If you only have a small monthly income, unexpected urgent purchases or bills are more difficult to pay than a borrower with a sufficiently high income. This clientele is also at a disadvantage with banks, because banks only grant loans if the general conditions are right. Anyone looking for a low-income loan must meet these conditions.
Small income loan – the outlook
If you have to make do with little money a month, unexpected financial situations are often a heavy blow. There is an invoice to pay, the amount of which the customer did not expect, the washing machine is breaking right now and, last but not least, the money for the child’s school trip has to be raised. Usually, low earners make ends meet despite little income. Many have simply learned what it means to save.
As experts advise, reserves should be built up, which is actually not possible for a low-income earner. The financial resources are just enough for the most urgent costs of living. From this situation, a loan with a low income is then sought.
In most cases, before banks approve a loan, they draw up an income / expenditure plan. In this plan all income and expenses are listed and compared. In the best case scenario, there is a plus so that a loan with a small income could be managed.
But whoever earns so little that not even a attachable part of the income can be seen is the end of a loan with a small income. A loan with a low income can only be approved if the customer can provide collateral. A property or a loanable life insurance could serve as security, but a second borrower or guarantor is also possible.
For banks, it’s not just income that counts, as some customers might think. If you want a loan, its financial situation will be examined carefully. In addition to the income, the Credit Bureau is also queried. If, for example, negative entries are noted, this could also be a reason for rejecting the loan. Even if several loans or installments are to be paid, the bank sees from the Credit Bureau, in which all liabilities that a customer has to pay are saved.
If there is a loss of installments, a negative entry is made. Even if an invoice has not been paid on time and a reminder has already been sent, a negative entry will result. The Credit Bureau is therefore an important approval feature when granting a loan. The customer should carry out a personal Credit Bureau query anyway before submitting a loan application. This shows any entries that have already been completed and that could be deleted. This would improve the customer’s creditworthiness.
It is not necessarily said that a loan with sufficient income is granted sooner than with a small one. High-earners usually have a different standard of living than low earners. There are often several loans to be serviced, think of a real estate loan or a car loan. The bottom line is that sometimes a higher earner has no more than a low earner. Only earn so much too much and too little.
Those who earn little can definitely buy in retail stores. The financial situation is not seen as bad. The customer can buy his most urgent purchases locally in the furniture store or in the electronics market. If the customer has a flawless Credit Bureau, he receives a low-income loan from these companies on favorable terms. Just think of the 0% financing that some furniture stores or electronics stores offer.
The rules for such a loan are not so tight that a small income loan is also approved. However, not in cash but in the value of the goods. These are the property of the markets until final payment. If the customer is in default of payment, the goods will be picked up again without further ado.
However, if it has to be a cash loan, the loan seeker can name a second borrower or a guarantor. The customer should know that a guarantor must be fully informed about his guarantee. If the guarantor comes from a circle of relatives or acquaintances, there is actually a certain relationship of trust. Think of a parent’s guarantee for their child or grandparents for their grandchildren. Nevertheless, the guarantor is checked extensively. His income, Credit Bureau and a permanent job or a decent pension must match the bank’s credit conditions.
Even if the guarantor comes from the local area, he should know that a guarantee is a risk. Whenever the borrower can no longer pay, the guarantor is consulted and must repay the loan with his assets. The guarantor should also know that the guarantee is entered in the Credit Bureau, which may ruin or at least reduce his credit rating.
So a loan with a small income is not impossible, you just have to create the right conditions. The borrower should know that government benefits such as child benefit, parental benefit, housing benefit or other benefits are not counted as income. The money is paid monthly, but is not accepted by the bank.
Banks have a duty of care towards their customers. Granting a small income loan also requires foresight. If the customer draws their income from a self-employed activity and the bank targets the unemployment scenario, the bank knows that the loan seeker could not pay the loan with any unemployment benefit. This is quite possible for the better off.
However, there are banks that grant a loan with a pension of just under $ 900. If the rate is not set so high, then an installment payment can certainly be paid. But if rent, utilities and living expenses are to be paid from the 900 USD of income, the bottom line is that in most cases there will be a minus. In such a case, the bank acts irresponsibly.