The unavailability of cash leads to the suffering of unemployed individuals. In fact, in today’s era, being out of cash is a menace. Unemployed people require money, and in such a situation, they remain in a fix. How do they obtain the additional funds to meet their expenses, and from where? Thankfully, loans for the unemployed are now available, which can be of great financial help to unemployed people and help them get out of their worst fiscal situations.
Secured vs. Unsecured loans
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The loans for the unemployed are available in two forms—unsecured and secured.
Secured Loans
With secured loans for the unemployed, you can borrow any amount from $5000 to $8000. The lending company requires collateral to be placed for these loans. However, the duration of these loans is kept flexible and often ranges from 5 to 25 years or so.
The interest on secured loans for the unemployed is usually low for the long term as the money of the loan lending companies or lenders is secured here.
Unsecured Loans
The amount of unsecured loans for the unemployed ranges between $500 and $25000. These loans are unsecured, usually short-term, and can be availed for a given term or period of 1 to 10 years. Now, the interest rate for unsecured loans for the unemployed is quite higher than that for the other loans for the unemployed.
The loan lending institutions usually ask the borrowers to complete a simple application form online in order to collect some kind of personal information about the borrowers, like the telephone number, address, name, current account number, occupation, etc., when they choose to apply for loans for the unemployed.
Loan lending institutions or private lenders authorized to give loans can ask for an active checking account, approximately three months old, to obtain a loan. A checking account is needed as the lending companies need to transfer cash into the borrower’s account.
How to get a Loan If You are Unemployed
Know Your Loan Options
In order to look for a jobless loan, knowing what you have is important. Some loans are types of loans that are available for a person with bad credit or with no credit history at all. These loans may cost more money. If that doesn’t apply to you, then simply search for cheaper loans.
Some of the most common forms of loans include;
- Unsecured Loan: Suits those that can successfully fulfill the requirements of the credits as well as show a certain form of income.
- Secured Loan: Qualify if you have valuable collateral like a car or savings
- No Income, No Assets (NINA) Loan: This loan is usually used to purchase real estate with the expectation of rental income.
- Title Loan: Anyone with a car can use it to qualify for this type of loan. However, these are often extremely high-interest loans with very short payoff times.
- Payday Loan or Cash Advance: These are short-term loans for paycheck earners. They do not depend on credit checks, but they are very costly and come due pretty fast.
- Payday Alternative Loan (PAL): These are available through credit unions for credit union members. They offer longer payback times and are less expensive than payday loans.
- Borrowing from Family or Friends: This is a private loan agreement with someone you know. Be sure to write down the amount borrowed, interest rate, repayment terms, and any penalty so there is no future disagreement over what was agreed.
- Cash Advance from a Credit Card: Generally, you may take out cash if you have a credit card. Although it is often more affordable than other loan types like payday or title, it is still not as expensive.
- Cash-Out Refinance: Refinancing your mortgage might enable you to earn a higher cash payment amount if you own a property. Of course, you will still want a source of income in order to repay your debts.
- HELOC or Home Equity Loan: You lend against the value of your house. Just as you would with cash-out refinancing, you will need to have some sort of income to pay off the loan.
- Debt Management Plan (DMP): This is not really a loan, but you can probably reduce your monthly payments if you are to be placed in debt. A credit counselor will help you come up with a 3 to 5-year plan wherein you will pay for all of your debts in a single, more affordable payment.
Proof of Income
Even when you are unemployed, you may have other means of income that will qualify you for an unsecured loan. Be prepared to produce documents such as current statements or verification of the following:
- Child support
- Alimony
- Pension or annuity payments
- Disability benefits
- Social Security
- Dividends from investments
- Interest income
- Minimum withdrawals from retirement accounts
- Income of your spouse
The ability to prove income stability would be very different. You will probably be qualified for an unsecured loan instead of having to secure it with some asset.
Use Your Collateral
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If the above is not possible due to the lack of sufficient income, utilizing your assets can become a means of securing a loan. Here are some examples of collateral that might be used for consideration by the lender:
- Savings or certificate of deposit
- Car, motorcycles, RVs
- Boats
- Retirement accounts
- Stocks or bonds
- Jewelry, artwork, or collectibles
Talk to Your Bank or Credit Union
Secured loan products may also be more accessible from credit unions and banks. When it comes to unsecured loans, they may also explore non-traditional sources of income. Credit unions are another institution that provides payday loan alternatives, which coincidentally happen to be much cheaper and have better repayment options than traditional payday loans.
Online Lenders
Online lenders work very similarly to banks but might have less stringent qualifications when making loan offers. They may accept other forms of income besides a job. Some lend primarily secured loans, while others lend primarily just unsecured loans. Be sure to shop around so that you get the best for your situation.
Avoid Predatory Loans
Be cautious of extremely high fees or risks attached to the loan. Title loans, whereby you use your vehicle as a guarantee, and payday loans, which have enormous fees and have to be repaid in quick order, are two types of predatory loans. You risk losing your car or getting trapped in bad debt should you not repay.
Make the Right Choice
Carefully consider interest rates and fees before accepting to borrow. Since you may be unemployed, giving a higher risk factor than the lenders would, they might even charge you more in interest. Take some time researching, then decide on a plan that really works well for you to ensure you can afford to pay for future repayments.
Conclusion
Last but not least, loans for the unemployed can be used by the unemployed to meet various expenses. Hence, an essential requirement is that a borrower applying for a loan for the unemployed must be more than 18 years of age and a permanent citizen of the country he or she is applying to be eligible for the loan’s approval.
