5 Loans for the Unemployed With Bad Credit

Being unemployed makes it harder to qualify for a personal loan, and bad credit can limit your options even further. But you don’t necessarily need a traditional job to get approved. Some lenders accept other reliable sources of income.

The bigger question is whether you have enough income to repay what you borrow. Social Security benefits, disability payments, retirement income, or self-employment earnings may help you qualify, although each lender has its own requirements.

We reviewed five lending services that may be worth considering if you’re unemployed and have bad credit. We’ll explain how they work, what lenders look for, and how to avoid expensive loans that could make your financial situation worse.

Can You Get a Loan While Unemployed With Bad Credit?

Yes, you can qualify for a personal loan while unemployed, even with bad credit. However, most lenders still want proof that you have enough reliable income to make your monthly payments.

Employment status and income aren’t the same thing. Someone who doesn’t have a job but receives $2,500 a month in retirement benefits may qualify for a loan that someone with no regular income couldn’t get.

Your credit history also matters. A low credit score can lead to higher interest rates, smaller loan amounts, or fewer offers. Some lenders may decline your application regardless of your income if your credit history doesn’t meet their requirements.

If you have no income at all, an unsecured personal loan will be much harder to obtain. In that situation, it may be better to explore financial assistance or payment arrangements before taking on additional debt.

5 Best Loan Options for Unemployed People With Bad Credit

Several online lending services accept requests from borrowers who don’t have traditional employment income. However, they don’t all work the same way.

Upstart facilitates installment loans through partner financial institutions. The other four services connect applicants with lenders, and some of those lenders offer expensive short-term loans.

Here’s how the five options compare.

What Income Can You Use to Get a Loan Without a Job?

You don’t always need pay stubs from an employer to qualify for a personal loan. Some lenders accept other documented income sources if they provide enough money to cover your existing expenses and the proposed loan payment.

The income sources a lender may consider include:

• Social Security benefits: Regular retirement or disability benefits may qualify as income, subject to the lender’s requirements.
• Disability payments: Some lenders accept qualifying disability benefits as a dependable income source.
• Retirement income: Pension payments, retirement account distributions, and other recurring retirement income may count.
• Self-employment income: Freelance work, contract jobs, and business earnings may qualify if you can document consistent income.
• Rental income: Some lenders consider regular rental payments, although they may require tax returns or other records.
• Alimony and child support: You may choose to disclose these payments if you want a lender to consider them as income.
• Unemployment benefits: Some lenders may consider unemployment compensation, but its temporary nature can make qualification more difficult.

Not every lender accepts all these sources. For example, Upstart has specific requirements for self-employment and rental income, and it doesn’t let applicants count a spouse’s income as their own.

A lender may also consider how long your income will continue. If your unemployment benefits expire in two months, a lender may be reluctant to approve a loan that requires payments for several years.

How Lenders Evaluate Loan Applications From Unemployed Borrowers

Lenders want to know whether you can repay a loan, regardless of where your income comes from. Your credit history matters, but it isn’t the only factor they review.

The most common considerations include:

• Credit score: A higher credit score generally improves your chances of qualifying for favorable loan terms. A low credit score can limit the lenders willing to work with you.
• Payment history: Missed payments, recent charge-offs, defaults, and other negative information on your credit report may affect approval.
• Income stability: Lenders may review how much you receive, how often you receive it, and whether that income is expected to continue.
• Debt-to-income ratio: This compares your monthly debt payments with your gross monthly income. A high ratio suggests that another loan payment could strain your finances.
• Loan amount: A smaller loan may be easier to qualify for if the monthly payment fits your income and the lender’s requirements.

For example, someone who receives $2,000 a month and already owes $800 in monthly debt payments has a debt-to-income ratio of 40%.

That doesn’t automatically disqualify the borrower, but it leaves less room for another payment. You can learn more about how lenders measure this in our guide on how to calculate your debt-to-income ratio.

How to Apply for a Personal Loan While Unemployed

Before you submit an application, make sure you have the information needed to show that you can afford the loan. An organized application can help prevent delays, but it won’t overcome a lender’s eligibility requirements.

Here are five steps to follow.

1. Calculate your current income: Add up the income you regularly receive from benefits, retirement payments, self-employment, or other sources. Don’t count income you aren’t reasonably certain you’ll receive.
2. Gather proof of income: Collect recent bank statements, benefit award letters, tax returns, or other documents that show where your money comes from.
3. Check lender requirements: Look for lenders that may accept your income source and credit history. Review state restrictions, minimum income rules, and any checking account requirements.
4. Compare loan offers: When possible, check potential rates before submitting a formal application. Some lenders use a soft credit inquiry for prequalification, but you should confirm the credit inquiry policy before you proceed.
5. Review the loan agreement: Check the APR, fees, payment amounts, repayment dates, and total repayment cost. Only accept a loan if you can realistically make every payment.

Be careful with any company that promises guaranteed approval before reviewing your finances. A legitimate loan offer should clearly explain how much you’ll receive and what you’ll owe.

How Much Does a Loan Cost When You Have Bad Credit?

The cost of a loan matters especially when you’re unemployed. A monthly payment that looks affordable now could become difficult to manage if your income decreases.

