Compare low-income loans

If you’re looking for a loan but your income is limited, we’ll walk you through your options and provide you with everything you need to know about low-income loans.

Table of contents

Written by Mark Grimley
Read time: ~5 mins
Published: 28th September 2023

Can I get a loan with a low income?

If your income is low, getting approved for credit can sometimes be more difficult, but it's still possible to get a loan despite limited earnings due to unemployment or illness.

There are all sorts of reasons why you may have a low income; for instance, you may have:

  • been made redundant
  • suffered long-term illness
  • childcare responsibillities
  • to care for a family member
  • a low-paying job
  • zero hours contract

You may also be receiving benefits like Universal Credit or Disability Living Allowance.

Are low-income loans a good idea?

When you're on a low income, unexpected costs can sometimes be challenging to afford.

A low-cost, short-term loan can be a helpful way to get access to cash quickly, but borrowing money when you have a low income also comes with some pitfalls, such as high-interest rates.

If you can’t repay your loan, your money problems could spiral and cause further problems. It’s important to make sure you can afford the repayments of a loan and consider all your options carefully before applying for a loan.

What types of loans can I get with a low income?

If you've tried other avenues of financial help but still need a loan, there are several options available for people with low incomes.

Guarantor loans

Guarantor loans are a type of unsecured loan where someone else, usually a friend or family member, guarantees that they will repay the loan on your behalf if you can't repay yourself.

Both you and the guarantor will need to have affordability and credit checks performed, and your guarantor will need to sign a legally binding agreement that they are jointly responsible for the loan.

Doorstep loans

Also known as home credit or home collection loans, this is a short-term, personal loan arranged in your home and repaid weekly to a loan agent who visits your property. Doorstep loans are typically for small amounts, between £100 and £1,000.

This type of loan comes with higher interest rates, meaning they're more expensive than other loans.

Secured loans

This type of loan, sometimes called a homeowner loan, requires you to own your own home to qualify. The equity in your mortgaged property is used as security against the loan.

If you have a low income but own a property, you have a better chance of getting a secured loan than a personal loan because your property guarantees the debt.

However, if you cannot repay the loan, your home could be repossessed, and the sale proceeds will be used to recover the money owed.

Short-term, high-cost loans

Historically, these types of loans were also known as payday loans and are typically for amounts under £1,000 via an online direct lender or broker.

These loans generally have high-interest rates and short repayment terms of between 3 and 12 months.

Low-income bad credit loans

These loans are also known as poor credit loans and are designed for people with a poor credit history or existing bad debt and are available from specialist loan companies, which you can find on comparison sites like ours.

People with bad credit may find it difficult to get a mortgage, take out a loan or get finance on a car, so this type of loan can be helpful for unexpected costs. However, you may only be able to borrow small amounts with a bad credit low-income loan, and they are likely to come with high-interest rates.

Credit union loans

If you’re a credit union member or belong to a community with a credit union, you could approach them to see if they would be willing to lend to you.

A credit union will take into account your circumstances and assess your application fairly.

Credit union loans typically have lower rates of interest and can be cheaper than a bad credit or short-term loan.

Government loans

If you've been on a benefit like Income Support or Pension Credit for six months or more and need to borrow money to buy essentials, you could be eligible for an interest-free budgeting loan from the government.

If you're on Universal Credit, you may qualify for a Budgeting Advance.

Credit building cards

Credit building credit cards may help to solve short-term cash flow problems. A credit builder card is worth considering if you need a small loan but have low income or bad credit. These cards have low credit limits but are likely to have a lower interest rate than a payday loan or doorstep loan.

You'll need to repay the balance on time and in full every month to build your credit score. If not, you could risk further damaging your credit rating.

Where can I get a loan if I have a low income?

Getting a personal loan can sometimes be difficult if you have a low income, so your options may be limited.

The best low-income loans are usually found online from a direct lender or a comparison site like ours - we can help to match you with a range of lenders or brokers tailored to your financial needs.

You could apply directly for a loan from a high street bank, but your application may get turned down, and a record of a hard credit check will be left on your credit report. More than one of these in the space of six months can damage your credit rating.

Can I get a loan if I have little income and bad credit?

It's possible, but loans for people with low incomes and bad credit will often come with higher interest rates, meaning that you'll pay more in interest, which makes borrowing more expensive for you.

