To get an unsecured loan, you must have an income source and a good credit rating. Your credit report does not necessarily have to be perfect because there are chances of getting the nod for a greater personal loan from a few lenders but at a high interest rate. An affordability check is a must when it comes to having a lender sign off on your application. Under no circumstances will a lender give the nod if you do not have an income source, but there are a lot of things you need to know about them.
Of course, you cannot borrow money unless you have income to pay it off. Your lender lends you money in the hope that they will get it back on time, but it is not a must to have a full-time job. By income source, a lender means a monetary source that you will utilise to pay back your debts, which can be your full-time job or a part-time job.
Lenders rather emphasise the size of your earnings than the source of income you have to ensure that you will not struggle with payments. There is a possibility of qualifying for an unsecured loan despite the fact that you have no full-time job. When you are out of work, unemployment benefits will be considered your income. However, your chances of approval are high when you have a side gig.
The size of the loan cannot be so huge
With the help of a side gig and unemployment benefits, you can certainly get an unsecured loan despite the fact that you do not have a regular income source, but the loan amount will be a paltry sum. Hardly will you get it up to £1,000 as, in most cases, lenders put a cap on £500. Remember that having an income source and having a repaying capacity are two different things.
Your lender will be more concerned about your repaying capacity. Having a side gig or unemployment benefits makes you eligible to apply for an unsecured loan, but your repaying capacity decides the fate of your application.
It is unlikely to get approval for a larger sum when you are on benefits. Bear in mind you will have to cover the cost of your regular expenses as well. A lender will carefully examine your income and outgoings to ensure that you do not struggle to keep up with payments.
The consequences of borrowing more than your affordability can be far-reaching. You will fall into a deep hole of debt. Your credit score will be brutally hurt, and your chances of qualifying for a loan will be bleak down the line.
Therefore, it is vital to give an accurate account of your income. It will help a lender to decide whether you can manage payments without compromising on your regular expenses. If so, your loan will be approved.
Ways to get an unsecured loan when you are out of work
Here is what you need to do to qualify for unsecured loans after losing your job:
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Apply for benefits or get a side gig
On no account will you obtain a loan without any income source? As soon as you lose your job, you should apply for unemployment benefits. Even though you have a decent amount of savings, it cannot be considered your income, and therefore, it is crucial to apply for unemployment benefits. An injection of cash will help you a lot tide over during financial emergencies. If you come across some sort of emergency, you can use unemployment benefits as your income to borrow money.
However, they might not amount to much, so try to get a side gig as well. It can be babysitting, walking a dog, Uber driver, delivery partner, etc. You can also try to act as a freelancer by getting work in your chosen field, such as writing, web development and designing, graphic designing, and the like. Side income will show you an advantage, and therefore, the chances of getting approval are high.
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Keep your credit file up to scratch
Lenders will find you a risky borrower if you are unemployed, and therefore, to mitigate the risk, they want you to have a good credit file. Despite a good income from a side gig, the borrowing sum will be restricted and slightly high interest rates will be charged. If your credit rating is not so good, you will most likely be refused.
It is always advisable not to use doorstep service 4 unemployed because doorstep service will add up the total cost of the debt. A representative of a lender will hand in and collect money on your doorstep. High fees will be levied for offering doorstep services. You should always try to avoid home credit loans. However, the fact is that there is hardly any lender that provides doorstep loans.
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Borrow less money
As you know, loans for the unemployed carry a smaller sum, so you should always carefully analyse your budget to ensure that it includes the scope for the payment. First off, you should try to determine how much you need. Do you think you can repay that sum on time? Is there a possibility of borrowing less than that? If so, try to borrow less than you need. It will increase your chances of getting approval for a loan.
The final word
Qualifying for an unsecured loan when you are out of work is not a cinch. Despite you earning good money from a side gig, your lender will be reluctant to approve your application. Make sure your past payment record is good, and you do not borrow a larger sum.
Apart from that, apply for unemployment benefits. They will come in handy to tide you over when you come across some sort of emergency. Ideally, you should have enough savings to stretch your pennies until you land a new job. Loans are always expensive even though you can afford to pay them back on time because you are to pay interest on what you borrow.