How the unemployed can take out a loan to meet emergency expenses

It could be a bit challenging to take out a loan to meet financial emergencies, especially if you are unemployed. At the time of taking out a loan, you will have to prove your repayment capacity. Most of the lenders will run an affordability check in order to ensure that you will not fall behind on payments. This involves a perusal of your credit score and income sources. Your income sources reveal whether you can repay the debt, while your credit score is an acknowledgement of your past payment behaviour.  

When the loan amount is so small, say, £100, you do not have to have your credit rating checked. Lenders will conduct soft queries that do not appear on your credit report, and therefore, there is no risk of misplacing your credit issues. The lending determination will be made based on your earnings sources. As long as your budget has the wiggle room to repay the debt without struggling to meet essential expenses, you will be approved.  

What are emergency loans? 

Emergency loans are small loans that people take out in order to meet small unexpected expenses. They are discharged in entirety on the expected date. In other hand, they are repaid in one fell swoop. The repayment term of these loans is not more than a month, and the maximum amount you can borrow with these loans is up to £1,000. These loans are known by various other names. Some lenders call them cash loans, while others call them bad credit loans, as they are generally aimed at subprime borrowers. Emergency loans are called unemployed loans if they are to be applied for by unemployed people.  

Emergency loans are supposed to bridge the gap in your savings. At the time of using these loans, it is worth bearing in mind that: 

In order to qualify for emergency loans, you do not have to have a good credit rating, but you must have a strong repayment capacity. However, if you require a little emergency loan as an unemployed, the approval criteria slightly vary. 

How to prove your repayment capacity to qualify for an unemployed loan? 

When you need an emergency cash loan as an unemployed, you should ensure that you can repay your debt on time. While applying for a loan, you must have a stable income source. Under no circumstances will a lender sign off on your application if you do not have some income to repay. When you are out of work, a loan is out of the question. If so, how do lenders manage to approve an application for an unemployed loan?  

Just because you are applying for an unemployed loan, it does not insinuate that you do not need to have an income source. It rather indicates that a regular income source is not mandatory to apply for these loans, but you still need to have some income to ensure that you can repay the debt.  

It is fine if you do not have a regular full-time job, but you should have a passive income source. These income sources include: 

If you do not have any passive income, you cannot apply for an unemployed loan. Some people try to use their savings, but it is not recommended. A golden rule of thumb says that you should never use your savings as your income to borrow money, because otherwise, you will end up exhausting them too soon. There are high chances that you will fall into an abyss of debt.  

What if you do not have passive income? 

You know very well that you will not be able to qualify for unemployed loans if you do not have any passive income source. What if you are not lucky enough to have any additional income? Unemployment is unexpected. When you lose your job, you might not be able to start a side gig immediately. If this is the case with you, you can consider unemployment benefits as your income. 

The government provides these benefits for a limited time period; however, there are certain terms and conditions that you have to meet. If you are on unemployment benefits, you would be able to apply for these loans. 

It is enjoined that you provide accurate details of your finances. If you give a wrong account of your income and expenses, your lender would misjudge your repayment capacity. As a result, they will likely end up lending you more than you could afford. This will harm your financial condition because you will end up falling behind on payments. Once you miss the payment, you will have to roll it over. This will keep accumulating the size of the debt.