How to Get a Loan When You're Unemployed

January 26, 2024 Personal Loans
How to Get a Loan When You're Unemployed

A strong economy is essential when you are looking for a job. Unfortunately, according to the US Bureau of Labor Statistics, unemployment rates are rising drastically due to the recent COVID-19 pandemic.

If you are struggling to pay your bills and need to take out a loan, finding funding can be difficult. Add bad credit to that and it becomes nearly impossible.

Thankfully there are options. Whether you are unemployed or unemployed with bad credit, there is something for you.

Personal Loan Alternatives for the Unemployed

Before you apply for a personal loan, consider your other options first. While there are personal loans available for unemployed consumers and are appealing since they don't require collateral, they usually come with unfavorable terms. There is even a possibility you may not qualify for a personal loan. In this case, you should look to some alternate methods of receiving funds:

  • Credit card cash advance: If you have a credit card, you can use it to get a cash advance.   Cash advances have a limit and come with high fees and interest, although there are a handful of cards that offer low fees for cash advances.  
  • Line of credit: A personal line of credit is similar to a credit card since it allows you to draw the funds you need and pay it back as long as you are using the account. Like a credit card, you make a monthly payment that may include interest and fees.
  • Ask for help from friends or family: Ask a trusted family member or friend is willing and able to assist you during your financial hardship. This is risky since you are putting your personal relationships on the line, but if you know you can pay the loan back in full, it would be the least expensive alternative.
  • Car title loan: If you have enough equity in your vehicle, you can use it to secure a car title loan.   These loans are risky and expensive since you can lose your car if you default on the loan.
  • Home equity line of credit (HELOC): If you have equity in your home and some form of income, you can use a home equity line of credit (HELOC), a revolving loan account that is similar to a line of credit. This is a secured line of credit, which means you risk losing your collateral -- your home -- if you default on the loan.
  • Home equity loan: A home equity loan is similar to a home equity line of credit in the sense that the funds you can borrow are based on the equity in your home. These loans can be paid back like a mortgage with a fixed term and fixed payment.
  • Refinancing Loan: You may be able to refinance a loan in order to use the equity in your vehicle or home.
  • Secured loan: If you don't qualify for an unsecured personal loan, you can use collateral to assist you in taking one out. Like unsecured loans, you will have interest rates and fees, but you also risk losing your asset if you default on your loan.
  • Pawn shop loan: Pawnbrokers can appraise your items for cash, although what you receive is typically much less than the actual worth. If you don't pay back the loan and added interest to get your item back, they will keep the item to pay it off.
  • Loan with a co-signer: Consider asking a trusted family member or friend to co-sign a loan to give you a higher chance of acquiring one, especially if they have better credit. However, taking out a co-signed loan is risky since your co-signer agrees to make any payments that you miss and can potentially damage a close relationship.
  • Debt Consolidation Loan: A debt consolidation loan is one method in which you can reduce monthly payments and lower interest rates to pay off your debt more easily.
  • Payday alternative loan: A payday loan alternative, or PAL, allows members of specific federal credit unions to borrow small amounts of cash at a lower cost than typical payday loans.
  • Look for alternate forms of income: Look for other forms of income such as: savings, unemployment insurance and/or benefits, welfare benefits, Social Security, pension funds, disability, investments, child support, alimony, VA benefit income, spousal income, or a side job.

How To Get A Personal Loan While Unemployed

Personal loans can be used for nearly any purpose, which is ideal when you are unemployed and have bills to pay; but if you're struggling with unemployment, it can be difficult to not only qualify for a loan, but also end up with low interest rates and good repayment terms.

If you are unemployed and struggling with bad credit, your best option may be a short-term installment loan or payday loan. However, these loans come with short repayment terms and high interest rates.

Most payday lenders accept other forms of income aside (if you are unemployed) and generally look for the following criteria before lending:

  • Funds in your bank account (checking and/or savings)
  • Some form of income -- whether it is your spouse's income or income from a side gig, unemployment, alimony, child support, retirement benefits such as Social Security or 401(k) withdrawal if you are retired
  • Collateral (optional)
  • A cosigner (optional)
  • Investments such as capital gains or real estate
  • Your debt-to-income ratio, which is ideally low
  • Your credit history -- this is one of the most important factors in determining whether or not you will qualify for a loan since lenders want to see how you have handled credit accounts in the past (For more information on credit scores, check out our guide.)

