|By David Pilley on August 16, 2010
You might think that you can’t get a loan if you are unemployed. This is not the case. Like any loan, there is risk involved, but it is possible for you to receive a loan if you are between jobs.
The two major types of loans you need to be aware of are secured and unsecured loans. Secured loans deal with collateral, or a pledge of property to the lender to secure repayment. If you receive a secured loan and do not pay it back on time, the lender can then take the piece of property as fulfilling payment. Most often, a car or a home is used as collateral. A lender giving out a secured loan does not usually take your credit history into account because the property used as collateral assures the loan will be paid back, whether by cash or by the monetary value of the property.
If you are trying to get a loan from your bank, you will have to use your car or your home as collateral. If you default on the loan, the bank will then seize your property, and you could soon be homeless as well as being jobless.
If you don’t want to risk losing your vehicle or your home, another option is an unsecured loan. Because there is no collateral with an unsecured loan, a lender will focus more on your credit history and look at any outstanding debts you currently have. Unsecured loans also have much higher interest rates than secured loans, meaning you could be paying it back for quite a while. The lender will also take note of your current situation and how readily you can pay back the loan. Therefore, if you are unemployed and actively looking for new employment, the lender will have good cause to believe you can pay back the loan, and you will have a better chance to be approved. However, if you are not actively seeking a new job, the lender might be less willing to give out a loan.
If you need a small amount of money, a good option is to go to your local pawn shop. Here, you will receive a secured loan, but unlike the bank you can use a smaller piece of property for collateral, such as jewelry, a television, or even a musical instrument. This is a great option if you don’t want to deal with high interest rates and you don’t want to risk losing your home.
One other option is to get a cash advance. If you have a line of credit that’s been sitting unused for a while, you can use it like a debit card and receive actual cash. With a cash advance, there is a transaction fee involved, meaning you could be building up more debt if you go this route.
Being unemployed does not mean you can’t receive a loan. Just remember that the situation is temporary. Your loan is temporary, your unemployment is not permanent, and actively seeking new employment will ultimately help you in the end.