Thousands of Australians take out loans each year. One of the criteria necessary for a loan application approval is a good credit score. A good credit score tells lenders that you are in control of your ability to repay the finance.
A bad credit score can be influenced by several factors. These may include a default on your credit file, late or missed payments, court judgements or multiple loans taken out in a short period. These factors have a direct impact on your credit score as they lower your score making it harder to secure a loan.
Your income, on the other hand, does NOT have a direct impact on your credit score. The idea that your income could affect your credit score is just a common misconception.
In the grand scheme of securing a loan, your income does however matter and it can decide whether or not you get approved for a loan.
Why Does Your Income Matter?
- If your income is low, lenders may not rush to approving your loan. A lender is concerned about whether you can responsibly pay back the loan. If for example, your income is too low, then they may question whether you will meet the criteria to pay back the required installments.
- If you are approved for a loan, the loan terms may be longer. When you can’t afford to pay too much on a monthly basis, you can’t get longer terms. Some may take this as an advantage, others as a downside.
- Low income can also lead to a bigger upfront payment. As a borrower, this can benefit you as your monthly repayments will be lower. The lender will also benefit from upfront revenue.
How Can I Get a Loan If I Have a Low Income?
In the ideal world, more income means a greater chance of securing a loan. In today’s peer to peer based society, there are endless possibilities to earn additional income. With the rise of companies such as Uber, Airtasker, eBay, and Gumtree you can easily make extra income. Alternatively, you can always try and negotiate for a reasonable payment plan with lenders. Whilst traditional banks are strict on their lending terms, alternative lenders such as Australian Lending Centre, offer flexible and tailored loan solutions.
Honesty credit repair
In some cases, a low income may not be the determining factor in getting a loan. There are alternative lenders who help Australians in complex financial situations. If you are honest and proactive in improving your financial situation; a lender may be more lenient.
Making a large upfront payment may also convince lenders to help you out by giving you the loan. Think twice, however, before you decide to apply for a loan when your income is small. If you miss out on repayments, you’ll accumulate penalties, and your credit score will continue to drop. Budgeting plays a large role in managing your finances. If you are capable of making repayments; apply for a loan; if not look for an alternative source of income.
Fix my bad credit
Fixing your credit score is a great way of improving your chance of loan approval. A clean credit will give you the financial freedom to apply for finance. Clean Credit specialises in the removal of defaults, court judgments and negative listing from your credit file. It is important to remember that a clean credit works hand in hand with smart financial decisions.