Select breaks down a few things to know about applying for a personal loan if you’re unemployed.
The Covid-19 pandemic increased the financial strain on many individuals and families who lost all, or part, of their income as a result of being furloughed or laid off. But regardless of your employment status, there are some expenses you can’t avoid even when times are lean.
Maybe you’ve decided to take entrepreneurship by the horns, but it turns out that starting a small business is more expensive than you initially thought. Or perhaps a costly home repair crashed into your lap, and it’s beyond what your emergency fund can handle.
Whatever the reason, a personal loan can be a useful tool when it comes to getting the money you need for expenses that you otherwise may not be able to cover immediately. But much like any other financial product or service, personal loans are not without their own set of considerations that potential borrowers should keep in mind.
Select spoke to financial wellness educator Danetha Doe to break down what you need to know about getting a personal loan if you’re unemployed.
How do you apply for a personal loan?
First and foremost, you’ll need to figure out how much cash you need to borrow since with a personal loan, you’ll borrow a fixed amount of money, says Doe.
If you’ve lost your job and you’re considering taking out a personal loan to cover lost wages, consider how much you actually need to live on. Doe recommends you multiple your total monthly expenses by the number of months you think it will take to find a new job. This way, you can apply for a loan with that total amount in mind.
Before you head to a lender, look through your credit report to make sure that everything looks accurate and you know your credit score. In the event that something on your credit report doesn’t look right, you’ll want to dispute the error before applying for a personal loan.
Knowing your credit score can help you shop around for lenders you know you will qualify for. Some lenders like have online tools you can use to figure out if you would qualify for a personal loan without putting in a full application.
Select also has a comparison tool that allows you to review different loan offers. You’ll need to answer 16 questions, including your annual income, date of birth and Social Security number in order for Even Financial to determine the top offers for you. The service is free, secure and does not affect your credit score.
This tool is provided and powered by Even Financial, a search and comparison engine that matches you with third-party lenders. Any information you provide is given directly to Even Financial and it may use this information in accordance with its own privacy policies and terms of service. By submitting your information, you agree to receive emails from Even. Select does not control and is not responsible for third party policies or practices, nor does Select have access to any data you provide. Select may receive an affiliate commission from partner offers in the Even Financial tool. The commission does not influence the selection in order of offers.
Once you’re ready to submit your application, you’ll need to gather up all your paperwork. “You’ll want your most recent paystubs because you’ll have to fill out information on your net income,” Doe says. “And if you’ve moved, you’ll need updated address info.”
And while there are a variety of ways you can use a personal loan – a wedding, a home renovation, debt consolidation, funeral expenses, an emergency expense and more – you’ll usually have to explain how you will use the money when you submit your application.