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How your job could affect your personal loan eligibility

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What you do for a living can make or break your application.

While your credit history plays an important role in getting approved for a personal loan, it’s not the only aspect lenders consider. In fact, many online providers are moving away from looking at your credit in favor of other factors, such as education and employment. With some lenders, your occupation and your work history can potentially disqualify you.

6 job-related factors lenders consider

While not all lenders look at every single one of these factors, many consider at least one of them, especially income.

1. How much you earn

Your income is one of the most important factors in any loan application — even payday loans. Some states legally require lenders to consider your ability to pay when you take out a loan. Even in those that don’t, it’s standard practice for lenders to ask for proof of income when you apply.

How much you earn actually affects two parts of your application: your monthly pretax income and your debt-to-income ratio. Generally, you must have a high enough income to afford the monthly cost of the loan you apply for. But even if you meet your lender’s minimum income requirements, you could be disqualified if your recurring monthly bills add up to more than 43% of your income.

2. How many hours you work

Some lenders require you to work a certain number of hours to qualify for a loan — typically around 30. Others might only offer funding to borrowers with full-time jobs. Generally, the more hours you work, the more likely you are to get approved for a personal loan.

3. Who you work for

Being your own boss has many benefits. But it can be difficult to qualify for a personal loan if you’re self-employed. Some lenders flat-out won’t work with self-employed borrowers.

Others like Best Egg have a difficult time evaluating your income, especially if you don’t have pay stubs. If you receive pay in an unconventional manner, it might take a little bit longer for lenders to process your application — especially if they rely on an algorithm. You also might have to submit additional documents, such as recent bank statements and tax returns.

4. Your employment history

How long you’ve been in the work force is another factor that can affect your application — as well as the types of jobs you’ve had in the past. Some might require you to be at your current job for at least a year or two. Others might only work with applicants who have worked in the same industry for a certain amount of time.

Often, these lenders will ask you to provide information about your work history in the application. For example, Earnest asks you to provide information about your employers over the last four years.

5. Your occupation

While it’s uncommon for lenders to list certain industries as ineligible for a personal loan, what you do for a living can affect your eligibility. That’s because some occupations have a higher rate of default than others. Investors lost the most money when funding loans to individuals from the following occupations, according to NSR Invest data on Prosper peer-to-peer loans:

  • Licensed Practical Nurse (LPN)
  • Homemaker
  • Nurse’s aid
  • Bus driver
  • Car dealer
  • Food service
  • Laborer
  • Truck driver
  • Food service management
  • Retail sales

6. Prospective jobs

Some lenders also count a job on the horizon in your favor when you apply for a loan. Typically, you need to sign the contract and have a start date before you can put it on your application. Others might require you to start within a certain timeframe. For example, SoFi requires you to have a start date within the next 90 days.

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Can I get a personal loan if I’m unemployed?

You might be able to get a personal loan if you’re unemployed, though it can be hard finding a lender willing to work with you. If you don’t have any form of income, you likely won’t be able to qualify anywhere. However, you could be eligible in some of the following circumstances:

  • You live off a pension. If you’re retired, some lenders count your pension as income and will offer a loan.
  • You depend on your spouse. Lenders will sometimes consider household income rather than personal income when you apply for a loan.
  • You receive government assistance. Some lenders are willing to consider disability or other types of government benefits as income if you apply for a loan — especially short-term loan providers.
  • You get alimony or child support. If you receive enough from a former partner to afford your repayments, you could qualify for a loan based on this income alone.

6 more factors lenders consider

While work and income are two important aspects lenders consider when you apply for a loan, they aren’t the only ones. Here are some other factors that could affect your application:

  1. Credit score and history. Most lenders have a minimum credit score — even if they don’t advertise it. Others might require you to have a credit history of at least three years to qualify.
  2. Monthly expenses. Having high income might not be enough if your monthly bills clock in at over 43% of what you bring home.
  3. Age. The legal age to borrow is 18 in most states. It’s 19 in Alabama and Nebraska, and 21 in Mississippi.
  4. Legal status. Most loans are only available to US citizens or permanent residents.
  5. Where you live. Some providers aren’t licensed to lend in all states, since many have their own rules for lending.
  6. Housing. It’s common for lenders to ask if you rent or own and how much you pay for housing each month.

Surprising factors lenders take into account

Bottom line

Your job might have more of an impact on your personal loan application than you think. From your monthly income to your time in the workforce, what you do to support yourself plays a major role in how lenders view your application. You can learn more about how it all works by reading our guide to personal loans.

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