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Payday Loan Options for the Unemployed
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Can You Get a Payday Loan if You are Unemployed?

Loans often present a Catch-22 for potential borrowers: to get one, you generally need to be bringing home a decent paycheck every week or two. But if you were bringing home a decent paycheck, you probably wouldn’t need a loan. With unemployment numbers at record highs, more people than ever are in need of extra cash. But can you get a payday loan if you are unemployed?

The short answer is no. A payday loan is treated as a cash advance on the borrower’s next paycheck; so it stands to reason if there isn’t a payday, there can’t be a payday loan. However, all hope is not lost. There are loan options for the unemployed. Fittingly, they’re called unemployment loans.

Risky Business

Unlike the process involved with securing a payday loan, applying for an employment loan might require some effort on your part--and even then there’s no guarantee you’ll be approved. The fact of the matter is lending money to someone who doesn’t have an income in risky business, so the company you deal with is going to make sure every last duck is in order before agreeing to part with the cash. To that end, borrowing money when you don’t have a job is just as risky for you. The last thing you want to do is take on more unnecessary debt and dig yourself a deeper financial hole. So before examining your options for an unemployment loan, you should first ask yourself if it’s really necessary. Then you should consider other options, like making payment arrangements with your current lenders or borrowing money from a relative. If you decide you absolutely need the money and the alternatives to getting a loan don’t pan out, there are three options you can explore:

  1. The first, and certainly the easiest, type of unemployment loan is very similar to a payday loan. To get it, you have to be receiving unemployment benefits. Since many states now disperse unemployment funds to residents by depositing them into a bank account that’s tied to a debit card, the loan will be treated like a cash advance on your next unemployment payment and the lender will automatically withdraw the money you owe on the day of your next deposit. If you live in a state that still sends unemployment checks in the mail, finding a short-term lender that’s willing to work with you might take a little work. The downside to this type of loan is you’ll be limited to the amount of your weekly benefit, which generally isn’t a whole lot of money.

  2. Another option is to obtain a secured loan, which will require that you post some sort of collateral to guarantee repayment. If you’re a homeowner and you’re willing to put your house on the line, you shouldn’t have a problem. Most lenders will accept vehicles as collateral, but only if they’re newer models. Another possibility is a transferrable life insurance policy. Of course, these items will be accepted only if you’ve built up equity in them; meaning you’ve paid down the balances to the point where they’re not fully owned by the financers. If you decide to go for a secured loan, just make sure you proceed with caution. If your employment situation doesn’t turn around as quickly as you’d like, you could end up losing a very valuable possession.

  3. If you don’t have anything to use as collateral, you can apply for an unsecured loan--but only if you find someone with a good job and a decent credit score who’s willing to co-sign. Even if you do, getting approved isn’t a certainty. Whereas lenders used to approve co-signed loans based on the merits of the most qualified applicant, many have taken to giving equal consideration to the incomes and credit histories of both. So even if your co-signer has a good job and an impressive credit history, your current situation could pull the whole thing under. One of the biggest downsides to an unsecured loan is you’ll likely be charged a much higher interest rate than if you had collateral. And the downside for your co-signer is if you fail to land a job, he or she will be stuck paying back the loan.

Play it Safe

So while there are loan options for unemployed people, not all of them will be able to take advantage of them. And that might not be such a bad thing, considering the number one rule in getting a loan is never borrow more than you can afford to pay back. You’ll likely be much better off if you hold off on acquiring any new debt until you’re working again.

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