Seeking finance after losing or leaving a job can be complicated if you don’t know about the right option. Direct lending has always been a dependable solution for most of the fund seekers.

There are potential reasons for that, but to know everything about the unemployed loans from a direct lender, you need to know everything.

The guide below will clarify all your doubts, guiding you on how to borrow funds from a direct lender without a job.

Is it possible to get a loan if unemployed?

Yes, it is realistically possible to get a loan from a direct lender after a job loss. This is because direct or private lenders approve loans based on current repayment ability. They do not make biased decisions on employment status. However, the rule of proving affordability works here as well.

Why do direct lenders offer loans to the unemployed?

Direct lenders work on a liberal lending approach. They approve your funds as per your repayment ability in the past six months. The new-age loan companies believe that a temporary job loss does not define a person’s payment ability.

By showing any kind of income, whether from unemployment benefits, freelance or part-time work, if an applicant shows enough proof of creditworthiness in current times, funds should be approved.

Not only this, but even the credit score status is not the only decisive factor. This is why you can even apply for urgent loans for bad credit from a direct lender for the unemployed. But once again, don’t forget that you have to prove financial ability to repay the loan.

Common reasons to apply for unemployed loans

For the following typical reasons, people apply for these loans. For sure, you too can relate to these if you are seeking funds.

You can apply for the loans to –

• Clear overdue utility bills
• Repair household appliances
• Pay for an unexpected travel
• Keep up with rent
• Manage unexpected travel
• Pay for everyday essentials
• Fill the gap between benefit payments
• Arrange funds for medical emergencies

What types of loans can you apply for when unemployed?

It is great to know that despite unemployment, you have plenty of direct lending loan options. There is one common thing about the loan options below. All are available with an instant approval decision.

• Personal loans: The loans are available with an instant decision to be used for any purpose.
• Short-term loans: Also known as instalment loans, available at customized rates.
• Guarantor loans: Bring a guarantor with a good credit score and regular income to borrow funds.
• Secured loans: This type of loan requires collateral. As per the lender’s policies, you pledge an asset, such as a vehicle, to borrow at a lower rate.
• Credit union loans: It is a popular option, but you need to be a member of a credit union to borrow funds.

What are the benefits of using a direct lender for unemployed loans?

Obviously! Borrowing funds after leaving or losing a job is a facility that comes with many advantages.

• Flexible eligibility criteria: Minimum age requirement is 18 years, and maximum age limit is 75 years. A bad credit score is acceptable, too.
• No middlemen: Borrow directly from lenders without including any middleman or broker, which saves money on brokerage fees.
• Faster approvals: All loan types for unemployed people are available with instant approval decisions.
• Tailored loan amounts: Get approved for any loan amount as per your repayment ability.
• Soft credit checks: Check eligibility or get a loan quote through a soft check. But to start the application process, a hard credit check is vital.

What affordability factors do direct lenders consider before approving an applicant?

Prove your credit purchasing power in the following aspects, and you can borrow funds.

• Bank statements: The statements show your overall finances and stability. For approval, it should show timely paid bills and debts. Also, high-risk transactions like sending money to an online casino can affect approval chances.
• Income stability: Any type of regular income should be available to pay loan instalments.
• Existing debt: Your debt should be in the right ratio with your income. Debts dominating your current income source may make the lender approve a smaller amount at a lower rate.
• Credit report: This is required for a hard credit check, as in the case of unemployed loans, lenders need to be sure. They will check your recent repayment ability before accepting your application.

Ways to improve approval chances

You need to be very careful before and while applying to a direct lender. The tips below will help you keep the right approach.

• Check your credit report: Check the report to see if there are no errors in it. A wrongly mentioned pending bill, incorrect spelling of your name, etc.
• Borrow only what you need: It is not wise to take a chance when there is no regular or dependable employment source. Hence, borrow a small and affordable amount.
• Consider a guarantor: If credit purchase power is not strong enough to apply, add someone to support your application. Yes, a guarantor will help, but the person should have a regular income and a good credit score.
• Avoid multiple applications: Apply to one lender at a time, as multiple applications invite many search footprints. This shows you are desperate to borrow, and lenders think there is something wrong with your finances.
• Show consistent income: Whatever the income type, it should be regular. Only then can a direct lender approve your funds.

Risks of unemployed loans

It is the other side of the coin. Despite some advantages, the unemployed loans come with their own set of risks that you should know.

• Overdependence on borrowing: Direct lending offers loans with instant decision and timely fund disbursement. This makes borrowing easier, provoking you to borrow more. Repaying the loan can be difficult if you borrow without realising.
• Higher rate of interest: With weaker repayment ability due to unemployment, you get a higher interest rate. Other income sources are not as strong as a regular income from stable employment.
• Asset risks (if you choose secured loans): Secured loans let you borrow a bigger amount at a lower interest rate. But not paying instalments on time or defaulting on the loan gives the lender all the rights to your asset.
• Effect on credit score: Missed or delayed instalments immediately affect the credit score. Hence, pay on time to improve financial stability.

Are there any alternatives to loans for the unemployed?

Before applying for loans, you can choose to work on the following options.

• Borrow from friends/family: A dependable option if you have people around who help during bad times.
• Charities: Some charities provide financial help to manage essential living costs or to buy household goods.
• Sell your stuff: That is the most self-reliant choice that you can work on. However, this needs time as things take time to sell.

How to apply for the unemployed loans from a direct lender?

Direct lending is known for its quick and simple application process. The steps are-

• Apply online: This requires six months of bank statements and any regular income proof. Address and identity proof are also required.
• Wait for affordability assessment: Lender takes a few minutes to verify your details online.
• Receive approval decision: Get the decision in a few minutes. If approved, read the loan offer.
• Accept loan offer: If you are satisfied with the offer’s interest rate, accept the lender’s offer by giving consent to the loan agreement.
• Get funds: Right after consent, the lender sends money through an electronic fund transfer.
• Repay on time: Use the funds and don’t forget to repay on time without delay. It will improve your credit score, proving your creditworthiness for future loan approvals.

Conclusion

If used wisely, direct lenders can be the best choice to borrow funds. Try to avoid risks related to these loan types, and you can learn to borrow and repay responsibly.

Direct lending offers flexible and affordable deals on loans for the unemployed in the UK. Use this liberal approach in the right manner, staying loyal to your repayment plan.