Finding and getting an unemployment loan can be a difficult proposition for those who are unemployed or have very little income. Life is not free and it is not easy. Providing you or your family with the basics of our society can be a financial burden when things turn around in an emergency.
Sometimes we just need a little more money to get back on track, but the problem is finding a suitable lender. Let’s look at loans for the unemployed and how to get different types of jobless loans before applying.
Common problems for unemployed people looking for loans
Under normal circumstances (that is, when employed), the process of obtaining a loan from a source of financing is more or less simple.
The person in question decides how much to borrow, how much disposable income he or she can use to pay interest and principal, how to find a suitable source of finance, and how to get the loan.
This process is easy for those who are already working because one of the first factors that credit institutions consider in deciding whether and how much to lend to a person is their ability to repay the loan.
By definition, unemployed people with no income can obviously be a huge red flag for most traditional lending sources.
The situation then becomes a catch-22: The unemployed person needs an income in order to qualify for a loan to overcome financial difficulties and find work or start a business. However, without a job or business offering this income, it will be very difficult for him to obtain this loan. It is a difficult situation.
In many cases, those who apply for such loans may seek an emergency loan in order to:
- Repair or buy a car for transportation.
- Purchase clothing or equipment that may be needed at work.
- Pay for studies that will help them improve their skills and get a job.
- Pay rent and utilities so that their living situation is stable enough to allow them to find and keep a job.
- Money for Christmas
These problems, although different, all follow a common theme: the unemployed often need financial resources to find ways out of relative poverty and re-enter the labor market.
Different types of loans for the unemployed
Fortunately for those struggling in situations such as those described above, there is indeed a wealth of resources to help them put their lives back in order on time.
1. Loans to those receiving unemployment insurance payments
If the person in question has lost his job without fault on his part, in most cases he will be eligible to receive unemployment insurance benefits from the state in which he lives. The amount that is given to individuals varies from state to state, but generally represents a decent percentage of their former salary.
In many cases this amount will not be enough to cover all household expenses. The good news is that many credit institutions view UI as income and, if the person applying for the loan has a poor credit history, many credit institutions will make a loan available to them. individual in question.
It may not be huge, but it’s just enough to help the person overcome the barriers that unemployment can create.
2. Loans secured by real estate or other
Many modern credit institutions are more than willing to provide credit even if the person applying for the loan does not receive any income. As long as it can provide some form of collateral, these lenders frequently provide loans to the unemployed.
In most cases, the amount of credit granted will be proportional to the value of the property provided as security.
For example, a person seeking to take advantage of a portion of the equity in their home will generally be able to borrow more than someone who uses their motorcycle or car as a source of collateral.
Another similar method is to obtain a loan using accumulated life insurance funds as a source of collateral. In most cases, once the loan is repaid, the credit worthiness of the person is restored.
People looking to use their property as collateral in this way should carefully consider the situation before embarking on it. If they end up defaulting on some of their payments, their home or property is usually subject to requests for assistance, which may ultimately result in loss of ownership.
Therefore, it is important to count the cost of the loan before proceeding.
3. Use of co-signatories
If the unemployed person has family or close friends who have good credit, credit institutions are generally more willing to extend a line of credit if they are willing to co-sign the loan application.
This can be a big lifeline, but borrowers need to make sure they will be able to repay their loan on time. Otherwise, the co-signer will become responsible for the outstanding balance, which can obviously lead to financial difficulties for friends or relatives.
4. Use credit cards
Credit cards sometimes have high interest rates, but in an emergency, they can save your life. They can be used as emergency loans for the unemployed. If the person needs money quickly to make ends meet or to facilitate the creation of a new job, this option should not be overlooked.
Cash loans for the unemployed, in the form of a cash advance on credit cards, are also a good idea, but need to be carefully considered.
If this option is chosen, borrowers should be fully aware of the company’s credit card requirements for fine print. They need to know when payments are due, what the minimum payments will be and what the penalties are for late payment.
Being armed with this type of knowledge can help them further damage their credit ratings, thus preserving their credit history for the future.
5. Retraining loans
In some circumstances, many state and federal governments offer recycling loans to those who are entitled to them. For example, according to the Opportunity.gov website, the US government is prepared to extend loans of up to $ 5,500 to Pell Grant for job retraining purposes to people receiving unemployment benefits.
In addition, many states and municipalities will also provide recycling funds. Once added together, the amounts can be quite large.
6. Micro lenders
Usually, big banks have little interest in lending money to those at the bottom of the income ladder or those with bad credit. The unemployed fall into this category.
In response to this, many non-profit organizations have been created with the express purpose of providing small, interest-free loans to people in need of financial assistance.
How micro-credit works:
These types of loans are called microcredit because their amount is usually much smaller than the one banks offer to people. In many cases, loans of this type are in the range of 250 euros at low prices to about 5,000 euros at high rates.
Micro loans up to 50 000 euros are not unknown. Getting a loan of € 3,000, if invested wisely, can help a person to completely change his life.
How can you get one of those incredible micro loans? The process is quite simple. The US Small Business Administration, or SBA, provides microcredit to small business owners. This is a good thing overall but as in most bureaucracies; the process can be painfully slow and impersonal.
What would be a better option? There are quite a few micro-loan sites between individuals, one of the best known being Dubal. The process could not be simpler or more user-friendly. Dubal has two types of users, borrowers and lenders.
The person applying for the loan, the borrower, creates a self-identifying profile, their financial situation and the amount of the loan they are looking for.
At this point, one of the many lenders affiliated with Dubal consults lists of borrowers, chooses one to sponsor and voila! A loan is granted and repayment terms are generally quite generous.
What is the best loan for the unemployed?
Payday loans and fast term loans are unlikely to be a solution because of their interest rates and high fees. However, if you need someone to approve a loan for you, this could be an option in an emergency.
It all depends on each person’s situation and the resources available in their area. In most cases, the unemployed should focus on easy-to-manage sources of funding that require little or no paperwork, do not require solvency or revenue verification, and have good repayment terms..