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Guide to Personal Loans for the Unemployed

Is It Possible to Get a Personal Loan While Unemployed?
Sheryl Nance-Nash
Sheryl Nance-NashUpdated November 16, 2023
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Periods of unemployment can cause uncertainty of how you will pay your bills and how many months it might take to find another job. You may be looking for resources to keep you afloat. Family and friends may not be in a position to help, and your savings may not tide you over for long.You’ve probably heard about personal loans, but can you get one when you’re not currently working?

Can You Get a Personal Loan While Unemployed?

Yes, you can get a personal loan when unemployed, but it’s going to be harder than if you had a steady job. To qualify for a personal loan, lenders look at three main things — your credit score, your income, and your debt-to-income ratio. If you have no income and your debt-to-income ratio is high, you’ll have a hard time getting approved. However, if you have alternative sources of income, such as Social Security, alimony payments, or retirement, you may be able to qualify for a personal loan while unemployed.

Personal Loan Basics: What Are Personal Loans?

Personal loans are lump sums of money given to a borrower from a lender. They can be used to make a big purchase, consolidate high-interest debts, or help pay the bills during times of uncertainty. Personal loan interest rates are often lower than those on credit cards, and the interest rates are typically fixed.Personal loans are often unsecured, meaning you don’t have to put up collateral to guarantee the loan. Some lenders offer secured personal loans, as well, which do require collateral. Not needing to provide collateral may be appealing, but secured loans may have more favorable interest rates than their unsecured counterparts. They also may help you land a loan if you’re currently unemployed.Payments are typically made monthly, with terms ranging from one to seven years. Loan amounts can vary from $1,000 up to $100,000.

Can You Apply for a Personal Loan While Unemployed?

Yes, you can apply for a personal loan while unemployed. Unemployment isn’t necessarily a deal breaker for personal loan approval. If you have other sources of income, such as alimony, child support, Social Security payments, pensions or annuities, or certain disability payments, for example, you may be able to get a personal loan.Applying for a personal loan typically begins with getting prequalified. Most lenders do a soft credit pull during this stage, so it may be worth it to apply and see if you’re prequalified. If so, you can move forward with submitting your full application.Recommended: Can Small Business Owners File for Unemployment?

Can You Apply for a Personal Loan as a Student?

College students can apply for a personal loan, but lack of a credit history and low (or no) income may present a hurdle to approval. Lenders may see you as a risk because there is not a long record of how you have met your financial obligations in the past.If you’re a student seeking a personal loan, you may want to consider asking a friend or family member to cosign the loan. If they have a solid credit score and regular income, you’ll have a better chance at getting approved. This is because if you fail to make the monthly payments, the cosigner becomes liable.Recommended: Student Loan Refinancing While on Unemployment

Personal Loan Options When Unemployed or as a Student

While you may get a personal loan when you’re unemployed, there could be limitations. 
  • The lender may require you to have a cosigner
  • You may be approved for less money than you asked for. 
  • The term of the loan may be shorter, for instance, 24 months instead of 36 months, because a lender may see this as less of a risk. 
  • You may be approved at a higher interest rate than if you were employed.
Recommended: Understanding Personal Loans for Students

How to Qualify for a Personal Loan with No Income

To qualify for a personal loan, lenders are going to look at your credit, your income, and your debt-to-income ratio. Lenders need to know that you are going to pay the loan back and that you have the funds to do so.If you have good credit, your chances of being approved for a personal loan are higher than if you have poor credit. You’ll also qualify for better rates and terms with good credit.Your income does not need to come from employment. Instead, you can use Social Security income, retirement income, alimony or child support, rental property income, long-term disability, and more. If you don’t have any income coming in, you may need to get a cosigner or put up collateral to back your loan. If you then fail to make the monthly payments, the lender can seize your collateral.Your debt-to-income ratio is the amount of debt you have when compared to your income. Lenders prefer this number to be less than 36%. If this number is low, you have a better chance at being approved for the loan.

