You may assume it would be impossible to obtain a loan if you are unemployed, but nowadays the truth is, although it may be more difficult and your choice of loan and provider more limited, it is entirely possible. With more and more providers considering the unemployed for a loan (and some even targeting them) it even pays to shop around.

The first thing to consider when applying for your loan is whether you are going to put up collateral. In other words, will the loan be secured or not.

Secured Loan
If you are unemployed with valuable assets, you have a very good chance of getting a secured unemployed loan. The asset is used as collateral- security pledged for repayment of loan- and is most commonly your house. With a secured loan, the interest rate will be lower but of course, you risk losing your home or other asset if you fail to keep up repayments of the loan.

Unsecured Loan
An unsecured loan will be more difficult to acquire if you are unemployed but again, there are plenty of financial institutions willing to take into account any circumstances. An unsecured loan will usually be offered at a comparatively higher interest rate, reflecting the risk of lending to someone who is unemployed but collateral won't be required. It's a viable option if you are a tenant instead of a homeowner, can't provide guarantee or are a student or graduate. Like any loan, they are entirely tailored to the individual and all circumstances will be taken into account when calculating interest rates and repayment terms.

Although borrowing money may not sound like a good idea if you are unemployed and perhaps facing an uncertain financial future, it is maybe the perfect time to consolidate existing debts and reduce your monthly payments. An unemployed loan could help you do just that, streamlining your finances and allowing you to concentrate on other things. Depending on the type of debt you have already, you may even save money if you are paying exorbitant interest rates on store cards, credit cards etc. A good loan provider will be able to advise on debt consolidation and managing your debts while you are seeking employment.

Career Development Loan
While you are unemployed, it may also be the perfect time to apply for a Career Development Loan (CDL). A CDL is a bank loan which is designed to help pay for any work-related learning and is available to the unemployed who may be thinking of learning a new skill or honing existing ones in order to better their chances of gaining employment. It can be used to fund a variety of vocational courses and repayments don't start until at least one month after the end of the course.

There are three areas that a CDL can help fund:

• Course fees - 80% of your course fees (up to 100% if you are unemployed for three months or longer at the time of 2. your application)
• Other course costs such as books, childcare costs, travel expenses and any costs relating to disability.

Living expenses - food, clothing, fuel, rent, council tax etc. (Although these costs must not already be covered by state benefit or another grant.)

More Information:

• Career development loan information - Free info from DirectGov, the government's information site.
• Strategy Unit Press Release for loans - A press release article from the government on many loan types.