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Will a Loan affect my ESA

Hi @BenefitsTrainingCo. I am considering getting a loan from a charity based on the equity in my house. I will have to repay the loan back. I have the option of having the loan as a lump sum or as monthly payments. 

Will this loan affect my income based ESA?


  • Neil2017
    Neil2017 Member Posts: 155 Courageous
    Hi @RSISolutions
    i would take an educated guess and say it depends on what you are going to do with it. Eg if you invested it with the intention of getting a better return than the interest rate your paying back on the loan I would say it could. 

    I know now there is a SAVINGs lower limit from previous posts of 6000 pounds that starts to affect amount of ESA paid. But whether this would apply to a loan I do not know.

    if ESA is your main source of income, unless you have another benefit which you are not fully spending like SpAiP how would you pay the loan back anyway. Given also that prices are on the increase, interest rates are on the way up and the government has stated is going to increase welfare payments by around 1% although it does not specify which benefits exactly.

    my thoughts anyway, unless you have a really good deal loan.
  • CockneyRebel
    CockneyRebel Member Posts: 5,216 Disability Gamechanger
    I think it might depend on how much you borrow and what you plan to do with the money.
     If you take it as a monthly payment it could well be classed as income.

    Be all you can be, make  every day count. Namaste
  • BenefitsTrainingCo
    BenefitsTrainingCo Member Posts: 2,628 Pioneering

    For income-related ESA, if you have capital of more than £16,000, this will stop your benefit.

    If you have capital of less than this, but over £6,000, you would lose £1 of ESA for every £250 (or part of £250) above £6,000. That's £1 per week.

    However, deductions are made from the value of your capital for any debt or mortgage secured on it (which this would be). So, if you took a lump sum which is secured, that should be all right. For example, if a creditor holds the land certificate as security for the loan, and has registered notice of its deposit at the Land Registry, this is a debt secured on your property.

    If, however, you took it in instalments then much depends on how it is going to be repaid. A loan that you have the obligation to repay immediately should not be treated as your income or your capital, even if it is paid in instalments. If there is no immediate obligation to repay, I'd be concerned that an instalment plan would simply result in your irESA being reduced £1 for £1 by the value of the instalment once turned into a weekly figure.

    In addition to all the above, I'd advise that if you expect to be on income-related ESA for a while this may only increase problems further down the line. I'd want get some money advice before going ahead. It all seems pretty risky. I don't know if you get any mortgage interest help with your ESA at the moment, but if you do, that is going to become a loan from April 2018 anyway (you should get letters about this, if you haven't already).

    As you probably know, you wouldn't be able to get help with the interest on this new loan (the one from the charity) via irESA (unless it is for repairs or improvements which are needed, including adaptations).

    I'd also be worried that when you declare this to the DWP, your ESA might be stopped or reduced whilst they investigate the terms of the loan. 

    Maybe talk to the charity a bit more about your concerns, and be sure to get some money advice, for example from your local CAB or a debt advice charity (such as StepChange, or National Debtline), if you haven't already.

    The Benefits Training Co:
    Paul Bradley
    Michael Chambers
    Will Hadwen
    Sarah Hayle
    Maria Solomon
    David Stickland


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