As of June 2020, the unemployment rate stood at 11.1%*. This unemployment rate is on the higher side, and in the midst of the current COVID-19 pandemic, job uncertainties have increased. Imagine a situation wherein you lost your job all of a sudden? There’s no reason to panic yet, as you can look for emergency loans even if you don’t have a current job. You can use these funds until you get employed next.
How to Qualify for a Loan if you are Unemployed?
Two factors can influence your chances of availing an emergency personal loan despite having no current job. They are: Your Credit Score and any Alternative Source of Income.
- Your Credit Score
Your credit plays a vital role in getting your emergency loan approved in case you are currently unemployed. The financial lenders will definitely go through your credit history as well as your credit score in order to determine your ability to repay the availed loan amount.
If you have a high credit score, then the financial lenders will definitely consider offering you a loan. On average, a credit score of 670 and above is considered to be extremely good. Ultimately, it also depends upon the scoring model** such as Vantage Score or FICO.
The credit scores are usually calculated utilizing the information present in your credit reports. You can verify the same on an annual basis and at no additional costs. If you have a good credit history, then so is the chance of you having a good credit score. It is very important for you to consistently check your credit score and fix any issues with respect to the same in order to correct your credit score.
Always remember that any past due amount which is older than 30 days can cost you at the very least 100 points on your credit score.
- Options with respect to Alternative Income
If you do not possess any employment proof in case of a layoff, then you can show alternative sources of income to your financial lender to express your loan repayment ability. Unemployment benefits can easily be used*** to represent your income status on the following:
- Pension as well as retirement benefits
- Income of your spouse in case of availing a joint personal loan
- In case of any disability
- Child support or alimony
- Social Security benefit payments
In case you have certain savings in your bank account, or in case you are a freelancer having an independent source of income, or if you have any upcoming job offer, then you can even present those as your source of income to your financial lenders.
What to do in case you do not qualify for any loans?
In case you do not possess any income to avail a personal loan, then there are certain alternatives for emergency loans. Following are some of the alternatives:
- Applying for a loan along with the Co-Signer
If your credit score prevents you from availing a personal loan when you are currently unemployed, then having a cosigner while applying for the same can definitely help your cause. The co-signer can be a family member or your friend having a good credit score. The advantage of having a co-signer is that it increases your possibility of getting your loan approved. You can try to get your loan at a lower interest rate and if possible avail a larger loan amount as well.
Always remember that both you as well as your cosigner are responsible for the payment of the loan amount. So, in case either one of you misses those payments, then you come under financial scrutiny.
- Getting a Joint Personal Loan
Just like a cosigner, you can always apply for a joint personal loan with anyone who has good financial security and credit score.
The basic difference between the two is that the cosigner only shares the responsibility of repaying the loan and not the ownership. In case of a joint personal loan, both the applicants are the owners. Availing a joint personal loan can be beneficial for friends, couples and families in which one member is unemployed while the other has a steady source of income.
- Applying for a credit against your home or HELOC
If all of the above options do not meet your requirements, and in case you are a homeowner, then a Home Equity Line Of Credit (HELOC) may be able to offer you some emergency cash. The credit allows you to borrow money against your home and therefore is not dependent on your income. It basically involves a revolving line of credit through which you can borrow based on your requirements.
HELOC is not dependent on your income. But, it uses your home as collateral against the availed credit. In case you’re unsure about making the repayments, then you have to be extremely careful before availing this credit and should consider choosing any alternative routes for financial assistance.