If you’re a young person that’s currently considering whether or not it is possible to get a loan or not – then this is the article for you!
Below, we’re going to be talking you through everything you need to know about getting a loan when you’re younger. Let’s jump right in.
When a loan application is made, the lender will then undergo a lengthy application process which consists of assessing the potential borrower to see if they’re a suitable fit for the loan.
One of the biggest risk factors that lenders take into consideration when deciding whether or not to approve a loan is the age of the borrower.
So, for example, if you are older in age, then lenders may be reluctant to approve your loan application simply due to the fact that you may have fewer working years left to pay back the loan before you reach retirement.
On the other hand, if you are younger in age, then lenders may be less likely to approve a loan to you due to the fact that you will likely have less experience managing money, as well as little to no experience in paying back debts.
In addition to this, another hugely important factor that is taken into account during the decision-making process is the credit score of the potential borrower – which is something that most young people do not yet have.
All of these factors combined mean that getting a loan as a young person can often be quite difficult to achieve, although there are some steps that can be taken to help boost your chances of getting approved by a lender.
If you’re currently 17 years old, then the bad news is that you aren’t going to be able to get a loan in your name until you reach the age of at least 18 (however, for most lenders, the minimum age is usually 21).
Nevertheless, even though there are some lenders that will approve loans to 18 years olds, it should be noted that getting a loan approved at this age is still relatively difficult to achieve, as the younger you are, the less experience you will have had with managing debt and income.
This will therefore increase your risk level to lenders, and in turn, mean that most lenders will likely be reluctant to lend you any money.
In addition to this, it should also be noted that getting other forms of credit (such as a credit card) might also be a little trickier to get, as you will not yet have been able to build your credit score or demonstrate your ability to manage money well and make consistent repayments.
1. Student/career progression loans: One of the most common loans that young people aged 18 or over can usually obtain is either a student or career progression loan.
These types of loans are often issued by either the government or an organization and are designed to help young people further their education or development within their chosen career path.
2. Guarantor loans: Another type of loan that is most commonly obtained by young people is something that is known as a guarantor loan, which is a type of loan that is essentially designed for people who suffer from low credit scores.
Seeing as young people often have low credit scores due to the fact that they have not yet been able to build one, it means that guarantor loans are well-suited to young people aged 18 and up.
In a nutshell, a guarantor loan is a type of loan in which a friend or relative of the borrower agrees to act as guarantor, which means that they are making a written promise to pay off the loan in the event that the borrower fails to do so for whatever reason.
– Build your credit score
By far one of the best ways that you can increase the likelihood of getting accepted for a loan is by building your credit score.
In order to do this, you should begin by making sure that you have registered on the electoral roll, as all lenders like to know whether or not applicants have a fixed place of residence or whether they do not.
If you can show lenders that you have a fixed place of residence, this will dramatically increase your chances of getting approval from one of the lenders you have applied for a loan with.
Alongside doing this, you should also be aware that applying for too many loans at once may leave a negative footprint on your credit file and lenders will place you at a higher risk.
Besides this, you may also find that your credit score takes a dive if you do not ensure that you are taking the time to space out your applications for credit.
– Get a guarantor
As we have already stated above, the likelihood of getting approved for a loan while still very young is nearly impossible to do – so you’re going to need to consider the possibility of a guarantor.
If you are interested in going down this route, then you will need to speak with the family member or friend that you have in mind, in order to gain their permission to go ahead with the guarantor loan.
– Consider an alternative
If you are finding it difficult to get approved for a loan, then you could alternatively opt to take out a credit card instead. There are a variety of options to choose from out there, and most people actually use a credit card as a way to build their credit.
If you are interested in taking one out, then we recommend doing your own research and consulting with a family member (or the bank you are considering taking out a credit card with) to make sure that it is a suitable choice for you and your personal circumstances.