How To Get a Home Equity Loan if You’re Unemployed

Everyone may need money sometimes. If a person is a homeowner he or she can feel the temptation to take a home equity loan. It is a type of borrowing when a house serves as collateral. Some people opt for this model because it is usually cheaper than others and is easier to pay off. 

However, it doesn’t mean that everyone can make use of this loan kind without paying much effort. Even though nowadays it is possible to get a $10,000 credit card no credit check, you still have to specify the source of income and show your credit history before taking a loan. 

Then the question arises “What if I am unemployed? Is it possible to get money from lenders in this case?”. In terms of the Covid-19 and wars in the world, this topic is relevant to many people nowadays. This article will give you answers to this and other questions. 

What Is Unemployment Rate in the United States

According to the most recent data from the U.S. Bureau of Labor Statistics, the unemployment rate in the United States is currently at 3.7%. This means that there are approximately 5.8 million people who are unemployed. However, this number does not include those who are underemployed or who have given up looking for work. When these people are taken into account, the actual unemployment rate is closer to 7.3%. 

Despite these high rates of unemployment, many lenders are still offering home equity loans. Home equity loans are a type of loan that allows homeowners to borrow against the equity in their homes. The interest rates on these loans are typically lower than other types of loans, and they can be used for a variety of purposes, such as home improvement, debt consolidation, or investment. 

While home equity loans can be a helpful financial tool, it is important to remember that they also come with risks. If you default on your loan, you could lose your home. As a result, it is important to carefully consider all of your options before taking out a home equity loan.

What Is A Home Equity Loan?     

Due to this type of lending, you receive the required amount of money from the lenders and provide your real estate as collateral. It can be a house, apartment, or cottage. The borrower remains the sole owner of the property. At the same time, it is not necessary to cancel the registration of your relatives, to transfer property to other people. However, during the term of the loan agreement, real estate that was defined as collateral cannot be sold. 

Among the main benefits of a home equity loan is that it doesn’t require a borrower’s official employment. The only thing that matters is a source of income. The lenders usually don’t even check whether your income is official or not. This type of loan is actively used by freelancers, people who are just starting their business or are involved in seasonal work.

Can I Get a Home Equity Loan If I’m Unemployed?

How can an unemployed person get a loan? It is one of the most popular questions among people worldwide. Especially among those who work and receive their salary in an envelope. The absence of an official source of income can make it more difficult to get this type of a loan but it won’t make it impossible. 

You should understand that unemployed people are not only the ones who do not work at all but also those who are employed unofficially. Many employers apply this strategy to save on taxes. What’s more, this category includes freelancers as well.

Who Is A Perfect Borrower From A Lender’s Perspective? 

It isn’t a surprise that lenders take into account a number of aspects before approving the loan. These factors may define the terms and conditions of your cooperation with the lenders including even interest rate. So, who is a perfect borrower?

1. Age: between 30 and 50 years old;
2. Preferable men;
3. Officially employed;
4. Married;
5. Has been working in the current position for more than a year;
6. Average salary;
7. Owns real estate.

Such a person makes the impression of a respectable borrower who has the ability to regularly repay the debt. Consequently, these people are more likely to get a loan. 

Can the Unemployed Get A Home Equity Loan?

If you are not officially employed, and your profile does not meet the above-mentioned standards, it is better to take some preparatory measures to get a loan from lenders. Below you will find some valuable tips to increase your chances of getting financial assistance. 

1. Look for a Co-Signer

Co-signer is a person who shares the whole responsibility for a loan with the borrower. The co-signer guarantees to the lenders that the borrower will pay off the debt, and takes financial responsibility for this. This model is frequently applied by the spouse. However, if you opt for this model, make sure you have discussed all details of future cooperation with the co-signer. If you won’t be able to fulfill the obligations, the co-signer’s credit score will be lowered considerably. 

   2. Be Reasonable

You should understand that lenders don’t want to get loans to the unemployed. It means that you have to win their hearts and make them trust you. Due to this, do not ask for a great sum of money at once. It is better to get a small loan and show yourself as a respectable client. If you manage to repay this borrowing on time, your credit score will improve. It will increase your chances of a serious loan.

  3. Boost Your Credit Score

Before applying for a loan make sure your credit history won’t spoil your plans. To improve your credit history, you must first pay off the current delays, minimize the number of simultaneously opened contracts, actively use credit products (preferably small short-term loans), making payments on them in a timely manner.

  4. Be Honest

 When filling in the borrower’s questionnaire, specify only truthful information about yourself. Including the purpose of lending, place of work, and additional sources of income. Be sure to include the phone number of one of your relatives, colleagues, or manager. (people who can confirm your ability to repay the loan)

  5. Earn More 

 In most cases a person is not required to be officially employed for getting a home equity loan. However, to get it approved you must have a source of income. If you can find a second job or take on more projects, do it! Firstly, it will make lenders trust you. Secondly, you will pay off your loan faster. What’s more, make sure you can prove the fact that you have an alternative source of income.

Drawing the Line

Nowadays it is much easier to get any type of loan. Today you can make use of a home equity loan even if you are unemployed. It makes these services appealing to freelancers and people who get a salary in an envelope.

However, it doesn’t mean that lenders won’t require a confirmation of your income. It is essential to step for analyzing your financial capabilities. Don’t underestimate the importance of preparatory steps and do your best to make a good impression on the lenders!