What loans are available if you are unemployed?

If you do not currently have a job, you will find it difficult to get access to many loans available on the market. This is because lenders will be looking for evidence to ensure that you would be able to afford to not only take out the loan, but have enough to make loan repayments too. However, in a small number of cases, it could be possible to get access to a secured loan (using a high-value item as security) a guarantor loan, or potentially get a loan through the appropriate credit union.

Why is it difficult to get a loan if I am unemployed?

It comes down to creditworthiness and affordability checks. Lenders will usually need successful applicants to show evidence of a regular, stable income and a salary before deciding to approve a loan. Not having a job suggests to the lender you may have trouble paying back a loan granted to you. When you take into account the interest that will also be needed to be paid for the loan, this could lead an unemployed applicant into a cycle of debt they could struggle to get out of.

However, as we have previously mentioned, it may be possible to get a loan with some specialist lenders without having a job.

What types of loans are available for the unemployed?

  • Benefits
  • Secured loans
  • Guarantor loans
  • Credit unions


One of the most common things to do for someone that is long-term unemployed is to get benefits. This will be a weekly income that is used for the most basic necessities. The amount you get from Job Seeker’s Allowance (see below) is not a huge sum, in which case you may be better off finding work than relying on benefits.

Secured loan

A secured loan typically allows you to gain access to more favourable interest rates than you would usually get if you were applying for a loan whilst unemployed. You will also usually be able to borrow more than you would with an unsecured loan.

The main reason for this, is that something of high value that you own (such as a vehicle, piece of jewellery or property) is used as collateral against the loan. For the lender, this helps to mitigate some of the risks in lending to you, as this item secures the loan. It does mean that should you fail to keep up with repayments there is a high level of risk to you: the lender has the right to repossess your home (if put up as security) or other high-value items if you can’t pay the loan back.

Guarantor loans

Another possibility if you are unemployed is getting a guarantor loan. Guarantor loans work through the main applicant having a nominated individual (with a strong credit score, a stable income, and usually homeowner status as well) ‘guaranteeing’’ the loan amount. In the majority of cases, the guarantor is a close friend or family member.

You and your chosen guarantor must be fully aware of the possible implications of this type of loan before signing the contract. What we mean by this, is that the guarantor is legally obliged to pay the loan back in the event the main applicant does not, or cannot, pay the loan themselves.

Once the contract has been agreed, it isn’t possible for the guarantor to reverse it and no longer be the guarantor.

Credit unions

Depending on your individual circumstances, it could be possible to get a loan from a credit union. This is usually a lower-cost alternative to other loan products available, and they are specifically open to members who have a common bond amongst them. This could be the same church, trade union, occupation or community.

There are more than 500 unions in the UK and approximately one million credit union members in total. You can research online if there is a credit union you meet the loan criteria for.

Should I use payday loans if I am unemployed?

No, you should avoid using payday loans if you are unemployed. This type of loan is usually only for a few weeks and offers high rates of interest than other typical loans (usually for the convenience of speedy funding). Since repayments are usually at the end of each month and not spread over several years, the interest rates can add up and put financial strain on people who are without employment.

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