A job change can be a happy event. But it can also put a stress on your finances. And when a career change comes uninvited, in the form of a layoff, life can be extra stressful. Whether your career change is a positive or negative event, you may be wondering if a personal loan during job change can help you bridge a financial gap.
In this article, we’ll examine why you might find a personal loan useful, what the potential financial risks and rewards of a personal loan during job change might be, and alternative borrowing options should you decide a personal loan isn’t for you.
Key Points
• A personal loan can help cover costs during a job change, whether planned or due to a layoff.
• Personal loans are typically unsecured, have fixed interest rates, and can be obtained relatively quickly.
• Funds from a personal loan can cover short-term expenses, relocation costs, job training classes, or be used for debt consolidation.
• Before borrowing, consider the risks, including increased debt, potential fees, and the possibility of a negative impact on your credit score if payments are missed.
• Alternatives to a personal loan during career transition include using savings, credit cards, and a home equity loan or line of credit.
What Is a Personal Loan?
A personal loan can be an attractive option for those in the midst of a career change. Before deciding whether or not to borrow, make sure you understand the way personal loans work. These loans are most often unsecured, so there’s no risk that you’ll face foreclosure on your home should you have difficulty repaying what you borrow.
The process and timeline for getting a personal loan for career change is also fairly straightforward, and personal loans usually take less time to obtain than a loan based on your home equity. Some loan approvals come as quickly as a day after the application.
These are lump-sum loans, so you receive all the funds at once. Lenders set their own ceiling for these loans, but depending on your qualifications, you may be able to borrow anywhere from $1,000 to $100,000.
Personal loans usually have a fixed interest rate, so you’ll know at the outset how much you’ll have to pay each month and for how many years (a typical term is seven years, though shorter or longer terms may be available). This consistency can be helpful when you take out a personal loan during job change.
Recommended: Secured vs. Unsecured Personal Loans
Why Career Changes Can Impact Finances
Even if your career change is elective and your unemployment period is a happy event, your finances may be affected in one of several ways.
Income Gaps
Money usually stops flowing in when you leave one job to move to another, and if this income gap is extended — perhaps you’re having trouble finding your next gig — the bills can pile up. You can keep on track (and avoid missing payments, which could negatively impact your credit score) by using funds from a personal loan to bridge the gap.
Relocation Costs
Even in this age of remote work, relocation for a new job might be necessary. And not all employers will cover the costs. The average cost for a move of more than 100 miles is almost $5,000. And that’s not including any expense related to a new nest, such as painting or furniture. A moving and relocation loan is a personal loan that can allow you to spread these costs out over a period of several years.
Training or Certification
Maybe your job change is part of a larger life plan that includes studying or training for a new career. Thinking of going to cooking school or training to become a physical therapist? A personal loan can be a means of financing career transition.
How a Personal Loan Might Help During a Career Transition
The funds you obtain with a personal loan can be used for any legal purpose, and as you might imagine, a career transition can result in a few possible scenarios where a loan might be useful.
Covering Short-Term Expenses
If you don’t have an emergency fund or hesitate to tap it to pay your monthly bills during a time when you don’t have income coming in, a personal loan might allow you to spread out the payments over a period of several years while you get back on your feet.
Debt Consolidation
Some people build up debt — on credit cards, in many cases — during a career transition. If you find this happening, you might consider a personal loan for debt consolidation. Credit card interest is typically higher than interest on a personal loan. Using a loan to pay off your credit card debt can reduce the total cost of borrowing and make payments less of a hassle (you might swap a few different card payments for just one personal loan payment).
Predictable Payments
As noted above, the payments you would make on a fixed-rate personal loan are consistent. If you borrow this way, you’ll know at the outset how much you’ll owe each month. You can use a personal loan calculator to see projected payment amounts.
Recommended: Guide to Personal Loans for Beginners
Risks to Consider Before Borrowing
Borrowing money inevitably comes with some potential downsides, which are worth exploring if you’re thinking about financing a career transition.
Added Debt
Taking out a personal loan will increase your overall debt level (unless your loan is purely used to consolidate existing debt). This isn’t necessarily a bad thing, but if you are carrying significant debt, you may find it more difficult to obtain a home or auto loan until that debt is paid down.
Fees and Penalties
Some lenders charge loan origination fees, and most charge a penalty for missed or late payments. Look carefully at these details when considering a loan offer, as these extras can drive up the overall cost of borrowing. Looking at a loan’s annual percentage rate (APR) instead of just its interest rate can help you compare the cost of different lenders’ offerings.
