Personal loans are a great tool to help cover unexpected expenses. You can use personal loans to consolidate debt, pay for vacations, cover medical bills, or even build up your emergency fund.
To qualify for a personal loan, lenders want to have a healthy credit history and income. But your income doesn’t have to come from a traditional “job”. However, you need to have a reliable source of income to reduce the risk of your loan default or default.
A personal loan has many advantages but also comes with risks, especially if your finances are unstable.
If you are looking for a personal loan, you can explore your options by visiting Credible to compare rates and lenders.
YOU CAN GET A LOAN WITH BAD CREDIT – BUT BEWARE OF THESE RISKS
How to get a personal loan
When deciding whether or not to finance a loan, a lender takes several factors into account, including:
- Credit score
- Credit history (do you pay your bills on time, do you have bankruptcy)
- Debt-to-income ratio (how much debt do you have compared to how much money you make)
- Loan terms (how much and for how long)
- Collateral (if you choose a secured loan)
If you do not have a traditional job with a W2 employer, you can still benefit from a personal loan. Potential sources of income that lenders are considering include:
If the income is taxable, you can use it as a source of income when applying for a personal loan. When you’re ready to check out your personal loan options, visit an online marketplace like Credible.
Unsecured loans: all you need to know
Risks of taking out a personal loan without a job
If you are considering taking out a personal loan and you do not have a traditional job, having a reliable source of income is essential to protect yourself against defaulting on your loan. If you miss payments, you will be charged a late fee. If your payment is extremely late, it could affect your credit score. Even two missed payments could lower your credit score 100 points or more.
Several missed payments can add up quickly, making it harder to catch up. If you miss too many payments, your loan could default.
If your loan is in arrears, your lender may ask you to repay your loan immediately. If you have a co-signer, your lender may go to them for payment. In addition to the damage to your credit score, your co-signer’s credit score could also drop.
Once you’re in arrears with your payment, you’ll likely start hearing from debt collectors. In the worst case scenario, your lender may garnish your paycheck, place a lien on your home, and / or take possession of anything you have used as collateral.
Alternatives to a personal loan
A personal loan may not be the right choice for everyone. Other options may better suit your personal situation.
1. Cash mortgage refinancing: If you own a home and have equity in your property, you could take advantage of lower interest rates and opt for cash refinancing. A cash refinance allows you to replace your current mortgage with a new loan for more than what you owe and the extra money you are given to spend. Your home is secured with this type of mortgage, so making your payments on time is essential.
2. Home equity line of credit: Similar to refinancing, a line of credit uses the equity in your home to determine how much you can borrow. You can borrow from your line of credit as many times as you want if you have funds available. You can pay back what you owe at any time and continue to make withdrawals as needed. Interest is only charged on the amount of your loan.
3. Small business loan: If you run your own business, you may be eligible for a small business loan. These loans should only be used to cover business expenses. Still, they can be used to cover a range of items from wages to equipment and supplies.
Once you are ready, you can visit Credible to explore your personal loan options or other alternatives available to you.
ADVANTAGES AND DISADVANTAGES OF A CASH-OUT MORTGAGE REFINANCING
Using a personal loan to cover unforeseen expenses or help extend your expense account in times of uncertainty can be helpful. But you should do a lot of research and check your finances to make sure you can afford a loan because missing payments can put you in a worse situation.
If you’re trying to decide if a personal loan is right for you, visit Credible to connect with experienced loan officers and get your personal loan questions answered.
PERSONAL LOAN VS. CREDIT CARD – WHEN TO USE EACH
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