Is There A Loan Option For Unemployed Individuals?
Due to the COVID-19 pandemic, so many individuals lost their job. Some may have already returned or found a new one, but some may still be unemployed up to this moment. Even if you do not have a job, you still need to continue paying your obligations and buying your needs.
But how would you do that if you have no source of income? One solution is to acquire a loan.
However, you may ask if you will qualify for a loan giving your current situation. Is there a loan option available for unemployed individuals like you?
Of course, there is. Here are the loan options that you can acquire even if you are currently unemployed.
Personal Loan
A personal loan is designed to cater to both employed and unemployed individuals. Personal loans have different variants: unsecured, secured, consigned loans, and many more. If you are unemployed, a secured personal loan would be the best for you.
A secured personal loan requires collateral from unemployed applicants. Collateral is used as insurance for the lender just in case the borrower defaults. You can also take up a personal loan against your investment or retirement fund if you do not want to offer your assets as collateral for your loan.
Aside from unemployed individuals, a secured personal loan is also best for individuals with bad credit scores. However, the scale of borrowing individuals today has increased due to the COVID-19 pandemic, so lenders are very cautious in approvals of applications. Due to the given circumstance, it is best to talk to the lender first before you jump in and apply for a loan on a specific lender, as it may only hurt your credit score if you get denied.
Only push through with your application if you feel that you have a good chance of being approved by the lender. Remember, you are currently unemployed, which puts lenders at risk in lending you the money.
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Emergency Loan
Unemployment benefits are one of the options for you as an emergency loan. During your employment, a portion of your salary is spent on funding your unemployment insurance. This insurance will assure you to be eligible for various unemployment benefits in case you lose your job.
If you lose your job and it is not your fault, you are eligible for unemployment benefits under your unemployment insurance. One of the benefits you can get through unemployment insurance is a weekly paycheck that will be enough to cover all your needs.
Car Title Loan
If you own a car, you can acquire a car title loan. The lender will use your car title as collateral for the loan they are giving you. Make sure that your car title is not tied up on a lien from the bank.
A car title loan is a clear option for you at this moment. However, you should only acquire this type of loan as a last resort after being unsuccessful by other loan options you can opt for. The Federal Trade Commission or FTC strongly discourages the public from taking this type of loan if possible.
The APR of a car title loan is usually high due to additional fees lenders impose, including a monthly charge for financing the loan. The car title loan might help you go through your financial dilemma today, but it may add to your future problems.
HELOC (Home Equity Lines of Credit)
HELOC is where you can acquire a loan within an agreed term and use your home’s equity as collateral. This is also referred to as a second mortgage. Home equity is secured against the value of your home’s equity, which is why lenders are willing to give you a low-interest rate than other loan options.
If you choose a second mortgage, you must remember that you are giving lenders the rights to your property in addition to the first mortgage lien in case you default. Make sure that you do not repeatedly borrow money against your property as it may increase the risk.
If you only need a small amount of loan, HELOC is not advisable for you. Only go for this option if you need a large amount of cash, such as financing a business, as most lenders will only give you a loan for $25,000 and up. You also need to consider all the closing costs, such as the origination fee, processing fee, recording fee, and appraisal fee.
All types of loans are an addition to your financial obligation, but sometimes it is necessary to take one due to personal reasons. If you are determined to acquire a loan to temporarily support you, it is best that you also look for another source of income that will help you in the future if your loaned money is exhausted.
Takeaway
There are still so many loan options for you, even if you are unemployed. However, you need to choose the one that will not put you at too much risk or eventually drown you with debts. Do your research and study each option to make sure you are going for the one that will help you and not worsen your situation.
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