Getting a loan at affordable interest rates is not that easy. Although online lending has made it easier to borrow money, a lot of people struggle to get a loan at lower interest rates. There are a lot of formalities that you need to get through, for instance, a credit check.
The facility of online lending has been provided to help you tide over during financial emergencies. Still, you need to prove your repaying capacity, which cannot be possible without an income source. It means you must have a sufficient source of income to borrow.
This is why when you borrow money during unemployment, you must have to be on benefits or have a passive income source that you can utilize to pay off the debt. Various direct lenders are out there providing loans for people on benefits, but the question is how fast you can get approval for these loans.
When you are unemployed, you may need money for various reasons, and you may not be able to wait for a longer time. Getting approval for these loans is not that easy. Just because you have a passive income source including benefits, they increase the risk on the part of a lender.
Ways to get quick approval for loans on benefits
Even though these are small loans, it does not mean that the lender will immediately get ready to approve your loan. Here are some factors that you keep in mind to get the approval as fast as possible:
- A good credit rating
You must have a good credit score if you want the lender to sign off on your application. A lender will run a credit check to know your credit score. A good credit rating gives the lender confidence that you will be able to pay back the lender.
This will also help you borrow money at affordable interest rates. A couple of lenders do lend money despite a bad credit rating. You can get the approval, but you will end up paying high interest. Some people seek borrowing without a credit check in order to avoid having their credit score go down.
This increases the risk of the lender, and that is why you will end up paying high interest. Because lenders do not mind lending money despite your bad credit rating, it does not mean that they will always approve your application. If your lender does not feel convinced, your application will be turned down right away.
- Your income
Because you are applying for loans for the unemployed, it does not mean that direct lenders in the UK do not need to look at your income status to approve your application. Of course, a lender would like to get money back and hence you must have an income source.
The lender can treat benefits, rent, dividends or any other income source to determine your repaying capacity. If the lender finds that you are just living on benefits and you are left with insufficient cash to pay off the debt after meeting your regular expenses, they will not sign off on your application.
This is why it is your responsibility to carefully see if you have enough money to pay off your debt. Of course, you will have difficulty getting approval if your benefits are not enough to meet debt obligations and other regular expenses.
What if you do not qualify for the loan?
There could be several factors for being unable to qualify for the loan, but the most common reason is lack of repaying capacity. In such a scenario, you should do the following:
- Arrange a co-signer
If you need money urgently and you have been denied to borrow money, you should arrange a co-signer who can be your friends or family with a good credit rating.
This will lower down the risk of the lender. Note that if you fail to pay off the debt, it will not just affect your credit rating but the co-signers as well.
- Secure your loan
It would be best if you try to secure your loan because this can allow you to borrow money at affordable interest rates. If you fail to pay off the debt on time, the lender will cash out the secured asset.
The bottom line
There are various things you need to consider when it comes to getting the loan approved as quickly as possible. It will help if you try to have a good credit rating and income source.
Some lenders can lend you money despite a poor credit rating, but approval is not possible at all if you do not have a good repaying capacity. You can either arrange a co-signer or secure your loan in this situation. However, these two alternatives have their own pros and cons. Make sure that you weigh up both the alternatives.
