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When you need emergency cash in a pinch and you don't have a home to borrow against, you may be tempted to charge your expenses on a credit card and call it a day. But there may be a better solution: a personal loan.
With a personal loan, you borrow a lump sum of money you can use for any purpose. Personal loans have a fixed interest rate, making your payments predictable. And you could have that money in your bank account within days of applying. Plus, a personal loan is not a secured loan, so it doesn't need to be tied to a specific asset, like an auto loan. And in some cases, you can even qualify for a personal loan if you have bad credit.
That said, there are certain criteria your lender will take into account when determining if you're a good personal loan candidate. Specifically, lenders will check to see:
- What your credit score looks like
- Whether you have a source of income that will enable you to repay your loan
If you're currently out of work, you may be wondering: Can I get a personal loan if I'm unemployed? And the answer is: Maybe.
Borrowing with a personal loan when you're unemployed
For a lender to feel secure letting you borrow money, a strong credit history isn't enough. You'll need to prove that you have the means to keep up with your loan payments, and generally, having a job is the best way to do that.
But that doesn't mean you're completely out of options if you're unemployed right now. While it's true that you'll need to provide proof of income to your lender, that income can come from a variety of sources. These include:
- Social Security benefits
- Disability insurance
- Alimony or child support payments
- Interest or dividend income from investments
- Public assistance
- Rental income from a property you own
Now, let's say you're out of work and need cash quickly, but you also own a rental property with an active $800-per-month lease. If that's the case, a lender should be willing to count that $800 as income, even if it's not coming from an employer.
What if you don't have any income at all? Well, you may be out of luck. That said, if you have a signed offer letter from a new employer but haven’t started the new job yet, then a lender may be willing to loan you money.
Getting a coronavirus hardship loan
It may be possible right now to qualify for a modest coronavirus hardship loan if your finances have taken a hit in the course of the pandemic. These loans are basically small personal loans with favorable borrowing terms, and many feature an interest rate as low as 3%. Of course, to qualify for one of these loans, your lender will also want reassurance that you can stick to your payment plan. But if your credit score is great and you can prove that you're grappling with a near-term financial hardship (e.g., you've been furloughed but expect to be employed again in a few months), then you may qualify.
Explore your options for borrowing affordably
Whether you need money due to the ongoing pandemic or another reason, your goal as a borrower should be to make your debt as affordable as possible. In that regard, a personal loan is a much more cost-effective option than accruing credit card debt. While personal loan approval does normally hinge on having a job, there are ways to get around that, especially if you have another source of income at your disposal, so don't assume this loan option is off the table just because you're currently unemployed.
Our Picks of the Best Personal Loans for 2020
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