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Low-Income loans: What they are and where to get One

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Low-Income Loans: What They Are and Where to Get One

People with low incomes may be eligible to receive a private loan, but there may be more affordable alternatives to financing.

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Updated on January 25, 2023.

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A low income doesn’t have to be a barrier in the path of getting a personal loan. While some lenders have minimum income requirements, others prefer to see regular cash flow.

Online lenders and credit unions are a viable option for those with low incomes or with thin or bad credit since they have softer borrowing requirements or take into consideration factors beyond your credit and income when submitting the loan application.

If you qualify for a , carefully consider whether the monthly payments will strain your budget. You may also have cheaper financing options than borrowing with a personal loan.

What exactly is a low income loan?

The low income loan is a type of personal loan that is available to those who earn or below a specific income level. The Pew Research Center, which analyzes economic and demographic trends is able to define lower income as three-person households that have an annual incomes below $52,000 (using information from 2020). 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 a lender’s income requirement for the borrowers.

Certain lenders require an annual or monthly income in some cases, while others only require evidence of regular income regardless of the amount. For example, online lender has a minimum requirement of $24,000, while there is no income requirement.

How to qualify for a personal loan for those with low income

There are a myriad of factors that lenders take into consideration that include income when evaluating the borrowers. Here are some strategies that may help for a personal loan if you have an income that is lower.

Check your credit report for errors. A lot of lenders will look at your credit history during the loan approval process. Therefore, make sure you have a credit history free of errors, like an incorrect spelling of your name or a falsely reported delinquency that could affect your credit score as well as your chances of getting approved.

Make a list of all sources of income. Borrowers with low income can declare earnings from traditional jobs, freelancing or even pensions, depending on the lender.

Take into consideration a joint loan. The addition of a co-signer on your application — especially those with higher incomes and credit score may make it easier to secure a loan even for those with lower incomes.

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Ask for less cash. The smaller the loan will be, the lower the risk for the lender So requesting a lower loan amount could aid in getting accepted. A smaller loan could also result in lower monthly payments and interest costs.

Lower your debt-to-income ratio. Take care to pay off any debts you are able to in order to lower your DTI. Most lenders will allow the maximum debt-to-income ratio of 50%, but lower is better.

Lenders who have no or very low income requirements

Certain lenders don’t require a minimum income However, they require borrowers to provide income when filling out the loan application. Including income from other sources such as the child’s support payment, an alimony, and social security contributions could help you get an loan.

Lender

APR

The loan amount

Minimum income requirement

4.5 NerdWallet’s ratings were determined by our editorial team. The scoring formula considers the factors we believe to be beneficial to consumers, including the impact on credit score rate and fees customers’ experience, and ethical lending practices.

11.69% — 35.93%

$1,000 — $50,000.

None.

5.0 NerdWallet’s ratings are compiled by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including the impact on credit score, rates and fees as well as the customer’s experience and responsible lending practices.

8.49% — 35.97%

$1,000 — $50,000.

None.

4.5 NerdWallet’s ratings were determined by our editorial staff. The scoring algorithm takes into consideration the factors we believe to be beneficial to consumers, including impact on credit score, rates and fees customers’ experience, and ethical lending practices.

6.50% — 35.99%

$1,000 — $50,000.

$12,000.

4.5 NerdWallet’s ratings were determined by our editorial staff. The scoring algorithm takes into consideration the factors we believe to be consumer-friendly, including impact to credit score, rates and fees customers’ experience, and ethical lending practices.

7.73% — 29.99%

$2,000 — $45,000.

$24,000.

5.0 NerdWallet’s ratings are determined by our editorial team. The scoring formula takes into account the factors we believe to be consumer-friendly, including the impact on credit score, rates and fees customers’ experience, and ethical lending practices.

7.49% — 18.00% .

$250 — $50,000.

None.

4.0 NerdWallet’s rating is determined through our team of editors. The scoring algorithm takes into consideration the factors we believe to be consumer-friendly, including the impact on credit scores rates and fees, the customer experience and ethical lending practices.

9.95% — 35.95% .

$2,000 — $35,000.

$1,200 monthly.

Product not yet evaluated.

5.00% — 15.99% .

$300 — $50,000.

None.

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Things to take into consideration beyond income requirements

While looking for personal loans, look not only at income requirements but also at costs and conditions.

The cost of a loan. A personal loan includes the interest as well as any . The more expensive your APR, more you’ll pay each month as well as in the total amount of interest. Many financial experts recommend only taking a look at loans with an APR less than 36%, the cap at where an loan can be considered to be affordable.

Repayment terms. Typically, personal loans come with repayment terms between two and seven years. A longer repayment time means smaller monthly payments, but a shorter repayment term will mean lower interest rates. If your budget is smaller due to being a smaller income, a more long-term repayment could make more financial sense.

The pre-qualification option. shows your estimated rate and the term prior to committing to an loan. It involves an uninvolved credit pull that means you are able to pre-qualify with multiple lenders to assess offers without impacting your credit score.

How do I request a loan

These are 5 steps you can take when you earn any amount.

Check your credit: Review your credit score and the borrowing requirements of lenders to determine what lenders you could be eligible for. You can get a free credit report with NerdWallet or request a credit report through .

Make sure you are prequalified and select a lender: Compare offers from different lenders to find the loan that fits your budget and requirements.

Take your documents with you: Lenders will ask for documents to verify that you are who you say they are, as well as your residence, and your income. This can include copies of a driver’s license utility bill, tax return, and W2.

You can apply for a loan It is possible to apply for a loan on the internet or in person at certain lenders. A formal application requires a and your score may be lowered by a few points at this point.

You can get your money: Some lenders offer same-day approval, but others require some days. If you’re approved, you can expect to receive your money in less than a week. The first payment is likely to be due after 30 days.

See if you pre-qualify for an personal loan and it will not affect your credit score

Answer a few simple questions to get personalized rates estimates from several lenders.

Personal loan alternatives for low-income borrowers

Assistance from the government. The program provides cash monthly to individuals with minor children. Those who meet its qualifications, such as income and employment status are eligible to apply for the program in their state.

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Extra money. Think about a job, such as tutoring or walking dogs, to increase your earnings. Even a temporary gig may give you the extra cash you need.

Family and friends. Family members or friends with better terms and rates, but be mindful of the potential negative impact on your relationship.

Cash advance apps. You can borrow funds from your next paycheck , and pay back on payday. They can be helpful for emergency situations, but they could be subject to fast-funding charges and may also ask for an additional tip.

Pawnshop loans. allow you to use an item as collateral to secure a loan. You and the pawnshop lending institution can agree on the loan conditions, terms and the 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-Wade is the individual loans for NerdWallet.

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