Social loans for people on low incomes

In the UK, "social loans" usually means public loans made by the state or devolved governments to people on low incomes, rather than loans from a bank. Until 2013 most of this help came through the Social Fund. Today it is split between the Department for Work and Pensions, which still offers interest-free loans and advances to people on benefits, and the nations and councils, which run their own crisis support, much of it now paid as grants rather than loans.

Knowing which scheme applies to you, and whether a grant is available instead, can save you from a commercial loan you do not need. This guide explains the system nation by nation.

Interest-free loans from the DWP

Budgeting Advance for Universal Credit claimants

If you receive Universal Credit, you can apply for a Budgeting Advance to cover essential one-off costs, such as furniture, household items, rent in advance or costs of starting work. You normally need to have been claiming for a period and your earnings must be below a set limit; the minimum amount is £100. The advance is interest-free and is repaid through deductions from your Universal Credit.

Budgeting Loan for Pension Credit and legacy benefits

If you have received Pension Credit, Income Support, income-based Jobseeker's Allowance or income-related Employment and Support Allowance for at least six months, you may be able to get a Budgeting Loan. It can help with items such as furniture, clothing, rent in advance, moving costs, maintenance and costs related to work or funerals. The loan is interest-free, starts at £100, and is recovered from your benefit payments.

For both, the amount offered depends partly on your circumstances and on any existing social loans you are still repaying. Our page on loans while on benefits explains how deductions affect your income.

Scotland: grants rather than loans

The Scottish Welfare Fund, run by councils, provides two types of grant that do not have to be repaid:

• Crisis Grants for emergencies or disasters where there is an immediate threat to health or safety;
• Community Care Grants to help people stay in or move into the community, or to ease exceptional pressure on families.

Apply through your local council. Because these are grants, they should always be explored before any social or commercial loan.

Wales: the Discretionary Assistance Fund

In Wales, the Discretionary Assistance Fund offers non-repayable help: the Emergency Assistance Payment for urgent costs such as food, gas and electricity, and the Individual Assistance Payment to help people live independently, for example with furniture or white goods. Applications are made online, by phone or through a partner organisation.

Northern Ireland: Discretionary Support

Northern Ireland runs Discretionary Support, which can provide interest-free loans or grants for short-term living expenses or household items in an emergency or crisis. Eligibility depends on your income and the urgency of the need. Budgeting Loans and Universal Credit Budgeting Advances also exist in Northern Ireland alongside it.

England: local welfare and crisis support

In England, local welfare assistance is run by councils, and each one sets its own rules. Some offer grants, vouchers or prepaid cards for food and energy; others provide recycled furniture or white goods rather than cash. A few councils work with local credit unions to offer small loans. Search your council's website for "local welfare", "crisis support" or "emergency support", or ask a Citizens Advice adviser what your area offers. Our guide to emergency financial help covers the same-day options.

How to make a strong application

Social loans and grants are discretionary and often limited by budget, so a clear application helps. Prepare:

• your National Insurance number and benefit details;
• what you need and why, with prices where possible;
• how the problem affects your health, children or ability to stay in your home;
• details of any help already refused, and any existing loan deductions;
• a supporting letter from a social worker, health visitor or support worker if you have one.

Be honest about your income and any savings, because the decision maker will compare what you say with the records they hold, and inconsistencies slow things down. If you have no internet access, you can usually apply by phone or ask a local advice centre, library or support worker to help you complete the form. If you are refused, ask for the reasons in writing and whether you can request a review. Decisions on DWP Budgeting Loans and Budgeting Advances can be reconsidered, and the Scottish Welfare Fund has a formal review process.

Limits and risks of social loans

Social loans are much cheaper than commercial credit, but they are not risk-free. Deductions reduce your income for months, and several overlapping deductions for advances, overpayments and arrears can leave you short every week. Before accepting:

• check the monthly deduction and how long it lasts;
• ask whether a grant from your nation's fund or a charity could cover the need instead;
• consider whether a smaller amount would be enough.

If deductions are already causing hardship, contact the DWP to ask for them to be reduced, and speak to a free debt adviser at Citizens Advice, StepChange or National Debtline.

Beware of anyone charging to apply

All the schemes on this page are free to apply for. Nobody needs to pay a fee to get a Budgeting Loan or a council grant, and genuine officials will never ask you to pay by gift card or bank transfer. Be wary of social media posts offering "government loans" or asking for your Universal Credit login details.

If a social loan cannot cover the full cost, compare community and credit union lenders and the broader UK borrowing guide for low incomes before turning to high-cost credit.