By LaToya Irby
Edited by Michelle TipswordHow to Get a Loan Without a Job
Quick Answer
If you don’t have a job, you may be able to get a loan by using other sources of income, such as earned income, government benefits, investment income and court-ordered income. You can also try applying with a cosigner or getting a secured loan.
Making ends meet can be tough when you don't have a job. A loan can be a useful tool for covering unexpected or everyday expenses. It's possible to qualify for a loan if you're unemployed, but you'll likely need solid credit and another source of income. Understanding where to look and how to prove you can afford loan payments can help you get a loan even if you don't have a job.
Can I Get a Loan Without a Job?
Lenders use your income along with your credit score and debt payments to approve your loan application and determine whether you can afford monthly payments. You typically need a steady and verifiable source of income to get a loan. Fortunately, your income doesn't have to come from a traditional job.
Potential Income Types
Many lenders are willing to consider other forms of income than a job when they're evaluating your loan application. Lenders typically want to see steady, predictable income, even when the income doesn't come from a traditional job.
Funds you receive just once—like a tax refund, inheritance or profit from selling assets—may not be enough to help you qualify for a loan, but you may be able to use several other types of income or assets to qualify for a loan. These include:
- Personal income: You may be able to qualify by reporting income from freelance or gig work or self-employment income. Irregular income may be averaged.
- Government benefits: Unemployment compensation, Social Security or disability benefits, government annuity and public assistance payments may qualify.
- Retirement or investment income: Lenders may consider regular income from pension funds or other retirement benefit payments, regular proceeds from a trust, recurring interest or dividend payments or rental property income.
- Court-ordered payments: Alimony or child support may be used if they're documented and you expect them to continue.
- Cosigner income: You can typically use income from your spouse, partner, relative or another person who's signing the loan with you to count toward your total household income.
- Cash: You may be able to borrow against financial assets like cash in a bank account, investments or retirement account balances.
- Future income: In limited cases, an employment offer may count as a source of future income, but your lender may require you to also have other income sources in addition.
Be aware: Cash income may not be counted since it's harder for lenders to confirm. If you receive cash income, make sure to deposit it into your bank account regularly and maintain records of your deposits.
Prepare Your Documentation
You'll need documentation to verify that your income is reliable and sufficient, even when it's from a nontraditional source. Expect to provide detailed, up-to-date proof to provide the lender a clear picture of your income, assets and ability to repay a loan.
Lenders will typically require you to provide official documents like PDF statements (not screenshots) you've downloaded directly from your bank.
Examples of proof may include:
- Recent bank or investment account statements
- Tax returns
- Benefit award letters
- Court orders for alimony or child support
Lenders may request additional documentation. Responding quickly avoids delays in processing your application.
Assess Existing Debts
When you don't have a job, your existing debts—credit card, auto loan, student loan and mortgage payments—can make it harder to qualify for a loan. Your debt-to-income ratio (DTI) is a key factor in loan approval. It shows the percentage of your monthly income that's allocated for debt.
Lenders are more likely to deny a loan application if a significant amount of your current income is committed to other debt payments. Adding another payment to a heavy debt loan increases the risk that you'll default.
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What to Consider Before Taking Out a Loan While Unemployed
There are some important things to think about before taking out a loan while you're unemployed.
- Affordability: Missing just one payment can do significant damage to your credit, and defaulting will put a major blemish on your credit history. If you think there's a risk you can't make your loan payments, consider borrowing less or exploring other options.
- Timeframe: Personal loan terms typically range from one to seven years. Consider how long you realistically expect to be unemployed taking the current economy and job market into consideration. A longer term lowers your monthly payments but means higher interest costs.
- Loan use: Taking out a loan to cover essential expenses or for extra spending money can be risky when you don't have stable income. However, borrowing may make sense to avoid eviction or foreclosure, cover emergency medical expenses or consolidate debt to lower your monthly payments and free up funds for daily expenses.
- Alternatives: Before committing to a loan, consider whether other options may help you meet your needs with less risk or more flexibility. For example, you may be able to use your savings, negotiate payment plans or borrow from friends and family.
