Last updated on August 23rd, 2021 at 02:53 pm
Loans can be availed for any financial emergency. It is pretty much clear to everyone by now. The lending industry has developed dynamically in recent times; it now also provides short-term loans for a limited period of time. If an individual resides in the UK, then the unemployed period can be very problematic, considering the high cost of living.
For those who are involved in paid employment, a number of options are available. Now the short-term loans for the unemployed are made available for those living in the UK.
Eligibility Criteria of Loans for Unemployed
Basic eligibility conditions for different types of loans for the unemployed are almost the same. They are:-
1. Citizenship and Residence
Before applying for the loans, the unemployed borrowers have to keep concerned about the eligibility criteria first. According to the general norms, they have to be a permanent resident of the UK or at least staying for the last 7 years in any county located within the region. The lenders may ask for residence proof because employment proof is not there to make your application strong.
2. Age Criteria
Another important aspect that the lenders consider within the eligibility is the age criteria. It has to be mandatory that the unemployed people should be 21 years old or above. It may vary from lender to lender but generally, it is assumed as the same. Borrowers must be ready with specific age proof while submitting the loan application.
3. Bank Account
In the world of digitization, the lending market is no exception. Most of the lending companies prefer to know the bank details of their clients so that they can judge their authenticity as well as transfer the amount if their application is approved. It must be noted that the borrowers should have a valid bank account to show to the lender.
Types of Short Term Loans for Unemployed
1. Payday Loans
These are a kind of short-term loans available for those unemployed who are going through financial emergency problems such as Repairs and Bill payments. These loans are for those who have a stable and sufficient income like rent or freelancing for repayment but are unemployed
2. Quick Loans
One thing is pretty much established in the case of unemployment that you will always have a need for money. These loans are made available after the assurance of repayment. Choosing this plan is workable because it provides relief for those unemployed as well who have a bad credit history. These loans don’t require collateral or a guarantor. The applicant must be a minimum of 21 years
3. Guaranteed Loans
As the name suggests, these loans require the provision of a Guarantor, you can find these loans using sites similar to financegab.com and others, as well as find more information on their specific policies. Its presence brings credibility to the application as the Guarantor will be held responsible in case of payment defaults and bankruptcy. The Guarantor Loan can help you borrow a large amount with a repayment time period of 1 to 7 years. The Guarantor must not be bankrupt and on an Individual Voluntary Arrangement
4. No Credit Check Loans
These loans are taken by unemployed people who don’t have full-time employment but have a repayment capacity. To borrow these funds, you are required to submit income sources like rental income, government benefits, or part-time jobs. These loans don’t have any impact on your credit score, and no inquiries show up on your credit report. The funds are made available for unemployed people with bad credit histories. These loans come with variable repayment periods and flexible terms and conditions
5. No Guarantor Loans
For an unemployed person in the UK, getting a loan is very difficult especially when they do not have a guarantor. In spite of showing your repayment capacity, lenders may reject your application citing the high default risk associated with it. Few lenders in the industry are providing no guarantor loans to finance unexpected expenses. These loans can be availed without any need of searching for someone to become their co-signer.
Advantages of Loans for Unemployed
- These loans help in improving the precarious financial situation of the borrower. Living in an expensive neighborhood has its own demerits. The cost of an expensive lifestyle can bring anyone to the doorsteps of Lending Agencies.
- Generally, Individuals with bad credit history can benefit from these options
- Short-term loans are usually made available to prospective buyers without the need for a guarantor
- Flexible terms and conditions for repayment are allowed in short-term loans. These facilities help in managing the personal financial situation of borrowers
- In the case of the short-term period, it is easy to foresee and evaluate financial capability. Suppose, taking a loan for a period of 20 years. It is difficult to gauge where you will be financially in the next 20 years. These loans make predictions of financial worth easier
- These loans take a short period of time to process; hence, the availability of cash is available quickly. In need of some fast cash, the modern era of Internet access makes it easier to apply for a short-term loan without visiting a lending agency physically
- Short-term loans help in improving the Credit Score. Less the time taken for repayment, the higher is the credit score. People who have a bad credit history often use short-term loans to improve their credit score
- Lenders do not seek collateral in most of the cases of short term loans, after getting a sense of security, they usually allow the sanction
- In the case of Long term loans, the money is owed for a long period of time and to watch interest augment brings a certain psychological and emotional distress on the borrowers. In short term cases, the debt is paid off quickly, and the borrower is freed from the burden
- Businesses set up lines of credit that allow borrowing money quickly and repaying it at their own pace. It allows to borrow and re-borrow up to the limit and pay interest only on the money actually borrowed, letting minimize interest costs
- Short-term loans are usually given by alternative sources such as online and peer-to-peer lenders. The dynamic growth of the lending industry has brought many small businesses into the market. Competition among these agencies helps in keeping the interest rates low
Disadvantages of Loans for Unemployed
- Unattractive interest rates discourage prospective borrowers from applying in the first place
- Terms and conditions are set by the Lending agency. The borrower doesn’t have the upper hand in the negotiations
- The loan amount tends to be small in size; hence, requirements for a large sum remain unattended.
- There are very few Lenders that operate in this domain, as there is a higher risk of default payments
- Arranging a creditworthy Guarantor is another task which at times becomes difficult to arrange
It is evident that unemployed status doesn’t spare an individual from financial responsibilities. These loan options are there to help turn around their financial situation. They should take the help of these available options and come out of the quagmire of financial distress.
Loans should be applied after a careful study of all the factors, in the case of affordability issues; it is advisable to avoid such endeavors.