Being out of work with no source of income is a stressful and scary season of life. In some cases, individuals are able to live off savings or even unemployment. However, neither of these things will last forever.
So what do you do when your bills are mounting and there’s no income coming in? Well, you may need what’s called an emergency loan.
Is it even possible to qualify for an emergency loan without a job? The answer depends greatly on your credit score and how well you paid your monthly bills, loans, and credit cards when you were employed. If you paid your bills late consistently when you had a job, lenders will feel less confident that you will repay an emergency loan when you have no employment. If your credit is less favorable, you may also be able to rely on alternative income sources such as unemployment benefits, social security, or even spousal support.
The main goal is to show lenders that you can and will be able to repay the loan in the future. Anything that can increase their confidence in their loan being repaid is usually helpful.
Using Your Credit to Get Approved for Emergency Loans
Your credit rating is a major factor in whether you will get approved for any loan when you are without a job. Having favorable credit also allows you a bit more flexibility in choosing loans that have less than predatory terms.
That is because not all loans are created equal. Each lender is different from the next and some might be better for you than others. Before you decide to get an emergency loan, do your research.
You’ll need to find out the terms and conditions of your loan and whether you think you’ll be able to handle them. Know exactly how much interest they charge and how exactly they want you to pay your loan back.
As I said, some lenders have predatory practices and you can end up in a cycle of debt that can be very hard to get out of, especially if you are unemployed which only makes hard matters worse.
Therefore, if you have a decent credit rating, your chances of getting approved for a loan while unemployed increases. It’s never a guarantee but it helps a whole lot.
As a place of reference, typically, a good credit score is 670 or above.
Related: Installment Loans for Those With Bad Credit
How to Use Alternative Income Sources
If your credit isn’t in the position to help you get approved, you will need to rely heavily on using alternative sources of income. This is basically any money that you get on a reasonably consistent basis.
Here are a few alternative income sources that you may be getting:
Unemployment Benefits
Are you receiving unemployment checks every month? Even though this income usually doesn’t replace your total lost employment income, it is income coming in and can give lenders confidence that these checks will help you pay back their loan.
Social Security or Disability Benefits
If you are on Social Security or currently receiving disability benefits, these are predictable payments that lenders can count on coming without fail.
Alimony and/or Child Support
Child support and alimony payments can also be used as alternative income sources outside of employment. If you are divorced, there’s a chance you are periodically receiving alimony payments from your former partner.
Your lender could be satisfied with these alimony payments as regular income. It is not that easy, however. We’ve all heard the stories of spouses that never pay their alimonies on time, or fail to pay them at all. And this also goes for child support payments.
Being able to prove that these payments have been coming consistently is really the key here.
Other Alternative Income Sources
A lender will consider any of these as income:
- Investments like annuities
- Pension
- Rental income
- Inheritance
- Alimony
- Regular payments from a settlement
What Do I Do If I Don’t Get Approved?
If your credit rating isn’t helping to add confidence in your ability to repay an emergency loan and you don’t have many alternative income sources you may only have one other option and that’s to have a co-signer.
There are many things to consider when asking a friend or family member to co-sign a loan for you when you’re unemployed.
The first is that you may be disappointed when many refuse to co-sign out of fear that they will become liable if you’re unable to repay the loan.
The second, and most important is, that if you do not repay this loan you could damage a close personal relationship. Which is all the more reason to be sure that you can get re-employed or increase other sources of income.
Other Ways to Create Income
Increasing income is almost always the best option because it’s money you’ve earned and never have to repay. Therefore, you are in the best position to get ahead.
Related: Free Money Hacks to Grow Your Income Fast
Start a Side Hustle
We are living in the age of the side hustle and it’s never been easier to make income from home doing relatively simple work. If you can carve out a few hours a day and you have special interest or skill, you could turn that into full time income over time.
Just do an internet search of how to start a side hustle and you’ll get a million and one ideas. Just don’t get overwhelmed!
Sell Stuff for Cash
You can also look around you and see if you can make some cash by selling your stuff. This can be anything from your kid’s outgrown clothes, books and textbooks, to pieces of furniture that aren’t used.
There are many apps and Facebook groups that make selling stuff so easy that you could get cash in hand by the end of the day.
Apply for Government Benefits
Along with unemployment benefits, the government also offers various types of assistance programs that may potentially help cover your costs of living. These programs include:
- Supplemental Nutrition Assistance Program (SNAP)
SNAP is a federal nutrition program that can help cover your food costs. Under the program, for qualifying individuals, each month, benefits are given on an Electronic Benefits Transfer (EBT) card, which is used just like any other credit or debit card at locations that accept EBT cards.
- Temporary Assistance for Needy Families (TANF)
The TANF program is a time-limited program designed to provide qualifying families with children when the parents or responsible relatives cannot afford to provide for the family’s basic needs.
Sometimes circumstances don’t allow for emergency loans without a job. You may not have a cosigner, good credit, or additional income. It’s important to know what financial relief is available at this time, from temporary assistance with your bills to federal aid specifically set up for COVID-19.
Keep doing your research to see what options are available, but remember to do your best to keep your financial health intact whenever possible.
