The COVID-19 pandemic has increased the financial strain on thousands of families and individuals in Australia who lost their jobs and are still trying to get back up on their feet. With dry income streams and piling debt due to car repairs, college tuition, medical bills, and business overheads, the financial and emotional distress can be overwhelming. Fortunately, there is a solution that can bail you out, at least temporarily, subject to approval – an unemployment loan.
We know what you’re thinking – why add more fuel to the fire? Getting a personal loan may not be the go-to choice for many people. However, it could be your only shot at avoiding bankruptcy, foreclosure, or eviction and living to fight another day by taking care of mandatory expenses you can’t avoid even when you’re out of a job.
However, just like another financial product or service, personal loans come with their sets of considerations to meet the eligibility requirement. However, the key to approval remains the same for every loan type – Persuade the lender that you can make the monthly payments regularly.
So, whether you’re unemployed by choice or unexpectedly, we’ll share how to get an unemployment loan in Australia.
Eligibility Requirements for Unemployment Loans
The following are the two most important factors lenders consider when evaluating unemployment loan applications apart from your credentials, previous job termination or experience letter, 90-day bank statement, and visa status (optional):
Strong Credit History
The first thing most lenders in Australia will check is your credit history and the pattern of your payments, especially late and missed ones. If they’re little or none, this is an indicator that you manage your debt responsibly. Many also check for negative events, such as foreclosures or bankruptcies.
Most banks, credit unions, and other financial institutions typically set minimum credit score requirements for different types of loans. While you don’t need an excellent score to get approved, many lenders reserve their best loan offers (ones with lower fees and interest rates) for borrowers with exceptional scores.
Even if you don’t have a job, the lenders need to know how you’ll be able to make your loan payments every month. The good news is that you can pay from other reliable income sources, such as Centrelink payments by the Australian government, as long as they’re sufficient to cover monthly expenses and the payments. Some income sources include:
- Child care subsidy
- Pension funds
- Disability income
- Family tax benefit
- Parental leave pay
- Single income family supplement
- Dad and partner pay
- Rental income
- Public assistance
- Spouse income, etc.
Things to Consider Before Getting a Personal Loan While Unemployed
Even if you’re employed with additional income streams, you should consider your ability to repay any loan as agreed. Missing just one payment can damage your credit report, so you can imagine the consequences of defaulting. Only consider an unemployment loan if you need to cover your expenses, and make sure that the amount doesn’t exceed what you need for necessities. If you quit your job to start a business, many lenders could either lower the loan amounts or expect full repayment in a shorter period on top of higher interest rates.
Types of Loans Offered to Unemployed Applicants
Personal loans for unemployment are typically cheaper than other loans since most applicants don’t require huge amounts unless they’re running a business. Here are the three loan categories you can apply for:
These are loans under $2,000 with a repayment term of one year. They’re mostly unsecured, meaning you don’t need to put anything up as collateral.
These are loans with amounts falling between $2,000 to $5,000 with a one-year tenure. They’re usually the go-to options for people who are looking for jobs and need to cover expenses for two to three months.
These are loans with amounts above $5,000 that are typically paid back within two years. They’re usually taken by applicants starting or running a small business to maintain their cash flow.
How to Apply for an Unemployment Loan in Australia
There are several ways for getting finance when you are unemployed in Australia. The most straightforward is to head to your bank or credit union to ask for a loan. However, most traditional financial institutions don’t work with high-risk applicants, especially if you’re unemployed with a bad credit history. However, there are several online services down under that can get you the amount you need. All you have to do is browse around for credible lenders in your area and fill out an online application form.
In most cases, you’ll have to select the amount you need and the repayment time and provide documents, such as proof of identity, bank statement, and contact information. Once your application is processed and approved, you will get confirmation from the company along with your contract and repayment terms. They will then ask for your bank details for the transfer to complete the loan process.
Personal loans for unemployed Australians can be a valuable tool to help them sail the financial storm and get everything together. They’re more difficult to secure but not impossible as long as you can prove that you’ll be able to pay back. So, whether you’re looking to pay for car insurance, medical bills, groceries, or home repairs while looking for a job or starting a business, make sure you analyze your circumstances to ensure whether getting an unemployment loan is the best decision for you.