Personal Loans for the Unemployed
Employment is a big factor that decides your eligibility for any form of credit. But conditions like the current pandemic may have left you out of job, or you may have decided to take a break or maybe pursuing studies after working for a certain number of years. In all these conditions you are unemployed. Ideally, you should have saved up for any such situation. But what if you still run into a situation where you need a loan? How would you deal with that?
It may be difficult to avail personal loans when you are unemployed, but it is not impossible for sure.
Features of Personal Loans for the Unemployed
There are some personal loans that the unemployed can avail. Some of the important features of them are:
Secured Personal Loans
TAssets like fixed deposits, gold, mutual funds, shares, or money-back policies are valuable and can be pledged to get a personal loan at any time. The best thing, here, is that you do not lose ownership of your asset.
The Requirement of Other Income
When you are unemployed or not drawing a fixed salary, then some other income in the form of rent, royalty and dividends/interest income may be a good way to get a personal loan.
Good Credit Score
When you do not have a fixed income, a high credit score becomes essential for a lender to lend you a personal loan. If you have sufficient reserves in your kitty, a lender may allow you a short-term loan if you have a good credit score
Existing Relationship with the Lender
Relation with your existing lender matters a lot if you are looking for a loan and you are unemployed. Your existing relation could give the lender confidence to lend you a loan.
Only short-term loans may be available for the unemployed as the risk is higher in lending
Easy Loan Options for the Unemployed
Secured personal loans are one of the best options for the unemployed. Some of the easily available options there are:
Loan Against Fixed Deposit
Fixed deposit is a popular form of investment as it is risk-free and easy to understand. A fixed deposit is an investment that many go in for when you have some extra cash. The FD can be put to good use in times of difficulty
You can get a loan against the FD up to 75-90% of the value of the FD without even breaking the FD. The investment will continue to grow and at the same time, you can get a loan. The interest charged is 1-2% higher than the FD rate. But keep in mind you will not be able to liquidate the FD before closing the loan.
Gold is one of the favourite investments of us Indians. It is estimated that Indian households hold about 25000 tons of gold. Availing a loan against the safety of gold is a great way to put this asset to use
If you are facing difficulty in getting a loan due to your unemployment situation, then a gold loan may be a good bet. Moreover, there is no credit score requirement for availing a gold loan.
Loan Against Rent Receivables
If you have a property (commercial or residential) which is given on rent, you can avail a loan against the rent that you will receive in future. To get a loan against rent receivables, you would need to get into a tripartite agreement between the lender, your tenant and yourself. The future rental for your property is paid directly by your tenant to the lender till the loan is closed.
Loan Against Investments
You may have investments in mutual funds, shares or even money-back insurance policies. All these investments are worthy and can be used to get a loan by pledging these investments. The interest rate on these investments is usually lesser than the interest rate on usual personal loans due to the safety of these investments.
The only thing that you should keep in mind is that you would not be able to sell any of these investments before you close your loan. And if you are not able to clear your loan, your investments would be sold to realise the loan amount
Loan Against Property
If you are looking for a big amount as a loan, you might want to try getting a loan against a property. This amount could be used for purposes like starting a business, buying another property, meeting expenses of higher education, etc. This is a long-term loan, so it might be difficult for an unemployed individual to get this loan.
Also, if you are facing financial problems due to COVID and do not have any of the assets above to get a secured personal loan, then you could use loans or advance from your EPF account or even take a withdrawal from your PPF account. You could also use many of the measures announced by your state or central government.