Getting a loan with little or no income

Key takeaways

• It’s not impossible to get a loan if you’re unemployed or claiming benefits

• Expect smaller loan amounts and higher interest rates compared to those in work

• Some lenders specialise in offering deals to those on benefits or with poor credit scores

• Failure to repay may result in missed payment fees (usually around £25) or default notices

If you’ve been made redundant, are in between jobs or finding it hard to get a job, you need to think carefully about whether or not taking out a loan is a good idea. 

It's likely to be very difficult to be accepted for a loan if you have no regular income - even if your credit score is good.  

But that doesn't mean it is impossible. If you need a loan - and if you're confident you can afford the monthly repayments - there could be options, although they're likely to be limited. 

Borrowing can fill a financial gap or tide you over – particularly in an emergency. But it should be thought through carefully as you could risk falling into long-term debt and damaging your credit rating if you’re not able to repay. 

Here we look at whether you can get a loan, the different types of borrowing available and what the terms will be like. 

Can I get a loan without a regular income?

If you’re not currently in work, and you’re not getting paid, you may still be able to get a loan but the amount you can borrow will be limited.

Here are some scenarios where you could still be accepted, even if you’re not being paid:

Which benefits might be considered as a regular income?

The following benefits may be considered regular income:

• Universal Credit 

• Industrial Injuries Disablement Benefit 

• Incapacity Benefit 

• Child Tax Credit 

• Child Benefit 

• Personal Independence Payment 

• Employment and Support Allowance (formerly Severe Disablement Allowance or Incapacity Benefit) 

• Fostering Allowance 

• Disability Living Allowance (Personal Independence Payment) 

Which benefits won't count towards my income: 

Benefits which will be considered as regular income will vary across lenders. However, these are the benefits usually not seen as income: 

• Job Seekers' Allowance 

• Housing Benefit 

• Pension Credits 

• Income Support 

If you receive any of the above benefits, this does not mean you won’t be approved for a loan but you might find it harder if you are also not employed.  

What type of loan can I get when I’m unemployed?

If you’re unemployed you may qualify for certain types of loans – but be aware that some, such as payday loans, will not be a good option if your finances are already stretched and you can’t afford to repay them.

What are the advantages of getting a loan if I’m not working? 

There are possible upsides to taking out a loan when you’re unemployed:  

• Fast access to cash: Getting a loan will mean quicker access to funds and this could be useful in an emergency. But you should be confident you can afford the monthly repayments or you could end up in a worse financial situation 

• Can help with budgeting: A loan will usually offer a fixed interest rate and fixed term (length of the loan), so this should help with budgeting. Unlike a bank overdraft or credit card, a loan won’t offer an open line of credit so there’s no temptation to borrow more  

• Debt consolidation: A loan could be used to consolidate other expensive debts in one place - making your debts easier to keep track of and potentially cheaper (if you can find a lower loan rate than your current borrowing interest rates) 

• Could boost credit score: Making loan repayments on time and in full could boost your credit rating – meaning lower cost borrowing in the future  

What are the disadvantages of getting a loan if I’m unemployed? 

Here are some of the downsides to taking out a loan when you’re not working: 

• High interest rates: You’ll usually face higher interest rates on a loan if you’re unemployed. This is because lenders see you as being at greater risk of default if you’re on a low income or on benefits 

• More debt: Taking out a loan will increase your debt burden. Think carefully about borrowing, particularly if you already have other debt commitments, such as credit cards, car loan or an overdraft  

• Increased financial difficulty: If you get into financial difficulties and can’t meet your loan repayments you’re likely to be hit with penalty fees and even higher interest rates. It could also damage your credit rating. You could end up with unmanageable debts which could be highly stressful   

Can I get a loan if I am unemployed and have bad credit? 

Being out of work and having bad credit doesn’t mean you will be unable to get a loan, but it makes it considerably harder. There are specialist bad credit lenders out there who lend to people with poor credit. However, being unemployed and having a poor credit score will make it more expensive to borrow and you’ll face much higher interest rates. 

How long will it take me to receive the money if I am accepted? 

How long it will take to get your loan will depend on your loan provider and the type of loan you apply for.  

Different lenders have different procedures for paying out the proceeds of a loan. But generally, it should be in your account within a few days of your application being fully approved - if your application was straightforward. If there are any issues or further checks are required this is likely to take longer. 

What are my alternatives to a loan if I am unemployed? 

There may be alternatives to taking out a loan when unemployed, such as an authorised bank overdraft or credit card. But these should only be considered if the borrowing is affordable, and you won’t get into persistent debt.

If you’re receiving certain benefits, you might be able to apply for an budgeting loans (which is then repaid through lower benefit payments).

Or, it may be preferable to speak to family and friends if you need a small cash boost to help you through a tricky period. Alternatively, if you have time try to set aside small amounts each week to save towards what you need.

If you have debt concerns and you’re struggling to cope, seek help early from an independent and free debt help charity, such as Citizens Advice, StepChange,or National Debtline.

What happens if I can’t repay the loan?  

If you’re struggling to repay your loan then you should contact the lender as soon as possible who may give you alternative options for repayment. If you don’t pay back the loan, you could face consequences such as: 

• Missed payment fee: If you don’t make your payments on time, then you’ll be charged a late or missed payment fee, which is usually £25. As always, check the terms of your contract to find how much you’ll be charged for missing payments 

• Default notice: This happens when you’ve missed several payments and is a formal letter sent by the lender when you’re behind on your payments 

• Lower your credit score: Missing loan repayments and being unable to pay back your loan will be logged on your credit file and this will hurt your credit rating. Having bad credit will make it difficult to borrow money in the future 

• Repossession: If you’ve put down a secured asset such as your home or car for the loan, you will lose it when you can’t pay back your loan 

Other useful guides  

We have a range of guides you can read to help you learn about loans: 

How to get a loan with a poor credit score 

Payday loans explained 

What to do if you’re struggling to afford your loan repayments 

Compare personal loans with MoneySuperMarket 

When you search and compare loans with us we’ll show you your chances of being accepted before you apply.  

Be aware that if you have a low credit score or if you are currently unemployed and have no income, it may be difficult to be accepted for credit. The good news is searching with us won't affect your credit score in any way so you can see what might be available to you - and the possible interest rates - before making any decisions. 

We compare loans from leading providers. Just tell us a bit about yourself and what you want the loan for, then we’ll filter the results – and if you’re eligible for a loan we’ll show you the best deals to suit your needs. 

MoneySuperMarket is a credit broker – this means we’ll show you products offered by lenders. We never take a fee from customers for this broking service. Instead, we are usually paid a fee by the lenders – though the size of that payment doesn’t affect how we show products to customers.