How to pay off credit card debt when you’re unemployed

Unemployment can lead to severe financial hardship, especially if you have outstanding credit card debt. With this type of high-interest debt, if you can’t make more than the minimum payment, your balance will continue to increase and can quickly become unmanageable.

And if you can’t make your credit card payments, it’ll damage your credit score. Getting rid of your credit card debt while unemployed can be challenging, but it’s possible. And doing this will free up money you can use elsewhere.

• Should you pay credit cards while unemployed?
• How to handle credit card debt when you’re unemployed
• 7 personal loan lenders with low or no income requirements
• Paying off credit card debt with a personal loan

Should you pay credit cards while unemployed?

It can be hard to manage your bills when you’re unemployed, and you may have to prioritize certain payments over others. For example, you can’t let your rent or mortgage payments slide and must continue paying for utilities.

And you should continue making at least the minimum payments on your credit cards. If you stop making payments altogether, this can hurt your credit score and affect your financial situation for years to come.

But try to make more than just the minimum payments if you can. Credit cards come with high interest rates, so only making minimum payments means your debt will grow faster.

How to handle credit card debt when you’re unemployed

Here are a few ways you can manage your credit card debt when you’re unemployed:

• Talk to your credit card company. Contact your credit card issuer to see if it’ll work with you, especially if you’re struggling to make the minimum payments. It may be willing to defer payments or reduce your interest rates temporarily, especially if you have a positive payment history.
• File for unemployment. If you were let go from your job, you might be able to file for unemployment. These benefits typically pay a percentage of your previous wages, though the exact amount will depend on where you live. Visit the Department of Labor website to look up unemployment benefits in your state.
• Free up money. You can also look for ways to minimize other budget items to put more money toward your credit card debt. For example, you could cancel subscriptions that you no longer use and put that money toward your credit cards instead.
• Look for temporary income. Try to find ways to bring in some supplemental income that you can put toward your credit cards. For example, maybe you could take on a part-time job or drive for a rideshare company while you look for more permanent work.

7 personal loan lenders with low or no income requirements

If you’re receiving unemployment benefits, you may still qualify for a personal loan. More lenders are willing to consider factors beyond your income alone, and some work with low-income borrowers. But keep in mind that some lenders may require you to demonstrate your ability to repay the loan.

Best Egg

• Minimum income: Verifiable income must support ability to repay
• Loan amounts: $2,000 to $50,000
• Repayment terms: 2 to 5 years

FreedomPlus

• Minimum income: No income requirements
• Loan amounts: $10,000 to $50,000
• Repayment terms: 2 to 5 years

Happy Money

• Minimum income: No income requirements
• Loan amounts: $5,000 to $40,000
• Repayment terms: 2 to 5 years

LendingClub

• Minimum income: Verifiable income must support ability to repay
• Loan amounts: $1,000 to $40,000
• Repayment terms: 3 or 5 years

Prosper

• Minimum income: Some form of annual income
• Loan amounts: $2,000 to $50,000
• Repayment terms: 2 to 5 years

Reach Financial

• Minimum income: $1,000 monthly
• Loan amounts: $3,500 to $40,000
• Repayment terms: 2 to 5 years

Upstart

• Minimum income: $12,000
• Loan amounts: $1,000 to $50,000
• Repayment terms: 3 to 5 years

Paying off credit card debt with a personal loan

If your credit card company can’t help you, paying off your card balances with a personal loan may make sense. Replacing your credit card debt with a personal loan comes with many advantages, including:

• Lower interest rates — Personal loans come with much lower interest rates than credit cards. The average credit card interest rate as of May 2022 was 16.65%, according to Federal Reserve data. In comparison, 24-month personal loans during that same time period had an average interest rate of 8.73%, so they tend to be much more affordable.
• Fixed monthly payments — Personal loans are a type of installment loan, so you’ll make the same payment each month over a fixed period of time. This can make planning for your monthly payments easier, but you won’t have the option to pay less if your income is tight one month.
• Flexible income and credit requirements — Some lenders will let you take out a personal loan even if you have a low income or poor credit. However, there are disadvantages to this strategy, since bad credit personal loans tend to come with higher interest rates, more fees, and less favorable repayment terms.

You’ll have to meet the lender’s income, credit score, and other requirements to qualify for a personal loan. The exact requirements will vary depending on your lender.