Providing Help in Testing Times – Loans for Unemployed People
Loans for unemployed people can really help consumers get through a tough spot financially. They may have lost their jobs for a variety of reasons, qualified for severance pay and for unemployment insurance and now need extra cash for many different reasons. A loan at this time can be really helpful for someone who is short of money and needs to put food on the table for their families, pay utility bills, taxes on the house or even the rent. When you are unemployed all of the normal expenses just keep on coming in unless you take drastic steps to reduce or curtail your expenses.
These loans can either be secure or unsecured and it is completely one’s discretion to opt for the most suitable one provided that the consumer qualifies for the loan and has the credit rating to support their loan request. It is also extremely important in situations like this that all of the conditions of the loan are met. Be regular with repayments each month and always ensure that there are sufficient funds in your account to avoid insufficient funds fees levied by both your bank and the lender. We recently read an article that suggests that banks are reaping huge profits from customers who for one reason or another do not have enough cash in their account and end up with insufficient funds fees. This can be a charge for recovering the payment or it can be a fee for processing the payment, but this takes you into overdraft zone and there can be high fees for overdraft situations. Sometimes taking a loan can be the better option.
Using Your Home as Collateral for Your Loan
This is one of the best ways to obtain personal loans and to find the best interest rate and terms. If you have unused equity in your home, consumers can use this equity to obtain a secured loan. The unused equity is the value of the home, less any existing outstanding mortgages or loans that you may have on the home. The lenders will only approve up to a percentage of your total value of the home. Typically this may be 75% of the value of your home.
Let’s assume your home is worth $150,000 and you have a mortgage on the home with a remaining balance of $65,000. The different is the unused equity in the home which in this example is $85,000. Now the lenders will not lend the full amount to you since they want to make sure that there is sufficient value to the home to cover their loans and the existing mortgage. They might lend up to 75% of the value of the home which would be $112,000 less the value of the existing mortgage which leaves a difference of $47,000! This is a large amount of money and if used wisely can help someone who is unemployed for a long time and until they find a new job.
It is important to note that if the consumer is unable to pay his monthly payments for whatever reason, the lenders could make arrangements to foreclose on the home and attempt to sell it to claim the money they are still owed. If you do decide to take this route and apply for a secured loan using your home as equity, evaluate the associated risks and make sure you always are able to meet all of the monthly payments. If you cannot meet the payments, it is time to negotiate with the lender or take even more drastic action and sell your home, pay off the outstanding mortgages and loans and find a place to rent that is cheaper.
Unsecured Loans for the Unemployed
An alternative is to apply for an unsecured loan. These loans are not secured with any asset and consumers are basically providing their promise that they will meet all of the terms of the loan and repay the loan as per the agreement. Consumers may have a more difficult time being approved for this type of loan if they are unemployed.
Loans for unemployed people require excellent credit ratings and a high confidence of being able to find a new job that will help them meet all of their obligations. While this is generally the case, consumers should always apply for this type of loan, since there are lenders that are willing to take the increased risk and lend money under these conditions. Interest rates may be a little higher and the terms not quite as interesting as a secured loan, however there are less costs as well since there is no appraisal cost and there are no legal fees to register the loan against your home. Someone has to pay these fees and if you can eliminate them, then the cost of the loan will be much less for consumers.
Loans like these can really provide a lot of help in testing times for unemployed people. In addition to loans for unemployed people, consumers should examine all of their expenses and make adjustments while being unemployed. If you reduce your expenses, then the money you do have plus the loan will help you last longer financially until you are able to find another job. Depending on the market conditions, the industry, and the overall employment rates consumers can sometimes take as long as a year to find jobs in their field of expertise. Other lower paying jobs can often be found, but many people who are recently unemployed are reluctant to take these kinds of jobs preferring to wait until something better comes along.
While loans for the unemployed can provide help in testing times, every source of funds should be explored to help you get through these testing times. In addition to loans for the unemployed, part time jobs, reducing expenses, selling one of the cars, cancelling memberships, delaying a vacation etc are all areas to be explored while you are looking for that next job that pays the money you need to maintain the life style that you and your family have enjoyed. It can be a tough environment for people who have worked all of their lives, but in tough situations, tough decisions need to be made to ensure that there is food on the table and a roof over your head. Work with your family members to help figure out what the best scenario is for your situation and make your decision regarding applying for a loan to help you while unemployed.