What’s the minimum income required for a personal loan?

If you’re looking to borrow a personal loan, you may wonder if your income is high enough to qualify. While there’s no universal minimum income for a personal loan, most lenders want to see that you earn enough to afford loan payments. Some lenders look for specific monthly or annual earnings, while others don’t disclose their requirements to applicants.

Understanding how income impacts your odds of loan approval, as well as how big a loan you can get, can help you find the right lender for your needs.

The minimum income for a personal loan varies by lender. Discover, for example, requires a minimum annual income of $25,000 to qualify for a personal loan, while Upstart asks for only $12,000 per year.

Other lenders don’t disclose a specific minimum. But even if they don’t state their earning requirements, most lenders evaluate your income to ensure you can afford loan payments. They use it to assess whether you can cover personal loan payments in addition to your regular living expenses and other debts.

Your income might also impact your loan size and terms. A high income can open the door to larger loan amounts, while a low income may result in a lower borrowing limit. A strong, steady income may also help you access a better interest rate and a wider range of repayment terms.

Lenders will consider income from a variety of sources when you apply for a personal loan. This could include:

• Regular salary from an employer, along with bonuses or commissions

• Hourly wages and overtime

• Self-employment income

• Income from investments or rental properties

• Social Security, retirement, disability, pension, or trust income

• Alimony or child support

You’ll need to provide documentation of your income, which could include pay stubs, tax returns, or W-2 forms. Depending on the type of income, some lenders may require proof of consistent earnings for at least a year. Upstart, for example, has this requirement for self-employment and rental income and asks you to verify both with a tax return.

Ensure that you include all sources of income on your loan application, so the lender has a complete picture of your financial situation.

Related: Personal loan requirements: How to increase your chances of approval

Check with your lender for specifics, but the following types of income may not count when you apply for a personal loan:

• Spousal income, unless you submit a joint application together

• Signing bonuses or relocation packages from an employer

• Income you earn in a foreign currency

• Business income that you don’t claim on your personal tax return

Generally, a lender won’t count income that you get on a one-time or inconsistent basis. Instead, it’s looking for stable, regular earnings that will help you repay your loan on the agreed-upon terms.

If your income doesn’t meet a lender’s requirement, you may still have options for getting a personal loan:

• Shop around: Each lender sets its own borrowing criteria, so it’s important to compare personal loan offers. Even if one lender denies your application, you may still be able to get approved with a different lender.

• Request a smaller loan amount: While your income may be too low for a large loan, you might qualify for a smaller loan with more affordable monthly payments.

• Wait to borrow: If you’re self-employed or recently started a new job, a lender may want to see consistent earnings over several months before approving your loan application.

• Take on a side hustle: Consider ways to increase your income with a side hustle, promotion, or new job. A higher income will make it easier to get approved for a loan and access larger loan amounts.

• Apply with a co-borrower or co-signer: Submitting a joint application with a co-borrower could help you get approved, since the lender will take both your incomes into account. It might also help you snag a better interest rate.

• Consider a secured personal loan: Some lenders offer personal loans that you can back with collateral, such as a savings account or vehicle. Secured loans are less risky for lenders, so they may have more lenient income and credit requirements. Understand that the lender can seize your collateral if you default on the loan.

While your income plays a major role, it’s not the only criterion for a personal loan. Here are a couple of other important requirements:

Along with your income, lenders consider your debt-to-income (DTI) ratio when evaluating your ability to pay back a personal loan. Your debt-to-income ratio compares your monthly debt obligations with your gross (pre-tax) income.

Let’s say, for example, that you make $5,000 per month and pay $2,000 toward existing debts, such as a mortgage, student loan, and credit card. By dividing your debt payments by your income, you’d have a DTI of 40%.

Lender requirements vary, but a DTI lower than 35% is often preferred. If your DTI is on the high side, you could lower it by increasing your income, paying down your debts, or both.

Credit history and score

Your credit also plays a big role in the loan application. Lenders want to see how you’ve managed credit in the past, including whether you’ve made on-time payments on your loans and credit cards.

They also look at your credit score, which reflects your history of managing debt. A good or excellent credit score will help you get approved and access better interest rates, while a fair or poor credit score can make it harder to get an affordable loan.

If your credit needs work, consider applying with a co-signer or opting for a secured loan. Both these options come with risks, though; your co-signer’s credit will be damaged if you miss payments, and you could lose your collateral if you default on a secured loan.

Lenders want to see that you’re making a consistent income that’s high enough to afford your payments on a personal loan. Some lenders share specific income requirements, while others don’t state a minimum number.

When you apply, make sure to include all sources of income on your application, including alimony, child support, or government benefits. Gather your documentation in advance to ensure a smooth application process.

If you’re concerned about a low income, consider ways to earn more money or pay down debts to decrease your debt-to-income ratio. It’s also wise to shop around with multiple lenders to find one that best suits your situation.

Many lenders let you prequalify online, so you can check your rates and odds of approval without harming your credit score.

This article was edited by Alicia Hahn.