If you’re not working then the personal finance market can seem like a tough place to be. Many lenders will specify that they are looking for a borrower with an income in order to be able to lend. Given that new industry rules require the personal finance sector to ensure that short-term loans in particular are not extended to anyone who doesn’t have the ability to pay them off, it is often assumed that anyone without a job is simply excluded. However, this is not the case as there is a range of options when it comes to cheap personal loans for the unemployed in the UK.
Other types of income
Whatever the reason that you may not be working – whether that’s because you’re retired, you’re taking care of children or you’ve been unable to find your next role – you’re not necessarily excluded from being able to obtain credit. There are a large number of lenders who are happy to offer cheap personal loans to someone who is unemployed, as long as you have some other type of income. This income could be benefits, a pension or it may be savings that you could use to pay off the loan or it could be student finance. As long as you can show that the loan is affordable to you i.e. you will be able to repay it in the agreed way, then new credit may be an option.
While there is some flexibility over the kind of income you can have to be able to borrow a personal loan, there are other basic conditions that do need to be met. For example, you need to be at least 18 years old to be able to make an application to borrow. You will also need to be a UK citizen or have the right to legally reside in the UK. In most cases you should also have a UK bank account that the loan can be paid into and the repayments set up to come out of. However, those are really the only requirements. Most personal loans are unsecured, which means that they are available to borrowers, even if you don’t own a property. As long as you can show that you are borrowing responsibly – i.e. you can afford to repay – and you meet these basic requirements then you can go ahead an make an application.
Problems with credit history
If you’re unemployed and you have a less than perfect credit score as a result of issues that you’ve had in the past then this isn’t necessarily an obstacle either. There are many different types of financing available to unemployed people and these are geared towards being able to provide you with the finance you need while giving the lender some reassurance that they will be repaid, and also ensuring you can manage repayments affordably. A guarantor loan, for example, is a great option for anyone with credit report problems – your guarantor acts as the insurance for the lender so that if you’re not able to make payments on the loan they can step in and help.
What are loan options if you are unemployed?
If you’re unemployed and looking for cheap personal finance then there are a number of different options that may be available:
Guarantor loans – as mentioned, lenders are often more willing to lend if you have a guarantor to support your application. Your guarantor should be at least 18 years old and may need to be a homeowner. Borrow up to £12,000 over a period of between one and seven years. But if you’d prefer a loan without a guarantor then those options exist too.
Payday loans – short term lending is a good option if you’re unemployed as lenders may be willing to offer payday loans. Expect to have to show your income is sufficient to repay any loan. Borrow up to £1,000 for a short period of time (usually a month).
Doorstep loans – often called ‘a more traditional type of finance,’ doorstep loans are loaned and repaid face-to-face and lenders are often more willing to be more accommodating of individual personal circumstances. As always, you’ll need to be able to show you can repay the amount that you borrow but you don’t necessarily need employment income to do this. Borrow £100 to £2500 and repay between 13 and 104 weeks.
Homeowner loans – for those looking to borrow much larger amounts, homeowner loans give the lender the security of the property that you own. You must be able to show that you can afford the repayments on the loan but that doesn’t necessarily mean that you need to be employed. Borrow between £25,000 and £250,000+.
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read more about Alex Hartley