American household debt exceeded $13 trillion in 2018. Credit cards alone account for 20 percent of all debt. Loans make up another 21 percent of this amount.
Considering these facts, it’s not surprising that getting a loan poses more challenges than ever before. Banks need to make sure customers can actually pay off debt. Being employed is often the most important factor in determining your creditworthiness.
The good news is, you can still get a loan without a job. However, you’ll likely have to show that you have investments, retirement benefits, or another source of income.
So what does it take to obtain a personal loan with no job? Most importantly, what options do you have? Let’s find out!
Assess Your Options
First, make sure you understand what options are available for the unemployed.
Depending on your personal circumstances, you may apply for personal loans with high-interest rates or secured loans. The latter require collateral, such as your car or house. Beware though – the bank can repossess your assets if you don’t pay off debt on time.
A growing number of lenders are now offering unemployed loans. In this case, your credit score matters most. You may also need to provide additional documentation, such as welfare checks and bank statements.
The downside is that these loans often come with higher fees. That’s why it’s important to assess your options, compare multiple lenders, and read the fine print.
Factors That Affect Your Loan Application
As mentioned above, most lenders will evaluate your creditworthiness based on several factors. These may include:
- Income sources (investment income, freelance income, social security income, child support, etc)
- Credit history
- Credit score
- Debt-to-income ratio
Maintaining a good credit score, for example, shows that you’re likely to keep up with the payments. Your credit history will reveal information about your spending habits as well as your ability to pay off debt.
Be Smart about Unemployment Loans
The amount of money you can borrow depends on the factors listed and varies from one lender to the next.
Assess your needs and decide why you need a loan in the first place. Are you dealing with a medical emergency? Perhaps you must pay your utility bills, fix your car, or repair the roof?
Don’t get a loan just for the sake for it. Unemployment loans are not meant to pay for your vacation or provide you with the money needed to update your wardrobe.
Most importantly, don’t borrow a penny more than necessary. Be realistic about your situation and seek ways to cut your expenses. Consider asking your family or friends for help.
Getting a Loan without a Job Isn’t Impossible
Perhaps the most important thing you can do to increase your chances of getting approved for a loan is to improve your credit score.
Pay your bills on time and keep your balances on credit cards. Refrain from applying for several loans or credit cards at once. This will result in multiple inquiries and affect your credit rating. Space out your applications to stay on the safe side.
Also, check your credit reports regularly. Make they’re accurate and up-to-date.
With some planning and research, it’s possible to get a loan without a job. For more tips, browse our unemployment section.
We’ll show you what to do when your unemployment benefits are denied, how to manage your house payments and much more!