Everyone agrees that the chances of securing a meaningful loan sum when unemployed are pretty slim. Even those banks willing to take the perceived risk and approve a loan typically charge very high interest rates, making the loan too expensive anyway. But the good news is that $5,000 unemployment loans are available.
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Perhaps $5,000 does not seem like a lot of money, but when loan and mortgage repayments are looming, it can be a vital sum to have at hand. But how can one get loan approval without employment, when an ability to repay is the core condition every lender insists upon?
The fact is that there are a number of lenders now willing to take a chance on unemployed bad credit borrowers due mainly to the volume of people affected by the global economic crises. Therefore, some allowances have been made, and affordable installment loans are available.
How Lenders See The Unemployed
The key reason behind the introduction of loans specifically designed for those without a job is down to the way in which lenders look at the unemployed. Of course, there are different categories of jobless, and not all of them can qualify for a $5,000 unemployment loan.
The opportunities are reserved for the recently unemployed, though no sooner than 6 months before submitting the loan application. This is chiefly because the lender needs to be sure that the terms offered on the loan are not taken advantage of. Granting loan approval without employment is a risk to them.
The long term unemployed cannot qualify as their chances of finding work are diminished. The offer of affordable installment loans is for those likely to find a new job within 12 months, thereby justifying the risk taken.
How Unemployment Loans Work
The logic behind granting a $5,000 unemployment loan can seem strange, but lenders have very good reasons for approving applications. They are not likely to take an uncalculated risk, after all. The best comparison is a student loan, where the lender trusts that the education the funds pay for will see the borrower employed soon after graduation.
When well-educated workers lose their jobs, they have a strong chance of getting a new job within 18 months. Lenders are willing to grant approval without employment in the belief that the borrower will secure employment in the near future.
So, the offer of affordable installment loans is made on the condition that the borrower will soon earn an income, even if not the same substantial income they previously had, and be in a position to repay the loan.
Loan Terms To Expect
While a $5,000 unemployment loan can be a useful thing to get when income is gone, the terms that are offered are the key to the effectiveness of the loan. Interest rates can be quite high, something that is to be understood when the risk factor is so high.
However, lenders are realistic enough to know that approval without employment is pointless if the repayments required are too high. For this reason, the loan term is longer than usual, thus keeping the repayment sum low.
These affordable installment loans are also enhanced by an interest-only clause that some lenders are willing to provide. This offer is for a short period only (usually just 12 months), after which time the full repayment sum is charged.
With no certainly of a new job, it is foolish to agree to a loan without checking out the small details of the contract first. So, be sure to study the contract before putting your name to it.