Loans have been a financial cushion for many situations, whether to cover unexpected expenses, pay for an essential purchase or make an investment. But what if you suddenly lose your job?
How to Get Approved on A Loan Without A Job?
Apparently, unemployment can be tough and stressful. It can hit your finances hard, and you most likely need a fund to fall back on and help you through until you find another job.
However, one of the factors that lenders take into account is your income. With that, it can be more challenging to take out a loan while being unemployed, but it’s not entirely impossible. The key is to reassure the lender you can consistently make payments on time.
To help you do that, we’ve discussed below how to get approved on a loan without a job.
Provide Proof of Alternate Income
Although lenders may consider a range of factors, your income can have much bearing on your application.
Even if you don’t have a job, they might still require proof of income because lenders want to ensure that they’ll get paid. However, it doesn’t necessarily have to be income from an employer.
You can provide proof of alternate income to prove to the lender that you’re capable of repaying the loan. Take a look at the different types of income below and identify what applies to you.
- Social Security Benefits
- Unemployment Benefits
- Child Support
- Pension or Annuities
- Certain Disability Payments
- Interests and Dividends
Note that you must support them with some documents. It can be bank statements, pay stubs, sales receipts, interest and dividends income statements, etc.
As long as you receive such income on a regular basis with proof and they are enough to cover your loan payment, then you’re good.
Put Up Collateral
Using your assets as collateral can also help you get approved on loan even without a job. When your loan is secured by an asset, your lender has the right to repossess in the event that you stop making repayments.
With collateral, lenders will be more comfortable approving your loan application as they can sell the asset to recover the money you borrowed.
But it’s worth noting that a lender will typically offer you a loan that is less than the value of your pledged asset. Some might be heavily discounted. The reason is to increase their chances of getting all their money back if the investments lose value.
Collateral can take many forms, but it usually relates to the nature of the loan. Nevertheless, the following are some of the assets that you can use as security.
- Real Estate
- Appraised Valuables
- Government Bonds
Pledging your asset will be an excellent option if you’re certain that you can repay the loan. But if not, remember that you may lose your possession if you aren’t able to pay back the lender.
Apply With A Cosigner
Getting a cosigner is another way to strengthen your loan application and increase chances of loan approval when you’re unemployed.
A cosigner is someone who leverages their financial profile or information as an assurance for the lender on your behalf. If you missed payments or failed to repay the loan, the cosigner takes equal responsibility.
Most often, a cosigner will be a family member, but it can also be a friend as long as they have good credit and regular employment.
When a cosigner is involved, lenders are more likely to approve you for the loan with favorable terms and interest rates. Note that it’s vital for someone who’ll cosign to understand that they may be held financially accountable along the line.
Find The Right Lender
Finding the right lender is critical to get approved on a loan without a job. Remember that every lender is different and most of them disclose their minimum requirements for credit scores, income, and whether or not they offer options like cosigners.
From there, you’ll have a better idea of which one fits into your qualifications and is less likely to turn you down.
As much as you can, shop around multiple lenders, such as CreditNinja. Many of them offer a variety of loans to people who are unemployed or have less stellar credit.
But of course, you’ll have to understand that some of them might make adjustments to their standards to compensate for your unemployment. For instance, they may charge higher interest rates than usual.
Explore Your Options
It’s possible to get a loan without a job. However, it may not always work for others. In some cases, you may have to look for other options other than taking out a loan. There’s no harm in trying to do the things mentioned above but don’t limit yourself with them.
Explore any other viable options, and don’t hesitate to consult with a qualified financial expert if you need help.