Securing a Personal Loan Even if You Have a Low Salary
A personal loan helps you to manage your debt better and it can come in handy if you’re planning a big purchase but don’t currently have the required funds.
But what happens if you’re a low earner and don’t feel confident that you’ll be able to secure a personal loan from a lender?
It’s tough – but there are solutions. In this article, we’ll take a look at how you can secure a personal loan even if you’re on a low salary, as well as whether or not you’ll be eligible in the first place.
Personal Finance Stats
Financial illiteracy is a big concern, where around 76% of the adult population lack even basic financial skills. This means that it’s hard to know how to even get started when it comes to applying for a personal loan for many people.
Worse still, 44% of respondents to a survey said that money matters are the biggest source of stress in their lives.
And yet it’s essential that you improve your financial knowledge, with surveys showing that over a quarter of applicants for personal loans come from low-earning groups. The less a person knows about their financial situation, the harder it will be for them to secure a loan.
A low earner might be denied a personal loan for any number of reasons, including a poor credit score and insufficient proof of income.
Who Should Apply for a Loan?
Before you apply for a personal loan it’s important to understand whether or not you’d have a chance of being accepted in your current situation.
In other words, are you eligible?
Creditors have a minimum income threshold that must be met by all applicants, and this is usually a monthly salary of at least Rs 20,000.
If you’re not in work at all at the moment, you won’t be eligible for a personal loan.
A potential lender will also take a look at your credit rating. If you have a poor credit score, it’s unlikely that you’ll be considered for a personal loan because any potential lender will lack the confidence that you’ll pay it back.
How to Improve Your Eligibility for a Personal Loan
If you’re concerned that you’re not currently eligible for a personal loan, don’t panic. There are things you can do to improve your situation, such as reducing credit utilization and improving your credit score.
Improve Your Credit Score
The easiest way to boost your eligibility for a personal loan is to improve your credit score. Depending how low it is at the moment, this may take some time.
It all starts with being more financially responsible when it comes to credit. For example, paying bills on time and settling all outstanding debts is a good place to start.
Choose the Right Lender
If you’re a low-income earner, it’s a smart idea to seek out financial institutions that deal specifically with those on a low income.
Provide Collateral
A lender might be more encouraged to offer you a personal loan if you put up some sort of security of collateral.
Try a Joint Loan
If you know someone who is in need of a personal loan and who earns more money than you, the two of you could apply for a loan together.
Apply for a Short-Term Loan
If you’re not able to secure a long-term loan, you could try for a short-term loan instead. Lenders are typically more flexible on this front when it comes to who they’ll loan money to, although the monthly installments may be higher.
Provide Proof of Income
As we’ve seen, one of the reasons a low-paid worker in India might not be able to secure a personal loan is because they’re unable to provide proof of income. If you can, gather together all the essential documents.
Don’t Apply for Multiple Loans at the Same Time
You might not realize it, but if you apply for too many loans at the same time, it will negatively affect your credit score, thereby potentially undoing any good work you may have already done to improve the situation.
Final Thoughts
Although the situation might seem hopeless at times, securing a personal loan as a low-income worker in India isn’t futile. There is much you can do to improve your chances, including paying your bills on time and providing proof of income.
You could also discuss things with your boss, as they may be able to help you as their employee secure a personal loan.
Applying for a Personal Loan on a Low Salary: FAQs
1.Can I get a personal loan even if I’m on a low income?
Yes you can get a personal loan even if you’re on a low income. Lenders judge each case on its own individual merits and as long as you have the right documents and a good credit score, you will have a strong case.
2. How do I improve my chances of getting a personal loan on a low income?
The best way to improve your chances of getting a personal loan as a low earner is to improve your credit rating. You can do this by settling outstanding debits, paying your bills on time and reducing your credit utilization.
3. What’s the minimum salary required for a personal loan?
Lenders prefer you to be earning at least Rs 20,000 before they’ll consider you for a personal loan in India.
4. How long will I be waiting before I get approved for a personal loan on a low income?
The time frame varies when it comes to how long you’ll be awaiting approval. You can speed things up by having all the necessary documents and complying with everything that’s asked of you.
Once you’ve handed in your documents, you could be waiting up to a week before a decision has been made.