Question: Why aren't there loans for people with low income, who haven't established their credit yet? My credit isn't bad, because I've never had a loan, but companies seem to think that's the same as if I'd gone bankrupt or something. I'm also not making much but I'm hoping for a raise and promotion soon. Where can somebody like me get a loan? --Rob R., Illinois
Answer: I'm guessing you're young, but if you're over 21, have an income of at least $1,000 a month and a checking account, there are companies who will loan you money, even if you have no credit history. Personal loans can be useful regardless of your income, but if you're just starting out and haven't had time to build up an emergency savings fund, they can be especially helpful to tide you over when unexpected bills arrive.
A personal loan is "unsecured," meaning you don't have to offer collateral such as a house or car. The lender is trusting you with the money based on your regular paycheck, which doesn't need to be much, but you do need steady employment. There's more risk for the lender, which makes loans more expensive if you have no credit history, but there are many companies willing to take the chance on people who are just starting out in the job market or who have just returned to work. You can search online for loans with "no credit check," apply online and receive the money electronically, without needing to apply in person.
When you fill out the application, it's important to be honest. You'll usually be asked for your name, address, income, where you have your bank account, Social Security number, and similar information. If you qualify, approval will usually be fast, within a few hours. The amount you can borrow is dependent on your income, so a low income may limit you to $250 or less, but if you successfully pay it back, a company may be willing to trust you with more if you need to borrow again in the future.
For example, at this company, you might be able to receive a loan up to $1000, even if you have no credit history, poor credit history or a bankruptcy in your past, as long as you have a job or other source of income and a checking account.
Loans may either be payday loans, which must be paid back entirely out of your next paycheck, or short-term installment loans, which you pay back over several months. You can also usually renew payday loans at least one time, if you can't repay in full. The exact terms you're offered depend both on what different companies are willing to lend and on the regulations of your state. Most states require lenders to give exact information on the fees, interest rates and other costs such as penalties for paying late or renewing the loan, so you'll be able to make an informed decision after applying but before finally accepting an offer.
If you take out an installment loan and your income increases, you may be able to save money by paying it back early. Check the contract before agreeing to the loan, and see if there will be a reduction in fees or interest for paying more than the minimum required or paying off the balance early.
If you have no credit history yet, this is a good time not to make mistakes. Only borrow as much as you're sure you'll be able to repay. If you're trying to build up your credit score, see if the lender reports to the big three credit bureaus, Experian, TransUnion or Equifax. Not all do, but having your on-time payments added to your records will start to build up your credit history. At the least, most lenders report to smaller credit bureaus like Teletrack, so prompt repayment will help your reputation there.
If you can get a loan with no credit history, because they don't check Experian, TransUnion or Equifax, does that mean you can also get one if you have problems? If they don't check your credit history at all, they'd never know what was reported there, good or bad. --L.P., Fresno
That's actually true. Whatever's on your main credit report or whatever your credit score is, they'll never see it. That doesn't mean they'll loan money to anyone, though. In general, you can't have other payday loans out, and can't be in default on payday loans or similar short-term, high-risk loans. Companies will usually look at Teletrack or some similar report, which covers those kinds of loans, though there are also some lenders which specify "no Teletrack," meaning they won't check Teletrack either. --John Baker, Loanwhere
Getting a loan is like getting a job. Nobody wants to hire you if you don't have experience, but you can't get experience without a job. Same way, nobody wants to lend money if you don't have a credit history, but you can't get a history if you no one will give you a loan. --wm21
How low of an income can you have and still get a loan? Anonymous, Chicago
Usually around $750 to $1,000 a month is the lower limit. If you earn $1,500 a month, you'll have a better chance of being approved. Some places will accept any regular, direct-deposited income, like disability or unemployment checks, while others only want to see paychecks from a job. If in doubt, the best bet may be to submit your information to a company who will send it to a variety of lenders and let each make offers, if they want. That way, you'll have a better chance that one or more will be willing to lend to you, and you can choose which one to accept. Such companies are easy to find by searching online for payday lenders or installment loan lenders. --John Baker, Loanwhere