When you're comparing loans, check the Annual Percentage Rate (APR). The higher the APR, the more your loan will cost you overall.

What are the pros and cons of getiing a low-income loan?

Low-income personal loans can help you cover unexpected costs like vet bills or a broken boiler.

  • It's easy to apply for a loan online
  • Funds can be available quickly if you're approved
  • Could be cheaper than a credit card or overdraft
  • Could help with budgeting because repayments are fixed for a set period
  • May boost your credit score if you repay on time and in full
  • Low-income loans often come with high APRs, making the cost of borrowing expensive
  • You have to stick to repayment terms or risk fees for missing or late repayments
  • Applying to lots of lenders in a short period of time will impact your credit score
  • You risk worsening your financial problems if you can't repay your loan

Are there any alternatives to loans for people with limited income?

If you have savings, it may seem a shame to use them, but it won't cost you anything compared to the interest of a loan, and you can always build your savings back up again.

Alternatively, you might want to consider speaking to family or friends who may be able to lend you money if you only need to borrow a small amount for a short period of time.

If you're a homeowner, you might want to consider talking to your mortgage lender about taking a mortgage payment holiday. This could free up some short-term funds, although you'll have to repay more per month once the payment break ends to cover the difference.

If you need to borrow a larger sum, your mortgage lender may be able to offer you a remortgage deal which will free up funds. Bear in mind this will mean you end up paying more interest in the long run, which will add to the cost of your mortgage.

Finally, if you’re struggling to cope or have debt worries seek help from a debt-help charity, such as Citizens Advice or the National Debtline.

Low-income loan FAQs

What happens if I can't pay back my loan?

If you miss or make late repayments on a loan, you may need to pay late payment fees, which will add to your debt and likely damage your credit rating.

It’s really important to speak to your lender as soon as you know you’ll be unable to repay your loan. Your lender might be able to reduce your regular repayments, but this would mean it will take longer for you to repay your loan.

With a secured loan, a lender has the legal right to repossess any property you used to guarantee the loan, and a secured loan provider may start court proceedings if you default on your loan and don’t respond to correspondence.

Will a low-income loan affect my credit score?

Taking out a low-income loan won't adversely affect your credit rating if you repay it on time and stick to the agreement terms.

However, when you apply for a loan online, a hard credit search will be recorded on your credit report, so it’s best to avoid multiple applications in the space of six months.

If you're worried about your credit score, use our eligibility checker to first compare loan providers that are most likely to approve you for a loan without leaving a record of a hard credit check on your credit report.

If you make regular repayments on time, a loan could help to build your credit score.

Can I get a loan if I'm unemployed?

Yes, it's possible to get a loan if you're unemployed or on benefits, although you may not be able to borrow as much as you want, and interest rates could be higher because you'll be viewed as riskier by lenders.

If you have a good credit score, despite your low income, you'll have a better chance of getting approval for an affordable loan.

How long does it take to get a loan on a low income?

It depends on the type of loan you apply for.

Most online loans are approved or rejected instantly or within 24 hours, and the funds could be in your bank account within a few days.

However, credit union loans, secured loans and government loans may take longer to process.

What does APR mean?

APR is an abbreviation of Annual Percentage Rate and shows the overall cost of your loan. The APR takes into account all the costs during the term of the loan, including interest rates and any additional fees. The higher the APR, the more the loan will cost you.

When you're comparing loans, always check the APR and opt for the lowest APR rate available to you.

Written by
Mark Grimley
Head of Partnerships & Take Control Author at Choose Wisely

Mark joined Choose Wisely in 2015. He continues to work in close contact with the providers, brokers and journalists operating in the world of consumer credit.

Important Information.

All of the information in this guide is correct at the time of writing.

If you complete a loan search application on the Choose Wisely website, the rates shown may vary based on your personal circumstances, are subject to status and are available to those aged 18 and over. Rates available range from a minimum of 13.9%APR to a maximum of 1721%APR Representative and loan repayment periods range from 3 to 60 months.

If you need financial advice you can visit stepchange, speak to citizens advice, call the national debtline or speak to

If you've been declined, please refer to your credit report to gain an understanding of why before making further applications.
You can access your credit report for free from Credit Karma, Clearscore or Experian.

Warning: Late repayment can cause you serious money problems. For help, go to