When you want to take out a loan, banks and providers will look at how much you earn and your past borrowing habits to decide how likely you are to meet repayments and pay the loan back.
The better your credit score and financial situation, the better loan interest rate you’ll be offered.
If you’re unemployed, in-between jobs, or don’t get paid for your work, it’s likely that you’ll find it difficult to get a standard loan. But it’s not impossible.
While most high street banks and building societies will decline someone if they’re not in regular paid employment, there are ways you can get one.
Specialist lenders have begun to offer products aimed at those who have been denied a standard loan. But, the interest rate will be much higher compared to standard personal loans.
What do I need to do?
Whether you’re employed or unemployed, you’ll need to be attractive to lenders if you want a loan. One of the easiest ways to make this happen is to improve your credit score. If you’re unemployed and have a poor credit score, you’ll be deemed a very high risk.
You can improve your credit score by:
- Checking that your details are correct with credit reference agencies.
- Adding your name to the Electoral Register.
- Stop applying for credit in short spaces of times.
- When you do get credit, try and keep up with repayments to rebuild your credit history.
Types of loans for unemployed people
While you won’t be able to apply for the majority of loans available, there are specialist loans aimed at people who are at a greater risk.
Secured loan – This type of loan asks you to put a possession up as security, such as a house or car. If payments aren’t met, this item can be repossessed.
Personal loan – This type of loan is unsecured, which means you don’t need to use anything as security. While this might sound good, the higher the risk you are, the higher the interest.
Payday loan – This can be a very expensive way of borrowing money. These loans aren’t secured against your belongings and are designed for those looking to borrow a small amount of money over a short time. Payday loans often come with high interest rates and if you can’t afford to pay back the repayments, the costs can spiral.
So, while you usually need a steady salary to take out a loan, there are several specialist providers for the unemployed.
Just because you don’t have a regular income no longer means you won’t get access to credit. Instead, you’ll have fewer options, and loans will come with higher interest rates.