six months on Universal Credit, ESA or Pension Credit, unless you need the money to start a new job or stay in work.

How is it repaid?

Both are interest free: you pay back only what you borrow, and repayments come automatically out of your benefits. A Budgeting Loan is normally repaid within two years — 104 weeks — and the weekly repayment is set out in the offer, so you see it before you accept. A Budgeting Advance is usually repaid over 24 months, starting from your next Universal Credit payment.

If the repayments become unaffordable, a Budgeting Advance can be deferred for three months — through the journal in your Universal Credit account, through a Universal Credit contact at the jobcentre, or by phone. Leaving benefits does not clear the debt: DWP Debt Management writes to explain how to repay, in full or by monthly payments.

How do you apply?

A Budgeting Loan is applied for online, which is quicker, or on paper form SF500, which you can download and print or request by phone from the Social Fund Enquiry Line, allowing seven days for it to arrive. The decision comes by email, text message or letter — email and text are faster and let you accept online. Do not apply again while you are waiting for a decision.

A Budgeting Advance is requested through the journal in your Universal Credit account, through a Universal Credit contact at your local jobcentre, or on the Universal Credit helpline, 0800 328 5644 (Welsh language 0800 328 1744), Monday to Friday, 8am to 6pm. A Budgeting Loan is paid into the same account as your benefit, so change the account before you apply if you want it to go elsewhere.