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Learn everything you need to know about how to get a loan if you are unemployed.
- Can I get a loan if I’m unemployed?
- Explore your loan options
- How to avoid a loan
- Loans for disabled or ill people
Personal Loans for Unemployed
Long term unemployment is not unusual. It especially does not discount the fact that many families will find themselves in a situation where they might need small personal loans for bad credit. Those people who are unemployed or disabled may have little savings. Therefore, unforeseen and unexpected bills can mean that borrowing is a necessity. Whether it is for a leaky roof or new windows to prevent heat loss, unexpected costs can quickly arise in any household. It is not impossible to borrow home improvement loans – or any loans – if you are unemployed. In addition, there should be no discrimination against anyone with a disability.
In effect, many people do not know where to start their search for a lender that will grant personal loans for the unemployed. If they do, it may be hard to find a lender without extortionate interest charges. That’s why we have written this short guide to help you.
But first, here are some statistics that we cannot ignore.
Main points for the 3 months to January 2017
Estimates from the Labour Force Survey show that: Between August to October 2016 and the 3 months to January 2017, the number of people in work increased. At the same time, the number of unemployed people fell. The number of people aged from 16 to 64 not working and not seeking or available to work (economically inactive) also fell.
There were 31.85 million people in work, 92,000 more than for August to October 2016 and 315,000 more than for a year earlier.
Office of National Statistics UK Labour Market March 2017
Although the number of unemployed people has fallen, the number of people employed on zero-hours contracts has risen. These are people who also suffer when it comes to getting a personal loan at low interest rates.
Can I Get A Loan If I Am Unemployed?
If you don’t work, the first question to ask yourself is whether you want to go into debt. Do you really want to take on a loan if you have no job income? But of course, no matter how carefully you prepare a monthly budget to manage household expenses, there may be times when you need a lump sum to pay for an unexpected bill.
Even without a job, you may still decide that you can afford to take a personal loan. Perhaps you are excellent at managing money and convinced that you can afford to repay a loan. Or, you may be out of work for just part of the year (as a seasonal worker). Therefore, you would expect to earn money later which will cover the repayments. Whatever your motivation for borrowing, it may not be simple but it is possible. You can be accepted for cheap interest personal loans if you are currently out of work, you just need to know where to look. There are personal loans for the unemployed available online to help you out of a tight spot.
Types of Unemployed Loans
Just because you are unemployed, you do not have to settle for the first loan you see. There are still a number of different options available to you, and it is up to you to look through them and select the best option for your circumstances.
Loans for Unemployed With No Bank Account
If you do not have a bank account, you will not manage to receive a loan from an online lender. Instead, you may manage to take a personal loan from a lender with a shopfront. However, most mainstream lenders will want to see proof of income before agreeing to accept a loan application. This is a similar problem faced by those seeking a loan for self-employed. If you can prove another source of income, it is still possible to get a loan. However, it may be outside the mainstream lending businesses.
Personal loans for the unemployed might be harder to find as you do not have a reliable and steady income. High street banks and other mainstream lenders will offer the best rates and terms to applicants with good credit ratings. Another important factor they will consider is if you have been employed with the same company for a number of years. So as you can see, employment and time at employer are important deciding factors for most lenders.
Bad Credit Personal Loans for Unemployed
You could be refused a personal loan if you have a previously bad credit record, made multiple applications for loans or if you have had a County Court Judgement for non payment of a debt. So, approval for a loan when you are unemployed might depend upon your credit record. This is because your credit report will show how responsible you have been when repaying credit cards or other loans. Other factors that come under consideration regarding personal loans for the unemployed, as well as general personal loans, may be how long you have lived at your current address and if you are on the electoral roll.
So, what are the alternatives if you do not have a job and need to borrow money but cannot access funds from the mainstream reputable lenders?
Benefit Loans For Unemployed
These kinds of loans are misnamed as they are usually granted upon the premise that you will have a guarantor for the loan.
