The global crisis has had a significant impact on the labor market. Obtaining personal loans from traditional financial institutions while unemployed now is more challenging than ever.
Your monthly income and credit score are critical factors for getting a personal loan offer. Good news: income doesn't only mean wages from a job. People can still get emergency loans with no job to cover their primary expenses and get their finances back on track.
Lenders often consider alternative income sources as reasonable ones. There are various loan options available for unemployed individuals, even for those with bad credit scores!
Table of Contents
- Can You Get an Emergency Loan Without a Job?
- Traditional vs Online Emergency Loans Eligibility
- An Unemployed Emergency Loan Requirements
- Types of Emergency Loans While Unemployed
- Safe Alternatives to Emergency Loans for Unemployed
Can You Get an Emergency Loan Without a Job?
You can get emergency loans with no job if you provide proof of a regular source of income. Online personal loan lenders rely more on your monthly income than employment status.
Alternative income sources may be different. Some of them include:
- Recurring interest from smart savings or investments;
- Social Security or Disability benefits;
- Pension or retirement income;
- Freelance or contract work;
- Alimony or Child support (essential for emergency loans to single mothers)
- Unemployment benefits;
- Interest and dividends;
- Spouse's income;
- Rental income;
Online lenders also consider money in your savings account or a pending job offer as a viable income source.
Traditional vs Online Emergency Loans Eligibility
Traditional lenders consider several aspects of your financial profile when reviewing your loan application. Apart from your income, your credit score, credit history, and the debt-to-income ratio are significant factors for your eligibility.
Online emergency loans for bad credit skip the traditional credit report check. They rely solely on your monthly income and common eligibility requirements.
Credit scores are calculated using data from your credit reports. 670 and higher is considered to be a good credit score. 579 and below is a bad credit score territory. You can get a free check once a year on AnnualCreditReport.com.
Traditional loan lenders like banks or credit unions will likely provide only secured loans to individuals with poor credit. Some online lenders may offer emergency loans for bad credit borrowers, but they typically have elevated interest rates.
Individuals with good and excellent credit scores can qualify for a broad spectrum of personal loans to cover emergency expenses. A strong credit score gives you a lower interest rate and more favorable terms.
Debt-to-Income Ratio (DTI)
The debt-to-income ratio is all your monthly debt payments divided by your gross monthly income. Lenders use it to determine if you can handle new loan payments.
To calculate DTI:
- Add up all your monthly debt payments (from loans or credit card bills).
- Divide this total by your gross monthly income.
- Multiply the result by 100. This percentage is your DTI ratio.
Let's calculate now. You have to repay $1,000 each month, and your monthly income is $4,000 before taxes. Your DTI would be 25% — ($1,000 ÷ $4,000 x 100).
Lenders often view a debt-to-income ratio above 50 percent as a red flag. A high DTI usually leads to the rejection of emergency loan applications.
Getting a new loan amount is impossible if you're holding debts from past credit card cash advances or payday loans. Your good credit score and sufficient monthly income won't help you there. In these cases, you can consider debt consolidation loan options.
An Unemployed Emergency Loan Requirements
The full requirement list may change depending on a chosen lender, but they share many things in general. To apply for an unemployed emergency loan, you must meet these criteria:
- Be a legal US citizen;
- Be a legal age in your state;
- Have a valid contact number and an active email address;
- Provide most recent pay stubs or bank statements as proof of your ability to repay;
- Have a driver's license/photo ID and Social Security Number (or alien registration number or ITIN);
- Have an active bank account/checking account.
Types of Emergency Loans While Unemployed
Traditional banks often won't give loans without a steady job. Unsecured loans are appealing because they don't require collateral. Once approved, you only need to sign the loan agreement to obtain your funds.
Sometimes, people are not able to get unsecured loans due to unemployment or bad credit. In this case, secured emergency loan options may be the answer.
Car Title Loan
A car title loan offers emergency cash using your car as collateral. It's an ideal option for individuals with bad credit. It requires minimal criteria for approval. The downside is the high APR and additional fees lenders charge for financing cash loans. Also, failure to repay means losing your car.
Payday Loan for the Unemployed
A payday loan is a short-term, unsecured loan that you must repay on your next paycheck. Online lenders provide loan amounts between $100 and $1,000. Payday lenders aim to transfer the loan funds to your bank account within a single business day or even less.
Payday loans for the unemployed have the same loan terms as simple online cash loans, and the only difference is the type of income you provide. Even though the sum may vary from state to state, it is easy to get the desired loan amount with an alternative income source and a bad credit score.
Pawnshop loans are secured loans where you borrow against a valuable item as collateral. The items used to obtain pawn shop loans vary. These usually include electronic devices, jewelry, musical instruments, and art objects. If you fail to repay, the lender sells your item to recover the loan amount.
Safe Alternatives to Emergency Loans for Unemployed
Secured loans are much easier to get as you provide valuable assets that a lender may sell in case you default. Not everyone wishes to take such risks. Here are the safer alternatives to emergency loans for unemployed borrowers.
Credit Card Cash Advance
A credit card cash advance offers quick access to a short-term loan without a credit check or regular income. It's available from the nearest ATM. It comes with high-interest rates and additional costs. Also, it has a fixed fee for each cash advance that a credit card imposes.
Home Equity Line of Credit (HELOC)
A home equity line of credit is borrowing against the equity of your home. It's calculated by your property's value minus your mortgage balance. While monthly income isn't crucial for this loan, you need to have at least a 680 credit score. Timely repayment is vital to avoid losing your home.
P2P credit mirrors unsecured personal loans but involves lenders – be they individuals or institutions – who are part of a web-based marketplace and choose to fund your loan.
Loan from Family or Friend
Borrowing from family or friends could be less complex, but think about possible issues. Discussing financial difficulties with loved ones isn't comfortable for everyone. Should you fail to repay the debt — you risk your relationships here, not collateral.