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Young couple wondering which is the best personal loan for them

Best Personal Loans for Young Adults

The best personal loans for young adults will depend on the reason for taking out the loan and the person's ability to repay the loan. There are two major forms of loans available to young adults: installment loans or a line of credit and each one has its own benefits and purposes.

As a young adult, you’re just now entering the modern workforce and probably trying to gain some financial stability. This will mean new situations arising when some extra cash flow is needed; there are a variety of reasons young adults may want to apply for a personal loan.

When approaching any situation involving money, it’s wise to perform a little research on the processes and requirements for applying, especially if it will be the first time as a young person.

You will want to know the best personal loans for young adults and this article will detail good reasons to get a personal loan in your early-20s.

What to look for in a lender, the types of loans available to you, and how to prepare for making a big step towards a secure, financial future are also shared!

Why Would a Young Adult Need a Personal Loan?

A lot of early adulthood is about figuring out money and making enough of it to pay your bills and take on new financial responsibilities. Some common situations that call for taking out a personal loan in your 20s are:

  • Landing a new job
  • Preparing for a big move
  • Graduating from college
  • Paying off emergency car repairs 
  • Consolidating high-interest debt
  • Starting a business

Consolidating and Paying Off Existing Debt

Starting out on your own will probably bring some unexpected purchases to get things set up comfortably. A personal loan will assist with paying off debt related to credit card purchases. The result is getting through roadblocks that may otherwise hold you back financially.

Credit card debt can slow things down when trying to achieve your goals. Consolidating your loans will also help lower the interest rate on your current debt. If you’re extended a low APR, this can be a great option for paying off debt quicker and with less interest over time.

For a Big Move

Moving is exciting, tiring and... expensive! People move around a lot more in modern times for many different reasons: job opportunities, family reasons, cultural preferences, or sometimes just for a change of scenery.

A personal loan will help pay for all the costs associated with a big move. Things like transportation, new furniture, cleaning, or securing deposits and down payments can really add up as you’re trying to move out.

If you are, indeed, moving for work, it’s recommended that you apply for a loan while you’re still employed. Unemployment does not look good on a loan application. 

Funding Business Startup Costs

These days, more and more small businesses are opening up. Quite often, people are breaking out to work for themselves and grow their side gig into a full-fledged business. 

There may be a great idea you’re passionate about and want to grow it into a wholly realized concept. Whatever the business plan is, you will need to be willing and able to personally invest in it in order to accomplish your goals.

Office supplies, continuing education, application fees, accounting services or technology investments are all startup costs to consider. Some are necessary for getting a new business on its legs and a personal loan will definitely ease the financial pressures related to startups.

Paying for School

Sometimes student loans can be maxed out, especially if you’re in a field of study that is notoriously expensive like law, health science, or technology. Student loans are the first line of defense, but personal loans can help as a last resort.

Other educational reasons for taking out a loan could be to cover exam costs or relocation for residency programs; that is if traditional student loans are not available.

Things To Do Before Applying for a Personal Loan

There are a few things to do before applying for a personal loan. Simple steps and a little organization will go a long way to make the process as easy and smooth as possible.

Strengthen your Credit

A very important factor that lenders consider when reviewing your application for a personal loan is your credit score. It means a lot more than some people realize so getting things lined up before even contacting a lender is important.

Strengthening your credit can look like checking your credit reports, getting on top of bills, resolving any outstanding payments, and reducing any hard pulls on your credit report. All of these things will help get your credit score in the best place to apply for a personal loan.

Know How Much You’re Willing To Borrow

The last thing you want to do is take out a loan for an amount that you’re not able to pay off. There are convenient calculators online to help estimate how much you can afford and how long it will take you to pay it off.

Having this information upfront will educate your own and the lender's decisions about the financing terms and length of the repayment plan.

What Are the Requirements for a Personal Loan?

There are a set of traditional requirements you can expect when applying for a personal installment loan. Some criteria may be a little different than what you see here; it all depends on the lender’s rules and regulations. 

