You may think it’s impossible to get a loan with manageable payback terms and reasonable interest rates without income verification, but this is just not the case. Fortunately, there are loans specifically designed for no-income applicants or those struggling financially. Here, we’ll explore how to get a loan without income and some alternatives to traditional loans.
What Exactly Are No Income Loans?
No income loans are for people who want to secure a loan but cannot prove their source of income. These loans are ideal for self-employed individuals and seasonal workers interested in accessing additional funding. However, since no-income loans don’t require as many documents as traditional loans, you should expect higher interest rates.
If you don’t have income rolling in, no-income loans can help. You can qualify for no-income loans even if you receive child support, social security benefits, or any other financial assistance besides employment income.
How To Get A Loan Even With No Income
While most lenders ask for income verification to provide the borrower with a loan, some offer different ways around this issue. So, how do you get a loan with no income verification? If you have no proof of income – or no income – you’ll need to prove your creditworthiness to get approval for your loan application.
Putting Up Collateral
Loans are designed for individuals who need cash. If you don’t have a source of income and want to get a loan, some lenders may ask for your collateral, an asset they will take as your loan payment and sell to recover their money if you default. The collateral that you can submit includes:
- Real estate
- High-value goods
- Cars (car title loan)
- Investment products
If the lender approves your loan, the loan amount that you will get is a percentage of what your verified asset is worth. Typically, the collateral’s value will be double the loan amount.
Getting a Cosigner
Lenders care more about recouping their money. If you don’t presently have proof of income, you could ask someone with good credit and reliable income history to co-sign with you.
Remember that co-signing on a loan program isn’t just testifying for you. The cosigner is putting its name on the loan. If you default the loan payment, the cosigner is liable for paying back what you owe. If you pay late or default, it hurts your cosigner’s credit score, which could get in the way of them getting a new loan in the future. So, think of how you can repay your loan before you ask someone to co-sign a loan with you.
Having Good Credit
You must show your lender or bank that you have a responsible borrowing history if you can’t prove your income. In this case, you must have a credit score of 750 and above. Any credit score from 750 to 850 is considered “excellent” credit, although different lenders or banks have different benchmarks.
Your credit report must be good as your credit score. So, anything that brings down your credit score is a red flag on your report. These include:
- Home foreclosures
- Bankruptcy filings
- High credit card balances
- Missed or late loan payments
If you have negative records on your credit history report, you’ll need to improve your credit score before you can get a loan with no income. Start by paying off any debt you have on your credit cards. You can also choose to consolidate your debt, which can lower your monthly payment, but it can make your credit score dip more.
Alternative To Getting A Loan With No Income
Other ways to get a loan with no income verification include:
Use a Home Equity Loan/HELOC
If you have a house, you can get a loan or line of credit based on the house’s value minus the amount you have left to pay on the mortgage. While it may be challenging to qualify for a HELOC with income verification, it is possible. However, remember that your house could face foreclosure if you fail to repay what you borrow.
Borrow from a Friend/Relative
A friend, colleague, or family member may be willing to give you a loan even if you don’t have a job. However, if a friend, colleague, or family member is ready to help you, it’s essential to draw up a repayment plan because you don’t want to ruin your relationship by not paying back.
Get a Cash Advance
If you own a credit card, you can use the card to withdraw money from an ATM up to a limit on your monthly statement. However, interest on a cash advance begins accruing right away because it doesn’t fall under your credit card’s grace period.
Payday Loans
A payday loan is a short-term loan that leverages future income. This loan provides you with the cash you need. A payday lender can offer quick cash if an emergency arises and you need to borrow a little money without income verification. However, keep in mind that your loan can accumulate a lot of interest within a short period.
Borrow from Your Retirement Account
You can withdraw money from your retirement fund, but you’ll need to pay the money back within five years, or you’ll be fined. You’ll also pay interest on this loan, which goes into your retirement account to help compensate for the time the fund wasn’t being invested. However, this is not a great option even if you can pay the loan back within five years because it lets you pay extra out of your pocket rather than have your money naturally increase in value.
