A personal loan can be a valuable tool for consolidating high-interest debt, making a large purchase, or getting through a financial emergency. But, as with most types of financing, personal loan lenders generally require that you have some sort of income to repay the loan.
The good news is that, while it may be more difficult, being unemployed doesn’t necessarily prevent you from qualifying for a personal loan. There are several other ways you can qualify.
The short answer is yes, you can get approved for a personal loan while you’re unemployed. When you apply for a loan, most lenders consider three primary factors to determine whether you’ll be able to repay it:
Even if you don’t have a full-time job, you may have other income that can help you qualify for a personal loan. Here are some alternative income sources that can bolster your application:
Even if you don’t have enough income to qualify for a personal loan, there are ways you can increase your chances of approval:
It’s easier than ever to find personal loans. You can shop around with online lenders, which offer convenience and a straightforward application process.
Plus, online lenders typically have faster funding times than traditional banks and credit unions. Depending on the lender, you could even have the money deposited into your bank account the same business day.
Related: Learn more about getting a personal loan
You can also visit your local bank or credit union. If you already have a relationship with a financial institution, you may have an easier time getting approved. After all, you already have your assets there, and they can clearly see your ability to repay. Additionally, you may get more personalized service since you can speak with someone directly.
While it’s possible to get a personal loan when you’re unemployed, it’s worth considering whether it’s a good idea. In some cases, a personal loan can help you get through a difficult financial situation. But if you’re unsure you’ll be able to repay the loan, it could make matters worse.
If you need the money and can qualify for a personal loan, it may be the best option. While some people turn to credit cards during financial emergencies, they generally have much higher interest rates. And that interest tends to compound, meaning your balance grows even faster.
Additionally, other short-term loan options — like payday loans — can be predatory and end up trapping you in a cycle of debt. You could end up with an annual percentage rate (interest rate plus fees) of nearly 400%, and you usually have to repay the loan in just two weeks.
At the end of the day, it’s important to look at the big picture. Consider what you’re planning to use the money for, whether you’ll be able to make your payments on time, and how the loan will affect your finances in the long term.
Related: Learn more about getting a personal loan