Finance

How to get a loan when you are unemployed

Unemployment can take a real toll on your finances, ego and general management of daily struggles. For most people it’s a stressful moment which everybody wants to get out of as soon as possible. 

One of the major downsides of unemployment is that you will be denied good rates for loans from traditional institutions like banks or credit companies. Most likely you won’t even qualify to apply for such products, therefore you must look elsewhere until you get back on track with having a job.

But what can you do in this situation when you most likely need the money most and are probably in the least favorable situation to get them? 

Types of loans for the unemployed

Yet, since this situation is very frequent and some lenders understood that this is only a temporary situation most people get away from fast, there are lending companies ready to take the risk. Of course, their risk translates to more interest for you, but the good news is that you have options. It’s best to first decide on the type of loan you are looking for and then shop around as much as possible to get the best deal. 

Secured loans

If you are confident this is just a passing situation or you already have a clear mapping of your professional steps, you can cut back on some of the financial losses by choosing a secured loan. This means putting forward an asset, usually your home or car as a warranty for the money you borrow. 

In the unfortunate event you don’t pay your installments, these goods can be repossessed, making this a very risky choice for you. The downside is that you don’t get a much better rate. 

High-interest personal loans 

If you are afraid that you might lose your home but still need some quick money, you could choose to get a personal loan. These are usually between $1,000 and $10,000 with interest rates as high as 39%. Beware that any higher than that can be considered predatory and you should stay away from such arrangements at all costs since they only get you even deeper in depth.

Of course, as soon as you get a job you should start working on rebuilding your credit score and maybe refinance the loan at a lower rate. 

Unsecured unemployment loans

Some credit companies have dedicated products for the unemployed which don’t require brining a collateral. The advantage of choosing such a product is that you will need no justification of how you will be spending the money. Use it to pay your bills, medical expenditure or even a class to get some new skills which will help in your job hunting. 

You are in control

The good news is that you have options and you can regain control over your finances even when unemployed. It only takes some time to get used to the idea that you have to limit your spending for the moment. Under no circumstances should you take a loan to spend it on unnecessary items just because you have access to money. 

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