Loans for people on low incomes in the United States

Millions of Americans with low incomes have no credit score, a thin file or a history of missed payments. When an unexpected bill arrives, the businesses most eager to help are payday lenders, auto title lenders and online installment lenders, often at triple-digit APRs. There are better options, but they take a little more effort to find, and what is available depends heavily on the state where you live.

This page is about borrowing. For SNAP, LIHEAP, rent help and other assistance that does not have to be repaid, start with our guide to emergency assistance in the US.

Credit unions and Payday Alternative Loans

Credit unions are member-owned nonprofits and are often more willing to work with people on modest incomes. Federal credit unions can offer Payday Alternative Loans (PALs), small-dollar loans regulated by the National Credit Union Administration. Under the PAL I rules, loans range from $200 to $1,000, last one to six months, carry an APR no higher than 28 percent and an application fee no higher than $20. A newer PAL II version allows larger amounts and does not require a waiting period after joining.

Not every credit union offers PALs, and you generally need to become a member first. Ask also about small personal loans, share-secured loans (borrowing against your own savings) and credit-builder loans.

When you apply, bring proof of all regular income, including benefits, child support or gig work. Many credit unions look at your whole budget and recent account history rather than only your credit score, so a steady, small surplus can matter more than a perfect file.

CDFIs and nonprofit lenders

Community development financial institutions (CDFIs) are certified by the U.S. Treasury to serve low-income and underserved communities. They include some banks, credit unions and nonprofit loan funds. Some offer small personal loans, loans to consolidate high-cost debt, or employer-based loans repaid through payroll.

Community groups also run lending circles, where members contribute a set amount each month and take turns receiving the pot, often with payments reported to credit bureaus to help build a score. Our page on nonprofit loans explains what to ask.

Who regulates lenders, and why your state matters

The Consumer Financial Protection Bureau (CFPB) enforces federal consumer finance laws, including the Truth in Lending Act, which requires lenders to disclose the APR and finance charge before you sign. Banks are also supervised by federal or state banking regulators, and credit unions by the NCUA or state agencies.

Interest rate limits, however, are mostly set by state law. Some states ban payday loans or cap rates on small loans; others allow very high-cost lending. Check your state's financial regulator or attorney general before borrowing from a non-bank lender. Active-duty servicemembers and their dependents are covered by the Military Lending Act, which caps most consumer credit at a 36 percent military APR.

Credit reports, scores and bank refusals

Your history is held by the three nationwide credit bureaus: Equifax, Experian and TransUnion. You can get free reports from each through AnnualCreditReport.com, the official site set up under federal law. Dispute any errors directly with the bureau; it must investigate.

If you have no score or a low one, a few steady steps help: a secured credit card with a small limit paid in full each month, a credit-builder loan from a credit union, or reporting rent payments where your landlord offers it. If banks have closed accounts in the past, look for a low-cost "Bank On" certified checking account so that you are not paying check-cashing fees.

Comparing cost: the APR is not the whole story

Federal law requires lenders to show the APR and the total finance charge. On a two-week payday loan, a flat fee that looks small can equal an APR in the hundreds. Before you sign, check:

• the amount you will receive and the total you will repay;
• the number and size of payments, and whether they line up with your paydays or benefit dates;
• late fees, returned-payment fees and any automatic debit from your account;
• whether the lender reports on-time payments to credit bureaus;
• whether renewing or "rolling over" the loan adds new fees.

Write out your monthly budget. If the payment leaves you short on rent, food or utilities, the loan is likely to lead to another one.

High-cost products to avoid if you can

• Payday loans: due in full on your next payday; many borrowers end up renewing several times.
• Auto title loans: your car is the collateral and can be repossessed.
• Rent-to-own: total payments can be far above the retail price.
• Online installment loans from lenders that claim to be exempt from your state's rate limits.
• Tax refund advances with hidden fees, and paid earned-wage-access apps with high "tips" or express fees.

Alternatives worth trying first

• Ask your employer for a paycheck advance or hardship fund.
• Ask the hospital for charity care, or the utility for a payment plan, before borrowing for the bill.
• Borrow from family with a written plan; see our page on family loans.
• Talk to a nonprofit credit counselor if you already have several debts.

If you are struggling with existing loans, our guide to borrowing with too much existing debt explains why a new loan often deepens the problem.

Scams and warning signs

• A legitimate lender will not ask for an upfront fee, gift cards or a wire transfer before paying out.
• Be wary of offers through social media messages, texts or unsolicited calls.
• "Guaranteed approval, no credit check" is a common hook for fraud.
• Check that the lender is licensed in your state.

You can file a complaint with the CFPB or your state attorney general. Creditpauvre.com does not lend, broker loans or share your details, and no lender mentioned here is endorsed as reliable.