Ask anyone what the most important factor when seeking a loan from a lender is, and a high percentage will suggest that being employed is number one. In truth, lenders are reluctant to lend money to those with no income, but there are some offering installment loans for the unemployed.
This might seem strange but it is important to remember that there is a multitude of loan products available to people with poor credit scores and bankruptcy, so securing loan approval without any income is not a major jump from such levels of trust.
Online lenders are especially approachable when it comes to seeking installment loans that have been designed specifically to benefit unemployed applicants. Sums of as much as $5,000 are within reach, but there are conditions that should be considered before applying.
How Unemployment Loans Are Possible
It is true that lenders are normally unlikely slick cash loan to approve a loan application from an applicant with no income. After all, it does not make sense to lend to someone without any means to make repayments. So how can installment loans for the unemployed be possible at all?
Well, just because an applicant has lost their job does not mean they are destined to be without any form of income in the long term. Statistically, the recently unemployed college educated professional is likely to find a new job. In that light, granting loan approval without any income is not as big a risk as it seems.
Also, the structure of these installment loans is designed to make repayments affordable, even those on social welfare. As a result, modest sums lent over longer periods are much cheaper than normal loans of the same sum.
Why The Risk Is Smaller
But how can a borrower repay a loan if they have no job? Well, it does depend on the conditions of their losing their employment, but in the case of redundancy there is a lump sum granted to the applicant. In fact, an installment loans for the unemployed can be borrowed against savings.
The concept of the loan is that a sum of money is borrowed to tide the unemployed applicant over until they secure another source of income. For example, rather than taking $5,000 from their savings to meet 1 or 2 months of expenses, the loan of $5,000 can be secured, costing a fraction of that sum each month instead.
For the lender, granting loan approval without any income is safe because it is granted against a cash sum, while the probability of the borrower securing a new source of income within the term of the loan is high. Therefore, the installment loan is likely to be repaid in full on time.
Terms To Look Out For
So, what terms should be expected when seeking a cheap installment loan for the unemployed? The key factors are the interest rate and the term of the repayment. The interest will be higher than usual, reflecting the degree of risk that the lender is accepting, but with a longer term the monthly repayments are kept low.
It is also important to look for special features. For example, some online lenders are willing to grant a certain interest-only period on larger sums, easing the pressure of repayment for a while. Getting loan approval without any incomeis also easier when some collateral is offered, but this mean an item of value is put at risk.