A low-income loan is often imperative since current revenues are not even sufficient to replace damaged home appliances. On the other hand, banks require a certain minimum income for lending, so low household income makes it difficult to obtain a loan.
Consumers often prefer to use their discretionary credit rather than a consumer loan on a low income basis. Most giro banks provide an availability framework even with regular, albeit low incoming payments, so that the MRP is actually easily accessible. Due to the high debit interest, however, its use is not recommended, especially for low incomes.
Requirements for the income of the borrower and its calculation
In order for the bank to grant a loan with low incomes, it must at least be sufficient to pay the monthly installments. The installment can be significantly reduced by extending the repayment term, with the maximum limit for consumer credit being ten years, but limited by many banks to seven to eight contract years.
In addition, many financial institutions expect an income above the seizure limit, so that they can make a garnishment if not repaid. Since this option is irrelevant in the case of a loan repayment as agreed, the banks partly waive this claim and are satisfied with sufficient income to pay the loan installment. Consumers specifically apply for a low-income loan from a credit institution that does not cite income above the seizure limit as a prerequisite for lending.
Low-income workers in their main job often earn extra income. It is extremely helpful for a successful loan application if the selected bank also contributes it to its budget. Whether this is the case can usually be seen from the information on the income calculation or the documents to be submitted on the homepage of a financial institution.
In principle, only the earnings of the applicant are considered as income, even if individual financial institutions deviate from the total household income in the case of married persons. Otherwise, couples will jointly apply for a desired low-income loan so that the bank can count on the income of both borrowers. It is also possible to borrow from a non-resident applicant so that, among other things, parents can support their children as co-borrowers. For a few banks, however, there is the restriction that both borrowers must be reachable at the same address.
Experience has shown that the chances of obtaining a bank loan with low income increase if the applicant does not approach it directly through a bank but turns to a credit intermediary. Thanks to its comprehensive market overview and the total demand it represents, the service provider often lends in difficult cases. There is no risk when hiring a reputable credit intermediary who does not charge any initial costs. The success fee to be paid to the service provider is offset by savings in lending rates, as the intermediary compares offers and arranges a favorable credit to its client.
Pay attention to financial reserves and flexible repayment options
In addition to low interest rates, flexible repayment options for a low-income loan are extremely important. Credit agreements are increasingly linked to the right to an occasional suspension of installments. This clause facilitates the proper repayment of the loan despite a low income in case of unexpected additional expenses.
If premature repayments are permitted without prepayment interest being charged, the low-income borrower will, as a precautionary measure, choose a long term and correspondingly low mandatory installments. As soon as he has money left, he makes additional loan repayments so that he becomes debt-free again early. When making a credit comparison, pay attention to the provision of free special repayments. Some banks continue to advertise that additional payments are possible, but conceal the incurred prepayment interest.
Alternatives to low-income bank loans
It is much easier than in the banking industry to borrow a low-income loan in the form of installment payments. Most retailers do not require their customers to present a receipt for average purchases, but are content to confirm the bank details through the card bank’s prior history. At the same time, in the case of a request submitted by a trader, the Schufa information does not contain any information about existing liabilities. For these reasons, in the case of installment payment agreements in the retail sector, the consumer is increasingly obliged to check whether he can pay the accrued installments with his low income on time.
Installment payments often have an extremely attractive effect due to the low interest rate or even an interest-free allocation. However, interest savings may be offset by excessive commodity prices. In any case, buyers compare not only the direct installment costs but also the selling prices of the individual dealers.
An organized personal loan offers another chance to get a low-income loan. Private credit operators have lower minimum income requirements than common commercial banks and also accept the submission of credit requests by members whose Schufa information contains a soft negative mark. Actual lending occurs when members registered as lenders draw the request. These are often based on the planned use of funds, so that precise information on the reason for the desired borrowing makes sense.