In general, a loan applicant will need to:

  1. Be at least 18 years of age.
  2. Have a verified source of regular income.
  3. Have their loan purpose approved by the lender.
  4. Have U.S. citizenship, permanent residency, a valid Social Security number, or a long-term visa. Non-US citizens are sometimes deemed too much of a risk for some lenders and extra documentation may be required if citizenship has not been established.
  5. Live in the lender’s state of operations. Lender operations are determined at the state level and each one will have different loan terms and rates depending on local regulations.
  6. Meet minimum credit requirements. FICO Credit Scores are checked for debt-to-income ratio and a solid income source. 
  7. Have valid government-issued identification. Approved documents, including but not limited to: a passport, driver’s license or Social Security card.
  8. Have a permanent address. Proof of residential address can be accomplished with a utility bill or bank statement.

What Types of Personal Loans Are Available to Young Adults?

Installment Loans

If you have good credit, installments loans are easier to acquire. Installment loans are often offered as unsecured and this means that the loan is not backed up by any collateral, meaning only your creditworthiness is considered during the application process.

Lenders rely on your credit history as a good way to measure your ability to pay them back. The result of this is that lenders have a more detailed list of requirements and checks in order to be confident of your eligibility to borrow money from them. 

Installment loans are paid monthly until the balance reaches zero and the term of the loan can last anywhere from one to six years.

Benefits of Installment Loans with

  • Flexible loan repayment periods
  • Fast and easy application process
  • Get a loan decision instantly!

A Personal Line of Credit

A personal line of credit is a second type of loan available to fund your future. This type of loan is a form of credit that revolves, very similar to a credit card or a flex loan. A line of credit is more customized for your needs at any given moment.

Emergencies or unplanned expenses are common reasons to get a personal line of credit and sometimes these are secured by using certain assets which will be held as collateral while you pay off the balance. 

How Does a Line of Credit Work?

With a line of credit, you simply borrow what you need, all the way up to your credit limit. You don’t have to spend the full amount which you are approved for so there is flexibility for how much you have available to you, depending on your current expenses compared to your limit.

In general, you need a decent credit score and good credit history to get a personal line of credit. 

Benefits of a Line of Credit with

  • Draw funds up to your credit limit
  • More flexibility with cash advances
  • Simple and fast application process

What Is the Difference Between a Personal Line of Credit and a Personal Loan?

In contrast to a personal loan, which is a set amount of money borrowed, a credit line gives access to available funds which will be used as needed.

Personal loans have an end date to the repayments whereas a line of credit will be paid off depending on your spending habits and ability to pay off the monthly balance, which will be different each month.

Another difference is the Interest on a personal loan is set and remains the same throughout the term of the loan. With a credit line, interest is charged on the outstanding balance only. So it’s a good option if you’re able to pay off the monthly balance in full each time.

What Are the Common Types of Lenders?

There are so many lenders to choose from! It’s a little daunting to attempt to understand the variety of lenders available and their specific purposes.

Credit unions, mortgage bankers, correspondent lenders, savings and loans lenders, and mutual savings banks are a few of the most common lenders.

Credit Unions

Lower interest rates are offered to shareholders within a credit union. They are member-owned and have fewer restrictions and requirements, so it’s favorable to join a credit union if your credit is good enough.

Mortgage Bankers

Mortgage bankers, obviously, specialize in mortgages! Underwriters are employed to assist with loan applications for new home down payments. Correspondent lenders are a type of mortgage lender that have the funds to fulfill your loan requests but have a backing ground of other lenders who they will pass your loan on to.

Mutual Savings Banks

In general, mutual savings banks are locally focused and quite competitive when it comes to who they offer loans to. It can be a little harder to get a loan from these institutions and require an excellent credit score and history.

Why you should choose for your personal loan needs:

  • Flexible loan repayment periods
  • Fast and easy online application process
  • Get a loan decision instantly!

What to Look For in a Lender

A few tips are shared below for things to look for when shopping for personal loan lenders.

  • Lending limits are enough for your needs
  • Flexibility with financing terms
  • Replies to your emails, calls, and messages
  • Excellent reputation
  • Proven experience 
  • Acts as a financial partner

What Should You Know About Online Loans?

As mentioned above, when applying for a personal loan you will need to check to see if the lender you are considering is registered in the state where you’re applying. The Nationwide Multistate Licensing System Registry can help you do that.

You may also want to search the Better Business Bureau for honest consumer reviews and more information on any particular lender you may be considering.

How To Get Started With an Online Personal Loan

A simple online loan application can be started today! Perfect credit isn’t required and all that is required is a valid driver’s license or state-issued photo ID, plus an active checking account.

The process with Simple Fast Loans can begin right away. Get approved for a personal loan today! 

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