Loans for Young People with Little or No Credit History

Taking out your first loan can feel overwhelming, especially if you’re navigating it at a young age. Whether you’re 16 and thinking ahead or in your 20s and ready to make a move, understanding your options and the potential hurdles, like limited credit history or income, is crucial.

Let’s explore considerations for getting a personal loan at different stages of young adulthood.

Can young adults get loans?

Young adults can get loans, though options may be more limited than older borrowers. Generally, you must be at least 18 years old to qualify for most loans, although some lenders may have higher age requirements.

At this stage in life, young people may have minimal or no credit history, which can make securing a loan more challenging. Lenders like to see a track record of financial responsibility before approving a loan.

While a person cannot legally sign a loan if they are under 18, there are still options. For example, you could get approved for a student loan or a secured credit card, or you could apply for a loan with a cosigner.

However, if you have limited or no credit history, your loan will likely be for a lower amount and with higher interest rates than if you were applying with a long and positive credit history.

Here are some examples of loans you might qualify for as a young adult:

• Personal loans. Though harder to come by for those with no credit history, personal loans may be an option through lenders that cater to new borrowers.
• Student loans. Student loans help cover educational expenses and are often available to those pursuing higher education.
• Loans with a cosigner. If you’re under 18, getting a loan with a cosigner, such as a family member or friend with good credit, might be a viable option.

Loans for young adults by age

Navigating the world of loans as a teenager can be tricky, especially with limited credit history. If you’re asking questions like, “Can I get a loan at 17?” — you’re not alone. Below is a detailed table covering loan types for teens and young adults, including car loans, student loans, personal loans and home loans.

Age	Can I get a loan?	Alternative options
16 years old	Car Loans: Not without a cosigner. Student Loans: Eligible for federal student loans with a cosigner. Personal Loans: Generally not available. Home Loans: Not available.	Consider asking for family support or a secured credit card to start building credit.
17 years old	Car Loans: Possible with a cosigner. Student Loans: Federal student loans available with a cosigner. Personal Loans: Rarely available without a cosigner. Home Loans: Not available.	Look into savings plans or part-time jobs to build financial stability.
18 years old	Car Loans: Possible with or without a cosigner, depending on credit. Student Loans: Eligible for both federal and private student loans. Personal Loans: Available, but terms may be limited without credit history. Home Loans: Unlikely without substantial credit and income.	Explore credit builder loans or secured credit cards to establish credit.
19 years old	Car Loans: More accessible, especially with some credit history or a cosigner. Student Loans: Federal and private loans available. Personal Loans: Available, but terms vary based on credit and income. Home Loans: Possible but difficult without significant income and credit history.	Consider part-time work, scholarships or grants to supplement income.
20s	Car Loans: Generally accessible, especially with established credit. Student Loans: Federal and private loans readily available. Personal Loans: Widely available with varying terms based on credit and income. Home Loans: Possible, but requires a good credit score and steady income.	Leverage savings, employer benefits and financial planning to enhance loan eligibility.

How to get a loan at a young age

Here are some steps to get you started on applying for a loan:

1. Be prepared to answer a bank’s questions. If you are borrowing from a bank, it’ll want to know how you plan to use the money, what your income is and your assets — to give them a clearer picture of how you’ll repay the loan — and your credit history.
2. Check your credit score. Your credit score plays a significant role in your loan approval. You can get a free credit report online. If you have a low or no credit score, consider ways to start building your credit before applying.
3. Gather required documents. Each loan has its own requirements, but these are typically the documents you’ll want to have ready:
   • Valid ID (e.g., driver’s license)
   • Bank account with a positive balance
   • Recent pay stubs, tax returns or bank statements
   • Proof of address (e.g., utility bill in your name)
   • Employment verification or employer’s address
   • Phone number and other contact information
4. Consider collateral and income. A bank may require you to put up collateral, like a car or house, as proof that you can pay the loan even if you default. Additionally, lenders want you to have a consistent income to prove you can make your repayments.
5. Apply with a cosigner if needed. If your credit history is short, your income is low or you’re under 18, apply with a cosigner that can help you secure better terms.
6. Complete the application process. Fill out the loan application accurately and submit all required documents. Be honest about your financial situation to avoid any issues later on.
7. Review loan offers. Once approved, review the loan offers carefully, paying special attention to the interest rate, loan terms and conditions and fees.
8. Sign the loan agreement. If you agree with the terms and conditions, sign the agreement.
9. Make repayments. Make timely payments to build your credit score and avoid penalties. Set up automatic payments if possible to ensure you never miss a due date.

Pros and cons of getting a loan as a young adult

Understanding the advantages and disadvantages can help you make an informed decision about whether taking out a loan is the right decision at this stage of your life.

Pros

• Quick access to funds. Loans provide immediate cash for emergencies like car repairs or replacing essential items.
• Credit building. Making timely repayments can improve your credit score, which can help you get loan approvals in the future with a better APR.
• Manageable payments. Typically, you can repay the loan over 12 to 60 months with fixed monthly payments. This payment structure can help you practice financial responsibility.

