So, you're 18 and in need of a loan, but you've got no credit history to your name. It might seem like a tricky situation, but don't worry, you're not alone in this boat. In this guide, we'll show you how it's entirely possible to secure a loan and begin building your financial future.
Yes, if you are 18 with no credit history, you can get a loan. The loan types and the loan terms will be limited, though.
We all know that when it comes to borrowing money, lenders usually peek into our credit history to determine if we're worthy of their trust. But what if you haven't had the chance to build a credit history yet? Does that mean you're out of luck when it comes to loans? No. There is hope in online lending.
Believe it or not, there are online lenders out there who specialize in offering loans to folks who haven't yet dipped their toes into the credit pool. These lenders take a different approach, looking at factors other than credit scores to decide if they should approve your loan application.
To convince lenders that you're responsible enough for a loan, you'll need to show them a few things:
Let's dive into the types of loans that an 18-year-old with no credit history can actually get approved for.
If you're in need of a quick financial solution, installment loans might be your go-to option. These loans are relatively easy to get approved for, and the application process is typically speedy. You can often receive a decision within a short time frame.
The borrowing limits for installment loans vary from state to state, so make sure to check your state's lending limits. While you might not secure a massive sum, it's usually enough to cover essential expenses or unexpected emergencies.
Secured loans require you to put up collateral, which serves as a safety net for the lender. Collateral can be an asset like your car, savings account, or even valuable possessions. By providing collateral, you reduce the risk for the lender, making approval more likely.
However, keep in mind that if you fail to repay the loan, the lender has the right to take possession of the collateral. So, it's essential to borrow responsibly and make your payments on time.
P2P lending platforms connect borrowers directly with individual investors. These loans can be a viable option, especially if you have a compelling reason for borrowing. While your credit history is still a factor, some P2P lenders may be more lenient with younger borrowers who lack extensive credit records.
Having a co-signer, typically a family member or close friend with good credit can significantly improve your chances of loan approval. The co-signer essentially vouches for your ability to repay the loan. Keep in mind that if you miss payments, it will negatively affect both your credit and your co-signer's credit.
Related: Pros and Cons of Co-Signing a Loan
If you're a member of a credit union, you might have access to more favorable lending terms. Credit unions often consider your financial history and personal relationships when reviewing loan applications. They might be more understanding of your limited credit history and offer lower interest rates.
These loans are tailor-made to support 18-year-olds looking to build a credit history.
Here's how they work: When you apply for a credit builder loan, the lender sets aside a modest sum in a savings account or a certificate of deposit. You won't be able to access this money until the loan is completely paid off.
The magic happens as you diligently make your monthly payments. Each payment you make is reported to the credit bureaus, showcasing your responsible financial behavior. Over time, this positive payment history begins to paint a picture of your creditworthiness.
There is no set limit or amount but be prepared for a smaller amount. Lenders often consider it risky because there's no credit score to evaluate your borrowing history. As a result, you might not be approved for the highest loan limit.
When it comes to loan options, different lenders may have varying limits, but it's essential to be realistic about your borrowing capacity. Your income plays a significant role in this decision. Lenders want to ensure you can comfortably manage your loan payments.
While specific limits may differ depending on the lender, it's advisable not to expect approval for the maximum loan amount, especially if you're just starting to build your credit history. Instead, consider applying for an amount that aligns with your income and budget, ensuring a smoother repayment process.
Getting a loan at the age of 18 can be a big step in your financial journey. It has its advantages and some things to be cautious about.
Taking out a loan can be a valuable way to build your financial future, as long as you do it wisely and within your means. Explore your options and borrow wisely to get your financial journey started on a good path!
If you are researching loans for 18-year-olds, here are some frequently asked questions on this topic.
Before diving into a loan, it's wise to explore cost-effective alternatives. Here are some options to consider:
Remember, there are alternatives to loans that can help you manage your finances effectively while minimizing debt.
Many online lenders like SimpleFastLoans do not require a cosigner if you have proof of income, an employment history to reference, a state-issued ID, and an open checking account.
While it is an option, sometimes, it's not necessary all the time. You could get approved all on your own and start your credit history if you meet the above criteria.
Ideally, if you are 18 and receiving a paycheck, you should have an active checking account. Most lenders will require that the account be established for some length of time. In other words, it doesn't do much to help get a loan approval if you open the checking account the day before you apply for your loan.
The worst thing you can do is just skip a payment without contacting your loan company. If you find yourself in a situation where you don't have the funds to make your monthly payment, reach out right away. The more you delay, the worse the situation could get. Most lenders will consider restructuring your loan payments or postponing a payment.