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Even if you aren’t generating income, you can still opt for a loan when unemployed. Although the terms may be different, it will still help you to cover the costs when needed, especially when starting a new business. However, the lenders may not offer such lucrative terms.
Types of Loans for Unemployed
- Payday loans: It’s usually a short-term borrowing you should repay on your next payday. The conditions highly depend on the lender. The ultimate benefit is that such a loan is easy and fast to get. For example, at Payday Depot, you only need your ZIP code, first and last name to get started.
- Secured loans: They are linked by an asset or, in other words, are supported by the collateral. The risk is that if you fail to repay it, the lender may start debt collection by taking your asset as payment.
- Unsecured loans: Such a type of borrowing usually comes with worse terms compared to secured loans. On the bright side, your assets are safe.
- Cash advances: It’s a short-term loan at a high cost. You can receive a cash advancement by going overdraft with your credit card. But keep in mind that it can be associated with extra fees.
- Debt consolidation loans: Suppose you already have some borrowings but can’t repay them. In such a situation, you can get a debt consolidation loan that combines all your debts in one big loan that sometimes can come with a better interest rate.
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Peculiarities of Taking Out a Loan When Unemployed
Qualifying for a loan when umemployed can be hard, even if you have a job and a steady income. Lenders usually assess your credit history, credit score, and estimate your assets besides the amount of regular pay.
When being unemployed, they may ask to inspect other types of income. According to the data from the IRS, the following falls in the category:
- Pay received for work while an inmate in a penal institution
- Interest and dividends
- Pensions or annuities
- Social security
- Unemployment benefits
- Child support
Having unearned income can significantly help you get the loan itself and better terms when borrowing in the first place. Therefore, analyze all your income before applying for credit in order to minimize the interest rate.
What to Do if Getting a Loan Isn’t an Option?
Although this is a rather pitiful situation, there is still a solution:
• Improve your credit score: A good credit score is the backbone of getting a loan when unemployed. Try to repay all your debts or consider debt consolidation. Also, avoid taking loans for some time while paying back the existing ones if you can.
• Get aid: There are many nonprofit organizations that support people struggling with covering their expenses. In particular, some offer help for freelancers or industry workers.
• Try to find an alternative source of income: We are living in the age of digital when you can find a part-time job online. Although you may not get a high wage, it will still help you.
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