The Covid-19 pandemic increased the financial strain on many individuals and families who lost all, or part, of their income as a result of being furloughed or laid off. But regardless of your employment status, there are some expenses you can’t avoid even when times are lean.

Maybe you’ve decided to take entrepreneurship by the horns, but it turns out that starting a small business is more expensive than you initially thought. Or perhaps a costly home repair crashed into your lap, and it’s beyond what your emergency fund can handle.

Whatever the reason, a personal loan can be a useful tool when it comes to getting the money you need for expenses that you otherwise may not be able to cover immediately. But much like any other financial product or service, personal loans are not without their own set of considerations that potential borrowers should keep in mind.

Select spoke to financial wellness educator Danetha Doe to break down what you need to know about getting a personal loan if you’re unemployed.

How do you apply for a personal loan?

First and foremost, you’ll need to figure out how much cash you need to borrow since with a personal loan, you’ll borrow a fixed amount of money, says Doe.

If you’ve lost your job and you’re considering taking out a personal loan to cover lost wages, consider how much you actually need to live on. Doe recommends you multiple your total monthly expenses by the number of months you think it will take to find a new job. This way, you can apply for a loan with that total amount in mind.

Before you head to a lender, look through your credit report to make sure that everything looks accurate and you know your credit score. In the event that something on your credit report doesn’t look right, you’ll want to dispute the error before applying for a personal loan.

Knowing your credit score can help you shop around for lenders you know you will qualify for. Some lenders like Marcus by Goldman Sachs and LightStream have online tools you can use to figure out if you would qualify for a personal loan without putting in a full application.

Select also has a comparison tool that allows you to review different loan offers. You’ll need to answer 16 questions, including your annual income, date of birth and Social Security number in order for Even Financial to determine the top offers for you. The service is free, secure and does not affect your credit score.

This tool is provided and powered by Even Financial, a search and comparison engine that matches you with third-party lenders. Any information you provide is given directly to Even Financial and it may use this information in accordance with its own privacy policies and terms of service. By submitting your information, you agree to receive emails from Even. Select does not control and is not responsible for third party policies or practices, nor does Select have access to any data you provide. Select may receive an affiliate commission from partner offers in the Even Financial tool. The commission does not influence the selection in order of offers.

Once you’re ready to submit your application, you’ll need to gather up all your paperwork. “You’ll want your most recent paystubs because you’ll have to fill out information on your net income,” Doe says. “And if you’ve moved, you’ll need updated address info.”

And while there are a variety of ways you can use a personal loan — a wedding, a home renovation, debt consolidation, funeral expenses, an emergency expense and more — you’ll usually have to explain how you will use the money when you submit your application.

In addition to an application, the lender will also run a credit check, or do a hard inquiry, which can impact your credit score. The credit check looks at your financial profile, so the lender can compare your debt (i.e., credit cards, other loans, etc.) to your income to make an assessment on how likely you are to repay the money you receive (this is known as your debt-to-income ratio).

While you don’t need a perfect credit score in order to get approved for a personal loan, the higher your credit score, the more likely you are to get loan terms that are more favorable for you, like no fees and a lower interest rate. (Have a bad credit score, Select rounded up a list of the best personal loans for bad credit.)

Can you get approved if you’re unemployed?

It is possible to get approved for a personal loan if you’re unemployed, says Doe.

“Being unemployed does make the process more challenging. From the lender’s point of view, they want to lend money to an individual who they believe can pay the funds back,” she says. “So if you’re in a situation where you don’t have money coming in, it may be challenging for you to pay them back. If you have a history of paying down your credit cards and other past debts on time, that will lend itself to your favor.”

Also keep in mind that income doesn’t always necessarily come from a traditional paycheck. According to the IRS, other ways to show earned income can include gig economy work, money made from self-employment, benefits from a union strike, some disability benefits and nontaxable combat pay.

And of course, it’s very important to make sure you feel comfortable with the impact a loan repayment plan could have on your finances. Under some circumstances, you may not have any other choice but to take on more debt until you can improve your situation.

Take the time to consider how much of an impact the monthly loan payments will have on your overall budget. In some cases, the extra financial obligation is worth it to pay for an emergency, like a car repair so you can commute to and from new job interviews. In other cases, taking on additional debt may not be the best decision.

Can you get approved if you have inconsistent income?

If you are a freelancer, gig economy worker or a self-employed person, chances are you may have experienced (or continue to experience) periods of inconsistent income. Regardless, you can still get approved for a personal loan. It can help if you’re able to show that you’ve been in business for at least two years. Otherwise, the lender may ask you to get a co-signer for the loan.

What if a personal loan isn’t the right fit for me?

If a personal loan doesn’t sound like something that would be a fit for your circumstances, you still have other options for covering expenses. You may want to consider a personal line of credit instead. It’s similar to a loan, but it allows you to borrow money, repay the amount and then borrow again for a set period of time.

“A personal line of credit can be used when you aren’t quite sure how much money you’ll need but you know you’ll need a buffer,” Doe says. “If an unemployed person doesn’t know how long it will take them to start earning an income again, then a personal line of credit may be a better choice since they don’t know how much they will need.”

Also, keep in mind that personal lines of credit can accrue interest, and you will be expected to pay those charges as well.

While you might feel like your options are limited when you’re unemployed and in need of money, be on the lookout for predatory lenders, like payday loans. They carry very high interest rates even when you’re only borrowing a small amount of money.

Whenever you decide to borrow money, take the time to read the fine print and understand the repayment terms and conditions, so you’re not caught off guard by additional fees.

Bottom line 

Personal loans can be a valuable tool for anyone who needs money to cover an expense. And while you can still be approved for a personal loan if you are unemployed or have inconsistent income, it might be tougher (but not impossible) to prove that you will be able to pay back the funds. You should always analyze your personal circumstances to make sure any new debt or other financial decision is the best step for you.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.