We may find ourselves unemployed for a number of reasons, many of them out of our control. Whether you’re in-between jobs or dealing with the effects of redundancy, not having a regular income can be a worrying and stressful time. Unfortunately, the bind of paying for bills and necessities doesn’t ease just because we can no longer afford them.
The idea of taking out a loan to tide you over might have crossed your mind. While you should always think very carefully before applying for any form of credit, it’s even more important to do so if you are unemployed. As with any loan, you must be confident that you can make your monthly repayments on time, as failing to do so would have a negative impact on your credit score. You should also make sure that keeping up with your repayments would not mean that you are unable to pay for essential outgoings, such as rent or mortgage, food, and utilities.
I’m unemployed - how likely is it that I will be approved for a loan?
The approval eligibility for loans often requires a certain criteria to be met. When you apply at Cash Lady we share your details with our panel of trusted lenders, financial service providers, and other credit brokers. Only a small number of our lenders will consider applications from people who are unemployed; and we will only share your application with these particular lenders.
However, without a consistent income, the chance of being approved for a loan may be low, even if you have a good credit score. While there are loan possibilities for those who are unemployed, they are likely to be limited, and the interest rate could be a lot higher.
If you require advice on what your options are for obtaining a loan while unemployed, you can get free, impartial help at moneyhelper.org.uk
CashLady Representative 79.5% APR
If I am approved, what happens if I fall behind on my repayments, or I am unable to pay off my loan?
These are possibilities that need to be realistically and honestly considered before you take out a loan, or you could find yourself in an even worse financial position.
If you miss a loan repayment you may be charged a fee, plus interest. This will negatively impact your credit rating, which will lower the chances of you being granted other financial services, such as credit cards or a mortgage, in the future.
Being unable to repay the loan as agreed could lead to an increased level of debt, as well as the effects of financial strain on your home-life.
If you are approved for a loan, it’s a good idea to set up a Direct Debit to make sure you never miss a repayment.
What if I’m unemployed and claiming benefits? Can I apply for a loan?
If you’re unemployed and claiming benefits, it may still be difficult to gain approval for a loan, although, in some circumstances, some lenders may consider certain benefits as regular income. These benefits include Universal Credit; Child Tax Credit; Child Benefit; Fostering Allowance; Industrial Injuries Disablement Benefit; Personal Independence Payment (PIP); Incapacity Benefit; Disability Allowance; and Employment and Support Allowance (ESA).
Why might a loan NOT be the best option for someone who is currently unemployed?
Being unemployed will lower your chances of being approved for a loan.
If you are approved, however, you are likely to be charged higher interest rates than a standard loan. You should carefully read the terms and conditions of any loan offer before signing a credit agreement, paying particular attention to the rate of repayment you are offered, and what your monthly repayments will be.
Again, we must stress the importance of careful consideration when applying for a loan or credit product. While the prospect of obtaining credit to bridge a gap may sound appealing, it’s imperative that a full personal risk assessment is considered before you make a decision.
I’ve been approved! How long will it take for the money to reach my bank?
Every lender is different but, typically, once you have been approved, you could expect the money to reach your bank within a matter of days, or sooner. If the money is needed to make an emergency payment, you may want to speak directly with your lender.
It might be a good idea not to make any money-based decisions until you have received full confirmation that your application has been approved and you have an idea of when the funds will be with you.
I’ve weighed up the options and I’ve decided that a loan isn’t the right product for me while I’m unemployed. However, I need help. Are there any other options that I could look into?
Before you think about a loan, there are other avenues to explore that could be a better option for you and your circumstances.
If you are in receipt of Universal Credit you may be able to apply for a Budgeting Advance. You can request a Budgeting Advance by leaving a message in your online Universal Credit journal.
If you have been claiming certain benefits for six months, you may be eligible for a Budgeting Loan. Qualifying benefits include Income Support; Pension Credit; income-based Jobseeker’s Allowance; or income-related Employment and Support Allowance (ESA).
This government-issued loan can be used to pay for clothes and footwear; funeral costs; security or maintenance improvements to your home; costs associated with getting a new job; furniture or household goods (such as a washing machine); costs linked with moving house (including advance rent payments); UK-based travelling costs; and maternity costs.
Budgeting Loans are interest-free, and repayments are taken from your benefits every month, usually over a 12-month period.
For more information on Budgeting Loans, or to check your eligibility, visit the Gov.uk website.
Is there anything else I can do to ease the financial burden?
Finding yourself without an income can be frightening, especially when it comes to purchasing essentials. If your situation means you cannot afford to eat, you may be able to visit a food bank. Food banks are in operation across the UK, providing groceries, toiletries, and other essential household items to those who are in emergency need. You will usually receive a three-day supply of necessities.
You can contact the Citizens Advice Bureau and ask them to refer you to a food bank. They will speak with you about your current situation and determine the best plan of action for you.
Referrals can also be made by other professional bodies, including your GP, local authority, and JobCentre Plus.
To find your nearest food bank, type your town or postcode into the search bar on the Trussell Trust website.
You can check you are receiving all the benefits you are entitled to at Turn2Us.
If you are in receipt of certain benefits (including Income Support and income-based Jobseeker’s Allowance), your child may also be entitled to free school meals, food vouchers, and the Holiday Activities and Food programme. For further information and to check your eligibility, please visit the Gov.uk website.
We understand that this is a stressful situation. The reality is that stints of unemployment – whether intentional or not – could happen to anyone, at any time. We hope that you will feel comfortable in sharing your concerns with someone you trust, or a trained financial specialist.
Remember that help is out there. For free advice, visit Citizens Advice Bureau, National Debt Line, Money Helper and StepChange.
We have teamed up with the UK’s leading debt charity StepChange to provide a free online questionnaire for anyone currently worried about money. The answers you provide will help to determine the advice offered, and taking the quiz will not affect your credit score. Click here to get started.
