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Can I get a loan if I’m unemployed?
Being out of work can mean you have to live on a stricter budget than most. However, no matter how good you are at managing your finances, something may come up that costs more than you can afford (and that any benefits you receive won’t cover) – so what are your options?
Most lenders require you to be in work in order for your loan application to be accepted. However, that doesn’t mean there are no loans available to you if you’re unemployed. Read our guide to find out what your options are.
As we said before, most lenders will only consider applicants who are in work. This is because they want the assurance that the borrower can afford to repay the money they’ve lent them – and that they won’t have to over-stretch themselves massively to do so.
However, there are lenders who specialise in proving loans to people who are unemployed. If you meet most of the other criteria they’re looking for in a borrower, like a good credit history, and your details are on the Electoral Roll, you may be able to get a loan through one of these providers.
Be aware, though, that the interest charged for this type of loan is likely to be quite high, and far more than the best deals on the market. This is simply because you present a greater risk to the lender as you do not have a regular income to cover your repayments.
You should be completely sure that you could make the repayments on your loan. If you don’t, the interest will start to mount up and make your repayments even higher. Your credit history will also be affected, which could make borrowing in the future difficult.
A different option if you have doubts about going through a specialist lender is to apply for a Budgeting Loan. This is a government loan that provides funds to cover essential items when you can’t afford to pay for them.
The minimum you can borrow is £100 and, depending on your personal circumstances, you can apply for a loan of up to £348 if you’re single, £464 if you’re in a couple and £812 if you have children. You can use the loan to pay for essential items like furniture, clothing, footwear, travel expenses, home maintenance and security, or maternity or funeral expenses. You can also use it to support you while you move home, by paying for things like removal costs or an advance on your rent, among other things.
You pay back the money you borrowed in regular instalments taken from your benefits. These repayments are interest-free so you only pay back the money you borrowed.
In order to qualify for this loan, you need to have received either Income Support, income-based Jobseeker’s Allowance, income-related Employment and Support Allowance or Pension Credit for at least 26 weeks. If you live in Northern Ireland or Scotland, you can apply for a Crisis Loan or Community Care Grant, while in Wales you can apply for a Discretionary Assistance Fund.
Can you cope without borrowing?
You may be relieved to learn that you can apply for a loan if you’re unemployed, but we would recommend you think very carefully before you do so. We understand that sometimes emergencies happen, like the boiler packing up or your car breaking down, that require you to fork out for repairs or replacements. If you don’t have the money readily available, a loan can plug this gap. However, you may be limited in how much you can borrow, and you may end up paying back quite a bit more than you borrowed in the form of interest.
If you don’t need an emergency lump sum of cash but could do with more funds to cover your day-to-day spending while you look for work, see if budgeting better could help you get by until you find a job. You could also speak to your family and see if they are willing to lend you the money you need until you’re back in employment.
We hope this guide has given you a better understanding of the loans available to you when you’re unemployed. If you are currently out of work and are struggling to keep up with your mortgage payments, you can find out more about your options here.