Applying for a Loan While Unemployed: What You Need to Know
Without the assurance of having a job, you are less likely to get approved for a personal loan. Being unemployed will be tough to prove that you can pay back the loan.
Take some time to assess your situation and see whether you can apply for a loan or not.
To help you out, here is a quick guide to applying for a personal loan while you’re out of a job.
Factors That Affect Your Loan
The main factor that determines your eligibility for a loan is your income. If you have experienced a big cut in your income, it will impact your ability to get approved for a loan.
Your loan request should be approved if your monthly income falls within limits set by the lender. Most lenders will ask for your last three to six months of payslips or T4 to assess your income.
The lender will also consider your outstanding debts when deciding whether to approve your loan or not. Most lenders will frown upon your request for a loan if your debt load is high.
Debts include the credit card balance, lines of credit, car loans, and student loans. If you have credit card debt, it is best to pay them off completely before applying for a loan.
3) Credit Score
Your credit score is another factor that proves whether you are eligible for a loan or not. If you have a low credit score, you will have a rough time getting approved for a loan.
The lender will use your Equifax credit score to determine whether you are a credit risk or not. If your score is below 600, it is best to improve your credit score before applying for a loan.
This is because lenders will be more inclined to reject you than approve you.
4) Debt-to-Income Ratio
Your debt-to-income ratio is an integral factor that your lender will consider. This ratio is calculated based on your gross income and debt payments.
Your lender will see if you have a high debt-to-income ratio and might decline your loan request. If your debt-to-income ratio is high, it means that you are paying a lot of your income on managing your debts.
Personal Loan Alternatives to Try
There are many alternatives to personal loans that you can turn to when you want to get a loan and you don’t have a job. It is crucial to find the best loan to suit your financial situation if you need a loan.
Here are some alternative loans you can consider if you need a loan:
1) Credit Cards
Credit cards are the easiest and the most popular loan alternative. They are easy to apply for and expect approval. Most people have a credit card, and you can get one too.
If you have bad or no credit, a credit card is the best loan option you have. Credit cards have a high-interest rate, but they are convenient and flexible.
You can use them to make cash advances, pay for goods and services, and make monthly payments.
2) Home Equity Line of Credit (HELOC)
A home equity line of credit is an alternative to a personal loan. The HELOC allows you to borrow money against your home’s equity.
You will be required to make payments every month. Unlike personal loans, HELOCs usually have lower interest rates. You can use it as an alternative to a personal loan.
3) Line of Credit
If you have a good credit score, you can consider getting a line of credit. A line of credit is an unsecured loan from your bank.
It is flexible and can be used for any purpose. You can opt for a line of credit to pay the down payment on a home or buy a car.
It isn’t easy to get approved for a personal loan if you don’t have a job. There are various factors that the lender will consider before approving your request.
At Mid-Town Finance Company Huntsville, apply for a personal loan easily regardless of your financial situation or credit history. You can even use our loans to build your own over time. Get in touch with us today to learn more!