Payday loans for the unemployed

Navigating a period of financial choppiness is never easy, especially if you’ve suddenly become unemployed. And without a reliable income stream, many people look for ways to get cash fast. But are loans for unemployed people a feasible option? And are there alternative ways you can secure funds and get back on your feet?

Here at Moneyboat, we commit ourselves to responsible lending for our short-term loans. This means we’ll only lend to those who meet our minimum lending requirements – one of which includes being in full-time or part-time employment.

In this guide, we’ll dive further into the eligibility criteria surrounding short-term and payday loans, discuss alternative options, and offer some handy tips for navigating a rough financial patch.

In this guide: 

• What is a payday loan?
• Can you get a loan without a job?
• How to get a loan without a job
• What type of loan can I get if I'm unemployed?
• Advantages and disadvantages of loans for the unemployed 
• What happens if you can’t repay a loan? 
• Managing your finances during a period of unemployment 
• How to boost your employability
• Emergency resources

What is a payday loan?

A payday loan is a small amount of money which someone might borrow to tide them over until their next payday.

Payday loans can be helpful when it comes to unexpected expenses such as broken-down cars and boilers, as you can access money quickly to cover these emergencies. However, some lenders may expect you to repay the payday loan in full when you next get paid.

It’s also important to highlight that payday loans may not be suitable for everyone, and you should only consider one if you’ll be able to comfortably meet the repayments.

At Moneyboat, we offer short-term loans as an alternative to traditional payday loans. If we think you’re a suitable borrower who can reasonably make the repayments, you’ll have the choice to repay your loan in flexible instalments or clear the loan the next time you’re paid.

Can you get a loan without a job?

Short-term loans for the unemployed are complicated. When applying for a loan, a responsible lender will look at your credit history, your income, and your employability status.

For instance, if you apply for a short-term loan with Moneyboat, you’ll need to meet the following minimum criteria. You must:

• Be in full-time or part-time employment
• Have a minimum NET pay of £1000 per month
• Hold a UK bank account & debit card
• Be aged 18 or over

Most short-term or payday lenders registered with the Financial Conduct Authority (FCA) will complete eligibility checks to confirm you’re employed, ensuring you can comfortably meet the repayments and won’t fall into financial difficulty.

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

Lenders will also carry out a credit history check. So, if you’ve had financial difficulties in the past, resulting in a less-than-ideal credit report, you might not be accepted.

Although if you meet other requirements, there’s a chance you’ll be accepted, but be prepared to be offered smaller loans and higher interest rates. If you’re looking for further insights on this, dive into our guide on payday loan eligibility criteria.

How to get a loan without a job

If you’re unemployed and looking for funds to help cover bills or an emergency payment, a payday loan can be a risky manoeuvre.

While there are some lenders that may offer payday loans for unemployed people, people on benefits, or those who have a poor credit history, they often come with much higher interest rates. This means it can cost you more to repay the loan, which could put you at risk of getting into further debt.

You’ll increase your chances of being accepted for a loan if you have some savings or an asset, such as a home, or you have another income source such as your pension or state benefits. Benefits that are considered a regular income include:

• Universal Credit
• Child Tax Credit and Child Benefit
• PIP (Personal Independence Payment)
• Employment and Support Allowance
• Fostering Allowance
• Incapacity Benefit

But remember, you should never apply unless you’re confident you’ll be able to comfortably meet the deadlines. The last thing you want is to end up in a trickier situation than you started in.

What type of loan can I get if I’m unemployed?

As mentioned, many payday and short-term loan lenders may reject those who are unemployed, but there are other loans available. These include:

• Secured loans: These loans involve the borrower putting a valuable possession up as collateral. While it might help you secure funds in the short term, the asset might be repossessed if you don’t make the repayments.
• Guarantor loans: A guarantor loan requires a trusted friend or family member to agree to make the loan repayments if you are unable to.

Loan alternatives for people on benefits

If you regularly receive benefits and need urgent help paying for an essential bill or unexpected cost, you may be able to apply for a short-term Budgeting Loan.

Budgeting Loans can help you cover costs such as rent, clothes, and appliance repairs, as well as funeral and maternity expenses. However, you can only apply if you receive one or more of the following benefits for at least six months:

• Income Support
• Income-based Jobseeker’s Allowance
• Income-related Employment and Support Allowance
• Pension Credit

If you receive Universal Credit, you won’t be eligible for a Budgeting Loan. However, you may be able to apply for a Budgeting Advance to help cover emergency costs.

Benefits loans may be a more suitable option if you’re considering a short-term loan while you’re unemployed. This is because you’ll only pay back the money you borrow through the benefits you receive.  

Potential advantages and disadvantages of loans for the unemployed

Next, let’s take a quick look at the potential advantages and disadvantages of taking out a loan if you’re unemployed.

1. Potential advantages

As long as you’re confident you can meet the repayments, one of the main potential benefits is that you’ll get access to fast cash, which could help you resolve an emergency cost.

