For banks and financial institutions, you are in the low-income bracket if your annual household income is within $55,000. This small annual income makes it difficult to get a personal loan. It becomes worse if your credit score is bad as well.
Hence, the question is, “How to get personal loan for bad credit and low income?” There are several alternatives for you to get a personal loan. The most possible ways are taking a personal loan from online lenders, family & friends, pawnshops, etc.
We discuss this matter here in detail to help you out.
Why Are Credit Score and Income Amount Important to Get a Loan
Before heading to the process of getting a personal loan with bad credit and low income, we suggest you understand the importance of these terms in loans.
How Credit Score is Important to Get a Personal Loan
- A good credit score indicates you are good at personal finances and highly concerned about paying off debts.
- It assists lenders to evaluate how well you’ve handled money in the past.
- Lenders use it to decide if you’re good at paying back loans.
- Credit score acts as an indicator for lenders to appropriate interest rates and terms.
How Income is Important to Get a Personal Loan
- This amount shows the lender how healthy your financial status is. A high income proves your ability to pay back the loan amount.
- Lenders want to know if you earn enough to pay back the loan. And a higher income always acts as an assurance in this case.
- If you don’t make much, getting a loan or borrowing a smaller amount might be harder.
- Income helps lenders see if you can manage a new loan and other expenses.
Effective Ways to Get a Personal Loan with Bad Credit and Low Income
Big banks and financial institutions won’t approve your personal loan application if your credit score and income are both low. In this case, you have to find alternative ways. Here, we explain how to get personal loan for bad credit and low income.
Take a Personal Loan from Online Lenders
At present, there are several online lenders who will lend you money even if your credit score is bad and your income is low. Some online lenders approve personal loans despite a low annual income threshold, say less than $25,000. However, you should know that the APR rate can increase to 35% in such a condition. Below is the process to get a personal loan from online lenders.
Step 1: Evaluate your credit score and income.
Step 2: Find out some suitable lenders who accept personal loan applications with bad credit and low income.
Step 3: Apply to the short-listed online lenders by applying along with the required documents.
Step 4: After receiving multiple offers, compare among them.
Step 5: Select the best suite and receive the allocated amount.
Take a Loan Family & Friends
If you have a wealthy and kindhearted friend or family member, you can ask for a loan instead of going to a professional lender. Explain your situation and the issues with getting a good personal loan with bad credit and low income.
Offer them a standard interest rate to make them convinced. But we strongly recommend you pay back the loan amount on time. Otherwise, your relationship with such a kind person will not be good.
Take a Loan from a Pawnshop
If you cannot find any good loan offer from any online lender or near ones, taking a loan from a pawnshop is a lucrative choice. Pawnshop loans require you to deposit any of your valuables, and you will get 20% -50% of the item’s resale value as a loan.
Also, the APR is high and can reach up to 35%-50%. The loan term is also very short. Below is the stepwise process.
Step 1: First, find a valuable item from your possession with a resale value.
Step 2: Do online research about local pawnshops. List down their name and address.
Step 3: Hit the road and visit multiple shops to get the best deal.
Step 4: Pay back the amount on time. Otherwise, the shop owner will sell your deposited item to another person to recover the amount.
Look for Government Assistance
This way is only applicable if you are not in need of a large amount at a time. There are several US government-run programs that are designated to help you if your household income is below average. For example, getting an EBT card is highly beneficial to survive on low income. We suggest you visit the USDA website to learn more about government-funded programs that help people experiencing poverty.
Resourceful Tips to Get a Personal Loan with Bad Credit and Low Income
- Ask for a lower amount as much as possible.
- Try with small banks and co-operatives.
- Carefully check your credit history to identify errors. Mistakes can lower your credit scores.
- Try to find a co-signer or co-borrower.
Hence, how to get a personal loan for bad credit and low income? We hope this financial article will help you find a fruitful way. You will surely get a personal loan by trying the mentioned ways.
Finally, we suggest you do a close examination of your income sources. There might be any side hustle or other income that you are not counting, but conventional lenders positively consider those to approve a personal loan.