Types of loan for less income people
Obtaining a loan if you have a lower income or a lower salary can be challenging, but it is not impossible. There are some suitable loans that are available to people with lower incomes and low credit.
- Personal Loan
A personal loan is a great tool that can be used for various purposes, including home improvements, medical expenses, and debt consolidation. As lower-income people may face a higher interest rate, this loan provides you with flexibility.
- Microloans
Smaller loans that a microfinance institution is lending to borrowers with lower income who may not meet the criteria for standard bank loans. These loans are mostly given by small companies for basic needs.
Microlending is supported by peer-to-peer lending digital capabilities that connect investors, borrowers, and lending platforms worldwide.
- Installation Loans
Installation loans involve borrowing a specific amount of money and repaying it in predetermined monthly installments. Some lenders may be willing to work with people with lower incomes, while the interest rate can vary.
- Secured Loans
Secured loans involve collateral such as home equity, a car, or a savings account. Lenders are ready to lend the loan to individuals with low incomes as there is collateral involved. However, an individual should understand the risk of using assets as collateral.
- Peer-to-Peer loans
Peer-to-peer loan systems connect individual lenders and borrowers. These platforms may have more lenient standards, and interest rates can be different based on their creditworthiness.
- Government-backed loans
Some government initiatives offer loans to low-income people with favorable terms. Here are examples of SBA loans for enterprises and FHA (Federal Housing Administration) loans for homebuyers.
- Credit Union Loans
Credit unions offer affordable loans as compared to traditional banks. They are providing credit-builder loans, personal loans, or small loans with reasonable terms.
“Read terms and conditions before seeking a suitable loan; understand interest rates and all associated fees. You can consult with a financial advisor for helpful insights.”
