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About Loans for Unemployed People in India

Due to the rising cost of goods and services around us, we require a loan for almost everything in our lives. But banks go through a stringent credit appraisal process before actually disbursing the loan. First of all, they see your credit history and repayment capacity. If you have a steady source of income whether it is through salary or business income, you always score brownie points. However, if you are unemployed and do not have a steady source of income, not many banks will be keen on granting you the loan. Maybe you are just out of a job, in career transition stage or in the initial phases of your start-up venture. Even housewives, students and retired people form a bracket of borrowers who have no current source of income. Whatever the situation may be, the formal banks and financial institutions will not easily consider sanctioning the loan for you.

Loans For Unemployed People In India
Loans For Unemployed People In India

Loan Options Available for Unemployed in India

In case there is a dire need of money, you have no option but to avail loan. There are many other options other than personal loans. Many banks offer cash to unemployed people. The various types of cash loans offered by the banks are:

  • Same day loans for the unemployed : 
  • There are many banks which offer loans to unemployed people within the same day. These loans are short term in nature and can be availed by anyone if you have attained 18 years of age. There is no formal credit appraisal process in place for these loans and can be granted to anyone who even has a bad credit history.

  • Unsecured loans : 
  • An unemployed borrower can also opt for an unsecured loan. The interest rates for this loan is higher and it can have varied repayment tenures. The best option to go for unsecured loans is to avail it with a co-applicant so that your application is deemed stronger and there are better chances of loan approval.

  • Loans without credit check : 
  • The loans without credit check is the one which can be granted to anyone who is unemployed or has a bad credit history. There is no collateral required for this kind of loan.

  • Payday loans : 
  • This is a loan that is granted without any credit assessment. The interest rate for payday loans is higher than that of normal loans. The EMI for these loans is deducted from your salary account.

  • Long- term loan : 
  • An unemployed person can also take loans which are for the long-term and can be availed without any employed record or credit history. These loans are done usually by pledging an asset.

Apart from this, there are also different forms of loan for unemployed people in India.

  • Gold Loan :
  • This is one of the most ancient forms of loans. Mainly housewives and retired people can opt to go for this loan. Those in an emergency can put their gold jewellery to use and take cash in lieu of pledging it. You can simply walk into your nearest bank branch to opt-in for these specific loans which also offers an attractive rate of interest.

  • Education Loan :
  • Though this loan is only for the purpose of higher education and can be availed only by students who are yet to get employment. The parents can act as a co-applicant in this case. Once the student gets a job or completes the loan tenure, whichever is earlier, he can pay back the money in easy instalments.

Government Schemes for Unemployed People in India

The Government of India has also launched many schemes which offer loans to the unemployed youth in the country:

  • Prime Minister Rozgar Yojna : 
  • This scheme has been designed only for the unemployed. The government offers financial assistance to the youth for starting their new venture. The loan offered is in the range of Rs 2 lakhs to Rs 5 lakhs. The amount disbursed is for starting a venture in the advanced industrial sector. Borrowers in the range of 18 to 35 years are eligible for the loan.

  • Cash Loan by the Government of West Bengal : 
  • This scheme is funded by the government of West Bengal, wherein any unemployed person in the age group of 18-45 years can avail a loan up to Rs 50,000.

  • Agriculture Loan : 
  • Under this scheme, the Government of India provides loans to unemployed youth above the age of 22 years for starting his venture in the field. This is specifically for people who are or want to be engaged in the agriculture sector. The Government has tied up with many banks and financial institutions to provide this loan.

  • Loan subsidy for the unemployed by Tamil Nadu government : 
  • This scheme for the unemployed youth is called NEEDS by the Tamil Nadu Government. The full form of NEEDS is New Entrepreneur and Enterprise Development scheme. The state government provides 25% subsidy for loans. There is collateral required for this loan, which is decided by the banks.

There are various advantages related to Secured and Unsecured loans for the unemployed are:

Secured LoanUnsecured Loan
Reasonable interest ratesNo requirement of collateral.
Flexible and easy loan repayment termsCo-applicant is not needed
Loan tenure spread over long termHassle-free application and processing
Composite loan amountFaster loan approvals.
The interest is tax deductibleMinimal documentation required

There are also certain disadvantages associated with both forms of loan for the unemployed are:

Secured LoanUnsecured Loan
In case the loan is not repaid in time, there is risk of the lender taking possession of the assetsThe rate of interest is relatively higher
The borrower should own the property being pledgedThe individual loan payments are more expensive
The terms and conditions are only decided by the lenderThe terms and conditions are decided by the lender
The interest rate and other fees and cost related to the loan makes it more expensive in the long runThese loans are mostly short term in nature

Frequently asked questions: Loans for Unemployed People in India

1. Who are considered as unemployed borrowers?

A borrower is considered unemployed if he has no current source of Income, be it a job or business. Housewives, students and retired people are also part of this bracket.

2. What are the options available for unemployed people as loans?

Unemployed people can avail cash loans available in various forms. Apart from that, there are also Gold Loan and Education loan for specific purposes. Even the Government of India offers many loan programmes for unemployed youth.

3. Is there any collateral required for a loan for unemployed?

There is secured as well as unsecured loan which is offered for the unemployed people. In a secured loan, an asset owned by the borrower is pledged as collateral. Whereas in an unsecured loan, there is no requirement of collateral, but the rate of interest is high.

4. Other than gold and education loans, is there any other form of loans for the unemployed?

There are various cash loans offered by banks for people who are unemployed and have a weak credit history. The Government of India and State Governments also have various schemes for the unemployed youth so that they can start their business.

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