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Unemployed and Need a Loan: A How-To Guide

[Dec 24, 2008.]


Unemployed people are in a bind because they need a personal loan but often, because they're unemployed, can't get one. While this is understandable from a lending perspective--how is the loan going to be paid back, if no job income is coming in?--it can be devastating to an unemployed person who needs a personal loan.

Here are a few tips on how an unemployed person might go about obtaining a personal loan:

1. Have a Good Credit Score

Even today, with the credit crisis raging for over a year now, there are services that offer personal loans with no collateral and no job income verification--but only for people with excellent credit scores. A near-perfect credit score is particularly valuable for unemployed people seeking personal loans if there is no or not much other debt on the credit report. In that case, an unsecured personal loan is not as scary for the lender.

2. Have a Marketable Skill

Some unemployed people are not likely to stay unemployed for long, and just need a personal loan to tide them over and pay expenses while they search for a job. Other people are, unfortunately, facing a more difficult employment situation, possibly long-term. The difference between these two groups is usually the job skills possessed by each. Companies (and people) that offer unsecured personal loan products know which professions are in demand and which are not. For the unemployed person who is in category A, with in-demand skills, obtaining an unsecured personal loan is far from impossible.

3. Credit Line Rather Than a Lump Sum Personal Loan

Being unemployed is hard enough without worrying about piling up more and more debt. Therefore, consider structuring a personal loan so that it's a credit line, rather than a hard money lump sum. This can reduce stress and may even lower the interest rate, since less money is "out" at any one time. This strategy may also help with the approval process, because it respects the lender's risk.

4. Offer Collateral

An unsecured personal loan may not be possible for every unemployed person. Sometimes, collateral will be needed. This may include a house, a car, or some other asset. This may not be the best option, but when a personal loan is badly needed, collateral can make it happen.

5. Take a (Repayment) Holiday

Companies and individuals who make personal loans to unemployed people understand the nature of the game. Although they certainly seek to be repaid, they are sometimes willing to offer a repayment "holiday" of, say, three months while the unemployed borrowers job-searches. This makes sense for both borrower and lender, and is definitely an idea to bring up in any unemployed personal loan discussion.


About Author:

Andrew Freiburghouse is a writer and businessman. He has worked as a magazine reporter, tax preparer, screenwriter, copywriter, and loan officer. He graduated from Santa Clara University in 1999 with a B.A. in English. Andrew was born and raised in the City of Los Angeles.

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