Households that earn too much money may be able to get help for paying their rent from emergency, short term loans. These tend to come into favour when you have some form of income but do not qualify for any other housing benefit or rental scheme from the government. Unfortunately many families ma be excluded from government social welfare programmes as they have some source of income. Still, if something traumatic occurred which is causing you to miss your rent payment, you could be facing a major difficulty in retaining the occupancy of your flat.
It is a valid option to borrow money to cover living costs, including rent and utilities, if you have experienced a recent crisis that is temporary in nature. What happens is that you have the opportunity to keep all of your payment history in current status.
The terms and conditions set by every lender will vary. Banks and payday lenders offer loans for a profit, while nonprofit institutions like Newport Credit Union may offer more affordable products. They will also provide unsecured rental loans. When borrowing funds, you will need to simply cover the loan repayment over the next several months or however long it takes. So it provides tenants time to get their finances back on track.
Borrowing money for rent when you are chronically unemployed or disabled is rarely a good idea. The only benefit would be a temporary reprieve from your financial woes, followed by a worsening financial situation as you struggle to repay even more debt.
Government sponsored Crisis Loans used to be available to help you cover your monthly rent during times of economic hardship. Many vulnerable households have relied on these funds. However, budget cuts have eliminated many of these crisis loans from England, Scotland and Wales, and they now can be difficult to find. Tenants in Northern Ireland may still apply, although there is no indication that the programme will continue to be offered on a permanent basis.
Organisations that offer emergency loans for rent arrears help
Before you leap to file an application for a loan, it is best to consider whether you might qualify for financial aid. Many of these are provided by charities, not-for-profit organisations as well as local councils. There may be emergency rental assistance programmes that are available to those households earning very low income.
In England, your local council may provide loans or other aid for emergency rental costs. Examples of these include the Discretionary Assistance Fund can help in Wales. There is also the Scottish Welfare Fund in place to provide much needed emergency aid. All of these schemes are designed to help those who are very low income, so if you normally have higher earnings, then you likely will not qualify. Always contact the appropriate programme first to confirm though, since there may be exceptions. Find sources of council loans and whether they are available in your area.
Loans for paying rent may also be provided by local welfare schemes. Many of these provide help in an emergency. the type of assistance provided will vary based on each council. However the authorities do have central government funding allocated to them each year. Some may loan out the funds to help paying rental arrears, or they may offer other emergency housing assistance. Find a listing of emergency welfare schemes.
Credit Unions may also allow tenants to borrow money at a lower interest rate. This source of money can be used for paying for different types of bills, which may include rent. Many councils in the UK are also directing families on a low income to credit union loans as well rather than using a payday lender. Since they are not-for-profits, the interest rates charged are much lower. So while it is not a good idea to borrow money in an emergency for paying rent, if the APR is lower, it is an option to explore. There are hundreds of credit unions that may assist.
Borrowing money for paying rental arrears can come from a number of sources, but it is best to consider whether you will be able to repay the funds. Here are some examples of typical loan amounts and repayment terms:
- HSBC Personal Loan: £3,000 may carry an 18.9% APR, giving you a £190.61 monthly payment for 18 months.
- HSBC Personal Loan: For those that qualify, individuals can obtain up to £5,000. This may carry a 6.1% APR, with a £291.01 monthly payment for 18 months.
Notice how much the APR drops when you borrow a higher amount. Total interest charges on the higher loan are £238.24 whereas you pay a much higher £431.03 in interest when you borrow a smaller dollar amount. It would actually be cheaper to borrow more money at the lower rate and invest what you do not need!
Realistically though, most borrowers will find that they can use the proceeds to get caught up and even ahead on all of their monthly bills so that they can more easily recover as the crisis eases. Still, it is best to limit what you borrow, since you have to repay it in full plus interest.
We compared loan terms at Tesco Bank also. While the 4.5% APR rate looked great, we found that the rate applied to a range of £7,500-£15,000 only. If you only need to borrow £3,000 then the rate jumps to at least 12.3% APR. While still relatively high, it is much lower than the advertised rate for a £3,000 personal/rental loan through HSBC.
One of the better deals we investigated was a 7.4% APR rate that you can apply for through the Post Office. Loan amounts begin at just £2,000, making this a reasonable option for someone looking for a minor bit of help while in a tight squeeze.
It is best to compare at least 3-4 offers from competing lenders before completing an application. Determine which offers the best deal, and consider whether the loan will help you accomplish your goals. If you believe it will be unaffordable to borrow money, then don’t apply for it. Emergency loans for paying rent or other living costs are only a good idea if they help you avoid delinquencies in the short term and defaults in the long term.