If your debt-to-income ratio is too high, a lender may use this as an indication that you may not have enough income to pay both your debts and your daily expenses.
Your credit is also key for lenders to consider granting you an unsecured personal loan. Lenders will almost certainly check your credit scores and may also consider payment history and other information on your credit reports, such as past bankruptcies or accounts in collections.
The Fair Credit Reporting Act requires credit reporting agencies to maintain fair and accurate information on file that lenders can consider. While strong credit may not fully compensate for a lack of income, it can have a positive impact when you’re trying to get a loan.
Risks of borrowing while unemployed
Obtaining a loan carries risks for both the borrower and the lender in the event of default.
Let’s look at some of those risks before you borrow while unemployed:
Missed Payments: One of the obvious worst case scenarios when you get a loan out of a job is not being able to repay the loan. Defaulting on a loan can hurt your credit, lead to collections, and make an already difficult financial situation even more difficult.
Higher interest rates: If your income is low, you may still be able to get a loan, but you are more likely to have a higher interest rate. Higher interest rates come with higher overall borrowing costs.
Shorter Payment Period: If a lender determines that you are a riskier borrower, you may be limited to loans with shorter payment periods. This is because a lender is less likely to believe that your financial circumstances will change in the short term.
Alternatives to personal loans
Credit cards: You may already have a personal 대출 alternative in your wallet. Some credit cards offer a cash advance as a way to take advantage of your line of credit in addition to regular purchases. Just be careful: credit cards can have high interest rates depending on your credit history, and cash advances often have their own high rates too, so it’s best to pay your balance on time and in full if you use them for short-term needs.
Line of Credit: A personal line of credit works similar to a credit card in that you can add to your balance and pay it off multiple times over the life of the account. You make a minimum monthly payment, paying interest on your outstanding balance and possibly a fee for using the line of credit. If you can qualify, this may be a reasonable alternative.