Getting a personal loan becomes more than crucial when your personal finances dive. However, If your personal credit score is low, getting a personal loan is challenging, even with a high income.
So, how to get personal loan bad credit but good income? There are three ways. First, try to convince the conventional lenders with high-income status. Second, getting an income-based personal loan. Third, get an online personal loan.
Let’s discuss the matter to have a clear understanding.
How Credit Score and Income Matters to Get a Personal Loan
When you file a personal loan application, lenders want to be sure you’ll pay it back. They look at two things to understand if they can trust you.
How Credit Score Matters
- Your credit score indicates how you’ve managed your money in the past.
- This score also acts as an indication of your concern level of paying off debt.
- It allows the lender to offer you a good amount and terms.
How Income Matters
- Lenders want to know you have enough money to pay them back. Your income provides that information.
- They look at your monthly income and compare it to your bills. Lenders feel better if the borrower has plenty of money left after paying bills.
- More income allows the lenders to offer you a bigger loan amount and a lower interest rate.
02 Loan Sources: How to Get Personal Loan Bad Credit But Good Income
We have already mentioned that there are three ways available in this case. Let’s discuss those in detail.
Taking a Personal Loan from a Conventional Lender
If your annual income is more than $145,000, conventional lenders like banks or financial institutions consider you an upper-income group member. This figure is quite enough to answer their question regarding your financial ability. There are many lenders who will provide you with a personal loan by seeing your high income.
But, in this case, the debt-to-income ratio must be very low if you want to get the application approved. In this way, you can convince them that in the past, you were in a struggling situation like money loss in investment, etc. And due to those reasons, your credit score is low.
But, the low DTI ratio will assure the lenders that you have plenty of money to pay back the loan amount perfectly. However, if you cannot convince any lender this way or don’t like the terms and interest rates, we suggest applying the below-listed strategies.
Go for a Secured Personal Loan
As you cannot get an unsecured personal loan due to bad credit, we suggest you use a secured one. In this case, you provide collateral to the lender.
The collateral can be your home, car, stock investment, etc. With high income and collateral, you will get a personal loan of a larger amount.
Get a Cosigner
This is also a good option to secure a personal loan with bad credit. Add a cosigner to your personal loan application. In this case, you and the cosigner are responsible for paying off the loan.
However, you have to ensure that your cosigner’s credit score is good; the FICO Score should be above 670. Also, the consigner’s income has to be good, with a low DTI ratio.
Get a Co-borrower
A borrower acts similarly to a co-signer. The difference is that the cosigner only carries the loan-payoff responsibility without any share of the amount, but a co-borrower shares both.
However, to get a personal loan approved, the requirements of a borrower are the same as the cosigner.
Taking a Personal Loan from an Online Lender
Online lenders usually approve personal loans with low credit scores and even with low income. So, as your income is high, you can find several online lenders to get a personal loan. But, there are two issues that we must mention here.
First, online lenders usually approve low amounts. You cannot expect to get a personal loan of $50,000. Second, the respective APR can reach up to 35%.
Taking an Income-Based Loan
If your credit is bad and your income is high, you can also go for an income-based loan. There are lenders who do not count credit score but your income only to provide the loan approval.
You can get a personal loan of up to $50,000 with an APR of 5.99%-35.99%. Below are some facts about income-based loans:
- The payoff period is usually short in the case of income-based loans. You can get a 3-5 year maximum.
- There are orientation fees.
- The higher the income, the less the interest rate.
How to Apply for an Income-based Personal Loan
Below is the stepwise guide to getting an income-based personal loan.
Step 1: Consult various lenders and know their general terms and conditions.
Step 2: Make a shortlist and apply for pre-approval.
Step 3: Upon getting pre-approval, go for submitting a full-fledged application. Also, enclose the required documents.
Step 4: The fund will be transferred to your account after receiving acceptance.
Hence, how to get personal loan bad credit but good income? We hope that you have a clear understanding. From the elaborated option, you can select a suitable one and get the loan.
Finally, we suggest you check all the terms and conditions before accepting any offer. Also, we suggest you do a careful examination of your credit report. If there is any error in your report, it reduces your credit score.