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Do you earn a low income? Have you been researching loans for low income earners without any luck? We’re here to help.

Our number one tip for low income earners is to find a good lender to work with and that you trust. There are lots of options out there for low income earners, but not all are recreated equally. Taking on expensive debt, or jeopardizing your credit score, is never a good idea. This is why comparing personal loan options is so important. Keep reading to find out what types of low income loans are available to you.

Can You Get Personal Loans For Low Income Earners?

Yes, there are several ways you can qualify for a personal loan even if you have a low income. That said, your approval chances will depend entirely on what type of lender you apply with, as well as your ability to pass their borrowing requirements. 

In general, low income earners will have a higher chance of being approved for a loan if they apply with an alternative lender. Other factors such as their credit score, income-to-debt ratio, security and loan amount will also affect their approvals odds. 

They must show their lender that they can make all their loan payments on time to get approved. 

Best Personal Loans For Low Income Earners

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Loans Canada
Loans Canada
Amount
Up to $50,000
Rate
Prime to 46.96%
Term
3-60 months
Fora
Fora
Amount
$1,000 - $10,000
Rate
19.69% - 46.9%
Term
Varies
Spring Financial
Spring Financial
Amount
Up to $35,000
Rate
9.99% - 46.96%
Term
6 - 60 Months
Fairstone Financial
Fairstone Financial
Amount
Up to $50,000
Rate
19.99% - 39.99%
Term
6 - 120
Cash Money
Cash Money
Amount
$1,500 – $10,000
Rate
Varies by province
Term
Varies
Mogo Finance
Mogo Finance
Amount
Up to $3,500
Rate
9.9% - 47.72%
Term
-
easyfinancial
easyfinancial
Amount
$500 - $100,000
Rate
9.99% - 46.96%
Term
Varies
LoanMeNow
LoanMeNow
Amount
$500 - $1000+
Rate
28% to 32%
Term
3 Months
Nyble
Nyble
Amount
$150
Rate
No Cost!
Term
-
Bree
Bree
Amount
Up to $250
Rate
No Cost!
Term
-
goPeer
goPeer
Amount
$1,000 - $25,000
Rate
7.5% - 31.5%
Term
36 - 60 months
Unfortunately we couldn't find you a provider with the given filters

How To Qualify For A Personal Loan With A Low Income If You’re Employed?

If you’ve got a steady job that provides a consistent flow of cash for your payments, it’s far easier to obtain a personal loan, even if your yearly income is considered low. Similarly, there are certain factors a lender will assess to determine your risk.  

Your Credit 

Your credit score is an indicator of how likely you are to repay your debts on time. Many lenders will use your credit score when assessing your risk and determining what interest rate to charge you. As such, it’s beneficial to increase your credit score prior to applying as it can help you qualify for a loan, especially if your income is low. 

Your Debt-To-Income Ratio

Debt-to-income ratios are another thing lenders use to assess applicants and a maximum ratio of around 30% – 40% is preferred. The further your DTI goes beyond that point, the harder it will be to acquire a personal loan with reasonable rates and conditions. Paying off some current debts can lower your DTI and increase your ability to get a loan. 

Your Job Stability 

If you’re looking to finance a loan over a long term, your lender will want to ensure that you have a job that is stable enough to handle the payments. If you have unexplainable gaps between your job, your lender may be more hesitant to give you a loan, especially larger loans with longer terms. 

How To Qualify For A Personal Loan With A Low Income If You’re Self-Employed?

If your income is low and/or inconsistent because you’re self-employed, it can be tough to qualify for a personal loan because you present more risk for the lender than someone with a steady full-time job. So, it’s a good idea to take these steps before submitting your application:

  • Earn More Income – The more income you generate, the easier it is to qualify for a loan with a decent interest rate. Whether it’s from contract work, freelancing or government benefits, your lender will want to see all your income sources to determine whether you’ll be able to cover your personal loan payments.            
  • Consider A Smaller Loan – Applying for a smaller personal loan is sometimes a safer option if you’re self-employed. While interest rates are often higher for small loans, they usually generate less interest overall because their terms are shorter. Plus, lenders aren’t taking as much risk, which leads to better odds of approval.
  • Gather Your Documents – To see your earnings, as well as the expenses you’ve written off to minimize your taxes owed, lenders may ask for your tax returns and notices of assessment from the past 2 years. Signed purchase agreements and bank statements may also be accepted if you’re newly self-employed. This helps them verify your after-tax earnings and offer you a loan based on that amount.

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What Documents Are Required For Loans For Low Income Earners?

Before a lender can approve you for a personal loan, your lender will have to confirm that your income is high enough to cover your upcoming payments, plus any interest and fees. To verify your income, they may ask for at least one of the following documents:

  • A recent pay stub (to see if you meet their minimum income requirements)
  • A recent bank statement (to learn more about your finances and liabilities)
  • Your latest tax return
  • Your employer’s contact information 

Here are some other general requirements you need to get loans with low income:

  • An active bank account (for the lender to deposit your loan and collect payments)
  • A low debt-to-income ratio
  • A decent credit score (650 – 900 is ideal)
  • Proof of residency (utility bill or another document with your name and address)
  • Proof of identity (government photo ID, like your passport or driver’s license)

To apply for a personal loan in Canada, you typically have to be a permanent resident or citizen and at least the age of majority in your province or territory (18 – 19+).      

