The trick to getting a personal loan when you have a bad credit history and a low income is to keep the requested amount as small as possible.
Small borrowed amounts help overcome the higher default risks associated with a consumer report riddled with delinquencies, repossessions, judgments, or bankruptcies.
Small borrowed amounts also help overcome your low income, keeping the projected monthly payment affordable when added to your existing housing, food, transportation, and other living expenses.
Finally, showing that your meager earnings will likely continue past the loan term helps ease subprime lenders’ minds, leading to more approvals.
Small Loans With Bad Credit
First, we focus on the bad credit history component of getting a small personal loan with a low income. As default risks increase, lenders are less likely to approve applicants when their consumer reports include derogatory marks.
But you can increase your approval odds by keeping the installments affordable.
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Low Monthly Payments
An affordable monthly payment is the best way to get a personal loan when you have low income and poor credit scores. Lenders are more likely to approve applicants when the borrower can handle the installments comfortably.
Bad credit loans with low monthly payments accomplish this feat by balancing the one consumer-controlled factor against the two terms lenders dictate based on their underwriting philosophy.
- Interest rate: determined by lenders
- Repayment term: dictated by lenders
- Requested amount: specified by the borrower
In other words, keeping the principal amount small (the one short-term factor you control) translates into affordable monthly payments and more approvals.
Based On Income
Working through sub-prime lenders that de-emphasize FICO® and Vantage® scores is another way to get a personal loan with poor credit and low income. Lenders focus more on your annual earnings while using alternative data sources to predict future default risk.
Personal loans based on income, not credit scores, rely heavily on alternative reporting bureaus (those not named Experian, Equifax, or TransUnion). You may have been severely delinquent years ago due to past financial hardship but might be current on apartment rentals, utility bills, etc.
The non-traditional source of positive information helps your cause.
Personal Loans With Low-Income
Next, we focus on the low-income component of getting a small personal loan with a bad credit history. You want to balance your application with something positive: an attractive DTI or ongoing earnings.
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Low DTI
An acceptable Debt-to-Income (DTI) ratio is the primary way to get a loan with a low income when you also have an adverse payment history on your consumer report. Sub-prime lenders use DTI and credit scores to predict future default.
Personal loans for a high Debt-To-Income ratio are unrealistic with an inadequate salary unless you can consolidate other obligations and spread payments out further over time. If approved, your DTI before borrowing the extra money is less important than the ratio afterward.
Ongoing Earnings
Making a compelling case that your earnings will continue without disruption is another way to get a personal loan with a low income when you have poor credit scores. Lenders feel most comfortable knowing that money will regularly be deposited into your checking account in the future.
Disabled People
People with disabilities have one advantage when seeking small personal loans with low income and weak credit scores: the reliability of Social Security Disability monthly checks.
Loans for people on disability with lousy credit bank on the consistent flow of money into your checking account. Although SSI and SSDI recipients have meager incomes, the federal government has deep pockets and regularly disperses benefits with few interruptions. Sub-prime lenders love the cash flow certainty.
Government Workers
Federal government employees with low incomes have a slightly different advantage when seeking personal loans with a lousy credit history. Once hired, it is almost impossible to get fired!
Federal employee payroll deduction loans take advantage of secure government employment while going one step further. Sub-prime lenders automatically draft the monthly installment before you have a chance to spend it elsewhere.
Unemployment Beneficiaries
People collecting unemployment have low incomes but are at an enormous disadvantage when seeking personal loans with adverse history on the consumer report. The government benefits have an expiration date.
Unemployment loans without job verification are next to impossible when you have bad credit. Applicants are not providing a positive element to their profile. The two negatives do not cancel each other out.
Self-Employed
Self-employed individuals with low incomes must take extra steps to get a personal loan with lousy credit scores. Sub-prime lenders have nobody to call to verify employment or earnings.
Loans for independent contractors with poor credit require at least three months of recent bank statements showing regular deposits from an established third party with deep pockets. For instance, Uber or Lyft drivers might be able to satisfy this requirement.
