• November 8, 2022
  • Adrina Martinez

Your employer does not inform you beforehand of their intentions about moving the furniture around. They do it when they want to do it without giving a toss about the impact of their decision on your finances.

Financial experts suggest having money stashed away in your emergency corpus that seems to be able to cover at least six months' worth of essential expenses, so you can dip into it when you are unemployed.

It is your hard work and luck how soon you land your new job, and your savings will fulfill your financial needs until you get the one. If your savings have fallen short of money to meet all of your expenses, including unforeseen ones, you can turn to private loan money lenders.

These lenders may lend you some money to help tide you over, but only when you are able to pay it off. To be eligible to borrow money, you are supposed to have a stable income source. As you are already out of work, a lender will look over income from sources like unemployment benefits, a part-time job, dividends, rent, and the like.

However, some people struggle with payments and then feel like they have been trapped.

Be cautious when you take out an unemployed loan

Needless to say, for lenders, loans are a way to make money in the form of interest. The rule of caveat emptor says that it is your responsibility to determine whether or not you can repay the debt.

When you are in dire need of money, you just sign the deal without looking over if it will be in your favor. Guaranteed loans for the unemployed from direct lenders have been exclusively made to help tide you over during emergencies, but it does not mean that they are incredibly cheap.

The size of these loans is small, usually not more than £1,000, and repaid on the due date in a lump sum. Therefore, they seem manageable, but when the due date comes, you end up rolling over the loan, which rapidly adds up the debt cost.

THIS HAPPENS BECAUSE:

Some lenders club together your savings and income streams and hence fail to estimate the actual amount you can afford to pay back. They may do the entire calculation work on the back of an envelope and approve the money you demand, even though it is beyond your repaying capacity.

Therefore, you should do proper research. Reputed direct lenders do not consider your savings as your income source. They would ask for the details about your part-time or freelance income to check if you are left with sufficient money to cover the rest expenses despite the loan repayment.

Have a sense of responsibility

If you are looking to borrow money, the first thing to ask yourself is if you can afford to pay it back. Although a lender will thoroughly check your credit report and repaying capacity, you must rely on more than just their decision-making.

For instance, if you need £500, try to find out how much it will cost. Online calculators can give you the estimated cost. Now see if your budget can meet all of your expenses after setting aside the estimated cost.

The actual cost of the debt will be more than that because of varying interest rates, processing fees, and origination fees. Most people end up falling into debt as they are not left with enough money to cover other essential expenses.

Further, you should try to avoid taking out a loan when it is not an emergency. Ask yourself if you can put them off. If so, you should avoid borrowing money. As long as you behave like a responsible borrower, you will not find any loan like a trap.

Prefer living off a lean budget

You should live off a lean budget until you land a new job. It means you will meet only essential expenses. Say no to discretionary expenses. Try to cover all of your necessary expenses from your income if possible. Use your savings as well for monthly fees. Make sure you still have some money in your emergency corpus, so you can take your time with a direct lender to borrow money.

You should create a lean budget as soon as you leave your job. To do so, you will need to look at the expenses you made in the past three months. Make a list of all costs and divide them into essential and inessential categories.

The next step is to find the average of your essential expenses and see if they fit your budget. As far as it is about savings, try to spread it across three months, not to mention, first, you will stow away some money for a rainy day.

Track your expenses

You must track your expenses to ensure your budget is maintained. Though you are to spend money on essential costs, you should still know how much you have already spent.

This helps control your spending, so you do not cross the limit you have set for a particular month. Otherwise, you will struggle with your expenses in the coming days and rush to unemployed loans, and there may be better situations to borrow money.

The takeaway

Guaranteed loans for the unemployed can back you up when you run out of money. However, these loans are ideal only when you are to fund an emergency and your savings have fallen short of it.

You can manage payments only when your budget has the scope to bear this additional expense, along with other monthly fees. It is recommended to peruse your repaying capacity before applying for these loans to avoid falling into a debt trap.

Make sure you do not get trapped by outlandish claims like no credit check loans, as these loans can be outrageously expensive. Borrow money from a direct lender that lends money at affordable interest rates after taking into account your repaying capacity.

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