 TITLE: How to Get a Loan During a Recession CONTENT: Does a Recession Affect Your Ability to Get a Loan?\n---------------------------------------------------\nMany lending impacts in a recession are indirect. Unemployment may rise, increasing the likelihood that you won't be able to pay your debts. Home values may drop as well, reducing the amount of equity you have in your home and limiting your ability to sell profitably. Even if you manage to avoid losing your job or being \"underwater\"—owing more than your home is worth—on your mortgage, the level of risk that any borrower represents is higher during a recession. Just as a rising tide lifts all boats, a recession makes everyone—borrowers and lenders alike—a little more vulnerable.\nAs a result, lenders are likely to take a harder look at your credit scores and reports when the economy is tight. When you're looking to get credit during an economic downturn, be prepared for lenders to scrutinize the following information:\n*   **Income**: As always, the more regular your income is, the better. If you've recently lost your job or been furloughed, the disruption to your income may be a red flag.\n*   **Credit score and report**: Your credit history shows lenders how you manage credit and debt. Do you make payments on time? Have you ever defaulted on a loan or declared bankruptcy? Also, it provides a snapshot of how much you currently owe, which will help lenders determine how much additional debt you might be able to shoulder.\n*   **Debt-to-income ratio**: Lenders consider how likely you might be to repay a loan by looking at how much of your income you use to make your monthly debt payments. For instance, if your current mortgage payment accounts for 50% of your income, refinancing to a larger loan might be impossible.\n*   **Assets**: In a financial emergency, would you have the funds to continue making loan payments? Savings are key.\n*   **Down payment**: \"No money down\" home and auto loans might be harder to come by—or harder to qualify for—in a recession. On the other hand, if you can put a larger down payment on a new loan, you might improve your chances of approval.\nDuring a recession, lenders are likely to set the bar a little higher for these parameters. For example, they may require a higher FICO® Score☉ for you to qualify for the best rates or a lower debt-to-income ratio when setting a loan amount. They may also simply approve fewer loans if the economic environment seems risky. END