How You Can Get A Loan Without Employment – What to Know

October 03, 2019

The perils of unemployment are aplenty: no constant income, deprivation of social benefits, an unfulfilled desire to do more, and the ability to do less. Although unemployment comes with many challenges that vary in difficulty, there’s nothing more troubling than the near-impossibility of taking out a loan.

Most banks and financial institutions specify having paid employment as the foremost prerequisite in applying for a loan. Oftentimes, loan applicants who don’t have a steady income will be declined nearly 100 per cent of the time. The challenges of applying for a loan without employment is so severe that even payday lenders won’t bother to review an application with no proof of employment attached to it.

Applying for a loan as an unemployed individual is difficult because there is no demonstration of the ability to pay as well as a specific level of creditworthiness. Without showing that you can pay, it will be a challenge to seek financial help. However, in recent years, the problem of being unemployed and the inability to be granted a loan has seen a few developments, dialling down on difficulty and becoming more available.

By considering certain details and technicalities, you can increase your chances of being granted financial assistance by applying for a loan even while you’re unemployed! 

To help you get started on understanding whether or not a loan for the unemployed is a good option, let’s go over a few details that you need to know about:

What are loans for the unemployed? What are their rates?

Often, loans for the unemployed are perceived as a daunting financial challenge for paying off debt simply because of the staggering APRs and interest rates. As a trade-off for not being able to provide proof of a stable monthly income, those who are unemployed are subject to APRs that go beyond 200 per cent. To put the trouble of getting a loan for the unemployed into perspective, here’s an example: 

“An unemployed person takes out a loan to pay for a few medical expenses and groceries—that totals to about R600. For most 90-day repayment periods on these particular loans, the interest rate can fluctuate between 140 to 200 per cent, making it out to be R1200 at most for repayment.”

Although some people may argue that APRs and interest rates vary per lender, they’re still significantly higher when compared with employed persons taking out a loan. 

The two types of loans for the unemployed: secured loans and personal loans. 

Should the worst come to worst and a loan for the unemployed is the only option available, then the next best thing to do is to pick the right type of loan according to your capabilities. The lack of paid employment can play a significant role in a person’s credit score, which can prove to be a handicap when applying for certain amounts. The best lenders to go for as an unemployed person are special ones who can take a higher risk by approving loans for those without work or a stable income. Let’s look at the two options that are available to those that seek a loan for the unemployed:

1. Secured loans for the unemployed

With the need to provide a form of loan security, secured loans for the unemployed heavily rely on the presence of collateral from the borrower’s end to take place. Possessions that qualify as collateral for a secured loan include (but are not limited to) a house, car, flat, and gold jewellery. It is important to note that secured loans come with a repossession feature that lenders can activate should a debt fail to be paid off.

2. Co-signer loans for the unemployed

By applying for a loan with a co-signer, you can dramatically improve your chances of being approved for a loan by reinforcing or substituting your ability to pay with someone else’s. Most co-signer loans involve granting an unemployed person’s loan while handing off the responsibility to pay and additional security to someone else that is more financially capable. A co-signer can be anyone that you know, whether it be a family member, relative, or friend. However, a co-signer must have a high credit score to increase the chances of being granted a loan as well as being able to land a lower interest rate.

Applying for a loan doesn’t always have to be difficult for an unemployed person, especially with several options available through different lenders. Although it would be optimal to apply for a loan with employment and proof of income, secured loans, and co-signer loans are still available for those in dire need of financial assistance while they’re unemployed. 

If you’re in South Africa and want to take out a payday loan at affordable rates, feel free to contact Hoopla Loans today to see what we can do for you!