Finding a great personal loan without a job can be a problem. It makes sense when you think about it from the lender’s point of view. If you lend to someone, you can make sure they can repay you and do it on time.
Unemployment can extremely mind stressful. And when you’re thinking of getting a personal loan to help you get through a difficult time, you probably have a lot of questions. Can you get a jobless loan? What types of personal loans are available? And what risks should you consider?
Unfortunately, many of us are in an emergency at some point in our lives. How we react when this happens – and how we get the money we need – may have repercussions in the years to come. And if you don’t have a job right now, it’s even harder when you need it. If you currently need unemployment benefits, this article is for you.
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Things to Consider Before Taking Out a Personal Loan
If you are unemployed and are applying for a personal loan, you need to consider a few things first. Arranging a personal loan can have financial and short-term financial consequences that you need to be aware of.
Here are some questions you should ask yourself as a qualified financial expert before taking out a personal loan when you are unemployed.
Do You Know the Risks?
If you are looking for a personal loan, it is out of the question to consider the best and worst-case scenarios. Here are some questions to consider:
- Is a personal loan your best choice?
- What happens if you can’t pay?
- Will you lose your car or your house?
- What can you pay in total in terms of interest? If you can, talk to a qualified financial professional to understand the potential risks.
Do You Understand the Terms of the Loan?
Make sure you fully understand the terms of the loan. This includes matters such as interest, fees, charges, fines, and so on.
Can You Make On-Time Payments?2
For each loan, you need to think about whether you can handle the minimum payment on time. Late payments can affect your credit score and can be associated with late payments. And if you are unable to repay the debt, the lender may begin to recover the debt, submit negative information about your credit report, seize your property or sue you.
How important is my Credit Score if I am looking to avail a loan for the unemployed?
Your credit score plays a very important role in getting a loan. If you are unemployed, your credit score can be extremely important. The higher your credit score, the better your chances of getting a loan. In India, there are lenders who offer loans even if you have a low credit score. In these cases, however, the minimum credit score you can maintain is almost 600. Credit score requirements vary from lender to lender.
I want a personal loan. Should I get a co-applicant?
Yes, since the bank may not be willing to offer you a loan if you are unemployed. The bank takes into consideration your occupation and annual income as it helps them determine the rate of interest, they should levy on your loan amount and whether you will be able to repay the loan back in time.
Hence, it is always a good idea to have someone as your co-applicant who will take the responsibility on your behalf to repay the loan. Your co-applicant should be someone you trust most preferably from your family such as your parents, siblings, spouse, etc.
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Types of Personal Loans for Unemployed Borrowers
If you are currently unemployed and have a bad credit score, your path to a personal loan may be more difficult.
A bad credit score can affect many aspects of your life. It is more difficult to get a loan license, credit cards, credit lines, etc. The simple fact is that lenders are reluctant to offer loans to bad credit providers. A low credit score tells lenders that you haven’t done a good job managing your money or payments in the past.
Payday Loans
A prepayment loan is usually a short-term loan with a high price designed to repay your next installment. Terms and structure may vary by state, lender, and individual loan. However, pre-payment loans can carry extraordinary risks and are even illegal in some countries. Therefore, when considering a loan before payment, make sure that you fully understand the conditions and risks.
Pawnshop Loans
These loans are also secured, but instead of offering your car, you can offer any valuable item that the pawnshop is interested in. Every day used by the lender as a guarantee includes jewelry, electronics, musical instruments, and more.
It works the same as title loans and any other secured loans. The main difference between this loan and the loan is the amount you get and the type of guarantee you need.
Because your guarantee is probably not the same as the value of the car, your loan will probably be lower. But the same rules apply if you can’t pay off your debt. If you are unable to repay the loan on time, the lender will sell you a guarantee that you will get your money back.
Cash Advances
Some credit cards allow you to borrow part of your credit limit in cash. This is known as cash advances and another type of short-cost loan. Using your credit card to get cash from an ATM is expensive and monetary benefits may be associated with an additional fee. In addition, interest rates on cash advances are often higher than interest rates on ordinary credit card purchases.
Debt Consolidation Loans
If you’re trying to stay on top of all your accounts, you can choose to consolidate – or consolidate – all of your debts into one debt settlement so you can focus on paying off one account.
According to the FTC, some debt consolidation loans may require you to place the mortgage as collateral. And the CFPB reminds consumers that debt consolidation loans can’t clear your debt. In some cases, you may be able to repay more debt consolidations into another type of loan.
The Dangers of Emergency Loans
Emergency loans come in many different shapes and sizes. Short-term emergency loans are usually small-dollar loans that people desperately need. They promise quick approval and quick money. But just because a lender can give you money fast doesn’t mean you have to use it.
Unfortunately, many emergency loans have much higher interest rates, shorter repayment periods, and unmanageable loan terms. As a result, it is not easy to get loans for the unemployed. And if you find a lender who offers personal loans for the unemployed, make sure you do your homework before applying.
What if You Don’t Qualify for a Loan?
If you are unemployed and do not qualify for a loan, there are still ways you can start planning your finances.
Evaluate your savings and emergency funds.
If you have money in a savings account or an emergency fund, now is probably the time to use it. And if you’re thinking about using your retirement account soon, be sure to consider all the factors. Again, every situation is different and if you can, it’s a good idea to talk to a qualified financial professional.
Evaluate bills and take steps to reduce expenses.
If you are unable to pay your bills, credit cards or other loans, the CFPB advises you to work directly with companies and creditors. And if you are a Capital One® customer, you can talk directly about the resources available. You can also consider reducing unnecessary costs.
Look for other aid.
There are non-profit organizations and other organizations that offer assistance to service workers, sole traders and people facing medical expenses. And if you need immediate help getting food, you can learn for yourself how to gain access to food banks.
Before making any personal loan decision, it is important to explore all your options and explore the benefits and advantages of each decision. If possible, it’s a good idea to talk to your qualified financial professional about your situation.
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