Losing your job sends your finances into a roller coaster state. Your finances promptly go into a turn, and you shuffle your bills with the little fund from unemployment and other sources.
Unfortunately, bills will not wait for you to get another job before they start coming again. The bills will keep coming, and if you do nothing about them, they will pile up, and you will be cut off from essential amenities. So what is the solution? Emergency loans for the unemployed.
To make sure you stay afloat financially when you are out of a job, you might have to look toward a loan. Finding emergency loans for unemployed people may prove to be difficult because of the lack of steady income. Emergency loans are a kind of personal loan that may help you through a challenging financial situation, including losing your work or getting stuck with a large medical bill.
A lender gives you borrower cash then expect repayment of the whole sum and interest on the agreed date. If you fail to pay on the agreed date, a penalty fee will be added. These loans are generally processed faster than others. The aim is to get you the cash you need as soon as possible.
Personal loans are the best and cheapest loans out there for the unemployed because they are cheap and fast, and the rates are low. You may also consider taking out a payday loan, title, or pawn shop loan in a pinch.
When I found myself in this situation some years back, I had to do a few things differently.
My first point of call was the savings that did not fetch me much because it was low. Next was to list some family and friends and then write out how much I thought each person could loan me comfortably. The idea was to spread the burden.
So, when I needed $1,000. I did not place the whole burden on one person. I listed about five or more people who could loan me $200 each. It may be more or less in your case. On the list were friends, former colleagues with whom I had a great relationship, parents, and even grandparents.
Quite frankly, I know this is not going to be easy for you because it will bruise your ego and all that but look at it from a different angle. I know we like to come to our friends as being “Okay” and all that, but you will be shocked at how they are able and willing to help if we reach them. I kept a record of every loan I collected from each person and made sure I paid back every dime when it was time.
Respect your family and friends by paying back what you took as a loan. I know they might not be willing to chase you down like the lending companies out there, but you need to be seen as one who keeps his words. You never know when you need another favor.
So you might wonder why I decided on friends and family as my first point of call. Truth be told, when you are unemployed, you may never know precisely when you will be back on your feet in another job. There are no guarantees.
Whatever you take from the organizational borrowers will not come free. There will be interest payments and penalties to be paid. Imagine adding interest and penalties to your existing bills. It can be a real burden. If you can avoid it, please do, but if you must, then do it with accurate information.
Below, we will explore how to be eligible for emergency loans for the unemployed and find such loans and a few other alternatives to traditional private loans.
Qualifying for an Emergency Loan as an Unemployed Person
When obtaining a private loan, almost all creditors will need to see a couple of things, such as a good credit rating and stable income. When you are unemployed, showing a steady income will be a problem, but it is not a dealbreaker.
Suppose you can prove you have regular income from different resources and have great credit. In that case, lenders can consider earnings from sources besides full-time regular employment.
Listed below are a couple of regular income examples that might help you meet emergency loan requirements while unemployed.
Social security is a federal insurance scheme that provides benefits for pensioners and disabled or unemployed people. If you are unemployed due to an underlying medical problem or retirement, then there is an opportunity you’ve got or are eligible for regular income from Social Security.
Though you do not have work, Social Security income will help you get approved for the private loan you are looking for.
These are payments made by the state or, in the US, a trade union, to an unemployed person. As an employed worker, a part of your payment goes toward financing unemployment insurance.
Each State in the US sets its unemployment benefits qualification rules. Still, you typically qualify; if you lose your job through no fault of yours, you might be eligible for various unemployment benefits. One of those benefits comes with a weekly paycheck.
Yes, unemployment benefits pay just some of everything you can make as a full-time worker, but they will be able to help you meet the requirements for this unemployment loan.
Alimony is financial support that a person gets from their spouse during separation or divorce. It is an order of the court. If you collect alimony regularly, it may help you qualify for an emergency loan for the unemployed.
Like alimony, child support is usually an order of the court. It is a regular payment from one parent to other parents who have custody to help support the child’s basic needs.
Child Support is another regular payment that can help you qualify for an unemployment loan.
As an unemployed person, if your spouse still has a job, their income can help you get approved for a personal loan.
The catch here is they must be included as a co-signer of the loan. A co-signer is not the owner of the loan, but they share responsibility for the loan.
Joint Personal Loan
Another option of getting an emergency loan for unemployment is getting a joint loan. Here you can apply for an emergency loan with someone who has adequate financial security and a good credit score.
Unlike using a co-signer, you will be responsible for all payments on the loan because you both own the loan.
