Millions eligible for DWP £812 loan you don't need to repay for two years after rule change

A new rule change which has come into force at the start of April will see millions of people in the UK eligible for a DWP loan that they won't need to repay for two years. Claimants who are eligible for the budgeting advance can borrow up to £812 through the loan, but won't need to repay it for 24 months.

Budgeting advances are interest-free loans which you can get if you claim universal credit and can be used to cover certain costs, such as household furniture or clothing. At the beginning of March, Chancellor Jeremy Hunt announced that he was doubling the repayment period that would affect budgeting advances claimants.

Initially, these loans had to be repaid within 12 months, but the period has now been extended to 24 months. The rule change has come into force at the start of April and according to Mr Hunt, aims to protect those on the lowest incomes in addition to a 6.7% increase to means-tested benefits.

READ MORE: People urged not to go into the water at these popular locations in Wales

LATEST: DWP £434 monthly payment due within days if you have these common health conditions

With that in mind, we've taken a look at everything you need to know about the budgeting advance loan, who is eligible for it, what you'll get and how it is repaid. For money-saving tips, sign up to our Money newsletter here.

How do I get a budgeting advance loan?

For a person to get a budgeting advance, you must satisfy a number of criteria. A claimant must have been receiving either universal credit, income-related employment and support allowance, income support, income-related jobseeker's allowance or state pension credit for six months or more, unless you need the money to help you start a new job or keep an existing job.

You are also eligible if you have earned less than £2,600, or jointly £3,600 for couple, in the past six months. You are eligible if you have paid off any previous budgeting advances. To apply for a budgeting advance, claimants must contact their local Jobcentre Plus work coach.

What can I get from this loan?

Budgeting advances can be used for things like one-off expense such as replacing household appliances, buying uniforms or tools, home repairs, travel expenses, moving costs, clothes and things like maternity and funeral costs. The smallest amount you can borrow is £100.

You can get up to:

• £348 if you're single.
• £464 if you're part of a couple.
• £812 if you have children.

But how much you can get depends on whether you can pay the loan back, or if you have any savings over £1,000. According to the DWP, they will reduce the loan amount they offer to a claimant by £1 for every £1 you have in savings over the £1,000 threshold.

How will I repay the loan?

As a budgeting advance is a loan, you will need to repay it through your regular universal credit payments. Your payments will be lower until you pay it back. But if you no longer get universal credit, you will need to repay it by other means, for example, from wages or other benefits you may be getting. You will be told how much your payments will be reduced by.

If you move from Universal Credit to another benefit the deductions will usually continue from your payments until the advance is paid off. If you move off benefits you will receive a letter telling you how much you owe. The letter will ask you to contact the DWP debt management contact centre to arrange your repayments.

According to the DWP, if a claimant does not make payment arrangements, the department can recover the amount they owe by either contacting the claimant's employer, where they have one, to arrange for deductions to be made from your earnings, or asking an independent debt collection agency to collect this money on the claimant's behalf.