Cons

• Higher interest rates. Young adults might not qualify for the best rates, making the loan more costly.
• Risk to credit score. Missing payments or defaulting on the loan can severely damage your credit score and lead to legal action.
• Debt accumulation. If you cannot make timely payments, you’ll be subject to high interest rates, which can lead to overwhelming debt accumulation, especially when you’re young.
• Financial commitment. Loans require consistent repayments, which can strain your finances, especially if your situation changes, such as losing a job.

Tips for young people to get approved for a loan

Getting approved for a loan as a young adult can be challenging, but following some strategic steps can improve your chances.

• Build your credit. Look into tips on how to build credit or become an authorized user on someone else’s card to establish a credit history.
• Choose reputable lenders. Avoid potential fraud by doing your homework. Research personal loans and go for ones that are well-known and credible.
• Plan how you’ll use the loan. Lenders want to know who you are and what you plan to do with the money. Clearly outline how you’ll use the loan funds, focusing on responsible and constructive purposes, such as education or home improvements.
• Present yourself professionally. Dress appropriately and be prepared to meet with a potential lender as you would a potential employer in a job interview.
• Get a cosigner. Having a cosigner with a good credit history can make your application stronger as well as help you get better loan terms.
• Get a job and maintain stable employment. Consistent income from a steady job shows lenders that you can repay the loan.
• Offer collateral. If possible, provide assets like a car or savings account to secure the loan and reduce the lender’s risk.
• Space out applications. Avoid multiple loan applications in a short period, as this can lower your credit score and make lenders wary.
• Use soft searches. Check your eligibility using soft searches that don’t impact your credit score before formally applying.
• Register to vote. Being on the electoral roll provides proof of a fixed address, which lenders look for when assessing your application.

What to watch out for

Here are some important things to watch out for to ensure you make informed and safe borrowing decisions.

• Borrow responsibly. Only take out a loan if you are confident you can repay it on time to avoid debt traps and potential default.
• Avoid scammy lenders. Ensure the lender is reputable and verified to prevent falling victim to scams. Learn different ways to identify if a lender is scamming you.
• Understand interest rates. Be aware that high interest rates can significantly increase the total amount you need to repay.
• Check for hidden fees. Look out for origination fees, late payment fees and prepayment penalties that can add to your overall cost.
• Consider the impact on credit. Be mindful that applying for a loan will temporarily lower your credit score due to the hard inquiry.
• Manage monthly payments. Ensure you can handle the fixed monthly payments, which may be higher than credit card payments, to avoid financial strain.
• Monitor your credit report. Regularly check your credit report to ensure there are no errors and to see how the loan affects your credit score.
• Understand the loan terms. Fully comprehend the loan’s terms, including the repayment period and total repayment amount, to avoid surprises.

Alternatives to loans for young people

If taking out a loan doesn’t seem like the best option, there are other ways for young people to access funds. Here are some alternatives to consider.

• Save up. Accumulating savings over time can help you avoid debt and provide enough flexibility that you won’t need a loan. Getting a part-time job while in school is a great way to start your nest egg.
• Overdrafts. Request an interest-free overdraft from your bank or an extension on an existing one, but be cautious of high fees if it’s not interest-free.
• Secured credit cards. Secured credit cards are backed by a security deposit and are easier to qualify for. Even with bad or no credit history, you can get a secured card and build your credit score.
• Credit-building debit cards. Credit-building debit cards are linked to your bank account and use the account balance to set your credit limit. Typically, they don’t require a credit check, annual fees or an APR. Your activity is reported to credit bureaus, helping you build credit.
• Student credit cards. Designed for students, these cards help build credit history and cover emergency expenses but should be used responsibly by paying off the balance monthly.
• 0% credit cards. Zero percent credit cards offer an interest-free period for purchases, but ensure you pay off the balance before the introductory period ends to avoid high interest charges.
• Scholarships and grants. For students, applying for scholarships and grants can provide financial aid without the need for repayment.
• Family and friends. Borrowing small amounts from trusted family or friends can be an alternative to going to a lender. Just be sure you have a very clear plan to repay them.

Frequently asked questions

Are there loans for young adults with no credit?

Yes, some lenders offer loans specifically designed for individuals with no credit history. These often require a cosigner or collateral and may come with higher interest rates.

Is it a crime to borrow money and not pay it back?

Failing to repay a loan is not a criminal offense. However, it can lead to severe financial consequences such as damaged credit scores, collection actions and potential lawsuits from the lender. You likely won’t go to jail if you’re a minor, but the consequences are serious if you don’t repay your loan.

Can a 16-year-old cosign a car loan?

No, a 16-year-old cannot legally cosign a loan. Cosigners must be at least 18 years old and meet the lender’s credit and income requirements.

Can you get a loan with no credit at 17?

Legally, minors cannot enter into binding contracts, including loans. However, exceptions like federal student loans exist, and private loans may be possible with a qualified cosigner.

Can I get a loan at 19 with no job?

Obtaining a loan without a job at 19 is challenging, but it might be possible if you have a cosigner, collateral or other sources of regular income, such as benefits or a trust fund.