Can I get a personal loan if I have low income?

You sure can! Many lenders are willing to offer personal loans to low-income earners. You might just need to look beyond the big four banks. 

At Plenti, we understand that many low-income earners are looking for a loan to move forward and take advantage of opportunities that arise. There are many ways a personal loan can be the right move, without breaking the budget.

How will I be assessed?

When you apply for a personal loan, the lender will review the following details to make a decision about how much they’re willing to lend you and the rate of interest:

  • Bank statements
  • Employment status
  • Credit report 

Let’s look at each of these in detail.

Bank statements 

When you apply for a personal loan as a low-income earner, you may need to provide bank statements to show your spending habits, savings and regular expenses. If you can show that you pay credit card debts regularly and use your money responsibly, the lender is more likely to view you as a trustworthy borrower.

But don’t panic if you’ve overdrawn on your accounts in the past. Small, occasional lapses won’t impact your chances of being approved for a personal loan.

Does your spouse or partner contribute to your daily expenses? If so, this will help your chances of being approved for a personal loan and may increase the amount you can borrow. You’ll need to provide evidence of your partner’s income through bank statements or pay slips. Alternatively, you could choose to make your partner a joint borrower. This means your incomes will be combined, giving you greater borrowing power.

But remember, you’ll both be equally responsible for repaying the loan. If one of you cannot contribute to repayments down the track, the other will need to take responsibility for making full repayments.

Employment status

If you’re a low-income earner applying for a personal loan, chances are you work as a casual, part-time, or are self-employed. No two loans are the same and each lender has different requirements for employment. Many lenders will ask you to show pay slips or a letter from your employer to prove you’ve been working full time, casually or part-time for a number of months. If you’re a contractor, sole trader or freelancer, you’ll probably be asked to show evidence of income for the past 6 months to 1 year. 

To be eligible for a Plenti personal loan, you must earn over $25,000 per year from a provable, regular source of income.

Keep in mind, many lenders will include government benefits as an income. This means everything from Carers Benefit, Family Tax Benefits, Aged Pension, Disability Support Pension and Partnered Parenting Payment could be considered part of your regular income. Check with your lender when you apply for the personal loan to find out if government benefits will be accepted.

Credit Report 

Your credit score is a number that sums up the information on your credit report. It takes into account information like the number of credit applications you’ve made and the amount of money you’ve borrowed. It also notes your history of repaying debts on time. Basically, it tells the lender whether or not you are a trustworthy borrower. 

If you have a low credit score, it could hurt your chances of being approved for a personal loan, so it may be worth working on improving your score before you apply. You can do this by:

  • Paying your rent, mortgage and utility bills on time
  • Making credit card repayments on time and paying more than the minimum repayment
  • Lowering your credit card limit
  • Limiting how many applications you make for credit 

All of these things will help your credit score to improve over time, giving you a greater chance of being approved for a personal loan and securing a competitive interest rate. 

A typical credit score will fall between zero and either 1000 or 1200, depending on the credit reporting agency. The higher the score, the better! 

Check out this credit score table from Equifax so you know where you stand:

  • Excellent: 833 – 1,200
  • Very good: 726 – 832
  • Good: 622 – 725
  • Average: 510 – 621
  • Below average to average: 0 – 509

If your credit score is over 600, chances are you will be able to secure a personal loan interest rate between 5% - 10% per annum. Scores below 510 are likely to attract a higher rate. 

Checking your credit score is a worthwhile exercise. It can help you negotiate better deals or understand why a lender rejected you. If you spot any errors in your credit report, you can fix them for free by contacting the credit reporting agency. 

Comprehensive credit reporting

Around 50 major Australian lenders, including Plenti, use ‘comprehensive credit reporting’. This means both negative and positive information is included in your report, painting a clearer picture of your credit history.

This is a good thing. It means you’re less likely to be held back by one or two negative slip-ups from the past because the lenders will see a more balanced story of your borrowing history, including all the times you DID make payments on time!

Comprehensive credit reporting is mandatory for all lenders by 1 July, 2021.

How can I find my credit score?

You can get a copy of your credit report and credit score for free every 3 months. Check your credit report for free by contacting one of these credit reporting agencies:\

Simply call to get your credit score on the spot or access your report online within a day or two. You could have to wait up to 10 days to get your report by email or mail. 

Alternatively, you can find out your credit score online for free through government financial guidance site Moneysmart, or financial comparison sites like Canstar.

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