Especially low earners, whose wages or salaries are often only sufficient to cover their own livelihood, often have additional financing requirements. This is especially true when major purchases have to be made or certain repairs have to be financed. Nevertheless, it is anything but easy for this group of people to get a suitable loan for low earners. Income is usually so low that there is either little or no scope for paying credit installments. If this income is below the garnishment exemption limit, the banks would also have no way of accessing the salary if payment arrears persist.
Similar to any other loan, the requirements for a low-income loan are relatively high. Not only must the income be significantly above the garnishment exemption limit, but the Credit Bureau information must also be in order. If even one of these two requirements is not met, this usually leads to the loan for low earners being rejected. There is always a good chance of getting a low-income loan if the amount borrowed is relatively small and the monthly installments can be kept very low. Some banks already issue loans with a total amount of 500 or 1,000 USD.
Approval and repayment
If all the requirements for a low-income loan are met, the money will be transferred to the customer’s checking account within a few days. The loan must then be repaid in regular monthly installments. Care should be taken to ensure that these installments are paid properly and on time. Otherwise, it could happen very quickly that the bank cancels the loan and the remaining amount must be repaid in one amount. This is especially true if the borrower is behind with several monthly installments. A credit cancellation always results in a negative Credit Bureau entry, which means that the customer in question can generally no longer get a loan.
If the total financing requirement is small, it could make sense in certain circumstances to take out a loan from a group of friends, acquaintances or relatives. Such a loan would have the great advantage that the conditions between the lenders and the borrowers can be regulated individually. You are not bound by the strict requirements that a bank loan does.
For low earners who are in Hartz IV, there would also be the option to apply for a loan from their responsible group. However, there should be a valid reason for this, as would be the case, for example, with a defective refrigerator or a defective washing machine.