Equally, making regular, prompt credit payments can help you boost your credit score in the long term. You’ll have the opportunity to demonstrate that you’re a responsible borrower who’s able to make timely repayments.

2. Potential risks

However, there are various potential downsides that you may need to bear in mind too.

Firstly, the most obvious disadvantage is that you’re taking on more debt. So, it’s crucial to consider whether it’s the right route for you, especially if you have other commitments such as a credit card or car loan.

If you’re unemployed, you’ll also often be offered higher interest rates, making the repayments much more expensive.

What happens if you can’t repay a loan?

If you fail to repay, you may face consequences such as missed payment fees, a

default notice, and a negative impact on your credit score. So, if you find yourself struggling, contact the lender as soon as possible and make your situation clear.

Contacting creditors

If you reach out to your lender and explain your situation, there’s a possibility your lender may offer some alternative options, such as setting up a repayment plan. This may give you some breathing room and help you get back on track.

managing-finances-unemploymentManaging your finances during a period of unemployment

Here at Moneyboat, we only offer loans to those who are in full-time or part-time employment. Many responsible lenders do the same. So, if you’re unemployed and a loan isn’t looking like a feasible option for you right now, let’s look at some other ways in which you can navigate a tricky financial period.

Effective budgeting

Effective monthly budgeting is key when it comes to taking control of your finances; it can help you stretch the money you do have and help ensure you don’t run out. Whether you use budgeting templates or handy budgeting apps, it’s important that you’re aware of the money you have coming in and going out of your accounts.

If you’ve previously built an emergency fund (dedicated to keeping you afloat when emergencies arise), budgeting can also help you make effective use of this.

If you don’t have an emergency fund, it’s a good idea to make steps to building one once you’re back on your feet.

Look for ways to save

Next, it’s a sensible idea to look for ways to cut back on your everyday expenses too. Here are just a few ideas:

• Food shopping: When it comes to food shopping, how about creating meal plans before you head off to do your weekly shop? Meal plans help to reduce both impulse buys and food waste. Plus, you should keep your eyes peeled for discounts, loyalty programmes, and cash back opportunities.
• Utility savings: Whether it’s unplugging your electronics, choosing energy efficient appliances, or opting for water-saving fixtures, there are various ways to save when it comes to your utilities.
• Saving on entertainment: While it’s important to budget for entertainment and enjoyment, how about cutting back costs by cancelling unused subscriptions? Another option is to share the cost of subscriptions with family and friends!
• Negotiate your bills: It might also be time to negotiate with your service providers (including your phone and internet providers). You could ask whether they’re currently offering any discounts, and if not, you could always switch to a more affordable provider.

And don’t forget to explore your options when it comes to benefits, if you haven’t done so already. For instance, those who have a low income, are out of work, or are currently unable to work may be entitled to Universal Credit. To claim this, you must live in the UK, be 18 or over, and have £16,000 or less in savings and investments

How to boost your employability

Securing a new role doesn’t come without its challenges, and we understand that it can feel like a huge mountain to climb. But there are various things you can do to boost your employability and successfully secure your next role.

Refresh your CV

First of all, ensuring you’ve crafted a clear and compelling CV is key to supercharging your employability. You’ll want to display your key skills and capabilities, as well as your education and employment history.

Perhaps the most important tip is to tailor your CV (and cover letter) to every job you’re applying for. This gives you the opportunity to demonstrate your enthusiasm and explain why you’re a good fit for the role.

Make sure to dive into our blog on how to write a CV which is filled with everything you’ll need.

Spend time developing your skills

While a period of unemployment may leave you feeling uninspired, why not spend some time developing a few new skills? This will give you a burst of motivation as well as making you stand out in a pool of applicants when you do apply.

You could sign up to an online course, attend a workshop, or dedicate some time to a volunteering project you’re passionate about. Alternatively, spend some time developing softer skills (such as teamwork and collaboration). This is an important step when it comes to securing a new role and boosting your income.

Emergency resources

Navigating a period of financial hardship can be challenging, but that doesn’t mean there isn’t help out there. If you’re struggling to stay afloat, consider looking into either of the below:

• Food banks: For those going through financial hardships, food banks can provide short-term food support. There are various banks dotted around the UK offering supplies to those who need them. Simply type your postcode into the Trussell trust website to find your nearest food bank.
• Debt management services: Next, if you’re struggling with debt as well as unemployment, there are services designed to help. You could contact a charity such as StepChange for free debt management advice.

If you’re currently thinking about loans for the unemployed, it’s important to consider all of your options first. In the meantime, find out if you could be eligible for benefits and emergency benefits loans, which are designed to help in urgent situations.

For more independent help and advice, you can always contact Citizens Advice, and MoneyHelper for support.

Before you go, why not head over to the Moneyboat blog and explore more financial tools and guides? There you can read all about managing your personal cash flow and how to find out if you could be claiming benefits.