There is a lot written about credit requirements for loan approval. However, there is little being said about the income factor. Income is as important in the approval process of bad credit loans as credit score and probably even more. Since bad credit loans are tailored for people with bad credit, credit history comes to a second place in the loan requirements list and the position is taken by your income. Since your credit report shows delinquencies, the lender will want to make sure you will be able to repay the loan and that is when the income requirement becomes important. As with lenders your credit score determine whether you are approved for a loan or not, the interest rate, loan amount, etc., your income will determine whether you are approved or declined for a bad credit loan and will contribute to establish all the bad credit loan terms too. How Income Affects Approval In order to get approved for a bad credit loan, your income has to let you afford the monthly payments without sacrifices. Moreover, after payment, you have to have sufficient money left for unexpected expenses. That is why the amount of the loan’s monthly payments cannot exceed certain portion of your overall income. Though these numbers are flexible, truth is that a small income will limit your ability to get finance with or without bad credit. Since bad credit loans are more expensive, you will be able to get even smaller monthly payments with the consequent longer repayment programs and smaller amounts. How Income Affects The Installment’s Amount The loan installment’s amount cannot exceed 35% or 40% of your income without risking a loan decline. If your income is limited, you need to request longer repayment programs so as to reduce the amount of the monthly payments. This limitation is due to the fact that the lender wants to be sure you will be able to afford the monthly payments. Lenders consider that expenses added up (without the loan installments computed), usually eat up 50% of your income and logic rules that at least a 10% should be left for unexpected expenses that may rise. And if nothing unforeseen happens, that extra money should be added to a savings account. Income Problems And Solutions Having income problems will eventually reduce your ability to get approved for a loan. If you also have bad credit, chances are that you will not be able to get approved at all. However, there are a couple of things you can do in order to boost your chances of getting approved for the loan you seek. First of all, you need to reduce your spending dramatically. You can call it war economy if you want but just cut any unnecessary expenses and save as much money as possible. Remember that a small income is even smaller if your expenses exceed what is expected for someone with that income level. With the aid of a co-signer you will be able to get approved since both incomes will be computed towards the loan. Thus, if both incomes added up meet the necessary requirements, then you will get approved without hassles. Sometimes, lenders raise the income requirement a bit when two people apply for a loan. However, the difference never exceeds 20%. For example: If the income requirement for a loan is $1000 and you apply with a co-signer, the two incomes combined may have to reach $1200.
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