When life happens, taking out a personal loan may be necessary to stay afloat financially. If your credit score is in good shape and you earn enough income to afford the loan payments, you could get back on track sooner than later. But if money’s tight, managing a personal loan can be challenging and have severe consequences for your finances.

Still, it’s possible to get a good deal on a personal loan with a low income by exploring your options. The payments may still stretch your budget thin, but the borrowing costs could be more affordable if you secure a personal loan with competitive terms.

How to get a personal loan with low income

Lenders want reassurance that you earn enough income to make timely loan payments. So, they’ll likely have a minimum income requirement. Here are some other general guidelines to be aware of:

  • Credit score: Perfect credit isn’t required to qualify for funding. However, the best loan terms are typically reserved for borrowers with good or excellent credit – 690 or higher. If you have a lower credit score, expect higher interest rates and fees.
  • Income: Some lenders request proof of steady and verifiable income, such as a recent pay stub, W-2 or tax return, along with your employer’s contact information. If you’re unemployed but earn income from self-employment, side hustles, child support, alimony or government benefits, be sure to disclose it on your loan application.
  • Debt-to-income (DTI) ratio: A reasonable DTI is required for loan approval. It’s calculated by dividing the sum of your monthly debt payments by your total monthly gross income. Aim for a DTI below 50 percent to have the best chance of getting approved for a personal loan with low income.
  • Proof of residence: The lender may request a copy of a mortgage statement, lease agreement, or utility bill that includes your name and physical address listed on the loan application

You can strengthen your approval odds by applying for a lower loan amount or ask a friend or relative to cosign for you. Or you can try applying with an online lender that has flexible eligibility criteria.

Use a personal loan calculator to view your potential monthly payment and determine how big of a loan you should request. Also, remember that each lender sets its own rules, so borrower requirements vary.

If you don’t need the funds immediately, consider paying down your debt and working towards improving your credit score to possibly unlock larger loan amounts. You can also search for a better-paying job or negotiate a raise to lower your DTI and make your loan application more attractive to lenders.

5 low-interest personal loans 

These lenders feature personal loans with low interest rates to make taking out a personal loan more affordable:

Lender APR range Loan amounts Loan amounts Minimum credit score
Upstart 5.40% – 35.99% $1,000-$50,000 3 - 5 years Not Specified
PenFed  7.99% – 17.99% $600-$50,000 Up to 5 years 700
LightStream 7.99% – 25.49%* with AutoPay $5,000-$100,000 2 - 7 years 695
Happy Money 11.52% – 24.81% $5,000-$40,000 2 - 5 years 640
PNC Bank Varies by ZIP code $1,000-$35,000 6 months to 5 years Not specified

Upstart

Upstart offers rapid approvals and funding in as little as one business day. What makes the lender even more attractive to prospective borrowers is that there’s no minimum credit score requirement. Instead, Upstart looks beyond your credit score by evaluating your employment and education history to gauge if you’re a good fit for a loan.

PenFed

You must join PenFed Credit Union to apply for a personal loan. However, it could be a worthwhile move since there are no origination fees, and you can apply with a joint applicant. Plus, the starting interest rate is among the lowest in the industry if you have a strong credit score.

LightStream

LightStream is another exceptional online lender offering competitive interest rates on personal loan products to borrowers with good-to-excellent credit. The amounts are some of the most generous you’ll find, and depending on when you apply, you could get approved and receive funding the same day. There’s also an option to select a later funding date that coincides with when you’ll need the loan.

Happy Money

On the Happy Money site, you’ll find a plethora of money management tools and financial education resources to help you take better control of your finances. You can check your rate in minutes and customize a loan product that works for your financial situation if there’s a match. A member of the Happy Money team will reach out to you quarterly to check in and answer any questions you may have.

PNC Bank

PNC Bank is a brick-and-mortar financial institution that also offers unsecured personal loans with minimal fees and competitive rates. Co-borrowers are also allowed if you want to strengthen your approval odds. If you already have an account with PNC, you may qualify for a discounted interest rate. Plus, there are over 2,600 branches nationwide if you’d like to receive in-person support.

Alternatives to a personal loan when you have low income

Whether you’re unable to qualify for a personal loan or would prefer to explore other funding sources, these options could be viable:

  • Credit cards: If you have good or excellent credit, consider a credit card with an introductory interest-free period. Paying off the entire balance before the promotional period ends means you won’t pay any interest on charges you incur. Otherwise, this form of financing could be costly, mainly if you spend more than you can afford to pay back before the offer expires, interest starts to accrue and you end up only making the minimum monthly payment for some time.
  • Payday loans: These loans should only be used as a last resort for a few reasons, although they’re easy to access if you have a low income than perfect credit. For starters, the interest rates are often well into three-digits, some as high as 650 percent. And as the name suggests, the balance is generally payable on your next payday.
  • Secured loans: You’ll have to put up collateral to get a secured loan. However, they’re attractive to many borrowers because you can get approved with a lower credit score and minimal income. The downside is you could lose your asset if you default on the loan payments.

Also, consider contacting your local credit union to inquire about personal loan options. They often extend smaller loans and may agree to lend you more if you’re already a member and have established a positive relationship with the branch.

Talk about alternatives and whether they are better or worse in general. Include payday loans, secured loans, credit cards and local credit unions

Bottom line

Taking out a personal loan is sometimes necessary, but having a lower income can make it challenging to manage. The upside is some lenders offer flexible, affordable loan products with competitive rates. Before you apply, explore other funding options as they may work better for your budget.