Loans for unemployed people
We explain your borrowing options if you’re unemployed.
What is a loan for the unemployed?
Loans for the unemployed are for people who are out of work - for example, temporarily between jobs, retired or in receipt of benefits.
Although loans for the unemployed are available, your choice of lender will be limited. And as you’re seen as a higher risk, these loans are more expensive than other types of loans.
You should consider if an unemployment loan is the right option and only borrow what you can afford.
There are alternatives which are worth exploring first. We explain these below.
Can you get a loan without a job or income?
It’s impossible to get a loan with no income or means of repaying. But you may be able to get a loan with no job if you have a way of making repayments – for example, from benefits, pensions or savings.
Which benefits count as income?
Some lenders treat benefits as income while others don’t. Those that do, typically accept the following benefits:
- Universal Credit
- Child and Working Tax Credit
- Disability Living Allowance and Personal Independence Payment
- Child Benefit
- Employment Support Allowance
- Incapacity Benefit
- Fostering Allowance
- Industrial Injuries Disablement Benefit
Jobseeker’s Allowance, Income Support, Housing Benefit and Pension Credits do not usually count as income.
What loans can you get if you’re unemployed?
Unemployment loans are typically unsecured personal loans.
You may also be able to get a guarantor loan or a secured loan (where you provide collateral for the loan, such as your car or house).
If you need an emergency loan and are unemployed, payday loans are available. But these have very high interest rates and fees which means your debt can spiral quickly if you miss a payment.
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What are my chances of being approved for an unemployed loan?
Getting approved can be difficult. Mainstream lenders are unlikely to consider you. But you may be able to get a loan from a lender or through a broker specialising in unemployment loans if you can show you can afford the loan.
The smaller the amount you want to borrow, the less risky you are to the lender and the more chance you’ll be approved.
How much money can I borrow?
The amount you can borrow if you’re unemployed depends on factors including your income, credit history and what repayments you can afford. Unemployment loans generally range from £50 to £10,000.
How long can loans for the unemployed be?
This varies by lender and the amount you’re borrowing. Typically, they’re anything between three months and five years.
What are the disadvantages of getting a loan when unemployed?
The disadvantages of unemployment loans include:
- Higher interest rates. Lenders charge more because of the greater risk you’ll default on the loan.
- Small loan amounts. The amount you can borrow is likely be lower than if you were employed.
- Financial stress. If money is tight, adding an extra financial commitment may be a bad idea.
- Risk of losing your car or home. If your loan is secured on your house or car and you miss repayments, the lender can repossess the asset.
How to compare different loans with Experian
It’s free to compare loans with Experian and it doesn’t affect your credit score. You’ll get your eligibility rating for each loan so you can see your chance of getting approved before you apply. Simply enter some basic details about yourself and the loan you want and then browse your loan offers.
We're a credit broker, not a lender†
Can you get a bad credit loan if you’re unemployed?
There are a few lenders which offer loans to the unemployed with bad credit. But the interest rates will be much higher because you pose a greater risk.
Will applying for a loan for unemployed people affect my credit score?
Applying for a loan temporarily lowers your credit score. If you manage your loan responsibly, your credit score will recover and should even improve.
Avoid making multiple loan applications in a short period as this can damage your credit score, making it harder to get credit in the future.
We're a credit broker, not a lender†
What should I do if I’m refused a loan?
Ask the lender why it’s refused you credit. If it’s an issue with your credit report, ask which credit reference agency they used and request a copy. Check it and ask for errors to be corrected. There are steps you can take to improve your credit score.
What if I can’t repay the loan?
Talk to your lender straightaway - it may offer you a payment holiday or a plan to repay the arrears.
If your account goes into default, it stays on your credit report for six years and impacts your ability to borrow.
Can I borrow money from the UK government?
Yes. You can apply for an interest-free loan from the government (known as a Budgeting Loan or Budgeting Advance, depending on the benefits you’re claiming). They can be used for essential items and are repaid from your benefits.
If you can’t make ends meet while waiting for your first Universal Credit payment, you can apply for a Universal Credit Advance.
If you have a mortgage or home loan, you may qualify for a Support for Mortgage Interest loan. You must repay the loan with interest when you sell or give away your property.
Can I get an unemployment loan from a credit union?
Yes. Credit unions are not-for-profit organisations and are a good alternative to high-cost and payday lenders.
They offer small loans at reasonable interest rates to people on benefits and those with less-than-perfect credit histories. You’ll have to become a member. And some require you to save first or pay some of your benefits into your credit union account.
What is a hardship loan?
If you’ve had your benefits sanctioned and can’t cover your essential needs, you can apply for a hardship payment from the government.
How can I get help without getting a loan?
You can explore these options before resorting to a loan:
- Check you’re getting the benefits and grants you’re entitled to
- Ask family or friends for help
- Contact your local council (they have welfare and assistance funds)
- Apply for a social tariff for your phone or broadband (these are cheaper deals for people on benefits)
- Ask your energy and water providers for help if you’re struggling to pay
- Get help from a food bank
- Apply for a Discretionary Housing Payment if you get the Housing Costs element of Universal Credit or Housing Benefit
Where can I get debt advice?
Organisations offering free debt advice include:
For more options, visit the government-backed website MoneyHelper .
How to apply for a loan with Experian
You can check your eligibility rating for personal loans when you compare them with Experian. Comparing loans with us is free and we only carry out a soft credit check. So, even if you’re unsure if you’ll be accepted for credit, you can search the market, without damaging your credit score.