Frequently asked questions

About Child Benefit Loans

What are Child Benefit Loans?

Child Benefit Loans are fair and affordable loans provided by a partnership of local credit unions as a much cheaper alternative to high-cost lenders.

You can apply for a first Child Benefit Loan of up to £600, on the condition that your Child Benefit is paid directly to the credit union.

What can a Child Benefit Loan be used for?

You can apply for a Child Benefit Loan for any purpose that supports your family. Many people find this loan helpful for paying up-front childcare costs (such as nursery deposits) or meeting expenses such as school uniforms or trips.

What happens to my Child Benefit?

If you are offered this loan, you will be sent a HMRC notification letter requesting that your Child Benefit is redirected to the credit union. Once you’ve electronically signed this letter to us, we will submit the request to HMRC on your behalf.

Loan repayments and regular saving contributions will be taken automatically each time your Child Benefit comes into the credit union. The remainder is yours to withdraw or add to your savings.

About Credit Unions

What are credit unions?

Credit unions are not-for-profit financial cooperatives that are used by over 1.2 million people in the UK and recommended by everyone from Martin Lewis, the Money Saving Expert to the Archbishop of Canterbury. Each credit union is mutually owned by all its members so everyone who saves, borrows or uses its financial services has a say in how it is operated.

They offer a range of simple and safe savings accounts and affordable loan products as well as a range of other financial services.

Are you regulated?

Yes. Just like all banks and building societies, every credit union is regulated by the Financial Conduct Authority and the  Prudential Regulation Authority.

In addition, they are covered by the  Financial Ombudsman Service and any savings you deposit are 100% protected by the Financial Services Compensation Scheme.

How do I join?

You will need to join of one of the participating credit unions – unless you are lucky enough to already be a member.

This is a simple process and will be part of your loan application. If your loan is approved, you will automatically become a member.

Does it cost to join?

If you are not already a member, there may be a one-off membership fee to join – typically this is free but depending on the credit union it can be between £1 and £3.

In addition, everyone has to make a minimum saving deposit to activate your membership – typically this is between £1 and £5 and is put into your new credit union savings account.

You’ll be notified of these requirements in advance and they are only required if your loan is actually approved. You will have the amount reduced from the loan amount transferred.

Applying for a loan

Am I eligible?

To apply for a Child Benefit Loan you must:

  • • Be over 18 years old.
  • • Be in receipt of Child Benefit and agree to your Child Benefit being paid directly from HMRC to your credit union.
  • • Have a UK address.
  • • Not be bankrupt or involved in an Individual Voluntary Arrangement or Debt Relief Order.
  • • Agree to save a minimum of £2.50 a week (or £10 a month) whilst repaying your loan, which cannot be withdrawn until the loan is repaid or topped up.
  • • Agree to a credit check being performed.
  • • If approved, you will become a member of the participating credit union, but don’t worry, this process is all part of your loan application.

Can I apply if my credit record isn’t perfect?

As part of the application process a check will be undertaken to help verify if you can afford the loan. If you are already struggling to repay other credit, you are unlikely to be able to obtain a Child Benefit Loan and should instead look to access support from agencies such as StepChange Debt Charity  or National Debtline who can help with free independent debt advice.

What information will I need?

We need you to provide personal information, including: your National Insurance number, Child Benefit number, your home address(es) for the last 3 years and your bank account details where your Child Benefit is currently paid.

The bank account you use for your day-to-day banking and bills, plus details of the bank account your Child Benefit is paid into, if different.

Do you perform credit searches?

Yes. As part of the loan application process, you will provide consent for the credit union to undertake checks with credit reference agencies to assist with fraud prevention and this also ensures we only approve applications from people who we believe will be able to repay what they borrow.

Why do I need a current account?

To apply you will need to provide the valid bank or building society current account that your Child Benefit is currently paid into.

If approved, we will deposit the loan funds into this bank account.

When can I apply?