Pension and Retirement Income
You may be retired and unemployed but have a regular income. If your previous company pays the pension that you collect regularly, many lenders are willing to consider that a steady income for personal loan approval.
The same is applicable for other retirement income like 401(K) and IRA distribution.
Income from Investment
If you have income interest in an investment like an annuity and other income, you can use that to qualify for an emergency loan for unemployment.
For instance, if you have a $110,000 annuity that pays an average of 6.5%, you can claim up to $6,000 as regular income to get approval for a personal loan for unemployment.
Reasons for Rejected Applications for Personal Loans
A cash loan is not a guarantee, even when you can prove that you can repay. Here are some cases where you may be refused personal loans,
- Poor credit history
- If you have previously been declared bankrupt or have a history of delinquency.
- If there has been a court judgment against you on some financial issues, you may struggle to get an emergency loan.
I recommend you avoid applying to multiple lending organizations at the same time within a short time.
I suggest one or two applications every six months, and that is because every request leaves a footprint on your record, and this may be a concern to lenders when reviewing your application.
Finding Emergency Loans for Unemployed
There are several financial organizations offering emergency loans for the unemployed. Let’s review some options for getting emergency loans.
Banks and Credit Unions
The ideal alternative is to use an institution you are knowledgeable about, so head into the bank or credit union you visit regularly.
Since your bank or credit union has worked with you for several years(hopefully), it might be more flexible with its approval requirements. There can be a few additional requirements to get accepted, such as opening up a certificate of deposit, a savings account that needs you to leave your money inside for a fixed period in exchange for higher-than-average interest rates.
Even auto-drafted loan obligations, but this might loosen the earnings or credit score requirement.
The internet is never lacking direct lenders who are always ready and willing to do business without a middle person. A quick search will turn up loads of options to choose from.
Direct lenders are people who give the cash straight to you. There’s no intermediary or extra markup about the loan, and you’re going to get the payments directly to the creditor.
You can apply to these lenders one after the other. This is sometimes a time-consuming procedure for people who have poor credit. Still, if you look around, it usually nets you more generous loan conditions, such as lower rates of interest and loan charges.
An internet search will hook you up with numerous loan aggregators. These businesses don’t offer you personal loans themselves. They are like mediators.
When an aggregator finds a loan, it provides a one-time fee of around 10% and then offers it to you. When the process is completed, you will probably never hear from the aggregator again since you’ll make all of your payments to the creditor.
These aggregators are handy since they publish your credit to a lot of lenders at once. However, this may also cause multiple challenging credit queries, which may damage your credit rating. Additionally, that 10% fee is high for something you can do yourself, particularly if you’re looking for a high loan amount.
Suppose you would rather cut these expensive loan aggregators entirely. In that case, there are a couple of signs that will let you know you are working with a loan aggregator instead of a direct lending institution.
To begin with, they’ll consult with creditors as “lending partners” or something related. They’ll likewise not quote you a loan till you agree to that 10% fee and after they have contacted their partners.
Getting Emergency Loans Unemployed and with Bad Credit
Obtaining a personal loan typically requires at least a good credit rating. When you’ve got terrible credit, this may restrict your ability to find an emergency loan while unemployed.
Luckily, there are a couple of techniques for getting emergency loans for unemployed people with poor credit.
Work with a Co-signer
A co-signer is an individual having a fantastic credit score that is willing to sign the loan with you. Even though they might not pay the monthly payments, the creditor holds both of you financially accountable for the personal loan.
That means the co-signer is also responsible in the case of any default, and this will cause a dent in their financial record and credit score if you miss a payment. It’s a shared responsibility arrangement.
Think about it before you invite someone to be a co-signer or before you co-sign for someone.
As I have mentioned previously, this co-signer may also help you get accepted because the creditor may consider their earnings.
Reduce the Loan Amount
Sometimes, the problem holding up your loan approval is the amount of the loan. If your creditworthiness can not support the amount of the loan you are applying for, reduce the requested amount and reapply.
Finding Options for Conventional Loans
Suppose you are desperate to obtain an emergency loan because of a bad credit rating or income difficulties. In that case, there are many other loans to think about. These might not be the perfect private loans you’re searching for, but they can help fill the financial void at a pinch.
HELOC – Home Equity Line of Credit
A Home Equity Line of Credit (HELOC) takes advantage of the equity on your property. Your residence’s value is worth deducting the remainder of your mortgage on the home – to offer you access to your credit line for a specific time frame.
A HELOC usually has a draw interval, that is, the total amount of time through which you’ll be able to use the credit line of a decade.
