When you are not earning through a regular job, getting a loan can be difficult. However, small amounts of short-term loans are available. You need to fulfil affordability conditions to get approved. This may demand some hard work, but it is worth it if you actually need urgent money.  

Know the ways to know your chances  

There are several ways that can help get a loan despite unemployment. If you know those ways, you have better chances of getting loans for the unemployed. Here is a guide on the same.  

What are short-term loans for the unemployed? 

Unemployed loans for short-term are borrowing options for a small tenure of 1 to 2 years. The loans are approved as per your repayment ability. This includes income regularity (any income source) and verification as an authentic citizen. The interest rates are high considering the risky profile. But there are ways to get a lower rate and a larger amount. Read about that later in the guide here.  

How do lenders check affordability? 

Lenders use several factors to check your affordability. In the case of the unemployed, the lending conditions are decided with no flexibility.  

• Regular income (verifiable) – Even if you are not doing a regular job, some kind of income is required. Even the income from unemployment benefits is considered income. Besides this, additional funds from part-time or freelance work provide a reason for the lender to consider your application for approval.  

• Recent credit record –  It can be fine if you missed repayments in the past. But in the recent six-month credit record, all bills and debts should show a timely payment record.   

• Debt-to-income ratio – Oversized debts steal your chance of loan approval. Hence, if your debts are multiple, try to downsize them. Pay off some of the small debts before applying for the loan.  

• Presence of a guarantor – Despite your efforts, if your affordability is weak, use a guarantor with a good credit score. Anyone from friends and family can support the loan application.  

• Collateral may be needed too – What if you need a big amount? A sudden and big home repair need during unemployment can be chaotic. It may happen in winter. Don’t worry, secured unemployed loan options are there too. However, the loan amount will still not be big considering your employment status. But with collateral, surely you can get a larger amount at a lower rate.  

Additional factors – Not mandatory, but boost approval chances 

Having these additional income factors strengthens your approval chances considerably.  

• Appointment letter from a new job – You are unemployed today, but not forever. If you have cleared an interview and have an appointment letter from the new employer, get approved.  

• Sufficient savings – This may not be a vital condition to qualify for funds. But if you have saved some money, lenders get a sense of relief. They cannot use your savings, though, to auto-debit instalments.  But at least they have the hint that if your income reduces, you will make repayments using the savings.  

• Multiple income sources – Without a regular job, there may not be a large amount coming into your account every month. But with multiple income sources, which are regular, of course, applying for a loan is possible.  

Low approval chance factors 

You should also be aware of the factors that can adversely affect the chances of loan approval. Hence, make sure you are aware of them to apply safely.   

• No or consistent poor credit record – Having no credit history at all or having a consistent bad credit situation proves that you are financially irresponsible.  

• No verifiable income – You may be earning regular income from a source.  But if that income is not verifiable, it is of no use. Lenders need verified earning sources to check affordability.    

• No guarantor or collateral – As per lending policies or due to weaker repayment ability, a guarantor or collateral may be required.  Hence, if you fail to do so, getting funds is not possible. 

Types of short-term loans  

Here are some loan types you can apply for without a job but with a provable income. All the loans below have customised deals, hence you can expect them to be a bit affordable. 

• Personal loans – Borrow funds for your personal expenses despite no job. Make sure you have worked on all the factors mentioned above that help in approval.  

• Bad credit loans – If you are unemployed with a bad credit score, consider these loans. The interest rates are higher, but at least you get funds on time. 

• Guarantor loans – Use a guarantor and get a smooth approval. Also, it is simpler to bargain on interest rates. However, your guarantor should have a good credit score and a stable income and job.    

Alternative options to borrow funds  

If you want to borrow, it is fine. But also think of other options. It may not always be good to get into debt without a regular job.  

• Community support – Some community-based financial help providers can provide you with funds for small expenses.  

• Government assistance programs – The government offers help in the form of unemployment benefits. Other options are available too; check those applicable in your state.  

• Credit union loans –  These are community-based loans at a lower rate.  But you need to be a member of a credit union for that.  

How to improve approval chances for loans for the unemployed? 

Although you have already read about what helps to get an easy approval. But still, it is a good way to remind them all in one place. 

• Show a provable income  

• Offer collateral  

• Arrange to get a guarantor  

• Improve credit score  

How to evaluate loan offers? 

Once you get the loan offer, compare and evaluate it as per the points below.  

• Interest rate and APR – This affects the monthly and annual loan cost.  

• Repayment terms – Flexible repayment plans are preferable. You should be able to change the repayment date.   

• Fees – Confirm the fee structure and included fee types. It can be a processing fee, a late payment fee, etc.  

• Penalties – What if you miss or delay repayments? Will there be any penalty? Confirm that.  

When should you avoid a short loan? 

There can be circumstances when you should avoid taking a short-term loan for the unemployed.  

• If repayment conditions demand that you get a new job soon.  

• If you have pending payday and short-term loans.  

• When you can manage despite struggles with current income sources. 

• When you are not sure about the regularity of other income sources.  

Hence……. 

Your chances of getting a loan for short-term use when unemployed are good. But that happens only if you know how to prepare your application for the loan. Make arrangements as per your financial circumstances.  

Provable regular earnings are the first factor to get approved. It even allows you to get a loan despite bad credit and without obligation. Prove repayment ability and get loans for bad credit with no guarantor.  

Add a guarantor if you struggle due to weaker credit purchase power. If you want to get a bigger loan amount at a lower rate, add collateral. Be ready to fulfil the loan conditions, and approval will be easier.