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Whether you’ve lost your job due to cutbacks or COVID-19, left for personal reasons, or you’re just waiting for your next career path to come along, being unemployed can definitely put you in a tough financial situation. When that happens, you may start asking yourself; can I get a loan if I’m unemployed?
Yes, you can. In fact, there are plenty of lenders in Canada that now offer short-term unemployment loans to jobless credit users struggling with debt. That’s right, if your application is approved, a lump sum of cash will be deposited into your bank account, which you can use for almost any expense that comes your way.
How Do You Qualify For An Unemployment Loan?
Obviously, one of the best things about unemployment loans is that you don’t need a job to qualify for financing, which other credit products may require you to have. That said, there are a few personal and financial criteria that you’ll need to be eligible, such as:
- Income – You must still be earning enough money to cover your loan payments. Acceptable forms of basic income include welfare, unemployment insurance, the Canadian Child Benefit, your pension, or other government benefits.
- Decent Credit – A few negative marks on your credit report isn’t always a deal-breaker. However, bad credit, a history of missed payments, or a recent bankruptcy can limit your options, increase your interest rate, or get you denied.
Required Documents may include (but aren’t limited to):
- Government photo identification (passport, driver’s license, etc.)
- Your latest bank statements (proof of income & active bank account)
- Your Social Insurance Number (SIN)
- A utility bill or other proof of your address
- A pre-authorized debit form or VOID cheque
Types Of Unemployment Loans
There are a few types of loans you can get while on government benefits including employment insurance, CCB benefits, social assistance, and disability assistance income.
Unemployment Payday Loans
Payday loans for the unemployed on benefits can be found in many parts of Canada. In fact, you could find a payday loan while on unemployed benefits in Ontario, Alberta, BC or any other province for that matter. However, getting a payday loan while on unemployment benefits in Quebec can prove difficult due to their lending laws. In Quebec, payday lenders can only charge an apr of 35%, which is why many payday lenders do not operate in Quebec.
Regardless, payday loans are one of the easiest loans to qualify for while unemployed. The reason being, many accept non-traditional sources of income including employment insurance (EI), CCB, social assistance, CPP and disability assistance. Moreover, it generally does not require credit checks. This makes payday loans a good option for those who are looking for quick cash and have poor credit. However, it’s important to remember that there are numerous risks associated with payday loans including high interest rates, short-terms and the possibility of getting trapped into a payday loan cycle.
Cost Of Payday Loans By Province
The maximum a lender can charge you per $100 borrowed varies by province. Here is the maximum your lender can charge you:
- Ontario, British Columbia, New Brunswick and Alberta – $15 per $100 borrowed
- Manitoba and Saskatchewan $17 per $100 borrowed
- Nova Scotia $19 per $100 borrowed
- Newfoundland and Labrador $21 per $100 borrowed
- Prince Edward Island $25 per $100 borrowed
Unemployment Installment Loans
There are lenders in Canada who offer installment loans to those who are unemployed whether due to a disability, an injury, pregnancy or simply because their work had to let them go. Generally, these installment loans will have higher rates and lower term lengths and amounts due to the added risk they take by lending to someone who is considered risky. Installment loans are typically a better choice than payday loans as they have longer terms and lower rates, making them more affordable.
Unemployment Auto Title Loans
Vehicle title loans are another form of credit that may not require employment verification. So long as you have a source of income, you should be able to qualify for an auto title loan. The requirements are a lot more flexible with an auto title loan due to the security it provides. If you miss a payment, the lender can use your vehicle as collateral.
Unemployment Lines Of Credit
Another loan you can get without employment verification is a line of credit. Lines of credit are great for unexpected expenses, as you’ll have a reserve of cash you can use whenever you need. You only need to pay interest on the amount you use and like a credit card, you regain access to the funds as you repay the amount you use.
Best Unemployment Loans In Canada 2021
|Types of Loan||Funding Time|
|Up to $10,000||43%||36 – 60||Guarantor loan||With 24 hours||More Info|
|Up to $20,000||19.99% – 46.8%||6 – 60||Personal loan||Same day||More Info|
|Up to $15,000||19.99%||Open-end||Line of credit||Same day||More Info|
|Up to $1,500||15% – 23%||–||Payday loan||Within 24 hours||More Info|
|$500 – $750||28% – 34.4%||3||Short-term loan||Same day||More Info|
|$100 – 10,000||–||6 – 60||Line of credit||Within 24 hours||More Info|
|$1,000 – $15,000||46.93%||12 – 60||Personal loan||Within 24 hours||More Info|
How To Increase Your Chances Of Qualifying For An Unemployment Loan?
Essentially, getting approved for the best unemployment loan in 2021 is all about your creditworthiness. While it can be embarrassing to declare your lack of employment, your lender simply wants to know you’ll be able to pay off your debt without issue. As long as you’re a permanent Canadian resident with decent credit, are past the age of majority in your province or territory, and have an income large enough to cover your payments, then you shouldn’t have too much problem qualifying for an unemployment loan.
In addition, there are a few things you can do to increase your chances of approval for a favourable loan amount, interest rate, and repayment plan, including but not restricted to:
- Complete your application honestly – Although every lender has different requirements for their potential clients, filling out any questions or details they request is the first step to any good loan application. Doing this allows them to check your financial health and lets them know you’re a serious borrower.
