In principle, a low-income customer is not excluded from the credit approval. Because, as studies show, low earners often make ends meet better than higher earners. One should actually think that this is only the case in theory. Because the more you have, the more you want. This is also the case with loans. High-earners often have to pay more loans than a low-income customer. Many will think logically, the earnings look very different. But it is also the higher earners who are in the Credit Bureau, because many simply take over. Anyone who needs a low-income loan as a low-income earner will try to pay this loan correctly.
The low-income loan – the outlook
If banks are ready to grant a loan, they check the income, the work and the employment of the customer. These three things can be called approval criteria for a proper loan. If a customer now wants a low-income loan, a number of conditions are imposed. The banks would like to see loan collateral, a guarantor or other valuables. They secure a low-income loan in such a way that they are secured against all eventualities.
Sometimes, as a normal consumer, one wonders why customers who have a large salary get one loan after another approved, although they can only pay with difficulty. It is not uncommon for a higher earner to attempt debt restructuring because he has taken out too many loans. That won’t happen to a low-income earner, the banks put a stop to it.
Of course, you don’t want to demonize everything that banks don’t approve. Because banks have a duty of care towards their customers and that says that with a low-income loan, the customer can pay the installments. That is why the bank carries out a budget calculation. All income and expenditure are compared. If this results in a plus, the bank is more inclined to approve a low-income loan. A budget should definitely be carried out by the borrower even before borrowing.
Because the low-income earner should know that a small income is always relative. A single person can easily pay their living expenses with 2,000 USD gross, while a family man with two children is on the poverty line with this income. If you want to apply for a low-income loan, you have to make it clear to your bank that you can make an installment commitment.
If you have good contact with your bank, you can discuss the loan with an employee. The rate can often be adjusted to the income. That means the term will be a bit longer and the loan will be more expensive overall. But the installments can be paid. To what extent the so-called balloon financing, which is known from car loans, applies to a low-income loan, remains to be seen.
This loan is designed in such a way that only small installments are paid during the term of the loan. The closing rate at the end of the term is then high. This type of loan only makes sense if the customer expects a larger sum of money at the end of the term, for example from life insurance or a fixed savings contract. This constellation of borrowing is usually only feasible at the house bank where the customer is known.
The online loan
If the loan is applied for online, it is likely to go through a standardized review process. If the income is not high enough, the customer is sorted out immediately. It would be worth applying for a credit broker here. This clientele knows about the banks that also grant a loan if others have already canceled. However, the loan must be adjusted to income.
The credit protection
If the loan seeker does not find a loan, he can secure the loan with a guarantor. The guarantor can come from relatives or friends. Think of the parents, grandparents or children and grandchildren here. But all guarantors have to be solvent. This means that if there is a loan default, the guarantor must continue to pay the loan with his assets. For this reason, an income must be high, his Credit Bureau must be clean and a permanent job must be available.
If these conditions are met, the guarantee contract can be drawn up. The guarantee must be written in a certain form, otherwise it is invalid. Most of the time, banks require a joint and several guarantee, which equates to the guarantor to the borrower. This means that if the borrower no longer pays, the customer is consulted. The guarantee is entered in the Credit Bureau, which may reduce its creditworthiness. The guarantor also has to know that he takes a risk with the guarantee.
A second borrower could also hedge the low-income loan. This can be the husband or the partner. However, this must also have a sufficiently high income. The income must come from a part-time job. Those who are unemployed or self-employed will not receive this loan. The unemployed receive state benefits that cannot be seized, the self-employed have an unstable income.
Is Credit Bureau-Free Credit the Solution?
If you have a bad Credit Bureau, you have even worse cards with a low-income loan. The Credit Bureau-free loans that come into question for these people have strict requirements themselves. A sufficient income must exist that must not be pledged and must have a attachable share of at least 100-150 USD. Using the attachment tables, you can see that a single person must have at least 1,100 USD net, a married person with a wife and two children must earn at least 2,200 USD.
If the loan seeker has an income of $ 1,100, the garnishment exemption limit is $ 1,079.99 net. At 1,080.00 USD, it is just 4.28 USD that can be attached. With an income in a 4-person household, the income is 2,160.00 USD, the attachable portion is just 1.29 USD. In order for the single person to achieve a attachable share of at least 81.28 USD, he must earn 1,190.00 USD.
Since this type of loan is secured in terms of income, someone can immediately calculate who is eligible for the Credit Bureau-free loans and who is not. Despite all the advertising promises on the Internet, there will be no low-income, non-Credit Bureau credit from abroad.