Unemployment and a financial emergency are two unfortunate situations no one wants to encounter. However, emergencies don't choose who and when to strike. Being unemployed, you are likely struggling to make ends meet. While most people turn to emergency loans during such situations, it can be challenging to secure a loan without a stable income. The following is an overview of the options you have when it comes to loans for the unemployed.
While securing the ordinary bank loans may be a challenge if you are not employed, you can still get a personal loan. This is a loan that requires no collateral to secure it. However, to get this loan, you must have a good credit rating and prove that you have a regular income source. Lenders want assurance that you will be able to manage your debt and repay on time.
Your credit history matters
One of the ways they can get this assurance is by checking your credit history. They want to see how you have managed your previous loans if any. If you have a good history and score, you are likely going to get a loan.
Being good in paying previous debts is not enough to win you an unemployed loan. You need to prove that you have an income source to repay the loan you are applying for now. In this regard, you should provide proof to show that you have alternative sources of income that you will use to finance the loan. They could be a pension, business income, pending job offer, savings, or any other source.
Even though unsecured loans seem like they are easy to get, there are some requirements that you need to meet. They include:
In some cases, when you apply for an emergency loan, the lender may not agree to process your loan, or you may not meet the qualifications needed hence getting your application rejected. This is just a bump on the road; there are other ways you can use to get the finances that you need, including:
When your application for unemployment loans fails to come through, there are still other methods that you can use to raise the funds that you need. They include:
While there seems to be a variety of options to get a loan when unemployed, this loan comes are associated with some risks, which include:
High interest rates - Most lenders who offer loans for the unemployed or in emergencies know you are desperate. They know you are likely not keen on terms and conditions of the loan, and even if you are, you will comply with them because you have limited options. Therefore, you will find that these loans have hidden charges and high interest rates compared to other loans types.
Missing payments and losing collateral - Emergency loans come with the risk of losing the item you have put down as your collateral ones you miss your payment. This is very common with pawn shops.
Shorter repayment terms - In some instances, emergency loans have shorter repayment terms. This puts you under pressure which might end up in missed payment.
Facing a financial emergency while unemployed may leave you with no option other than taking a loan. While securing a loan if you don't have a job is challenging, you can still get one if you have a good credit rating and prove that you have the income to repay it.
You can also seek assistance from friends, peers or charitable organizations. However, you need to keep the disadvantages of these loans in mind before getting one to avoid getting your financial wellness out of control. Do your research and compare various lenders to settle on the one that offers the best deal.