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Whether you’ve lost your work due to layoffs or COVID-19, left for personal reasons, or are simply looking for a new professional path, being unemployed can put you in a difficult financial situation. When this happens, you may wonder if you may acquire a loan while unemployed.
Yes, you certainly can. In fact, a number of lenders in Canada currently provide unemployment loans to jobless credit users who are in debt. That’s correct, if your application is granted, you’ll get a lump sum of money placed into your bank account. This money can be spent for nearly any purpose.
One of the best things about unemployment loans is that you don’t need a job to qualify for funding. It’s leverage because it is a requirement for several other credit products. However, you must meet a few personal and financial requirements to be qualified. These include:
Income – You must be able to cover your loan installments with your current income. Welfare, unemployment insurance, the Canadian Child Benefit, your pension, or other government payments are all acceptable kinds of basic income.
Creditworthiness — A few blemishes on your credit report aren’t usually a deal-breaker. However, bad credit, a history of missed payments, or a recent bankruptcy, can limit your alternatives, raise your interest rate, or prevent you from getting a loan.
Required Documents may contain (but are not limited to) the following:
- Photo identification from the government (passport, driver’s license, etc.)
- The most recent bank statements (proof of income & active bank account)
- Your Social Security Number (SIN)
- A utility bill or other form of address verification
- A VOID cheque or a pre-authorized debit form
Unemployment Loans: What They Are and How They Work
While receiving government benefits, you may be eligible for a variety of loans.
This includes employment insurance, CCB benefits, social assistance, and disability support income.
1. Payday Loans for Unemployed People
In many places of Canada, payday loans for the unemployed on benefits are available. In fact, you might get a payday loan while receiving unemployment benefits in Ontario, Alberta, British Columbia, or any other jurisdiction.
However, according to Quebec’s lending restrictions, securing a payday loan while on unemployment benefits can be problematic. Payday lenders in Quebec are only allowed to charge a 35 percent annual percentage rate. This is why many payday lenders do not operate in the province.
Payday loans, however, are one of the easiest loans to obtain when unemployed. That’s because many people accept non-traditional forms of income such as EI, CCB, social assistance, CPP, and disability benefits. Furthermore, it rarely necessitates credit checks.
Payday loans are therefore a suitable choice for people who need money quickly yet have bad credit. However, it’s crucial to note that payday loans come with a number of concerns, including high-interest rates, short repayment terms, and the possibility of becoming trapped in a payday loan cycle.
2. Installment Loans for Unemployed People
In Canada, there are lenders who provide installment loans to persons who are unemployed due to a disability, an injury, pregnancy, or simply because their employer had to fire them.
Due to the additional risk, they face by lending to someone who is regarded as hazardous, these installment loans will typically have higher rates and shorter-term lengths and quantities.
Installment loans are often preferable to payday loans since they have longer durations and lower interest rates, making them more affordable.
3. Auto Title Loans for Unemployed People
Another type of credit that does not require employment verification is vehicle title loans. You should be able to apply for an auto title loan as long as you have a source of income. Because of the security provided by an auto title loan, the conditions are much more flexible. If you don’t make a payment, the lender can seize your car as collateral.
4. Unemployment Credit Lines
A line of credit is another type of loan that can be obtained without the need for employment verification.
Lines of credit are ideal for unexpected expenses. They provide you with a cash reserve that you may use anytime you need it.
You just pay interest on the amount you spend, and you recover access to the funds as you repay the amount you used, just like with a credit card.
How Do You Pick The Best Unemployment Loan Provider?
Remember that there are numerous lenders in Canada who can provide you with an unemployment loan. However, you may need to look outside of banks and credit unions, where the conditions are often more stringent, requiring you to have a job in order to qualify.
Instead, you may need to apply with a private lender, a no-credit-check lender, or a payday lender. As long as you can make your loan payments, these organizations are usually much more liberal with their limits. They may also have more flexible repayment plans and faster approval processes.
Make sure you do your homework and keep an eye out for scams.
All of this is to say that doing your homework and comparing a few different lenders in your area before handing over any personal or financial information is critical. After all, one of the most significant hazards associated with unemployment loans is the possibility of higher interest rates and administrative expenses.
Unfortunately, because alternative lenders are more difficult for the government to supervise, there is a higher risk of scams, fraud, and illegal rates. These predators are either attempting to offer you a bad loan at an exorbitant price or, even worse, attempting to steal your identity, money, and financial information.
Payday Loans For Unemployed People On Benefits In Canada Should Be Avoided
A payday loan, for example, is a small payment ($100 – $1,500) put directly into your bank account. These loans are appealing since they have few restrictions and can be approved in as little as one or two days. Furthermore, some payday lenders will approve you even if you don’t have a job, as long as you have a regular source of income.
Payday loans, however, are problematic due to their high-interest rates (300 percent – 500 percent APR) and short repayment terms of 14 days. While they may be a realistic alternative in an emergency, they come with a slew of fees and penalties. A payday loan might be significantly more expensive than a typical jobless loan as a result of all of this.
Before you apply, double-check that your lender has valid credentials, a long history of satisfied customers, and a solid BBB rating.
The Bottom Line
At Lionsgate, we specialize in helping people obtain funding private mortgages for land purchases as well as for other real estate transactions. If you are looking to buy land in Canada, get a mortgage or apply for a loan, leave us a message and we will try to connect you with local realtors and sourcing for financing.
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