How to get a hardship loan if you are unemployed

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If you are unemployed, a hardship loan can help you stay afloat financially. (Shutterstock)

If you’re struggling to manage your bills, you may qualify for a financial hardship loan. You can apply for this type of personal loan to help offset financial losses associated with emergencies such as medical bills, car repairs, or home repairs.

If you are unemployed, distressed loans can help you stay afloat until you find another job. Some financial institutions even specialize in lending money to borrowers with lower credit scores or low income. Here’s what you need to know about hardship loans.

Where to get a hardship loan

You can use a hardship loan to cover most household expenses, including bills, groceries, rent, and utilities. Since many financial hardship loans have shorter repayment terms, you should only take out what you need.

Applying for a financial hardship loan is quick and convenient, and you have several lender options.

Online lenders

Completing an online application is the quickest option when applying for a hardship loan. You can complete the application at your convenience, and it usually only takes a few minutes. If you apply later in the day, you may have to wait until the next day to finalize some details. Many online lenders offer financing in as little as 24 hours from loan approval. But some lenders may take a few days to process the application and deposit the loan funds.

Visit Credible for quick and easy compare personal loan rates from various lenders, all in one place.

Banks and credit unions

While online lenders may be more convenient, it might be easier to borrow from a bank or credit union if you’re unemployed or struggling with your credit. Applying to your current bank or credit union may make eligibility easier, since you have an existing relationship with them. Ask a loan officer at your bank or credit union to see if they offer hardship loans.

Can you get a hardship loan if you are unemployed?

It is possible to obtain a hardship loan if you are unemployed. But without a regular salary, you may need to provide proof of other income, such as unemployment benefits, retirement income, child support, alimony, or social security payments.

Some lenders have minimum income requirements as low as $12,000 per year, while others do not set a specific minimum income. If you have sources of income other than employment, you may still qualify for one of these loans.

These credible partner lenders have no minimum income requirement:

  • best egg
  • LibertyPlus
  • happy money
  • loan club
  • Prosper

Alternatively, you may be able to find help from a national program or local nonprofit organization that offers emergency financial assistance. Some organizations to consider include:

Types of hardship loans

Several types of distressed loans are available, and each has advantages and disadvantages. Understanding how they work can help you choose the best one for your situation.

Loans for bad credit

Bad credit loans are personal loans that some lenders give to people with lower credit scores. The FICO credit scoring model classifies scores below 580 as poor and between 580 and 669 as acceptable.

Lenders who offer loans for bad credit know that borrowers are at a higher risk of not paying their debt. If you are approved for a loan with bad credit, you will likely receive a higher interest rate to offset the lender’s risk. You will also have fewer loan options as many lending companies have minimum credit score requirements.

You may consider asking a trusted friend or family member to co-sign for a loan if you cannot qualify on your own. Adding a co-signer with good credit to your loan application can increase your chances of being approved and receiving better rates.

Secured Personal Loans

To get a secured personal loan, you will need to provide collateral, such as your home, vehicle, or other valuables. You can use a secured personal loan for various purposes, including debt consolidation.

Secured loans can offer lower interest rates than unsecured loans personal loans since your warranty makes you a lower risk. You may also qualify for better repayment terms and a higher loan amount with a secured loan. The biggest drawback is that you could lose your guarantee if you don’t meet your payments.

Coronavirus Hardship Loans

Coronavirus hardship loans were introduced during the COVID-19 pandemic to help people who have lost income due to job loss, illness or inability to work when the economy has stopped. These hardship loans generally have shorter repayment periods and lower interest rates. Sometimes the loans include deferred payments. These loans are available from many online lenders, banks and credit unions.

The advantage of a coronavirus hardship loan is that the interest rate may be lower than what you would typically be entitled to, and you may still qualify if you are unemployed. The downside is that the loan amounts may be lowerrepayment times are often shorter, and you may still need to provide proof of an alternative source of income (such as unemployment or retirement).

How to apply for a hardship loan

When you’re ready to apply for a hardship loan, here’s what you need to do:

  1. Collect information. Before applying for a loan, make sure you have all the necessary documents. Even if you are unemployed, you may need to provide proof of income or proof of unemployment. You must also have proof of residence and an identity document on hand.
  2. Compare rates. Compare rates from several lenders. Although you may have higher rates because lenders view unemployment as a higher risk, you can still save money by finding a lender with the best terms for your situation. Don’t be afraid to shop. If multiple lenders pull your credit score in a short time, the credit bureaus will likely group them together to limit the impact on your credit score.
  3. Complete your application. Once you have chosen the lender you wish to work with, complete the application. If your credit is questionable, consider adding a co-signer. A co-signer with a great credit score and a stable income might make it easier to get a more affordable loan.
  4. Finalize the loan documents and wait for the funds. After approval, your lender can deposit your loan funds directly into your bank account. You may have to wait a few days, depending on the loan approval date and the lender’s processing times.

Credible, it’s easy to view your prequalified personal loan rates without affecting your credit.

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