How can I get a loan without a job?

Are you strapped for cash due to unemployment? The good news is that getting a loan without employment verification is possible. But there are some things you need to be aware of to ensure you don't dig yourself into further debt.

If you're ready to get paid, read through our unemployment loan guide below!

Do you need to be employed to get a loan?

As we said, not all loan providers require a loan verification for you to access money. And, lucky for you, there are several types of unemployment loans available to Canadians who need money quickly. So, before we get into how you can go about getting a loan without a job, take a closer look at some of the loan options you have below:

Payday loans

Payday loans are a type of quick-fix personal loan that allows you to borrow up to $1500 on the same day. Sounds like a good deal, right? Not necessarily. The concept behind payday loans is that you receive a cash advance that you're, in theory, supposed to pay once you get your paycheque. However, payday lenders are notorious for short repayment terms and high interest rates.

So, by the time your payment is due to your payday lenders, you'll owe a significant amount more than what you originally borrowed. And, in the event you're not able to pay back your payday loan, you can seriously obliterate your overall financial health, including your credit score.

Personal loans (secured loan)

Next up, we have personal loans, which will either be classified as unsecured loans (no collateral needed) or secured loans (collateral required). Personal loans are typically offered by banks, credit unions, and other online lenders. What's the difference between credit unions vs. banks? The major difference between the two is that banks earn a profit, while credit unions are member-owned.

Now, when it comes to a personal loan, the payout can range anywhere between a couple hundred dollars to $35,000, depending on where you apply. Typically, when you get a personal loan, you'll have a better interest rate and more flexible repayment terms. However, to get a loan without a job, most lenders will require a credit check beforehand.

To most lenders, a bad credit score means you aren't as responsible when borrowing money. Basically, your credit score is based on your credit history and indicates how risky or safe you are to lend money. It is based on your debt-to-income ratio, whether or not you make your monthly payments on time, and how long your credit report is. If you have a good credit score, obtaining no-income loans from a bank may be easier and will likely yield a better interest rate than what you would be offered with a bad credit history, but it'll depend.

Unsure what your credit score is or how it compares to the average credit score in Canada? Get a free credit score check and build your credit with KOHO!

Home equity loan

Home equity loans are a type of secured loan you can apply for without a job if you are a homeowner. These types of unsecured loans work in that you'll receive a lump sum payment from your lender, who then receives interest on the amount you borrowed throughout the loan’s lifetime.

While this type of personal loan offers lower interest rates, your home essentially becomes collateral, meaning if you default on the loan amount, your lender will have the legal right to seize your home to make up their losses.

Guarantor loans

Beyond home equity loans, you may want to consider guarantor loans. Essentially, this is a standard personal loan that requires you to have a co-signer, which can be a family member or friend. With a co-signer, the individual vouches that you'll be able to make your monthly payments on time and pay back the full loan amount, plus interest. Because the guarantor likely has a good credit score, you'll likely be able to secure a lower interest rate and higher loan amount.

Keep in mind, however, that your co-signer will be responsible for making your interest payments if you are unable to do so. So, if you're considering this route, make sure you don't miss payments and are financially responsible with your money, or else things could get awkward the next time they're over for dinner.

Auto title loans

Car title loans are another option for unemployed loans. Similar to a home equity loan, auto title loans are secured, meaning that for your loan application to be approved, you'll need to use your vehicle as collateral. Generally speaking, auto title lenders will give you up to $25,000, depending on how valuable your car is.

But remember, if you are unable to pay back the entirety of your title loan, your lender will be able to seize your vehicle as collateral.

Cash advance

Cash advances are unemployment loans that allow you to borrow money against your credit card. While these types of loans offer less money, you can get a cash advance instantly. Keep in mind that most cash advance lenders tend to hike interest rates on these types of loan payments, require credit checks, and have loan repayment terms due within a month of your application.

But, with KOHO, you can get up to $250 instantly with no interest payment, no credit score check, and without employment verification. The best part? You can pay back your cash advance anytime--there's no repayment cycle!

Pawn shop loans

Do you have personal belongings with value that you'd be okay parting ways with? Pawn shop loans may be the solution you're looking for. These types of alternative lenders allow you to bring in your valuables and get a loan without a job within minutes.

