I’m Not a Top Earner and I Need a Loan: Will Anyone Approve Me?


By Contributing Author

While you manage to get by on a lower income, it’s not always easy. When you need some sort of financing, it seems as if many of the traditional lenders are not interested in talking with you. Are there any institutions that offer personal loans for low-income earners? The answer is yes. Based on your individual circumstances, there’s a chance that you would qualify for one of those loans. Here are some tips that will help you sort through the choices and hopefully find a lender who has the ideal solution.

Identifying What the Lender Considers a Minimum Income

Every lender requires applicants to show proof of income. The goal is to determine if the applicant generates what the lender considers to be the minimum amount required to repay the loan and still take care of most common living expenses. What you may not realize is that some lenders set that minimum income amount higher than others.

Your goal is to find out what the lender under consideration considers the minimum amount of income required for approval. You may be surprised to find that there are a number of lenders who require less than you currently bring in every month. While meeting or exceeding that minimum will not automatically qualify you for approval, it’s an excellent start.

Confirming Which Income Sources Are Accepted

Now that you know how much monthly income is needed to be considered for a loan, confirm what sources of income the lender will accept. This is where things can get a little more confusing since some lenders accept a wide range of income sources while others only accept income from a steady job.

There are lenders who will accept a wider range of income sources. For example, you will find some who are happy to accept pensions, government subsidies, and even maternity benefits as eligible sources. Child custody payments or alimony that’s remitted through the court may also be eligible for consideration. If you have money from a settlement that’s paid in monthly increments, it may also qualify as an eligible source.

If you have more than one source, the combined total will be what the lender looks at if you prefer. For example, you may have a part-time job but also receive monthly payments on a settlement. Submit information on both and the lender may consider both sources eligible and base the loan offer on the cumulative total.

Should I Apply for a Secured or Unsecured Loan?

There are benefits and potential drawbacks associated with secured and unsecured loans. It will be up to you to determine which approach would work best in your case. Knowing a little about each type, and how it can impact the terms of the loan, will help you make the right choice.

Secured loans are lending arrangements that require pledging some asset as collateral for the duration of the loan. One of the benefits is that collateral helps to reduce the amount of risk the lender takes on in order to do business with you. Should you default on the loan, the lender can seize the pledged asset and sell it to settle the outstanding loan balance. Since you have no plans on defaulting, pledging an asset that you weren’t going to sell for the loan duration anyway does make sense.

Unsecured loans do not require pledging any type of collateral. Depending on how low your income happens to be, a lender may require a higher interest rate to offset some of the risks involved with approving the loan. This works well if you would rather not tie any of your assets to the loan and you don’t mind paying a little more in interest.

Comparing the Loan Terms and Conditions

Even with loans designed for those with lower incomes, you will find some variance in the terms and conditions. Reputable lenders will take the time to point out every type of fee that needs to be paid upfront as well as any recurring fees that come up during the life of the loan. This is great, since it makes it easier to know how much you will ultimately repay to the lender.

Keep in mind that some lenders may point out some costs while encouraging you to read the loan terms and conditions for yourself. This is something that you want to do in any case. It’s important to know what to expect if a payment posts a day after the due date or you’re not able to make a payment on time for some reason. Before you accept the loan offer, make sure you understand exactly what type of commitment you’re taking on.

Being Realistic About Your Ability to Repay

The fact that a lender is willing to extend a loan is not sufficient proof that it’s the right one for you. Ultimately, you must determine if the amount of the monthly payments is affordable.

Can you realistically make those payments on time for the entire loan period? Do you have a plan for making a payment on time if your paycheck was delayed for some reason? What if you were between jobs for a couple of months? If you have strategies for managing the loan while resolving short-term issues, accept the loan with confidence.

Never assume that your income is automatically a deal-breaker with all lenders. Even with lower monthly income, there are lenders out there who will seriously consider your applicant. Find them, make sure you can comply with their conditions, and all will be well.