Getting loans can be very hard when you’re out of work and have bad credit. Banks see you as too risky. But emergencies and bills pile up regardless. What do you do?
The key is approaching loans for the unemployed with bad credit by making informed, wise choices. Don’t fall victim to predatory lenders charging crazy rates. Take time to understand better options so your situation improves rather than worsens!
This guide covers:
- Government programs providing support
- Borrowing through community groups
- Applying with others to get approved
- Using collateral to secure funds
As of April 2024, the unemployment rate in the UK stood at 4.4%, with approximately 1.51 million people unemployed. The percentage of opting for loans in this group is also high as the cost of living in the UK is increasing day by day.
Unemployment lending can happen responsibly – it just takes extra planning and creativity! Remember, your current job and credit struggles are temporary.
What Are Your Loan Options in the UK?
If you’re out of work and have bad credit, some loans exist in the UK to help you get fast cash.
- Payday Loans: These give money for only a month or less. The catches? Very high interest, low max amounts.
- Guarantor Loans: A friend or family member with good credit guarantees to pay if you can’t. This allows you to borrow more at better rates.
- Credit Unions: Community groups that pool members’ savings to lend internally. Their rates are affordable, and they understand unique situations.
The key is being realistic with repayment. Avoid borrowing more than unemployment, and other income can be covered each month. Read all the terms so high costs don’t surprise you later!
How Can You Improve Your Loan Eligibility?
If you receive government benefits, share the proof with lenders. This steady income makes getting short-term loans on benefits easier. Benefits can count as your source of repayment.
Types that work are:
- Unemployment benefits
- Disability benefits
- Retirement pensions
Also, show your history of paying major bills on time – rent, utilities, and phone. Consistent payments help even with bad credit. Other proofs:
- Rental leases and receipts
- Past bank statements
Finally, finding a guarantor greatly improves chances. This person signs, too, promising to cover payments if you default. They should have a strong income and a high credit score.
Provide everything you can, confirming at least some consistent money coming in and responsible habits. This gives lenders security that small loans to help bridge gaps can be repaid.
Can Government Assistance Help?
Universal Credit
This benefit combines several into one monthly payment. It covers unemployed up to age pension. It also calculated based on previous income. Apply instantly online.
Jobseeker’s Allowance
Get weekly cash to support basic living costs while seeking work urgently. Attend meetings with your work coach, too. You must show effort to find work to keep qualifying.
Local Authority Grants
Councils have emergency funds for critical expenses like food, utilities, and furniture when facing a temporary crisis. If Universal Credit falls short of basic costs, apply for these hardship grants.
The government is launching a new Back to Work Plan to help up to 1,100,000 people with long-term health conditions, disabilities or long-term unemployment find and stay in work. Check this out on the official site.
Various government programs step in to fill gaps so you can focus fully on the job search without money stresses. Apply for every benefit and grant possible – it’s there to support people between jobs. Meet with a benefits advisor to ensure claiming correctly.
Look into Secured Loans
Secured loans require you to put up something valuable (collateral) in case it is unpaid. Things that work:
- Car
- Jewellery
- Property
Benefits over regular loans:
The collateral reduces the lender’s risk if you default. To them, that equals a safer bet. With an asset securing it, lenders don’t price high rates covering default risk.
Just be sure you can make the payments! If you fall behind:
- The collateral gets seized
- Sold to cover missed loan payments
- Losing a car or ring over a few hundred pounds isn’t worth it!
Explore secured borrowing only once you are confident a new job is lined up. Avoid the potential pain of losing beloved stuff!
Apply for a Joint Loan
If you lack income, a relative or partner with a steady job can apply together for a “joint loan”. This means:
- You’re both listed as borrowers
- The loan goes to you, but they sign, too
- Monthly repayments come from their income
Benefits include:
Much Higher Approval Chances
Their financial track record helps offset your current unemployment. It shows consistent ability between you to repay over time.
Bigger Loan Amounts Available
With two names backing it, lenders feel more secure lending more money that a single unemployed person normally couldn’t get approved for alone.
Start by asking a willing, working family member you trust – like a parent, sibling, or long-time partner. Explain how it aids you temporarily. Offer to sign something, ensuring you’ll repay your share from future work.
Having a joint signer gives lenders confidence during unemployment. Make sure someone trustworthy understands the commitment first before moving ahead together.
Compare Loans Online
Special websites exist to help you find your best loan options. They let you answer a few questions once to instantly see offers from many different lenders.
Benefits are:
- Quickly compare interest rates side-by-side
- Filter loan amounts, terms, monthly payments
- See overall costs short and long-term
This makes it fast and easy to catch very bad deals that are charging too much. Also, check customer reviews of the lenders listed. See what actual past borrowers say about their experiences. Watch for complaints about hidden fees or shady practices.
Responsibly getting needed funds involves shopping around, not just taking the first search result. Loan comparison sites simplify doing the research, so you can pick affordable payments that work for your budget.
Conclusion
Even without a current job and low credit scores, some loan options exist. But you must be more careful in your situation!
Don’t think quick-cash offers are a real help. Check shady-sounding lenders properly first. See what friends could personally lend informally. You can contact government agencies about programs you qualify for before borrowing externally at all.
You must approach loans smartly. You have to improve eligibility where possible by showing a stable history outside credit reports. Weigh every term and risk – it’s not worth wrecking your financial recovery!
Most importantly, knowing that there is no work phase, lending can work responsibly with effort and wise planning. Don’t believe claims needing money now require agreeing to outrageously unfair loan terms. Protect yourself through informed comparisons first!
Mark Williams works as one of the Loan Advisors at a direct lender firm, Onestoploansolution. He has been working with the lender for about 15 years. He has been known to facilitate his employer in remarkable ways from writing to consulting and whatnot. He is a professional who wants to explore more of the UK financial market, the loan products and how customer requirement changes with time.
