You can qualify for a personal loan with a low income, but lenders may only approve you for a smaller loan amount or if you apply with a cosigner.
Be wary of high interest rates — the average personal loan rate currently sits at 12.41%, and in some cases, you could face an APR up to 36% if you don’t have good credit.
If you don’t qualify for a personal loan, alternatives include secured loans and credit cards.
Most lenders require you to have a stable income, and some even set a minimum income requirement. However, you may still qualify as long as you can reasonably afford the monthly payment — a low debt-to-income (DTI) ratio and strong credit will help your odds of approval.
Happy Money offers one loan — the Payoff loan. It’s designed to consolidate high-interest credit card debt. The starting APR is much lower than the average credit card rate, which is above 20 percent. Happy Money has no minimum income requirement, though you’ll need enough regular income to cover your monthly payment. This lender also offers online money management tools and financial education resources to help you take control of your finances.
Prosper is a peer-to-peer lender, meaning that loans are funded by individual investors rather than a direct lender. You may qualify with any income over $0, as long as it supports the payments. Prosper also supports co-borrowers, making it easier to qualify.
Universal Credit has no income requirement and a lower minimum credit score than competitors at 580, but its APRs are higher, too. They stand out for offering small loan amounts, starting as low as $1,000. However, Universal Credit only offers two repayment term options: three or five years.
Like some of the other lenders on this list, Upgrade doesn’t have a minimum income requirement, though you must earn enough to support the repayment of a new loan. If you’re borrowing to consolidate debt, Upgrade also offers direct payments to creditors (with a small rate discount). And if you don’t qualify for an Upgrade loan, you can apply with a co-borrower or secure your loan with a vehicle to improve your eligibility.
Upstart has a low annual minimum income requirement of just $12,000. This lender also works with borrowers across the credit spectrum. If you have great credit, you may qualify for one of the lowest rates on the market. If you’ve had some credit challenges, you may qualify for a loan with a score as low as 300 — or even if you don’t have enough credit history to generate a score. However, rates can be high for less-qualified borrowers, and this lender charges the largest origination fee we’ve found: up to 12 percent.
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Bankrate insight
If a lender doesn’t disclose its annual income requirements, ask whether it offers prequalification. When you prequalify for a personal loan, the lender performs a soft credit check to determine whether you qualify and allows you to preview potential rates.
Is a low-income personal loan the right choice?
If you have a steady income, strong credit (at least in the 620s) and a low DTI, then a low-income personal loan can help you cover a large expense or emergency. Compare options from banks, credit unions and online lenders — the exact terms you receive will vary, and you may be able to get a more competitive rate than you think.
If your credit score needs work or your income varies, look into alternatives. A payday alternative loan, offered by many federal credit unions, usually has less strict requirements and a rate cap of 28%. Other options, like credit cards, may also be available to you.
How to get a low-income personal loan
Lenders want reassurance that you earn enough income to make on-time payments. While not all lenders have a minimum income requirement, they all have other approval criteria you must meet to get a personal loan. For example, you may need to provide proof of income or show you have no recent defaults or bankruptcies.
Compare lenders — including banks, credit unions and online companies — to learn about eligibility and your potential rates and terms.
Plug your loan amount and possible APR (annual percentage rate) into a personal loan calculator to estimate your potential monthly and overall repayment.
Create or optimize your budget, perhaps by trimming unnecessary expenses, to ensure you can realistically afford your potential loan repayment.
Check your credit report and start monitoring your credit scores, as strong credit can help you make up for a lower income.
Consider the possibility of a personal loan cosigner, or delay your loan application, if possible, to continue fine-tuning your budget and improving your credit.
Prequalify with lenders that offer you the ability to confirm eligibility and check rates without submitting to a hard credit check.
Check in with other reputable financial institutions, including your nearby banks and credit unions, to see if they can beat rates and terms you’ve found elsewhere.
Submit a formal application with your preferred lender, supplying documentation like your proof of income.
Other minimum requirements to consider
Credit score: The average personal loan rate is currently above 12%, but bad-credit borrowers may receive a rate as high as 36%.
Income: Lenders may ask you to provide recent pay stubs, W-2s or tax returns, along with your employer’s contact information. If you’re not a W-2 employee but earn income from self-employment, side hustles, child support, alimony or government benefits, list these on your loan application.
Debt-to-income (DTI) ratio: Lenders prefer a DTI at or below 36%, though some lenders will accept DTIs up to 50%.
Proof of residence: The lender may request a copy of a mortgage statement, lease agreement or a utility bill that includes the name and physical address listed on the loan application.
Bankrate’s take: If you don’t meet the eligibility criteria and don’t need immediate funding, consider working with a credit counselor or creating a debt management plan to help you pay down existing debt and improve your credit.
Avoid high-interest, predatory loans
Depending on the state you live in, you may have access to payday loans, title loans and other short-term options. While these are advertised as good options to help those with low income or poor credit, avoid them if possible.
Unlike personal loans, payday loans — and other predatory loans — are able to charge the equivalent of a 300% (or higher) APR. In many cases, you may need to pay a finance charge of $10 or $15 for every $100 you borrow. Combined with a repayment term of less than four weeks, these loans are incredibly difficult to pay off and often lead to a cycle of debt.
Instead, consider personal loan alternatives or trying to increase your income. It may be difficult, but avoiding a predatory loan will save you money and financial strain in the long run.
Alternatives to a personal loan
If you’re unable to qualify for a personal loan or would simply prefer to explore other funding sources, consider the following options.
Credit cards
If you have good or excellent credit, consider a credit card with an interest-free introductory period. Paying off the entire balance before the promotional period ends means you won’t pay any interest on charges you incur. If you carry a balance from month to month, however, this form of financing could be costly. Interest will accrue, and your balance can grow quickly.
“Good to excellent credit might get you approved, but lower income often means a smaller credit limit. Usually, these 0 APR offers last anywhere from 12 to 21 or more months, which gives you time to pay off the balance from a large expense or debt consolidation,” says Seychelle Thomas, a former Bankrate writer and Certified Financial Education Instructor.
“Before choosing this form of financing, it’s important to have a plan to pay it off before the introductory period ends and the regular APR kicks in. Otherwise, any remaining balance will start accruing interest — and usually at a higher rate than a personal loan,” Thomas advises.
Secured loans
You must put up collateral to get a secured loan, commonly a vehicle or savings account balance. However, secured loans are attractive to many borrowers because you can get approved with a lower credit score and minimal income, and you may receive a substantially lower rate than you’d get on unsecured debt. The downside is that you could lose your asset if you default on the loan.
Payday alternative loans
Some federal credit unions offer small-dollar emergency loans to their members. These low-income loans are often referred to as payday alternative loans. These loans can be up to $2,000 with a maximum APR of 28 percent — that’s significantly more affordable than the 400 percent APR that you’ll find with payday loans. However, you must be a credit union member to borrow this type of loan, and not all credit unions offer them.
Bottom line
Taking out a personal loan is sometimes necessary, but having a low income can make it challenging to manage. The upside is that some lenders offer flexible, affordable loan products with competitive rates for those with a lower income.
Before you apply, make sure you can afford the monthly payments. Explore well-regulated options like personal loans and credit cards before turning to riskier, higher-interest alternatives.
