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Can you get a loan if you are unemployed?

[Nov 7, 2010.]

 

Can you really get a loan if you are unemployed? That depends upon several factors. While you are unlikely to be approved for a personal loan from a bank if you don't have a job, there may be other alternatives to getting cash. However, just because you might be able to qualify for a loan doesn't mean it is a good idea to borrow money without an income.

Can you pay back a personal loan?

One of the most important questions that needs to be answered before even applying for a loan is whether or not you are going to be able to pay it back. Banks are in the business of lending money to make money. So a lender is only going to approve a loan if it appears that there is a realistic chance to get the money back with interest. Without an income most lenders won't touch you with a 10-foot pole.

Payday loans want a paycheck

Even payday lenders want to know that you have a steady income before loaning money to you. Cash advance loans don't require a credit check, but you do have to give the lender a post-dated check or bank account number that can be accessed when the loan is due. If you are able to get approved, payday loans are generally good for two weeks until your next payday. If you can't pay off the loan, interest accrues and the balance is rolled over into another loan. Payday loans have extremely high interest rates and should only be considered as a last resort.

Borrow money from yourself

Some people who are unemployed and having extreme hardship turn to their own retirement or investment accounts for personal loans. Generally, it is best to avoid tapping into retirement accounts. However, during these tough economic times many people have had to bite the bullet and borrow from their own retirement funds. Make sure you understand the rules and tax ramifications involved with taking money out of a retirement account. If possible, cash out other non-retirement investments before going to a retirement account.

Family and friends

If things are very serious, you may find yourself turning to friends or family to borrow a loan. Make sure you have a written contract to protect both parties involved in this type of deal. You should specify the amount of the loan, interest rate, and when and how the loan should be repaid.
 

 

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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