When you are between jobs, it is hard to qualify for a loan. Most of the lenders will not approbate your applications as the risk of default is too high. On the other hand, rejection is quite obvious as you do not have a stable source of income. No lender would ever sign off on your application unless you prove your repayment capacity. The basic criteria for acceptance of loan applications include having a stable source of income, which means you must have a full-time job.
Does it insinuate that you are not eligible to borrow money when you are between jobs? No, not at all. There is still a possibility of getting approval for loans, provided you meet the criteria.
Ways to improve your chances of loan approval when you are between jobs
Here are the ways to ameliorate your chances of loan approval when you are unemployed:
Apply for benefits
As soon as you lose your job, you should try to apply for benefits. If you are eligible, you can seek unemployment benefits. They will help tick you over until you have a job. Unemployment benefits are provided only for six months. There are various other benefits and grants that the government provides to people who are in a tight spot due to an unexpected job loss.
Getting unemployment benefits is necessary as this can serve as the basis for your income in the absence of a full-time job.
Get a side gig
Just because you have benefits, it does not guarantee that your lender will be willing to accept your application. This is because it is likely that your repayment capacity is still poor. You should try to get a side gig. It means you should try getting a supplemental income source.
There is no need to have a degree or professional skills to take up a job to help you keep afloat. You can rather pick up some elementary-level job, such as babysitting or Uber driving, if you have a licence and know how to drive.
Income from side gigs is your actual income, and therefore, you can increase your chances of being approved for a loan. When you are on benefits, you can club them with your side gigs. When your overall financial condition is sound, your chances are high for receiving approval.
Keep your credit score decent
Urgent loans for the unemployed in Ireland are small loans, and therefore, they do not involve a hard credit check, but not all lenders follow this criterion. Legitimate lenders are not permitted to lend money without perusal of your credit rating. They will run a hard check. If your credit score is not impressive, they will most likely reject your application, and if they sign off on it, they will charge very high interest rates.
It is enjoined that you keep your credit rating in good condition. This will increase your chances of being approved. Even if you are applying for these loans without a bad credit rating, you should ensure that your credit score is higher than the bare minimum rating that lenders are accepting.
Ensure you do not have an existing debt
Unemployed loans charge high interest rates. If you have an existing debt, most of the lenders will call your credibility into question. They will most likely assume that you will not be able to discharge your obligation on time. It is recommended that you avoid having other short-term high-interest debts.
For instance, you should not owe payday loans at the time of seeking unemployed loans because they are very expensive and exhaust a significant portion of your savings and income. It is likely that you fall into an ongoing cycle of debt.
Arrange a guarantor
You should arrange a guarantor with a good credit history. This will help improve your chances because your guarantor promises to pay off the debt in case you make a default. It is worth noting that your guarantor will be responsible for discharging your obligation only if all means of recovering money from you have been exhausted.
If your guarantor is to settle your debt, they will also lose their credit points. This will also ruin your relationship with your guarantor. You should arrange a guarantor only if you are completely certain about your repayment capacity.
Risk related to unemployment loans
Here are the risks related to unemployment loans:
- Unemployment loans charge very high interest rates. Since you do not have a full-time job, it is likely that you will struggle to repay your debt.
- These loans are paid off in one fell swoop. If you miss the payment, you will have to pay late payment fees, and your loan will be rolled over to the next repayment date. This will significantly increase the cost of the debt.
- Unemployed loans can trap you into an ongoing cycle of debt. They can ruin your credit history, which will make it extremely difficult for you to borrow money down the drain, especially for a mortgage.
Ways to minimise risks if you need money during unemployment
Here are the ways to minimise risks if you need money during unemployment:
- You should consider alternatives such as borrowing from friends and family. You can even take out loans from credit unions as their interest rates are much affordable.
- Ask yourself if it is urgent to borrow money. If not, do not take out a loan. You should rather stash away money.
- Keep your credit score in good condition, as this helps secure lower interest rates.
- Try to avoid having short-term high-cost debt, such as payday loans, at the time of applying for unemployed loans. In fact, you should be free from debt obligations.
To sum up
To improve your chances of loan approval while being between jobs, you should have a decent credit rating, apply for benefits, arrange a guarantor, and ensure you do not have any existing debt.
But these loans come with a high interest rate. You should consider other alternatives first, such as credit unions and borrowing from friends and family.