If you find yourself out of work, you’ll discover in short order that being unemployed is usually followed closely by a cash flow problem. If you were caught unprepared, you’ll probably be looking for a way to rectify your cash insolvency problem quickly. Like most of us, the thought of a short-term loan probably comes to mind. The only problem is that most loan companies don’t want to lend you money when you don’t have a job. So what are your options?
Even unemployed, there are options available to you. If you’ve taken steps to secure your net worth for retirement, there could be help for funding a loan there. Rather than run the risk of devastating your retirement savings, however, you may be able to take advantage of some loans specifically designed for unemployed individuals.
This type of loan may be an option if you have good credit. You may be able to procure a loan from a lending company, credit union or bank that can help you in the short term. If your credit reflects a good history and you have a relationship with the bank, they may be able to loan you funds even if you are unemployed. You can also approach family or friends for a helping hand.
Interest rates for personal loans will vary between lending sources. The current market rates are variable depending on your credit history. For a loan graded “A,” you may find interest rates as low as 5 to 8 percent. As your credit scores declines, the available interest rate options increase. If you fall into the lowest credit score levels, you may be looking at interest rates as high as 28 to 36 percent. You can talk to your personal banker or lending institution, or go through an online lending group
This type of loan is designed to help someone who is unemployed get past an immediate but short-term financial situation. These loans are generally short-term loans, meaning they are expected to be paid back within a short amount of time. A typical period for the loan may be as short as three months. Most companies who offer this type of loan do require that the applicant be over 18 years of age. A valid bank account is also generally required.
This type of loan can be accessed easily through online websites that make direct electronic deposits into your existing bank account. These websites frequently provide you with a listing of available lenders willing to provide you a loan regardless of your employment status. There are storefront businesses in most cities offering payday loans as well. But keep in mind that the interest rates for these types of loan tend to be on the higher end, up to 30 percent or higher!
Car title loans
If you own your car, then you have an asset that can be used to help you through your tough situation. A company that offers loans against your car’s title can get you the money you need in a short amount of time. With this type of loan, you retain the use of your vehicle so you can continue to look for work. The repayment schedule will be worked out at the time the loan is made. You must own the car with a clear title and the vehicle can be no more than 10 years old.
With this type of loan, the interest rate can be on the high side. Companies providing these loans can charge interest on a monthly basis in most states, with rates as high as 25 percent. Be sure to read all the information provided about interest rates on this type of loan before procuring one.
Borrow against your home equity
If you own your home, you may be able to get a home equity line of credit. This is a type of loan that is similar to a credit card that carries a revolving balance. If you’ve built up a decent amount of equity in your home, this could be a way to go for you.
When repaying this type of loan, your interest rates will vary depending on which lending institution you utilize. Your best rate will probably come from your local bank or credit union. If you prefer to obtain this type of loan through an online lending service, interest rates may vary from 3 percent to 12 percent.
Borrow against your life insurance
You can also try contacting your life insurance company. Many life insurance policies carry a cash value that can be drawn down if you need it. Talk to your bank or credit union for advice on these possible courses of action.
With this type of loan, you may be charged interest on repayment of the amount borrowed. The rate of interest may vary from 5 to 9 percent. Some insurance companies will simply charge an upfront fee then deduct the borrowed amount from the payout when the policy is probated. Check with the agent who issued your policy.
All of these options do come with risks. Borrowing money means you have to pay it back, of course, and seemingly “quick fix” loans can get very expensive you’re not careful. Before getting any loan, do your research to make sure you’re not inadvertently turning a short-term problem into a long-term disaster.
For guidance on staying afloat while you’re unemployed, check out this resource by the Chicago Tribune.