Getting a loan of any kind, including a personal loan, while unemployed may seem impossible. However, that is not true. While extremely challenging, it is possible to get a personal loan even if you are unemployed. An employed individual needs to provide a proof of income to acquire a personal loan. However, that is not possible without having a job, so an unemployed person would have to jump through many hoops to get a loan approved.
Factors To Consider
Before you go out trying to get a personal loan while unemployed, you need to do some research and background work. Some things that you need to check would include the following:
- Whether You Really Need the Loan: If you are recently unemployed, you need to carefully consider your financial needs and any savings you have to evaluate whether your need for a loan is essential or if you can avoid it. This would also depend on if you have any potential leads for a new job.
- Another consideration would be whether it is a wise choice for you to take on debt while you are already unemployed and have no source of income. If it does not seem like a wise choice, you may want to consider other sources of getting a loan which may be a little more suitable such as loans from friends and family.
- Unemployment Benefits: If you have the scope of getting unemployment benefits which meet your necessities, you may not want to unnecessarily get yourself a loan as well. This is because you would have to pay the loan back which will put additional pressure.
- Cleaning Up your Credit Score: Before you can apply for a personal loan, you may want to check your credit score. Since you do not have a job either, this will play a more important role. So, you need to request your credit score from any financial institution or your credit card company. In case of any discrepancies, you should content it and get it resolved before approaching a lender.
- Evaluate Your Loan Requirement: It is a wise choice to first sit and evaluate your essential expenses before applying for a loan. This allows you to have a more accurate number for how much amount you should ask for in the loan, preventing the possibility of overburdening yourself.
- Prepare A Good Explanation: Since you are unemployed and seeking a loan, you will need to work harder in order to get the loan approved. This can include explaining why you need the loan, what is its intended usage, and how you plan to repay it back. People without a source of income are riskier to lend money to, which will lead lenders to ask several questions, which you must explain.
How To Get a Personal Loan While Unemployed
In order to get a personal loan while you are unemployed, you will have to go through some different processes than what would regularly be required.
- For starters, you must consider asking for a secured loan instead of an unsecured loan. Typically personal loans are very easily offered in an unsecured manner which means you do not need to put anything up as a collateral.However, for a person who is unemployed, their chances of defaulting on the repayments are higher.
As a result, in order to secure the loan, you may have to go the secured loan path, and offer something as collateral. This could be something of significant value and which the lender agrees to.
Also read: How to take Personal Loan if you are Unemployed
The collateral will be kept by them to satisfy the loan in case you fail to repay.
- Another thing you may want to consider is finding a co-signer. If you can get someone with a job, like a parent, friend, sibling, or spouse to co-sign on the loan, you may be able to secure the personal loan under your name.
But, for the sake of transparency, your co-signer must be made aware of their liability in case you default in making the payments on schedule. As such, you should clarify the exact policies from the lenders and preferably understand those in the presence of the co-signer in order to avoid any misunderstandings.
- While a job is considered a main source of income, and it does impact your ability to secure a personal loan, it is not the only source of income a person has. Other sources of income could include alimony, unemployment benefits, rents, investment interests, spousal income, disability benefits, social security benefits, and pensions.
If you are supported by any of them, they too, can be considered a viable source of income, provided there is consistency in getting them, and the amount you receive is ample to make the repayments.
Where To Get Personal Loans While Unemployed
If you think that being unemployed means that you can only get a loan from a loan shark, you are wrong. Although the chances of getting approved by them is higher, they also apply rather high interest rates and can be much riskier to deal with. As such, you must opt for:
Banks
Credit Unions
Online Lenders
These sources are much more secure for getting a personal loan.
Also read: Personal Loans for Health Care Workers: What to Know
They employ a methodical approach for loan approval which means that they will evaluate your application and supporting documents thoroughly before designing an offer for your requirements.
These institutions are also more likely to provide a better interest rate which does not put as much of a burden, while also giving better overall repayment terms. Additionally, some sources, such as online lenders, may not require an income verification process. This means that they will assess your application based upon your credit history and record alone increasing prospects to secure a loan.
Getting a personal loan as an unemployed person can be a more challenging task. Nevertheless, with a little research and organization of your financial history, you can convince a legitimate lender or financial institution to offer the loan to you. To ensure favorable terms, you can also opt for a secured loan, or have a cosigner make things easier.
