How to Get a Personal Loan with Low Income & Bad Credit

What is a low-income loan?

Low-income loans are designed for people who may be turned away from other lenders or turned down for traditional personal loans based on income. These loans may require income verification, but they don’t have a set income threshold that must be met in order to qualify.

That doesn’t mean that anyone can automatically snag a loan, though. Lenders may look at other factors, like credit history and debt-to-income ratio, to decide whether an applicant is a poor or worthwhile risk.

Can you get personal loans with bad credit and low income?

It’s entirely possible to get approved for a persona l loan even if you have bad credit and lower-than-average income. But those loans typically come with questionable terms, including low interest rates and sky-high fees. No-credit-check loans are another option, though they often come with even higher interest rates and strict repayment terms.

What is the minimum income needed for a personal loan?

Minimum income requirements for a personal loan differ from lender to lender. You may even find that they change depending on the type of loan you’re applying for or how much you’re asking to borrow. For example, a lender will look for a much higher income level on a loan application for a $50,000 loan versus one asking for just $7,500.

How to qualify for a loan with low income

Lenders consider a number of factors when reviewing a loan application. Here are some ways you can improve your chances of getting the loan you need, even if your income is lower than you’d like.

Check your credit report

Use a site like Annual Credit Report to get your credit report. Look for any debts or delinquencies that may have been reported by mistake or don’t belong to you and contest them ASAP.

Get a co-signer or co-borrower

A co-signer or co-borrower is someone with a higher income and better credit score who is willing to sign a loan document and act as a guarantor. By co-signing, this person is saying that they’ll repay your loan if you fall short. Getting a co-signer can greatly increase your chances of being approved for a loan, and you may also be eligible for far better terms. This can be particularly useful if you’re trying to get a loan with no credit history.

Ask for a smaller loan

Before you apply for a loan, think about how much money you’re asking for and consider whether that amount is truly reasonable based on your income, credit history and debt-to-income ratio.

Lenders often have their own secret algorithm that calculates how much they’re willing to lend based on your income and overall creditworthiness. If that magic number is 20%, they’d theoretically be willing to lend $20,000 to someone who makes $100,000 per year, but only $10,000 to someone who makes $50,000 per year.

Lower your debt-to-income ratio

Your debt-to-income (DTI) ratio shows how much you owe creditors compared to how much money you’re bringing in overall. You can lower your DTI by paying off loans and making your overall financial picture more attractive.

Increase your income

Increasing your income is one of the easiest ways to improve your standing with lenders. You can try negotiating a raise, especially if you’ve been at the same rate of pay for several years or more. You can also start a side hustle, or even consider looking for a new job or even an entirely new career.

Things to consider when shopping for a loan

When shopping for a personal loan, it’s important to come equipped with knowledge, documents and an understanding of what you want from a lender and your ideal loan.

These are some things to consider:

• Income requirements. It’s a waste of time to apply for loans with stated income requirements far above your average salary. Some lenders may stretch a bit in the face of a great credit score, but most use income as a basic requirement and pass on applications based on that factor alone.
• Loan costs. Compare loans based on not just the loan offers themselves, aka how much you can borrow, but also how much the loan will ultimately cost you. Things like interest, application fees, administration fees and an origination fee can add up quickly and make an otherwise positive loan much less attractive. Try using our loan interest calculator to see how much you can afford.
• Repayment terms. Most personal loans have loan terms that require repayment in two to seven years. The longer the term is, the lower your monthly payments will be, and vice versa. If you want an installment loan that doesn’t come with a huge payment due on the 1st of each month, seek a loan with a longer repayment term.
• The option to prequalify. Prequalifying for a loan involves a soft credit check that won’t affect your score. Lenders use that to give you a rough estimate of how much you would be approved to borrow and the interest rate or APR you’d get if you went on to fill out an actual application. Prequalifying to test eligibility can save you time and test out lenders without affecting your credit score.

How to apply for a loan with low income

The only way to know for sure whether you’ll be approved is to actually apply for a loan.

Here’s how to get it done.

• Check your credit score: Do your own pre-app legwork by conducting a credit check and seeing how your score stacks up.
• Prequalify and choose a lender: Use the results of your prequalifications to identify the lender with the loan offers and terms best suited to your needs.
• Prepare your documents: Lenders often need copies of your government-issued ID, Social Security card, pay stubs, tax returns and utility bills (for proof of address/residency).
• Apply for the loan: Depending on the lender, you can apply in person at a local bank or credit union branch or even online, uploading your documents and using e-signatures to complete your application.
• Get funded and start making payments: Once you have your cash, it’s time to schedule payments. Use a calendar or mobile app to keep track and make sure you’re not paying late.

Lenders with no or low-income requirements

Looking for a personal loan with no or low-income requirements?

These lenders are known for working with borrowers who may not fit the bill for a traditional, high-income loan.*

• Universal Credit: Universal Credit is an attractive option because the company offers large loans and lengthy repayment terms, but the APR is on the higher end, and there are origination fees.
• Avant: Low annual income requirements, low minimum credit score and flexible loan terms make Avant a solid option. But loans max out at $35,000, and there are admin fees attached.
• Upgrade: This lender offers loans ranging from $1,000 to $50,000 and isn’t afraid to consider low-income borrowers, but interest is high, and there are origination fees to consider.
• Achieve: Achieve offers high loan amounts and relatively fast funding, but the minimum loan amount is high, and there are origination fees and high max APR to contend with.
• Best Egg: Borrowers love Best Egg’s low annual income requirements and large loans, but it can take several days for funding to come through, and there’s a high maximum APR.

*Loan terms are subject to change at any time. Contact each lender personally to verify the information.

Personal loan alternatives for low-income borrowers

If you’re denied a personal loan or just prefer another funding source, check out these personal loan alternatives.

• Government assistance: Look for federal and local programs designed to help individuals or families in need. There may be grants or loans geared toward parents of small children or women entering the workforce for the first time.
• Cash advance apps: These apps allow you to borrow against your next paycheck. You receive the funds quickly, but you have to pay back the loan quickly too or face sky-high interest.
• Credit cards: You can take a cash advance from your credit card, but beware of secondary interest rates that are higher for cash advances than regular purchases.
• Payday loans: Like cash advance apps, payday loans offer funding based on your average paycheck. Interest rates are enormous, and it’s easy to get into a cycle of debt.
• Hardship loans: Designed for individuals facing unexpected financial hardships, these loans often come with more favorable terms and lower interest rates than payday loans or cash advances.
• Help from family and friends: If your loved ones are in a position to lend you money, consider taking them up on it. But always write up an official loan document that includes interest and detailed repayment terms.