Typically, you'll receive anywhere between 20%-60% of what your item is worth. Again, you'll need to repay your loan on time, or you risk having your belongings seized by the shop as collateral.

Before you apply for a personal loan

Now that you have a better idea about the types of loans without employment verification, we always recommend doing a bit of your own research beforehand to ensure that a non-employment verification loan is the route you want to take.

Here's what you need to consider before moving forward:

Check your credit score

Applying for non-employment verification loans will most likely yield high interest rates. But it's still a good idea to check your credit score beforehand as it may help you get a personal loan with a lower rate at the end of the day. You can do this by looking at credit bureaus like Equifax or TransUnion.

We should note, however, that checking your credit score online may not be accurate, but they can give you a ballpark of what you can expect. Additionally, multiple credit checks can sometimes be viewed as a red flag to lenders and hurt your credit score. So, be mindful of how many times you're checking your score.

Compare interest rates

The next thing you'll want to do is compare interest rates. You can do so by looking at different online lenders or using a loan comparison platform, which you can also find online. Ultimately, shopping around and comparing lenders will give you a better idea about how much you can borrow, what you'll pay in interest, and repayment terms before going through the application process.

Remember to check out reviews for different lenders as well, as it can be a good way to know whether or not they are a trustworthy source to borrow from.

Consider getting employment insurance (EI)

If you aren't quite sold on the idea of getting a loan without employment verification, you may be able to qualify for employment insurance (EI). Employment insurance is a type of temporary income relief funded by the Government of Canada. These government benefits are available to those who are temporarily between jobs due to being laid off, illness, injuries, pregnancy, and caring for another family member.

Rather than a standard personal loan, you'll receive a monthly income, which will be determined during the application process. However, you could possibly deposit up to 55% of your insurable earnings, which consists of your employment income, tips, bonuses, union dues, and more, up to $668 a week.

Things to be aware of

While getting a loan without employment verification can temporarily help your financial situation, there are a couple of things you need to be aware of regarding these types of loans.

Smaller loan amounts

Most of the time, a loan without employment verification typically won't allow you to borrow a large sum of money unless it is a secured loan, where collateral is involved. So, if you don't own any valuable items, a vehicle, home, or other assets to put up for collateral, you may only be approved for a couple hundred dollars.

Shorter loan agreement terms

Loans without proof of income often take advantage of people, which is why employment verification loans also tend to have shorter repayment terms with high interest rates. This means that you'll have higher monthly payments over a shorter amount of time, which can put you in a difficult financial place than you were before you applied for said loan.

High loan fees

Lastly, beware of loan fees. Loan fees you should keep an eye out for include:

• Application fees: Application fees are expenses charged by lenders when you submit a request for a loan. These costs typically cover the cost of processing your application, running your credit check, and more.

• Origination fees: Origination fees are charged by lenders when they process and fund your loan. This fee will often cover underwriting, loan documentation, and administrative costs.

• Late fees: If you fail to make your monthly payment on time, you will be charged a late fee. These fees are intended to compensate the lender for the delay. However, most lenders offer a grace period, so if you do miss a payment, you'll have about a month to make it before the late payment is sent to a credit bureau and the fee is applied to your account.

• Early repayment fees: While not all lenders charge an early repayment fee, some will if you choose to repay the total amount of your loan before the end of your repayment term as a way to compensate lenders for the loss of interest.

• Overdraft fees: Overdraft fees are charged when you spend more than the available credit in your bank account. To prevent this, consider getting overdraft protection coverage.

Information you need to get a loan without a job

How you apply for a loan without a job will look a little differently than how you'd get a bank loan in terms of the information you'll be required to submit at the time of your application. Here's a closer look:

1. Personal identification

Similar to applying for personal loans with employment verification, you'll need to provide proof of your identification, which could be in the form of the following:

• A valid Canadian driver's licence

• Your permanent Canadian resident card

• A Valid Canadian passport

• Canadian citizenship card.

2. Proof of income

Next, you'll need to provide proof of income if you are unemployed but receive some other type of government or social assistance, such as the Canadian Pension Plan (CPP), Canada Child Benefit (CCB), Old Age Security (OAS), or the Disability Tax Credit (DTC). Pay stubs or documents from these assistance programs should be sufficient.

3. Bank statements

Lastly, you'll need to submit three of your last bank statements, as this will allow your lender to calculate your debt-to-income ratio and determine whether you are able to afford to take on more debt.

