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Alternative Loan Options for Low-Wage Earners 

Not everyone is eligible for a loan. Creditors have to make sure you can afford the loan installments. Whether or not you can pay off your debt depends heavily on your salary and work history. Possible factors include the total annual income, the stability of that income, and the nature of that income.

Fortunately, you can still get a loan even if your finances are tight or your salary is low. Read on to learn about your alternatives.

Payday Alternative Loans

Payday loans are short-term loans often due on your next payday. The period is brief, lasting at most a couple of weeks. You can get this easy loan from a payday lender, most of whom have physical locations but also from some reputable online lenders.

Most persons who get payday loans have low to moderate incomes and have trouble getting other forms of credit, such as credit cards or loans, because of their low credit ratings. Payday loans, thus, may seem like the most convenient choice.

People who need cash quickly benefit the most from payday loans. This is because filling out the application from start to finish takes only a few minutes at most.

Your income and checking account status will be validated before a payday loan is approved. The purpose of bank account verification is to certify how you will pay, while income verification is used to evaluate your ability to repay.

Credit-Builder Loans

You can either start from scratch with no credit or work to enhance your current score with a credit-builder loan. It's perfect for people who don't have a credit history or who have a poor one and have a hard time being approved for credit cards or other forms of traditional financing.

Once your application for a credit-builder loan has been granted, the bank will place the entire loan amount into a savings account that accrues interest. At the end of the loan term, you’ll receive the loan proceeds (less any fees that may have been paid) in exchange for your predetermined monthly payments over that time.

Credit-builder loans are typically approved without the lender performing a credit check. Your chances of securing a loan may be reduced if they look at your banking history and see things like rejected checks and high overdraft fees.

Title Loans

People with bad credit who need quick cash often turn to title loans. Despite the high-interest rates and unfavorable terms, many borrowers go forward with the loan because they are confident they will be able to repay it on time. You'll need some equity in your vehicle to qualify for a title loan. Additionally, having no outstanding loans on the vehicle is a requisite of many lenders.

The application procedure for a car title typically takes 15 to 45 minutes, and you can keep using your car while making payments. These loans are short-term and have high-interest rates, which can be helpful in the short term but can negatively impact your long-term financial stability.

Pawnshop Loans

You may want to consider getting a pawn shop loan if you're in a tight financial spot but have a lot of valuables stored away in the basement. When you borrow money from a pawn shop, you take out a short-term, secured loan. Pawn loans might be a quick and easy way to get cash if you don't have a bank account or a reliable co-signer. The only qualification for these loans is the collateral you offer; no credit check is involved.

Furthermore, if you cannot make loan payments, there will be no negative impact on your credit score, and you won't be bothered by debt collectors. If you fail to repay a loan from a pawn shop, the shop will only keep any collateral you put up as collateral.

Pawn shops often offer loans between $75 and $100, or 25% to 50% of the value of the item you've pawned. You can get your stuff back after making all the loan payments on schedule.

Borrow from Friends and Family

If you're having money problems, asking family and friends for assistance might be smart. In addition, they may usually provide you with more favorable loan terms. While asking for help from loved ones is never easy, you may find that you receive more than you asked for if you can show that you are committed to paying them back.

If possible, put the terms of the loan, including the repayment schedule and interest rate, in writing. It's also a good idea to track when payments are made and received so that you and your lender can see exactly how much money is owed at any given time.

Final Thoughts

Lenders will be more likely to give you their stamp of approval and write you a check if they know you have a reliable source of income to put toward your payments. Small-income borrowers may still be able to secure a loan, but this will ultimately depend on the financial institution they apply to. Borrowing money doesn't have to be difficult if you're determined and can show that you have the means to repay one of the alternative loans we've mentioned here.


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