Loan Articles


The loan options for unemployed borrowers are more limited simply because many of them do not have a stable source of income. The reason is that they are considered risky by banks meaning that the risk of default is higher. Depending on the product of choice, having a guarantor may be of help. The options to consider include secured financing, credit card overdrafts, payday loans, pawnshop brokers, and others.

Requirements and Options Available

Most financial institutions require that applicants have a stable job and good credit history. If you are unemployed, one option is to borrow against your life insurance or house. You may want to consider a home equity line of credit whereby your property serves as collateral (guarantees prompt repayment). This is provided that the applicant has enough equity. There are banks which require that the applicant has some source of income, be it alimony, child support, or unemployment benefits. Another option is to ask a family member, close relative, or friend to become a cosigner. It is important that the co-signer has a very good or excellent credit history. This will improve your chances of getting approved for a larger loan. You still need to show proof of income, be it money in a savings account, bonds or stocks, rental income, or other sources of income.

Another idea is to contact your insurer and ask if they can provide a certain amount of money. Your credit union or bank loan officer may offer advice in this direction. When applying with a cosigner (yet another option), financial institutions look at factors such as income, loan to income ratio, payment history, and others.

Other Options for Unemployed Borrowers

There are other options to choose from, including car title loans and cash advances. A car title loan is a type of secured financing whereby loan repayment is backed by collateral (the value of the vehicle). Lenders usually require that a professional inspects the vehicle. There is an option to apply online. If you have a credit card, many issuers offer a cash advance. The problem with this option is that interest rates are often high.

Payday Lenders, Pawnbrokers, Loans by Friends and Family

Of course, you can always ask your family or friends for a small loan. If you are not comfortable with this idea, you may want to consider pawnshops as an option. And if borrowing is not your thing but need money, selling items or assets that you donít need also makes sense. Pawnbrokers are an option for borrowers with no income (no extra income such as child support). But if you have some source of income, for example, alimony, disability, or pension, you can apply for a payday loan. The problem with payday loans is that the repayment term is usually very short while the interest rate is very high. On the positive side, this is a small loan, e.g. between $100 and $1,000. First-time borrowers are offered smaller amounts than regular customers. Not all payday lenders accept unemployed applicants. This is usually a good solution for persons who need money immediately. There are emergency situations when you need cash right away. It may take several weeks before you get approved for a standard bank loan.
Finally, there are private lenders that offer loans to unemployed people provided that they put a considerable amount down. The down payment is usually 25 percent or higher. Whatever the products available, it always pays to check with your local bank first. If you are an existing, trustworthy customer, you have better chances of getting approved for a loan.