- Trade-offs: Without traditional income to guarantee payments, lenders may offer higher interest rates, lower loan amounts or shorter repayment terms. They may also charge fees or require autopay enrollment to ensure monthly payments.
Learn more: Things Not to Use a Personal Loan For
Where to Get a Personal Loan
Personal loans are available from several types of lenders. While loan options may be limited, comparing offers from multiple lenders is important to find the best personal loan for your needs.
- Banks: Large banks tend to have stricter loan requirements. If you have an established relationship, it can work in your favor. However, some banks may require you to apply in person at a branch.
- Credit unions: These often have competitive rates and may also consider your overall financial situation rather than relying solely on your income and credit score. If you're not already a member, you'll have to join to apply. A long-standing relationship can work in your favor.
- Online lenders: You can get faster lending decisions working with online lenders. They are generally more flexible and may be more likely to accept nontraditional sources of income.
Tip: Scammers often target borrowers when they're most vulnerable. Watch for red flags like guaranteed approval claims, requests for advance fees or vague loan terms.
Learn more: What Credit Score Is Needed for a Personal Loan?
Can I Get a Loan With Bad Credit?
Bad credit can make loan approval challenging, especially when you're also unemployed. Fortunately, there are ways to get a loan with less-than-ideal credit.
- Look for a lender that focuses on credit building or loans for borrowers with damaged credit.
- Work on improving your credit before applying if you have time. Sometimes even a small increase can help you land better interest rates or lower fees.
- Apply with a cosigner who has strong credit. Keep in mind that if you fail to make your loan payments, both you and the cosigner's credit will be impacted.
- Consider applying with a co-borrower. This person's credit and income will be considered on your application along with yours, which could mean the difference between getting approved and getting denied. Just keep in mind that co-borrowers share both responsibility for repayment and the loan funds, so make sure it's someone you trust.
Getting prequalified can help you see loan estimates while avoiding credit dings from hard inquiries. You can compare offers and apply only with lenders who are likely to approve you.
Learn more: How to Get a Loan With Bad Credit
Alternatives to a Personal Loan
If you don't qualify for a traditional loan but really need some working cash, you have other options to help with your financial needs. Here are some alternatives to consider.
Home Equity Line of Credit
If you're a homeowner and have been making mortgage payments long enough to have significant equity in your house, you may qualify for a line of credit that lets you borrow against it. Home equity lines of credit (HELOCs) usually offer low interest rates but your home is at risk if you default.
Secured Personal Loan
Offering collateral, like a savings account or a valuable asset, reduces the lender's risk. In turn, secured loans can be easier to qualify for when you're unemployed. Collateral can also help you qualify for a lower interest rate. However, you risk losing your collateral if you can't make loan payments.
Credit Card Cash Advance
Cash advances are easy to access at ATMs, via a bank transfer or with a cash advance check, but they usually come with a high interest rate and fees. They're one of the most expensive ways to borrow money and should only be used for short-term emergencies.
Learn more: Alternatives to Credit Card Cash Advances
Loan From Friends or Family
Getting help from loved ones can help you access funds quickly without interest rates and with more flexible repayment terms. Borrowing from friends or family can strain your relationships, so having terms in writing can lower the risk of misunderstandings.
Disaster Assistance Loan
If you live in a federally declared disaster area and need the funds to recover, you may be eligible for a disaster loan from the U.S. Small Business Administration (SBA). These loans often have lower interest rates and longer repayment terms compared to traditional personal loans.
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Frequently Asked Questions
The Bottom Line
It's possible to get a loan without a job, but getting approved depends on your other income sources, current debt payments and the lender. Applying with a cosigner or offering collateral can improve your chances of getting approved.
Without traditional employment, your credit score may play a bigger role in your loan approval. Before applying, check your FICO® ScoreΘ for free from Experian before applying to see where you stand and gauge your approval odds. If your credit score isn't in the best shape, focus on loans that cater to your credit needs or consider exploring other options.
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About the author
LaToya Irby
LaToya Irby is a personal finance writer who works with consumer media outlets to help people navigate their money and credit. She’s been published and quoted extensively in USA Today, U.S. News and World Report, myFICO, Investopedia, The Balance and more.
Read more from LaToya