Low-Income Loans: What They Are and Where to Get One

A low income doesn’t have to stand in the way of getting a personal loan. While many lenders have minimum income requirements, others care more that you have a steady monthly cash flow. 

Online lenders and credit unions may be good options for low-income borrowers or those with thin or bad credit because they can have softer borrowing requirements or look at factors beyond your credit and income on a loan application. 

If you qualify for a personal loan, carefully consider whether the monthly payments will strain your budget. You may also have cheaper financing options than borrowing with a personal loan.

What is a low-income loan?

A low-income loan is a personal loan offered to consumers with income that falls at or below a specific income level. The Pew Research Center, which studies demographic and economic trends, defines lower income as three-person households with annual income below $52,000 (using 2020 data). The threshold for lower income can vary based on location and cost of living.

For personal loans, a low-income loan can refer to a lender’s income requirement for borrowers.

Some lenders require a minimum annual or monthly income amount, while others require only proof of regular income — regardless of the amount. For example, online lender Rocket Loans requires a minimum income of $24,000, while Upgrade doesn’t have an income requirement.

How to qualify for a personal loan with low income

Lenders consider multiple factors, including income, when evaluating borrowers. Here are some strategies that may help increase your chances of getting approved for a personal loan if you have a lower income.

Check your credit report for errors. Many lenders consider your credit history during the loan approval process. Therefore, make sure your credit report is free of mistakes, such as a misspelled name or falsely reported delinquency that could hurt your credit score and your chances of being approved.

List all income sources. Borrowers with low income can list earnings from traditional employment, freelancing or even a pension, depending on the lender.

Consider a co-signed or joint loan. Adding a co-signer or co-borrower to your application — particularly someone with a higher income and credit score — may make it easier to get a loan with a lower income.

» MORE: Personal loans with a co-signer

Ask for less money. The smaller the loan, the less risk for the lender, so requesting a smaller loan amount may help you get approved. A smaller loan can also mean lower monthly payments and interest costs.

Lower your debt-to-income ratio. Pay off any debts that you can in order to lower your DTI. Most lenders will accept the maximum debt-to-income ratio of 50%, though lower is better.

Lenders with no or low income requirements

Some lenders don’t have a minimum income requirement, but they still require borrowers to show an income on the loan application. Including income from other sources like child support, alimony and social security payments can help you qualify for a loan.

» MORE: Best personal loans for fair-credit borrowers

Things to consider beyond income requirements

While shopping for personal loans, look not only at income requirements but also at costs and terms.

Loan costs. A personal loan’s annual percentage rate includes interest and any origination fee. The higher your APR, the more you’ll pay each month and in total interest. Many financial experts recommend only looking at loans with an APR below 36%, the cap at which a loan can still be considered affordable. 

Repayment terms. Typically, personal loans have repayment terms of two to seven years. A longer repayment term means smaller monthly payments, while a shorter term means lower interest costs. If your monthly budget is smaller due to having a lower income, a longer term could make more financial sense.

The option to pre-qualify. Pre-qualifying shows your estimated rate and term before committing to a loan. It involves a soft credit pull, which means you can pre-qualify with multiple lenders to compare offers without impacting your credit score.

How to apply for a loan 

Here are five steps to take when applying for a personal loan at any income level.  

1. Check your credit: Review your credit score and lenders’ borrowing requirements to get an idea of which lenders you may qualify with. You can check your credit score for free with NerdWallet or request a credit report from AnnualCreditReport.com.

2. Pre-qualify and choose a lender: Compare offers from different lenders to find the loan that fits your monthly budget and needs.

3. Gather your documents: Lenders will ask for documents to verify your identity, address and income. This can include copies of a driver’s license, utility bill, tax return and a W2. 

4. Apply for a loan: You can apply for a loan online or in person with certain lenders. A formal application requires a hard credit check, so your score can decrease a few points at this time. 

5. Get funded: Some lenders offer same-day approval, but others can take a few days. If you are approved, expect to get your funds in less than a week. Your first payment will typically be due after 30 days. 

Personal loan alternatives for low-income borrowers

Government assistance. The Temporary Assistance for Needy Families program offers monthly cash payments to individuals with minor children. Those who meet its eligibility requirements, including employment status and income thresholds, can apply in their state.

» MORE: How to get free money from the government

Extra money. Consider a side hustle, like tutoring or walking dogs, to boost your income. Even a temporary gig may give you the extra cash you need.

Family and friends. A friend or family member may offer a loan with better terms and rates, but be mindful of the potential impact on your relationship.

Cash advance apps. Cash advance apps let you borrow from your next paycheck and are repaid on payday. They can be helpful for emergencies, but they may come with fast-funding fees and ask for an optional tip.