When you’re out of a job, your cash flow is under pressure – and this can happen to anyone. No matter what your skills, it can also take time to find new employment.

Because of the pressures, it’s common for people who are unemployed to consider taking some sort of personal loan. This may be to keep up with payments for basic utilities, rates, contractual obligations and day-to-day expenses.

No steady income stream, no mainstream loans

The problem though is that the second you no longer have a steady stream of income coming in, most mainstream lenders – banks, other financial institutions and even short-terms loans providers – will no longer even consider granting you a loan.

Even if you still have some form of monthly income, you’ll struggle to qualify for a loan if you have a poor credit rating, if your company or small business has been liquidated or if you’ve personally been declared bankrupt.

These are all events that you sometimes can’t avoid. When a business venture fails, for example, you often have to endure a financial crunch – meaning that by the time the ship really does sink and you’re left without a reliable source of income, you’re already ineligible for bank loans.

Prepare for higher interest rates

Despite all the doom and gloom, not all lenders will reject you outright. The downside is you’ll have to pay higher interest rates to offset the lenders’ perception that you pose a higher risk of not repaying a loan.

In addition, you’ll often have to have some sort of regular income – dividends, interest on unit trusts or rental income – to offset the loan.

Short-term loan providers

Wonga, the short little loan specialists, for instance, require that you submit payslips or bank statements showing your income to qualify for loans up to R3000 for new customers, and R8000 for existing customers. You will, however, have to pay interest of more than 26% to get your hands on the cash.

GetBucks offers loans up to R4000, payable over 26 days, and at an annual interest rate of 60%. To qualify, you have to be permanently employed for at least three months, and should not be placed under debt review, administration or sequestration.

FinChoice, a division of HomeChoice, offers loans of up to R26 000, payable over between 6 and 24 months for existing HomeChoice customers. Qualifying criteria are a valid bank account and South African residency, and interest rates are regulated by the National Credit Act. Unfortunately, there’s no guarantee that you will, in fact, qualify for a loan.

Loan sharks

You do, of course, have the option of approaching unregulated lenders, commonly known as loan sharks. The odds are you’ll pay very high interest rates and, should you skip a payment, exorbitant penalties.

In extreme cases, you could also put yourself and your family at risk – illegal personal loan providers are notorious for their gloves-off approach to debt collecting.

Asset-based short term loans

A solution that could well work for you if you’re unemployed is an asset-based, short-term loan of the type we offer at Lamna. With this form of loan, you offer a tangible asset, like a car, boat, jewellery, artwork, antique or luxury watch, as collateral for a loan.

There’s no need for credit checks, interest rates are NCA-regulated and, once you’ve paid off the loan and the agreed interest, your asset will be returned to you.

For more information about using an asset to secure a short-term loan, contact us on 086 111 2866 or simply complete and submit our online application form.