Before you wonder why I didn’t mention this earlier, there’s a caution. Though a HELOC offers you a low-interest rate, gives you access to flexible cash, and taps into an asset you own, it is far from ideal for several reasons:
- It places up your home as security, so if you default on the loan, then you might lose your property.
- The requirement requested by lenders is similar to that of a personal loan.
- A HELOC generally requires a 680 credit score based on Experian; thus, a low credit score may keep you from getting this loan.
Car Title Loan
An automobile title loan is just another way to get an emergency loan leveraging on your asset.
The creditor uses your free title, and one not tied up with a lien by a lender — as collateral to get a short term loan. Aside from needing a car with no loan or lien, these loans frequently have minimal acceptance requirements.
An automobile title loan might look like a fantastic alternative on the surface. However, the FTC warns consumers to steer clear if possible. This large APR is generally due to extra fees the lenders’ bill, adding up to a 25% monthly fee only for funding the loan.
If you default on a car title loan, the creditor could also repossess your car or truck, making it hard to go around and find work.
Credit Card Advance
A credit card cash advance is a short-term loan issued with your charge card. It is relatively simple to get and needs no credit check or income verification.
It is generally as easy as getting a credit card cash advance from an ATM using a pin. In case your card issuer did not provide you a PIN, you might need to contact your card issuing bank or visit the bank to acquire the advance.
Even though a cash advance offers quick and effortless access to emergency money, it includes a couple of serious drawbacks. First, cash advance interest rates are usually a few percentage points greater than the base fee for using your charge card for purchases. Your credit card can also cost a fixed fee of $20 or more for each cash advance.
Payday Cash Advance
A payday advance is a sort of cash advance based on your future earnings. These short-term personal loans provide you with the money you need today. When an emergency pops up, and you have to borrow $400 before the next unemployment check comes in, then a payday loan lender may provide fast money without a credit score check.
For this $400 payday loan, you write out a check for the amount you want and the lender’s fee, say $15, which means you’d write a $415 check. The creditor provides you the $400 cash or deposits it in your bank accounts.
If you cannot make the payment on the agreed payday lender might consent to roll over the loan for the next payday for a second $15 charge. Meaning you will be paying $430 by the next payday.
This might seem convenient, but that the FTC warns consumers to be careful with these lenders. The biggest challenge is the repayment terms. That little $15 adds up to 391% APR on a 14-day payday loan. The APR continues to rise every time you roll it over.
Factors to Consider Before Taking an Emergency Loan While Still Unemployed
Secured loans for unemployed people might be challenging to be eligible for, but they are far from hopeless. Often, the most challenging part is deciding what does and does not qualify as earnings for the numerous kinds of loans out there.
Also, what are the factors to consider before taking any of these loans.
Can You Pay Back The Loans?
Many unemployed loans have high-interest rates and short repayment periods of only a couple of weeks or even months. As a consequence, you might have to repay a ton more cash than you initially borrowed in a brief timeframe.
Before you take out crisis loans as an unemployed, be sure of the full cost and also have a strategy for paying your creditor back. Otherwise, you might fall behind on payments and get billed expensive late penalties or a top interest rate, placing you into debt and damaging your credit score.
What Other Options Are There?
Before you decide on a debt, perhaps it is possible to start a side hustle while waiting for regular paid employment or sell off some unwanted possessions. In case you’ve got a vehicle, you can become a driver for a rideshare or meal delivery services. You may even have the ability to qualify for an emergency relief grant for laid-off workers based on your circumstance. This way, you’re going to have the ability to borrow less money and save on interest.
Have You Negotiated The Terms?
If you are taking a loan to cover your debt and everyday living expenses, you might have the ability to find help rather than take a loan. Many lenders are providing debt relief to clients facing financial hardship due to different factors. For instance, Citizens Bank offers late payment assistance of up to 90 days and waiving late fees.
Even if your creditor does not have a particular debt relief coverage, you could have the ability to clarify your situation and get on a payment plan that is appropriate for you.
Even if you don’t have work or decent credit, you might have the ability to acquire a personal, payday, or title loan to tide you over till you find a job.
However, before you take out unemployment loans, consider options such as food aid grants and programs for laid-off employees. If it’s possible to find different means to cover your costs, you might not need to take on as much debt.
Consider stepping down on some expensive lifestyles that consume more cash than the others. Do you have items you can sell off or pawn? Weigh your options properly before you decide.
Remember, I’m always here to listen to you, so please share your experience with me and others.