What mistakes can unemployed people make when taking out a loan?
With loans, wishes can be fulfilled for which the monthly budget is not enough. Monthly benefits are scarce, especially for the unemployed. Funding issues may still arise. For example, a small family celebration can be scheduled or an important household appliance must be purchased. Loans can serve to bridge the financial bottleneck. However, mistakes that can be avoided can occur when borrowing.
Avoid borrowing mistakes
A loan only makes sense if you can pay the monthly installments to your creditor. When financing, you should make sure that the installments significantly reduce the monthly budget. Since the benefits that unemployed receive are scarce, it is all the more important to make a checkout. You should keep an eye on your finances. With a plan for your income and expenses that applies throughout the year, this shouldn’t be a problem. This gives you a direct view of the month from which higher costs are incurred and you can see the amounts due for insurance in your budget.
Are you wondering whether you would get a loan at all in unemployment? The answer to this question is yes. However, applying for a loan is a difficult undertaking. You can use regular benefits, but they are not considered regular income. This would mean that house banks would not grant you a loan due to the lack of collateral. Nevertheless, there are numerous loan providers who can help you out of your financial constraint. Nevertheless, you have to see the borrowing linked to conditions:
- For example, you can take out a loan if you can offer other collateral to minimize risk and your private credit checker is positive.
- Alternatively, you can deposit existing life insurance as security.
- You can also offer lenders security through a guarantor.
With the last point in particular, you should keep an eye on your financial income and expenditure. Guarantors are responsible for you if you are no longer able to pay your debts. Not only friendships, but also families can break apart. You should be particularly careful with loan providers who offer instant loans without private credit checker. It is not uncommon for these providers to charge so-called agency fees and borrowing still fails. In the worst case, you could even get caught on a loan shark. With us you will find reputable credit providers who also grant you small loans in unemployment.
Dealing critically with offers from the house bank
As a rule, the first way to take out a loan is to contact the adviser at the house bank. If it can grant you a loan by means of collateral, it tries to lure you with lucrative offers. However, you should check the conditions carefully. It is not uncommon for loan terms to have long terms, low credit rates and high interest rates.
For this reason, you should inform yourself about the effective annual interest rate. This reflects the total cost of your loan. You should also inquire whether there is a special repayment right. This can be useful if you expect additional income or, for example, a surplus in your ancillary costs. Otherwise there may be additional costs that drive up the interest charge.
Of course, the conditions of the house bank do not necessarily have to be bad, but an online comparison of the credit providers is recommended. This means you can be sure that you will find the cheapest offer for your loan and benefit from the lowest possible interest burden. Online, you often have a much greater scope to find a loan that is tailored to your situation.
Avoiding errors in the formalities
In addition to taking out an overpriced loan, errors in the formalities can also arise. Below are tips on how to avoid them:
- Credit request: Before you make a credit request, you should initiate a condition request. With this procedure you get an offer for a loan. It is important to know that credit inquiries can have a negative impact on creditworthiness. A condition request is neutral. In this way, you avoid deteriorating your creditworthiness in the case of several condition requests.
- Specific request: You should only make a specific loan request after comparing the providers. The conditions should have promised you here.
- Purpose: It can be advantageous to specify a specific purpose. When financing a car, the interest conditions can turn to your advantage. The lender can reserve the right to claim the car as security in the event of a default.
- Additional insurance: It is not uncommon for lenders to offer additional insurance. These should apply should you become insolvent. In unemployment, however, such insurance leads to an enormous burden. In addition, any insurance is often associated with a waiting period. This can put you in an extreme financial emergency. It is therefore not advisable to take out additional insurance for your loan.
Development of loan interest
The interest rate situation is currently pleasing for borrowers. Annual interest is low and the cost of a loan is cheap. However, it is questionable how the interest rate could develop in the course of 2018. The reason for the low interest rate is due to the policies of the Agree Bank. The goal of low interest rate policy is to stimulate inflation. Because banks can borrow money from the AB for free, the savings are passed on to customers. This is how the favorable credit conditions come about. Added to this is the high level of competition. In addition to traditional banks, numerous online providers offer low interest rates on installment loans. This means that house banks are also forced to keep their interest rates low.
