For some borrowers, getting a personal loan can be a sticky situation: When you need one the most, you might not have the finances to qualify.
Say you’re out of work, for example, and need a personal loan for emergency expenses. The first question you might ask yourself is, “Do loans for unemployed borrowers even exist?”
Where to find loans for unemployed borrowers
Most reputable personal loan companies consider your debt-to-income (DTI) ratio when quoting you loan offers. Even if you don’t have debt, your DTI will be out of whack if you’re income is close to zero.
Of course, you don’t need a full-time job to have considerable income. That’s where newer online lenders separate themselves from credit unions and banks, which may have stricter requirements.
LendingPoint requires that you have $20,000 in verifiable annual income, but the amount doesn’t necessarily have to come from employment. An older borrower receiving $20,000 in retirement benefits each year could qualify for a personal loan with the lender, for example.
Other top lenders, however, would prefer that you work full time in addition to (or in lieu of) earning a minimum amount. SoFi explained on its website that you must meet one of three conditions to qualify:
- Be employed at least part time.
- Have a job offer to start within 90 days.
- Have “sufficient income” from other sources.
Coincidentally, SoFi also offers unemployment protection to borrowers who lose their jobs. Other lenders, such as Upgrade, have no minimum income standard.
How to decide if you should borrow when you’re unemployed
Although it’s possible to borrow a personal loan without a job, that doesn’t make it a wise decision. Here are some questions you should ask before you sign on the dotted line.
1. Are you looking at an extremely high interest rate?
If you’re unemployed and looking to take out a loan, it’s possible to get suckered into borrowing with a shady lender. Googling “loans for unemployed” could land you with a lender charging APRs north of 200.00%.
If you’ve already started shopping around, be wary of lenders promising you funds in exchanges for high rates and fees.
A higher interest rate is a severe side effect of borrowing a personal loan while unemployed. It’s problematic because the higher your rate, the more expensive your loan. That’s why you should start your search with the best personal loan companies, which offer rates well below 35.00%.
Say you find a job and receive a modest 8.00% interest rate on a $15,000 personal loan from one of these lenders. Your monthly payment on a three-year repayment plan would be $470, according to our personal loan calculator.
Now say you’re unemployed and secure a 15.00% rate on the same loan. Your monthly payment would jump to $520.
An extra $50 per month might not seem like a lot, but you’d shell out about $1,800 more over the loan term.
2. Can you access a cosigner or co-borrower?
Even if you could afford these higher monthly payments without steady work, you should still consider bringing on a cosigner or co-borrower who’s employed and can share the burden of repayment.
You might be able to borrow from a credit union at a lower interest rate, for example, if your co-borrower lives in your household. Just understand that you’d be putting someone else’s finances at risk should your loan repayment go south.
3. Are secured personal loans an option for you?
Say you’re jobless but own a few assets like a car or boat. You could opt for a secured personal loan that requires you to put up collateral for consideration. You would include any available assets within your loan application.
The downside is that your lender could seize your assets if you default on your loan.
Consider alternatives to borrowing if you’re unemployed
Take some time to consider whether a loan is necessary, or if it can wait until you find another job.
If that home renovation isn’t needed for safety reasons, for example, put a pin in it for later. Similarly, you could delay your wedding (or throw a smaller party) until you have more income to support the debt.
Even if you’re confronting an emergency expense, such as a stack of medical bills, a loan might not be the answer. There are others ways to rack up some cash:
- Fundraise among family, friends, and strangers via websites like YouCaring
- Cut your spending and set a savings goal.
- Start a side hustle.
It might be more difficult to ask a family member for help, live modestly for a while, or take on freelance work. But if these alternatives keep you out of the red while you look to make some green, then your effort will pay off.
If borrowing a personal loan makes more sense for your situation, however, strengthen every other aspect of your loan application. You’d be wise to start by increasing your credit score.
Interested in a personal loan?Here are the top personal loan lenders of 2019!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.95% to 35.89%*. The origination fee ranges from 1% to 6% of the original principal balance and is deducted from your loan proceeds. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at the time of application. The average origination fee is 5.49% as of Q1 2017. In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,025 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months. Borrower must be a U.S. citizen, permanent resident or be in the United States on a valid long term visa and at least 18 years old. Valid bank account and Social Security number are required. Equal Housing Lender. All loans are subject to credit approval. LendingClub’s physical address is: LendingClub, 71 Stevenson Street, Suite 1000, San Francisco, CA 94105.
†Per reviews collected and authenticated by Bazaarvoice in compliance with the Bazaarvoice Authentication Requirements, supported by anti-fraud technology and human analysis. All reviews can be reviewed at reviews.lendingclub.com
**Based on approximately 60% of borrowers who received offers through LendingClub’s marketing partners between January 1, 2018 to July 20,2018. The time it will take to fund your loan may vary.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
|5.75% – 16.24%1||$5,000 - $100,000|
|7.69% – 35.99%||$1,000 - $50,000|
|7.99% – 35.89%*||$1,000 - $50,000|
|5.99% – 24.99%2||$5,000 - $35,000|
|5.99% – 29.99%3||$7,500 - $40,000|
|6.79% – 20.89%4||$5,000 - $50,000|
|9.99% – 35.99%5||$2,000 - $25,000|
|6.95% – 35.89%6||$1,000 - $40,000|
|6.99% – 18.24%7||$5,000 - $75,000|
|9.95% – 35.99%8||$2,000 - $35,000|