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Can I Get Approved For A Personal Loan If I’m Unemployed?

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Select’s editorial team works independently to review financial products and write articles we think our readers will find useful. We may receive a commission when you click on links for products from our affiliate partners.

The Covid-19 pandemic increased the financial strain on many individuals and families who lost all, or part, of their income as a result of being furloughed or laid off. But regardless of your employment status, there are some expenses you can’t avoid even when times are lean.

Maybe you’ve decided to take entrepreneurship by the horns, but it turns out that starting a small business is more expensive than you initially thought. Or perhaps a costly home repair crashed into your lap, and it’s beyond what your emergency fund can handle.

Whatever the reason, a personal loan can be a useful tool when it comes to getting the money you need for expenses that you otherwise may not be able to cover immediately. But much like any other financial product or service, personal loans are not without their own set of considerations that potential borrowers should keep in mind.

Select spoke to financial wellness educator Danetha Doe to break down what you need to know about getting a personal loan if you’re unemployed.

How do you apply for a personal loan?

First and foremost, you’ll need to figure out how much cash you need to borrow since with a personal loan, you’ll borrow a fixed amount of money, says Doe.

If you’ve lost your job and you’re considering taking out a personal loan to cover lost wages, consider how much you actually need to live on. Doe recommends you multiple your total monthly expenses by the number of months you think it will take to find a new job. This way, you can apply for a loan with that total amount in mind.

Before you head to a lender, look through your credit report to make sure that everything looks accurate and you know your credit score. In the event that something on your credit report doesn’t look right, you’ll want to dispute the error before applying for a personal loan.

Knowing your credit score can help you shop around for lenders you know you will qualify for. Some lenders like Marcus by Goldman Sachs and LightStream have online tools you can use to figure out if you would qualify for a personal loan without putting in a full application.

Select also has a comparison tool that allows you to review different loan offers. You’ll need to answer 16 questions, including your annual income, date of birth and Social Security number in order for Even Financial to determine the top offers for you. The service is free, secure and does not affect your credit score.

Editorial note: The tool is provided and powered by Even Financial, a search and comparison engine that matches you with third-party lenders. Any information you provide is given directly to Even Financial. Select does not have access to any data you provide. Select may receive an affiliate commission from partner offers in the Even Financial tool. The commission does not influence the selection in order of offers.

Once you’re ready to submit your application, you’ll need to gather up all your paperwork. “You’ll want your most recent paystubs because you’ll have to fill out information on your net income,” Doe says. “And if you’ve moved, you’ll need updated address info.”

And while there are a variety of ways you can use a personal loan — a wedding, a home renovation, debt consolidation, funeral expenses, an emergency expense and more — you’ll usually have to explain how you will use the money when you submit your application.

In addition to an application, the lender will also run a credit check, or do a hard inquiry, which can impact your credit score. The credit check looks at your financial profile, so the lender can compare your debt (i.e., credit cards, other loans, etc.) to your income to make an assessment on how likely you are to repay the money you receive (this is known as your debt-to-income ratio).

While you don’t need a perfect credit score in order to get approved for a personal loan, the higher your credit score, the more likely you are to get loan terms that are more favorable for you, like no fees and a lower interest rate. (Have a bad credit score, Select rounded up a list of the best personal loans for bad credit.)

Can you get approved if you’re unemployed?

It is possible to get approved for a personal loan if you’re unemployed, says Doe.

“Being unemployed does make the process more challenging. From the lender’s point of view, they want to lend money to an individual who they believe can pay the funds back,” she says. “So if you’re in a situation where you don’t have money coming in, it may be challenging for you to pay them back. If you have a history of paying down your credit cards and other past debts on time, that will lend itself to your favor.”

Also keep in mind that income doesn’t always necessarily come from a traditional paycheck. According to the IRS, other ways to show earned income can include gig economy work, money made from self-employment, benefits from a union strike, some disability benefits and nontaxable combat pay.

And of course, it’s very important to make sure you feel comfortable with the impact a loan repayment plan could have on your finances. Under some circumstances, you may not have any other choice but to take on more debt until you can improve your situation.

Take the time to consider how much of an impact the monthly loan payments will have on your overall budget. In some cases, the extra financial obligation is worth it to pay for an emergency, like a car repair so you can commute to and from new job interviews. In other cases, taking on additional debt may not be the best decision.

Can you get approved if you have inconsistent income?

If you are a freelancer, gig economy worker or a self-employed person, chances are you may have experienced (or continue to experience) periods of inconsistent income. Regardless, you can still get approved for a personal loan. It can help if you’re able to show that you’ve been in business for at least two years. Otherwise, the lender may ask you to get a co-signer for the loan.

What if a personal loan isn’t the right fit for me?

If a personal loan doesn’t sound like something that would be a fit for your circumstances, you still have other options for covering expenses. You may want to consider a personal line of credit instead. It’s similar to a loan, but it allows you to borrow money, repay the amount and then borrow again for a set period of time.

“A personal line of credit can be used when you aren’t quite sure how much money you’ll need but you know you’ll need a buffer,” Doe says. “If an unemployed person doesn’t know how long it will take them to start earning an income again, then a personal line of credit may be a better choice since they don’t know how much they will need.”

Also, keep in mind that personal lines of credit can accrue interest, and you will be expected to pay those charges as well.

While you might feel like your options are limited when you’re unemployed and in need of money, be on the lookout for predatory lenders, like payday loans. They carry very high interest rates even when you’re only borrowing a small amount of money.

Whenever you decide to borrow money, take the time to read the fine print and understand the repayment terms and conditions, so you’re not caught off guard by additional fees.

Bottom line 

Personal loans can be a valuable tool for anyone who needs money to cover an expense. And while you can still be approved for a personal loan if you are unemployed or have inconsistent income, it might be tougher (but not impossible) to prove that you will be able to pay back the funds. You should always analyze your personal circumstances to make sure any new debt or other financial decision is the best step for you.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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Are Sallie Mae Student Loans Federal or Private?

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When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances

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Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit

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Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

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