- Increase your credit score – Not every lender checks credit. However, many do because it tells them how you’ve handled debt in the past. You can gradually improve your credit score by paying down your existing credit products, disputing errors on your credit report, and other simple tactics.
- Consolidate existing debts – The more debt you have, the less likely you are to get approved for the loan you want, This is because a lender will see that whatever income you have coming is already being used to cover the preexisting debt payment.
- Provide security – Some lenders will accept collateral, such as your vehicle, home, or another asset. This can both increase your approval odds and help you secure better loan conditions. Be careful. If you default on too many payments, your lender will have the right to seize your asset and sell it to cover your debt.
- Get a cosigner – Otherwise known as a guarantor, you can also increase your approval chances by getting a stronger candidate to cosign your application if your own finances or credit aren’t good enough. Make sure they’re fully aware that your loan payments will fall to them if you cannot afford them.
How To Choose The Right Unemployment Loan Lender?
Remember, there are plenty of lenders across Canada that can offer you an unemployment loan. However, you might have to look outside of banks and credit unions, where requirements can be tougher, meaning you usually need a job to qualify.
Instead, you may need to apply with an alternative lending company, such as a private lender, no-credit-check lender, or payday lender. These institutions are usually much more lenient with their restrictions, as long as you can afford your loan payments. They can also have faster approval times and more adjustable repayment plans.
Do Your Research And Watch Out For Scams
All this said it’s extremely important to do research and compare a few different lenders in your area before giving away any personal or financial information. After all, one of the main risks associated with unemployment loans is the higher interest rates and administrative fees that may be involved.
Unfortunately, research is also key because alternative lenders are harder for the government to regulate, leading to a larger probability of scamming, fraud, and illegal rates. These predators are either looking to sell you a terrible loan for an unreasonable cost or, even worse, to steal your identity, money, and financial information.
Be Careful Of Payday Loans For Unemployed On Benefits In Canada
For example, a payday loan is a small lump sum ($100 – $1,500) that gets deposited directly into your bank account. These loans are tempting because there are very few requirements and approval times are only one or two days. Plus, some payday lenders will approve you without a job, provided you have some sort of monthly income.
Nonetheless, payday loans are risky because they have very high-interest rates (300% – 500% APR) and short repayment terms of 14 days. While they can be a viable option during an emergency, there are also many fees and possible penalties. All of this can make a payday loan far more expensive than a traditional unemployment loan.
Prior to applying, be sure your lender has legitimate credentials, a long history of satisfied customers and a good rating from the Better Business Bureau.
Why Do Consumers Need Unemployment Loans?
Obviously, it can be difficult to cover your daily expenses when you don’t have a job or you’re self-employed with an inconsistent income. It can also be tough when you’re retired or something is preventing you from working, such as a criminal record, a medical issue, or an unexpected event like the COVID-19 pandemic.
Overall, an employment loan can be a more affordable way of dealing with those issues because you can pay off all your most important expenses at once, leaving you with a single (often adjustable) repayment plan to follow.
Because the loan is liquid cash in your bank account, you can use it for almost any expense. That said since you could be in debt for some time, it’s best if you only use your unemployment loan to cover your essential costs, such as:
- Groceries and household supplies
- Home maintenance or repairs
- Vehicle maintenance or repairs
- High-interest debt consolidation
- Medications or other health costs
- Utilities and other household bills
Warnings To Look Out For With Unemployment Loans
Don’t forget, there are a few risks that you must consider before you apply for an unemployment loan in Canada. Although you shouldn’t have trouble finding a loan that suits your preferences, these dangers can definitely affect your credit and finances.
Here are a few warning signs to look out for with unemployment loans in 2021:
- The financial burden of your payments – While a loan can help you deal with your expenses, any payments, rates, and fees involved can put you in significant debt, so you must be careful and not apply for more money than you can handle.
- Higher APR (Annual Percentage Rate) – Alternative lenders can take on riskier clients because they balance out the equation with higher interest rates than some banks or credit unions. Extra interest may also apply if you miss payments.
- Fees – While interest will likely make up the main portion of your final loan balance, there may be several administrative fees associated with your unemployment loan, like loan origination, cheque cashing, etc.
- Automatic debits – Most lenders will automatically withdraw your loan payments from your bank account. They may charge you a non-sufficient fund (NSF) or overdraft penalty if you don’t have enough money in the account on the due date.
- Short terms – Although conditions vary from lender to lender, many will only offer you a short repayment term to minimize the risk involved. If you can’t afford to pay all your loan costs by the end of your term, bad debt problems can occur.
- Scamming and predatory rates – As mentioned, predatory lenders and scam artists can use your desperation to trick you out of your money. If the deal looks too good to be true or they claim to approve 100% of their clients, walk away.
- Danger to security – Remember, your lender may seize your collateral if you default on too many payments. If you have a guarantor, their finances and credit could be damaged if they become responsible for your payments and can’t afford them.
Can I qualify for a loan if I’m unemployed?
How much money can I borrow if I’m unemployed?
What documents do I need to provide to qualify for an unemployment loan?
Searching For The Best Unemployment Loan In 2021?
No matter the reason for your unemployment, there are sure to be some lenders in your area that can offer you a loan with favourable conditions. If you’d like to be connected with those financing sources, there’s no better referral network than Loans Canada.
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