Everyday loans are small emergency loans aimed at helping tide you over when you are in a tight spot. The ultimate goal of these loans is to provision an instant injection of cash during emergencies. The size of these loans is exiguous that a lump sum payment is expected to be made. The repayment length, more often than not, of these loans is not more than a month. In some cases, it is about a two-week period. Subprime borrowers can easily have these loans signed off on as long as they prove their repaying capacity.
However, emergencies never knock before knocking on your door, nor do they make an exception for the unemployed. What if you have lost your job and you come across some unexpected expenses? How would you be able to meet these expenses without enough earmarked cash?
The unemployed rely on their savings to meet all these expenses. Though it is enjoined that you cut back on your discretionary expenses to stretch your money a little longer, you may yet find your savings insufficient to meet unforeseen expenses. If you are out of work and you want to borrow money, it could be a bit challenging. Your subprime credit history can make it even more difficult.
Ways to get everyday loans for people on benefits despite bad credit
A bad credit history, though, does not preclude you from applying for a loan; it reduces your chances of being accepted. Most of the lenders accept subprime applications when the borrowing amount is paltry, which is not more than £1,000. However, if you want to borrow a large amount of money, you will end up being repudiated.
Everyday loans are small emergency loans, and therefore there are high chances that lenders will easily accept your application despite a bad credit rating. However, you must be able to prove your repaying capacity. If a lender finds that you do not have enough income to discharge your debt, they will never approve your application.
The approval criteria for loans from a direct lender with bad credit are not strict. You simply have to provide your personal and financial details by filling in particulars in an application form. Make sure that you furnish accurate details because they will serve as the basis for a lender to decide how much money they should lend you.
Then, they will ask you for pay slips or bank statements to carefully check whether you will be left with enough money to meet essential expenses after paying off your debt, but what if you are already jobless?
If you are unemployed, it could be challenging to get approval for a loan, but the following suggestions will help improve your chances of being accepted for everyday loans on benefits for bad credit:
- You must have a passive income source
No lender would be able to approbate your application unless you have some source of income to prove that you can repay your debt. Even though you are out of work, you must have a passive income source. This could be a side gig to demonstrate that you can repay your debt on time. A side gig includes, but is not limited to, dog walking, pet sitting, babysitting, and Uber driving.
You can try to get work from freelance websites. Various companies need freelance writers, developers, designers, etc. If you have some skills, you can have a bash at it. However, you must remember that you must be able to settle your debt on time.
Make sure that you do not end up reborrowing only because the money you are left with after the settlement of the debt, combined with your savings, is not enough to meet your essential expenses.
- Your credit score should not be too bad
Do not forget that your poor credit history will make it challenging for you to apply for a loan, and if any lender approbates your application, they will charge very high interest rates to mitigate the impact of default risk. Make sure that your credit rating is not so abysmal.
It must be close to a fair credit score range. If your credit score is in a very poor credit range or close to it, your chances of being turned down are quite high. High interest rates will make it complicated for you to keep up with payments. If you find that you have no affordable options left, you should consider other alternatives, such as borrowing money from your friends and family.
- Ensure you do not have any other debt obligations
While taking out a loan for the unemployed with a bad credit rating, you should ensure that you have no other debts to pay off. Having other outstanding debts, including credit card bills, will call your credibility into question. As a result, they will refuse you a loan.
- Borrow less money
Another way to improve your chances of getting approval for a loan for people on benefits despite a bad credit rating is you try to borrow less money. High interest rates will increase the cost of the debt. Borrowing less than you need will put less pressure on your budget.
It will make it easier for you to prove your repaying capacity. It increases your chances of getting a loan at slightly more affordable interest rates.
To wrap up
When you are on benefits and your credit rating is not up to scratch, it would certainly be challenging for you to apply for everyday loans. The good thing is that you can ameliorate your possibility of getting a loan by having a passive income source, borrowing less than you need, and having no outstanding debt at the time of applying for these loans. In addition, your credit score should not be extremely poor.
It is enjoined that you set aside a large amount of savings so you do not have to turn to lenders to meet your expenses after losing your job.
Jessica Rodz is the Senior Content Writer at Cashfacts. She has a long career in the field of content writing and editing. Jessica has the expertise in the UK lending marketplace where she has worked with 7 different lending organisations and acquired many responsibilities from preparing loan deals and writing blogs for their websites.
At Cashfacts, Jessica is managing a team of experienced loan experts and doing a major contribution in guiding the loan seekers via well-researched blogs. She has done graduation in Business (Finance) and now currently doing research papers on the UK financial sector.
