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Emergency Loans for the Unemployed
If you are facing limited cash flow in 2020, you are in the company of many. The pandemic has left millions of Americans unemployed, which makes budgets tighter than usual. More than 40% of Americans say they’d have a hard time covering an unexpected expense of just $250. But there is a silver lining. If you need access to affordable financing, we used our SimpleScore methodology to find three of the best emergency unemployment loans of 2020.
Emergency loans during COVID-19
Unemployment remains a major factor as the effects of the pandemic continue. The Department of Labor reports that in December 2020, the unemployment rate has fallen to 6.7%. This is due to the addition of 245,000 jobs into the workforce.
But many former employees are still out of work, particularly people in the restaurant, hotel and retail sectors. The 22 million jobs that were lost at the height of the pandemic are still a long way from being completely recovered, and many experts are predicting that it could take many months or even years to completely rectify.
The federal government has given billions of dollars in financial aid to taxpayers as a result of this virus and has extended unemployment benefits, allowed for new provisions for retirement plan distributions for those affected by the virus and has also spent billions of dollars on finding a vaccine. But this still may not be enough to make up for the lack of income suffered by millions of jobless workers in 2020. Many people who are unemployed may therefore consider getting an emergency loan to make ends meet for the moment.
The 3 best emergency loans for the unemployed 2021
- Best for Rebuilding Finances: LendUp
- Best for Mid-Sized Loans: BadCreditLoans.com
- Best for Large Bad Credit Loans: PersonalLoans.com
Best emergency loans for unemployed at a glance
|BadCreditLoans.com||5.99%–35.99%||Varies depending on lender, average 12 months||$500 to $10,000|
|PersonalLoans.com||5.99%–35.99%||90 days to 72 months||$500 to $35,000|
*Rates accurate as of May 2021
[ Read: Best Bad Credit Personal Loans in 2020 ]
What is an emergency loan?
Emergency loans are a form of personal loan that can get you through a tough financial situation like losing your job or getting stuck with a big medical bill. A lender loans a borrower money and then expects repayment of the entire amount, plus interest and fees. They usually have fast application processes and funding times to get you the money you need quickly. Personal loans are the best, cheapest emergency loan option, but you can also take out payday, title or pawn shop loans in a pinch.
Can I even get a loan if I’m unemployed?
Although lenders are always leery of lending money to those who don’t have a regular source of income, they can also see the opportunity in lending to this demographic segment. Jobless workers who have used up all of their federal aid really don’t have anywhere else to turn at this point. Lenders know that some of their borrowers will inevitably default on their loans, but the remainder will pay enough in interest to make this a worthy endeavor.
Loan applicants who are unemployed can expect to pay a higher rate of interest on their loans than they would if they had a job. And they may also have to supply some form of collateral, such as a savings account or retirement plan. But the application process is going to be largely the same in either case, although jobless applicants may need to list out their total assets and liabilities if they can’t provide any proof of income.
Am I eligible to apply for an unemployed loan?
If you can’t get a loan anywhere else, you can try applying for a coronavirus hardship loan with a bank or credit union. This type of personal loan, created by banks and credit unions at the encouragement of federal officials, charges lower interest than payday or title loans and also has deferred payment options.
These loans can range anywhere from $500 to $5,000 or even $10,000 in some cases. As mentioned previously, the interest rates are very low, averaging about 3% for those with good credit. Those with poor credit will pay a higher rate. But borrowers don’t have to start repaying for 60 to 90 days, and some loans even allow a 120-day deferral. And repayment plans can be stretched out for as long as five years in some cases.
Lenders generally have the same requirements for making a coronavirus hardship loan as they have for any other type of loan. Lenders want to see that the borrower has a good repayment history and has some source of income. There are lenders that cater to those with less than perfect credit and some that will overlook a temporary lack of income. Prospective borrowers should shop around to see who can get them the best deal. Credit unions may require that the borrower must already be a member, and national banks may only offer this type of loan to current customers.
How emergency loans work
Most emergency loans are installment loans, meaning you borrow a lump sum and repay it over a period of a few weeks or months. Emergency loans can range from $100 all the way up to $35,000 or more. But if you have a low credit score or limited income, you may not be able to borrow as much as someone with a higher score and level of income. You may also get charged a high interest rate if lenders see you as a risk.
[ Related: How to Get a Loan With Bad Credit ]
Still, if you can’t get a loan from family and friends, or don’t want to, emergency loans may be a good option. They have fast funding times and flexible eligibility requirements, allowing you to qualify even if you’re unemployed.
