September 29, 2021
When you feel low and tight on finances, the personal loan option may seem attractive as it can take you out of your financial quagmire and put you in a better state.
If you are unemployed, the option for loans is still available for you, but there are other factors that the lenders consider before lending loans to unemployed people.
For borrowing alone, your credit profile is very important that the lenders consider, and you can also borrow a loan despite being unemployed.
Loan approval process
When you are unemployed, it becomes difficult to repay the loan, but at the same time, the importance of a loan comes when you are out of finances. Many lenders consider multiple factors while analyzing your loan application.
Your credit score is a significant factor of consideration while getting your application for loans for the unemployed in Ireland approved.
Factors involved in the loan approval
Income is the primary concern while borrowing a loan from any lender. Being unemployed and then applying for a loan can be more challenging and tasking.
But if you have additional income sources apart from a steady job, you still can be qualified for loan approval. Some of the common examples of your alternative incomes are:
a. Spouse’s income
If you are unemployed but you are married, it can work in your favor. If your spouse is earning and you have an income source in your home, you are eligible for applying for a loan.
The lender can consider your spouse’s income for your loan application. In this case, the lender can allow you and approve you for a loan only if you can use your spouse’s income to repay your loan.
For this, your spouse needs to become the co-applicant for your loan, and you need to decide and choose your spouse’s income as the primary source of income for your loan repayment.
Any income, despite being unemployed, can be your gateway to your loan approval. If you have any capital gains or any money from your investments, it can make you capable of repaying a loan on time.
For any lender, the lender is concerned about the repayment of the loan, and in this case of being unemployed one-time capital gains can be considered by the lender.
The lender may also improve the recurring income from the dividends, or any properties on rent that you have can also work in your favor.
c. Other payments
Child support and alimony are other sources of income.
2. Debt-to-income ratio
Another factor that the lenders consider is your ability to repay the loan in the form of debt to income ratio. Your debt to income ratio will be calculated if you divide your total debt payments every month by your gross monthly income.
You are left with your gross income if you make certain deductions from your income, such as taxes insurance. Having a high debt-to-income ratio can be a good indication for the lender, and you can be given the option of taking loans online in Ireland.
3. Credit history
One of the significant indicators of your loan repayment is your credit history. Every lender evaluates your credit history before approving the loan amount for you. If you have a good credit score, it can work in favor of you.
Lenders do take a look at your credit score. Before approving the loan, they check your payment history and other relevant information in your credit report, such as any past bankruptcy or discrepancy in your accounts.
Although your good credit or strong credit score doesn’t need to help you get the required loan amount, it can work in favor and can help you get your loan approved.
Risks of borrowing while unemployed
a. Missing out on payments
There are many risks involved in boring alone while being unemployed. One of the most significant risks is missed payments.
If you fail to make a payment, it can damage your credit and further make it difficult for you to get a loan.
b. Higher interest rates
If you are unemployed, every lender will be skeptical of lending you the loan as there can be a risk in getting the repayments on time.
Hence the interest rates involved in the loans for the unemployed are comparatively higher than the other available loans. This makes the loan overall costly and difficult for you to repay while being unemployed.
Getting a loan while being unemployed is difficult compared to getting a loan while having a traditional study job. But it is not impossible. It is possible to get alone while being unemployed.
You just have to be mindful of the loan costs and look out for other possible alternatives. Before borrowing any loan from the lenders, always look out for the possible challenges you may face during the loan approval process.