Loans for the unemployed

Understanding loans for the unemployed

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Can unemployed people get loans? Yes, but they won’t have the best terms

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Can I get a loan if I’m unemployed?

You can get a loan if you’re unemployed – but it’s a lot more difficult than if you had a job.

A lot of high street banks and building societies will refuse to offer you credit if you are not in regular paid employment.

So if you are unemployed and claiming benefits, in-between jobs or simply don’t undertake paid employment, you might struggle to qualify for a loan on standard terms.

To find a loan, you will therefore have to apply to a specialist lender that charges higher interest rates.

Home improvement is the most popular reason for unemployed people to take out a loan

Can I get a loan with no income?

Loans are offered on the basis that the borrower will, in all probability, be able to repay the debt on schedule.

The better your financial situation, the more likely this is – and the greater the chance you’ll be offered a low interest rate.

You may still be able to get a loan if you have no regular income, but you might face higher interest rates as the risk of you not being able to pay the loan back is greater.

What loans can I get on benefits?

People on benefits may be able to qualify for certain types of loans. Options include:

  • Secured loans: These are less risky for lenders because you put a valuable possession up as security, such as a house or car. However, this can be repossessed if you start missing payments
  • High-interest personal loans: Some lenders will accept people on benefits as personal loan customers. However, as their perceived risk is greater, the interest rate will be higher than average
  • Payday loans: As an unemployed person, it’s sensible to steer clear of payday loans. These loans generally have high interest rates, short repayment terms, and impose hefty penalties if you fail to pay

How can I get a loan with a low income?

‘A person who is unemployed is less likely to have a regular source of income, making getting a loan more difficult. That makes it extremely important to keep your credit score in check if you are seeking a loan while unemployed’

If you are on a low income, improving your credit score is the best way to boost your chances of getting a loan.

There are several ways to do this:

  • Check that the main credit reference agencies, Experian, Equifax and TransUnion, have the correct information on you
  • Add your name to the electoral register (via your local authority) so lenders can check your personal details
  • Space out applications for credit. These are noted on your credit report, so if you apply several times in quick succession, your credit score will be damaged
  • Always make repayments on any outstanding debts on time. Missing payments will damage your credit score, but keeping up with repayments should improve it

Loans for the unemployed: The pros

  • Taking out a fixed-rate loan means you know when and how much you have to pay, which can help you to budget accordingly
  • You can generally choose how long you need to pay it back. A longer term means lower monthly repayments but more interest overall
  • You can spend a loan however you want, which is not always the case when using alternatives like credit cards

Loans for the unemployed: The cons

  • You will usually have to pay a higher interest rate than someone in employment
  • Taking out a loan will increase your debt burden, potentially putting more strain on your finances
  • If you become unable to meet the repayments, you will face penalties and damage to your credit score

Alternatives: How can I get money fast without a loan?

Alternatives to taking out a loan include:

  • Credit cards: You may be able to qualify for a credit card that allows you to spread the cost of larger purchases. This can be a good option for short-term borrowing
  • Overdrafts: Most current accounts offer overdraft facilities you can use to cover the cost of unexpected outlays. Just don’t forget to check the charges and get your bank’s permission first

Compare loans for the unemployed

Compare loans you are likely to be approved for by entering your details into the MoneySuperMarket Eligibility Checker.

Answer a few questions about the amount you need, along with some personal details, and we will run a soft check, which has no effect on your credit score.

It’s a quick and easy way to compare the deals available and find the loan you need.

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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