At first glance, it seems ridiculous, but there are lenders who are willing to make loans to the unemployed. Sure, this is silly, since the unemployed obviously have no source of income, but the fact is, it is possible to get a $ 5,000 unemployment loan when it is most needed.
How can this be possible? Well, let’s be honest and admit that $ 5,000 is not a great deal of money. It means that lenders can easily create conditions that benefit them, but in a way that, if the borrower defaults, it will not affect them much. Getting approved for a jobless loan depends on the same faith that students have.
Lenders will even offer unemployed applicants the opportunity to obtain a loan, because there is a great possibility that unemployment is temporary. Therefore, making affordable installment loans is seen as a viable decision rather than a major risk.
Why are the unemployed accepted
So why do lenders accept the unemployed? Well, lenders are not ignorant of the risks involved and are unwilling to make loans to everyone who is out of work. But there are some cases where the chances of default are quite low, so it is okay to grant a $ 5,000 unemployment loan.
There are two different types of unemployed. The long-term unemployed have been out of work for several years, so the chances of them finding work again are very slim. This type of unemployed will not be considered for a loan.
Those who can expect to be approved without employment will have recently been laid off, but it is understood that at least 6 months will have passed before the application can be submitted. The reason an affordable installment loan can be offered is that you are likely to find some form of employment in the next 12 months.
Unemployment loans explained
If approval for a $ 5,000 unemployment loan seems contrary to what might be considered logical, understand that the loan itself is used to keep track of existing loan payments and bills. For this reason, the loan is understood to be an interim measure.
However, it is the fact that the borrower is still considered highly employable that attracts the lender’s attention. It is similar to a student loan in that the loan is made with the faith that the borrower will graduate and get a good job.
Similarly, lenders have enough faith to grant jobless approval because the borrower will get a new job. Of course, they must also offer affordable installment loans because at the moment there is no means to meet normal repayment terms.
Terms to keep in mind
It may seem that granting a $ 5,000 unemployment loan is more of a social charity than a business. That is true to some degree, but it is also a business arrangement, and lenders expect the loan to be paid in full and on time. But what are the terms that should be expected?
The key terms are the interest rate and the repayment period, just like any other loan. However, because the lender grants the jobless approval, the interest rate is higher to cover any potential losses, while the repayment term is longer.
The longer term of the loan is what ensures that these affordable installment loans are, in fact, affordable. For example, a $ 5,000 loan repaid in 12 months is more expensive than in 5 years.