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How To Get A Loan If You Don’t Have A Job

Sarah Sharkey6-minute read
December 03, 2021

A period of unemployment can be a stressful time. Not only are you faced with the unexpected loss of a job, but also the financial burden that can become apparent without an income.

If you are in this situation, the thought of taking out a personal loan may have crossed your mind. A personal loan could provide the funds you need to take care of yourself during this difficult time.

Before you move forward, take some time to understand how the process of applying for a loan will look different without a steady paycheck. We’ll dive into those details today.

Can You Get A Loan Without A Job?

It’s entirely possible to get a loan even if you don’t have a job. However, it can be more challenging to qualify for a personal loan if you don’t have a reliable income to show to a lender.

In most lending situations, a lender wants to see that you have the income necessary to make payments on your loan. Without an income, a lender could have a more difficult time confirming your ability to repay the loan.

Since the lender will view you as a bigger risk, you may not receive the loan terms that you’re hoping for. You may run into smaller loan amount offers or higher interest rates to make the lender more comfortable with the loan agreement. Even with less-than-ideal terms, it’s possible to secure a personal loan to fund your needs during your period of unemployment.

Important Factors Lenders Consider For Unemployed Borrowers

When you’re seeking a loan under normal circumstances, your source of income will be a central piece of the loan application. Without a job, a lender will look at other factors to assess your borrowing power.

Let’s take a closer look at these factors:

Credit Score

If you’re applying for a loan, a good credit score will always be helpful. Even if you’re employed, a good credit score will further strengthen your application.

A good credit score is critical if you’re applying for a loan without a job. The three-digit number can help a lender assess your creditworthiness quickly. If you have bad credit, you might struggle to find a lender willing to work with you.

Credit History

In addition to a good credit score, a solid credit history is helpful. A lengthy credit history with a strong record is key to proving your reliability as a borrower.

On your credit history, a lender can determine if you consistently make on-time payments to keep your debts in good standing. With a good record, a lender can feel more comfortable working with you.

Alternate Income

Although you may be out of a job, you could have other sources of income. If you are able to prove that you have another source of income, that can bolster your loan application.

Other income sources can include unemployment benefits, investment income, alimony, pensions, disability payments, welfare, child support and more. With an additional source of income, a lender may feel that you can make your monthly payments. With that confidence is a higher likelihood of a successful loan application.

Evidence Of Future Income

Although you’re currently unemployed, you may have a source of income on the horizon. You might have a pending employment offer or large windfall due to the sale of an asset coming your way. But you may still need a loan to bridge the gap between the future income and your current situation.

If you can prove the promise of future income to a lender, then you’ll make a better case for your loan.

Current Debt Burden

Lenders will want to know more about your current debt burdens. If you have a large amount of debt already in the picture, a new lender may not feel inclined to add to the burden.

Tips For Unemployed Loan Borrowers

Now that you have a better understanding of what a lender is looking for, let’s talk about tips that can help make your application a success.

Put Up Collateral

Putting up collateral is a way to strengthen your application in the eyes of the lender. When you put up collateral, you’re essentially securing the loan with an asset of value. A few assets that can qualify as collateral include a car, a bank account, real estate properties and more.

The downside of putting up collateral for a loan is that you could lose the asset if you default on the loan. With that, the lender is more willing to take the risk because they could recoup their losses with the sale of your assets.

Find A Co-signer

A co-signer can dramatically improve your chances of obtaining a loan if the co-signer is employed with a good credit score. You can ask family and friends if they would be willing to co-sign on a loan with you.

Of course, make sure that you can repay the loan. Otherwise, it could put your relationship with the co-signer at risk.

Be Realistic

Before you move forward with the loan application process, take a minute to assess the situation. Although a personal loan could help fund your lifestyle for now, consider whether you can realistically repay the loan in the coming months.

Think about your income prospects in very realistic terms. For example, you may not secure a job in the near future, which could jeopardize your ability to repay the loan and lead to major credit score consequences. It may be a better approach to slash your spending to the essentials while continuing your employment search.

The answer you determine will depend on your unique situation. But consider options to avoid taking out a loan during this turbulent time of your personal finances.

Other Borrowing Options

If a personal loan isn’t the right fit for you, then take a look at these other borrowing options that could help.

Credit Cards

If you have a credit card, then you might be able to fund your immediate needs. However, relying on credit cards to maintain your lifestyle is a slippery slope. When you’re unable to make more than the minimum payment, your credit card debt can spiral out of control quickly.

This might be your last resort, but credit cards come with notoriously high interest rates, so you should consider other funding options first.

Cash Advances

If you need cold hard cash to fund your needs, a cash advance through your credit card could be helpful. Although it will solve the immediate financial problem, it can lead to steep interest charges and high fees. Plus, the low borrowing limits on a cash advance will not make this a long-term solution.

Home Equity Lines Of Credit (HELOCs)

A home equity line of credit can be a lifeline if you have a substantial amount of equity built in your home. You can potentially secure a line of credit based on your home equity whether or not you’re employed.

This is a good option because there are no restrictions on how you’ll be able to use the funds once the line of credit is open. You can use it to fund your living expenses until you have another job lined up. The downside of this loan is that you could risk losing your home. If you’re unable to repay your borrowed funds, then a lender could take possession of your home. With that, think carefully before pursuing this option.

Car Title Loan

If you own your car, you could seek out a car title loan. Essentially, this type of loan uses your car title as collateral. With that, you could lose your car if you’re unable to keep up with the payments.

Depending on your situation, putting your car on the line might be the right solution.

The Bottom Line

A period of unemployment can be difficult financially. In some cases, a personal loan may be the right solution. As you navigate this tumultuous time, take advantage of our free personal finance resources. With the right information in hand, you may feel better prepared to move your finances forward.

Remember, everyone’s financial situation is different and it’s best to speak with a licensed financial expert or advisor before making any major financial decisions.

Sarah Sharkey

Sarah Sharkey is a personal finance writer who enjoys diving into the details to help readers make savvy financial decisions. She’s covered mortgages, money management, insurance, budgeting, and more. She lives in Florida with her husband and dog. When she's not writing, she's outside exploring the coast. You can connect with her on LinkedIn.