Being out of work can bring you down emotionally, and if your savings isn’t good enough, handicap your spending power and ability to meet financial commitments. The usual thing at this point is to consider getting a loan. But you are probably wondering if this is even possible, considering lenders mostly pay attention to employed folks. Thankfully, you can get a loan without a job;
How to Get a Loan with No Job?
Lenders usually have different credit policies and factors they consider in determining whether an applicant is loan-worthy or not. The most common factors include the applicant’s credit score, annual income, and debt-to-income ratio.
Now, here comes the big question. What does the lender look at if the applicant is unemployed and has no annual income? What alternative loans can you explore without a job? What steps can you take to increase your approval chances?
Present collateral
You can leverage a valuable asset you have by presenting it as collateral to secure a loan, such as a car title loan. Defaulting on payment may mean losing ownership rights of the asset to the lender. Since the lender can sell off this collateral to recoup their cash, they consider you a lesser lending risk and may care less about your annual income.
Provide a credit-worthy cosigner
Another way to increase your perceived risk to a lender is to get a cosigner. This cosigner takes the fall for your inability to repay the loan. So, for your approval chances to be high, the cosigner must be creditworthy. They must have good credit and earn enough to afford the loan (annual income).
Reduce your debt-to-income ratio
The more your debt relative to your income, the riskier you are as a borrower. Most lenders prefer working with applicants with a debt-to-income ratio lower than 36%. Therefore, you should work towards this limit. You can reduce this ratio by paying off existing debts.
Borrow from loved ones
Asides from getting a loan with no job, you can consult your loved ones to see if any may be willing to help you out with some money. Although most friends will give you zero-interest loans, it’s important to find out if they are charging any interest and how much time you have to repay your debt. Remember to stick with the payment deadline, because defaulting may ruin your relationship with them.
What Counts as Income When I'm Getting a loan with No Job?
How to get a loan with no job? You can present proof of a steady, alternative source of income. However, not all income sources are tenable. The tenable ones are alimony, disability, and unemployment benefits. Others like social security payments, pension or annuities, interest or dividends, and spouse’s income may also be considered as income.