Most personal loans are largely based on employment information, which makes securing a loan difficult if you don't have a job. There are ways, however, to secure a personal loan if you're unemployed. Here's what you can do to increase your chance of getting approved for a loan.
Improve Your Credit Score
Your credit score is one of the main factors that lenders look at when deciding whether to approve your loan application, for this number is a reflection of how well you've previously handled debts. Without a job that provides income, your credit score becomes even more important.
Exact score requirements vary, but most lenders will only underwrite personal loans to applicants who have a credit score of at least 580 to 600. If you have a credit score over 600, that's even better.
You can request a credit report that shows your credit score from each of the three main credit reporting bureaus. By law, they're each required to furnish one report for free annually.
Once you know your credit score, there may be a few ways to improve it - even if you're unemployed. Depending on your score and personal situation, you may be able to:
- Pay down debt with a sudden financial windfall.
- Contest errors in your report that bring down your score.
- Wait until past financial issues on the report become older.
In some situations, even a minor adjustment in total debt load or the length of your history can help improve your score.
Use Other Sources of Income
Although you're unemployed, that doesn't necessarily mean you have no income. Should you have another source of income, your lender may be able to base a personal loan on this income rather than traditional job earnings. In some cases, certain types of other income might even be preferable to job earnings because these other sources are more reliable.
Winnings at a casino and one-time windfalls from inheritances won't qualify as viable income sources because they aren't regular and dependable.
If you receive child support, alimony, disability insurance payments, unemployment benefits, or a similar monthly source of income, however, you can likely use that in place of job earnings.
Show a Prior Sustained Source of Income
Sometimes, you can successfully get a personal loan by showing recent and sustained employment. Although you might not have a job at the current moment, a lender may underwrite a loan based on your past employment status and other factors. Typically, this requires manual underwriting, and all other considerations must place you in a good light.
Offer an Asset as Collateral Against Your Loan
If you have an asset that you can offer as collateral against the loan, a lender will be much more willing to grant you a loan. They'll do this because the collateral serves as a financial guarantee against the risk that you can't pay the loan back.
There are many different assets that lenders might accept as collateral. Some common assets include vehicles, collectibles, valuable jewelry, equipment, machinery, and other items with substantial worth like art. Different lenders will consider different types of assets.
As an added benefit, collateral often also lowers your interest rate. You may even want to offer something as collateral even if you can get a loan without doing so, as the lower interest rate will save you money.
Loans that are underwritten against collateral are known as secured loans. Unsecured loans don't have any assets put up against them.
If you need a personal loanand are unemployed, contact Central Finance to see what options are available to you. Our friendly team can help you find a solution that will fit your situation.
