Get unemployed and still get a loan?

Basically, it’s a fairly unfair fact: the less money you have, the less likely you are to get a loan, even if you don’t have much money, a loan is only necessary. But banks are companies, and understandably not only for profit, but also simply for the time being that they actually get the money that they lend to the borrower.

Loans without collateral and loans with collateral 

Loans without collateral and loans with collateral 

It is important to distinguish between loans without collateral and loans with collateral – it is basically impossible for an unemployed person to receive a loan without collateral. Because either you can provide collateral such as a piece of land or a property, insurance or other security for the bank, or just the regular income.

On the other hand, those who are unemployed because there is no need for regular work and the income is generated in other ways, for example from renting and leasing or from invested capital, naturally have better cards – it always depends on the customer’s situation, whether a loan approval is given or not.

If the criteria are restricted, it becomes increasingly difficult: if a person is unemployed and without income and looking for a loan, only collateral remains, as mentioned above, that must be provided so that a loan approval can still be reached – and even then Many banks generally refuse to grant loans in such cases.

Monthly benefits and not a real loan

Monthly benefits and not a real loan

There is the possibility of a mini-credit from the social welfare office or the employment agency – but it is rather an advance on the next monthly benefits and not a real loan. In addition, such an advance is only granted in exceptional cases if there are plausible reasons.

A fundamental question is of course how sensible it is to borrow if no fixed income is generated – for example, if the loan is needed to start a business, you are not de facto unemployed, but look for a loan for start-ups In these circumstances, the situation of the borrower is assessed differently than if the unemployed simply felt the desire to buy a new car or to go on vacation.

What is the modularity of the loan?

The modularity of the loan is a term which is certainly unknown to you today. It is however recommended to know it and to add this clause in your mortgage contract, because it could one day allow you to save money.

It is a question of having the possibility of modifying your repayment monthly payments, by increasing them for example. Thus, therefore, the duration of your credit will be decreased.

As a reminder, your loan is made up of three elements: the capital borrowed, interest on repayment and loan insurance. If you decide to increase your monthly payments and therefore repay your credit faster with your bank, then you will pay less interest, and less loan insurance, and you will therefore save money. This is called the modularity of the loan.

Increasing your monthly payments allows you to pay off your loan faster

Can we increase or decrease the monthly payments?

Can we increase or decrease the monthly payments?

The borrowers mainly use the modularity of the monthly payments when they wish to increase them. This allows them to repay faster and thus reduce the cost of their mortgage.

On the other hand, it is complicated to ask to reduce them with one exception: by reducing the monthly payments, you extend the duration of your loan. The banks accept with a limit: the credit must not be extended for a duration greater than 2 years. If the borrower asks his bank to lower his monthly payments by increasing the remaining term by more than 2 years, it would then be a debt restructuring. This therefore no longer falls within the scope of loan modularity.

Bank tips

Bank tips

Lite Lender tip # 1!

  • In a period of low rates, it is not worth repaying your loan faster. Indeed, some borrowers only look at the cost of credit. It is a mistake. It is often more profitable to keep your credit and invest your savings. Even at an equivalent rate, it’s more profitable. This is called leverage. We will come back to this term in a future article.

Lite Lender Tip # 2!

  • In a period of low interest rates, always favor the modularity of the loan over prepayment. This will allow you to keep your savings paid and thus it will be more profitable for you.

Finally, it is entirely possible to reverse your decision to increase your monthly payments: let us admit that you have decided to increase your monthly payments but that a few years later, you realize that the amount reimbursed initially suited you better. In this case, it is possible to reduce the monthly payments to find the monthly amount to be reimbursed, initially provided for in your mortgage loan contract.

TO REMEMBER !

  1. Include this clause in your contract
  2. Increase your monthly payments allows you to reduce the duration of your loan
  3. You can always return to your previous situation if it no longer suits you

We will see in a next article the advantages and disadvantages of the modularity of the loan.