How To Improve Your Ability To Qualify For A Personal Loan With A Low Income 

Prior to applying for a personal loan, make sure to compare lenders so you can locate the best deals in your region. Additionally, here are some tips to help you get approved:

Find Stable Employment

Before offering you a personal loan, some lenders require you to be employed at the same workplace for at least 3 to 6 months.

Create A Savings Fund

Another way to make yourself a less risky applicant is by having a healthy savings account. This will tell lenders that you have the funds to make your personal loan payments on schedule, no matter what. 

Build A Good Credit History

If you don’t require the loan urgently, take a few months to build your payment history and credit score. The higher your credit score, the less risky you’ll seem as a borrower.   

Get A Letter Of Employment

If you’re self-employed, getting a letter of employment that details your pay and term at the company can help boost your odds of approval. 

Get A Co-Signer

If you don’t qualify, you can get someone with a better income and credit score may to co-sign the loan and guarantee that it will be paid, regardless of the circumstances. This acts as a form of security for the lender because the co-signer must take responsibility for your payments when you can’t afford them.

Have Proper Documentation

During the application process, your lender may ask for a recent pay stub to confirm that you have a job. If you’re a new employee, they could also request your tax slips from the past 2 years to get an idea of the income you earned from your previous job. It’s important to provide all the required documentation, as any missing information can lead to rejection.

Get One Loan At A Time

It’s not smart to apply for multiple loans. Not only can this cause serious debt and a drop in credit score (due to hard inquiries), lenders will see you as a risker client, especially if you’re being denied for credit regularly. 

Alternatives For Low Income Loans

Since it can be difficult to qualify for a personal loan when your income is low, you might want to look into these alternatives if you need fast cash and can afford to pay it back:

Credit Card

As mentioned, a credit card is a good starter option if you’re interested in building a credit history and potentially applying for a loan someday. Requirements aren’t nearly as tough as they are with personal loans and you can even score certain promotions for signing up, like reward points, interest-free introductory periods and other bonuses. 

Unfortunately, credit cards also have downsides that can make them harmful to your finances. High interest rates may get problematic, especially if you don’t pay your full monthly balances. Such habits can result in unmanageable debt and ruined credit. Most promotions eventually expire too, making some credit cards not worth the hassle.    

Payday Loan

Payday loans are one of the easiest types of credit to acquire. Normally, you just need to be a Canadian resident, have an active bank account, be past the age of majority in your province/territory and earn a minimum monthly income of around $1,000 – $2,000. Once approved, you can obtain a $100 – $1,500 loan with a 14-day payment term. 

Despite those benefits, payday loans can be really hazardous to your finances because they have sky-high interest rates (sometimes over 600% APR). You could also get charged serious penalties if you don’t pay your entire loan after 14 days. On top of that, the world of payday loans is notorious for attracting scam artists and predatory lenders.   

Guarantor Loan

If your loan applications are being denied due to your bad credit or for some other reason, this might be the solution for you. When you apply for a guarantor loan, your credit and income will no longer be the main focus. Instead, you’ll enlist the help of a co-signer, someone you trust who has good credit and a decent income. Their financial profile then becomes more important during the application procedure. Once they co-sign your loan, they will have agreed to take over your loan payments in the event that you can no longer pay them as originally agreed.

 Do note, like a typical personal loan, you are still primarily responsible for your loan payments after approval. That means if you’re late or you miss a payment entirely, your credit will be damaged. You may even rack up penalties, making your debt level worse. Moreover, if you go into default and can’t make payments at all. The responsibility of the remaining loan balance lands on your cosigner’s shoulders. 

Searching For A Personal Loan With A Low Income?

If you’re a low income earner in need of a personal loan, don’t worry. There are many lenders and loan options to choose from in Canada. As long as you take the time to do research and improve your financial health as a whole. 

Personal Loans for Low Income Earners FAQs

What happens if I have difficulty repaying my personal loan?

If you think you won’t be able to make a personal loan payment, it’s best to contact the lender right away. They may be able to offer a solution, like smaller payments or a longer term. Things will only get worse when they have to chase after you. Which can lead to extra interest, late fees and, once the situation gets bad enough, debt collection and legal penalties.

What is considered part-time work?

According to the Canadian government, you qualify as a part-time employee if you work anything less than 30 hours per week. In that case, you may not be eligible for benefits that are reserved for full-time employees. This includes company health insurance and paid vacation days. It can also be harder to get a personal loan when your income is lower.     

How can I get a personal loan with a low income?

Even if your income is low, you can still qualify for a personal loan through many lending sources in Canada, particularly alternative lenders. However, you’ll need to show the lender that your overall financial health is good enough to make the loan payments. You can then strengthen your finances and become eligible for a low income personal loan. By lowering your debt-to-income ratio, improving your credit score, offering collateral or asking someone to cosign your application.
Bryan Daly avatar on Loans Canada
Bryan Daly

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and travelling the world in search of the coolest sights our planet has to offer.

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