Borrowers who aren’t unemployed can have an incredibly hard time securing personal loans. Most lending institutions simply aren’t willing or able to take on the risk of working with consumers who lack gainful employment. Income and employer information is always a key part of the loan application process. Moreover, funding amounts are established based upon applicants’ earnings and their established ability to repay. In some instances, however, it may still be possible to get a loan approval.
All forms of income are considered
Income verification and the assessment of your debt-to-income ratio are two of the most important parts of the application review and loan underwriting process. This is how lending institutions determine how at-risk you are for defaulting on a loan. It is also the basis for determining how much money you can reasonably afford to repay. Absent of traditional employment that provides regular and consistent income, you have the best chance at getting a loan approval if you have an alternative yet still-consistent source of cash. This might be unemployment or disability benefits. It can also be money that comes in from an outside gig.
What your debt-to-income ratio is
Your debt-to-income ratio is a comparison of your monthly living expenses to your monthly income. With a low debt-to-income ratio, lenders can see that you have a significant amount of disposable money remaining after your bills have been paid. With less disposable income or with high debt-to-income ratios, borrowers have a very high likelihood of being unable to pay their loans back.
Additional factors that might help you qualify for a loan despite unemployment
Getting an unsecured loan absent of employment can seem downright impossible. With other money coming in and a good relationship with the lender that you’re appealing to, you may be able to get a low-limit loan. Among some of the additional factors that might help you qualify for this loan are a high credit score, a sufficiently long history with the bank or lending company, or an adequate cash cushion stored away in your banking account.
For people who are unemployed, secure loans tend to be far easier to obtain than unsecured funding products. These are loans that are backed by assets that match their value. Having suitable collateral that you’re willing to put up can limit the risk of lending to you. Thus, if you’ve been able to land an unsecured personal loan, you may want to consider applying for secured funding products by leveraging any of your high-value assets.
Getting help from a co-signer
Having a spouse with a suitably high credit score is another factor that might qualify you for an unsecure loan despite your current lack of employment. When people are married, spousal income should only be included on loan applications if these monies can be used for loan payments. More often than not, a person’s spouse will need to act as co-applicant on the loan, and will need to sign both the initial loan application and the final loan agreement.
If all else fails, you also have the option of looking for a co-signer. This is someone who is willing to assume responsibility for the loan in the event that you default. During the application process, both your consumer profile and the consumer profile of your co-signer will be reviewed. Income verification and other factors will be checked for both parties. Moreover, if a loan is issued, your failure to repay this product will harm both your credit score and that of your co-signer. This makes it important to carefully think your repayment plan through before enlisting someone to co-sign any loan agreement.
Getting a loan without a job isn’t easy. Certain factors, however, could still qualify you for funding. Learning what your options are, and understanding the benefits and drawbacks of each are essential steps in making informed borrowing decisions.