A low income installment loan is often a better choice than a credit card or payday loan. The questions is whether you can qualify.

For those with little or no credit and those with less than perfect credit, the answer is often “no”. However, that is certainly not the case all the time. A lower income isn’t necessarily a barrier to installment loan approval.

Consistent Income More Important

Most lenders that offer a low income installment loan don’t set a minimum income amount. Instead, they want to see consistent earnings and the ability to repay the amount you want to borrow.

In fact, you will seldom find a lender that states precisely how much you need to earn. While this may frustrate you, you should realize it may also work in your favor. The lender probably considers other factors, not just your income. Consequently, you could qualify if you go about it in the right way.

Every Lender Differs

Even if you’re turned down by one lender, that doesn’t mean you’re out of the game. Every lender determines their own lending criteria.

As a result, you could qualify through a second lender even if the first one turned you down. You could potentially apply through many lenders before you find one that will grant you a loan. However, you must do so carefully.

How You Apply Matters

Take care if you’re considering making multiple loan applications. Always choose lenders that use a pre-approval process.

Why is this important? Pre-approval involves a specific method of checking your credit called a “soft” credit inquiry. It provides the lender with a general overview of your financial position, but not all the details of your credit report over the past 6-years.

More importantly, this credit inquiry method does not lower your credit score. Obviously, that’s an important consideration when you already have a low income and aren’t sure whether you’ll qualify for a loan.

Lenders that do not use pre-approval utilize a “hard” credit inquiry. This method can lower your credit score by as much as 12-points, making it even more difficult to qualify for a loan. If you apply for many loans, it can compound the problem. Creditors may read these inquiries as a red flag, even if you’re just shopping for a lender and a loan.

What Other Factors Do Lenders Consider?

We already mentioned that there really isn’t a fixed minimum income requirement across all lenders and no set criteria for loan approval.

Nonetheless, there are certain factors that many lenders do consider. They may place less or more emphasis on particular factors, depending on the segment of the lending market they want to capture.

Credit Score

Your credit score may be one of the factors a lender considers. Consequently, if you have bad credit and a low income it can be more difficult, but not impossible to qualify.

However, it makes sense to do what you can to strengthen your credit before you apply. Get a copy of your credit report and check for errors. The Federal Trade Commission suggests five percent of credit reports include mistakes that could negatively impact a loan application.

A higher credit score not only makes it more likely you’ll qualify for a low income installment loan, it can also mean better loan terms.

Debt-to-Income Ratio

Lenders want to know how much debt you already have before they lend you more money. Consequently, they will ask you to list your debt payments and confirm how much you earn to calculate your debt-to-income ratio.

Fortunately, you can still qualify for a low income installment loan, even when you have a reasonable amount of debt. According to Experian, lenders generally consider a DTI of between 35% and 40% acceptable. However, what is great for one lender may not be good enough for another.

If you want to calculate your DTI, you can do so here. As mentioned, every lender determines their loan qualification requirements. However, if you’re struggling to get a low income installment loan, you may want to lower your DTI.

Does a Low Income Installment Loan Cost More?

Generally, a low income installment loan often means the lender offers you a lower loan amount. However, you may also pay a higher interest rate.

Nonetheless, a low income installment loan can still be a viable option, particularly since they are available for almost any personal and financial circumstances.

Some lenders offer low income loans to new borrowers, students, pensioners, the self-employed, and those receiving child support or alimony, providing they earn a steady, recurring income.

Installment Loan vs. Payday Loan

It’s quite easy to get a payday loan, but it is also less desirable than installment loan for several reasons.

First, payday loans offer much less money. Second, payday loan interest rates can be more than twice as high than installment loans. Finally, payday loans only offer between two and four weeks to repay which is seldom enough time to get your finances back on track. Conversely, a low income installment loan can offer a year or more.

Will I Pay Extra Fees?

When you take out a low income installment loan, you should only pay interest and the principal amount you borrowed. However, you will definitely want to check whether the lender charges either of the following extra fees:

Origination fee – ranges between 0.5 – 9.99% of your total loan amount. This is an administrative cost for setting up your account and processing paperwork.

Pre-payment penalty – a fee levied by the lender to help them recoup lost interest if you pay more than your scheduled payments. This includes making extra payments, lump sum payments, or paying off your loan early.

Both these charges are at the discretion of the lender, but not industry standards.

How Will The Lender Confirm My Income?

That depends. Many lenders still want you to provide paper documentation. This may be past pay stubs or a letter from your employer. Then they will either ask you to fax or scan and email/upload this paperwork to them.

However, progressive online lenders tend to rely on digital income verification instead. With your permission, the lender requests direct deposit confirmation from your bank. The process occurs without effort on your part, plus it is quick and your data is heavily-encrypted.

What Other Information Might a Lender Need?

Generally, you must be a legal resident and of age of consent within your state for the lender to consider your application. Most lenders will not consider your application if you are currently enrolled in an active bankruptcy, consumer proposal, or credit counselling program.

Lenders usually need the following information to confirm your identity and income too.

Identity Verification

  • Name
  • Address
  • Valid and active email address
  • Phone number
  • Valid Social Security Number or Individual Taxpayer Identification Number

Income Verification

If you’re applying online and the lender uses digital income verification, they will want to confirm your steady source of recurring income through your bank. This means you must provide details of your active bank account with an American financial institution which at least several months of direct deposits.

Traditional lenders and some online lenders still want you to provide physical documents. Consequently, they may ask you to fax, scan, or upload documentation to confirm what you earn.

How Long Does the Process Take?

Considering how much we rely on technology today, applying for a low income installment loan shouldn’t take too much time at all. However, not all lenders have fully embraced modern methods, which can slow the lending process.

Traditional Lenders

If a lender still expects you to make an appointment, fill out a paper application form, and submit proof of income documentation, you can expect the process to take at least a few days. They must review your application, pull your credit file, confirm your earnings, and then let you know whether you’ve qualified.

After you’re approved, you need to sign your loan contract. That either involves faxing or scanning and uploading to the lender’s website or revisiting their office. Only once they receive this contract will they prepare for funds release, which could take several more days.

Progressive Lenders

If you use a progressive online lender, you may be able to fill out an online application form, submit it, and receive a decision within minutes, without providing proof of income. Moving ahead is very simple too since you do not need to visit an office to sign your loan contract. You can do this digitally.

The same applies to signing your loan contract. A good online lender offers digital contract signing, which immediately triggers the funds release process. In many cases, you can receive funds within 24 hours, or less.

What About Customer Service?

Just because your salary isn’t high, it doesn’t mean you need to sacrifice service. Good lenders offer great service, no matter what.

At the very least, your chosen lender should provide a convenient online account where you can check on your low income installment loan status at any time. They should also offer a toll-free number so you can talk to an actual person if you have questions or concerns.

Of course, a great website with a good FAQ page as well as email support are essential. You should be able to reach out in whatever manner suits you best.

Bottomline on Qualifying for a Low Income Installment Loan

Fortunately, almost anyone can qualify for a low income installment loan if they have patience and choose lenders that use a pre-approval process. There’s no impact on your credit score and if the lender pre-approves you, you’ll see their terms immediately.

If you’re considering a low income installment loan, FlexMoney could be your best option. We offer a 100% online process, loans of between $200 and $2,000, no fees, fast cash, and digital income verification and contract signing.

Please visit our website to start the application process or for more information on our company or our installment loans.