If you were to ask someone what matters when applying for a loan, they will tell you that it is your credit rating and your employment status. It is certainly true that these are important factors. And, while it is possible to find a solution if you have poor credit, finding one if you are unemployed may be a lot more difficult. However, some installment loans online are available just for this type of situation.
How Is This Possible?
Lenders always prefer to borrow money to someone with an excellent credit rating and a current job. This makes sense, because it guarantees they have money coming in to pay their bills. However, some lenders understand that some unemployed people are very likely to find new employment again quickly. For instance, if someone with excellent skills and knowledge is made redundant, it is likely that they will soon find a new job. Furthermore, since installment loans are paid by installments, the lender will assume that the applicant still has some money left behind and that, by the time this runs out, new funds will have been secured. The installments are also usually highly affordable, even if someone is on social welfare.
A Smaller Risk
However, people still question how it is possible for someone to pay a loan back without a source of income. In reality, this all depends on the individual. In a redundancy case, for instance, the applicant may have received a lump sum of money. Indeed, most lenders that offer installment loans to the unemployed do so against existing savings. Essentially, they take a loan out that is secured against money they already have. This may seem nonsensical to some. After all, if they already have money, why would they borrow? This can be for three reasons:
- They need to borrow more money than what they have in savings, and they can show the lender that they will have secured new employment within a short period of time.
- Their money is tied up in constructions that they cannot touch, but against which a lien can be placed.
- The interest on their savings is higher than the interest on the loan, meaning they actually end up with more money (while this is incredibly rare).
Important Terms and Conditions
If you are looking for an installment loan while you are unemployed, there are a few things you need to look for specifically. This includes:
- The interest rate. This essentially describes how much you will pay back by the end of the loan period. Generally speaking, the higher risk you present, the higher the interest rate will be.
- Any special features. You may be able to have a period of time with frozen interest so that your repayments are lower.
- Penalties. Some lenders will penalize you if you pay your loan back early by charging you interest over a time period that hasn’t actually happened yet, for instance, so that they still earn some money as well.