There is no clear definition for a small income. It makes sense to label income as low if it is barely sufficient to finance your livelihood. Another definition, which is largely common in credit, defines the small income as below the garnishment exemption limit for a garnishment.
Such is the result of low remuneration for full-time jobs, with fewer and fewer workers being affected by low wages thanks to the increasing introduction of the minimum wage. Furthermore, a low income from work results from reduced working hours. A low-income loan is often required even for inexpensive replacement purchases, since monthly household income does not allow unexpected expenses to be met.
Low income bank borrowing
A few banks only require that the borrower’s regular income be sufficient to pay the monthly installments. They do not necessarily require the garnishment exemption limit to be exceeded, so that they generally grant a loan even with a small income. So that the borrower can properly pay the monthly loan installments, he chooses the longest possible term for the loan agreement. This inevitably lowers the amount of the monthly installment because it spreads the repayment over a longer period of time. In addition to a long credit contract term, low loan interest rates also contribute to low monthly installments, making a loan cost comparison worthwhile.
On the one hand, the use of a disposition loan, which is also accessible with a small income, is associated with high interest rates, on the other hand there is no obligation in this case to make regular repayments. Most giro banks grant a credit line as a simple loan even with a small income, since regular payments are sufficient for this type of loan. This requirement is also met by a low monthly wage. If the size of a bank loan with small income does not allow the monthly installments to be paid in small installments, it is advisable to apply for a loan with a second person. This method is generally preferable when borrowing from unmarried couples so that both partners are equally liable for the repayment.
However, the second borrower does not necessarily have to live in a common household with the main applicant and is not necessarily related or engaged to the same. A guarantee for the loan with a small income is also conceivable instead of the joint application. However, it is associated with a legal risk for the credit bank, because courts have repeatedly declared loan guarantees void if the guarantor acted evidently for emotional reasons and did not fully understand the scope of a loan guarantee. A special feature is the loan with low income from the main job and other more or less regular income. In this case, the applicant actively searches for a credit bank that recognizes all sources of income and not just the main salary.
Alternatively, he applies for the desired loan as an instant loan without proof of income, since in this case he can add up all the income components and, in the case of irregular inflows, form the average value per month. Credit brokers often advertise that loans are accessible through them even with low incomes. In many cases, thanks to their market knowledge and bundled buying power, they are actually successful. A loan seeker can recognize a reputable broker by the fact that he does not charge any upfront costs, but is content with an appropriate performance fee when the money is actually paid out.
Alternatives to low income bank loan
A partial payment in mail order is almost always possible as a loan, even with a small income, since retailers only ask about the income and its composition in exceptional cases, such as unusually high order amounts. Customers with low income make sure not to conclude too many installment payment contracts. Since Credit Bureau only informs dealers of negative characteristics and no current credit obligations, their protective function does not apply to consumers. Another way to successfully apply for a low-income loan is through loan brokerage platforms between individuals. The private lenders registered there base their lending decisions mainly on social criteria and whether they want to support the intended use.
A small income does not make borrowing difficult as long as it can be seen that the loan seeker can pay the agreed installments with his income. For this purpose, it is also useful to agree on the longest possible loan term when organizing borrowing from a private individual. Formally, instead of the private platform member, a bank licensed as a full bank is considered the lender. This measure is necessary to comply with the BaFin provisions. The commercial bank leaves all lending, including the related decisions, to the platform members. These provide extensive insights into their financial situation, which are harmless with regard to data protection. One of the main contributors to confidentiality is that the platform operator is the only one who knows the bank details and contact details of the individual members and provides a means of communication as well as a bank account for processing payments.