If you can find someone willing to stand as guarantor, you may be eligible for a loan. Still, take into account that the guarantor personal loan interest rates charged may be higher than those offered by mainstream lenders. Typically, guarantor loans will charge between 29.9% APR and 49.9% APR.
If you can get a benefit loan without a guarantor you will need to prove that you have enough disposable income to make repayments. This means that lenders will want to look at bank statements. You will also have to undergo a financial assessment. Expect an offer with a very high APR and only a short term loan, usually between one and twelve months.
Unemployed Loans No Guarantor
If you are unemployed, being accepted for a secured loan against your property is easier to achieve than taking out an unsecured loan. This is because the lender will have the right to seize your home should you default on the repayments. Most lenders will also take into account your ability to make the repayments and will not just accept your word. So, proof of benefits or other income is essential.
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Logbook Loans For Unemployed
Logbook loans are a specific kind of lending which allows you to borrow money against your car. The car must be under 10 years old and these are very much lenders of last resort.
You can still use your vehicle as long as you continue to repay the loan. The amount you can borrow will depend upon the value of the car. Lenders vary in the sums available for this kind of borrowing with some offering 50% of the value whilst other go up to 80%. Lenders also charge a fee that could be as much as 4% of the loan. A typical APR for a personal logbook loan is 400%. So, you can see that this is a very expensive way of borrowing money. You cannot get logbook loans in Scotland.
Citizens Advice Bureau and Logbook Loans
The result of analysis of more than 23,000 cases of significant debt problems handled by Citizens Advice Bureau between April and September 2013. It found 127 cases which involved a logbook loan (also known as bills of sale). The findings show, on average:
- Logbook loan debts were worth more than double that of payday loan debts (£2,500 compared to £1,000)
- People with logbook loans had a total of ten debts, including other forms of credit, that’s double the number of loans held by all debt clients (5)
- 57 per cent of clients with logbook loans also had one or more other type of high cost credit
- 37 per cent of clients with logbook loans also had one or more payday loan
- The total amount of debt across all loans for people with logbook loans was £13,500.
Doorstep Lenders for Unemployed
Also considered to be a lender of last resort, a door step lender like Provident will provide short term loans. Again, be prepared to pay extra in the form of interest and charges. In addition, loans from this kind of lender are generally only allowed up to a maximum of £1,000. They can also be very uncomfortable if you fail to make payments as you will need to meet debt collectors fact to face.
Door step lenders are regulated in a similar way to normal mainstream lenders. The representative will call at your home and carry out an affordability assessment to establish whether you will manage to make the repayments. Unlike other lenders, this kind of organisation will take into consideration benefit payments, pensions and payments that you may receive from a spouse. Therefore, there could be a higher chance of acceptance with a door step lender than a personal loan lender.
Are Door Step Lenders Safe?
According to Citizens Advice Bureau, door step lenders do not have a good reputation. A new report published by the charity today has identified a number of concerning practices by some doorstep lenders. The evidence, submitted to the Financial Conduct Authority as part of its review into the high cost credit market, highlights:
Doorstep lenders often show harsh debt collection methods. Since they earn commission on collecting repayments, they sometimes use intimidating behaviour which breach FCA debt collection rules.
Citizens Advice helped one man with substantial doorstep loan debts who received a visit by a lender on the same day his son died. The lender refused to leave until a family member went to an ATM to withdraw cash. Another case saw a lender harass an elderly, blind woman for payments while she was in hospital receiving treatment for a stroke. This was despite repeatedly being asked not to visit.
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Irresponsible lending – there are not satisfactory checks to make sure people can afford to take out doorstep loans.
One woman who had very little money to spare. This was because she had a legally binding debt plan to repay nearly £20,000 was given 3 doorstep loans by 3 separate lenders. This was despite them knowing about her situation.
Alternatives to Loans for Unemployed People
Another alternative to loans for unemployed is turning to a credit union. However, in order to borrow from one of these organisations you must first become a member and then to have made some small savings.