When you compare offers, look beyond the advertised interest rate. These details will tell you more about the actual cost:

• APR: The annual percentage rate accounts for interest and certain loan fees. It’s generally the most useful figure for comparing the cost of different loans.
• Origination fees: Some lenders deduct a fee before sending your loan proceeds. You may receive less than the amount you borrow.
• Loan term: Longer terms can reduce your monthly payment but may increase your total interest expense.
• Late fees: Missed payments may result in additional charges and damage to your credit history.
• Prepayment penalties: Some lenders charge these fees, although many personal loans have no penalty for early repayment.

Personal Loan vs. Payday Loan Cost Example

Consider two hypothetical ways to borrow $1,000.

Loan Detail	Installment Loan	Payday Loan
Amount Borrowed	$1,000	$1,000
Borrowing Cost	30% APR	$15 per $100 borrowed
Repayment Period	12 months	14 days
Payment	About $97.49 per month	$1,150 due after 14 days
Total Repayment	About $1,169.85	$1,150

The installment loan example assumes a fixed rate and no additional fees. The payday loan example assumes a single $150 finance charge with no renewal.

Although the payday loan costs less in total dollars in this example, it requires you to repay the entire $1,150 in just two weeks. Its short repayment period creates an APR of nearly 400%.

That’s a serious problem if you’re unemployed and don’t have enough money to cover the full payment. The Consumer Financial Protection Bureau’s explanation of payday loan costs shows how quickly these fees can add up.

The two examples have different repayment periods, so they aren’t interchangeable financing offers. They illustrate why you need to compare both the total borrowing cost and the timing of each payment.

Risks of Payday Loans and Short-Term Loans With Bad Credit

Payday loans and other high-cost short-term loans can be especially risky when you’re unemployed. They may provide quick access to cash, but repayment can become difficult if you don’t have a predictable source of income.

Many payday loans require full repayment within a few weeks. If you can’t cover the payment, you may have to choose between paying the lender and covering basic expenses.

In states that allow loan renewals, some lenders permit borrowers to extend repayment for an additional fee. The problem is that you may pay more without reducing the original amount you owe.

Other high-cost loans may stretch repayment over several months. Smaller payments can look easier to manage, but an expensive installment loan can still cost hundreds or thousands of dollars in interest.

Before accepting a short-term loan, calculate whether you’ll have enough income left for housing, food, utilities, transportation, and your other obligations.

If you can’t afford those expenses after the loan payment, borrowing could leave you in a worse financial position.

Alternatives to Personal Loans When You’re Unemployed

If you can’t qualify for a personal loan or the offers are too expensive, you still have options. Some alternatives may help you cover an immediate expense without committing to another high-interest loan.

Consider these possibilities before borrowing against your home, vehicle, or other important assets.

Credit Union Payday Alternative Loans

Some federal credit unions offer payday alternative loans to eligible members. These loans are designed to provide smaller amounts of money at lower costs than many traditional payday loans.

Federal credit union payday alternative loans can carry interest rates of up to 28%, subject to program rules. Loan amounts, terms, and eligibility requirements depend on the type of program and the credit union.

You may need to become a member or meet other requirements before applying. Check with local credit unions to see which programs they offer and whether your income qualifies.

The National Credit Union Administration provides more information about payday alternative loans.

Payment Plans and Hardship Programs

If you need money for an overdue bill, contact the company you owe before taking out a loan. Some utility providers, hospitals, landlords, and other creditors may offer payment arrangements or temporary hardship assistance.

A payment extension could give you time to catch up without the interest charges that come with a new loan. Ask about fees, account restrictions, and whether the arrangement affects your existing account.

Local Financial Assistance Programs

Community organizations and government assistance programs may help with food, rent, utility bills, transportation, or other basic expenses.

You can call 211 in many parts of the United States to ask about local assistance programs. Eligibility varies by location, household income, and the type of help you need.

Loans From Family or Friends

A family member or friend may be willing to lend you money without the interest rates and fees charged by commercial lenders.

Make sure both sides agree on the loan amount, repayment schedule, and what happens if you can’t pay on time. A simple written agreement can prevent confusion and protect the relationship.

Credit Card Cash Advances

A credit card cash advance may provide emergency cash if you already have an account with enough credit.

However, cash advances usually come with transaction fees and higher interest rates. Interest also often starts immediately, without the grace period that may apply to regular purchases.

Our guide to credit card cash advances explains how these charges work. This should generally be a last-resort option rather than your first choice.

Frequently Asked Questions

Can a new job offer help me qualify for a personal loan?

Yes, some lenders accept a signed employment offer as proof of future income. They may require the letter to state your salary and start date. However, not every lender accepts future employment income, and approval still depends on your credit history and other financial information.

Can a cosigner help me get a personal loan while unemployed?

Yes, a cosigner with good credit and reliable income may improve your chances of approval if the lender allows cosigners. However, the cosigner becomes legally responsible for repaying the loan if you can’t make payments. Missed payments could also damage both of your credit scores.

What happens if I become unemployed after taking out a personal loan?

You’re still responsible for making your loan payments if you lose your job. However, some lenders offer hardship programs that may temporarily reduce or postpone payments. Contact your lender before missing a payment to discuss your options and any additional interest or fees.