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Lending Qualification Considerations
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Will Unemployment, Irregular Income or Benefits Affect Your Borrowing Eligibility?

Borrowing can present a Catch-22 to earnest consumers simply looking to get ahead: in order to qualify, an applicant usually needs to provide proof of a sufficient income in the form of a paycheck every two weeks. This is where the problem lies. If you were living comfortably with a decent income and consistent paychecks, you likely wouldn't need to borrow, would you? As the unemployment figures remain stubbornly high, more consumers than ever are looking for short-term financial solutions to their budgeting issues. So the next question to ask: Can I qualify for a short-term loan without a job? This is a tough one because the service is targeted towards those who receive a paycheck at least every couple weeks. After all, without a payday, there can't be a loan. However, don't let this get you down because there are some actions you can take to ensure you get the money you need to help you get by.

Here are Some Steps You Can Take

Unlike the approval process associated with secured lending services offered by most banks and credit unions, qualifying for an unemployed loan might take a little extra effort since you don't have a paycheck to back it up. Look at it from the lender's point of view: offering money to somebody without an income can be a risky proposition. What are the chances the provider will get their money back? As you can see, there are plenty of reasons why they wouldn't encourage unemployment lending products due to the risk element. They can also present a risk to you as the consumer as well. It is a risky decision to take on more debt and dig deeper into a financial pit. The first question you should ask yourself when thinking about contacting a lender is if it is even necessary. Also, you should think about contacting current lending companies you owe money to in order to see if you could make alternate payment arrangements until you get back on your feet. Also, consider borrowing money from a family member or trusted friend as you could likely negotiate a better interest rate, if they charge it at all. If you are seriously struggling and don't know how you can take control of your current financial situation, there are several options you can explore:

  1. The first thing you want to look into is an unemployed loan option that is similar to secured counterparts. In order to receive this type of advance, you have to be eligible for unemployment benefits. Many states now disperse benefits to recipients' bank accounts using directly, instead of mailing out a check. This means if the funds are deposited into your checking account that is tied to a debit card, you can use this balance to secure a cash advance. If approved, the amount you borrow plus any applicable fees would be automatically withdrawn on the day of your next unemployment payment. If you belong to a state that mails benefit checks, the process might be a little more complicated for you. The first step would be to find a company that is willing to work with benefit checks as collateral. A potential downside is that you may be limited to receive the amount of your weekly benefit in advance, which likely isn't a very significant source of income.

  2. Another option to explore is the traditional secured loan we mentioned earlier. This will definitely require some sort of collateral, hence the name. By providing something of value as collateral, the lender will still be able to recoup some (or all) of the funds they let you borrow. If you own a home, you may want to use this. If you own a vehicle, this might work as well. Many providers will accept a car or truck as collateral, if they are a newer model. You might also be able to use a transferrable life insurance policy. When it comes to collateral, whatever you use must have a certain amount of equity in it. This means you will have had to pay into your mortgage or car payment for a while in order to qualify. If you decide to apply for a secured lending option, make sure you do so with caution as there can be serious repercussions if your employment situation doesn't improve in the near future. You certainly want to lose any valuable possessions because you weren't able to pay back what you owe.

  3. Let's say you don't have any collateral to offer. You still might be able to get the money you need through a short-term loan, if you can find somebody who has a steady income and favorable credit score who is willing to co-sign on your application. Lenders used to place more of an emphasis on the income of the co-signer but they have recently moved towards using equal consideration of income and credit histories of both the applicant and the individual that is co-signing. This means if you aren't currently employed, you will likely have to have a pretty solid credit score in order to qualify. It is also risky for the person co-signing because if you can't get a job and repay the amount owed, they are responsible for it. As you can see, there are some serious considerations to be made when you are looking to borrow while unemployed.

Can I Qualify for an Advance if I have an Irregular Income?