Many personal loans have quick application processes, allowing you to apply online in minutes. Once you send in your financial details, you’ll usually receive your funds in one to seven business days. Typically, fast funding for personal loans means either same-day funding or next-day funding. If you need an emergency loan, look for lenders that offer same-day or next-day funding.
Lenders understand that borrowers who need money for unexpected expenses don’t always have perfect finances. That’s why many emergency loans have flexible eligibility requirements.
Even if you’re on unemployment or have bad credit, you may be able to qualify for a personal loan through a platform like PersonalLoans.com. Lenders on the site consider borrowers with alternative sources of income and credit scores as low as 580.
[ More: What Are No-Credit-Check Loans? ]
Title loans are also an option. They’re short-term loans that allow you to use your vehicle as collateral. However, if you go into default, your lender may repossess your car, putting you in a worse situation.
Payday loans are also available to borrowers with bad credit or no income. But their interest rates are usually much higher than other types of emergency loans, so you are better off avoiding them.
Emergency loan alternatives
If you only qualify for high-interest personal loans or payday loans, using a credit card could be significantly cheaper. The average credit card has an interest rate of just 14.52%, while payday loans can have rates of 400% or higher.
If you don’t already have a credit card, you may even be able to get approved while you’re unemployed. Thanks to the Credit Card Act of 2009, you can include your household income on your application. So if your partner is still employed and you have good credit, you may be able to qualify for a card that has a 0% intro APR and avoid paying interest altogether.
Some credit card companies offer instant approval and allow you to start using your card for online purchases right away. Once you receive your card, you’ll also be able to get cash advances at ATMs. Cash advances usually have higher interest rates than purchases, so keep that in mind.
Payday alternative loan
Depending on your credit score and income, you may be able to get a payday alternative loan. These are small-dollar loans offered by credit unions that have longer terms and lower interest rates than payday loans. You can usually borrow between $200 and $1,000 and repay it over one to six months.
However, payday alternative loans may not be the best option if you need cash right away. Credit unions typically require you to be a member for at least one month before you can take out a loan.
What to consider before taking out an emergency loan while unemployed
Can you afford to pay back the loan?
Many loans for the unemployed have high interest rates and short repayment periods of just a few weeks or months. This means you could have to pay back a lot more money than you originally borrowed within a short timeframe.
[ Read: Best Personal Loans for 2020 ]
Before you take out emergency loans with no job, make sure you understand the costs and have a plan for paying your lender back. Otherwise, you could fall behind on payments and get charged costly late fees or a high penalty interest rate, putting you further into debt and hurting your credit score.
Are there any alternatives?
Before you take on debt, maybe you can pick up a side gig or sell some unwanted belongings. If you have a car, you could become a driver for a rideshare or food delivery service. You might even be able to qualify for an emergency relief grant for laid-off workers depending on your situation. That way, you’ll be able to borrow less money and save on interest.
[ Read more: The Best Payday Loan Alternatives ]
Can you negotiate with your creditors?
If you’re taking out a loan to pay your debt and regular living expenses, you may be able to get assistance instead of taking out a loan. Many creditors are offering debt relief to customers facing financial hardship due to the pandemic. Citizens Bank, for example, is waiving late fees and offering payment assistance for up to 90 days. Even if your lender doesn’t have a specific debt relief policy, you may be able to explain your situation and get on a payment plan that works for you.
Financial Relief during COVID-19
In response to the pandemic, some lenders are offering low-interest emergency cash loans for unemployed workers.
The Capital Good Fund, for example, is providing crisis relief loans ranging from $300 to $1,500. It offers loans with a low APR of just 5% and terms as long as 15 months. The loans are also deferred for 90 days, giving borrowers a chance to financially recover before payments begin.[ Read: Where to Find Financial Relief During the COVID-19 Pandemic ]
How to choose the best emergency loan for you
- Check your credit. Some lenders have strict credit score requirements for personal loans, while others will consider borrowers with bad credit. Checking your credit score will help you narrow down your options and find a loan that fits your financial profile.
- Determine how much you need to borrow. Some companies like LendUp only offer small-dollar loans, which won’t work for you if you need several thousand dollars. Figuring out how much money you want to borrow before you start applying for loans will help you choose the right lender.
- Think about how much time you need to pay it back. If you only need a couple of hundred dollars to hold you over until your new job starts, a short-term personal loan may work for you. But if you’re going through an extended period of unemployment, a loan with a longer-term and lower monthly payments may be more manageable.
- Get pre-qualified. Getting pre-qualified with multiple lenders will allow you to compare rates and fees and find the best deal.
We welcome your feedback on this article and would love to hear about your experience with the personal loans we recommend. Contact us at firstname.lastname@example.org with comments or questions.