Even if you have some form of income, there is a serious risk that you may miss a payment or default on a loan, which can seriously damage your credit due to the late payments and the possibility of landing in collections.

How can I get a Loan without Proof of Income?

If you need a loan but don't have a way to show you have regular income, like a paycheck, you have other options.

One way is to get a secured loan. This means you give the lender something valuable, like your car or home, as a promise you'll pay back the loan. If you don't pay, the lender can take your valuable item and sell it. This makes it less risky for the lender, so you might get a lower interest rate.

What can you use for a secured loan? Common items are your house, car, or even money in a savings or investment account. For a house or car, you can only borrow as much as the item is worth, minus any money you still owe on it.

There are specific types of secured loans, like a Home Equity Line of Credit (HELOC), which lets you borrow against the value of your house. Another option is a car title loan, where you use your car as collateral. But be careful—these often have high fees and interest rates.

Another option is to use a savings or investment account as your collateral. The good thing here is that these usually have lower interest rates. Just remember, you can't take money out of that account until you've paid back the loan.

So, even if you can't prove your income, there are ways to borrow money. But be sure to understand the risks, like losing your house or car if you can't pay the loan back.

Can I get a loan if I just started a new job?

Having a new job can help you qualify for a loan. If you've just landed a job after being jobless, you'll need to prove how much you earn. You can do this by showing your new job's acceptance letter or some recent paychecks to the lender.

If your credit score is low, a loan can be a chance to improve it. To make this happen, choose a lender that reports to credit bureaus like Experian, TransUnion, and Equifax.

Make sure to pay your loan on time and at least the minimum amount due to have good reports. Paying the loan off quicker can be even better for your credit. The key is to use your new job to build a good credit history.

Can I get approved for a loan if I have inconsistent income?

If you're a freelancer, gig worker, or self-employed, you might have income that goes up and down. Even so, you can still qualify for a personal loan. Showing a business history of at least two years can help. If not, the lender might ask you to have someone co-sign the loan for you.

What is a Loan Rollover?

A loan rollover gives you more time to pay back what you owe, but it increases the cost with extra fees and interest. This is common for loans aimed at people with bad credit. If you're having trouble paying off your loan, the lender might offer to extend the time you have. However, this also means you'll owe more money in the long run. So, a loan rollover can make it harder to escape debt, especially if you're unemployed.

Applying For A Loan

To apply for a loan from an online lender or marketplace, you simply need to visit their website and fill out a free pre-qualification form. Interested lenders will then contact you and have you fill a full application loan.

During this time, you may have to provide the necessary documentation. You will most likely have to provide proof of income; the exception is a secured loan, in which your collateral is put up to take out a loan.

If you qualify and choose to accept the loan offer, you can finish the process.

Our Top Loans For Unemployed Consumers With Bad Credit

5KFunds

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5KFunds is a completely free and fast online lender comparison service that allows you to find the best loans for bad credit.

It's completely free to use the 5KFunds marketplace to help you find a lender for fast funding with reasonable interest rates.

5KFunds has an extensive partner network of over 100 lenders that compete for your business with their competitive interest rates and quick funding that is directly deposited to your bank account.

BadCreditLoans.com

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BadCreditLoans.com provides a free marketplace for comparing personal loan offers for bad credit. They are not a direct lender but instead sends your information to a network of trusted online lenders who contact you with loan offers.

Because BadCreditLoans.com only offers personal loans to those with very low credit scores, the maximum loan amount is usually less than $5,000. 

Can I get a loan if I am unemployed?

Yes, you can qualify for a loan if you have an alternate form of income and can prove that you can make monthly payments.

Can I get a loan if I am unemployed and have bad credit?

Yes, there are lenders that specifically cater to borrowers with bad credit.

About The Author

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Bryan Huynh

Product Tester & Writer

Bryan Huynh, a committed Product Tester and Writer, ensures that you are well-informed, guiding you in discovering and comparing top-rated financial services, including personal loans, business loans, credit repair, and tax relief.


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