The current economic situation has rendered many people unemployed. If such an individual does not have a good credit history and suddenly finds himself in an emergency, such as he needs immediate money to foot his medical bill, he might not have many options to get a loan. In today's market scenario, it is nearly impossible for a person who is unemployed and with a bad credit history to get a loan from a bank. So where should he turn to in case he needs some money urgently? This is where private lenders and institutions come in. They are much more willing to offer bad credit loans than banks, although their interest rates are comparatively steep.
Normally, when a person goes to avail of a loan from a bank or a private institution, their criteria for sanctioning is the ability of the borrower to pay back the loan. This ability to repay is assessed on the basis of the person's current income from all sources, including his current salary and incomes from investments, as well as his credit scores. But when the borrower is unemployed with a bad credit history, a lender takes a number of other things into consideration.
The lender checks the educational qualifications, skills, and previous work experience of the borrower. By assessing all these, a lender tries to determine the future job prospects of the borrower. He tries to determine what kind of salary he might be able to earn in the future. Based upon these assumptions, he will approve the loan. Sometimes, the loan amount is fixed by the lender on the basis of this probable salary of the unemployed person.
Lender will be more willing to offer loans to people who are unemployed and have a poor credit score, if they provide some collateral such as land or house or jewelry. It is slightly difficult for an unemployed person with a bad credit history to get an unsecured loan.
In order to avail of these loans, a person has to fill in an application form, either in person or online. In the application, he has to fill in details such as his name, contact details, age, educational qualifications, social security number, bank account number, the amount of loan required, etc. After filling this, the same is submitted to the lenders for approval.
The lenders evaluate the application form. They list out their terms and conditions, including the asset value that will be pledged as a collateral to the borrower. The amount of loans for the unemployed, the interest on it, and the installments that will be paid by the borrower on a monthly basis are all calculated on the basis of the collateral value as well as the unemployed person's probable salary. If all the terms and conditions are agreeable to both, the borrower and the lender, the loan agreement is signed. Sometimes, the lenders may offer some standardized loan programs to borrowers, in which all terms and conditions including the minimum value of the collateral are already pre-decided. A person can opt for these loan programs if he meets the eligibility criteria.
Since most of the no credit check loans are secured loans, it means that, if by any chance a person is not able to pay the interest or the stipulated monthly installments incurred on them, the lender has all the right to sell the collateral in order to redeem his money. Although some legislation has been passed to protect the interests of people without jobs, selling the pledged asset by the lender is a possibility. So, a person should evaluate his future earning prospects as well as current financial situation thoroughly before applying for these loans.