How to get a hardship loan

If you’re struggling to pay your bills, a hardship loan could provide the funds you need.

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If you’re unemployed, a hardship loan can help you stay afloat financially.  (Shutterstock)

If you’re struggling to stay on top of your bills, you may qualify for a financial hardship loan. You can apply for this type of personal loan to help offset financial losses associated with emergencies like medical bills, car repairs, or home repairs. 

If you’re unemployed, hardship loans can help keep you afloat until you find another job. Some financial institutions even specialize in loaning money to borrowers with lower credit scores or low income. Here’s what you should know about hardship loans.

Why should you get a hardship loan?

A hardship loan can help if unexpected expenses arise, like a pricey roof repair or an emergency surgery. Personal loans for hardships can be a great option, since they offer flexibility and typically lower interest rates than credit cards.

The benefits of hardship personal loans include:

  • They have longer repayment terms (typically between one and seven years).
  • You receive the funds as a lump sum up front.
  • Personal loans have fixed interest rates that are often lower than rates on other financial products.
  • Payments are made in monthly installments, with a set payoff date.
  • Unsecured loans don’t require collateral.

However, these loans aren’t right for everyone. Some drawbacks of hardship personal loans include:

  • They can come with fees, like origination fees for processing your loan application.
  • If you have fair or poor credit, you may not qualify for low interest rates.
  • Late or missed payments can negatively affect your credit score.
  • Secured personal loans require collateral, which the lender can seize if you fail to make payments.

Where to get a hardship loan

You can use a hardship loan to cover most household expenses, including bills, groceries, rent, and utilities. Since many hardship loans have shorter repayment terms, you should only take out what you need. 

Applying for a hardship loan is fast and convenient, and you have multiple lender options. 

Online lenders

Completing an online application is the fastest option when applying for a hardship loan. You can fill out the application at your convenience, and it typically only takes a few minutes. If you apply later in the day, you may need to wait until the next day to finalize some details. Many online lenders offer funding in as little as 24 hours from when the loan is approved. But some lenders may take a few days to process the application and deposit the loan funds.

Visit Credible to quickly and easily compare personal loan rates from various lenders, all in one place.

Banks and credit unions

While online lenders might be more convenient, it could be easier to borrow from a bank or credit union if you’re unemployed or struggling with your credit. Applying with your current bank or credit union could make qualifying easier, since you have an existing relationship with them. Check with a loan officer at your bank or credit union to see if it offers hardship loans. 

Can you get a hardship loan if you’re unemployed?

It’s possible to get a hardship loan if you’re unemployed. But without a steady paycheck you may need to provide proof of other income, like unemployment benefits, retirement income, child support, alimony, or Social Security payments.

Some lenders have minimum income requirements as low as $12,000 per year, while others don’t set specific income minimums. If you have other income sources besides employment, you may still qualify for one of these loans. 

These Credible partner lenders don’t have a minimum income requirement: 

  • Best Egg
  • FreedomPlus
  • Happy Money
  • LendingClub
  • Prosper

Alternatively, you may be able to find help with a national program or local nonprofit organization that offers emergency financial assistance. Some organizations to consider include: 

Types of hardship loans

Several types of hardship loans are available, and each has benefits and drawbacks. Understanding how they work can help you decide which one might be best for your situation. 

Bad credit loans

Bad credit loans are personal loans that some lenders provide to people with lower credit scores. The FICO credit-scoring model ranks scores below 580 as poor and between 580 and 669 as fair. 

Lenders that offer bad credit loans know that the borrowers are at a higher risk of not paying their debt. If you’re approved for a loan with bad credit, you’ll likely receive a higher interest rate to offset the lender’s risk. You’ll also have fewer lender options since many lending companies have minimum credit score requirements. 

You may consider asking a trusted friend or family member to cosign a loan if you can’t qualify on your own. Adding a cosigner with good credit to your loan application can increase your chances of approval, and of receiving better rates. 

Unsecured and secured personal loans

Hardship personal loans can either be unsecured or secured. An unsecured personal loan doesn’t require collateral, but it’s harder to qualify for than a secured loan. 

To get a secured personal loan, you’ll have to provide collateral, such as your home, vehicle, or other valuables. You can use a secured personal loan for various purposes, including debt consolidation.

Secured loans may offer lower interest rates than unsecured personal loans since your collateral makes you a lower risk. You may also qualify for better repayment terms and a larger loan amount with a secured loan. The biggest drawback is that you could lose your collateral if you default on your payments. 

Coronavirus hardship loans

Coronavirus hardship loans were introduced during the COVID-19 pandemic to help people who lost income due to job loss, illness, or an inability to work when the economy shut down. These hardship loans typically have shorter repayment periods and lower interest rates. Sometimes the loans include deferred payments. These loans are available through many online lenders, banks, and credit unions. 

The benefit of a coronavirus hardship loan is that the interest rate may be lower than what you’d typically qualify for, and you may still qualify if you’re unemployed. The drawback is that the loan amounts may be smaller, the repayment terms are often shorter, and you may still need to provide proof of an alternative source of income (like unemployment or retirement). 

How to apply for a hardship loan

When you’re ready to apply for a hardship loan, here’s what you need to do:

  1. Gather information. Before applying for loans, ensure you have all the necessary documentation. Even if you’re unemployed, you may need to provide some proof of income or proof of unemployment. You should also have proof of address and identification on hand.
  2. Compare rates. Compare rates from multiple lenders. While you may have higher rates because lenders consider unemployment as a higher risk, you can still save money by finding a lender with the best terms for your situation. Don’t be afraid to shop around. If several lenders pull your credit score in a short time, the credit bureaus will likely lump them together to limit the impact on your credit score.
  3. Fill out your application. Once you’ve chosen the lender you want to work with, complete the application. If your credit is questionable, consider adding a cosigner. A cosigner with an excellent credit score and a stable income could make it easier to get a more affordable loan.
  4. Finalize loan documents and wait for the funds. Upon approval, your lender can deposit your loan funds directly into your bank account. You may need to wait a few days, depending on when the loan is approved and the lender’s processing times.

Credible makes it easy to see your prequalified personal loan rates without affecting your credit.