Loans for 18 Year Olds

If you're 18 and looking for a loan, there are a number of personal loans you can apply for. You can use the funds to buy a car, go on holiday or buy a new laptop.

However, borrowing money is expensive. You'll have to consider interest charges, as well as fees such as establishment and monthly fees.

It may also be more difficult to apply for a loan as an 18-year-old. This is because you don't have an established credit history.

But there are ways you can increase your chances of approval. This includes showing savings, having a deposit and a steady job.

I'm an 18-year-old who needs a loan. What are my options?

If you've just turned 18, you have various loan options to consider:

A loan from your current bank

One of the problems you can face when applying for a loan is that you have limited or no credit history. You can get around this by applying for a loan with your current bank.

You're likely to have a long history with your bank. You may have had transaction accounts, travel cards or other banking products.

As a result of this history, they may be more willing to give you a loan.

Banks offer a variety of personal loans, including secured and unsecured loans. You may have a better chance with a secured loan.

Secured car loan

If you're looking to purchase a car, a secured loan may be a good option.

This is because secured loans are less risky for lenders. Your car will be used to secure the loan, and in case you default, the lender will be able to recoup its losses.

As the risk to the lender is lower, secured loans also come with a lower rate than unsecured loans.

There are a number of new and used car loans you may be able to apply for.

A guarantor personal loan

If you find you're ineligible for a bank loan, you could apply for a guarantor personal loan.

A guarantor can be a parent or relative. They will guarantee that the loan will be paid even if you're not able to repay it yourself.

Having a guarantor reduces the lender's risk of lending to you. This, in turn, increases your chances of getting a loan.

Here are some loans that accept guarantors. There are also joint application personal loans.

Short term unsecured loan for a lower amount

These are loans with short terms and small borrowing amounts, also known as payday loans.

These loans have a flexible lending criteria, so you may be eligible to apply. If your bank doesn't have a loan you can apply for, this can be another option.

You can borrow up to $2,000, although there are loans up to $5,000 or as low as $1,000.

However, these loans are comparatively expensive. They can also lead to debt.

If you're applying, you should only apply for how much you need and if you're able to afford it.

You can read more about short term loans and compare your options here.

Pay on demand apps

This is a type of short term loan, allowing you to borrow a portion of your pay cheque before your payday.

Your bank or employer may offer this option. There are also apps which specialise in this form of lending.

In exchange for borrowing a portion of your pay cheque early, you'll have to pay a fee.

You can read more and compare pay on demand services here.

Tips to improve your chances for a loan at 18

Having little or no credit history can stand in your way of getting a loan, but there are things you can do to improve your chances of getting a loan. These include:

Show you have savings

If you can demonstrate to the lender that you're good at saving money, it may be more willing to approve your loan.

Saving shows that you're financially responsible. It also shows you're capable of meeting your loan repayments.

A steady savings history will work best with your current bank. This is because it can view your account information when you apply.

Offer a deposit

Having a deposit when you apply for a car loan shows that you're in a good financial position.

The larger the deposit, the less you'll need to borrow. This could increase your chances of approval.

Apply for a secured loan

Secured loans, such as car loans, are less risky for lenders. This is because they can repossess the asset with which you secure the loan, covering the cost of lending.

Secured loans also come with lower interest rates than unsecured loans. This makes secured loans cheaper.

Apply for a lower amount

If you apply for too much with little or no credit history, or if you don't earn a high income, this will raise a red flag.

This can lead to an automatic rejection, because lenders will only fund you if they know you can repay the loan.

Applying for a lower amount can reduce the risk of rejection.

Get a letter from your employer

If you're only employed casually, or have not been in employment for long, a letter from your employer stating the security of your employment may help your application.

How can I compare my loan options?

When applying for any type of loan, it's important to compare your options first. This will help you find a loan with the best offer and best features.

