Finding a Bad Credit Loan
When You Are Unemployed

Getting a bad credit loan without a job

It’s much easier to find a bad credit loan when you are still working but for those who are unemployed because of retirement or disability, the process can be a little more difficult. That may mean the applicant needs to meet different qualifications compared to someone who is gainfully employed, but it is not impossible.

Debt to Income Ratio

For someone on a fixed income who is looking for a bad credit loan, the debt to income ratio may hold more weight than someone who is gainfully employed. The reason that may be possible is because there is less possibility of an increase in income for someone who is retired or on disability wage compared to someone who is employed.

It will also depend upon the reason a retired person has bad credit-if it was directly related to the fact that he retired and has reduced income, his bad credit may be detrimental to the approval of a new loan without substantial financial backing in the form of a co-signor or co-applicant.

Value of Security to be Pledged

In many cases the approval of a bad credit loan for someone who is unemployed will depend upon the value of the security he pledges. In a one to one ratio of loan amount to value of collateral, there is a better chance of loan approval.

Of course, a lender will consider other factors as well such as the type of collateral and whether the collateral will increase or decrease in value over the lifetime of the bad credit loan. In this respect, when a borrower pledges real property to secure a loan, he is more likely to find a lender to approve the loan than in the case of a motor vehicle that will decrease in value as it ages.

Purpose and Amount of the Loan

The reason for the loan and the amount a borrower needs also have a bearing on the potential for approval of a bad credit loan. If you’re unemployed yet looking for a loan to go on vacation, there is little likelihood you will be approved. With bad credit and no employment, vacation will be seen by a lender as a frivolous expense. That doesn’t mean you shouldn’t go on vacation if you are unemployed but rather that you should not borrow money to do so.

On the other hand, if you need money for college expense for your children, home repairs, furniture or even a new car, there is a good possibility the lender will approve your loan with the right collateral. The key to approval for those who are unemployed lies in the purpose of the loan, value of the collateral and the amount of funds that are needed.

The less funding you need, the more likely you are to be approved for the loan in spite of your credit. Of course these things also play a role for those who are working, but they hold more weight if you are unemployed especially if you will not be returning to work at any time now or into the future.

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