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Are There Loans For The Unemployed? All You Need to Know

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Are There Loans For The Unemployed? All You Need to Know
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In short, the answer is yes. But the amount you will be able to borrow and the rate of interest you will have to pay, will depend on your circumstances. There are several ways you can take out a loan when you are unemployed, here we look at what those are and what you need to consider. 

What do lenders look for?

When you are being considered for a loan a lender is likely to take into account several factors:

  • Credit rating – If you have missed repayments in the past or been the subject of an insolvency, it will have a negative impact on your credit rating. As will other issues such as not being registered to vote. 
  • Income – Does the amount of money coming into your account suggest you’ll be able to afford the monthly repayments of a loan? Sometimes lenders will allow you to include benefits as income.
  • Outgoings – What other expenses do you have and will these impact your ability to keep to the loan repayment plan. 

Even if you have a good credit rating and an income, from a rental property for example, if you are unemployed you will still be considered a higher risk and, therefore, offered a more expensive loan. 

Types of loan available to you

You can apply for the same loans as anyone else when you are unemployed, but they will be more difficult to get and more expensive. Your options include: 

Secured loans – These are loaned against an asset such as a car or home. If you have a low credit rating a lender will look at your application more favourably if it is secured against an asset, but you run the risk of losing that asset if you fail to make your repayments. 

Personal loans – You do not need to secure the loan against an asset which means unless you have a very good second income and an unblemished credit history you are unlikely to be given a personal loan if you are unemployed. The best place to start is with a bank you have a long relationship with.       

Payday loans – You should be extremely wary of taking a payday loan. Although they are available to unemployed people and may seem like a good quick fix, they usually come with extortionate interest rates and steep penalties for missed payments. 

Guarantor loans – Someone with a good credit rating and a stable income can agree to step in and pay if you fail to keep up with your repayments, reducing the risk to the lender.  

Credit cards – Many offer interest free periods, which can make them a useful tool to help you through a period of unemployment. However rates go up sharply after the initial 0% period so you should only use them if you are likely to be back in employment quickly. 

Overdrafts – You may have an overdraft facility attached to your current account, which you can use for a small fee for a certain amount of time. 

Remortgaging your home – You can access some of the value in your home by taking out a new mortgage. This is only advisable if you own a large proportion of your property outright. You’ll also need to prove to mortgage lenders you have enough income to meet the repayments.     

There are pros and cons to each option, but you should avoid any that come with rapidly rising rates and fees that could cause your debt to spiral out of control. 

If you think you may be unemployed for a long period of time, you should try to avoid a loan if possible. Missed payments can quickly make your debt unmanageable, they will also impact your credit rating which will make it harder to borrow money in future. 

Before taking out a loan explore other options, such as reducing your outgoings, asking for a mortgage payment holiday or transferring credit card debt to a low cost alternative.

Debt charities can help you assess your options and negotiate with creditors if you can no longer afford to keep up with your repayments. 

Working with us

If unemployment has put you in a difficult financial position and you own your home, working with us may be a good option for you. 

We specialise in selling houses fast, in as little as seven days if necessary, and aim to make the process as hassle free for you as possible at a difficult time. Although we pay slightly under the market rate for your home, we do not charge estate agency fees and by selling to us you know any costly mortgage repayments will quickly stop. 

We always buy with our own cash funds which means we are never part of an unpredictable chain of housing transactions. Once we’ve given you a completion date you can be sure we’ll stick to it and the sale will not fall through.

If you’d like to chat about our service and find out how much we’d offer for your home, please get in touch

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