If you’re between jobs or unemployed, it can be stressful to worry about where funds will come from for basic expenses. Considering a personal loan to carry you through is one option. But it’s not the only option. Even if you have regular work as a freelancer, lenders may consider you to be unemployed.
In either case, when you need extra funds, it’s possible to get a loan. You may also have access to government resources to carry your family through lean times. Find out how below.
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Can you get a loan without a job?
It’s difficult but not impossible to get a loan without a job. But you should think twice before taking out a loan if you don’t have the means to pay it back. If you have other sources of income, like freelance work or a spouse’s income, you are in a better position to repay the loan.
You can get a loan without a job with the help of a co-signer or by putting up collateral. A high credit score will help you secure the needed funds. And requesting a low amount may improve your chances of approval. You can also consider taking a cash advance or borrowing from savings, friends, or relatives.
How to get a personal loan without a job
If you want to get a personal loan without a job and you’re confident you can pay it back, there are several options to consider. Each of these can help you get the funds needed, and several together will make it even easier.
Use a co-signer
Adding a co-signer means someone else signs as a backup on the loan. They are essentially promising the bank that they will pay back the loan if you fail to pay. A co-signer can be a family member or friend. To be effective in getting a loan without a job, the co-signer should have a good credit score and a low debt-to-income ratio.
An ideal co-signer would have a credit score of 680 or higher and a low debt-to-income ratio. Even someone with a lower credit score and a low debt-to-income ratio could help you secure a loan.
The advantage of this option is that with a qualified co-signer, you should be able to get a loan. The disadvantage is that if you ever fail to pay the loan, the co-signer will be required to pay, potentially straining your relationship.
Put up collateral
If you have savings or something else like land or property that you own outright, the bank may be willing to accept it as collateral. Other potential options for collateral include:
- Investment accounts
- Retirement accounts
- Stocks
- Cars
- Fine jewelry
- Fine art
A loan with collateral is called a secured loan. As long as you make on-time payments, this is one way of getting a loan without a job. But if you fail to pay, the bank has the right to seize the collateral, leading you to lose the valuables you put up as collateral.
Borrow from a retirement account
You can choose to borrow from your retirement account. This is not a traditional loan, but you’ll need to treat it as one to recoup the money spent. When you borrow from a retirement account, the funds that are withdrawn are not allowed to grow for the duration of the loan, having a long-term impact on retirement savings.
When you borrow from a retirement account, there can be a greater temptation to treat it casually or not pay it back. These behaviors can put you in greater financial need at retirement time.
Improve your credit score
A higher credit score indicates to lenders that you are financially responsible, and there is a low risk that you won’t repay a loan. A credit score of 740 or above is considered very good, while 800 or above is excellent. If you can reduce debt and build your credit score, it can be a way to get a loan or get more favorable interest and repayment terms.
If you need a loan right away, improving your credit score might not be a practical solution as it can take months or years.
In the long term, improving your credit score is an important financial step for any future loans or financial opportunities including mortgages, credit cards, and small business loans. For many, building a good credit score can take months or years, making it a long-term credit strategy and not a short-term solution to get a loan.
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When you pay off your Credit-Builder Loan on time, you can reduce your debt-to-income ratio and show positive payment history — both of which could help improve your credit score. By improving your credit score, you could qualify for lower interest rates on future loans or refinancing options.
Join MoneyLion WOW membership and apply for up to a $1,000 Credit-Builder Loan with a competitive rate and no hard credit check. You’ll also unlock the full suite of MoneyLion WOW’s exclusive benefits, including cashback2, VIP deals, and added benefits to your favorite MoneyLion products.
Borrow from friends or relatives
Borrowing from friends or relatives can be a solution to getting a loan without a job, but it is not without possible pitfalls. Friends or relatives in a position to offer you a loan could give you instant access to funds. But be sure to write the loan terms clearly and adhere to the agreed-upon repayment terms to avoid straining your relationship.
The advantage is the instant access to funds without a credit check. The disadvantage is that it won’t be included in your credit report or help boost your credit score when you pay back the loan on time. A possible bigger disadvantage of borrowing from family or friends is the potential strain it can put on your relationship. Be sure the friend or relative is someone you can talk to about money and that you adhere to the terms to prevent harming your relationship with your loved ones.
Consider a cash advance
A cash advance is available through most credit cards. A cash advance limit is usually less than the total credit card limit. The interest rate on a cash advance is usually much higher than the annual percentage rate (APR) on the credit card, so you’ll end up paying more in interest on this option. Even with higher interest, the total is usually less than a payday loan. If you have a credit card and expect to be able to repay the loan amount quickly, a cash advance is a way of getting a loan without a job. If you don’t have a card, you can still apply for one without a job.
Avoid payday loans
Payday loans offer instant cash but are known to charge high interest and fees that can be equal to 25% or more of the total loan in two weeks. They’re designed to reach those who want quick cash who may not be able to get approved from a traditional lender. You have many other options.
