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How to get a loan if you're unemployed

It's extremely difficult to get a loan if you are unemployed. A loan by its very nature is not a gift. You have to pay it back, with interest. Legitimate companies are very nervous to loan someone money if that person has no steady income from which to pay them back.

As a result they load the loan with very heavy interest, especially if you have a bad credit history. If you can't pay back the loan, it's unlikely you're going to be able to pay back the ever-increasing interest as well.

If you are unemployed and you take a loan you are going to end up in debt, debt you may never get out of. That's not a maybe, that's a reality. If the debt is called in - in other words, if the person who gave you the loan demands their money back immediately and without notice - you may lose everything and end up homeless. Be very careful who you take loans from. Read the small print on the contract and if you don't understand it, don't sign the contract. If you feel you're being pressured to sign, walk away. Rather get someone else to explain the contract to you so that you are completely clear about what you're getting into before deciding whether to sign or not. If there isn't a contract run as fast as you can.

There are many so-called companies that will offer you loans. If these companies are not legal financial institutions or registered companies they are often what's known as fly-by-nighters or loan-sharks and they need to be avoided at all costs.

The most important thing to remember is this: Companies that offer loans don't do it because they're kind and feel sorry for you. They don't care about you or your financial situation. They are in business to make money!

If you do decide to take a loan you will usually be asked for the following: Proof of a permanent occupation or income, your identity book, pay slips, proof of residence and three months bank statements. This is going to be very difficult if you're unemployed.

In South Africa, if you are employed, the company you work for pays into the UIF - Unemployment Insurance Fund on your behalf. This means that if you end up unemployed due to retrenchment or you resign without another job to go to you can claim UIF from the Labour Department. How much you can claim and for how long will depend on what wage you were earning and how long you worked for the company. As soon as you find a new job the UIF falls away and you have to work for a certain length of time before you will be allowed to claim again. Never quit a job unless you have another one lined up. And by lined up we mean you have a definite start date with an agreed upon wage with the new company, a signed contract with them is even better.

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