Getting a loan if you’re ill or disabled

Being ill or disabled shouldn’t prevent you from getting a loan.

Banks and other lenders must treat you the same as any other customer – they’re not allowed to reject your application for a loan purely on the basis of physical or mental conditions. 

Anti-discrimination rules might apply to you even if you don’t think of yourself as a disabled person.

Under the Equality Act, a disability is a physical or a mental condition that has a substantial and long-term impact on your ability to do normal day-to-day activities.

So this applies if you have a physical condition, such as cancer, HIV or MS, and/or a mental health condition such as depression.

If you’re working, you have a regular income, and your credit rating is good, you should have several borrowing options.

But before you apply for loans or other forms of credit, follow these three steps:

1. Check whether you can afford a loan. Can you afford to borrow money?
2. Work out the best and cheapest way of borrowing the money you need. Decide on the best type of credit for you
3. Work out how and when you’re going to pay the money back. Work out a repayment plan for your borrowing

If you’re on a low income and claiming sickness or disability benefits, you probably won’t be able to get a loan from a major bank. That’s because they’ll likely consider there to be a high risk of you struggling to repay the loan.

But while you might be able to find ‘loans for people on benefits’ or ‘loans for disabled people’ on the internet, these are best avoided.

While you might be expecting an interest rate of say 10%-20%, the APR (Annual Percentage Rate) on loans offered by these lenders is more likely to be anywhere between 500% and 4,000%. 

In practice, thanks to something called the ‘high-cost credit cap’ the most you would pay for a short-term loan like this is double the amount you borrow. So if you borrow £1,000, you’ll pay back £2,000.Here are suggestions for what to do in common situations when you might need to borrow money.

If you’re struggling to pay household bills and other essentials, taking out a loan is definitely not the answer.

This is especially true if some of your bills are already in arrears or you have other debts.

Borrowing money you won’t be able to pay back will only make things worse.

Instead, talk to everyone you owe money to and see if you can agree a repayment plan. This applies to household bills, such as energy and Council Tax, as well as to any other loans you’ve taken out.

If your benefit payment is late, don’t be tempted to take out expensive credit like payday loans just to tide you over – even if you have priority bills to pay or other essential expenses to cover.

Instead, speak to the people you need to pay and explain the situation.

Then look into other ways of making ends meet such as:

• a short-term advance from the Jobcentre
• an interest-free Budgeting Loan from the Social Fund
• a Universal Credit Advance worth up to one month’s payment.

You might also have access to local authority welfare assistance schemes that can help cover the cost of food and other essential items. The type of assistance available in England varies by local authority. 

If you’re getting income-related Employment and Support Allowance or Income Support, you might be able to apply for a Budgeting Loan.

These are interest-free and you repay them out of your future benefit payments. The amount you repay is based on your income – including any benefits you receive and what you can afford.

If you’re claiming Universal Credit, you’ll need to apply for a Budgeting Advance rather than a Budgeting Loan.

If you don’t qualify for a Budgeting Loan, see if there’s a credit union in your area that might offer you a loan.

They specialise in providing loans at low rates and helping members who need financial advice and assistance.

You’ll probably need to save a small amount with the credit union for a few months to qualify for a small, low-cost loan, but not always.

If you’re tempted to take out a payday loan, it’s important to stop and consider your options.

Although it might feel like an easy option, a payday loan can quickly turn into a problem debt.

It can also affect your future credit rating – even if you pay it off on time.

Loan sharks are illegal lenders who might target you if your household income is low.

A loan shark might not be a stranger, they could be someone you know or even a ‘friend’ or family member.

If you need to get some work done on your home to make it accessible, you might be able to apply to your local authority for help.

They might be able to award you a Disabled Facilities Grant.

These grants are means-tested, unless you’re applying for a disabled child under the age of 18.

This means that your local authority will consider any income and savings that you and your partner have. And you won’t need to pay the money back.

Local authorities can also help with the cost of making minor adjustments to your home, such as the installation of handrails.  

If you’re a homeowner claiming an eligible benefit – including income-related Employment and Support Allowance, Income Support or Universal Credit – you might be able to get help with interest payments on loans you take out for repairs or adaptations to make your home more suitable for your needs.

This help is called Support for Mortgage Interest, a loan that you will have to repay with interest when you sell or transfer ownership of your home.