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Understanding loans for the unemployed

Find out more about loans for unemployed people, from types of loan to the potential problems you may encounter. 

If you are unemployed and claiming benefits, in-between jobs or do not undertake paid employment, you will probably find it difficult to get a loan on standard terms.

Indeed, most high street banks and building societies will simply decline to offer you credit if you are not in regular paid employment.

Standard loans are available to those who can demonstrate that they will, in all probability, be able to repay the debt on schedule. The better your financial situation, the more attractive the terms of the loan will be – which means you’ll be offered the lender’s lowest interest rate.

The flip side of this is that, if you’re on a lower income, you might be charged a higher rate. With no regular income and a poor credit history, your application will almost certainly be turned down.

To cater for the demand for loans from unemployed people, specialist lenders offer products, but the interest rate you’ll pay on the amount you borrow here is significantly higher compared to standard personal loans.

This reflects the risk of the loan not being repaid in full or on time.


At least 75% of our customers search for a loan for:

Buying a car

Getting a loan can be cheaper than car dealer finance, and we can help you find the right loan for you. Having a car loan makes you a cash buyer, which is the best start for getting a great deal on your new car.

Consolidating debts

Gathering all your debts together into one loan may help you get them under control. You can search for a loan that’s right for you. To really tackle your debts, make sure you get your spending in check too.

Improving your home

Doing up or extending your home is a great way to add value to your home – as well as giving you and your family a wonderful place to live. We can help you find the right home improvement loan for you.

Moneysupermarket Loan data, from June to November 2014

Loans for the unemployed

Usually, you will need a steady and ongoing salary to borrow from mainstream lenders, but there are an increasing number of specialist providers of loans for the unemployed.

So being without a stable job and income to borrow from high-street banks doesn’t mean you won’t get access to credit anymore.

However, there may be separate factors at play making it complicated for you to access credit. For instance, you might already suffer from a poor credit history – this can happen if you've missed repayments in the past, or ever had a County Court Judgement (CCJ) or bankruptcy against your name.

But even being in this situation does not mean that all lenders will reject you. It simply means that you’ll have fewer options, and loans will come with higher interest rates.

Improving your credit history

To get a loan you need to be attractive to lenders, which often means improving your credit score. Otherwise you will struggle to get a loan if you are both unemployed and have a bad credit history, as you are deemed a high risk.

You can improve your credit score in several ways:

- Check your details are actually correct with credit reference agencies such as Experian, Equifax and Call Credit.

- Add your name to the Electoral Register (contact your local authority to do so). This will be the first place lenders look when they check your personal details.

- Space out applications for credit. Every time you apply for a loan you leave a 'footprint' on your credit file. If you are rejected several times in quick succession, this will make other lenders less likely to accept you.

- If and when you get credit, make sure you keep up repayments. Doing so will gradually rebuild a damaged credit history. If you do not, your file will be damaged further.

Types of loans for unemployed people

As someone with a poor credit rating, you won't be able to apply for most of the loans available, especially those with the most attractive terms and rates. These are likely to be reserved for borrowers with clean credit histories who are in employment.

However, there are specialist lenders that offer loans to people who seem a greater risk because of their poor credit history, or unemployment. You can compare the rates on offer from these on comparison sites like MoneySuperMarket.

Secured loans: You could consider a secured loan, which means you would have to put a possession up as security, such as a house or car. However, this security can be repossessed if you do not keep up with the payments.

Personal loans with a high interest rate: It must be noted that the greater the risk you are perceived to be by the lender, the more interest you'll pay. It seems that people who need access to credit most face the highest interest rates from lenders.

Avoid payday loans as they are relatively expensive – additionally, the repayment periods can be very short and the penalty fees add up quickly.

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.

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