A low-income personal loan isn’t as hard to get as you might think. Certainly, many lenders don’t grant loans to people who earn modest incomes, but that’s not always the case.
Nonetheless, you need to look at certain factors to increase your chances of obtaining a low-income personal loan. Otherwise, you’ll waste your time filling out application forms for financial products that you probably can’t get.
Let’s look at some of the most common factors that can lead to a loan refusal and what to look for instead.
Minimum Credit Score Requirement
Traditional lenders often consider those who earn modest incomes higher risk. Consequently, they set a minimum credit score requirement to ensure those who earn less at least handle credit well.
Transunion, one of Canada’s credit reporting agencies considers a credit score over 720 good. However, Equifax uses a different credit scoring model. They consider anything over 660 good.
Nonetheless, many people can’t meet either of these minimums for many reasons. Sometimes they had one late payment or they’ve yet to build a credit history.
Other times the applicant has no credit mix. They may have revolving credit such as a credit card or pay a cellphone plan or utilities. Yet, they’ve never had a loan or mortgage.
Luckily, this isn’t a worry if you choose the right lender. Some do not have a minimum credit score requirement. If you’re unsure whether your credit score is high enough or you know it isn’t good, one of these lenders is your best bet. It’s one less hurdle for you to overcome for a low-income personal loan.
How Do They Check Your Credit File?
Even if a lender does not have a minimum credit score requirement, they will check your credit file. They will want to know how much debt you have and whether you have a history of judgments, bankruptcies, or consumer proposals.
Even if you don’t have any negative issues on your credit report, always ensure the lender uses a “soft” credit inquiry. This method gives the lender an overview of your credit, but does not impact your credit score.
Conversely, a “hard” credit inquiry provides the lender with a full credit report. The hard inquiry also lowers your credit score. Additionally, hard inquiries stay on your credit report for up to three years, even if the lender does not grant you a low-income personal loan. Should you apply through multiple lenders, this can have a significant negative effect.
How Does the Lender Confirm Your Income?
Many lenders offering low-income personal loans only consider income earned through a regular job. This can be extremely annoying, since many people earn money in many other ways today.
For instance, you may work several part-time jobs, but earn a decent, regular income. You could be self-employed and still earn enough to pay back a loan. Private and public pensions also provide steady income streams.
So, what happens if you are one the people that don’t fit into a mainstream lenders rigid box? They will want you dig up pay stubs, ask your employer for a letter, or even get an income statement from your accountant if you’re self-employed.
Then you will either need to upload them to a website of drop them off at their office. After all that, there’s no guarantee you will qualify for a low-income personal loan.
Luckily, there’s a better way. Always choose a lender that uses electronic income verification. The lender verifies your regular deposits through your bank and you don’t need to run around. Your data is full-encrypted and the lender can’t pry into your financial affairs. They’re only interested in your income. It’s quick, easy, and efficient.
What is the Lender’s Minimum Income Requirement?
Obviously, this is the biggest hurdle for those that earn modest incomes. However, you’ll be happy to know that minimum income requirements vary greatly between lenders. Just because you don’t earn a bundle, it doesn’t mean you can’t qualify.
While traditional lenders love those who earn big pay cheques, other lenders are more welcoming. Some transparent lenders actually tell you the income amount they require, but this isn’t the norm. Always look for a lender that tells you their income requirement. Otherwise, there’s no point in applying.
What Are the Lender’s Stability Requirements?
Traditional lenders usually have much stricter requirements regarding long-term stability too. They may consider a person who’s moved, changed jobs, or switched banks as high risk. They may turn you down for a loan, even if you have a legitimate reason for any of these changes.
Luckily, other lenders don’t place as much emphasis on stability. If you’ve lived, worked, and banked in the same places for the past three months, that’s enough. They’re more interested in where you stand now, that what you were doing years ago.
Does the Lender Tell You Their Other Eligibility Requirements?
Only certain lenders provide all their eligibility requirements. We already mentioned work, financial, and residence stability, as well as income and debt requirements. However, there can many additional ones such as your citizenship status, age, and more.
The problem is that most lenders expect you to fill out an application form first. Then you sit and wait to see if you’re approved. This makes little sense as you’d just be wasting your time if you don’t meet them.
Luckily, a good lender tells you their basic qualification requirements. While this isn’t a guarantee you’ll qualify, it is one less hurdle towards obtaining a low-income personal loan.
Are They Licensed to Lend in Your Region?
Unfortunately, fly-by-night organizations can prey on unsuspecting people who are desperately trying to get a low-income personal loan. They charge extremely high interest rates and fees, or they could even scam you for your sensitive personal data.
The Government of Canada and provincial governments advise you not to use unlicensed lenders. Instead, choose a licensed lender. They must follow provincial and federal consumer protection laws. Plus, you have recourse if the lender doesn’t handle your loan properly.
Additionally, if you choose a good online licensed lender, you will enjoy a quick and efficient process. They accept applications 24/7 and provide a decision in minutes. There’s no need to visit an office, even when it comes time to sign your loan contract. It is all handled digitally.
Realistically, you must earn enough to comfortably pay your bills and your estimated loan payment. Consequently, lenders look at your debt-to-income ratio (DTI), which measures how much you owe against how much you earn.
Before you apply for a low-income personal loan, use this calculator to determine your DTI. You’ll need to input your debts, but it is worth it. Otherwise, you’ll waste your time filling out application forms for loans when you can’t qualify.
Your DTI shouldn’t be over 40, and lower is always better. Even if you think you have enough money to repay a loan, all lenders place heavy emphasis on this figure. If your DTI is too high, you need to reduce your debt load before you’ll have a chance of qualifying for a low-income personal loan.
Choose FlexMoney for Your Low-Income Personal Loan
FlexMoney is one of those rare lenders that believes in total transparency. As a result, we’re providing you with our qualification requirements for a low-income personal loan through our company.
Basic Qualification Requirements
FlexMoney doesn’t believe in wasting your valuable time. Here’s what we need from you to consider your application, as well as when we can’t help:
- Net monthly income of at least $2,000 for at least the last three months (We consider income from full-time, part-time, and self-employment, as well as public and private pensions)
- Active account with a Canadian financial institution with at least three months of transactions
- Canadian citizen
- At least 20 years of age
- Valid email address
- Cellphone number
- Paid by direct deposit
- Debt-to-income ratio of 40 or less
Sorry, we can’t help you if:
- Your income source is Employment Insurance, the Disability Tax Credit, or COVID-19 benefits
- You are currently enrolled in an active bankruptcy, consumer proposal, or credit counselling program
- We find you have provided false or misleading information.
Benefits of Choosing FlexMoney
- FlexMoney is a licensed lender in Ontario, British Columbia, Alberta, New Brunswick, Nova Scotia, and Newfoundland
- We’ve issued loans to Canadians since 2012
- Our company is 100% Canadian, including our professional customer service representatives
- We do not have a minimum credit score requirement
- FlexMoney uses a soft credit inquiry
- Electronic income verification
- Our minimum income requirement is much lower than most lenders
- We place less emphasis on stability than most lenders
- FlexMoney operates online, from application form to funds release
- Repayment terms between 6 months and 5 years
- Loans from $500 and $15,000
- No set up fee or pre-payment penalty
- Fast decision & funds release
- Outstanding customer service via our toll-free number, website, chat, or email
Find Out More
FlexMoney makes it easy to obtain the funds you need, even when you earn a modest income.