Best Personal Loans for Young Adults
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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. Two major forms of loans are available to young adults: personal loans or a line of credit, each with 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 arise when some extra cash flow is needed; young adults may want to apply for a personal loan for various reasons.
When approaching any situation involving money, it’s wise to research the processes and requirements for applying, especially if it will be the first time for 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.
We share what to look for in a lender, the types of loans available, and how to prepare for a big step toward a secure financial future.
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 break 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 into a wholly realized concept. Whatever the business plan is, you will need to be willing and able to personally invest in it 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 ease the financial pressures related to startups.
Paying for School
Sometimes student loans can be maxed out, especially if you’re in a notoriously expensive field, 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 if traditional student loans are unavailable.
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 much more than some people realize, so getting things lined up before 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 you 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 you cannot 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 inform 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?
You can expect to meet a set of traditional requirements when applying for a personal loan. Some criteria may differ slightly from what you see here; it all depends on the lender’s rules and regulations.
In general, a loan applicant will need to:
- Be at least 18 years of age
- Have a verified source of regular income
- Have their loan purpose approved by the lender
- Have U.S. citizenship, permanent residency, a valid Social Security number, or a long-term visa. Non-US citizens are sometimes deemed too risky for some lenders, and extra documentation may be required if citizenship has not been established.
- 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.
- Meet minimum credit requirements. FICO Credit Scores are checked for debt-to-income ratio and a solid income source.
- Have valid government-issued identification. Approved documents, including but not limited to a passport, driver’s license, or social security card.
- Have a permanent address. A utility bill or bank statement can provide residential address proof.
What Types of Loans Are Available to Young Adults?
Personal Loans
If you have good credit, personal loans are easier to acquire. Personal loans are often offered as unsecured, meaning 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. This results in lenders having a more detailed list of requirements and checks to be confident of your eligibility to borrow money from them.
Personal loans are paid monthly until the balance reaches zero, and the loan term can last anywhere from one to six years.
Benefits of Personal Loans with SimpleFastLoans.com:
- Flexible loan repayment periods
- Fast and easy application process
- Get a loan decision instantly!
A Line of Credit
A 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 line of credit, and sometimes these are secured by using certain assets which will be held as collateral while you pay off the balance.
What Is the Difference Between a 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 that 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 differ each month.
Another difference is that the interest on a personal loan is set and remains the same throughout the loan term. With a credit line, interest is charged on the outstanding balance only. So, it’s a good option if you can pay off the monthly balance in full each time.
Who Are the Most Common 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 specialize in mortgages! Underwriters are employed to assist with loan applications for new home down payments.
Mutual Savings Banks
Generally, mutual savings banks are locally focused and quite competitive regarding whom they offer loans. Getting a loan from these institutions can be a little harder and require an excellent credit score and history.
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!
