The Cold Truth Behind Personal Loans and Unemployment

When you couple unemployment with the financial demands of an emergency expense, it can feel like a double whammy to your bank account. And the worst part is, joblessness only perpetuates the need for extra cash.

The Associated Press reports that the unemployment rate dropped to a four-year low of 7.7 percent in November. But with fiscal cliff uncertainties looming on the horizon, the National Association for Business Economics expects unemployment rates to remain steady in 2023.

If you anticipate being saddled into this jobless rut while contending with bills you can’t pay all on your own, there are a few things you should know about personal loans with unemployment. Without the right preparation or borrowing savvy, you risk going down a treacherous debt path.
Personal Loans and Unemployment: Know Your Limitations
The Cold Truth Behind Personal Loans and Unemployment
Unfortunately, lenders tend to view unemployment as an added liability when looking at your qualifications.

“Lenders decide what is required to underwrite their loans and require a source of regular income or assets as collateral,” says Gregory Grier, CEO of USALoansNearMe. “Employment is almost always required to evidence ability to pay and affordability.”

Grier adds that these requirements also extend to lenders who deal with higher risk borrowers on a daily basis. While short-term and car title lenders may look past a credit check, even they won’t ignore the need for an income.
Dealing with Financial Strain During Unemployment

A lack of income may be a huge roadblock, but something like a leaky roof or medical bill won’t stop for anything. Before you start to look for any sort of high interest personal loan that skirts around unemployment, it’s important to exhaust the alternatives in the throes of financial uncertainty.

Jon Snyder of SHM Financial asserts that unemployed individuals can still approach borrowing—just from a different perspective.

Don’t be afraid to consider the “family and friends” route.

“Be honest with loved ones about your financial stress,” says Snyder. “Don’t live a financial lie or buy gifts you can’t afford. Loved ones will appreciate your honesty, and the financial pressure will ease.”

If anyone is willing to give you a break during a rough patch, it’s likely to be friends and family. What’s more is they may be more lenient about how much interest they charge and allow you more time to pay it back.

Approach a loan from loved ones like a traditional bank loan.

“Write down the terms and insist on a nominal interest rate,” says Snyder. “This keeps personal feelings at bay and will encourage the borrower to repay in a timely manner.”

It’s important not to take any generosity for granted; otherwise it may become all too easy to fall into bad payment patterns. It may even diminish the incentive to look for employment to help you secure another traditional loan in the future.

Part-time income is better than no income.

“Many of the unemployed today are being much more open minded,” says Grier. “Not giving up their goals or aspirations, but they are taking part-time positions to learn new, basic skills and developing relationships.”

Taking a less than desirable job now doesn’t mean you have to be stuck there for good. Using it as a springboard for gaining experience will not only keep you at least partially afloat financially, but it may also afford you the ability to borrow when the emergency need arises.
Considerations for All Borrowers

Whether you’re secure in your career, worried about potential unemployment, or dealing with it front and center, all consumers should heed the same personal finance advice.

“Like all loans, both secured and unsecured, you must consider how you will repay your lenders,” says Wilson Hanson.

Coleman advises to take a look at your personal situation to determine your borrowing needs: can you use your unemployment benefits instead? Do you have solid job prospects and simply need a loan to bridge a financial gap?

Before you bank on hunches, determine the budget you’re working with. A short-term personal loan not only requires repayment of the principal amount, but interest based on how much you borrow. A quick personal loan may help you face the uncertainty of financial emergencies, but don’t add to the burden by borrowing unemployed without understanding the long-term implications.…

5 Odd Long Term Budget Ideas for Payday Loan Borrowers

Payday loans tend to catch borrowers off-guard when they consider their total itemized cost.

Not only must consumers pay off the principal loan, but they’re also dealing with finance charges based on the amount of cash borrowed. And when that total expense is not paid off in one fell swoop, a rollover loan rapidly accelerates these fees.

According to a 2021 study by Lyman J. Morrison, the average payday loan borrower takes out eight payday loans a year, spending more on interest than the principal amount.

The Consumer Federation of America (CFA) also reports that researchers at Vanderbilt and University of Pennsylvania found that 54 percent of first-time borrowers defaulted on these personal loans in the first year.

Based on these delinquencies and debt cycles, a fortified budget is critical to coming out of the borrowing process relatively unscathed. But it’s not always good enough to say, “save your pennies” or “spend less than you make” and be successful.

When the stereotypical sage advice doesn’t work, consumers need more tangible tips they can scale to their own finances so that payday loans don’t become a runaway expense. These tricks can also be implemented beyond a payday loan budget to be used as lifelong habits that may keep finances steady.
Shed those extra accounts
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Keeping track of multiple bank accounts is a lot like having to juggle bills: the more you have, the easier it is to let one slip through the cracks.

Bank accounts are rife with charges that can eat away the money you have in them. Maintenance fees, minimum balance fees, late fees and transaction fees can lead to trouble.

By cutting back on the number of accounts, you’ll automatically cut back on the number of fees charged. Additionally, by focusing on fewer accounts, it’s easier to stay on top of associated expenses.
Make savings an expense

What makes many emergency savings funds so slim is that they’re more of an afterthought rather than a priority. By paying yourself at the same time as you pay your other bills, it may become easier to maintain a rainy day account over the long term.

You can also make this commitment automatic by setting up payment deposits into a savings account so that you never have the chance to miss the money.

Additionally, treating savings like an obligation can provide that extra push to commit. By sticking to this reformed way of thinking, you’ll be able to repay your next short-term loan immediately or avoid one altogether.
Squash your subscription services

Life can feel like one giant subscription. Between cable, satellite, Internet, phone, Netflix, magazines and the jelly of the month club, it’s easy to drain your income on what should be discretionary spending.

Calculate how much all of these monthly commitments are costing you and scale back. For example, you may be able to get rid of cable and Netflix, but stick to watching your shows and movies via the Internet as you need them.

This “a la carte” approach allows you to still enjoy your free time, but also choose entertainment as you go while reducing out-of-pocket expenses. Most likely you’ll be surprised at how well you can get along by eliminating a few of these things.
Downsize when you go out

You can still enjoy the food and atmosphere of your favorite hangout spots when you’re trying to budget, but with a few small changes.

Instead of ordering that entrée you can’t finish anyway, inquire about the price of a half portion, or stick to the appetizers. Enjoy your libations at home, and you’ll shave off at least $10 from your bill with the absence of a beer or cocktail.

The same downsizing can be applied to the movie theater experience. Instead of spending more than $20 on Junior Mints and popcorn, you can apply the age-old trick of bringing your own store bought for a fraction of the price.
Go vegetarian a few times per week

Many of us can’t think of a life without sizzling bacon or juicy burgers. But by switching out your meat for a vegetable-based protein at least once a week, you could start to reap some serious savings.

According to TLC, vegetarians who sub out chicken for black beans save $200 per year while trading tofu for steak would save another $237 per year.

While you may not be able to quit meat cold-turkey (pun intended), re-evaluating the carnivorous expenses populating your grocery list could yield the extra dollars you need for emergency costs.

By putting these odd payday loan budget tips into practice, you may end up finding it easier to come up with the all of the cash needed by the repayment date.

A lending product with such a short turnaround time should never be used to treat the symptoms of a lasting cash dilemma. However, these penny-pinching habits can act a proactive measure to nip financial ailments in the bud before they get out of control.…