It is an unfortunate truth that economic crises result in businesses closing down and companies shedding staff to lower costs. The chief consequence is an increase in the number of people in need of cash injections. Having no source of income should surely ruin any chances of a loan application being approved, but with unemployment loans, it is a qualifying condition.
It does seem like a contradiction, but just as lenders are willing to lend money to students who have little or no income, so too are they willing to lend to individuals who have lost their jobs but are highly likely to find new employment within a given period of time.
Granting loan approval without income is not completely down to blind faith, however. There is a choice between secured and unsecured unemployment loans, and the right one is down to the situation the applicant happens to be in.
What Are Unemployment Loans?
Anyone who has ever lost their job will know about unemployment benefits, and other government sponsored schemes for those without work. But these are very different to the unemployment loans that are available from some lenders.
These loans are designed to help those who need cash injections to tide themselves over, principally to take care of the key monthly expenses. For example, granting loan approval without income is ideal for ensuring the next few months mortgage is paid, that utility bills are met and that food can be bought.
However, whether getting a secured or unsecured unemployment loan, there are conditions that must be met, and some terms that need to be accepted, before any applications should be submitted.
Advantages of an Unemployment Loan
The key conditions relate to the practical workings of the unemployment loan. For example, if there is no employment, there is no income; so how can the loan be repaid? Well, it is a matter of resources (such as savings) and timing.
Perhaps the total monthly outgoings are $3,000, and personal savings amount to $30,000. That means funds would last just 10 months. But repayments on a $30,000 loan can be just $500 per month, so after a year, there is still $24,000 in your savings.
There are other ways to get loan approval without income. For instance, using equity on your home as security means that repayments can be kept to a minimum, even with no steady income. Of course, unsecured unemployment loans may depend on the size of the monthly benefit checks.
Terms Worth Considering
There is an obvious advantage to taking out a secured unemployment loan. The interest rates are much lower, making the loan repayments each month smaller and more affordable. It is also possible to get a longer loan term, helping to reduce the repayments even further.
However, many people opt for the unsecured unemployment loans because they do not want to risk their home or any other item unnecessarily. This is where some careful calculation is required, estimating whether repayments are affordable or not.
Of course, loan approval without income is designed to help the applicant, not take advantage of them. And when the applicant finds a new job, the overall debt can be cleared more quickly under new terms, if so desired.