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Personal Loans

Income-Based Personal Loans

Lenders that offer income-based personal loans focus more on your income than your credit score. This option might be an excellent choice if you have a steady income but a poor credit profile.

However, before you apply for one, consider the drawbacks. These loans often have higher rates and fees than traditional personal loans, and they also tend to have shorter repayment periods. We’ll explain the pros and cons of income-based personal loans so you can assess whether they’re right for you and consider alternatives.

How do income-based personal loans work? 

When you apply for an income-based personal loan, a lender considers your income the primary factor in deciding whether you qualify. A steady income can signal to the lender that you can afford to repay the loan as agreed.

Unlike a traditional personal loan, the lender doesn’t perform a hard credit check. A lender may still perform a soft credit check, which doesn’t lower your credit score.

An income-based loan is similar to the standard type of personal loan. If you’re approved, a lender will deposit a lump sum into your account. Afterward, you repay what you borrowed, plus interest, over a specific repayment term.

Where to get income-based personal loans

You can get an income-based personal loan from several credit unions and online lenders. You could also ask your bank whether it offers them. 

The following table lists three lenders that offer income-based personal loans.

LenderMinimum incomeRates (APR)
Xplore Federal Credit UnionDeposit of at least $400 per month17.99%
OppLoansNot disclosedUp to $179%* 
Possible FinanceNot disclosedUp to 178%
*Varies by state and OppLoans partner lenders

Federal credit unions have lower maximum rates than many other types of lenders. The most a federal credit union can charge is 18% on loans, except for payday alternative loans (PALs). PALs come with rates up to 28%.

Eligibility requirements for personal loans based on income 

You must meet specific requirements to qualify for an income-based personal loan. For example, you generally:

  • Must be at least 18 years old 
  • Have a bank account
  • Have steady income
  • Live in a state where the lender is licensed

These requirements are similar to standard personal loan requirements.

Pros and cons of personal loans based on income only 

It might be easier to qualify for an income-based personal loan with bad credit, but first, consider the drawbacks.


  • Quick funding time 

    Some lenders can fund your loan on the same day or within 24 hours.

  • Might be easier to qualify for than a traditional personal loan

    You could get approved for an income-based personal loan even with poor credit.

  • Flexible loan purpose.

    Similar to a traditional personal loan, you can use an income-based loan for almost any legal reason.


  • Higher rates

    Income-based loans can come with higher average rates than traditional personal loans.

  • Less flexible repayment terms

    While some lenders that offer standard personal loans have maximum repayment terms of up to seven years or longer, you may have to repay an income-based personal loan in a year to 18 months.

  • Possible credit score damage

    If you default on the loan, it could damage your credit score.

How to apply for income-based personal loans

The application process depends on the lender, but here are the typical steps to apply for an income-based personal loan.

  1. Gather necessary documents. Documentation varies by lender, but you may need to provide recent pay stubs and W-2s, government-issued ID, such as a driver’s license or passport, and your Social Security card.
  2. Comparison shop. Compare rates, terms, and repayment terms across at least three lenders. 
  3. Submit an application. Once you’ve found the lender that offers the best rate and term for your financial circumstances, you can submit a loan application online or in person.
  4. Repay the loan as agreed. After you get funds, repay the loan on time to avoid damaging your credit. Enrolling in autopay is one way to ensure you make payments on time.

Alternatives to income-based personal loans

Income-based personal loans offer some consumers a convenient and tailored method of borrowing, but these financial products might be viable alternatives.

Credit cards 

Credit cards are popular alternatives to income-based personal loans. The revolving credit lines allow you to use and repay your credit as needed. Unlike income-based personal loans, credit card limits aren’t tied to your income but to your credit score.

The benefits include flexibility in usage and potential rewards, such as cashback or travel points for your spending. However, a major drawback can be high interest rates, especially if you carry a balance month-to-month. If you plan to pay off the balance within the grace period, a credit card can serve as a terrific substitute for income-based personal loans.

Home equity line of credit (HELOC)

If you own a home, consider a HELOC. HELOCs are secured against your property, unlike an unsecured income-based personal loan.

The benefit is often a lower interest rate than income-based personal loans. The fact that it’s collateral-based can result in a generous credit limit. But these loans carry a significant risk: Defaulting could mean losing your home. It’s critical to weigh the risks against the benefits before choosing a HELOC over an income-based personal loan.

Peer-to-peer lending 

Peer-to-peer lending (P2P) platforms allow people to borrow from individuals instead of traditional lenders. The income-based mechanism takes a backseat as your creditworthiness drives the borrowing limit and interest rate.

P2P lending can offer you competitive rates and repayment terms. Some platforms also exhibit greater leniency towards lower credit scores. However, not every P2P platform is regulated, which can expose you to fraud. It’s essential to research and use reputable platforms when considering this alternative.