Think carefully before you go on loan with unemployment benefits. With unemployment benefits you have enough income to continue your old lifestyle. But your income is not guaranteed. After your unemployment benefit ends, you will receive another source of income. At the moment you do not yet know whether that will be paid work or another benefit. That is why it is still unclear which monthly charges you can handle in the future.
You may not do paid work in the future and become dependent on sickness benefits such as WIA or Wajong. If things go wrong you can even become dependent on social assistance benefits. The most important point of this article is that your unemployment benefit is temporary. Borrowing with unemployment benefits is risky for you and the lender, because it is unknown what your future income is.
A loan will put extra pressure on your monthly payments. You will have less money to spend for your daily life. Borrowing money with unemployment benefits is a last resort: only do it if you have no other options for earning extra income. Earning money by buying and selling trade or offering services is better than borrowing.
First list the other options for getting money. It may be that you have possessions that you can offer for sale, such as selling a scooter, billiards table or valuable old coins. You can also learn how you can save money instead of borrowing. This way, your monthly payments will remain affordable in the future.
Borrow with unemployment benefits for one-off expenses
Unemployment benefit is approximately 70% of your previous wage. It can be challenging to make ends meet on that lower monthly amount. In an unexpected situation you run the risk that you will not be able to pay some bills. If you do not have enough savings, unexpected situations can cause financial problems. For example:
- You suffer from vermin. The insect killer must come by to clean your house.
- Your child breaks a window. You are not insured replacing the window is expensive.
- You get an accident and the costs for the hospital fall under your own risk.
Do you currently not have enough savings to pay for such unexpected bills? In some cases you can postpone solving the problem, such as a broken car. Then you go by bike or public transport for a few days or weeks. You postpone the repair until you have work again. Or you can discuss with the supplier that you are currently dependent on unemployment benefits. Ask for the option to pay the bill in installments over a longer period.
Is your problem of the kind that you cannot postpone? Then consider asking for help from family and friends. You can probably get an interest-free loan based on the confidence you create. But some are too proud for that, or they don’t want to risk their relationships with a loan. But you still have to pay your bill. In this situation you are forced to borrow with unemployment benefits.
A household that is dependent on unemployment benefits cannot afford high monthly costs. A lender will have to take this into account. They want to know if you can pay off a loan in monthly installments. Credit providers are therefore extra careful with lending money to families who are temporarily receiving unemployment benefits.
Which Money Providers Will Borrow Your Money with Unemployment Benefit?
You receive unemployment benefits because you are temporarily out of work. Your income is now lower than what you are used to. It is also not yet clear what your source of income is after your unemployment benefit expires. You may return to work and receive an income that is comparable to the former standard of living. In that case you can easily pay off a loan. But it could also be that you have a lower income, for example because you are going to do other work, or because you are receiving WWB benefits. Because of this uncertain future, it is risky to give you a loan.
Lenders will be happy to lend you money with unemployment benefits if the duration of the loan is shorter than your unemployment benefits and you can pay the monthly repayment. That means that a mini loan is no problem. A larger loan will be too risky for most lenders.
A part of the banks and lenders will refuse an applicant with unemployment benefits. They do not see your future income, so the risk is too great for them. Fortunately, there is a smaller proportion of the banks and lenders who will process your application. They will still strictly assess your situation, but you have a good chance if, for example, you have a partner with a fixed salary.
Your application for a loan with unemployment benefits has a good chance of being successful with a lender who does not do an income check. You can borrow money from them without a credit check. This usually concerns a mini loan. Your application for borrowing with unemployment benefits will be accepted, but the conditions will mean higher interest. You will probably have to pay a fine if you fall behind with your repayment. In this way, the lender can cover himself for the higher risks of borrowing without a BKR check. Therefore pay close attention to the conditions before you agree.
Your unemployment benefit has a specific end date. Then you are back to work, or you are eligible for another benefit, such as WIA or WWB. That is why it is not yet clear how high your income will be after your unemployment benefit ends. Lenders see this uncertainty as a risk that must be covered by the terms of the loan.
Make sure you have the information about your income and expenses at hand. An application for borrowing with unemployment benefits can be successful if you provide full insight into your financial situation. This way lenders can easily see if you can pay the monthly repayment.
Risks of Field Lending with unemployment benefits
As a recipient of unemployment benefits you have an uncertain future. Unemployment benefit is temporary and you do not know which source of income you will have if your unemployment benefit expires. It could be that you have work quickly again. But if things go wrong, then your income can also go down. Lenders look at your future employability. Employees differ in their chances of getting back to work quickly so that they earn well. The question is where your income comes from after your unemployment benefit has expired.
For example, you can end up in social assistance. A social assistance benefit is lower than an unemployment benefit. If you want to borrow with unemployment benefits, lenders will take this into account. They do not know how high your income will be in the future. You may not be able to repay a loan. That is their risk. They want insight into your financial situation to estimate whether you can also bear the monthly repayment in the future.
Carefully consider how likely you are to find a job again. Younger employees have good chances of getting back to work quickly. With paid work they will easily be able to pay the monthly costs of a loan. In addition, employees with professional training or a clear profession, such as a doctor, lawyer or plumber, quickly return to paid work. The lenders make a good estimate of the opportunities for them. They will lend money faster to this type of employees with unemployment benefits.