Can I Get a Loan While Unemployed?

Posted by in Loans | Updated on May 30, 2023
At a Glance: To get a loan while unemployed, you need alternative income or a large supply of cash. If you can’t get a traditional loan, there are alternatives you can explore to quickly secure the cash flow you need.

A period of unemployment can be a very stressful time if you were not able to prepare for it. If important expenses arise that you need to cover, you may ask yourself, “Can I get a loan while unemployed?’. The answer depends on a lot of different factors, so read on to learn more about this topic.

Is It Possible to Get a Loan While Unemployed?

Getting a loan while you are unemployed is possible, but you have to show the lender some kind of income. Otherwise, from the perspective of the lender, you would be receiving a loan with no ability to follow the repayment schedule. Many lenders will accept other kinds of income besides a paycheck, but they are likely to impose steep minimum requirements for your credit score.

Factors That Determine if Your Loan Application is Approved

Getting a loan if you are unemployed is more difficult, but it is still possible. Some of the key factors to keep in mind are outlined below.


Naturally, income is the most important consideration. If you have no income or savings you will not have the money to make the loan repayments. Many lenders will consider alternative sources of income for your loan besides a paycheck:

  • Household/spousal income: Some lenders let you count a spouse’s income as part of your income on your application.
  • Investments: Recurring investment income such as dividends and rental property.
  • Retirement: Social security benefits or retirement investments (e.g. pension, 401(k)).
  • Other: Unemployment benefits, alimony, or child support payments.

Debt-to-Income Ratio

If you have existing debt, the lender will also consider your debt-to-income ratio (also called DTI). Your DTI is a way of measuring how much of every dollar you earn has to go towards debt repayments. If you have a high DTI, it means you have to pay a large portion of your income towards debts. Lenders prefer that you have a low DTI.

Credit History

Personal loans are usually unsecured (do not require collateral). Checking your credit history is how lenders try to predict whether you will repay the loan. If your credit score is low, lenders will charge high-interest rates to offset the risk that you will default on the loan.

Can I Qualify for a Loan With Alternate Income?

If you do not have a regular paycheck, you can use alternative sources of income to demonstrate to your lender that you will be able to repay the loan. 

Some examples of alternative sources of income are listed below:

  • Social security benefits
  • Retirement investments or pension benefits
  • Disability compensation
  • Alimony or child support payments
  • Government annuities
  • Regular payments from a trust fund
  • Regular bond interest or stock dividend payments
  • Veterans’ Affairs (VA) benefits
  • Public assistance 
  • Spouse/partner income (cosigner)
  • Freelance contract
  • Firm employment offer
  • The pending sale of assets (e.g. real estate, securities)
  • Inheritance.

Considerations Before Taking a Loan While Unemployed

There are some important things to keep in mind when asking yourself, “Can I get a loan while unemployed?” A few of these are listed below.

  • Payments: If you fail to repay the loan, the lender might assign a debt collector to recover the money, putting you in a worse financial position. Defaulting also reduces your credit score, making it difficult or impossible to get another loan for a long time.
  • Conditions: If your financial position is not ideal, such as having low income, lenders usually charge much higher interest rates and offer shorter repayment periods than they otherwise would.

Alternatives to Loans When Unemployed

Besides “Can I get a loan while unemployed?” you should also consider other types of credit. A few of these are listed below.

  • Credit card: Credit cards generally have high-interest rates, but many offer an interest-free period during which you don’t pay interest on the balance as long as you pay it off in full.
  • Line of credit: A personal line of credit is like a credit card, with a few differences, depending on the lender.
  • Secured loan: Some types of loans allow you to provide something with monetary value (collateral) that you will give up to the lender if you fail to repay the loan. It is important to think about how losing the collateral will affect your life before taking out a secured loan.
  • Home equity line of credit (HELOC): This is like a personal line of credit, except you offer your house as collateral. A home equity line of credit (HELOC) is a credit facility that uses your house as collateral. This allows you to get credit for things as you need them. You would only pay interest on the money you use. If you fail to make repayments, your HELOC lender could foreclose on your home to recover the money you borrowed.

What If I Don’t Qualify for a Loan?

If your application for a traditional loan or line of credit is rejected, there are a few options you can explore.

  • Cosign: A friend or family member with good credit and a regular paycheck can cosign your application with you. The terms will be based on their income and credit, and if you can’t keep up with the payments, they will become responsible for repaying your loan.
  • Home equity line of credit (HELOC): In practice, a HELOC works very much like a credit card, except your house is on the line as collateral.
  • Car title loan: You can use your car as collateral for a loan with some lenders. Generally, the car must be fully paid off, and many lenders require that it is at most 5 or 7 years old.
  • Cash advance: In an emergency, some credit cards let you get a cash advance from an ATM, usually at an even higher interest rate than normal purchases. However, this interest may be deferred for a month or more.
  • Selling: You can sell valuable things you own using online marketplaces, or raise money at a pawnshop in an emergency.

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Final Thoughts

Whether you can get a loan while unemployed depends on various factors. Primarily, you need to prove some kind of alternative income or a large supply of cash. It also helps to have a good credit history. If you are unable to get a traditional loan, there are alternatives you can explore to quickly secure the cash flow you need.