Can You Get a Loan If You’re Unemployed?

Managing your finances when you’re unemployed is tricky enough — but qualifying for a loan can feel like an uphill battle. While it may seem daunting, getting a loan without a steady income is possible if you know what to do. 

Whether you're facing unexpected expenses or need to consolidate debt, even unemployed borrowers have options. 

Challenges of getting a loan when you‘re unemployed 

You’re probably already aware that traditional loans from banks and credit unions are tailored for those with employment. Without a steady paycheck, it’s difficult to demonstrate your ability to repay — and you may need to seek alternative loan options through a direct lender. 

Factors lenders use to determine loan eligibility 

Lenders typically consider four factors when determining a borrower’s loan eligibility, and your unemployment status could affect some of these factors. 

1. Income. A stable income is one of the most critical factors in loan approval because it indicates your ability to repay the loan. When you're unemployed, steady income is missing. This makes it harder to prove you can repay what you borrow, which labels you as a higher-risk borrower. 
2. Credit score. Your credit score reflects your financial history and reliability. Being unemployed doesn’t affect your credit score, but it can indirectly influence your credit if you struggle to pay bills or existing debts. A lower credit score can reduce your chances for loan approval or lead to higher interest rates. 
3. Credit history. Your payment history tells lenders how responsible you’ve been when you’ve borrowed in the past. Having a credit history of making payments on time and repaying loans in full increases your chances of approval for a loan when you’re unemployed. 
4. Debt-to-income ratio (DTI): Your debt-to-income ratio compares your monthly debt payments to your monthly income. Without income, your DTI could be skewed, and lenders may see you as a risk for taking on additional debt. 

How to get a personal loan if you’re unemployed 

If you’re unemployed but can provide proof of alternative forms of income — such as unemployment benefits, Social Security, pension or retirement income, alimony, child support, savings, or even a spouse’s income — you may be able to get approved for certain personal loans. 

Credit card cash advance 

Credit card cash advances can be a fast and convenient source of money for someone who has an existing credit card account. By borrowing against your credit limit, you can address urgent expenses without the approval process required for traditional loans. 

The main drawbacks of credit card cash advances are the higher interest rates compared to regular purchases, the immediate interest accrual, and additional fees. 

HELOAN or HELOC 

Home equity loans (HELOANs) and home equity lines of credit (HELOCs) can be useful for someone who owns a home with sufficient equity. HELOANs provide a lump sum of money that is repaid over a fixed term, ideal for large, one-time expenses. HELOCs offer a revolving line of credit, similar to a credit card, to cover expenses. 

Being unemployed may make it harder to qualify or result in less favorable terms for HELOANs and HELOCs. Both options use your home as collateral, so having a solid repayment plan is essential since failing to repay means a risk of losing your property. 

No-income verification loans 

No-income verification loans may be an option for someone who can show repayment ability through alternative means, such as assets, savings, or income sources like investments or rental income. They can provide needed funds if you’re between jobs or rely on non-traditional income streams. 

Because of the increased risk for lenders, no-income verification loans often come with higher interest rates and stricter terms. Carefully consider whether this option fits your financial situation and aligns with your goals and repayment abilities. 

Payday Loans 

Even though the name implies you need to be employed for these loans, you may be able to get a Payday Loan by providing proof of other types of regular income such as unemployment, disability, or Social Security benefits. You’ll have to repay the loan in full when you receive your next benefit payment, so be sure to plan accordingly in your upcoming finances. 

Collateral loan 

Collateral loans, such as title or pawn shop loans, offer a quick way to get money for those who are unemployed and not able to qualify for traditional loan options. When you can offer an asset like a car or other valuable item as collateral, the lender approves the loan based on that item’s value, not your income. Title loans and pawn shop loans also don’t require credit checks, so you don’t need to worry if your credit score is low. 

Collateral loans carry a risk of potential loss of your asset if you can’t repay on time. Be sure to weigh all the risks carefully and have a solid repayment plan before committing to a secured loan. 

Borrow from friends/family 

Borrowing from family or friends may be an option when you’re unemployed and need financial help. This informal lending is based on personal relationships rather than credit scores or income verification. If you have a supportive network, they might provide a loan with little to no interest and more lenient repayment terms. 

But proceed with caution here! Mixing personal relationships with finances can lead to conflicts or misunderstandings, so clear and open communication is crucial. Both parties should agree — in writing — on the loan amount, repayment schedule, and other terms to maintain trust and goodwill in the relationship. 

Get a co-signer 

Getting a co-signer with a strong credit history can improve your chances of getting approved for a loan and potentially help you secure better terms, giving you access to credit that might otherwise be difficult to obtain during unemployment. 

As with borrowing from friends or family, this is not a situation to enter lightly. Co-signing creates significant risk for the co-signer by also making them legally responsible for your loan. Any late payments or default on your part will affect the co-signer’s credit. 

If you must have a co-signer, have a clear and honest discussion with them about the loan terms and risks to prevent misunderstandings and avoid straining your relationship. 

Other ways to find cash when you’re out of work 

Emergency savings 

Did you do the hard work of building an emergency fund before losing your job? If so, pat yourself on the back because this is what you were planning for! 

Having an emergency fund means you can cover living expenses while looking for another job. Once you’re employed again, focus on replenishing your savings so it’s there if you ever need it again. 

Sell things online 

Take an inventory of your home to identify things that you may be able to sell through a free online marketplace platform. Remember to take flattering photos and write catchy descriptions about the items to attract buyers. 

Find a side gig 

Freelance work, part-time jobs, or gig economy roles like driving for a ride-share service offer flexible work opportunities to earn money while searching for a full-time position or managing other responsibilities. Side gigs can provide valuable income to bridge the financial gap during unemployment and may provide open doors to full-time employment. 

Look into government programs 

There are various government programs providing funds to help those in need with the costs of food, utilities, healthcare, and housing. Programs differ by the state, county, or municipality you live in. Contact your local 2-1-1 service to learn about available resources in your area. 

➢RELATED: Need Money Now? 6 Ways to Find Cash

Tips to find a job 

For most unemployed people, finding a job is a priority for getting back on financial track financially. Here are some tips for job hunting: 

• Update your resume or create one using free online templates and video tutorials to create a professional resume that helps you stand out to employers. 
• Set up search filters on job listing sites to notify you when jobs that match your skills and interests are posted. 
• Identify specific companies you’d like to work for and check their “Careers” or “Work with Us” pages regularly. 
• Consider a work-from-home job that will provide regular income and also eliminate the expense of commuting to a job. 
• Look for “Help Wanted” or “Now Hiring” signs around town. Some employers still hire this way! 
• Reach out to friends and family to let them know you’re looking for work. You never know when they might hear of a job that’s perfect for you. 
• Learn a new job skill or brush up on one you haven’t used in a while. If money is especially tight, look for free online self-study courses and tutorials. 

Advance America offers loans for unemployed borrowers 

At Advance America, we understand that temporary interruptions in your income are part of life. If you’re unemployed, receiving alternate forms of income, and need a loan to cover expenses, we may be able to help. Apply online or visit us in person to discuss your options.