It’s frightening to lose your job. All the more if you rely on your salary to pay for your necessities like bills, food, and housing. If you don’t have a consistent income and are in a financial crisis, taking a loan may assist you in getting through a difficult period.
Not only does that it will help you get through tough times, but it can also help you fund a startup. If you had just lost your job or just resigned from work and decided to take on the entrepreneurial journey, a loan could help you get started.
If you’re someone who does not know how to apply for a loan, here are some points to consider and alternatives to explore.
Factors That Lenders Check On To Grant A Loan
For anybody who needs cash to cover an expense, a loan can be a great help. While you can still get a loan even if you’re unemployed or have an intermittent income, proving that you’ll be able to repay the money will be more difficult but not impossible.
Because a direct lender needs to make sure you have had enough cash coming in to repay the new loan payment. They also need to know any other outstanding debts you currently owe to grant you loans such as secure online payday loans. So here are some factors for increasing chances of getting a loan, even if you are unemployed.
Your Income
The world of lending rolls around with income. That’s why having no job while taking a loan is more challenging. However, if you have sources of income other than a typical day job, you may still be eligible.
For example, if you are married, a lender may allow you to include your spouse’s income in your loan application, assuring that you can use your spouse’s income to pay off the loan. But, most probably, you will need your spouse to be a cosigner for the loan.
Also, you may not have to earn a payroll right away. However, you might produce other sources that may assist you in qualifying for a loan such as, investments, retirement benefits, alimony, and child support, which will be considered a predictable source of income.
Monthly Debt-to-income Ratio
Your debt-to-income ratio is another element that lenders may evaluate when considering your ability to pay back a loan. To turn up to this figure, divide your total monthly expenses by your monthly gross income.
That’s why if you have a high debt-to-income ratio, your lender could use this to determine that you do not have enough income to pay both of your debts and everyday needs. However, your lender might reconsider if you got a solid savings account balance in your bank that can cushion you if you can’t repay your loan.
Credit Record
Your credit report can be a key that your lender will grant you the loan. A healthy credit profile means it is less risky for a financial institution to grant a loan. Furthermore, lenders will look at your current credit score, payment history, or negative remarks such as past bankruptcies and collection accounts to weigh it in if you qualify for a loan.
While a healthy credit doesn’t make up entirely for your lack of income, it can make you look less risky for lenders when you try to get a loan without a job.
Loan Alternative Options
Finding financial relief while being unemployed is hard to find. That’s why it is essential to get familiar with various alternative loan types so you can choose affordable options depending on your situation. Here are some of the few:
- Secured Loans
- Unsecured Loans
- Payday Loans
- Cash Advances
- Credit Cards
- Home Equity Line of Credit (HELOC)
- Debt Consolidation Loans
Make sure that you are familiar with the pros and cons of whatever alternative loans you choose from, and it is also vital not to overlook its dire risks. Given that you are unemployed and considering taking a loan, understanding your options before making any decisions will get you out of serious trouble.
Final Thoughts
Getting a loan while having a job is sometimes hard, even more by not having one. That’s why It is crucial to be mindful of the costs and consequences when taking any loan out there. In addition, signing up for a loan that you can’t repay in a given period could make your financial situation even harder. Assessing your finances and getting advice from a qualified finance expert is a good idea.
