Types of loan available for unemployed people
The types of loan you’ll be offered if you’re unemployed may be limited and they’re likely to have a higher interest rate than a standard loan.
The types of unsecured loan you could be offered are:
- Personal loan – you’re likely to have to pay a higher interest rate as a lender may see unemployment as an added risk
- Tenant loan – to apply for this type of loan you don’t need an asset, such as a property, for security. Instead, the decision is based on income, affordability assessment and a good credit history
- Guarantor loan – to access this type of credit you’ll need a guarantor - a person who agrees to repay your debt if you fail to meet your repayments.
This table shows examples of unsecured loans, which were offered through Compare the Market on 22 November 2018:
|Type of unsecured loan||Company||Example amount of borrowing||APR rate||Monthly repayment time||Monthly repayment amount||Total you’ll pay back|
The two main types of secured loan you could be offered are:
- Homeowner loans – you borrow a lump sum of money against your house. However, a lender can repossess your home if you don’t keep up with the repayments
- Car loans – your vehicle is used as security against your loan. You could end up losing your car if you fail to meet the repayments.
You should stay clear of payday loans as they are comparatively expensive and typically have short repayment periods. Additionally, penalty fees can add up quickly and you could soon end up in a spiral of debt.