How to get a loan when you are unemployed

There are a number of reasons you may be looking for a loan or finance when you aren’t working. If you’ve recently been made redundant or left your current job, life still goes on and you may still need a loan. But is taking out a loan the best choice and is it possible? There could be some options available to you if you are confident, you can make the repayments on time and in full. There are also a number of ways in which you can help to increase your chances of getting approved for a car loan with no job.

Can you get a car loan when unemployed?

Borrowing money when you don’t have a job can be tricky. However, it doesn’t have to be impossible. Any finance lender will want security that you can be trusted to pay back your loan on time and meet every repayment. If you don’t have a regular income, then they may be wondering how you plan to pay back your loan. It’s also worth bearing in mind that car loans are usually spread over 3-5 years so you should consider if you would be able to meet the repayments for this length of time. Your ability to get approved can also depend on which type of car loan or finance you choose.

Which type of car finance are available?

• Hire Purchase. Hire purchase is a straightforward type of finance which can be offered to a range of people. Hire purchase is good for benefit car finance and people with low credit scores. Hire purchase is a type of secured loan which gives the lender more security as the loan is secured against the car. This means that if you fail to meet your monthly repayments, they have the power to take the car off you.
• Guarantor loans. Guarantor loans may be more suited to you if you can get someone to support your application. A guarantor loan is when a close friend or family members agrees to make your loan repayments if you fail to do so. However, you are both liable if you don’t make the repayments and both credit files can be negatively impacted.
• Joint application. A joint car finance application is when two people apply for finance on the same vehicle. If you don’t have a job or have low income, you can use your partners income to support your application. Both parties are then responsive for meeting the repayment deadline.
• Higher interest rates. When applying for a loan with no employment status, you may find that you are offered higher interest rates. Lenders usually use high interest rates to reduce the risk. If you have no job or a lower credit score you can be seen as more of a risk to the lender.

How to increase your chances of getting approved:

• Increase credit score. Having a better credit score can help to increase your chances of getting approved for loans without having a job. However, no matter what your situation, having a better credit score is always a bonus. It can help you to get offered a lower interest rate, increase your chances of getting approved and lower your monthly repayments.
• Reduce your applications. It is always recommended that you shop around for the best finance deal possible but making multiple application can actually harm your credit score. Multiple hard search credit checks in a short space of time can bring your score down. If possible, you should stick to soft search applications only.
• Make your payments on time. If you currently have anything on finance that you pay for, you should make sure you always make your payments on time and in full. Not only can it help to increase your credit score but it can show that you could be trusted to pay back your loan.