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To be approved for a personal loan, or any loan for that matter, you have to prove your ability to pay the loan back. But how can you prove your ability to pay a loan back if you’re unemployed?
While it can be challenging to get a personal loan while you’re unemployed, it’s still possible — especially if you have an alternate income source and decent credit.
Here’s how to qualify for a personal loan when you’re unemployed:
- Important factors to getting approved for a personal loan
- Can I get approved for a personal loan if I’m unemployed?
- Ways to qualify for a personal loan while unemployed
- Where to find personal loans while unemployed
- Should I get a personal loan while unemployed?
Important factors to getting approved for a personal loan
Lenders consider these main factors when deciding whether to approve you for a personal loan:
- Credit score: Your credit score is a three-digit number that indicates how you manage credit. The higher your score, the less risky you are to a lender.
- Income: Lenders want to see that you’ll be able to repay your loan. If you’re unemployed, you can provide alternate sources of income to help you qualify. While lenders may consider your household income, your personal income is more important to getting approved since you’re the one who’s ultimately responsible for paying back the loan.
- Debt-to-income ratio: Your DTI ratio is how much of your gross monthly income goes toward your debt payments. Lenders typically want to see a DTI ratio of 36% or lower.
While it’s possible to get a personal loan with bad credit, having bad credit and no income at the same time may put you at the mercy of payday loans.
Related Read: What Credit Score Do I Need to Take Out a Personal Loan?
Can I get approved for a personal loan if I’m unemployed?
Yes, you can get a personal loan without a job, but it’ll be more challenging, and you may pay higher interest rates. Lenders will also want to see that you have solid credit and an alternate source of income.
Personal loans are unsecured loans, which means that they aren’t secured by an asset, such as a car or house. Because they’re unsecured, they tend to have higher interest rates since the lender won’t have any collateral to seize if you fall behind on your loan payments.
The personal loan companies in the table below compete for your business through Credible. You can request rates from all of these partner lenders by filling out just one form (instead of one form for each) and without affecting your credit score.
|Lender||Fixed rates||Loan amounts||Check rates|
|9.95% - 35.99% APR||$2,000 to $35,000**|
|11.79% - 20.84% APR||$10,000 to $50,000|
|8.99% - 35.99% APR||$2,000 to $50,000|
|7.99% - 24.99% APR|
$2,500 - $40,000
|11.72% - 24.67% APR||$3,000 to $40,000|
|9.57% - 35.99% APR||$1,000 to $40,000|
|7.49% - 25.49% APR with autopay||$5,000 to $100,000|
|18.0% - 35.99% APR||$1,500 to $20,000|
|8.49% - 17.99% APR||$600 to $50,000 |
(depending on loan term)
|14.3% - 35.99% APR||$3,500 to $40,000|
|8.99% - 25.81% APR10||$5,000 to $100,000|
|11.69% - 35.99% APR7||$1,000 to $50,000|
|8.49% - 35.99% APR||$1,000 to $50,000|
|6.4% - 35.99% APR4||$1,000 to $50,0005|
Ways to qualify for a personal loan while unemployed
Lenders consider more than just income from an employer when they’re looking at personal loan applications. Here are some alternative income sources that could help you qualify for a personal loan.
If you’re old enough to file for retirement income or have a permanent disability, lenders can consider your income from Social Security as personal income to qualify for a personal loan.
Unemployment benefits regularly deposited by the state can help you get approved for a personal loan while you’re unemployed. Your lender will likely need proof of how long you’ve been on unemployment, your gross deposit amounts, how often you’re paid, and the maximum period of time you can receive unemployment benefits. You should be able to get proof of everything by contacting the state that pays you unemployment.
Alimony or child support
Regular alimony or child support payments can prove that you have sufficient income to pay back a personal loan. You’ll likely need to provide proof of past and current child support and alimony payments in addition to future entitlement to them.
If you’re over the age of 21, you can include a spouse’s income or assets on your personal loan application if you have reasonable access to their funds. This higher household income can help you qualify for a personal loan.
If you’re not able to qualify for a loan on your own, speak to your partner about cosigning your personal loan application. Just make sure they understand the risks of cosigning — if you fall behind on payments, your cosigner will be on the hook for them.
Pension or retirement income
You can also use pension or retirement income to qualify for a personal loan if you’re unemployed. For example, you can withdraw Roth IRA contributions at any time. And if you’re over age 59½, you won’t face a penalty.
If you earn regularly recurring interest on stocks, bonds, or property, you can list that interest as income for a personal loan. However, if you have enough in assets to earn a substantial amount of interest, cashing out those assets may be a better option than taking out a personal loan. Talk to a financial advisor to see what’s the best option for your situation.
If you have rental income, you can list it as income on a personal loan application. If you don’t have rental income but have a spare room, you can even rent it out to a roommate and count their rental payments to you as income.
Royalties can come from almost anything, including books, music, films, and photographs. Regardless of where your royalties come from, you can list them as income to help you qualify for a personal loan.
Foster care and adoption subsidies
If you’re a foster or adoptive parent and receive a subsidy or stipend from the state, you can list that subsidy as income in your personal loan application.
Where to find personal loans while unemployed
If you’re looking for a personal loan while you’re unemployed, you’re in luck. Here are some places where you can get a personal loan:
- Banks and credit unions: While not all banks and credit unions offer personal loans, if you belong to one it’s a good idea to check if yours does. Some credit unions have lower lending requirements or promotional rates available only to members. Banks may offer you a loyalty discount or be more likely to approve you if you have an account with them that’s been open for a long time and is in good standing. It could be easier to get a personal loan while you’re unemployed from a bank or credit union that you already have a relationship with.
- Online lenders: Online lenders are a popular option for personal loans because the application process is completely digital, and you often receive loan funds in as little as one or two business days after approval.
- Loan aggregators: Loan aggregators, like Credible, allow you to get instant quotes from multiple lenders in one spot, without a hard inquiry on your credit report. A loan aggregator allows you to see where you can get a personal loan and what rates you can expect without having to do the legwork of calling and applying through multiple lenders directly. When you find a loan option you like, you can submit an official application.
Should I get a personal loan while unemployed?
Ideally, you should avoid taking on debt while unemployed, if possible.
Re-assessing your budget, selling assets like a car or extra furniture, downsizing your housing, taking on roommates, or picking up a side hustle are all options for ways to make ends meet while unemployed.
If you’ve already adjusted your spending and explored every avenue for earning extra income, then a personal loan is a good option compared to putting your expenses on a high-interest credit card or using a payday loan. Just make sure you’ll be able to keep up with the monthly payments.
Once you secure employment again, make sure to pay off your personal loan as quickly as possible to save on interest and work on saving an emergency fund so any future periods of unemployment are easier to weather.