Being unemployed is often not a matter of choice, but it happens due to some unfavorable circumstances. At some point, everyone can get fired, have trouble finding a new job, or simply be between jobs. It’s human nature to always strive for color, but unforeseen things can lead you astray.
And not having a secure income can shake someone’s ground under their feet in a financial and psychological sense. Even if you have some savings to help you get through this period more easily, difficulties may arise. That’s probably why most people think that borrowing money right now is not the smartest thing to do.
Regular income is one of the things lenders look for when you apply for a loan. Without that, approval is a big question mark, even if your credit history is excellent and your score is high. Simply, without income, a red alert goes off to employers that you may not have enough cash to pay your obligations on time, so they will most likely reject your application.
But it does not have to be that way. Options are there, although your choices may be limited. Lenders can give you lån uten inntekt despite not being employed, as it doesn’t mean you have no income at all. But it is definitely necessary to think carefully about this decision.
What Is a No-Income Loan?
Some lenders are willing to lend money to borrowers without regular income from employment. As said, that does not mean that these people are without any cash flow, because there are other sources of income, such as renting real estate, various kinds of benefits, and non-standard forms of employment such as freelance or on a project basis.
What matters for these loans is that, in most cases, they are secured by some means. That makes sense, given that borrowers don’t have an income that can guarantee regular loan repayment. That’s why lenders need to secure their interest in case of possible default. Thus they need something to use to settle potential loss if they don’t get their money back.
Another option for people without regular job income is to add a guarantor or a co-signer to their loan application. It means that someone else undertakes to repay the debt on your behalf if you fail to do. This arrangement represents a big risk for the co-signer, so always choose people you trust and make sure that your obligations don’t fall on them.
However, some lenders might offer unsecured loans to the unemployed, but with a remarkably high-interest rate. These can be cash advances or something like a payday loan, with a short repayment term and fairly high APRs (up to 1500%). These are usually reserved for people on benefits because even though it is not income from salary, these payments are relatively regular and secure for the lender.
How to Qualify for No-Income Loan
When you do not have a job, your financial stability can be threatened if you do not have another source of income. These payments can include several types of benefits, alimony, disability pension, inheritance, rental income, or any other regular revenue you receive. Any of that is a good sign to the lender that you can afford a loan, despite unemployment.
If this income is not enough or you do not have it at all, lenders will ask for collateral. Besides “standard” loan guarantees such as real estate, cars, or works of art, your savings or retirement account can also serve as a loan guarantee. The latter would mean that you’re “borrowing from yourself,” which can be both good and bad, as seen here.
Credit Score Requirements
Besides the above requirements, you should have at least a good credit score for your application to be approved. If you are 580 or higher, you can apply for unsecured loans that do not carry the risk of property loss, as that could happen with secured loans in case of payment difficulties. Credit score requirements vary depending on lenders, but, in general, the better this parameter, the better your chances for approval.
Some lenders also work with bad credit borrowers, which gives a chance to those who made some mistakes in the past, which are now reflected in their below-average credit scores. Of course, it is always a better option to work on your credit score before borrowing money. But if that is not possible because you need cash urgently, you have to agree to the lenders’ conditions, which are not favorable at all.
In addition to a good credit score, you should not have bad marks on your credit report. It is also desirable that you have a good history of managing previous loans and no bankruptcy claim, at least not during the last year. Also, do not make several loan applications at once. Besides making you seem desperate; it could hit your credit score hard.
How to Choose No-Income Loan
Your decision to borrow money is final; now is the time to start looking for the most favorable offers adapted to your financial situation. Certainly, the first step is to find lenders that offer no-income loans. These can be banks, credit unions, or various online providers.
Look for lenders who can lend you as much money as you need. In general, you cannot apply for large amounts if you do not have a regular income, but you can ask for several tens of thousands of dollars. Finally, check the lenders’ eligibility criteria to see what your odds for approval are.
Compare Lending Terms
When comparing loans, the most important item is their total costs. It is a sum of principal and fees, which you repay through monthly installments. Interest plays a key role here, and this rate depends on your risk assessment, whether you pledge collateral, and how much money you ask for. In any case, the lowest you can get is a few percent if you are lucky, but the average is 15 to 20% APR.
Another thing you should compare is repayment periods. They can range from a few months to a few years, depending on the amount you need and your plans. If there is a chance to settle the debt earlier, and you can pay a slightly higher interest rate, decide for a short term. If you do not want to put an additional burden on your already slim finances, a longer repayment is a better solution.
Reasons to Apply for No-Income Loan
Without a regular income, you probably have a lot of trouble balancing upcoming expenses with your budget. If you are overwhelmed by paying rent, mortgage, or everyday expenses, any financial help is welcome.
In general, when you borrow money, lenders ask you why. It is not a deciding factor for them, but it shows whether you are borrowing according to your capabilities. It is not a good sign if you apply for a loan because you want to go on a fancy vacation but have financial difficulties.
Alternatives to No-Income Loans
If you have reviewed your options and realized that a no-income loan may be too much of a risk for you, you may be thinking of giving up. But other options may be less costly than getting involved with lenders. To begin with, you can ask relatives and friends to lend you money.
That is certainly the most favorable option because such loans don’t carry any interest or additional costs but are the goodwill of your loved ones to help you. Still, that doesn’t mean you should be too relaxed, but you should act responsibly towards it as with any other debt.
There is an option to do casual jobs that offer daily payoff, like rideshare driving, baby or pet sitting, or daily room renting, if you have any spare. That can be a good temporary solution while looking for a permanent job.
If you have managed to build some equity in your home, it’s possible to apply for a special line of credit – HELOC. It’s not the same thing as a home equity loan, as you don’t get a lump sum but a credit limit. You can use it to the maximum, but it’s highly desirable to borrow only as much as you need and pay it off regularly, like credit cards.
When unemployed, you don’t have much choice when borrowing money. You can choose between a few arrangements and fit them into your slim budget. In the meantime, you should put extra effort into securing a steady job and regular income to improve your finances in the long run.