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When you’re out of work and money is tight, a surprise bill can be stressful. Although unforeseen expenses can be tough to navigate, there are options. An emergency loan is a type of loan that can cover expenses while you’re unemployed. Compared to other options, like a credit card, an emergency loan can come with a lower interest rate, and longer terms can make payments more manageable. But like any loan, be aware of the debt you’re taking on and how you plan to repay it.
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Losing your job can be incredibly stressful, especially when it comes to your finances. When your income suddenly drops to zero how do you pay for necessities like food, housing, transportation, and healthcare? Unemployment benefits provide some relief but they generally only replace about 50% of your wages.
What can you do when unemployment insurance isn’t enough to cover your regular expenses? Getting a personal loan is one potential option to bridge the financial gap. However qualifying for a personal loan without steady employment can be tricky.
In this article, I’ll explain everything you need to know about getting loans when you’re unemployed. You’ll learn:
- The pros and cons of loans for unemployed borrowers
- What types of loans are available
- Loan eligibility requirements
- Alternatives if you can’t qualify for a loan
I have been unemployed myself in the past, so I understand the stress of having little income. Hopefully this guide will help you identify the best options for your situation.
The Pros and Cons of Loans for the Unemployed
Taking out a personal loan when you have no job can be risky You are taking on debt when you have reduced ability to repay it. However, loans can also provide much-needed cash to pay your bills until you find a new job
Here are some key pros and cons to weigh when considering a personal loan during unemployment:
Pros
- Access to cash quickly – Loans fund in as little as 1-3 business days
- Lower interest rates than credit cards – Personal loans average 10-28% APR
- Fixed monthly payments – Easier to budget than revolving credit card debt
Cons
- Difficult to qualify without income – Lenders wary of lending to unemployed
- Debt remains if you can’t find work – Risk of defaulting on the loan
- High interest rates due to credit risk – Rates of 30% APR or higher
As you can see, it’s a double-edged sword. Loans provide fast cash, but could dig you deeper into debt. Proceed with caution.
Loan Types Available for Unemployed Borrowers
If you do decide to apply for a personal loan during unemployment, what are your options? The main types of loans available include:
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Unsecured personal loans – No collateral required. Harder to qualify for than secured loans.
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Secured personal loans – Require an asset like a car or savings account as collateral. Easier to get approved.
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Payday alternative loans – Small, short-term loans with high interest meant to replace payday loans.
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Pawn shop loans – You put up an item as collateral like jewelry or electronics. Loans up to 60% of the item’s value.
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Home equity loans/lines of credit – Use equity in your home as collateral. Only for homeowners.
Payday loans are another option but should be avoided due to astronomically high rates of 400% APR or more. They will trap you in a vicious debt cycle.
Federal loans are not available for personal use. Only for education, agriculture, or business purposes.
Your best options are typically unsecured personal loans, secured personal loans, and pawn shop loans. Home equity loans only work if you have sufficient equity. Let’s look at the loan eligibility requirements.
Eligibility Requirements When Unemployed
Qualifying for a personal loan without a job is challenging but not impossible. Lenders will look closely at other factors to determine your ability to repay.
These key criteria include:
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Income – Proof of income from unemployment benefits, freelancing, etc. Some lenders may require a minimum amount such as $800/month.
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Credit score – Minimum scores between 500-650 depending on lender. The higher your score, the better.
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Credit history – Length of credit history and past repayment behavior impact loan decision.
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Debt-to-income ratio – Compares your monthly debts to gross monthly income. Target is below 50% DTI.
Meeting the above criteria is essential for getting approved for an unsecured personal loan while unemployed. For secured loans, you also need to provide the asset used as collateral.
Alternative Income Sources
One requirement that throws many unemployed borrowers off is proving current income. Even $1,000 per month in unemployment benefits or other sources can satisfy lenders.
Here are some options for demonstrating income when you don’t have a 9-5 job:
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Unemployment benefits – Most lenders accept unemployment income. Just submit your award letter.
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Part-time work – Some income from freelancing, gig work, etc. can supplement unemployment.
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Spousal income – If married, your spouse’s income may help you qualify.
