Is It Possible To Get A Payday Loan When Unemployed?

For those unfamiliar with payday loans, they are a form of short-term financing that allows borrowers to access loans of up to $1,000 to deal with small emergency expenses. Furthermore, unlike most other types of loans, these are usually due in full as soon as you receive your next paycheck. In addition, unlike regular bank loans, you do not need a good credit score or any type of collateral.

Instead, payday lenders will evaluate your eligibility based on your income sources. In other words, all you need to prove is that you have a steady income stream, and you should be able to get payday loans for the unemployed.

In fact, some lenders may even be willing to accept job contract offers or even proof of an upcoming inheritance. However, the downside of these loans is that they always come with exorbitantly high-interest rates and hidden fees.

While the precise rates will usually end up varying from state to state, the average payday loan can end up costing you between $10 and $30 for every $100 borrowed. It is for this reason that some states have implemented interest rate caps to limit how much payday lenders can charge.

Are Payday Loans Available For The Unemployed?

Yes. While most traditional lenders like banks and credit unions will not typically approve unemployed borrowers, the benefit of payday lenders is that they are usually willing to approve loan applications. However, this will usually depend on what other sources of income you have, such as social security benefits, unemployment benefits, disability income, or child support.

Most lenders will also require you to provide evidence that you receive these benefits on a regular basis. You will also need to be at least 18 years old and have an active checking account to qualify for a payday loan.

Sarah Ross, the co-founder of CocoLoan, also went on to add, “Since payday lenders are not usually concerned about your credit history, this makes payday loans a viable option to borrowers with bad credit.”

What Do Payday Lenders Consider When Evaluating Your Loan Application?

Payday loan providers will usually review a multitude of factors when evaluating a loan application. For most of them, their main focus is to determine the likelihood of you being able to repay your loan on time.

#1. Income

In this respect, one of the main things that they look at is your income. If you can prove that you have a steady source of income even if you are unemployed, then you may likely be approved for a payday loan. Some of these sources of income can include:

Spouse’s income: Some payday lenders may be willing to include your spouse’s income in your loan request if you are married. However, do keep in mind that you will need to include them as co-applicant(s) in your application if you choose to include their income as a source of income.

Investments & Retirement Benefits: If you happen to make any recurring capital gains from investments like stock dividends or real estate, this can easily be considered a viable income source that indicates your ability to repay your loan. This also includes any Social Security benefits or 401(k) withdrawals if you’re retired.

#2. Debt-to-income ratio

Another factor that payday lenders may take into consideration is your debt-to-income ratio. This is often determined by dividing your total monthly debt by your gross monthly income. If the ratio is too high, the lender may deduce that you lack sufficient income to handle your monthly expenses and repay your debts on time.

Risks of Borrowing Payday Loans When Unemployed

As mentioned before, even if you are unemployed, there is still a chance that you will be able to secure a payday loan. However, you need to remember that even if you can secure approval, taking out a payday loan comes with risks that should always be considered. Some of these include;

Missed payments: In the worst-case scenario, if you take out a payday loan without a job, then chances are you may not be able to repay the loan in full on its due date. If this happens, it could result in being charged expensive late payment fees, which can make your financial situation even more difficult to deal with.

Higher interest rates: Payday loans always come with high-interest rates, which means having to deal with higher loan costs. If you are unemployed, this could become a problem that could sink you even further into debt.

Shorter repayment terms: These types of loans often come with very short repayment periods, which means that if you aren’t confident in your ability to repay on time, you may find yourself struggling to not only repay the loan but also cover your monthly expenses as well.

Alternatives To Payday Loans

If you need a cash loan but don’t want to borrow a payday loan, an alternative option that you can consider is a personal loan from a bank or credit union. They are significantly less-risky and much cheaper.

Plus, they allow you to borrow significantly more money compared to payday loans. However, do keep in mind that you often need to have a good credit score to qualify. In the event that you have a less-than-stellar credit rating, you can always apply for a bad credit loan via CocoLoan.

Another option to consider is to apply for a 0% APR credit card that essentially allows you to make interest-free payments for a limited introductory period. This can be a great option that allows you to save money while also accessing the funding that you need.

Alternatively, you can always try asking friends or family for a loan. However, if you do decide to go this route, it is vital that you are clear about when the loan will be repaid to avoid any potential issues that could jeopardize your relationship.

Bottom Line

If you’re unemployed, you should carefully take your time to decide whether or not you are going to apply for a payday loan.

After all, even if the lender decides that you are qualified enough to be approved for funding, the fact is that borrowing this type of loan without 100% confidence that you can repay it can potentially complicate your financial situation.

And even if you can afford to repay your loan on time, you also have to consider your other monthly expenses as well. If you review your budget and determine that you will struggle to cover your other costs, then you are better off looking at other alternative sources of funding.

To put it simply, it is possible to obtain a payday loan via CocoLoan even when unemployed. However, it is only ever a good idea if you are confident that the total cost of the loan is affordable and can be repaid through some other type of income stream. Otherwise, it is a risk that has the potential to leave you stuck in a debt trap that can often be extremely difficult to get out of.

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