You can make a Child Benefit Loan application 24 hours a day, 7 days a week, including bank holidays.

How long does it take?

Once you have submitted your loan application and provided any supporting documentation requested, we aim to provide a decision within 1-3 working days.

Once your loan application is approved, your loan will be released once you have electronically signed both the loan agreement and HMRC notification letter.

Will I be approved?

Each application is assessed on an individual basis taking into account a number of factors. We are therefore unable to offer an indication of whether or not your application would be accepted before you submit it.

Please note – if you do apply and are unsuccessful, this will not leave a footprint on your credit file.

Will I need to send any extra information?

In most cases, your application will be completed online without the need for additional information. However, there may be occasions where you need to send further paperwork to help make a decision.

You will be notified by email if this happens and exactly what you need to do.

What if I change my mind?

The statutory right of withdrawal does not apply to this credit union loan, however, you can withdraw from the agreement within 14 days of taking the loan out. You will be charged interest until the date the loan is repaid (which must be within 30 days of notifying us of your intention to withdraw).

You can make extra payments on your loan at any time and if you want to repay it early, you’ll only pay the remaining balance and accrued interest due.

To do this or for more information, please contact your credit union.

Final steps and receiving your money

I have successfully been approved, what happens next?

Once you have been notified that your Child Benefit Loan application has been approved there are just a couple of simple steps remaining.

We will send you the loan agreement that you will need to review and electronically sign, along with an HMRC notification letter. You will be emailed copies of these documents.

Once you have signed these documents, the loan will be paid into your bank account and we will automatically submit the request to HMRC on your behalf to get your Child Benefit payments redirected to the credit union.

When will I receive my money?

Your money will be sent to the current account that you identified on your application by Faster Payment. So should receive your funds within 1 working day of being approved.

Making repayments and top-ups

How do I repay my loan?

Your Child Benefit payments will be paid directly to the credit union. This will be used to repay your loan.

Can I pay the loan off early?

Yes, you can, there are no charges for early repayment and by repaying early your loan will be even cheaper.

Can I top up a Child Benefit Loan?

You are eligible to apply for an additional loan with us once at least half of any previous loans with us are paid.

Can I get a standard loan with the Credit Union?

Once you have fully repaid your Child Benefit Loan, you will be eligible to apply for a standard credit union loan. The amount you can borrow will depend primarily on your income and expenditure. This application will also be subject to a credit check.

Saving

How do I save alongside my Child Benefit Loan?

As part of your application, you must commit to saving a minimum of £2.50 a week (or £10 a month), which cannot be withdrawn until your loan has been fully repaid.

These regular saving contributions will be taken each time your Child Benefit is received by the credit union, alongside your loan repayments. The remainder is yours to withdraw or add to your savings.

Are my savings protected?

Your savings with the credit union are fully covered by the Financial Services Compensation Scheme (FSCS), so your money is just as safe as it is in a bank or building society.

How do I withdraw my savings?

Your locked in savings will only be available once your loan has been fully repaid.

Any other remaining funds can be withdrawn at any time by making a withdrawal request with the credit union.

Illegal Money Lending

What is an illegal money lender or loan shark?

If you can answer yes to one or more of these questions you might be borrowing from a loan shark:

  • • Did they offer you a cash loan?
  • • Did they not give you paperwork?
  • • Did they add huge amounts of interest or APR to your loan?
  • • Have they threatened you?
  • • Have they taken your bank card, passport, watch or other valuables from you?

How can I report a loan shark?

The Stop Loan Sharks team have a 100% safe online reporting form that you can use to report illegal money lenders. Their team are also available 24/7 on 0300 555 2222 for anonymous information taken in the strictest of confidence.

How do I know if my lender is legal?

You can search the Financial Conduct Authority database for all legal money lenders in the UK. Or call the Stop Loan Sharks team on 0300 555 2222 and they can tell you if your lender is legal or illegal.