Peer-to-peer loan
Peer-to-peer loans have become a popular option for people seeking unsecured loans. Unlike borrowing from your friends or relatives, peer-to-peer lending services match your loan with other individuals who are willing to lend money as an investment and receive monthly income as you pay the loan back with interest.
These loans tend to be quite safe for borrowers, carry lower interest rates than some credit cards, and they can be easier to access than conventional loans or tapping into a retirement account.
However, they frequently come with higher fees, often in the form of origination fees, late fees, and early payoff penalties. With many loan providers to choose from, there is likely to be a peer-to-peer loan that works for you; just make sure you understand all the costs and fees in advance.
Line of credit
A personal line of credit is an unsecured loan from an institution like a bank. These are open or revolving accounts for a predetermined amount of money you can tap into and borrow from. You repay the amount you borrowed to the account with interest, and you can borrow from it again, repay, borrow, and so on for as long as the account remains open.
Banks typically require a clean credit history and they may require a credit score of at least 670 for a personal line of credit. These types of loans charge higher interest rates than loans secured by some type of collateral and may hit you with hefty charges for borrowing over the limit or making late payments.
Home equity loan
For homeowners, a home equity loan can be a great solution for how to get a loan without a job. This type of second mortgage allows homeowners to borrow against the difference between the current market value of the home and the amount they owe for their first mortgage.
Like the original mortgage, a second mortgage will have monthly principal and interest payments. You should be aware that if the market value of your home falls, you might end up owing more than the house is worth.
Things to consider before taking out a loan without a job
Taking out a loan may seem like a reasonable solution to the financial challenges you face while unemployed. However, missing just one payment can significantly harm your credit score, affecting your ability to borrow in the future.
Before you commit to taking that path, observe the following tips.
Understand the risks
Before you stress about how to get a loan without a job, think about why you need the loan and whether it is worth it. No loans are without risks. Make sure you have identified and fully understand the terms of the loan, along with the possible ramifications of a risk becoming a reality.
Read and understand the loan agreement
It is critical to understand all aspects of any loan agreement, especially those that cover the costs associated with the loan. Understand what you can or cannot do while holding the loan, such as paying it off early.
Consider the impact on your credit score
Taking out a loan can impact your credit score. If you make all payments on time successfully, the loan could improve your credit over time because payment history is a big factor in how your credit score is calculated.
However, your debt-to-income ratio is also a big factor. A large loan could tip you into a high-risk category for future lenders.
Have a backup plan
It can take some time for lenders to process and approve a loan. If you have a timely need for the money, it’s best to have a backup plan or two ready to go in the event your loan gets denied or takes too long.
What to do if you’re not approved for a personal loan
If you’ve not been approved for a loan, there are still steps you can take to get a loan. Here are the options to get a personal loan after you weren’t approved.
Lower your loan amount
If you asked for a high loan relative to assets or debt, lenders will usually not approve it without proof of income and a high credit score. If you lower the requested loan amount, you could still be approved. If you asked for a loan of $5,000, consider a loan of $2,500 or $1,000 to increase your chances of loan approval.
Wait until your credit score improves
A higher credit score can help you get approved for more loan options. If you can wait for even four to six months and focus on building your credit score, the higher credit score could be enough to tip the lender’s decisions in your favor. You can also take out a short-term credit-builder loan to help boost your credit score.
Consider alternatives to taking out a loan
Reconsider why you need the loan and explore resources for assistance where possible. Government programs to find affordable rental housing are available. You can apply to the Supplemental Nutrition Assistance Program (SNAP) or call the USA National Hunger Hotline to get immediate assistance. You can call 1-866-348-6479 for help in English or 1-877-842-6273 for help in Spanish. Free food for seniors programs and food for victims of natural disasters also are available.
In addition to government assistance, you can consider the non-traditional loan options above, including borrowing from savings, taking a cash advance, or asking friends or relatives for help.
Jobless Doesn’t Have to Mean Loanless
Getting a loan without a job is often an option, especially if you use a co-signer or put up collateral. But there are other ways to get the funds you need, from government support to borrowing from savings. While focusing on immediate cash needs, be sure to work to build your credit score and find other streams of income like a side gig or freelance work so you can pay back the loan and reach your next financial goals.
FAQ
What documents should I provide if I don’t have a job?
Helpful documents include those that demonstrate that you have enough assets or collateral to satisfy a lender. Bring brokerage or retirement account statements, mortgage documents and a recent home value appraisal, or a statement that someone will co-sign for the loan.
Are there any restrictions on the loan amount I can apply for without a job?
There are restrictions on the loan amount you will qualify for, with or without a job. The amount typically depends on factors like your other debts, your credit score, your assets available for collateral, and the financial situation of any co-signer.
Do lenders look at my credit history differently if I’m unemployed?
Your employment status does not have an impact on your credit score; only your payment history and current levels of debt affect your credit. However, lenders will want assurance that you can successfully pay back a loan one way or another.
