Skip to main content

You can get a loan as a young person by applying for a certain loan products or use a cosigner to help secure the loan. That being said, it can be difficult to secure a loan as a young person. This is typically because young people usually have a very limited credit history. So it is difficult for a lender to determine whether they are a good person to lend to or not.

For older people, they would have built up a better credit profile and usually have had multiple loans, credit cards, car leases or even a mortgage and this can give lenders a better idea if the person is good to lend to. But, in some cases, young people may not have any credit, income, or are still living with their parents or are at college- this can make it hard for a lender to confirm their eligibility.

In this guide, we will take you through some of the best types of loan for a young person, the pros and cons of taking out a loan as a young person, and what alternatives are available.

What Types of Loans are Available for a Young Person?


There are several loans that are catered towards younger people. These include:

  • Unsecured Personal Loans. These are loans available only to young people aged 18 or over. However, there is generally quite a low chance of being approved for a loan of this type if you have no credit score or regular income.

  • Bad Credit Loans. There are bad credit loans or no credit loans available for young people and people with a poor credit score or little financial history.However they will come with higher interest rates because of the leniency on credit score

  • Student finance. Student loans are a very common loan type for young people. These loans help pay for college tuition fees and living costs.

  • Cosigner loans. With cosigner loans, a family member or friend who has a better credit rating co-signs the loan and therefore agrees to become responsible for repaying the debt if a young person cannot keep up with repayments. If you have poor or no credit history, some lenders will insist on a cosigner before they will lend to you.

  • Car finance loans. These types of loans allow the young person to pay off the cost of a car in monthly installments.


What are the Pros and Cons of Taking out a Loan as a Young Person?


Before deciding to take out a loan, it is best to consider the advantages and disadvantages of doing so.


  • A loan means that you will have fast access to cash. This can be particularly useful in an emergency situation, such as the replacement of a damaged phone, medical bills, or emergency car repairs.

  • If you do take out a loan and repay it all on time, you will build up your credit score. This will help you access better rates on credit down the line, such as a mortgage


  • Young people, because of their limited credit history or employment status, are unlikely to be offered the best interest rates. This will make any loan that you take out much more expensive overall.

  • If you are unable to repay your loan, and default, your credit rating will be damaged and the lender may take legal action against you.

  • If your circumstances change, such as sudden job loss, you may struggle to keep up with loan repayments. This will leave you in a precarious situation.

What are the Pros and Cons of Taking out a Loan as a Young Person?


What Can Loans for Young People be Used For?


Young people may to borrow $500, borrow $600, or even thousands of dollars for a variety of reasons. These include:

  • Paying for clothes for work

  • Paying for a wedding

  • Paying for rent and household bills

  • Paying for a vacation

  • Paying for an engagement ring

  • Paying for a car

  • Starting a new business


Alternatives to Loans for a Young Person


While loans can mean fast access to money, they come with a lot of strings attached and are therefore not always the best way of borrowing. There are alternatives out there, such as:

  • Student credit cards. Many banks offer student credit cards to student bank account holders. If they are used responsibly, they can help build a credit history and can help cover emergency expenses. The best way to use one of these cards is to spend small amounts and pay off the balance in full every month.

  • Overdraft. You could ask your bank for an interest-free overdraft, or to extend the one that you already have.

  • Credit builder credit cards. Credit builder credit cards are offered to those with low credit scores. They tend to offer a lower credit limit and higher interest rates than credit cards available to those with healthier credit scores. They can be a great way of building up credit, but can be very expensive if the balance is not paid off in full every month.