Benefits and Risks of Taking Out a Loan While Unemployed

There are pros and cons of borrowing money when you’re unemployed. Assuming you’re approved for a personal loan while unemployed, it will be nice to have funds available to pay bills. However, the loan will need to be paid back and it’s important you can meet your monthly payment obligation.

Benefits of Taking Out a Loan While Unemployed

There can be several benefits to getting a personal loan when you’re out of work, including:
  • You can use the money to pay bills, keep in a savings account for an emergency, or to start your own small business.
  • The interest rate on a personal loan may be less than credit cards. 
  • You can consolidate multiple debts with a personal loan, which can help you save money if you’re approved for a lower interest rate than you’re paying on your credit cards or other bills. It may also simplify your budget by having just one one monthly debt payment instead of several.

Risks of Taking Out a Loan While Unemployed

If you’re considering taking out a personal loan during unemployment, there are some risks, as well, including:
  • If you can’t make timely payments or you miss payments altogether, the potential consequences to your credit can be significant. 
  • If you don’t qualify for a favorable interest rate, a loan may not be helpful in the long run and you might want to consider alternatives.
  • You may not qualify without a cosigner.

Benefits and Risks of Personal Loans During Unemployment

Money to replace missing incomeInability to repay loan without having an income
Possibly lower interest rate than a credit cardCredit can be damaged if the loan is not repaid on time

What Are Some Alternative Options?

A personal loan is a financial tool that can be useful in some situations. However, if you are struggling to qualify, there are alternative options to consider.

Credit Cards

Using a credit card may be one option to consider. The interest rate on a credit card is likely higher than it would be with a personal loan, but credit cards can be easier to qualify for than personal loans. If you do use a credit card, make sure to come up with a strategy for how you’ll pay it off as quickly as possible.

Personal Line of Credit

A personal line of credit (LOC) may be another option to consider. Personal LOCs work similarly to credit cards, but they can offer lower interest rates. Funds from the LOC can be withdrawn, up to the approved limit, and repaid in monthly payments. Interest accrues on any unpaid balance. LOCs generally have a draw period of a certain number of years, followed by a repayment period, during which no more money can be borrowed. Monthly payments continue until the balance is paid in full. 

Home Equity Line of Credit

Another option, similar to a personal LOC, is a home equity line of credit (HELOC) using your home as collateral. Because your home is collateral, interest rates tend to be lower than with other forms of financing. However, this may be the last option some people consider because you risk losing your home if you default on your loan.Recommended: Personal Loans for People on Disability Benefits

Alternative Financial Relief Options for Students

Students who find themselves financially strapped can explore financial aid such as scholarships, grants, work-study programs, student loans, and emergency student aid
  • Student loans can be federal or private, each having their own approval process and pros and cons. It’s important to note that federal student loans offer repayment options and federal benefits that may not be available with private student loans.
  • Federal student aid may also include grants and work-study. 
  • Scholarships and grants are available through community groups, nonprofit organizations, university alumni groups, professional associations, and more. Checking with your school’s financial aid office is a good first step to researching these opportunities that typically do not have to be repaid. 
  • Emergency student aid can help students pay for housing, food, and other essential needs. 

The Takeaway

Funds from a personal loan can be beneficial when you’re unemployed or a student. Understanding the risks and benefits of taking on debt can help you determine whether a personal loan is the best solution for you. Lantern by SoFi can help you compare rates and terms from multiple lenders. In just a few minutes, you can see personalized rates at no charge to you and without affecting your credit.* Check your rate at Lantern by SoFi.
Photo credit: iStock/LumiNola

About the Author

Sheryl Nance-Nash

Sheryl Nance-Nash

Sheryl Nance-Nash is a freelance writer specializing in personal finance, business, and travel. Her work has appeared in Money Magazine, Newsday, The New York Times, Business Insider,, AARP the Magazine,,, among others.
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