HOUSEHOLDS waiting for their first Universal Credit payment can apply for an advance loan.
The loan is designed to help finance groceries, gas and electricity – and here’s everything you need to know.
It can take up to five weeks to get accepted into the Universal Credit system, which can cause problems for many people.
During this time, existing services will be discontinued, leaving many households with difficulties in paying their bills.
The loan is designed to help you bridge the gap while you await your first Universal Credit payment.
However, the money has to be paid back, and that means the amount of Universal Credit you get will be reduced until the cost of the loan is repaid.
However, it can still come in handy, especially around holidays like Christmas when your budget is tight.
We have put together a guide for you that tells you everything you need to know about prepayment and whether it is worth it.
What is a Universal Credit prepayment?
The loan is called a prepayment loan, which you can apply for while waiting for your first Universal Credit payment.
This waiting period consists of a one-month evaluation period and an additional week for the payment to appear in your account.
The advance loan is for people who need help to pay their bills or other expenses while they wait.
Beneficiaries can borrow up to 100% of their expected payment, but they can ask for a smaller amount.
You only pay back what you borrowed since the loan is interest-free. So it makes sense to do this instead of going into debt elsewhere.
But remember: you’re still expected to pay it back.
The money will be transferred to you within three working days and should last for the entire five weeks until the first payment.
You can also receive an upfront payment if your circumstances have changed and you receive a higher payment but have not yet received the increased amount.
In this case, an online application is not possible. Instead, you must apply by calling the hotline on 0800 328 5644.
Note that an upfront payment is different from a budget advance – here you can get up to £812 to help make ends meet.
How to request a prepayment
You can apply for a Universal Credit advance before receiving your first UC payment.
If you have already received Universal Credit and have notified the DWP of a change in your circumstances, this means that you have received more but have not yet received the increased amount.
There are different ways to apply for the loan.
You can apply through your Jobcentre Plus work coach or by calling the Universal Credit Helpline.
You can apply for the loan from the time you first apply for Universal Credit to the date you receive your first payment.
You must explain why you think you need the advance and provide information to verify your identity (at your first Jobcentre Plus interview) and provide bank details for the advance.
If you can’t open a bank account, talk to your work coach.
You will usually be informed on the same day whether you will receive your advance payment.
If you need assistance, call the Universal Credit Helpline on 0800 328 5644 (text phone: 0800 328 1344).
The lines are open Monday to Friday from 8 a.m. to 6 p.m.
When do I have to pay back a deposit?
You are expected to repay the loan within the first 24 months of receiving it.
It used to be just 12 months, but in April the repayment period doubled, hopefully putting fewer people into the debt trap.
How it works is that the Department of Works and Pensions deducts an amount from your Universal Credit payment each month, starting with your first payout.
You can calculate how much will be deducted from your monthly payment by dividing the total cost of the loan by 24.
For example, if you borrowed £1,500, you would have £62.50 deducted from your Universal Credit payment each month.
If you cannot afford the repayment, you can request a repayment deferral for up to three months. However, this is only permitted in exceptional cases.
When you apply for an advance online, the screen will show you the repayment amounts for different repayment periods.
If you call the hotline and your application is successful, you will be told the following on the phone:
- how much you can have
- the monthly repayment amounts
- when the first repayment is due
However, you must repay the advance within 12 months if you applied for the advance before April 12 this year.
If you applied because of a change in circumstances, you only have six months. In this case, however, you can request a one-month delay in repayment.
Do I still have to pay it back even if I no longer have Universal Credit?
You will still be expected to pay back the loan even if you find a job and are no longer eligible for benefits.
You will receive a letter telling you how much you owe.
If you cannot afford to pay it all back, you will need to contact the DWP Debt Management contact center.
They can help you work out a favorable repayment plan and also assist you with setting up monthly direct debits and depositing cash or check.
You can call the Debt Management Center on 0800 916 0647.
If you ignore your debt, the DWP can have the amount you owe deducted directly from your income or refer the debt to a collection agency.
Can I be denied a prepayment?
Not everyone is automatically eligible for an advance loan and can be denied.
You cannot get one if the Department of Labor and Pensions thinks you have enough money to last until your next payment, e.g. B. from the last earnings or severance payments.
If you have savings or live with your parents, relatives or friends, you will be denied this.
Even if your identity has not been verified, you will be denied an advance.
You can request a review of the decision, but you have no right to appeal.
If you’re denied a loan but need help, you can apply for a budget advance to help with urgent household expenses.
For example, this can help pay for urgent household expenses like replacing a broken stove, finding a job or continuing to work, or even funeral expenses.
The smallest amount you can borrow is £100, but you can borrow up to:
- £348 if you are single
- £464 if you are part of a couple
- £812 if you have children
Budget advances are also paid back directly from your Universal Credit payments.