Personal loan options dwindle when you have low income, even though low-income earners need them the most. Today, many online lenders offer low-income loans, focusing on a borrower’s credit score and debt ratio rather than the income itself.
What makes you ‘low income’ varies by lender. Some consider you low income if you make 80% or less of the country’s average income and others have specific income guidelines.
No matter what lenders use to determine it, your loan amount may dwindle. If you have good credit and few debts, though, you may qualify for attractive loan terms. Knowing each lender’s requirements (minimum income, credit score, and debt ratio) helps you choose the right lender.
So what are your options?
If you have low income, consider a secured personal loan. If you can put up collateral, such as a car or a CD, lenders may be more willing to approve your loan. Lenders are more flexible with secured loans because they have ‘backup.’ If you default, they take your collateral. Your income isn’t as important in this case.
Money for peer-to-peer loans comes from ‘peers’ or individual investors. You aren’t dealing with a large bank with crazy high restrictions. Instead, individual people (like you and I) invest in the loans. Investors pool their money together to fund your loan.
Investors may invest as little as $25 or as much as they want. The P2P platform rates borrowers based on their income, assets, credit score, and debt ratio. Investors decide what risks they want to take and invest. The lower your income or the worse your other qualifying factors, the higher the interest rate and fees, but it’s a viable loan option.
Loan aggregators have a large network of lenders and personal loans available for different types of borrowers. You only complete one loan application but may receive offers from several lenders.
Loan aggregators make applying for a personal loan with low-income easier. You don’t have to explain your situation repeatedly. The aggregator matches you with viable lenders who contact you and determine if you qualify.
Almost anyone can join a credit union today. Check any groups, communities, or even your employer to see if there is a credit union available. Credit unions have more flexible guidelines and look at each situation individually.
They don’t have cut and dry requirements, like banks who turn you down for even one little ‘issue.’ Since credit unions are member-owned and non-profit, they tend to offer more flexible guidelines. This enables even low-income earners or borrowers with poor credit to get a loan.
No matter where you apply for a personal loan, improve your qualifying factors. If you have low income, lenders look for compensating factors. Great credit scores are the perfect answer. Fix your credit and/or lower your debt to give lenders a reason to give you a personal loan despite your low income.