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Rental income – Earnings from rental properties can be used if consistent.
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Retirement/investments – Social Security, 401(k) withdrawals, investment dividends may qualify.
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Child support/alimony – Steady payments count as income. Provide documentation.
The more income sources you can verify, the better your chances of loan approval. Even minimal monthly earnings make you appear “less risky” according to lenders.
Ideal Credit Score and History
Your credit score and history account for a significant portion of the loan decision. Lenders specifically look for:
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High credit score – Scores above 670 have the best approval odds. In the 600s may qualify for higher interest rates.
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Low delinquencies – If any bills are past due, this will negatively impact your application.
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Diverse credit history – Having various types of credit (mortgage, auto loan, credit cards) helps your case.
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Old accounts – Length of credit history signals you manage credit responsibly over time.
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Recent activity – Some new accounts and purchases show you still actively use credit.
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Low balances – Keep credit utilization below 30% of the card limits.
With a strong credit profile like the above, your chances of qualifying are much higher. Weak credit scores around 500-550 may still get approved with very high interest rates or a secured loan.
Improving your credit before applying is wise if time allows. Get current on bills, pay down balances, dispute any errors. Every point counts.
Calculate Your Debt-to-Income Ratio
Along with credit and income, lenders determine if you have manageable or excessive debts. This is measured using your debt-to-income ratio.
Your DTI is your monthly debt payments divided by gross monthly income.
DTI = Monthly Debt Payments / Gross Monthly Income
For example:
Monthly Debt Payments:
- Rent: $1000
- Car Payment: $200
- Credit Cards: $150
- Personal Loans: $100
- Total: $1450
Gross Monthly Income:
- Unemployment benefits: $1800
- Total: $1800
$1450 total debt payments / $1800 gross monthly income = 80% DTI
A DTI above 50% makes approval very difficult. Anything under 36% is ideal. To improve your ratio, increase income or reduce monthly debts.
Alternatives if You Can’t Qualify for a Loan
What if you have poor credit, low income, and high debts? Getting a personal loan may not be feasible. Before resorting to predatory payday loans, consider these options first:
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Borrow from family/friends – Ask relatives or friends to lend you some money. Offer to sign a loan contract.
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Credit card cash advance – Maximum 50% of your credit limit. High fees/rates apply.
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401(k) or IRA withdrawal – Allows you to borrow from your retirement savings. Taxes and penalties apply.
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Hardship programs – Ask lenders, servicers, and utility companies to lower or pause payments.
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Debt management plan – A DMP allows you to consolidate debts into one payment. Fees apply.
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Peer-to-peer borrowing – Sites like Prosper and LendingClub connect you with individual lenders.
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Payment plan – Ask creditors like hospitals and cell providers for a payment plan on bills.
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Debt settlement – Settle debts for less than you owe. Has major credit impacts.
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Balance transfer card – Transfer high-interest balances to a 0% intro APR card.
Most of the above options let you access cash or reduce bills without taking on expensive new debt. They provide alternatives to help overcome financial struggles during unemployment.
Unemployment Loans – Final Thoughts
Losing your job and source of income is extremely difficult. A personal loan can provide temporary financial relief and stability as you get back on your feet. However, loans also come with risks and should be used carefully.
If you have good credit, some income, and low debts, getting approved for an unemployment loan is possible. Just be sure to compare multiple lenders to get the best rate for your situation. If your financial profile
BEST FOR A RANGE OF REPAYMENT TERMS
Our ratings take into account loan cost, loan details, eligibility and accessibility, customer experience and application process. All ratings are determined solely by our editorial team.
APR range If approved, the actual loan terms that a customer qualifies for may vary based on credit determination, state law, and other factors. Minimum loan amounts vary by state.
Loan amounts Example: A $5,900 loan with an administration fee of 4.75% and an amount financed of $5,619.75, repayable in 36 monthly installments, with an APR of 29.95% would have monthly payments of $250.30. If approved, the actual loan terms that a customer qualifies for may vary based on credit determination, state law, and other factors. Minimum loan amounts vary by state.
