Last updated: 16/10/2020 | Estimated Reading Time: 4 minutes
Loans for unemployed people
Being unemployed is tough, it can be hard to pay for rent and bills, meaning that taking out quick money in the form of a loan can be an attractive option. However, it an be difficult to find loans if you do not have a projected stable income, and often interest rates can be very high. In this guide we will look at the best loan options for those who are unemployed, and alternative ways to find credit if you are in need.
In This Guide:
- Loans for unemployed people: Should I get one?
- What options are there for unemployed loans?
- How difficult is it to get low income loans?
- Alternatives to unemployed loans
- Compare low income loans online
Loans for unemployed people: Should I get one?
Lenders, particularly the more traditional ones such as banks, will be much more wary of lending to people without a job, as it represents a larger risk for them, with less chance of the loan being paid back. In order to stand a chance, then, having a good credit history score is essential, as it can help them build trust in you paying it back.
If you are unemployed, interest rates are likely to be much higher also, as lenders need to make sure that they will be getting a significant enough return on the risk.
This means that if you are unemployed, and you do not have any clear income coming in, you should think twice about taking out a loan. Being stuck in a cycle of debt and interest repayments can be incredibly difficult to get out of, and missing repayments can have a negative impact on your credit score, making it much harder to get a loan in the future.
What options are there for unemployed loans?
Even though it is harder to borrow money if you are unemployed, there are a few options for getting a loan. The main options are:
- Secured Loans: This is the easiest way to find cheap loans if you are currently out of employment. These guarantee an asset (such as your house or your car) that you own to your loan, which gives the lender security, and mean that they will be able to offer you lower interest rates. However, if you are unable to pay back the loan, they can repossess your belongings.
- Guarantor Loans: If you are lucky enough to have the support of friends or family, you could apply for a guarantor loan. This means that if you are unable to pay back the loan, then the allocated guarantor will be liable to pay back what remains of the money borrowed.
- Payday Loans: These can seem like an attractive option for borrowing small amounts of money easily, as you do not necessarily need a good credit rating, anything to guarantee the loans with, or stringent employment checks. However, the interest rates are usually extortionate, with APR rates in three figures. The penalties for missing repayments can be harsh as well, so it is best to try and avoid these as much as possible.
How difficult is it to get low income loans?
If you do have a job, but your income is low, it can still be difficult to find cheap loans, as lenders have to be confident that you will be able to pay it back. Like any other loan, having a good credit rating goes a long way.
Being able to guarantee your loan also helps, either through property or a guarantor.
Alternatives to unemployed loans
There may be other options for getting credit without having to take out a loan from a bank if you are unemployed, so consider some of these if you wish to avoid the very high interest rates that come with them:
- Credit Card: If you have a credit card, this could be a good option if you need to purchase something and you have income on the way in in the near future. Many credit cards have zero percent interest on a certain amount of time, although the interest rates can increase a lot if you leave it for too long.
- Overdraft: The interest rates on overdrafts can be relatively high, but if you get in contact with your bank, you could negotiate a reduction for this.
- Peer to Peer lending sites: These have become more popular in recent times with the growth of the internet. In essence, they provide platforms for people to borrow money directly off those who are willing to lend it, without the need for a bank or credit union. However, you will still likely need a good credit score to find cheap loans.
Compare low income loans online
The best way to find out what loans you are eligible for is to compare loans using a ‘soft’ search tool online. By typing in details such as your age, employment status, and credit history, you will be able to see what loans you are likely to get accepted. This allows you to search for potential deals without affecting your credit rating.
You can also compare likely APR rates, allowing you to make an informed decision about whether you should, and if you can where the best place to apply will be.