I’m unemployed - how likely is it that I will be approved for a loan?
If you’re searching for a loan for unemployed people, it’s important to manage your expectations. Finding a lender willing to consider your application for a loan when you’re unemployed could be difficult.
When you apply for a loan, the lender will complete a creditworthiness assessment; this will be a hard credit search and sometimes an Open Banking check. This helps the lender understand if you can afford to repay any money you borrow. One of the ways they’ll do this is by looking at your income. Without a regular source of income from employment, lenders could view your application as riskier, even if you have a good credit score.
CashLady Representative 79.5% APR
What if I’m unemployed and claiming benefits? Can I apply for a loan?
If you’re unemployed and claiming benefits, it may still be difficult to access credit. However, some lenders count certain benefits as income. This could include:
- Universal Credit.
- Child Tax Credit.
- Child Benefit.
- Fostering Allowance.
- Industrial Injuries Disablement Benefit
- Personal Independence Payment (PIP).
- Disability Allowance.
- Employment and Support Allowance (ESA).
You can find out more about loans for people on benefits in our guide here.
If I am approved for a loan for unemployed people, what happens if I fall behind on my repayments or I am unable to pay off my loan?
These are possibilities that need to be realistically and honestly considered before you take out a loan, or you could find yourself in an even worse financial position.
If you miss a loan repayment you may be charged a fee, and this will also harm your credit rating.
If you are approved for a loan, you might consider setting up a Direct Debit to make sure you never miss a repayment.
Why might a loan NOT be the best choice for someone who is currently unemployed?
Being unemployed could lower your chances of being approved for a loan.
If you are approved, however, you could be charged a higher interest rate. You should carefully read the terms and conditions of any loan offer before signing a credit agreement, paying particular attention to the rate of interest and how much your monthly repayments will be.
Again, we must stress the importance of careful consideration when applying for a loan or credit product. While borrowing money may be a short-term solution, could this make your financial situation worse in the long run?
I’ve been approved for a loan for unemployed people; how long will it take for the money to reach my bank?
Every lender is different. Some lenders, including several on the CashLady panel, could send your money the same day as your application is approved. The time it takes for the money to become available in your account will depend on your bank’s policies and procedures.
If the money is needed to make an emergency payment, you may want to speak directly with your lender.
I’ve decided that a loan isn’t the right product for me while I’m unemployed. Are there any other options I could consider?
If you’re unemployed, a loan might not be a suitable solution. However, there are other options that you may wish to consider in a financial emergency.
- Talk to a loved one. A trusted family member or friend could be in a position where they’re able to help you out financially. If you do borrow money from someone you know, you should both agree on a repayment schedule. It’s crucial to pay your loved one back with as much discipline as you would an official lender; defaulting on your repayments could damage your relationship.
- Use your savings. If you have access to savings, you might wish to think about using them to cover as much of your unexpected expense as you can. Breaking into savings can feel disappointing, especially if it’s for something unplanned and mundane like a new washing machine, but using your own money, rather than applying for credit, will save you money as you won’t need to pay interest.
- If you’re in receipt of Universal Credit, you may be able to apply for a Budgeting Advance, and if you’ve been claiming certain benefits for six months or more, you may be eligible for a Budgeting Loan. This government-issued loan can be used to pay for clothes and footwear; funeral costs; security or maintenance improvements to your home; costs associated with getting a new job; furniture or household goods (such as a washing machine); costs linked with moving house (including advance rent payments); UK-based travelling costs; and maternity costs. Budgeting Loans are interest-free, and repayments are taken from your benefits every month, usually over a 12-month period. For more information on Budgeting Loans, or to check your eligibility, visit the Gov.uk website.
Is there anything else I can do to ease the financial burden?
Finding yourself without an income can be frightening, especially when it comes to buying essentials. If your situation means you cannot afford to eat, you may be able to visit a food bank. Food banks are in operation across the UK, providing groceries, toiletries, and other essential household items to those in emergency need. You will usually receive a three-day supply of necessities.
You can contact Citizens Advice and ask them to refer you to a food bank. They will speak with you about your current situation and the best plan of action for you. Referrals can also be made by your GP, local authority, and JobCentre Plus.
To find your nearest food bank, type your town or postcode into the search bar on the Trussell Trust website.
You can check you are receiving all the benefits you are entitled to at Turn2Us.
If you’re in receipt of certain benefits, including Income Support and income-based Jobseeker’s Allowance, your child may also be entitled to free school meals, food vouchers, and the Holiday Activities and Food programme. For further information and to check your eligibility, please visit the Gov.uk website.
We understand that this is a stressful situation. The reality is that unemployment – whether intentional or not – could happen to anyone, at any time. We hope that you will feel comfortable sharing your concerns with someone you trust, or a trained financial specialist.
Remember that help is out there. For free advice, visit Citizens Advice, National Debtline or Money Helper.
CashLady has teamed up with the UK’s leading debt charity, StepChange, to provide a free online questionnaire for anyone currently worried about money. The answers you provide will help to figure out the advice offered, and taking the quiz will not affect your credit score. Click here to get started.
