How To Evaluate The Eligibility Of An Unemployed Person For A Loan

Definition of unemployed people The definition of unemployed people is that they are not in a position to earn a regular salary by any kind of employment. These are the people who are neither employed nor in a position to earn a regular salary. Hence, they have to suffer from inability to earn a living and to meet their expenses. The income earned by such people by any kind of employment does not count as per the guidelines laid down by the government regarding minimum income requirements.

Definition of unemployed also refers here to those unemployed who are working under contractual arrangements and there is no prospect of coming out of that contract. Microloans are specially meant for such people. For such payments to be made to unemployed people without much delay and with interest. Such loan is issued μ†Œμ•‘λŒ€μΆœ by some banks and financial institutions on the basis of certain criteria. Few of the important economic criteria that decide the approval of microloans are –

Presence of microloans: Microloans are issued to unemployed persons only when they fit into the following categories – those working-age population; those unemployed due to any reason other than the loss of a job or voluntary exit; those having a regular and fixed source of income; and those who are physically fit. All these groups are given equal weightage in the calculation of a standard rate of interest applicable to the amount of loan sanctioned. In addition, some more factors are also taken into account for the purpose of ensuring the repayment of the loan amount on time. For instance – if a person is unemployed because he lost his job due to the downturn and is looking forward to getting back to work through any source of job, then the amount of loan sanctioned may not be that large.

Presence of a reliable source of income: It is important that the loan sanctioned to an active-looking job seeker should also take into consideration the regular income coming in to his or her door. Remember, in the absence of regular income, any source of income will become less useful as cash advances become infrequent and the actual amount to be repaid during the repayment course gets increased. Hence, it becomes imperative that regular earnings should be considered for computing the eligibility of being granted a loan at low interest rates.

Duration of unemployment: An increase in the duration of unemployment is another factor that is taken into account for computing the eligibility of a loan being offered. The longer duration of unemployment, say one year to five years, has a significant impact on the ability of the unemployed people to repay the loan amount. This is because the repayment load becomes heavier with each passing month. Hence, the duration of unemployment is another important economic criteria for the loan being provided to unemployed job seekers.

Labor force participation rate: The third critical criterion for being granted a loan is the labor force participation rate of the unemployed persons. The rate at which the employed individuals are trying to find a job or have been searching for jobs for a long time is an indication of their credibility as job seekers. The higher the rate of actively looking job seekers for a particular occupation, the more credible that group is as a potential borrower. As such, it has become essential for unemployed persons to maintain their levels of looking for jobs to demonstrate that they are serious about pursuing an occupation and are not likely to give up searching even if they are unemployed.

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