Also if she’s a single parent, the top up benefits and housing benefits can actually make her better off than if she had a partner living with her on a low wage. The 2 child benefit cap has also been lifted so if she has 3+ children she’s likely recent become better off due to that as well.
One of the big downfalls with Universal Credit, is that they pay it to the claimant, meaning that for example she has been awarded £500 a month housing benefits, it just goes in with anything else she’s awarded to her bank account…meaning that she can choose not to forward that to the landlord.
I don’t see a loan helping the situation at all, she won’t repay it and it will be absolving her of her own responsibilities. She may also come back asking for more money in future. If you want to help her I would offer:
1- to go through her finances to help her work out whether she can make changes to ensure she can pay back the landlord.
2- if you can clearly see that she hasn’t been wasting money on non-essential spending during the time she has been arrears, and is genuinely in a situation she couldn’t avoid, gift the arrears value to her, but pay it directly to the landlord.
3- help her come up with a plan to prevent it happening again, this could include identifying areas to reduce spending, checking whether she is entitled to any additional benefits, and looking at whether she can move to a cheaper rental.
4- also look at the dates money is coming in and out. If her wages are her highest income, her rent should be going out the same/next day, to avoid other spending getting prioritised. You can pay a landlord a few days early as it just means you are in credit for the last week of the tenancy, or you can move the date forward by paying a week as a standalone and shifting the monthly renewal date. If there is a big gap between the income and the rent date…she may be mismanaging the money in between, so closing the gap could make it easier for her see how much money she actually has for the month.
What you need to do is avoid taking responsibility for her mistakes, as soon as you start, it won’t ever end, or it will end in tears. It does seem like a glaring red flag that you are being asked to give her a loan without seeing her bank statements. A bank wouldn’t give a loan without a credit check, so why should a family member give a loan blindly on trust, especially when it’s to pay off a debt to someone else that shouldn’t have built up to begin with. If she doesn’t intend to pay it back, she should be upfront and ask for a gift, to claim it will be paid back at £200pcm and then come up with excuses later for not paying reeks of someone who uses/abuses others.
I’ve never leant/gifted money in this way…but I have seen examples of people who do things like mismanage their finances so their phone is cut off and they get a warning about council tax payments being missed because they’ve gone over their overdraft limit…then a week later they are booking theatre tickets and buying a new sofa on credit. If she’s anything like the people I know…if they were given £2.5k to clear rent arrears, but the landlord was only demanding £200 monthly extra to stave off eviction…I’m 100% certain they would keep the cash in their account and not pay off the arrears, with the intention of just paying it at £200 a month…then some other bill would come up, such as wanting to pay monthly for a future holiday or pay for a child’s birthday party etc, and they would dip into the money, with the attitude of ‘worry about it later’.
Whatever you decided to do…if you are loaning/gifting, I’d say it’s VITAL that you pay it direct to the landlord. I’d also be asking for the landlord’s phone number because maybe the arrears are £2k and she’s just decided to tell you it’s higher to give her some buffer money etc. Someone I know was in a lot of credit card debt, then took out a bank loan to consolidate, but because the bank approved a max loan of more than that debt…they took out as much as possible just because they could…you might be suprised and find out the debt isn’t as much as £2.5k and she’s actually wanting money for other things.
Also, how well do you know her, I know you said ‘cousin’, but are you socialising with her regularly? If you aren’t, it would make it hard to tell if she’s frivolous with money. If you know she thinks nothing of going out to eat with glasses of wine at a restaurant every weekend…then you know she has mismanaged her money, but if she’s someone who doesn’t spend on luxuries and has second hand furniture etc you are on steadier
ground that she’s less likely to be using you.
As well consider what she would do for YOU. She may ever be in a position to help you financially, and you may never need it…but is she someone that would be the first to offer help with childcare, or visit you in hospital, look after your pets when you are on holiday etc….does she support you in other ways, or is she someone who is always on the take?