If you’re looking for a loan but are unemployed and have bad credit, then you may find it very difficult to find a lender who’s responsive to your application. 

Not every lender is going to slam the door on you if you don’t have a job and have bad credit but it’s definitely true that you’ll have much fewer options than if you had a job. 

In this post, I’ll be looking at what steps you can take to get a loan approved for yourself if you’re unemployed and have a poor credit rating.

Is it Possible to Get a Loan if I’m Unemployed and have Bad Credit? 

You can definitely get a loan if you don’t have a job but it’s definitely going to be much more difficult than if you were employed. 

Most high-street banks and building societies will refuse to offer you any type of credit if you can’t prove that you have any stable source of income. 

Thus, if you’re unemployed and on benefits or even in-between jobs, then you might struggle to find a standard loan with competitive interest rates. 

This is because lenders will see you as a greater risk to loan money to as your unstable finances could lead to you failing to pay back the money on time. 

Hence, when you’re unemployed, you’re going to have to look for a specialist lender that gives out loans to unemployed people. Keep in mind that these loans will typically have much higher interest rates. 

When a lender is considering whether or not to give you a loan, the main aspect they’re looking for is whether or not you will be able to make your loan repayments on time and in full or not. 

Thus, the better your financial situation is, the higher the chances of your loan application being approved. 

This means that you don’t necessarily need to be employed to be approved for a loan, if you can prove to have assets or other sources of revenue through which you can pay off your loan, then that can satisfy a lender as well. 

So far, I’ve talked about loans simply in the context of you being unemployed. However, if you don’t have a job AND have bad credit, then that can definitely make things even harder for you. 

In cases of a poor credit score, I always tell people to wait a few months before applying for a loan and use those months to improve their credit rating first. 

This is usually the best course of action to take if the purpose of your loan is not time-sensitive. 

Believe me when I say that the status of your credit rating can definitely play a huge part in whether your loan application gets approved or not. 

If the purpose of your loan is indeed time-sensitive and you need to get one immediately, then your only choice is to prove to the lender that you will be able to repay the loan within the specified time and in full despite not having a job.

You can do this by providing proof of other sources of revenue that you may have as well as providing proof of your monthly expenditures. 

As long as the lender sees that you have enough money left over each month to contribute towards your loan repayments, there’s a high chance that he/she will approve your application. 

loan to unemployed

How do I Improve My Credit Rating? 

Loans when unemployed are definitely hard to come by and when you have a bad credit rating on top of that, even those lenders can refuse you.

Thus, it’s a good idea to take some time out before applying for an unemployed loan and using that time to improve your credit rating.

So, how do you do that exactly?

Here are some ways through which you can rebuild your credit rating: 

  • Go through your credit file to ensure there aren’t any mistakes such as duplicates or mentions of debts that you have already paid off. If you find any discrepancies, make sure to get them fixed so your score improves. 
  • If you’re not already on the electoral roll, you should get on it. This is important because potential lenders, as well as credit reference agencies, use this information to ensure that you are who you say you are and you live where you’ve stated you live. Please ensure that you register using your current address information. 
  • When lenders are considering your application, they will look at the amount of credit you have access to as well as the amount of debt you already have. Thus, it’s a good idea to close all credit card accounts, store card accounts and mobile contracts that you don’t use or need anymore. 
  • Consider applying for and taking out a ‘credit building’ credit card. As the name suggests, this credit card can be used to improve your credit rating. Be sure to use this credit card only for essential expenses that you can pay back in full each month. You must also keep in mind that these cards have high interest rates so make your calculations accordingly. 
  • Don’t apply to too many lenders at once. Credit reference agencies don’t get informed if you’re rejected for credit but every time a lender makes a credit history search on you, this is mentioned in your file. The more mentions of such searches you have in your credit file in a short period of time, the lower your chances of having your short-term unemployed loan application approved. 

Please note that when you are refused or declined by a lender, you have the right to inquire why. You are also entitled to inquire about the agency that provided your credit file. 

What Types of Loans Can I Get when I’m Unemployed? 

Your options of getting a loan when unemployed are fairly limited. You will most likely only have short-term loans available to you with high interest rates.

Here are some types of loans you can opt for: 

Secured loans

These are much less risky for lenders since you’ll have to put up a valuable asset of yours such as your car or house as “collateral”. This would mean that this asset can be repossessed and sold off by the lender if you fail to pay back the money. While this is something you can consider, you will find that getting approved for a secured loan with a bad credit score can prove to be quite difficult.

Personal loans

These are short-term loans for unemployed people. You have the highest chance of getting approved for these types of loans. As you pose a greater risk to the lender since you don’t have a stable source of income and also have a bad credit score, you will most likely only have access to loans for unemployed people with smaller amounts and higher interest rates.  

Please note that you should always check your eligibility before applying to any lender. As I mentioned earlier, applying to a lender can result in your credit rating going down. You don’t want to apply to a lender and bring your credit rating down only to get rejected by them. 

You must also ensure that the lender you’re applying to is authorised and regulated by the Financial Conduct Authority. This is because if they’re authorised and regulated by the Financial Conduct Authority, then they’ll have to follow their guidelines. These guidelines ensure that you, the debtor, are treated in the fairest way possible throughout the entire process. 

What Are Some Alternatives to Getting Money if I Can’t Get a Loan Approved? 

Alternatives to taking out a loan for unemployed people include: 

Credit Cards

If you qualify for a credit card, you can use it to fund whatever purchases you may have for which you needed a loan. Just be sure to go over budget thoroughly to make sure you’ll be able to pay back the outstanding balance. 


If you have a current account, there’s a high chance that it offers overdraft facilities which you can use to fund whatever purchases you needed a loan for. Just make sure that you check any additional charges the bank may have and also take permission from your bank first. 


Loans for unemployed people have high interest rates and are difficult to come by but they’re certainly not non-existent. 

As long as you can prove that you’ll be able to pay back the money comfortably, you shouldn’t have any trouble getting your loan application approved. 

Just make sure to invest some time in improving your credit rating before approaching any lender regarding loans.

About the author

Scott Nelson

Scott Nelson is a financial services expert, with over 10 years’ experience in the industry, including 6 years in FCA regulated companies. Read more
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