If you suddenly find yourself unemployed, your first step should be to apply for unemployment, as well as any other federal assistance programs you might qualify for.
In the event you’re ineligible for these programs or the assistance is not enough, you may be able to get a loan when unemployed. With no job or a steady paycheck, though, it may be harder to get approved. This guide can help you maximize your chances of getting a loan and staying financially afloat.
On this page:
Increasing your chances of being approved for a loan while unemployed
If you’re applying for a loan while unemployed, you’ll need to be extra careful about what you put on your loan application, what lender you choose, and how you manage your finances.
Here are just a few tips to keep in mind as you attempt to get a loan:
List all sources of income on your loan application
You may not have consistent paychecks anymore, but if you have any income coming in at all, it needs to be on your loan application, as it will increase your chances of approval. Make sure to include each and every source of income.
You should include things like:
- Retirement or 401(k) distributions
- Social Security checks
- Disability income
- Unemployment benefits (yes, these count as income!)
- Capital gains, interest, and dividends earned on investments or savings
- Pension payments
- Income from rental properties (even short-term rentals)
- Your spouse’s income
- Inheritances or trust distributions
- Child support, spousal support, or alimony
You can even include any federal assistance you receive.
See if you can get a part-time job or freelance work
If you’re not bringing in much cash, consider taking up a part-time job or side hustle to make some extra money before you apply for your loan. Apps like Uber, Lyft, Favor, and Shipt all offer entry-level part-time gigs, and platforms like Upwork and Fiverr can be good for finding freelancing opportunities.
Try not to fall behind on credit card payments and other loans
Lenders are going to be looking carefully at your credit score and payment history, and if they show you falling behind or defaulting on other debts, they’re definitely going to be hesitant to approve you for a loan. Do your best to pay on time, every time, for any credit cards or other loans you have out (even if it means just making the minimum payment).
Choose a lender that targets consumers like you
Some lenders only loan to high-credit borrowers, while others have less stringent criteria and are willing to issue loans to borrowers with average or even poor credit scores. If your score is on the questionable side, be sure to shop around for your lender thoroughly. Find one that targets low-credit borrowers, and save yourself some time and hassle.
To compare options, check out companies that offer loans for the following credit ranges:
Add a cosigner or co-applicant to your loan
Applying with a cosigner or a co-applicant can help improve your shot at getting a loan—especially if they have a steady income and good credit. Just make sure they know what they’re signing up for (they’ll be on the hook for the debt if you’re unable to repay it).
If you are interested in one of these two options, click an option below to learn more about these loans and compare companies that offer them:
Getting a personal loan when you are unemployed
If you can qualify, a personal loan can help you stay afloat when times get tough financially. Personal loans can be used for anything, and they come with fixed interest rates and consistent monthly payments you can count on.
Generally, your income, credit score, credit history, and existing debts will be the key factors a lender looks at when considering you for a personal loan. While most lenders prefer a high-credit borrower, there are personal loans out there for all credit buckets—including those with good, fair, and even bad credit.
Note that bad-credit personal loans often come in the form of installment loans. They’re typically short-term loans with low balances.
Our experts recommend avoiding any personal loan, installment or otherwise, that has an APR of 36% or higher. If you only qualify for a loan with these terms, you might consider one of the alternative financial products listed below.
Other loan options for those with no job
If you don’t qualify for a personal loan, you’re not without options. In fact, there are still several financial products you may be eligible for when facing financial hardship.
- Secured personal loans: A secured personal loan is an option if you have some sort of collateral, like a car, stocks, business equipment, etc. Because they’re secured by an asset, they typically come with lower rates and larger loan amounts than traditional personal loans. The downside is that your asset is at risk should you default on the loan.
- Personal line of credit: A personal line of credit functions much like a credit card, letting you draw money as needed (rather than in a lump-sum payment). They can be a good option if you know you’ll need access to cash for an extended period of time but you’re not quite sure just how much it will amount to.
- Home equity loan or HELOC: Home equity loans and HELOCs are only options if you’re a homeowner, and like secured personal loans, they put your collateral (in this case, your house) at risk. Home equity loans act as a second mortgage and require an additional payment each month, while HELOCs are more like credit cards. You draw on them for an extended period of time (typically 10 years), and then start repaying the balance once that period comes to a close.
- Retirement loan: Retirement loans allow you to borrow against a retirement account (like a 401(k), for example), though your options will vary based on your exact retirement plan and employer. The risks can be big, though. For one, you put your retirement savings on the line. Additionally, you may owe the balance in full should you leave the employer who sponsors your plan.
- Pawn shop loan: A pawn shop loan, also known as a collateral loan, allows you to turn a piece of property into cash. You offer an item (let’s say some jewelry), and the pawn shop loans you money based on its value. Once you repay the loan, you get your collateral back. If you’re unable to pay back the loan, the pawn shop sells the item to make back its losses.
- Friend or family loan: If you have a friend or family member with some extra cash, you may consider a loan from them. If you do go this route, be sure to weigh the pros and cons of this, as well as the strain it could put on your relationship. You should also outline the terms of your arrangement carefully, and make sure both parties agree to it in writing.
- Credit card: If you can qualify for a 0% APR credit card, this may be a good option to consider. Just make sure you know when the promotional period ends and aim to have the balance paid off or transferred by then. If you don’t, it could mean sky-high interest costs and even more financial difficulty down the line.
- Credit card cash advance: Many credit card companies offer cash advances to existing cardholders. Though these can be helpful in a pinch, they do come with fees, and you’ll usually pay a higher interest rate on the balance you rack up, too.
- Payday loan: A payday loan should be your very last resort for funds. These come with high interest rates and require very fast repayment. They can also lead to a vicious cycle of debt from which it’s hard to escape.
What to keep in mind when taking out loans
Whatever loan you decide to take out, it’s important to think not just about the here-and-now, but also the long-term impacts the loan could have on your finances.
As you consider your options, make sure these questions are on your mind:
- How will you repay the loan? If you have no income, not repaying the loan may mean more financial hardship (and worse credit) down the line. Make sure you have a plan for increasing your income and paying down your balance before the situation can worsen.
- What is the repayment term? Lenders offer both short-term and long-term repayment options. Short-term repayment means less interest over time, but also requires higher monthly loan payments. Long-term repayment works the opposite way. Which one is best for your financial situation?
- What is the interest rate? Interest rates vary by lender and across loan products. Evaluate the interest rate of any loan you’re considering, and see what your interest costs would come to by the end of the loan term (not just each month).
- Are there fees? Interest isn’t all a loan company will charge you to borrow money. Most have a variety of fees and other charges you’ll incur along the way, so make sure you ask for a breakdown of any expenses you can expect before signing on that dotted line.
- What happens if you default? Know what’s at stake with any loan you take out. If you’re using a secured loan, could you lose your car or your grandmother’s wedding ring? If it’s unsecured, what would defaulting on the loan do to your credit and future financial prospects?
- What are you using the money for? Are you using the funds for needs or wants? You need to be sure the long-term costs of the loan are worth what you’re spending it on. Evaluate your cost vs. reward.
Losing your job can lead to financial strife, and a loan or line of credit may be able to alleviate some of the pressure. Just be careful that you’re not digging the hole deeper, and have a plan in place for how you’ll repay the loan long before it comes due.
You should also shop around for your loan, regardless of which product you use. Interest rates, terms, repayment periods, and other details can vary significantly from one vendor to the next, and comparing your options can mean serious savings over time.
If you’re ready to shop around and have answers to the questions above, check out the best personal loans to find an option that fits your needs.