Many people take out loans each year. In order to have a loan application approved, you must have a good credit score.
This credit score can be affected by numerous factors: defaults, late repayments, too many loans taken in a short period, and others.
However, the fact that your income could affect your credit is just a misconception. It doesn’t have anything to do with your credit directly. But the income does matter, and it can decide whether or not you get the loan you’ve applied for.
Why Does Your Income Matter?
- If your income is low, lenders might not rush to give you the loan. They are only concerned with your capability of repaying the money you’ve borrowed.
- If you do get the loan, the terms will 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. That is beneficial both for you and the lender. If you do that, the monthly repayments will be lower. This makes it possible for you to get a loan, even though your income is not that great.
How Can I Get a Loan If I Have a Low Income?
The best option you have is to increase it, obviously. You can work extra hours or perform the same job after hours, for another employer. In addition to that, you can negotiate for a reasonable payment plan on the loan, as long as you’ll have enough money to survive.
Sometimes, if you have a good credit score, low income is the last thing you should be concerned about. There are many lenders who work expressly with honest people who want to get a loan, but they’ve been rejected too many times to try anymore. The income is much easier to increase than the credit score anyway.
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 drop. It’s going to stay that way even if your income increases in the meantime.
If you’re sure that you can respect the payment plan, take the loan. If not, try to find alternative income.
Apart from that, fixing your credit score is also an excellent idea. Fortunately, you could choose the assistance of an experienced company, such as Clean Credit. This way, you could seriously grow your chances of getting a loan.
A professional’s input is unmatched, as he/she is acquainted with the ins and outs of credit inquiries and negotiating.
The credit score and the income are the factors that matter the most in the approval of a loan. However, your income does not impact the former in any way. It only affects your chances of having your application approved, for rational reasons.
If you have issues with getting a loan from a bank, look for some private lenders. Some of them compete with the banks, and sometimes they end up having more customers because they offer better payment plans. So, do a little research and try to find the lender with the best offers and reviews.