Sure you can! Most providers don't generally care if your earnings are irregular or not, just so long as it is regular enough that you can (and have) depend on it to arrive at a set time in the future. If you are in sales, for example and you receive a commission check or disability benefits only, the provider will want to know how much your benefits have averaged recently and limit your approved amount to that average. If you receive base plus commission, that will increase the amount they are willing to extend to you, but you should always remember to use these services responsibly.

On the other hand, if your 'irregular income' means that you only get paid every so often for whatever reason, getting approved for advanced funds in an emergency can be fairly difficult, as the general means of the service is for you to provide them a check to hold until 'payday' which is a specified date in the near future (usually within 2 weeks). If you establish a date like that with a payday lender and do not actually get paid on or before that date to enable them to deposit that check - you could find yourself facing some serious fees. So while it may be possible to convince a provider to lend you money until your next payday, if you are the slightest bit unsure of whether you will actually get paid on the agreed date, you're probably much better off arranging to get the money through other means such as borrowing from family or friends. Also, remember that responsible budgeting entails making sure you do not overestimate your ability to repay the amount owed.

Can I Borrow While Receiving Disability or Other Benefits?

Some lenders consider disability payments and Social Security payments a source of income. That said, it is ultimately the decision of the specific provider. As a part of our free matching service, we work with a wide variety of companies to give you the best chance of qualifying for funds before your next paycheck. As you can see, you have a great advantage when applying through us. Our competitors may only be working with one or two lenders with stringent lending guidelines.

Common Types of Disability Benefits

The Social Security department outlines two of the most common types of benefits for people with disabilities. First, Social Security Disability Insurance will pay benefits to disabled individuals, those on long term disability and certain family members if the recipient(s) are insured under the program. To qualify, the disabled recipient must have worked a certain period of time and paid Social Security taxes throughout that period. The second common type of disability payment is known as Supplemental Security Income. This benefit is paid out on a financial need basis. It is meant to provide assistance to aged, blind, and disabled individuals with limited earnings.

What to Specify When Applying

When applying, be sure to specify your disability or Social Security payments as income. You may be required to include proof of income by faxing your award letter to the provider you are dealing with. This requirement varies from state to state. If you are approved, it is recommended that you pay off the balance in a timely manner. Most individuals strive to pay off their amount owed by the next payday, or when a disability benefit is received. Consider other types of supplemental earnings that can be included on your application. Even if you work part-time or seasonally, reporting this will make it easier to get qualified for the service.

How You Can Survive Financially for the Time Being Without a Job

Once you've found out that you could potentially unemployed for an extended period of time, you should immediately examine your finances. Figure out where you're spending your money and how you can cut back. In this situation, it's always best to hope for the best, but prepare for the worst. That means you should plan your budget out for several months with the mindset that you'll be unemployed. With any luck, you'll find a new job right away and won't have to worry about it. Obviously, this is not the time to be making any major new purchases. New computers, clothes, televisions, or anything else can wait for now. Unless it's completely necessary, you should really avoid purchasing anything at all. It should probably go without saying, but you should also avoid taking on any new forms of debt while unemployed.

In every state, there are a number of government unemployment benefits available. It's very important that you take advantage of these while they're still available. Low rate loans, unemployment compensation, and even free training are just a few of the government benefits in some states. If you don't have much savings or any type of funds coming in, you'll need to find other ways to get by. For instance, there are many companies that pay people to give blood or plasma. You can also look for clinical trials or product testing in your area, many of which allow you to keep the product you're testing. While these types of odd-jobs don't pay too much, any extra money is worth your time.

We all know how much interest can accrue on a large amount of debt if left unchecked, but now isn't the time to deal with it. When you're unemployed, it's best to just make the minimum payments on all of your debt. You could even ask your lender to freeze your debt for a couple months, so that it doesn't accumulate interest. If you have some outstanding unsecured borrowing debt, contact your provider immediately to work out some type of repayment plan. It may not sound like an appealing prospect, but don't give up on the idea of finding part-time work, even if it's not the most glamorous or highly paid job. Having at least some form of income allows you to stretch your savings out for as long as possible. If you can find something that's in your general job field, this might even be more desirable.

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