Loans for unemployed people

Understand your borrowing options if you’re out of work

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Understand what loans you could get while claiming benefits

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Can I get a loan without a job or income?

It can be very difficult to get a loan from a mainstream lender without a job or income, as lenders will see you as a greater risk.

But there are specialist lenders and brokers who consider some benefits as part of your income when you apply for a loan. You’re likely to be charged high interest rates, though, which means it will cost you more to borrow.

Our data shows that unemployed people make up a very small proportion of overall loan applicants (1.8%)².

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Which benefits count as income?

Lenders who take benefits into account when deciding whether to lend will generally see the following as regular income:

Universal Credit
Child and Working Tax Credit
Personal Independence Payment (PIP) or Disability Living Allowance (DLA)
Child Benefit
Employment and Support Allowance (ESA) – previously called Severe Disablement Allowance or Incapacity Benefit
Fostering Allowance
Industrial Injuries Disablement Benefit.

What types of loans can I get if I'm unemployed?

You might qualify for the following types of loans if you’re unemployed. But it’s important to think carefully before you take on any debt. If you’re already financially stretched, borrowing could make your situation worse.

Personal loans

Personal loans are unsecured, so you won’t need to use an asset, such as your home, as security. Unfortunately, being unemployed can mean a higher interest rate if your application is accepted.

Secured loans

Secured loans use an asset, such as your home, as security. This means that you could lose that asset if you don't keep up repayments, so only apply if you're confident you can definitely afford to pay the loan back on time each month.

Guarantor loans

With a guarantor loan, a family member or friend with a good credit history agrees to repay the loan if you can’t. This could improve your chances of being accepted for a loan.

You can’t compare guarantor loans with Compare the Market.

Bad credit loans

The amount you can borrow might be low, and the interest rate high, but if you’re unemployed with a poor credit history you may still be able to get a bad credit loan.

Payday loans

Payday loans offer quick access to cash, but they come with high interest rates and short repayment terms.

If you’re unemployed, it’s important to think carefully about whether you can afford the repayments because charges can build up quickly if you fall behind.

You can’t compare payday loans with Compare the Market.

Credit union loans

Credit unions often offer loans with lower interest rates than high-street lenders. Depending on the credit union and the type of loan, you may be able to borrow shortly after becoming a member.

You can’t compare credit union loans with Compare the Market.

Can I get a bad credit loan if I’m unemployed?

If you have a bad credit score and are unemployed too, it'll be tougher to find a loan – but not necessarily impossible. Just bear in mind bad credit loans for unemployed people will come with high interest rates.

Our loan eligibility checker will give you an idea of whether you’ll be accepted for a loan before you apply. This is important, as making lots of applications for credit can harm your credit score. Our checker just uses a soft search, which doesn’t affect your credit score.

Try our eligibility checker

How to build your credit score

The higher your credit score, the more likely you are to be offered a loan. The good news is, there are some simple ways to build your credit score. For example:

Get on the electoral roll

Lenders use the electoral roll to check your identity. Registering to vote could help improve your credit score. Make sure you re-register if you move house

Check your credit report

The UK’s three biggest credit reference agencies are Equifax, Experian and TransUnion. You can check your credit report for free. Look for any mistakes – even a difference in how you spell your name could damage your score. You can fix any mistakes by contacting the relevant credit agency

Repay your loan on time each month

Making your loan and credit card payments on time and in full each month shows lenders that you’re a responsible borrower who can manage their finances

What government loans are available when I’m claiming unemployment benefits?

Budgeting Loan

You could be eligible for a Budgeting Loan if you’ve been claiming one or more of these benefits for six months:

Income Support
Income-based Job Seeker’s Allowance
Income-related Employment and Support Allowance
Pension Credit.

A budgeting loan can be used to pay for clothing, rent, household items, home maintenance and improvements, and costs linked to getting a new job, for example.

Repayments are taken directly from your benefits and the amount you repay is based on your income and what you can afford.

