If you are unemployed and need instant cash, getting a cash loan may seem like a very appealing option. However, the easy allure of cash loans can be dangerous – these inevitably lead to more debt, and debt while unemployed is a frightening thing to face.
You can apply for a cash loan through a bank, or through a less regulated “loan-provider”. Traditionally, the application process through a bank is more in-depth, and entails more stringent credit and employment checks. These types of loans are usually termed “personal loans”. You are unlikely to secure a loan through a bank if you are unemployed, as banks need to assess whether you have the means to pay back your debt through the form of a monthly income or some other regular inflow of money. Since most of us don’t have trust fund money happily flowing into our accounts each month, the regular inflow of money sadly falls to an income, secured only through employment.
While some people may have unemployment benefits from the state, lenders are often unwilling to see this as surety for the loan, as these benefits typically run out before the term of the loan, which would mean the lender is then left “stranded”, as the borrower has no further income prospects to pay back the loan. (www.dcreators.com)
It is a sad reality that in South Africa, so many people find themselves in untenable financial situations, and unscrupulous loan sharks prey upon this. For this reason, numerous entities exist offering “loans for unemployed”, “instant loans” and “loans with no credit checks”. In all of these instances they are catering to people who can’t afford to take on debt in the first place, but are desperate and generally know no better.
Providing cash loans to these desperate individuals is an attractive prospect to lenders for 2 reasons:
- These loans attract cripplingly high interests rates
- The loans attract extremely large late payment fees
In both cases, the lenders are essentially left to decide at their whim how high to make interest rates and late payment fees, knowing that applicants will struggle to find a lender who would provide the same amount of cash with kinder terms.
Unlike in the case of a PayDay loan, where the loan is “secured” against the incumbent’s next pay check, a cash loan to an unemployed person assumes that he will pay it back once he gains employment. This is dangerous as the small print can include cumulative interest rates and high “late” fees, which may not have been set out in the “standard” terms and conditions by the lender.
While unemployed people may know and accept the risks and pitfalls associated with applying for a cash loan, the sad fact is that many can’t avoid going this route, so as to keep their families fed and sheltered. Of course, there are many who seek out these types of loans for less admirable pursuits, such as gambling and drinking.
For those simply looking for a way to survive through unemployment, a cash loan may well be the only option. However, getting a cash loan while you have no regular employment opens you up to all kinds of “fine print”, abuse and unscrupulous characters. Ensure you understand all the terms and conditions of your loan, and make sure you can keep up with the minimum payments, to avoid getting into even more financial trouble.