Ravi Chandran
Personal loan during an unemployment period can be a boon or bane
By: Hitesh Khan/
One recent report said that some 5.2% of young Singapore residents aged 15 to 29 were unemployed in 2018 – more than double the unemployment rates faced by other age groups. The report by The Edge Singapore referred to statistics released by the Ministry of Manpower (MOM) in the latest first quarter labour market report.
“Overall, 2.9% of residents were unemployed last year. Some 2.2% of residents in their 30s were unemployed, compared with 2.3% of residents in their 40s, and 2.6% of residents aged 50 and above.”
Underemployment, which includes people who are working part-time or have given up searching for work, is not as closely measured but just as important to the people experiencing less income as a result of the languishing economy.
In times like these, a personal loan may seem like a solution. And a personal loan can be that solution.
But misuse of a personal loan during an unemployment period can also be financially problematic.
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Here are three tips for using a personal loan to smooth out an unemployment period:
1. Cut Costs Before Borrowing
The Singapore consumer has had better days. Unfortunately, many consumers are still living in that better days reality. Before taking out a personal loan, it’s best to acclimate to this new reality. In other words, cut unnecessary expenses. Ways to cut expenses include forgoing the trip to Starbucks, driving less, and price-checking recurring costs like insurance and handphone bills.
Do all of that and more to reduce expenses before taking out a personal loan to tide over an unemployment period.
Besides the opportunity to save real dollars, the exercise of looking hard at expenses entails getting into a different mindset. Namely, the mindset necessary to make good use of a personal loan.
2. Choose the Right Repayment Plan
Fixed rate personal loans with regular repayment dates are probably the cheapest of personal loan options. However, these attractive products are sometimes limited to consumers with good or at least fair credit. Personal loans with bad credit sometimes have other repayment arrangements, such as balloon payments.
There is nothing inherently wrong with these alternative repayment plans, but be careful. This unemployment period may end soon, allowing full repayment of the loan. But it may last longer than expected. Use conservatism when agreeing to a repayment plan. Personal loans gone bad can be fixed, but it’s much preferable to make an agreement and stick to it.
3. Network for Work
The great majority of jobs, especially in a rough job market, are gotten through networking. Unemployed people, then, must be vigilant if not outright aggressive in using contacts to pursue work. The number one best way to use a personal loan when unemployed is to become un-unemployed as soon as possible.
Nowadays, networking can mean not only in-person schmoozing, but working the social networks like LinkedIn and Facebook to see what’s out there. Check out this interesting video on how to use social networking to generate job leads.
If you are already in debt in this unemployment period, make a plan to get out of debt. This doesn’t always require a visit to a counselor or a service fee to a financial advisor. In most cases, debt relief simply requires changing our relationship with money so that you can use our extra cash to reduce principal.
Getting an unsecured personal loan can be easy even for borrowers with imperfect credit. However, getting an unsecured personal loan will never be easy for unprepared borrowers with imperfect credit. To maximise chances of keeping the approval process smooth and simple, take steps to make it easy for a lender to approve this loan, no matter the credit issues and no matter the lack of collateral.
A personal loan, since it is designed to be a short-term, smallish loan, relies very heavily on a borrower’s income, so apply for a personal loan when you get the first hint that you are going to be unemployed – not when you are already in the unemployment period. Establishing current and verifiable employment, as well as employment history, is priority number one for the personal loan applicant who wants to make approval a slam dunk.
But if you are already unemployed, develop a short explanation (not excuse, explanation) as to why the problem occurred. Throw in a “lesson learned” to show that the problem won’t occur again.
How to Secure Personal Loans Quickly
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