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Can You Get Approved for a Personal Loan With Low Income?

Can You Get a Personal Loan With Low Income?
Jason Steele
Jason SteeleUpdated March 10, 2023
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
A personal loan can help you cover any number of expenses, from medical bills to home renovations. But if your income is low, getting a personal loan may be more difficult. That’s because one of the factors lenders use to determine whether you can repay a loan is how much income you earn. While it can be challenging to get a personal loan for a low income, it is possible. Read on to find out how to do it.

Types of Personal Loans for People With Low Incomes

There are lenders that offer loans based on income. Low-income personal loans are available to applicants whose income falls at or below a specific level. Each lender typically has a different minimum income amount they require for loan approval. However, some lenders don’t have a minimum income amount; they simply require proof that a borrower has a regular, steady income. If you’re unemployed, you can look into a no income personal loan. However, you’ll probably still need to show proof of some type of income, such as a retirement account, pension, or government benefits. One of the fundamentals of personal loans is that borrowers need to demonstrate that they have the ability to repay the loan. Payday loans are another type of personal loan for low-income earners. But these loans come with high interest rates and can be tough to repay. With a payday loan, the principal amount you borrow is part of your paycheck and the money is due on your next payday, typically within a few weeks. Unlike most other types of personal loans, payday loan lenders usually don’t look at your income, credit history, or credit score when approving you. However, getting out of a payday loan is difficult due to the high interest rates and short repayment terms. Some other types of personal loans for low income individuals include:

Personal Loans With No Collateral

Personal loans that don’t require you to use an asset as collateral are called unsecured personal loans. These loans may have higher interest rates because there is no collateral to back them. In other words, if you default on the loan, the lender has no asset to seize to help recoup their losses. You may have to meet a required minimum income and credit score for an unsecured loan.

Personal Loans With Collateral

Personal loans that require collateral are called secured personal loans. You can use a valuable asset like a car or an antique as collateral. However, if you don’t repay the loan, the lender can take possession of your asset. Secured personal loans are typically easier to qualify for because they are less risky for lenders. These loans may be an option for low-income borrowers. 

What Are My Chances of Getting Approved for a Personal Loan With Bad Credit and Low Income?

If you have both bad credit and low income, you may have a harder time getting approved for a personal loan. However, there are options for a personal loan with bad credit and low income.Subprime personal loans are available to borrowers with poor credit and low income. Subprime loans are easier to qualify for, but they often have high interest rates and fees. There are a few different types of subprime personal loans you can look into, including interest-only subprime loans, fixed-rate subprime loans, and adjustable-rate subprime loans.Another option for those with low income and bad credit is personal loans with cross-collateralized loan clauses. These loans allow a borrower to use one asset to secure two different loans. For instance, your car could be the collateral for both an auto loan and a personal loan. Borrowers with bad credit may have an easier time qualifying for cross collateralized loans. In addition these loans may have minimal fees and transaction costs. However, you will have two loans rather than one to repay. And if you can’t pay the loans, you risk losing your asset.

Is a Co-signer Required for a Low-Income Personal Loan?

If you have a low income, having a co-signer on a personal loan can help improve your chances of being approved, especially if the cosigner has good credit. However, you should only use a co-signer if you’re confident you can make your loan payments each month. If you don’t repay the loan, it could negatively affect your co-signer’s credit score. 

Getting a Personal Loan

When applying for a personal loan, there are several steps you should take, including:

1. Comparing Lenders

When looking for a personal loan with a low income, you should compare lenders. There are online lenders and in-person lenders. Online lenders may have different interest rates, funding timelines, and fees than in-person lenders. Look for a reputable online lender. Watch out for any red flags, including unrealistic promises, discrepancies in the loan terms and conditions, and a request for upfront application fees. For in-person loans, you can explore options at banks and credit unions. Be sure to get offers from different lenders and compare the costs, terms, and interest rates to find the one that best matches your specific needs. 

2. Completing the Personal Loan Application

Once you find a lender, you’ll fill out a personal loan application. You’ll likely need to provide documents showing proof of income, employment, identity, and address. The lender will look at your credit score and consider your debt-to-income ratio. If you have low income and other existing debt, your debt-to-income ratio may be on the higher side (lenders prefer it to be 36% or less). However, some lenders might let you include additional sources of income on your application, including child support, alimony, or government benefits. This could help lower your debt-to-income ratio and may make it easier to qualify. 

3. Getting Funds

Once you’re approved for a personal loan, you’ll receive the loan funds. The lender will disburse them in one lump sum, usually within several days. You can then use the money for almost any purpose. You’ll repay the loan over time in monthly installments that include interest. 

The Takeaway

It’s possible to get a personal loan if you have a low income. Potential options include secured personal loans, subprime loans, and cross collateralized loans. You may also find it easier to qualify by getting a cosigner on a personal loan.When you’re exploring personal loan options, Lantern can help. In our online marketplace, you can get offers from different lenders all at once to compare rates and terms to find the right fit for your needs.

Frequently Asked Questions

How can you get a personal loan with low income?
Is it easy to get approved for a personal loan with low income?
Can you get a personal loan with bad credit and low income?
Photo credit: iStock/whitebalance.oatt

About the Author

Jason Steele

Jason Steele

Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.
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