It would be a lie to say that everyone who needs a loan has a stable income, or even has a job that works as a source of income. Most of us don’t, it is not easy these days, and some of us have found ourselves in tricky situations.
So, what do you do when an emergency rears its ugly head, and suddenly you need to find some cash fast, but you do not have a job? Will lenders even accept you? Or, are you doomed?
Well, you aren’t doomed, you can get a loan even if you do not have a job, but it is not always the wisest decision on your behalf.
You may already be financially struggling and taking out a loan when you do not have stable means of paying it back could be detrimental to your financial health.
It can also be super difficult for you to qualify for the loan in the first place, having a stable income is part of the check that lenders do to ensure you are a good candidate for a loan.
However, not everyone who is unemployed has zero income, benefits and other things will count as a stable income. But to be unemployed with no income aiding you, is not the time to be taking out a loan.
There are alternatives to personal loans though, online no credit check loans, cash advances and so on can be useful as an easy alternative, but more on that in a moment.
Should You Get A Personal Loan If You Don’t Have A Job?
If you have no job and no alternative source of income, and you can’t afford a typical loan, it is best to stay away from ways you could end up racking up even more debt. Yet, if you do have an income, just not from employment, things are different.
Social security funds, retirement funds, benefits and so on can afford to take on debt, so you could get financing that you need in these situations. However, make sure that the income you do get can handle whatever loan you take out.
We say this only to prevent you ending up in a hole of debt.
Understanding How Lenders Assess You
It is important to understand how lenders work when you are looking to take out a loan, this means that you need to understand what you need to qualify for a personal loan when you seek to take one out.
These factors are made up of things that assess risk of lending to you.
They are the following.
Income is one of the main things that lenders will look at, they do this to ensure that you actually have the funds to pay them back. This means they will look at pay stubs, bank statements, tax returns and so on to ensure you are actually capable of paying back the loan.
If you do not have employment, income can be eligible if it is from; interest and dividends, long-term disability, alimony/ child support, rental properties, retirement funds, social security, or a trust fund.
If you are somehow able to get a loan if you do not have one of these, it is still best not to because if you cannot repay it, you shouldn’t take it out.
Debt Vs Income Ratio
DTI is something that measure how your monthly debts weigh up against your income. Lenders use this to see if you will be able to take on more debt.
They will divide your monthly debt by your income. If your DTI is high then you are a risk as a borrower, most lenders will have different requirements for this, but a ratio below 36% is ideal.
Your credit score will inform lenders of how risky you are to lend to. Most lenders will use FICO score models, ideally they would like to lend to someone with a credit score of 670 or higher, some may go down to around 500, below this it will be harder.
Your FICO score is calculated based on your history of payments, debt owed, mix of credit, length of history and new credit.
Credit history is also important to lenders, this means they will look at how you have managed your obligations of debt in the past and at the present time. If you miss payments or give payments late this is a warning sign to lenders.
However, if you have not yet established a credit history, some lenders might be a bit hesitant to approve you for a loan of any sorts.
You Can, But There Are Risks Involved
As we have said, you can get a loan if you are unemployed, however, even if you do, there are risks associated with this.
For example, you could damage your credit score if you default or fail to pay a personal loan. It can end up preventing you from getting a mortgage, or any other loans in the future, or it could skyrocket loan interest rates for you.
You may also only qualify for a lower amount, or you may not qualify at all!
Do not forget that it will likely come with higher costs. The riskier you are, the higher the interest rate will be. Paying a higher interest rate raises the overall cost of the loan, because not only are you paying the loan, and the interest fee you are also going to pay a higher origination fee too.
What Can You Do Instead?
Maybe you have read this and thought “maybe this isn’t for me”. If this is the case, good on you, but do not think that you can’t find money elsewhere. You can always take out a family loan, this means that you can borrow from family, or even friends.
You could also get a CD loan, these are secured however, so make sure you can pay them back, it comes with lower interest rates though.
Community loans and outside help are also available if you are struggling financially. Where there’s a will, there’s a way.