Yes, you can get a loan without a job, as long as you provide an alternative source of income, put up collateral or find a cosigner. Lenders won’t discriminate against you just because you don’t have a job, but they will require you to demonstrate the ability to repay what you borrow somehow. Below, you can find some detailed tips on the various ways to get a loan without a job.
How to Get a Loan Without a Job
Find an alternative source of income
This can include benefits like unemployment, retirement, disability, alimony or child support. You could also draw from assets such as a savings account, trust fund or investments. And you’re allowed to put down a spouse/partner’s income that you have reasonable access too, among other sources of income.
Get a cosigner
If you get a cosigner for a loan, that person assumes responsibility for repayment if you fail to pay. During the approval process, the lender bases their decision on the cosigner’s credit and income.
There are plenty of secured loans that require you to put up something valuable as collateral in order to receive the loan. If you default, the lender can take possession of the collateral to recoup their loss. Because the lender has an alternative way to get paid, they care less about your income.
Lower your debt-to-income ratio
The less debt you have relative to your total income, the less risky you are as a borrower, even if your income does not come from a job. So if possible, focus on paying down any existing debts (or increasing your income) before applying for a loan.
Increase your credit score
The higher your credit score is, the more likely you are to be approved for a loan. This can help offset not having a job, as long as you do have some form of income. The good news is that there are several easy steps you can take to improve your credit score.
Use a home equity loan/HELOC
If you are a homeowner, you can get a loan or line of credit based on the value of the house minus the amount you have left to pay on the mortgage. It may be difficult to qualify for a home equity loan or HELOC with no job, but it is possible. Just keep in mind that the loan or line of credit is secured by your house, so you could face foreclosure if you can’t repay what you borrow.
Borrow from a friend/relative
Someone close to you may be willing to help you out even if you don’t have a job at the moment. But it’s important to have a written plan for repayment – you don’t want to ruin your relationship with that person by not paying them back.
Take out an auto title loan or pawnshop loan
These options are should only be an extreme last resort. Avoid them at all costs. An auto title loan is secured by your car and could cost you up to 25% of what you borrow. Pawnshops charge 2% to 25% per month in interest and you risk losing your valuables if you can’t pay them back.
Get a cash advance
If you have a credit card, you can use it to withdraw money from an ATM, up to a limit listed on your monthly statement. But cash advances don’t fall under your credit card’s grace period, so interest starts accruing right away. The average cash advance APR is over 21%.
Borrow from a retirement account
You can take money out of your retirement fund early, but you’ll have to pay it back within five years or you’ll owe a penalty. You’ll also pay interest on this loan, but the interest goes into your retirement account to help make up for the time the money wasn’t being invested. Even if you can pay the loan back within five years, this option is still not a great idea because it causes you to pay extra out of your own pocket rather than have your investments naturally increase in value.
Risks of Getting a Loan Without a Job
Just bear in mind that it can be dangerous to get a loan with no job because if your alternative source of income dries up, you risk missing payments and therefore damaging your credit. In addition, you might not be able to get good interest rates, a long repayment period or low fees.
Alternatives to Getting a Loan Without a Job
A few less ideal ways to get a loan with no job include taking out an auto title loan, pawning an item or getting a credit card cash advance. In order to pick which method you should use to get your loan, you’ll need to compare all your options and know their pros and cons.
At the end of the day, not having a job won’t prevent you from getting a loan. But it will make the process more difficult. If you have another steady source of income or a cosigner, though, you should be fine. Of course, exactly how much income you’ll need depends on big of a loan you’re trying to get. Your income will need to be sufficient to make your monthly payments on top of your other expenses.
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