Low-Income Loans: What Are and How to Access One
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Low-Income Loans: What They Are and How to Access One
People with low incomes may be eligible for a personal loan however, there could be cheaper loans available.
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Updated on January 25, 2023
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A low income shouldn’t have to be a barrier in the path of getting a personal loan. While many lenders have minimum income requirements, some prefer to see an ongoing cash flow.
Online lenders and credit unions are a viable option for low-income borrowers or those with thin or bad credit because they can have softer borrowing requirements or take into consideration the factors that go beyond your credit score and income when submitting the loan application.
If you’re eligible for a loan, you should carefully consider whether monthly payments be burdening your budget. There are also cheaper loans than borrowing an individual loan.
What exactly is a low income loan?
A low-income loan is a type of personal loan offered to consumers with income that falls at or is below a certain income threshold. It is a term used by the Pew Research Center, which examines trends in economics and demographics is able to define lower income as three-person households that have an annual income of less than $52,000 (using 2020 data). The threshold for lower income will vary depending on the area and cost of living.
For personal loans, a low-income loan can refer to the income requirements of a lender for customers.
Some lenders require a minimum monthly or annual income in some cases, while others only require proof of regular income — whatever the sum. For instance, an online lender will require a minimum of $24,000, while there is no income requirement.
How do you qualify for a personal loan with a low income
The lenders consider a variety of factors that include income when evaluating the borrowers. Here are some suggestions to help you get an individual loan when you have less money.
Check your credit report for errors. A lot of lenders will look at your credit history when they conduct your loan acceptance process. Therefore, you must ensure that the credit reports are clear of mistakes, such as a misspelled name or falsely reported delinquency that could hurt your credit score and reduce your chance of being accepted.
List all income sources. People with low incomes can include earnings from traditional work such as freelancing, freelance work or even a pension, dependent on the lender.
Consider a co-signed or joint loan. The addition of a co-signer on your application (especially those with higher incomes and credit score may make it easier to obtain a loan with a lower income.
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Ask for less cash. A smaller loan is, the lower risk for the lender So requesting a lower loan amount could help you get approved. A smaller loan could also result in lower monthly payments and less interest costs.
Lower your debt-to-income ratio. Take care to pay off any debts you can to lower your DTI. The majority of lenders will accept the highest ratio of debt-to-income of 50%, though lower is better.
Lenders who do not have or meet low income requirements
Certain lenders don’t have a minimum income requirement however, they do require applicants to prove an income figure on their loan application. Include income from other sources like the child’s support payment, an alimony and social security payments could help you get an loan.
Lender
APR
The amount of the loan
Minimum income requirement
4.5 NerdWallet’s ratings were determined by our editorial team. The scoring formula takes into account factors we consider to be a good choice for consumers, such as the impact on credit score, rates and fees as well as the customer’s experience and responsible lending practices.
11.69% – 35.93%
$1,000 – $50,000.
None.
5.0 NerdWallet’s ratings are determined by our editorial staff. The scoring formula takes into account aspects we consider to be a good choice for consumers, such as impact to credit score, fees and rates, customer experience and responsible lending practices.
8.49% – 35.97%
$1,000 – $50,000.
None.
4.5 NerdWallet’s ratings are compiled by our editorial staff. The scoring algorithm takes into consideration factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and ethical lending practices.
6.50% – 35.99%
$1,000 – $50,000.
$12,000.
4.5 NerdWallet’s ratings are determined by our editorial team. The scoring formula considers the factors we believe to be friendly to consumers, such as the impact on credit score, rates and fees customers’ experience, and responsible lending practices.
7.73% – 29.99%
$2,000 – $45,000.
$24,000.
5.0 NerdWallet’s rating is determined by our editorial team. The scoring formula is based on factors we consider to be a good choice for consumers, such as the impact on credit score, fees and rates, customer experience and ethical lending practices.
7.49% – 18.00% .
$250 – $50,000.
None.
4.0 NerdWallet’s ratings are determined by the editorial staff. The scoring algorithm takes into consideration factors we consider to be beneficial to consumers, including the impact on credit scores, rates and fees, customer experience and ethical lending practices.
9.95% – 35.95% .
$2,000 – $35,000.
$1,200 monthly.
Product is not yet evaluated.
5.00% – 15.99% .
$300 – $50,000.
None.
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Things to consider beyond the income requirements
While looking for personal loans, look not only at income requirements but also at the costs and conditions.
The cost of a loan. A personal loan’s includes the interest as well as any . The higher your APR, the greater the amount you’ll be paying each month and in total interest. Many financial experts recommend only considering loans with an APR below 36%, the cap at which an loan can be considered affordable.
Terms of repayment. Most personal loans have repayment terms between two and seven years. A longer repayment period will mean lower monthly payments, while a shorter term means less interest. If your monthly budget is smaller due to being a smaller income, a more long-term repayment could make more financial sense.
The option to pre-qualify. shows your estimate of the rate and duration before committing to an loan. It is an uninvolved credit pull that means you are able to pre-qualify for multiple lenders and evaluate offers without affecting your credit score.
How do I make an application for a loan
Below are the five actions you can do you earn any amount.
Check your credit: Review your credit score as well as the borrowing requirements of lenders to determine the lenders you might be able to get with. You can get a free credit report with NerdWallet and request your credit score from .
Pre-qualify and choose a lender You can compare offers from different lenders to find the loan which is suitable for your budget for the month and your needs.
Gather your documents: Lenders will ask for documents to confirm that you are who you say they are, as well as your residence and income. These could include copies of your driver’s license and utility bill, a tax return and a W2.
You can apply for a loan Apply for an loan either online or in person with certain lenders. An official application requires a and your score may be lowered by a few points at this point.
You can get your money: Some lenders offer the same day approval, while others may take a few days. If you are approved, expect to get your money within less than one week. The first payment is likely to be due after 30 days.
Find out if you’re pre-qualified for an individual loan and it will not affect your credit score
Answer a few simple questions to get your own rate estimates from multiple lenders.
Personal loan alternatives for those with low incomes
Government assistance. program offers monthly cash payments for children who are minors. Anyone who meets its eligibility requirements, including employment status and income thresholds are eligible to apply for the program to their state.
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Extra money. Consider a , like tutoring or walking dogs, to boost your income. Even a part-time job can bring in an extra income you’re looking for.
Family and friends. A friend or family member with higher rates and terms, but be mindful of the potential negative impact of your friendship.
Cash advance applications. let you borrow from your next paycheck and will be repaid at the time of payday. They are a great option for emergency situations, but they could come with fast-funding fees and require an optional tip.
Pawnshop loans. let you use an item as collateral to obtain a loan. You and the pawnshop lender are in agreement on the loan, terms and interest. Once you pay it off, you get the item returned.
The authors’ bios: Chanell Alexander is a former personal loans writer for NerdWallet.
Ronita Choudhuri is the person who handles personal loans for NerdWallet.
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