For someone who is unemployed but who expects to start work again in the near future, a better option might be to borrow off a 0% credit card. Another option is to arrange an agreed overdraft with the bank. Of course, a new credit card might prove difficult. However, if you have been with your bank a long time and can prove that you have run your account in a responsible manner, it might be the best route to follow. Showing proof of a job offer can also help to enhance your case for an overdraft. These options can often be better than looking into personal loans for unemployed. This is because the interest rates are often much lower and can save you a lot of money.
Difficulties with a Loan
Even the most conscientious of payers may fall into difficulties. At some point, they may find themselves in need of borrowing. If this happens, there are many charities and organisations which can help you to organise a budget. Some even show you ways in which you can make your money go further. Always look at optimising the income that you have before borrowing money on a personal loan. In this way, you can avoid future financial problems.
Applying for a flexible personal loan when you are unemployed and only receiving benefits comes with a strong warning. The amount of benefits you receive can also change with your circumstances. So, the money is not always guaranteed. If you have any doubts about being able to meet the repayment commitments, then you could end up in serious debt. That’s why many lenders do not offer loans to people on benefits only.
Personal Loans for Ill or Disabled
All banks and other lenders must treat the disabled and those suffering from ill health in the same way that they treat every other applicant. This is even in relation to personal loans for the unemployed. Lenders cannot discriminate whether your disability or illness is physical or mental.
However, all applicants are subject to the same affordability checks, and this is where the problems can arise when seeking personal loans for unemployed. This is because unemployed applicants find it harder to pass the affordability assessments of lenders.
Disabled Applicants Who Are Employed
If you are disabled but have regular long term employment and your credit rating is good, then you should have no problems taking out a flexible personal loan. As with all applications, it is a good plan to first work out whether you actually need the loan. Then you should work out how much you can afford to borrow that can be comfortably paid back. With the right preparation, borrowing a personal loan without having a job can be less dangerous.
Applicants On Low Incomes
If you receive a low income and but supplement your wages by disability or sickness benefits, the major lenders may not want to take a risk. It is important not to begin your search by Googling ‘loans for the disabled’. This may show lenders who offer the very highest rates of interest. Instead, search for responsible lenders online that can help you. You may need to carry out a bit of research on the lenders’ sites.
Different Types of Borrowings For Unemployed People
Even while looking at bad credit personal loans for unemployed, never borrow money to pay regular monthly bills. If this is the state of your finances, then get some advice before getting into debt. Citizens Advice or a debt charity such as Step Change will be able to help. There is lots of other free advice about debt on the Internet. Still, many loan companies will agree to help you through a difficult patch if they believe it is only temporary. Make sure to always make an informed decision before borrowing money with any lenders out there.
You may want to use a pay day loan to cover your income while you wait for a late benefit payment. However, this is not advisable. Speak to the companies that you need to pay and explain the situation. Then contact the JobCentre to see whether you qualify for a payment from the Social Fund or a short term advance of your benefit.
Receiving some benefits like the ESA or Income Support will also allow you to qualify for a Budgeting Loan. They will not charge interest on this kind of emergency loan. You can pay it back out of benefit payments in the future. If you rely on your benefits to get by, this may not be the loan for you. Applicants who cannot get a Budgeting Loan could also consider a credit union. However, this organisation will only allow you to borrow after you have made some small savings over a period of months.
Instead of applying for small personal loans to make adaptations to your home, you can apply for a Disabled Facilities Grant. These grants are means tested. However, if you apply and receive a grant the money does not need paying back. This could be a great advantage to your finances!
Summary of Loans for Unemployed
The article covers personal loans for unemployed. It gives advice about what to do if you are of ill health or are disabled. Alternatives to pre-approved personal loans are discussed and other means of borrowing using government organisations. Hopefully, you are able to weigh out which loans are best for you, if you are unemployed.
Personal Loans Now specialises in trying to help you find a loan whatever your situation may be. With our access to Monevo’s large panel of direct lenders, you don’t need to take the time to see which lenders will grant your loan; we arrange that for you. Apply now for a loan of up to £25,000* and, if approved,you could receive the money with same day payout.