Money struggles and financial emergencies can be hard to handle and no one wants to be in a crisis position. However, things happen and we have no control of it. If this happens to you, don’t worry, it’s not the end of the world.
There is still an option for you to get the money you need and since you are in crisis, you don’t have to pay for interest. Yes, you read it right – no interest! This is what they call the crisis loan. Let’s familiarise crisis loan, shall we?
What is a Crisis Loan?
Crisis loans are interest-free loans made from the Social Fund. Its sole purpose is to meet urgent needs when no other help is available. As the name suggests, these loans are specifically designed to provide aid and financial support in an emergency or a disaster.
Who can apply for a Crisis Loan?
Anyone who does not have enough money to spend on urgent expenses can apply for this type of loan. You do not have to be getting a benefit or to have claimed benefit in order to take out a crisis loan.
If you have claimed a benefit and are waiting for a first payment, you may be able to get a crisis loan to tide you over if your benefits office cannot make an immediate funding.
How do I qualify for a crisis loan?
To be eligible for the crisis loan, you must be 16 years old or over and without sufficient resources to meet your immediate needs and or your family’s immediate needs as well.
Several factors have to be met for a payment to be made, including meeting the expenses in an emergency or because of a disaster. The situation means that there may be serious damage or a serious risk to your health or safety or the health and safety of a member of your family’s. Furthermore, a crisis loan must be the only means of preventing that serious damage or serious risk.
“Emergency” would mean an unforeseen circumstance or pressing need, of which requires immediate remedy or action. The term “disaster” is its everyday meaning.
“Serious risk to health or safety” means more than discomfort or inconvenience, but this does not mean that medical intervention would be required.
While a crisis loan must be the only means of preventing the serious damage or serious risk to health or safety, alternative ways of preventing the risk must be available soon enough and must be reasonable because a crisis loan is just an immediate remedy.
How to apply for a Crisis Loan?
If you want to apply for a crisis loan, you can do it in writing or over the phone. Telephone applications are available in almost all areas now. However, the law says they must still accept written applications, either on the appropriate form or in a letter.
If you apply over the telephone, you will be informed of their decision right away. If they make an award, you have to agree how you will repay the loan before you can have a payment. You need to put this in writing, and you may have to go to the office to do this. If they do not make an award, they will confirm the verbal decision in writing.
Include as much detail as you can about the crisis and how the crisis loan can help prevent serious risk to your health and safety as well as your family’s health and safety. They will send you their decision in writing. The payment will be sent to you only after you have agreed how you will repay it.
What can a crisis loan be used for?
There are no specific standards or pre-determined needs for which a crisis loan should be used. In general, applications are for a specific item or service or immediate living expenses are most common.
You may need it for emergency expenses, for instance, your washing machine suddenly broke down or perhaps any home appliance that you need to fix it urgently. Or, you might need money for everyday expenses because you might have lost your money or maybe because you have spent all your money and your paycheck is not until the next couple of weeks yet.
Some expenses that crisis loans cannot be paid for are those that are not too urgent or emergency cases such as medical items, spectacles or dental treatment. Most housing costs such as deposits to secure accommodation, mortgage payments or big renovations or repairs to your home are also not qualified for crisis loans.
However, you can get a payment for rent in advance if the landlord is not a local authority, to pay for board and lodgings, to meet intermittent costs like emptying septic tanks, or for minor repairs to your home. Crisis loan can also be used to buy or install a telephone, or pay call charges. Also, running costs for a motor vehicle such as repairs are also considered.
How to repay the loan?
You will be asked to agree to the repayment terms before the payment is given to you. The repayment rate is usually set at 5%, 10% or 12% of your income, depending on what other expenses you may have per month.
Normally, you have 104 weeks to repay your total Social Fund debt of the crisis loan. Your repayments can also be deducted from your benefit if you are receiving one.
There is no right to an Inspector’s review about the rate of repayment. However, if you have a struggle in making the repayments you agreed to, you can ask the office to consider rearranging the repayments.
Crisis loans are small and interim type of loans. They are very helpful because you will not pay any interest. However, you must remember that they are only for immediate or emergency expenses. These loans are designed to aid you in times of financial struggle when there is no other help available for you. Therefore, you should not use crisis loans to cover any long-term financial issue you have.