Published: 17/01/2022
In this and our next blog we will give you some information on loans for young people. If you’re needing extra financing for a trip abroad or your studies, getting a loan when you're younger can be difficult, but it’s not impossible. Our guide explains ways to obtain loans for young people.
Young people can struggle to borrow partly because they could be seen as more of a risk or do not yet have a steady income, but also because they often don't have much experience in paying back debt yet.
Bad credit? If you’ve been refused credit in the past, you can still find a loan without resorting to payday lenders.
For young people who have a regular income and experience with credit cards and paying back debts, getting a loan is much less of a worry. That said, the loans market does tend to make it harder for young people.
Rather like trying to get a loan when you're maybe over 60, getting one when you're under 25 can be difficult too. There are ideal ages for borrowing, based on various risk factors associated with age. Broadly speaking, the older you are, you may not live long enough to pay back the debt before you die! If you’re young, the less experience you have in paying debts or having a regular income.
Many young people will have a very poor credit score simply because they have never had any credit before.
When you're younger getting a loan may be harder, but there are ways to improve your chances of being approved by lenders. The main thing is to look for ways to minimise the appearance of risk.
Lenders restrict applications to people over the age of 18. Some will only accept applicants who are over 21.
If you are 18, it’s likely that your loan will be your first experience of debt (student loans only start getting repaid while you're working, so they don’t count towards your credit history yet). This restricts your choices and makes it tougher to get approved.
If you're 18 and working, you may not have been working for long, that adds to your perceived risk level. Lenders prefer people who have been in their job for at least a year, as it gives the impression of stability and someone who can be relied upon to pay the bills every month.
Being over the age limit to get a credit card does not mean that it's easy if you're between 18 and 25 years old. Age becomes less of a factor in applications as you get older, until you get 'too old' around over 60.
There are many options on the market if you need a loan to help further your career or profession by studying. Many lenders have loans tailored to people who have finished their main studies and are looking to pay for further education.
These are usually called student and career development loans. Usually, they allow you to pay for your studies and repay the debt after you graduate or qualify.
Interest rates are generally higher than the leading unsecured loan rates, but they often have more flexible terms, designed to help young people find a better way of paying it back.
Your application might also require you to prove how you plan to pay back the loan, and how the loan will help improve your financial situation via your career's development. More here.
Guarantor loans are designed for people with weak credit. Young people are often included in that category. Guarantor loans allow a friend or family member to guarantee the loan you apply for.
If you fail to keep up with repayments, your guarantor will be held responsible. They will need to have a good credit score and be deemed reliable enough to pay back the loan if you don’t.
Many young people ask their parents to be guarantors to help get approval.
1Plus1 offer personal loans backed by a guarantor, subject to both the borrower and guarantor meeting our affordability and credit worthiness criteria.
If you think you may be interested in a 1Plus1 Loan, please give us a call on 0330 1200 313 and one of our friendly staff will be more than happy to discuss the process with you, or start your application here.