Loans are usually taken out when your own income and savings are not sufficient to fulfill a specific wish. If you have a low income and absolutely want to fulfill a specific wish or have to make a necessary purchase, you may want to take out a loan despite little income. However, it can sometimes be difficult for those interested in credit with a low income to obtain a loan.
Do low-income earners get a loan at all?
Low-income credit prospects generally have a hard time getting a loan despite low income. In order to understand why it is so difficult for low-income borrowers to get a loan at all, a look at bank lending is necessary. Most banks grant their loans according to very clear guidelines. These guidelines include, for example, regular income. Now even a low income can regularly be received by prospective creditors, but not only the regularity is crucial, the amount must also be correct.
Most banks require a minimum income from which a loan is possible in the first place. This minimum income is often around 1,000 dollars. Low-wage earners are usually well below this minimum income, which is why they are out of the question as borrowers for many banks. The banks do this in order to keep the credit default risk as low as possible. You want to use these lending guidelines to ensure that the loans can actually be repaid. Still, it is not entirely impossible to get a loan with little income.
How can low-income earners get a loan?
If low-income earners don’t want to go without a loan, they can try to get a loan using a guarantor or certain collateral. However, borrowing from an online bank is then not possible. Online banks grant their loans using a standardized process, special regulations and the use of a guarantor are usually not provided.
The only exception is the application for a loan together with the spouse. In such a case, however, the spouse should have a normal income. Low-income earners can alternatively contact their house bank, describe the matter to them and apply for the loan together with a guarantor. However, like a normal borrower, the guarantor must also have a sufficiently high income and a good credit rating. Even collateral such as own property can increase the chance of a loan despite little income.
Regardless of whether you are a low or normal earner, every interested party should ask themselves before borrowing whether the purchase that is to be made is actually necessary and whether the loan can really be repaid appropriately. Anyone who can barely cover the cost of living with their income should refrain from taking out a loan.