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Can I get approved for a loan whilst on furlough?

Can I get approved for a loan whilst on furlough?

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Yes, you can be approved for a short-term loan or mortgage if you are on furlough. However, UK lenders are likely to be much stricter about your loan eligibility and long-term affordability. In some cases, you may need to provide written proof from your employer confirming your basic salary, return to work date and any other terms of return.

Key Points

Looking to borrow money whilst on furlough?

With the furlough scheme, the UK Government has topped up the income for more than 11 million jobs since the pandemic officially began in Q1 of 2021.
To help those hard-hit businesses facing high staff bills, people facing unemployment or loss of wages, the UK Government has helped enormously by covering 80% of their monthly wages and this has benefitted between 5 million to 11 million people per month in the last year.
However, whilst being on furlough provides financial security short-term, there are challenges for those individuals if they are trying to apply for loans or mortgages.
From the lender’s perspective, there are issues surrounding the individual’s affordability. Whilst they should be able to afford immediate repayments for the next few months, there is no certainty over their long-term employment and how this will impact their ability to repay off their future loan repayments on-time.

How do I get approved for a loan whilst on furlough?

Applying for a loan on furlough will be the same process as applying for a loan during the rest of the year. You will go to the lender’s website, submit how much you would like to borrow and how long for and wait for a decision.
In some cases, the lender may approve or decline your loan application and in other cases, they may need more information from you - requesting a proof of income and asking whether you are on furlough or not (such as mortgage or remortgages).
Being on furlough means that you have immediate financial security, however, it does not provide lenders with full certainty that you will be employed and earning a regular wage in 6 or 12 months time. If you have a loan duration that is expected to last for several months or years, the lender will need confidence that you will be earning a regular income and be able to afford repayments without falling into financial difficulty.
With this in mind, the lender may request some additional information subject to approval, including a letter from your employer confirming your basic salary, return to work date and any other terms of return to work.

What other factors do lenders consider when approving your loan?

There are several factors that lenders consider when deciding to approve your loan - and being on furlough is not enough to rule you out completely. After all, you may be holding an excellent position in a company and you are on furlough because your industry has been hit hard by Covid-19 such as being in hospitality, events, hotels or travel. Other factors that lenders consider include:Your credit status is a significant factor in determining your approval for a loan. Those with good or fair credit scores are more likely to be accepted for mainstream financial products such as personal loans, credit cards and mortgages. You can request your credit report from the UK Government for just £2 or use a credit reference agency such as Experian to find out your score and follow steps to improve it.

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Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk