Note: This article is applicable only to readers in Canada.
Uncertainty is everywhere in this world, and you can never find a surefire way to avoid a shortage of money. Some people require loans to build their dream home and purchase some other necessities, while some need loans to meet their emergency needs. If you’re reading this article, then chances are that you’re in need of a loan and that you’re under Employment Insurance (EI).
What Is Employment Insurance?
Canada Government offers the employment insurance program to provide temporary financial support to those who lost their jobs. An individual can receive financial assistance if they’ve not been able to work due to illnesses or childcare. Moreover, this program also helps unemployed individuals in their job search.
The Employment Insurance Act is the replacement of the old 1996 Unemployment Insurance Act. This revised scheme reduced the penalty for those people who could only work in temporary jobs. An individual to qualify for the employment insurance must exceed a certain number of work hours and the length of time. The benefits depend on the individual’s geographical region along with the unemployment rate in that area.
In an employment insurance program, your employer will deduct the premium from your pay while on their service. Then, the employer will pay 1.4 times the amount you contributed during your work.
Is It Possible To Get A Loan While On EI?
Some traditional banks and financial institutions might think you’re illegible for a loan due to a loss of income or a lower credit score. With that said, it’s still possible to secure EI loans. It’s even possible to get short-term loans and other specific loans to fulfill other expenses for an extended period.
What Type Of Loans Can You Apply For While On EI?
The type of loans you want depends on your needs. Sometimes you may wish to immediate cash quickly. However, the bad thing is that employment insurance may not be enough to get through your daily needs. Thankfully, there’re plenty of online lenders who can offer you short-term cash without asking for tons of documents.
Most people with bad credit are still eligible to get short-term loans and get money transferred within 24 hours. There’s no need to go for a formal loan processing if you want quick cash for a short time. However, some of you might need a specific loan for a longer time. The good thing is that it’s still possible to secure an appropriate credit.
Here’re some of the types of loan you can apply for while on EI:
- Secured Loans: With secured loans, you need to put some assets (houses, gold, etc.) to ensure your fund. In case of default, the lender holds the right to take over your assets.
- Unsecured Loans: You don’t require any sorts of assets to acquire unsecured loans, but you need an impressive credit score. Usually, you’d need to have over the credit score of 650 to be eligible for unsecured loans.
- Guarantor Loans: If your friend or family member with a good credit score can co-sign your loan, you qualify to secure money at an impressive rate.
Here’s an article if you want to know more about secured and unsecured loans. For people with employment insurance, the best option would be a guarantor loan.
Here are some reasons why you’d want to choose a guarantor loan over other types of credit:
Bad Credit Isn’t A Huge Issue
You’re likely to see a dramatic decline in your credit score once you’re out of a job. If you’ve failed to pay your bills, it’ll add up. Thankfully, the bad credit isn’t a huge issue to secure a guarantor loan. Instead of your credit score, your lender will check the credit score of your co-signer.
You’ll Have A Primary Responsibility To Pay The Loan
Is this an advantage? Well, it’s an advantage because you’ll be responsible for ultimately paying the loan. While repaying the loan, you’ll be improving your credit score by making the full payment. With a better credit score, you can have more options later when it comes to choosing the type of loan.
Attractive Interest Rate
When you’re applying for a guarantor loan, you usually have a good credit score who’ll be your co-signer. It offers them competitive interest rates, which will be to your advantage.
Despite having a few pros, you still have some cons of guarantor loans. Some of them are:
Penalty And Added Interests
Paying your interest in time is a necessity when it comes to the repayment of loans. If you don’t make a payment of your debt in time or follow some other conditions of the contract, you’ll be liable for penalty and added interest.
The Case Of Default Is More Dangerous
If you’re unable to make a payment, it’ll be a primary responsibility of a co-signer to make the payment. In case your co-signer isn’t able to make a repayment, they’ll also end up in debt. The default will lead to a decline in the reputation of both you and your co-signer.
How Can You Increase Your Chances Of Securing A Loan While On EI?
Regardless of the types of loan you want, it’s recommended to do some advanced preparation before applying for a loan. It’ll help you increase the chances of securing a loan. On top of that, you’re also more likely to get the best deal.
Here’re some tips to increase your chances of securing the best deal:
Check Your Credit Score
The first thing you need to do is to check your credit score. In case your credit score is below 600, you might not be able to secure a loan. Making a small effort to pay your bills on time can boost your credit score. If you’ve time, try to do everything you can to boost your credit score.
Compare Lenders
Unlike in the past, you have plenty of options when it comes to selecting a lender. The lender could be both traditional or modern financial institutions. Talk to your friends, experts, and conduct your research to gather information about lenders. Select at least 3-4 lenders that are great for the specific type of loan you’re looking to secure.
Pick the lender with the most competitive rate. You must also check out the hidden fees and other terms and conditions when choosing the right lender. Selecting the right lender can free you from a lot of hassles, and it’ll also save you thousands of dollars every year on interest charges.
Find Out The Criteria
Securing a short-term loan is an easy job. However, it’s not simple to obtain a specific type of loan for an extended period. Every lender wants to provide their money to those capable of repaying it with interest.
There’re specific criteria you need to meet to be eligible to apply for the loan. Some of their requirements could be a particular credit score, minimum income requirement, etc. Once you’ve done your research, you can contact the lender. They’ll further explain to you about the eligibility in detail.
If you don’t meet the criteria of the lender offering the best interest rate, go with the second or the third best option.
Get Your Documents Ready
After checking your edibility, the next step is to get your documents ready to support your claim. Any mistakes in your papers can delay your loan processing time. Some of the standard materials you’d need are bank statements, tax returns, utility bills, proof of identity, loan statements, estimation of your current expenses, etc.
The objective of documents is to ensure you’ve enough disposable income to repay the loan with interest charges.
Apply Selectively
Some of you might think that applying for multiple loans might increase your chances of securing it, but it can be counterproductive. Applying for multiple loans at once can lead to a decline in your credit score. Some lenders might also think you’re trying to get their money and flee.
You should only choose one type of loan after a careful analysis. It’s a wise step to take if you want to improve your chances of getting loan approval.
Submit Your Application
Once you’ve done all the hard works by doing your research and getting your documents ready, you can now submit it. The only thing left is to go to the lender’s application page on their respective site and apply for it. Fill the information correctly and provide all necessary documents to the lender.
Final Thoughts
Securing a loan while on employment insurance might seem like an uphill task, but it’s not like that if you have enough knowledge and preparation. There’re plenty of options for those, even with bad credit score and employment insurance.
If you’re looking for a quick loan, it’s better to choose an online lender who can offer a quick loan without tons of inquiries. Just make sure that you do enough research to verify the legitimacy of the lender. You may want to opt for a guarantor loan if you’re looking for a higher amount of credit for an extended period.
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