Living on benefits is never easy. Planning your life around the schedule of your benefit payments is inconvenient at the best of the times. Often it\u2019s completely impossible.<\/p>\n
It\u2019s a fact of life that, inevitably, we all meet with unexpected expenses from time to time. If this happens in-between your benefit payments things can get a little too close for comfort.<\/p>\n
One of the most effective ways to fashion yourself some breathing room is by taking out a short term loan<\/a>. However, there are a number of things to consider first.<\/p>\n
You will find it practically impossible, especially in today\u2019s financial climate, to get a loan from a major bank. If you are considering getting a loan whilst on benefits<\/a> then, unfortunately, you will have forget about the interest rates you have seen advertised on the high street.<\/p>\n
If you are unemployed the absolute largest amount you are likely to secure a loan for is \u00a33,000, however, only very few lenders offer this much to people who are on social security. Their interest rates are very high and their collection policies are inflexible, meaning if you are unable to keep up with repayments, which realistically, considering the APR, is likely, you\u2019ll be facing all sorts of trouble. Event then, these lenders will only lend an amount such as \u00a33,000 if you have a guarantor.<\/p>\n
A guarantor is somebody who is willing to make your repayments for you should you fail to do so. It can be anybody but it is normally a close friend or family member. Being a guarantor is a big commitment as they are making themselves legally liable to pay off the loan if you can\u2019t and as such guarantor loans need to be thought about carefully.<\/p>\n
Furthermore, they will need to have a job with a decent income and a good credit history, as they will be credit checked by the lender. This means they can\u2019t have received a CCJ or defaulted a payment in the last six years, or be on an IVA or be bankrupt<\/a>.<\/p>\n
Your credit history is also going to be a factor. If you receive a County Court Judgement<\/a> (a court order to pay an outstanding bill or debt) or receive a default notice (a letter from a company which comes after a final warning to tell you that you\u2019ve defaulted, or failed, to pay outstanding monies) both of these will stay on your credit history for up to six years, limiting the amount you can borrow and the types of lender you can approach.<\/p>\n
A secured loan is where you, the borrower, have to provide collateral to the lender as a kind of deposit for the loan. One particularly common form of secured loan offered to people on benefits or with poor credit are loans secured against cars. This is good news if you have a car or some other form of capital, as it opens up the option of secured loans to you.<\/p>\n
However, if you fail to keep up repayments you will lose your car. Losing capital is the last thing you need when you\u2019re already in a tight spot, therefore you have to asses the risk you are taking very carefully.<\/p>\n
In other instances you may be asked by a lender to pawn some of your possessions in order to get access to a loan. This is similar but less risky as you know where you stand and, generally, the possessions will be worth less than a car. Again the interest rates are very high, so there\u2019s no point sacrificing your possessions if you can\u2019t afford the repayments anyway. You\u2019d be better of selling them for cash. The amount raised would be smaller but at least you\u2019d avoid accruing interest or harming your credit rating.<\/p>\n