Being unemployed often makes it difficult and sometimes almost impossible to secure a personal loan. With the new regulation which requires that all lenders should lend to people who have a demonstrated ability to pay. This means that being unemployed, in-between-jobs, or in unpaid employment means it will be hard for you to get a loan.
Lenders appraise and determine the risk level of a potential borrower using factors such as credit history, a source of income, employment history among other factors. If you are employed on permanent and pensionable terms, it becomes easier for you to get a loan, even easier than someone who is employed on contract terms. The better your ability to pay, the lower the interest rate that you will be charged. Hence if you have a bad credit history, or you are in the lower income bracket, you will be charged a higher interest rate.
The requirement varies depending on the loan product, but some of the basic requirements include:
- You must be above 18 years of age, and of sound mind.
- You must be a UK citizen, or have a demonstrated legal right to reside in the UK.
- You must have a valid UK bank account.
- You must have a demonstrated ability to repay the loan, bank statements are not required as long as you have a source of regular income.
For a full list of accepted income sources that qualify for an unsecured short term loan if you are in-between jobs follow the link.
Secured Loan For An Unemployed Person
The secured loan is a loan facility provided for the unemployed borrowers. If you have a security like a car logbook, title deed, shares in a reputable company or any other well-defined asset, you can access the loan using the asset as collateral. In the event of default, the lender can recover the security and sell it to offset the loan.
The guidelines regarding how much loan facility you can get with what security varies depending on lending institutions. However, most lenders up to 50% value of the security. For instance, if your car is worth 2000 pounds, then the highest loan you can qualify to obtain is 1000 pounds.
Usually, lenders must take possession of the asset before advancing the loan. Remember, there is a difference between possession and ownership. For instance, if as a man you buy a car for your wife, and register it on your own name, then you have the ownership while she has the possession. In a similar case, most lenders require that they have possession of the asset before securing the loan.
This implies conducting a formal registration with the government authorities. Thus, being an unemployed person does not disqualify you entirely from getting a loan. With a demonstrated capacity and a good security, you can qualify for a secured loan.