How To Get a Loan Without a Job
- Getting a loan without a job is difficult, but not impossible.
- Income streams outside of a W-2 paycheck may be considered on your loan application.
- If your income and credit history aren’t sufficient to secure a loan on your own, you may be able to add a cosigner.
- If all else fails, there are alternatives to personal loans, but they tend to be much more expensive.
Lenders typically like to see regular income when you apply for a loan. The most common way to prove this is through paychecks linked to employment. So if you don’t have a steady paycheck, it’s harder to get a personal loan — but it’s not impossible. Evaluate all your other streams of income, check your credit score and consider a cosigner if you need a loan without a job.
Can you get a loan without a job?
Technically, you can get a personal loan without a job. That said, you’ll have to prove you have other consistent forms of income available to you. This requirement may be lessened if you have significant savings or can put up collateral, or you can also ask someone to cosign your loan.
What counts as income for a personal loan?
Income doesn’t necessarily have to be tied to a W-2 job. If you receive child support or monthly government-issued payments, or have investments that pay out regularly, you may be able to use these forms of income on your loan application.
Unemployment benefits
While some lenders may consider unemployment benefits as income for a personal loan — especially if you’re a seasonal worker — you’d have to borrow a very small amount for these benefits to make a difference. Unemployment benefits are only a fraction of your previous income, and they’re paid for a short period of time.
Child support and alimony
Some lenders will consider child support or alimony as income. To use this income as part of your application, the lender can request documentation of court orders or divorce decrees, proof of consistency of child support or alimony payments and information on the creditworthiness of the person paying your support.
Rental income
If you make income from a rental property, some lenders may consider it, especially if you’ve been receiving and paying taxes on regular rent payments for a period of time prior to your application.
Self-employment income
You may have a side hustle on top of your 9-to-5. Losing your W-2 income can be a big hit, but if you still have income from self-employment, it can count on your loan application. However, you will need to have tax records proving the amount and consistency.
Government-issued payments
If you receive government benefits, they may be accepted as proof of income. But be mindful of the loan terms, and be sure you’re working with a legitimate lender. Scammers will have you sign over your benefits under terms that are extremely difficult to get out of, illegally increasing your debt and worsening your financial situation rather than improving it. Sometimes you’ll even lose personal access to your benefits in the process.
After you’ve verified the terms of the loan are agreeable and nonpredatory, streams of government-issued income may include:
- Disability benefits
- Social Security benefits
- Veterans Affairs benefits
- Government-issued pensions
Income from trusts or regularly paid investment income
Some lenders may consider income from trusts or investments, but you’ll need proof that these income streams are regular rather than sporadic. Hitting a big, one-time payday due to a speculative investment, for example, would likely not be considered income for loan purposes.
Other personal loan factors
Income isn’t the only factor that contributes to a lender’s decision. Factors like a strong credit history or significant savings could help convince the right lender you’re a safe bet.
Credit score
A good credit score can be especially helpful when money is tight. When you’re coming into the loan process with nontraditional streams of income, a strong credit score could make the difference in convincing the lender you’re reliable with debt repayments. A higher credit score can also get you more favorable loan terms, making the debt easier to pay back while your income is constrained.
Credit history
Your credit score is determined by your credit history. On-time payments and the length of your credit history can help boost your score. Before you apply for a loan, check your credit report, which contains your credit history. That way, you can identify any inaccurate line items that may be dragging your score down.
The catch is that if you find an inaccurate line item, it may take a month or more to be corrected. This may prove difficult when you need the money now. Still, removing inaccurate, negative line items could boost your borrowing power in the future.
Debt-to-income ratio
Lower debt-to-income (DTI) ratios can help you secure a loan. To calculate your DTI, add up your gross monthly income, then divide it by your monthly debt obligations. Ideally, your DTI will be below 36%. But even if it’s higher, you may still be able to secure a personal loan if you have a high credit score or other compensating factors in your credit profile.
Assets and savings
Having significant assets or savings can be another advantage when applying for a personal loan, especially when you’re out of work. This cushion can show the lender you actually have the money to repay your debt.
Collateral
There are two types of loans: secured and unsecured. Unsecured loans don’t require any collateral, while secured loans do. For example, if you’re taking out a second mortgage, your house would be the collateral. Your car is another asset that might act as collateral. If you stop making payments on a secured loan, the lender may repossess your collateral as payment.
Tips for getting a loan when you don’t have a job
Getting a loan without a job isn’t easy, but there are some things you can do to improve your chances.
- Add a cosigner: If you don’t have the income or credit score to qualify for a loan, adding a cosigner may be a viable alternative — but cosigning a loan can be tricky. If you can’t repay the loan on your own, the cosigner is liable for the debt — as well as the credit consequences. Enter these arrangements responsibly to avoid damage to your relationships.
- Keep the loan request small: Borrowing less means you’ll have less to repay. This can be a key metric when lenders are evaluating your creditworthiness during a period of unemployment.
- Offer collateral on a secured loan: When you don’t have income, putting up collateral can be the difference between securing a loan and not. Just remember that you can lose your collateral if you don’t keep up on loan payments.
Realistic loan alternatives if you’re unemployed
If you’re not able to get a personal loan while unemployed, there are alternative options. Just be sure to read the fine print carefully, as “alternative” can often equate to “dramatically more expensive.”
Car title loans are a lot like payday loans, in that they’re short term and come with extremely high interest rates (often as high as 300% APR), plus other fees. They’re difficult to pay off — and if you default, you’ll lose ownership of your vehicle.
Financial hardship options
If you were already carrying debt when you lost your job, you may be able to secure a lower APR or waived fees on existing debt by contacting your lender. Many lenders have financial hardship programs for exactly this type of situation.
Buy now, pay later
For essentials, you may consider buy now, pay later options. Sometimes these products don’t require a credit check, which means your odds of approval may be higher. They also typically charge no interest if you make on-time payments. However, if you miss a payment, you may be charged interest and fees. And if you fall far enough behind, you could damage your credit.
Credit card cash advance
Your credit card may offer a cash advance option. But while this may seem like a huge relief when you’ve got no cash coming in, it is an expensive way to borrow money. Your cash advance APR is likely higher than your purchase APR. And while the APR on purchases doesn’t start accumulating unless you fail to pay the balance off in full on your next statement, the APR on cash advances starts accumulating right away.
Frequently asked questions
You may be able to borrow money if you’re unemployed, but it’ll be harder to secure a loan. If you have other streams of income, such as alimony or rental income, these can be applied to your loan application. Other factors that boost your chances include a good credit score or having a credit-worthy cosigner.
Unemployment benefits are typically small and short-lived. Unless you’re a seasonal worker, using this stream of income to secure a loan isn’t common.
Keep in mind that job loss can affect more than your borrowing ability — learn how unemployment can (and can’t) impact your credit before you apply.
Whether or not getting a loan while unemployed is a good idea will vary depending on your personal circumstances. Odds are that your loan application will be denied if your job was your only source of income. However, if you have multiple streams of income and report them on your loan application, you may have a higher chance of success.
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