On the surface, it seems ridiculous, but there are lenders who are willing to give loans to the unemployed. Sure, this is silly, since the unemployed obviously have no source of income, but the fact remains that it is possible to get a $5,000 unemployment loan when you need it most.

How can this be possible? Well, let’s be honest and admit that $5,000 is not a huge amount of money. It means that lenders can easily create terms that benefit them but in a way that, in the event of a borrower’s default, doesn’t affect them too much. Getting approved for the jobless loan depends on the same faith that students get.

Lenders will even offer unemployed applicants a chance to get a loan, because there is a high chance that unemployment will be temporary. Therefore, providing affordable installment loans is considered a viable decision rather than a major risk.

Why are the unemployed accepted?

So why are the unemployed accepted by the lenders? Well, lenders are not ignorant of the risks involved and are not willing to give loans to everyone out of work. But there are some cases where the chances of default are pretty low, so making a $5,000 unemployment loan is fine.

There are two different types of unemployed. The long-term unemployed have been without work for several years, so the chances of them finding work again are very slim. This type of unemployed person will not be considered for a loan.

Those who can hope to be approved without employment will have been laid off recently, but it is understood that it will be at least 6 months before the application can be made. The reason an affordable installment loan may be offered is that you will likely find some type of employment in the next 12 months.

Unemployment Loans Explained

If approval for a $5,000 unemployment loan seems counterintuitive, understand that the loan itself is used to keep on top of existing loan payments and bills. For this reason, it is understood that the loan is a provisional resource.

However, it is the fact that the borrower is still considered highly employable that attracts the attention of the lender. It is similar to a student loan where the loan is made on the faith that the borrower will graduate and get a good job.

Similarly, lenders have enough faith to grant no-job approval because the borrower will get a new job. Of course, they must also offer affordable installment loans because the means to meet normal payment terms do not currently exist.

Terms to keep in mind

It may seem like giving out a $5,000 unemployment loan is more of a social charity than a business. To some extent, that’s true, but it’s also a business arrangement, and lenders expect the loan to be paid off in full and on time. But what are the terms to expect?

The key terms are the interest rate and the repayment period, just like with any other loan. However, because the lender approves you without a job, the interest rate is higher to cover potential losses, while the repayment term is longer.

The longer loan term is what ensures that these affordable installment loans are, in fact, affordable. For example, a loan of $5,000 paid in 12 months is more expensive than in 5 years.