If you’re 18 years old and above, find out which loans young people are eligible for by searching our table below.
What's in this guide?
- What loans are available to young people?
- Should I take out a loan for young people?
- Can I get a loan at 18 years old?
- What is a credit score and how does it affect me getting a loan?
- How can a young person improve their credit rating?
- 5 tips for getting first time loans
- How to compare loans for teens and young people
- Alternatives to loans for 18 year olds and above
- Pros and cons of loans for under-21s
- Bottom line
- Frequently asked questions
What loans are available to young people?
Turning 18 can be exciting. After all, you’ll now be legally allowed to vote and drink. You’ll also be able to take out a loan.
However, getting a first time loan as a young person may be more difficult than simply applying and getting approved. When you’re young, you have little to no credit history which means lenders cannot assess how reliable you are as a borrower. You may also not have much in the way of savings. This means your loan options may be more limited. However, the good news is you may be able to access one of the following options:
Loans jargon explained
- APR. The annual percentage rate (APR) takes into account the headline interest rate as well as any compulsory charges.
- Representative example. Used to show consumers the standard costs that would apply to most successful loan, credit card or mortgage applicants.
- Interest rate.The interest rate is a charge for borrowing and is a percentage of the amount of credit.
- Eligibility. This is how likely you are to get accepted for a credit product such as a loan, and will take a number of factors into consideration.
Should I take out a loan for young people?
Before taking out a loan it’s crucial to work out whether you would be able to afford to repay it. This can be much harder when you’re young because your financial circumstances are likely to be more changeable and less established.
Consider whether you really need to borrow the money and if you do, whether you could use an alternative, cheaper option such as a credit card or overdraft. If you still want to apply for a loan, it’s a good idea to start small and borrow a small amount over a short term.
Can I get a loan at 18 years old?
Yes, once you turn 18, you’re eligible to take out a loan or other credit product. Whether you’ll be able to get a loan will depend on a range of factors:
What is a credit score and how does it affect me getting a loan?
Your credit score is used by lenders to determine your creditworthiness. If you have a good credit score, this indicates to lenders that you have paid back debts in the past and have not missed payments. The higher your credit score, the more likely you are to get accepted for a loan.
If you get accepted for a loan and repay it on time, your credit score will gradually improve. However, if you miss payments and default on the loan, this will be recorded on your credit report which could negatively affect your credit score.
How can a young person improve their credit rating?
Firstly, check you’re registered on the electoral roll as this will show lenders you have a fixed address. Next, check your credit report to see if there are any errors. If there are, contact the credit reference agency to get them corrected.
Also ensure you pay bills on time and if your landlord includes your bills in your rent, ask if your name can be put down on some of them.
5 tips for getting first time loans
- Show that you can save. If you can show the lender you’re good at saving, the lender may be more willing to approve you. A steady savings history will work best with your current bank as they can view your account information when you apply.
- Apply for a lower amount. Start small. Applying for too much when you have little credit history or don’t earn a high income can be a red flag to lenders and result in an automatic rejection. Instead, opt for a lower amount and prove to lenders that you’re a responsible borrower.
- Get on the electoral roll. Now that you’re old enough and have the power to vote, get yourself registered! This has the added bonus of bolstering your credit score.
- Get a letter from your employer. If you’re only employed casually or have not been employed for long, a letter from your employer stating the security of your employment may help your application.
- Offer a deposit. Buying a car? A deposit when you apply for a car loan shows you’re in a good financial position. The larger the deposit, the less you need to borrow, and the more likely an approval may be.
How to compare loans for teens and young people
The quickest and easiest way is to use Finder’s personal loan comparison tables. Compare interest rates carefully and aim to keep the overall cost as low as possible, while ensuring you can still afford the repayments.
Once you’ve found a suitable loan, check whether you’re eligible, whether there are any fees and how much you will be able to borrow.
- The overall cost.
This should be your primary focus when considering different loans (or other types of credit). Aim to keep the overall cost as low as possible while ensuring you can afford the repayments.
