It’s no surprise that we’re living in uncertain times. Due to the global pandemic millions of Americans are now unemployed, with more losing their jobs every day. Unemployment can take quite a toll on the average American, not only affecting their income but also their mental and physical health as well. In fact, studies have shown that unemployed individuals are much more likely to suffer from several stress-related illnesses such as high blood pressure, stroke, heart attack, and heart disease.1
In addition to these potentially serious health issues, unemployment benefits may not cover all of the costs of living like groceries, rent, utilities, and children’s school costs. And if an unexpected expense arises, it can be even more difficult to make ends meet. This is when many people would turn to short-term loan options to cover the unexpected costs or monthly bills, and hopefully get them back on track.
But the question remains: Can you even get one of these short-term personal loan options if you don’t currently have a job? The short answer is, there are loan options you may qualify for without employment, but whether or not they’re safe and affordable is another question entirely.
Read on to learn more about bad credit loan options, and which ones may help you in your time of need.
What Are Bad Credit Loans and How Do They Work?
There isn’t one type of loan that’s considered a “bad credit loan.” In fact, there are several different types of short-term personal loans that would fall under this description. Each one is designed for a specific type of situation, or borrower. Namely, those with poor credit scores are generally the ones who need money from these short-term loans.
Here’s a quick rundown of the most common types of bad credit loans, and a brief description of how they work:
Payday Loans: This is one of the most common types of short-term loans for people with poor credit histories. As the name suggests, it’s a loan that you get based on the promise to repay it by your next payday. They’re usually small loans, ranging up to several hundred dollars, and they sometimes come with very high interest rates.
Title Loans: A title loan is a type of secured loan that requires the borrower to offer up their vehicle as collateral. This means that if the borrower fails to repay the loan, the lender is legally allowed to seize the vehicle and sell it to recover their loss. The amount of money you get, will be a fraction of the vehicle’s value as the lender sees it. If you have a valuable vehicle you may get a larger loan and a longer repayment term, but you risk losing your vehicle if you have trouble repaying the loan.
Pawn Shop Loans: This is another example of a secured loan that requires the borrower to offer up collateral in order to get money. In this case, the collateral can usually be any valuable item that the borrower owns. It will depend on whether the pawn shop finds the item to be valuable enough to offer you money for it. Oftentimes borrowers use electronics, jewelry, heirlooms, or other valuable items for their collateral. The amount you get will be based on the value of your item. The terms and conditions will depend on what the pawn shop is willing to offer you. Just like with title loans, if you can’t repay the loan the lender will take your collateral and sell it.
Personal Installment Loans: This is widely considered to be a safer alternative to some of the other types of bad credit loans. It’s an unsecured loan that borrowers get based on their credit history, income, and ability to repay. These loans are usually for larger amounts than payday and pawn shop loans, with longer repayment terms as well. This allows borrowers to make smaller, monthly payments while also maintaining their other financial obligations.
Can I Get a Bad Credit Loan if I’m Unemployed?
So which of these personal loans, if any, are available to unemployed borrowers? And are there any other borrowing options available to people who aren’t currently working? Below are some options you should consider if you’re unemployed and looking for short-term financing:
Get a Joint Loan or a Cosigner
Some lenders will allow two people to apply for the same loan. This means both parties would share the same responsibility for the loan and the payments. This is referred to as a “joint loan.” There’s also the option of finding someone trustworthy with a good credit score to cosign the loan. This means that if you fail to repay the loan, that person becomes responsible for the payments. For both of these options, you’ll need to do some research and find a lender that’s willing to work with you.
For certain secured loans, the lender may not look into your credit history or employment status since the loan is already secured with collateral. While it may be risky to use a pawn shop or title loans, if you’re in a desperate situation and have no other choice then these may be an option.
Borrow From a Friend or Family Member
While this can sometimes cause strain in a relationship, there are times when it’s the only safe option for an unemployed borrower in need. If this is your only option and you know someone responsible who has the money to help you then you may want to consider it. If you do decide to use this option, the best advice we can give is to draw up a contract and a repayment plan, so that there’s no confusion as to the terms.
The Bottom Line
There’s no denying that getting a bad credit loan while you’re unemployed is not easy. There aren’t as many options for you if you aren’t currently working. This is because lenders need to know that the loan will be repaid, and you’re not as likely to repay if you don’t have steady income. That being said, there is always hope. It just means that you may have to do more research and explore every single option.
At CreditNinja, we recommend exploring the options above and figuring out which one is best for your specific situation. For more tips and financial advice, check out the rest of the CreditNinja Dojo!