What Loan Alternatives are Available for Unemployed People?

When you are in between jobs and you are caught unawares by a financial emergency, you think if it makes sense to borrow money. You must be on benefits, and they will unlikely be enough for meeting your daily expenses, let alone pay off your debt using them.

Further, it can be difficult to have approved for a loan when you have no income. However, it is not always implausible. Borrowing is still an option for you if you need it to fill the gap or tide you over. Financial emergencies do not see your employment status before knocking at your door.

Therefore, some lenders do not hesitate to lend you money even if you are out of work. Although a couple of lenders sign off on the applications from unemployed people, you should meet certain conditions.

For instance, you should have a stellar credit record, and you will need to prove your repaying capacity. Various types of loans are out there to fund your small needs. Many people think that short term loans for unemployed are a particular loan, while the fact is that there are a couple of loans available to you to apply for when you are out of work.

Cash loans

Cash loans are also known as small loans. Text loans are also a type of these loans. They aim to help you tide over during financial emergencies. As the borrowing amount is not big, you will be required to pay off the debt in a lump sum within a period of 14 days or a month.

Doorstep loans are also a type of cash loan. This facility is available for those borrowers who do not have a functional bank account at the time of borrowing money. For instance, if you have just a pay account, you can borrow money by requesting cash delivery at your doorstep.

All the formalities like the signing of the agreement will be done in the comfort of your home. The representative will visit your home to collect the payment.

Payday loans

It can be counterintuitive to apply for a payday loan when you are jobless, but it is true that you can apply for these loans if you are on benefits. Your benefits will be considered your income when you are out of work.

You will get money based on your benefits, so you do not fall into a debt cycle, and you will be asked to pay back the debt in a lump sum. Some lenders may offer you an instalment option. For instance, you may be offered weekly or bi-weekly instalments to managing payments easily.

Bad credit loans

A poor credit score is considered financial irresponsibility. A lender would not like to unnecessary take on the risk. Not all lenders will freely lend you money when your credit report is not perfect, but some of them can offer you some best deals. When you have a poor credit rating, you do not need to apply for payday loans or doorstep loans.

You should instead seek bad credit loans. You will have to pay down high-interest rates with a less-than-perfect credit score. A lender will mitigate the risk of lending money by charging a higher interest rate if you make a default.

Guarantor loans

A guarantor loan is similar to a cash loan with the difference that you will need to arrange a guarantor with a good credit rating. These loans have been designed to help bad credit borrowers raise money at lower interest rates.

If you are not happy with the deals offered by the lender, you can arrange a guarantor with a good credit rating. Guarantor loans will let you borrow money at attractive interest rates and more manageable repayments, as the lender can call on the guarantor to clear dues in case of a default.

The bottom line

There are several loans available to you when you are finding a job. Each loan has its own benefits and drawbacks. You should carefully monitor which one can serve your needs.

Even if they seem affordable, carefully scrutinise your repaying capacity. Unemployed loans are short term loans, so it can be tough to clear all dues on time.