Credit Score Concerns
Borrowers who can’t keep up with monthly personal loan payments may find their credit scores negatively impacted.
Personal Loan vs. Other Financing Options During Career Change
There are other ways to ensure your bills are paid besides taking out a personal loan during job change. Look at the pros and cons of these options before applying for a personal loan while unemployed. But do this early on, before you find yourself falling behind on monthly payments. Lenders consider your credit score as part of a financing application, and while there are loans based on income, a period of unemployment is not an ideal time to apply for them.
Savings
The best case scenario if you find yourself unexpectedly out of a job is to be prepared with a healthy emergency fund. This is a legitimate time to tap those savings. “An emergency fund is intended to be used at a moment’s notice. You’ll hear that a healthy emergency fund should cover between three and six months’ worth of living expenses — rent or mortgage, bills, food, and other essentials. Since you never know when an emergency might happen, it’s best to keep your fund relatively liquid,” says Brian Walsh, CFP® and Head of Advice & Planning at SoFi.
If you have an emergency fund, you might still want to take out a personal loan, then use the fund to make your loan payments, thereby stretching out your debt payment (and your fund) over a longer period of time.
Credit Cards
If you don’t have savings to rely on or choose not to obtain a personal loan, you can use your existing credit card(s) to help bridge a financial gap. Putting certain expenses, such as rent, on a credit card may come with additional costs, however. Landlords or property management agencies may charge a 2% or 3% fee for rent paid by credit card, and if you use a credit card to obtain a cash advance to pay rent, the cost can be higher still.
Personal loans typically win out over credit cards where interest rates are concerned. The average interest rate on a credit card is 20.97% according to the most recent report from the Federal Reserve Bank of St. Louis. The average rate on a personal loan in March 2026 is 12.15%. The exact rate you may be offered would depend on your financial qualifications.
Home Equity Loans and HELOCs
Homeowners who find themselves between jobs have an additional possible borrowing option: a home equity loan or a home equity line of credit (HELOC). You’ll typically need to have 15% to 20% equity in your home, and if approved, you may be able to borrow up to 85% to 90% of that equity, depending on which method you choose. (Your equity is your home’s appraised value minus whatever amount you still owe on your mortgage.)
The chief drawback of these methods is that a home equity loan or HELOC would be secured by your property. If you aren’t able to repay what you borrow, your home is at risk of foreclosure. As for the advantages? HELOCs and home equity loans may have lower interest rates and a longer repayment timeline than a personal loan.
The Takeaway
Used with care, a personal loan can be a good way to manage the financial challenges of a career change or close an income gap between jobs. It’s important to have a plan to make monthly payments on time and in full, as personal loans are lump-sum loans that must be repaid starting immediately. Fortunately, interest rates on personal loans tend to be lower than credit card rates for qualified borrowers. Explore loan options from multiple lenders to find the combination of interest rate and loan terms that work well for you.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.
FAQ
Can you get a personal loan without steady income?
It may be possible to get a personal loan without steady income, but you will likely need to show prospective lenders that you have resources to make the payments on what you borrow. Lenders may consider income from investments, government benefits, and alimony payments in addition to employment income. If you are self-employed and your income is erratic, you may be asked to provide additional tax returns or a profit-and-loss statement from your business during your loan application process.
Should I borrow during a job transition?
Whether or not to borrow money during a job transition is a very personal decision, based on your financial situation. Often, borrowing with a personal loan can help you stay up to date on your bills (such as rent or credit card payments) while spreading out your current costs over a repayment period that stretches to five, seven, or even 10 years. In making your decision, examine what the likelihood is that you can make the loan payments consistently, because they would start immediately.
Do lenders verify employment?
Lenders typically verify employment, although a lender might not contact your employer or former employer directly to accomplish this. You might be asked to provide pay stubs or W2 statements or your most recent tax return as part of a lender’s qualification process for a loan or line of credit. Some lenders use a third-party database to ascertain whether an applicant is employed.
How do lenders evaluate risk?
Lenders evaluate risk by examining a prospective borrower’s credit scores, debt-to-income ratio (the amount of debt you carry relative to your gross monthly income), consistency of income, and overall assets. How these elements are weighted would depend on the lender, the loan amount you are seeking, and whether the loan or line of credit is secured or unsecured.
Photo credit: iStock/Rockaa
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®
SOPL-Q126-096