Universal Credit advance

If you’re on Universal Credit, you may be able to get a Universal Credit advance to help pay for emergency household costs, such as buying a new cooker.

Support for Mortgage Interest

If you’re struggling to pay your mortgage or meet the repayments on a home improvement loan, the government’s Support for Mortgage Interest (SMI) could help.

It’s a secured loan but you don’t get a lump sum. Payments will be made direct to the mortgage provider or lender towards the interest on your mortgage or home improvement loan.

What our expert says...

"Borrowing while unemployed can feel like a quick answer to short-term pressure, but it often comes with higher costs and much less room for error. In that kind of situation, the focus tends to shift from simply getting credit to understanding whether taking on more debt could make things harder to steady later on."

Sajni Shah, Personal finance expert

What to consider before getting a loan when unemployed

Applying for a loan when you’re unemployed needs some serious thought. Ultimately, it could make your financial situation worse. You’ll need to consider:

Higher interest rates

Loans for unemployed people, or people with no income, often come with high interest rates

You could lose your home or car

If you have to use your home or car as security for a loan, the lender has a legal right to repossess the asset if you don’t make the repayments

Whether you can afford to take on the debt

Always make sure you can afford the repayments. Missing one or making a late payment could get you further into debt, as well as damaging your credit rating

How can I get help without getting a loan?

If you’re having financial difficulties, there are several steps you could consider before taking out a loan for unemployed people.

If you’re a homeowner, talk to your mortgage lender – it may agree to you taking a mortgage holiday, paying just the interest on your mortgage or extending the length of your mortgage. Be aware, though, that this can result in the mortgage costing you more in the long run due to interest being charged over a longer period.
Talk to your utility companies – help might be available if you’re in arrears on your gas, electricity or water bill.
Get advice – MoneyHelper has information on debt management, where to get free debt advice and help with the cost of living.

Loans if you’re unemployed

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Emergency loans

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FAQs

What is a loan for the unemployed?

Loans for the unemployed are for people who aren’t working – for example, those between jobs, retired or receiving benefits.

Being unemployed can put a lot of extra pressure on your finances. But while taking out a loan might seem like a solution, the reality is that it can be much harder to borrow money from a mainstream lender if you’re out of work.

Can I get an unemployed loan from a credit union?

You might be able to get a loan from a credit union if you’re out of work. But you’ll need to be a member of the credit union to borrow from it. It may also want you to build up some savings with it before you apply for credit.

As community-based, non-profit organisations, credit unions typically charge lower interest rates on loans than mainstream lenders.

What should I do if I’m refused a loan?

If you’re refused a loan, think carefully before applying for another one straight away. Too many loan applications over a short period of time can suggest to lenders that you’re struggling financially and can damage your credit rating.

According to Citizens Advice, if a lender refuses you credit it has to tell you which credit reference agency it used. You can then check whether your credit record with that agency contains any errors and get them fixed if so.

If there aren’t any errors, take steps to improve your credit score. This can take around six months, so you may need to wait before applying for credit again.

What if I can’t repay the loan?

If you’re struggling with your loan repayments, contact your lender as soon as possible. It should offer support and may be able to arrange a more affordable repayment plan.

If you do nothing and miss a payment, you could be charged a penalty fee. If you repeatedly miss your repayments, the lender can:

Pass your debt to a collection agency
Take court action against you
Take away the property or car if used to secure the loan.

Where can I get debt advice?

The following organisations offer free support and advice for people struggling with debt:

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Reviewed 07 Jul 2026 by Sajni Shah Personal finance expert

Sajni is passionate about finding money products to help you make great financial decisions. She keeps track of the latest trends and evolving markets to find new ways to help you save money.

Methodology

¹Based on the % of respondents claiming they have used Compare the Market in the last 12 months vs. other leading PCWs. Source: Savanta BrandVue Financial Services, National Representative Survey of 12,257 respondents (June 2026)

²Correct as of June 2026.

Compare the Market Limited acts as a credit broker, not a lender. To apply you must be a UK resident and aged 18 or over. Credit is subject to status and eligibility.