Our Guide to Getting a Loan While Unemployed

Flexy Loans Guide to getting a loan while unemployed
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Losing your job is one of life’s most stressful events, and can land you in very difficult financial circumstances.

Unfortunately, the time when you’re most likely to face a cash flow crisis is also one of the hardest times to borrow money. Most lenders want evidence of a salary before agreeing to lend money.

However, that does not mean it is impossible to get a loan if you are unemployed.

Whether you’re facing redundancy, or are a student who has stopped working to focus on your studies, there may still be borrowing options available if you know where to look.  

Can I Get a Loan When I’m Unemployed?

Yes, although you will still need to prove that you can afford to pay it back. Even if you don’t have a regular salary, there are lenders out there who will consider other forms of income.

Benefits, student loans and other non-traditional incomes can all be taken as evidence of your ability to pay back a loan. However, if you’re unemployed, lenders may consider you to be a high-risk investment.

As a result, you may need to provide collateral or a loan guarantor to convince the lender to loan you money. This assures the lender that they would be able to recover their investment if you stopped paying back the loan.

It is also important to consider whether you have exhausted other options available to you before taking on debt at a time when your income is irregular or very low.

Even though you may be in need of extra cash, you risk making your situation even worse if you take on debt which you cannot afford to pay back.

If you can find ways to reduce your expenses, dip into savings, apply for benefits, earn extra income or borrow from friends or family, this could be a less risky option than borrowing at a time when your income may be unreliable.

What Types of Loan Can I Get?

There are several types of loan which could be available to you, even if if you don’t currently have employment.  Below you can read more about the types of loan, along with their pros and cons and proof of income you’ll need to apply.

Loans Available if You Have Other Income

If you’re unemployed but still have some other form of income, such as Universal Credit or a student loan, there are several borrowing options open to you.

Guarantor Loan

A guarantor loan is a personal loan which someone else agrees to pay back in case you default on your loan. This person is known as a guarantor and can be anyone over the age of 21, with a regular income and reasonable credit rating.

You can borrow between £1,000-£25,000 with a guarantor loan, as it’s essentially just a personal loan- but with extra security for the lender. Having a guarantor may also help you access better interest rates than you would otherwise get.

What kind of income do I need?: You’ll still need to prove you can afford to pay back the loan, but lenders will be more willing to consider student loans, benefits and other non-traditional incomes if there is a guarantor on the contract.

  • Pros: You may be able to access better rates than with other types of loans and borrow large amounts of money
  • Cons: If you default, someone else has to pay the price- which could put your relationship under strain

Homeowners Loan

If you are a homeowner, you may be able to secure a personal loan using your property. It is possible to get a homeowners loan for anywhere between £1,000-£25,000, provided that you pass affordability checks.

Lenders are more likely to consider non-traditional forms of income with this type of loan because there is a guarantee they could recover their costs if you default, by taking possession of your property.

For this reason, it’s important to be sure that you can afford repayments before you apply.

What kind of income do I need?: You’ll still need to prove you can afford to pay back the loan, but lenders will be more willing to consider benefits and other non-traditional incomes because the loan is secured against your home.

  • Pros: You may be able to access better rates than with other types of loans and borrow large amounts of money
  • Cons: Taking on priority debt when you’re unemployed is risky- if you don’t keep up with repayments, you could lose your home

Logbook Loan

A logbook loan allows you to borrow money using the value of your vehicle as security. You can borrow up to 50% of your car’s value through a logbook loan and continue to use the vehicle while you pay back the loan.

However, if you default, the lender can tow your vehicle to recover their costs without having to take you to court. Logbook loans are available online or from high-street lenders.

What kind of income do I need?: You’ll still need to prove you can afford to pay back the loan, but lenders are likely to accept non-traditional forms of income.

  • Pros: You can get access to a lump sum within a matter of hours through online providers
  • Cons: If you default, you’ll lose your vehicle; logbook loans often come with high-interest rates

Payday Loans

Most payday loan companies accept benefits and non-salaried income as part of their affordability assessments, which makes them an easy option for borrowing while unemployed.

