Life can be very challenging if you are unemployed. You may have to do your best to maintain your lifestyle. If you lose your job at the time when you don’t have enough savings in your account, it can be very tricky to keep up with payments every month. That is, it is always encouraged that you start saving as early as you can. But again, things sometimes do not happen as we expect. An unforeseen occurrence may come and deplete all your savings. In this condition, the only way out may be taking a loan. Again, is it possible to get a loan when you are not employed? As we are going to see in this blog, it is possible but not easy.
Before you are approved for a loan, lenders must ascertain that you will be able to repay the loan. This is done using various strategies. Your credit score is used to determine your creditworthiness. However, there are important variables that are also used to gauge your eligibility. For instance, you must have proof of income. You will be required to make payments every month, and if you do not have a regular flow of income, it may be very difficult for you. It is difficult to secure loans if you are unemployed. However, it is not impossible. There are other avenues that you can exploit. However, you are a high-risk borrower, the lenders’ standpoint and therefore you be charged high-interest rates in case you are approved for a loan. Consider the following loan options if you are unemployed:
Borrowing from Friends
Borrowing from friends can be very helpful in case you are unemployed and cannot qualify for a personal loan from traditional lenders. The only challenge with this arrangement is that you risk damaging your friendships if you don’t repay the loan as agreed. In Singapore, borrowing funds is regulated by law. For this reason, it will be absolutely necessary for you to enter into a legal agreement with the lender. Setting out matters straight from the beginning will prevent collisions in the future. It is good that you understand all the terms in the agreement before appending your signature. The law requires the lender to explain all the terms of the loan to the borrower. You are only supposed to sign after understanding everything in the contract. Once you sign, the contract becomes legally binding any breach may lead to legal proceedings. The lender will give you a copy of the agreement. It is important to show commitment to loan by making payments as stated in the contract.
Borrowing from friends can be a very nice option for you, unlike in traditional banks, you will not be required to provide proof of income. Additionally, such things as credit score and your debt-to-income ratio are not considered. A friend may clearly understand your condition and can even give you a loan without or at low interest. Just commit yourself to pay the loan and avoid breaching the contract.
Consider Secured Loans
There are two types of personal loans; secured and unsecured. An unsecured loan, you are not supposed to secure the loan with an asset. That is why the terms for obtaining these loans are always strict. Lenders carry a lot of risks, and that is why they will always emphasize on credit score, proof of income, debt-to-income ratio, etc. in contrast, you have to provide collateral in secured loans. In case you default, the lender has the option of seizing the asset and use it to recover the outstanding loan amount. For this reason, the lender does not bear a lot of risks as in the unsecured loans. So then, if you are unemployed and need a loan, consider secured loans. With a good asset as collateral, you can easily get approved. Nevertheless, you must be very careful with the payments. Otherwise, you risk losing the asset used as collateral.
Look For a Co-Signer
With someone to cosign the loan, you can get approved for nearly any type of loan that you want if the co-signer has a good financial standing. The lenders will look at the credit score, debt-to-income ratio, and the income level of the co-signer as though he is the one applying for the loan. The only problem is that the co-signer is held personally responsible for the loan. For this reason, many individuals avoid co-signing. But is you know a person quite well and you are certain about repaying the loan, he may not have any problem helping you in this regard or you can just comparedifferent loans online by visiting Loan Advisor Top 10 reviews and see the one that suits your condition.
Credit Cards
And now you may be having a fantastic loan option right in your wallet. Did you know some credit cards allow for a cash advance? You only need to be careful because credit cards often come with very high-interest rates. Also, your credit rating may play a significant role when it comes to credit card cash advances. But we only recommend this alternative on a short-term basis.
Utilize Your Home Equity
If you have enough equity in your house, you may qualify for a home equity loan or perhaps a line of credit. You can easily be approved for a loan in this case because you are using your home to secure4 the loan. Nevertheless, this is a very risky affair. You are not employed, and this means you have cash flow problems. You risk losing your home in case you are unable to repay the loan. The only good thing about this arrangement is that it gives the lender more security and therefore you may be charged relatively lower rates.
The Bottom Line
It can be difficult for unemployed individuals to secure loans, yet it is not impossible. Several avenues can be used in this regard. We have discussed at least five options that can be exploited. Even if you are unemployed, maintain good financial habits. Avoid the things that can sink your credit. With an excellent score and a right standing before your bank, you can qualify for any loan
