In a situation of unemployment, the unemployed person’s finances will likely suffer significantly. There are different options and tools to reduce this impact: one is to request money in advance for unemployment benefits.
Financial security in unemployment?
When a person becomes unemployed, finances will generally suffer. Income is reduced, and expenses continue. It is common to take financial measures to meet these expenses with less income.
In some cases, accessing unemployment benefits may be sufficient. In other cases, between jobs, savings can be a basis for sustaining personal finances.
However, for many people, maintaining financial security in unemployment is complex. That is why people turn to certain financial tools that can try to make this situation less complex. Applying for advance money on unemployment benefits is one such tool.
Are there specific loans for the unemployed?
Except for some little-known exceptions, there are no specific loans oriented to unemployed people. Some lenders indeed offer this claim, but they are personal loans in which it is possible to qualify as a beneficiary.
However, as we will see below, some tools such as payday loans are cash advances.
It is important to understand this aspect. Lenders analyze our financial situation when we apply for a personal loan (really any loan). Economic analysis includes elements such as credit score and stable income. In the case of unemployment, the regular income is reduced; this can affect the lender’s decision.
A really important factor in this situation is maintaining a good credit score. If this is held and we have a savings base, it is relatively easier to access a loan and for the bank to advance our possible unemployment benefits.
Obtaining a loan with a good credit score
The unemployed person with a good credit score can consider accessing different options:
Conventional financial institutions, mainly banks or credit unions: this is generally the first option to turn to. Usually, it is advisable to go to those banks where we have our accounts since they can better analyze our credit history. It is possible that, in a situation of unemployment, we may be asked to provide additional collateral in addition to the loan.
Online loans and quick loans: this is an option that has been growing over time. Nowadays, there is a wide variety of loans and lenders. It can be a somewhat cheaper option than conventional entities; however, it can also have high level demands.
Getting a loan while unemployed and with a bad credit score
That is a more complicated situation. Having a bad credit history limits the possibility of obtaining access to financing. Some options that you can try to get approved are the following:
Accessing mortgage-backed financing: this is a complex transaction. It will take advantage of the equity in the home to offer a line of credit. The line of credit is granted temporarily, and you can take advantage of all or part of the amount on credit. Although it is an emergency option, it must consider that it puts the house at stake and requires a medium/high credit score.
Provide a consignee: it is possible to provide a consignee to sign the loan for us as a guarantor. In this case, too, we must remember that this is a complex operation since, in the event of non-payment, the guarantor will be responsible for paying the debt.
How does an advance of unemployment benefits work?
One option for unemployment benefits is applying for a cash advance. The cash advance is a small loan that consists of advancing the money that will be received from the unemployment benefit (although they are not always going to offer 100% of the amount).
This type of loan advances a certain amount of money that will be reimbursed at the time of payment. For example, if the unemployed person receives a monthly payment on the fifth day of each month but wishes to advance a percentage ten days before, they can apply for it. In this case, the debit account will receive the reimbursement plus the advance fee at the time of collection.
It is important to note that this is not as common as a personal loan. On the other hand, it is not a cheap loan either. The APR in this type of operation is high. That is why studying the proposal thoroughly before accepting it is necessary.