However, these loans come with very high-interest rates and a short amount of time to repay what you borrowed. This makes the likelihood of defaulting or ‘rolling over’ on a payday loan higher than with long-term forms of borrowing because you have less time to source the money to pay off your loan.

Before taking one out, you should have a clear repayment plan in place.

What kind of income do I need?: You’ll still need to prove you can afford to pay back the loan, but almost any income will be considered.

  • Pros: You can get access to a lump sum within a matter of minutes through online providers
  • Cons: Payday loans often come attached to very high-interest rates and late payment is likely to involve steep penalty fees

Payday loans is a complicated subject. We have written extensively about payday loans and you can find all the details here in ‘Our Guide To Instant Payday Loans‘.

Loans Available if You Have No Income Whatsoever

Even if you have no other source of income, there are still a few borrowing options out there that could help you through a period of unemployment.

As always, you should consider what other options might be available before resorting to borrowing options which could leave you at risk of losing your assets or financial security for non-payment.

Borrowing Against Life Insurance

If you have held a ‘whole life’ insurance policy for a number of years, you may be able to borrow from your death benefit. In order to be able to do this, you must have invested more than the total death benefit, because this is what’s used as collateral.

The insurer will charge interest on the loan, but your eligibility is not dependent on your income. If the loan is not paid back before you die, the amount you owe is subtracted from the total death benefit.

What kind of income do I need?: You don’t need to prove your income, but if you don’t pay back the loan, then the outstanding balance will be deducted from the death benefit paid to your next of kin when you die.

  • Pros: You can access the capital you’ve invested without needing to prove your income
  • Cons: It’s only possible to borrow against a whole-life policy; if you don’t pay back the loan, the policy’s death benefit will be used as collateral

Equity Release

If you’re a homeowner over the age of 55, you could tap into the value locked up in your home. Equity release allows you to withdraw money, tax-free, from your property’s equity in either a lump sum or steady stream of payments.

You don’t make any repayments on the loan as long as you live in the house, which means interest can build up quickly. Instead, the loan is normally paid back when you die or move into long-term care.

What kind of income do I need?: You don’t need to prove any income because you don’t need to make any repayments on the loan. Instead, you’ll need to prove that you own your home outright or be willing to use some of the equity releases to finish your mortgage.  

  • Pros: You can release a large amount of equity tax-free while continuing to live in your home; you don’t need to make any repayments.
  • Cons: Because you don’t pay off your loan, the debt accrues a lot of interest which can eat into the value of your estate; if you change your mind, it can be very expensive to pay off equity release plans early


Pawnbrokers are an expensive way to borrow, and there is a high risk of default due to the high-interest charged on loans. A pawnbroker lends you money against the cost of valuable (ideally non-essential) belongings, such as a HiFi or games console.

Normally, you can borrow up to 50% of the item’s market value. The pawnbroker retains ownership of the item until the loan is repaid, and has the right to sell it on at full price if you default on the loan.  

What kind of income do I need?: You don’t need to prove any income when you deal with a pawnbroker.

  • Pros: You can access cash quickly with no questions asked, using non-essential assets as collateral
  • Cons: If you don’t pay off your loan, you’ll lose the items you pawned; pawnbrokers charge high-interest rates, and you’ll need to pay full price to buy your item back at the end of the loan.

How Can Flexy Loans Help?

Here at Flexy Loans, we have partnered with some of the UK’s leading Lenders.

They have already helped thousands of people get loans already, and they can do the same for you.

Choosing a loan broker like us (we don’t charge any fees) means our application process matches you with the best loan available to you.  All lenders we recommend are regulated by the FCA, which gives you an additional layer of protection.

To apply and see what loan is available to you, click on the below and answer the question

Len Burgess
Len Burgess
Len Burgess is a 15-year digital financial entrepreneur. When he isn't writing or creating financial websites he is either watching cricket or football and spending time with his family, talking about football and cricket
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