New dresses, dinner, chocolates, parties, make Christmas expensive. Moreover, the average cost of Christmas dinner alone is £32.57/per person. It quickly increases if you invite your friends and family members over.
It could be challenging to arrange everything if you are currently unemployed. The good news is- you can still host the best dinner! Christmas loans may help you fund any requirements related to the celebrations. The blog lists how to get a Christmas loan as an unemployed person.
Why do I struggle to get a loan as an unemployed person?
You struggle to get a loan as an unemployed person because loan providers view a lack of a steady income source as risky. It reveals that you may not be able to afford the monthly instalments on the loan. You generally need stability of income, a good credit score, and proof of regular income to get a loan.
Without this, you may be deemed as risky. However, being unemployed does not immediately disqualify you from getting a loan. You may get one based on your current financial potential, income, and the benefits you receive. It is because affordability matters more than credit score in short-term loan solutions.
Can I get a loan against my unemployment benefits?
Yes, you may get a Christmas loan on the benefits that you receive from the government. Some loan providers may be willing to consider benefits as an income source.
Alternatively, you may need to provide additional income proof apart from benefits to get a loan in some cases. Your loan options are limited, and you could be offered a loan at a high interest rate. It is because of the risk that the creditor takes by providing the loan to a person without a consistent income.
Strategies to get a Christmas loan as an unemployed person
If searching for how to get a Christmas loan as an unemployed person, read ahead. Here are some strategies that may help you get a loan:
1) Check eligibility criteria for an on-benefits loan
Identify which loan companies provide Christmas loans based on benefits income. Alternatively, check the benefits that they provide with the loan. Next, determine the eligibility criteria to get a loan against unemployment benefits. It helps you determine the loan approval chances.
Who can get a Christmas loan against benefits?
- You must have been receiving certain benefits for the last 6 months
- You should be using the money for only essential needs like rent, food, and energy bills
- You must have earned less than £2600 in 6 months before applying
- You must be living at the same address for at least 6 months
- Must have clear proof of income
2) Additional income may help
Yes, you may get Christmas loans if you are living on benefits income. However, additional earning proof increases your affordability and chances to qualify. It is especially helpful if applying as an unemployed person with a bad credit score.
Check whether you may earn extra from side gigs such as renting out a place, freelancing, or investments. It may help you get a higher amount than what you may get with just revealing benefits as income. It is also helpful if you are struggling to qualify due to unemployment.
3) Borrow a smaller amount
As an unemployed person, you may not get a huge amount on the loan if applying individually. It is because you may not meet the general affordability parameter. Therefore, it is important to borrow a lesser amount or an amount that you can afford to repay without affecting the budget.
Taking up a small amount as a loan also helps you save money on interest liabilities. It limits your possibilities to default on the loan.
4) Consider a loan guarantor
A guarantor is a third person or someone known who helps you qualify for a loan by providing the strength of their credit score and income as proof of affordability.
It reduces the risk for the loan provider regarding default. It could be an ideal approach for someone who is unemployed without any tangible income source.
If you are waiting for the approval of the benefits cover from the government, consider the loan. It eliminates the need to wait until you receive your first benefit payments.
Instead, you get approved according to the guarantor’s affordability potential. He must undergo and meet the eligibility criteria.
Thus, a guarantor may help you fetch a higher amount at low interest rates.
He will be responsible for the payments if you cannot pay. You may get affordable loans for unemployed people in the UK in that way. Coordinate with your guarantor regarding the loan terms. Ensuring clarity on payments and paying them on time to get debt-free.
5) Reveal improved financial behaviour
Unemployment is a temporary situation. It does not define your permanent financial habits. Therefore, try to prove your affordability by revealing low overdraft usage, consistent side income, and controlled spending.
Moreover, responsible bank behaviour also improves the loan approval chances. Try to negotiate and pay the pending debts. You can begin with small ones to build reliability for the loan payments.
Bottom line
These are some aspects that may help you get a Christmas loan as an unemployed person in the UK. Identify and improve the possibilities by optimising credit history and exploring the best quotes.
Determine the prospects of getting an additional income. It improves your affordability and boosts loan approval chances. You may also consider a guarantor to get a higher amount at relatively low interest and affordable terms.