How to get a loan without a job

To get a loan without employment verification in Canada, here is a step-by-step you can follow to navigate the application process as smoothly as possible:

1. Look at your current finances

First things first, take a look at your current finances and determine what your financial needs are so you can get a better idea about how much money you need to borrow. You'll also want to take a look at your credit score to see whether acquiring a better interest rate and repayment term will be possible.

2. Shop around and compare lenders

Next, begin searching online for local lenders who are willing to lend money without employment verification. While doing so, make sure to compare interest rates, repayment terms, customer reviews, and fees.

Remember, doing your due diligence during this step is essential to avoiding scams and being locked into loans that are impossible to pay back.

3. Fill out your application

Once you've settled on one or two lenders who you believe are safe to borrow from, you can go ahead and begin the application process. Remember, your application will ask you various questions and require you to provide certain documents and identification. During this time, you'll also need to pay the relative application fees.

4. Get your loan approved

Depending on the non-employment verification loan you apply for, you could be waiting as little as an hour to a full 48 hours to be approved as the lender works to review your application.

5. Transfer funds into your bank account

Once your loan application has been approved, you'll be able to deposit your lump sum directly into your bank account and use the money for whatever bills or other expenses you need to pay. Word to the wise: Set up alarm reminders hereon to ensure you make your repayments on time.

Can I get a loan if I'm on social disability benefits?

Yes, if you accept social disability benefits from the government and would still like to apply for a loan, you will be able to do so with certain lenders. In fact, many alternative lenders will consider these benefits as proof of income, which could help you secure better personal loans.

Can I get a loan with bad credit?

The truth of the matter is that you may not be able to get a personal loan with bad credit from a traditional financial institution. However, there are bad credit loans available to Canadians who are looking for a quick cash advance. Typically, these include payday loans, secured loans, or loans with high interest.

That being said, there are credit cards available for people with bad credit, like a virtual credit card from KOHO, if a traditional personal loan isn't approved and you're looking to build your credit.

Can you fix bad credit scores?

If you have a poor credit score, breathe a sigh of relief because, yes, it is possible to fix bad credit and improve your overall financial health. Here's what you need to do:

Make your payments on-time

We get it--life can throw unexpected challenges your way, and the next thing you know, you're several interest payments behind on your credit card and other debts.

Making timely payments demonstrates to creditors your ability to borrow and return their money responsibly. In other words, it shows lenders that you know how to manage your finances and spend within your means. Late payments, on the other hand, will look like a red flag on your credit report and encourage lenders not to approve your loan.

It's time to fix this. One of the easiest ways to make sure your monthly bill is paid on time is by setting up automatic payments with your bank. Numerous types of savings accounts in Canada allow automatic payments. But, on the off chance your financial institution doesn't set a calendar reminder on your phone to keep you on top of your game.

Live within your means

Using credit responsibly and paying it back on time is a great strategy to improve your credit score over time. To make it clear to lenders that you are capable of spending wisely, consider using credit cards for minor, manageable expenses that you would normally pay for regardless, such as groceries, your phone bill, or gas (yes, the Taylor Swift tickets can wait).

Additionally, if possible, try to pay off the card's balance in full every month instead of making minimum payments, as this can help you avoid paying more interest in the long run.

Pay off high-interest debt first

If you have multiple debts, the best thing you can do is pay off high-interest debt first, as it can help you save more money over time. At the very least, you'll need to consistently pay the minimum each month. By doing so, you'll slowly be able to lower your debt-to-income ratio, which should otherwise be kept under 30%.

Be patient

A massive change in your credit score isn't going to happen overnight. So, stay committed and be patient, as these things take time. Learning to spend responsibly and re-evaluating your plans for spending and saving will help you be more financially stable in the long run. Remember, there's light at the end of the tunnel!

Streamline your finances with KOHO

At KOHO, we help Canadians simplify their finances and improve their financial literacy. Whether you're looking for more information about the difference between a TFSA vs. high-interest savings account, cash loans, or other financial topics, take advantage of our free resource hub that's available at your convenience anytime, anywhere.

Speaking of high-interest savings, if you’re interested in opening a bank account in Canada, KOHO has got you covered on all fronts. Financial freedom is closer than you think!