580 If approved, the actual loan terms that a customer qualifies for may vary based on credit determination, state law, and other factors. Minimum loan amounts vary by state.
9.95% to 35.99% Example: A $5,900 loan with an administration fee of 4.75% and an amount financed of $5,619.75, repayable in 36 monthly installments, with an APR of 29.95% would have monthly payments of $250.30. If approved, the actual loan terms that a customer qualifies for may vary based on credit determination, state law, and other factors. Minimum loan amounts vary by state.
$2,000 to $35,000 Editor’s Take
Founded in 2012 and based in Chicago, Avant is a consumer lending platform that offers secured and unsecured personal loans through a third-party bank (WebBank). Unsecured loans are available in Washington, D.C., and every state but Hawaii, Iowa, New York, Vermont, West Virginia and Maine. The platform specializes in middle-income borrowers with fair to good credit and only requires a minimum score of 580 to qualify, so it’s an accessible option if you have less than stellar credit but need money fast.
Avant applicants who are approved for an unsecured loan before 4:30 p.m. Central time Monday through Friday may receive their funds the next business day. This timeline may vary, however, depending on the borrower’s bank. It can also take longer for borrowers who take out secured loans.
Avant’s low minimum borrowing amounts ($2,000 to $35,000) and flexible repayment terms (two to five years) should be a good fit for those who need access to emergency funds—but don’t want to borrow more than they need. These loans do come with a price, though. In addition to an administrative fee of up to 4.75% of the loan amount, Avant’s APR range (9.95% to 35.99%) is high for applicants with a good to excellent credit score—and there is no autopay discount. Still, the platform earns top marks for borrowers with less than stellar credit who need quick access to funds. Pros & Cons
- Secured and unsecured loan options available
- Low credit score requirement (580)
- Loan terms available up to 60 months
- Charges an upfront administrative fee
- High starting APR for prime borrowers
- Co-signers and co-applicants not allowed
Details
Eligibility:
- Minimum credit score: 580
- Minimum income: $20,000
- Doesn’t allow co-signers or co-borrowers
Loan uses:
- Debt consolidation
- Large expenses
- Home projects
Summary: Best Unemployment Emergency Loans
We reviewed 29 popular lenders based on 13 data points in the categories of loan details, loan costs, eligibility and accessibility, customer experience and the application process. We chose the best lenders based on the weighting assigned to each category:
- Application process. 30%
- Eligibility and accessibility. 25%
- Loan details. 20%
- Loan cost. 15%
- Customer experience. 10%
Within each category, we also considered several characteristics, including available loan amounts, repayment terms, APR ranges and applicable fees. We also looked at minimum credit score requirements, whether each lender accepts co-signers or joint applications and the geographic availability of the lender. Finally, we evaluated each provider’s customer support tools, borrower perks and features that simplify the borrowing process—like prequalification options and mobile apps.
Where appropriate, we awarded partial points depending on how well a lender met each criterion.
To learn more about how Forbes Advisor rates lenders, and our editorial process, check out our Loans Rating & Review Methodology.
$40,000. Loan With Bad Credit – no income verification – Soft Credit Pull
Can you take out a personal loan while unemployed?
Taking out a personal loan while unemployed comes with a unique set of challenges and risks. One major issue is the high interest rates often associated with this particular class of personal loans. Without a steady monthly income, lenders consider unemployed individuals as high-risk borrowers.
How do I get a personal loan while unemployed?
Here is the process to get a personal loan while unemployed: Find lenders: Not all lenders have the same rules. Research and find those who are more understanding toward unemployed applicants. A good place to start is lenders offering secured personal loans, as well as banks where you have an existing account.
How does a loan work if you are unemployed?
If you are unemployed, the lender will likely take a closer look at your credit history, credit score, and credit report. If you have a good credit score, it should help qualify you for a loan with a lower interest rate and other favorable repayment terms.
Can I get an emergency loan if I am unemployed?
In this article, we’ll talk about your options and the procedures for getting an emergency loan when you are unemployed. You can obtain credit in many forms, including mortgages, vehicle loans, credit cards, secured finance purchases, and personal loans. Each form of credit serves a different purpose.