Banks earn money by lending on the calculated interest. Basically, it is easy to apply for a loan if the loan seeker can meet the conditions of a bank. Under these conditions, banks understand a sufficiently high income that is above the garnishment exemption limit and shows a garnishable portion. The Credit Bureau must also be clean, it must not contain any negative entries.
The loan seeker should know that the seizure allowances are created every two years. The loan seeker who wants a loan despite little income will only get a loan under difficult conditions.
Those who earn well
If you earn well, you don’t need a loan. Those who earn well can put aside a lot. Those who earn well can pay for larger purchases or repairs from the current budget. However, the reality is different. A good earner also needs a loan. However, he will get better terms than a low income customer.
Not only the credit opportunities increase, the loan amount can also be larger if the customer has a very good income. Banks want to see collateral if they grant a loan despite little income. If the income is insufficient, other credit safeguards must be mentioned. Banks are happy to suggest a second borrower or a guarantor.
In the case of a second borrower, the partner could join the loan agreement and thus secure the loan. However, he must be aware that if the borrower encounters payment problems, he must continue to pay the loan. For this reason, the solvent must be solvent, ie his income must be above the garnishment exemption limit. His Credit Bureau must also be impeccable. If the conditions can be met, the bank will check the creditworthiness of the borrowers on the basis of salary statements and bank statements from the past three months.
If the income that the bank checks based on the bank statements is correct, a loan is approved despite the low income. Many loan seekers wonder why the bank doesn’t approve a loan with a small income. This group of people pays their living expenses and other expenses from a low income. It is not only the garnishment exemption limit that has to be right, but the bank will check the customer’s complete economic situation.
This is done by drawing up an income / expenditure plan. As the name suggests, the income is compared to the expenditure. If there is financial scope left, this could be used for the rate. This creates a different picture and the customer receives a loan without a second borrower despite little income.
But often the check shows that everything goes from zero to zero and there is no financial leeway. With such a constellation, the bank must assume that the loan will default and will reject the loan despite little income.
But what to do if the customer urgently needs a loan. In this case, a surety could be an option. The guarantor is rigorously checked by the bank. He must also have a sufficiently high and regular income. The Credit Bureau must not contain any negative entries and it must have a permanent position. The job may not be limited and may not include a trial period.
The guarantor must be fully informed about a guarantee. Finally, he and the borrower assume the obligation to repay the loan. That can be a big risk. If the borrower stops paying, the guarantor has to step in and continue to pay the installments out of his own assets.
If the guarantor’s economic situation is good, the loan can be approved despite little income. The guarantor should also know that the guarantee is entered into his Credit Bureau like a loan, and this can reduce his credit rating.
Banks often ask for a surety, which puts the guarantor at the same level as the borrower. In a figurative sense, that the guarantor is immediately obliged to do so, there is a loan default, and the bank does not even have to carry out a complex reminder procedure.
Another option, which is much better for the guarantor, is the default guarantee. Here, the debtor must first go through all legal instances in order to ultimately go to enforcement. If these measures are of no avail, only then will the guarantor be brought into recourse.
There is also a temporary guarantee. The guarantor is bound to the guarantee in a timely manner. An exact time and a certain loan amount are agreed. If the time frame is over, the guarantor is out of the guarantee again.
Alternatives to the guarantee
But it doesn’t just have to be a guarantee that secures the loan, it can also be real estate, valuables or loanable life insurance. The rule applies that the more valuable the protection is, the more the chances of getting a loan increase despite low income. However, the low earner will only receive a small loan.
The small loan can be in a credit line of around 5,000 USD. Thus, the low loan amount remains affordable for a low earner. If the customer has an income that is just above the garnishment-free limit, a loan can still be successful with the aforementioned protection despite little income. But here the loan seeker can assume the conditions will not be that good. The bank will charge a higher interest rate for a customer with a poor credit rating.
In doing so, she tries to absorb the risk of default of the low income that could possibly arise. If you have collateral to offer and are aware that you can pay the installments, you should definitely conduct a free loan comparison. This shows the borrower the cheapest providers based on a list.
The interest rate that some providers display is not relevant for all customers. This low interest rate is only given to customers with an excellent credit rating. The customer only gets his own interest when he obtains a personal loan offer.
If a loan does not come about despite little income, but the customer absolutely needs some things, remedies can be remedied via mail order companies or dealers. The customer can buy consumer goods there, these do not require strict requirements. Often, having a credit card is enough for the merchant and the purchase is perfect. Nevertheless, even with this purchase, there must be certainty that the installments can be paid. If the customer can no longer pay the installments, the dealer will move in the purchased goods.