- Whether you’re eligible
At 18 years old or as a young person, you may well find that the lenders offering the best rates aren’t interested in you. That’s because each lender has a limited pool of funds to lend out, and they’ll aim to lend it to the safest prospects they can, to reduce the risk of losing any money if a borrower defaults on (fails to repay) their loan. But this doesn’t mean you can’t shop around. Use our “soft search” eligibility checker to quickly ascertain whether or not you’re likely to get approved.
- The interest rate.
Is the rate competitive? Is it fixed or variable? A fixed rate will remain the same for the full term of the loan, while a variable rate could change. Don’t forget, when a lender promotes their fantastic “representative APR”, they’re not going to give this headline rate to every borrower that comes along. They’re only obliged to award it to 51% of borrowers, and with a limited credit history, you’ll be more likely to be offered a “personalised” (meaning higher) rate.
- How much you’re able to borrow.
Lenders offer varying minimum and maximum loan amounts, but what you’ll be allowed to borrow will ultimately depend on what you can the lender deems you can afford to repay. Lenders must lend “responsibly”, which means considering each borrower’s unique situation (income, outgoings, job stability, credit history etc.) to ensure they are only offered loans that are affordable.
- Early repayment terms.
Clearing expensive debt can save you money in interest, but different products have different early-repayment terms. Will paying the money back early have a penalty? Will it actually save you any money? It’s worth checking before you apply. A fractionally better rate that comes with unforgiving early-repayment terms could be a false economy.
- Any special features of the offer.
It’s important to take into account any value-adding features of any credit, whether it’s cashback on a loan or a points scheme on a credit card. Weigh up the real financial benefits of these, but try not to to be blinded by an exciting promotion.
- The fees you’ll be charged.
There are different types of fees you can be charged, ranging from setup fees to annual fees and early repayment fees. Find out what fees are associated with your loan before signing on the dotted line.
Personal loan cost comparison
Loan amount: £5,000
- Loan term: 3 years
- Interest rate: 19.9%
- Monthly repayment: £181
- Total interest: £1,533
Loan amount: £5,000
- Loan term: 3 years
- Interest rate: 29.3%
- Monthly repayment: £201
- Total interest: £2,250
What about a broker?
A broker will find the best rate available to you from its panel of lenders, taking into account your individual circumstances. Normally this service is free, because the broker will earn a referral fee from the lender.
As long as you bear in mind that they don’t normally scan the whole market, but a subsection of lenders with whom they have an arrangement in place, then a broker can take the strain out of finding a competitive deal.
At Finder, we run soft searches with a range of lenders in seconds, meaning that without any impact on your credit score you’ll be able to get realistic rate quotes for loans you’re likely to be approved for. This can be a really smart way to avoid disappointment, protect your credit record and to only focus on lenders who are likely to approve you.
Alternatives to loans for 18 year olds and above
Used correctly, credit builder cards can help you to improve your credit score over time. However, they typically come with low credit limits and high interest rates so it’s important to pay off your balance in full each month.
Alternatively, you could speak to your bank about extending your overdraft and asking for more favourable conditions. Interest rates on overdrafts can be high so they may not always be the best option.
Pros and cons of loans for under-21s
- Easy access to the funds you need. This is an obvious ‘pro’. Get access to the funds you want to make the purchase you need.
- Build up your credit history. Acquiring a loan allows you to establish and build your credit history. This ultimately affects your eligibility for other types of loans and access to better interest rates in the future as well.
- You may only be eligible for a small loan. If you have no credit history or limited credit history, you may only be eligible for a small loan, which may not be enough for what you need.
- Risk of getting into debt. Taking on any loan comes with risk, so make sure to budget your repayments and don’t apply for a higher loan amount than you can afford to repay.
- Potentially high rates. As harsh as it may seem, to a lender, 18-year olds represent a greater risk, which they’ll normally look to offset by charging a higher rate.
Taking out a loan can be an easy way to borrow extra funds and, providing you’re sensible, it can also help to build up your credit score. However, interest rates can be high and if you’re unable to keep up with your repayments, you could do your credit score more harm than good. Always consider your options carefully before applying.
Frequently asked questions
Will you be approved?
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