On the surface, it seems ridiculous, but there are lenders who are willing to grant loans to the unemployed. Surely, this is foolish, since the unemployed obviously have no source of income, but the fact remains that it is possible to get a $5,000 unemployment loan when most needed.
How can this be possible? Well, let us be honest and admit that $5,000 is not a huge amount of money. It means that lenders can easily create terms that can see them benefit but in a way that, should the borrower default, will not hit them very hard. Getting loan approval without employment depends on the same faith that students get.
Lenders will offer even unemployed applicants a chance to secure a loan, because there is a strong chance that unemployment is temporary. Granting affordable installment loans are therefore considered a viable decision rather than a major risk.
Why The Unemployed Are Accepted
So, why are the unemployed accepted by lenders? Well, the lenders are not ignorant of the risks involved and are not willing to grant loans to everyone who is without a job. But there are some cases where the chances of defaulting are quite low, so granting a $5,000 unemployment loan is fine.
There are two separate types of jobless. The long-term unemployed have been without a job for several years, so the chances of them finding work again have become very slim. This type of unemployed individual is not going to be considered for a loan.
Those who can hope to get approval without employment will have been recently made redundant, but it is understood that at least 6 months will have passed before the application can be made. The reason why an affordable installment loan may be on offer is that some form of employment is likely to be found within the next 12 months.
Unemployment Loans Explained
If approval on a $5,000 unemployment loan seems contrary what might be deemed logical, understand that the loan itself is used to keep on top of existing loan repayments and bills. For this reason, there is an understanding that the loan is a stop-gap.
However, it is the fact that the borrower is still considered highly employable that attracts the attention of the lender. It is similar to a student loan where the loan is granted in the faith that the borrower will graduate and get a good job.
Similarly, lenders have faith enough to grant approval without employment because the borrower will get a new job. Of course, they must also offer affordable installment loans because at this moment in time, the means to meet normal repayment terms does not exist.
Terms To Look Out For
It may seem that giving a $5,000 unemployment loan is more social charity than business. To an extent that is true, but it is also a business arrangement, and lenders expect the loan to be repaid in full and on time. But what are the terms that should be expected?
The key terms are the interest rate and the repayment period, just as with any other loan. However, because the lender is granting approval without employment, the interest rate is higher to cover any potential losses, while the repayment term is longer.
The longer loan term is what ensures these affordable installment loans are, in actual fact, affordable. For example, a loan of $5,000 repaid over 12 months is more expensive than over 5 years.