• It's important to find one loan that ticks all the boxes and apply for it. This is because applying for multiple loans can hurt your credit score. This can make it harder to borrow money in the future. Here's what you need to keep in mind when comparing loans:
• Type of loan. There are several types of loans. If you're looking at personal and car loans, there are secured and unsecured loans. Secured loans require an asset as security, while unsecured loans don't. Secured loans offer lower rates than unsecured loans.
• Type of interest. There are 2 types of interest, fixed and variable interest. With fixed interest rates, your interest will remain the same throughout the lifetime of your loan. This makes it easy to budget for and predict repayments. With variable interest rates, your interest rate can fluctuate on a monthly basis, based on market interest rates. This means that your repayments can change from month to month. This can make it more difficult to budget for and predict.
• Interest rate. This is the fee you'll be charged for borrowing money. It is displayed as a percentage of the total amount borrowed. The higher the interest rate, the more you'll have to pay every month.
• Comparison rate. Apart from the interest rate, you also have to look at the comparison rate. This includes the interest rate, as well as fees and charges included in the loan. It's an indication of the true cost of the loan. This figure is also displayed as a percentage, next to the interest rate. It's important to look at the interest rate as some loans may advertise low rates, but charge high fees. This can make the loan expensive, as opposed to cheap.
• Fees. Some fees will be included in the comparison rate. These fees are upfront or establishment fees and ongoing fees. Establishment fees are charged upfront, at the start of the loan term and are one-off. Ongoing fees are monthly or annual fees that are recurring. Other fees can include fees for making extra repayments or paying off the loan early. These fees are important to note because they may add to the overall cost of the loan. Not all lenders charge these fees. So if you're planning on paying off your loan early, you should watch out for these fees.
• Loan features. There may be certain loan features that are important to you. This can include the ability to make extra repayments and pay off your loan early. Or you may want to redraw some of the extra repayments you've made.
• Loan terms. This is the length of the loan, or how long you have to repay the loan. This is important to note because it will affect your repayments. For instance, a loan with a long term may have lower monthly repayments, but you'll end up paying more in interest in the long run.
• Borrowing amounts. This is the size of the loan, outlining the minimum and maximum borrowing amounts. If you apply for a loan inadequate to your borrowing needs, you won't be able to make the most of your loan.
• Flexible repayments. Depending on the lender, loan repayments can be made weekly, fortnightly or monthly. It's important to take note of the frequency of the repayments because they may not align with your pay cheque. If the repayment schedule is flexible, you can tailor it to your ability to repay and not be left out of pocket.

What should I consider before applying for a loan at 18?

When you're looking for a personal loan, there are a few factors you need to consider. These include:

• Suitability of loan to purpose. If you apply for a car loan but want to use the funds for other purposes, a car loan may be unsuitable for what you require. This is because car loans come with restrictions, which include using the funds only for the purchase of a car.
• Loan use and restrictions. This ties in with the point made above. You need to be aware of how you can use the loan funds. You should always comply with any loan restrictions. For instance, a car loan may have other restrictions apart from how you can use the funds. Lenders may require the car to be of a certain age, for example. It's important to read and be aware of these restrictions before entering into a loan contract.
• Affordability. You need to be able to afford the loan in the first place. If it doesn't fit within your budget comfortably, you should reconsider. Look into whether the repayments will leave you out of pocket and whether you can meet them with ease. Additionally, applying for a loan beyond your means can lead to rejection. This can affect your credit score and ability to get credit in the future.
• Eligibility. There are a range of lenders out there, all with different eligibility requirements. Some may be quite strict, making it impossible for you to apply. You should always look into whether you're eligible to apply in the first place. There may be income requirements you'll have to meet, apart from age and citizenship. In short, you may not be eligible for all loan products.
• Lender's reputation. You should watch out for disreputable lenders. The best way to check if your lender is legal is to check if it's on ASIC's professional register. You should only deal with licensed and registered lenders. It's also worth checking if they're on ASIC's list of companies you should not deal with. If the lender is unknown and unlicensed, you shouldn't do business with them. You should also ensure the lender is easily contactable via phone, email or in-branch. It may also be worthwhile looking at reviews of the lender while researching.
• Check all your options before applying. You shouldn't apply for the first loan you find. There may be better options out there. By searching for other loans and comparing them, you can find what works best for you. Alternatively, if you can get a loan from a family member, it may work out better for you. This is because traditional loans come with interest and fees, and cost you more than what you borrow. You will also be entering into a debt agreement and there are legal repercussions to consider.

What are the benefits and drawbacks of personal loans for 18 year olds?

• Access to funding you need. This is an obvious benefit. You get the funds you need to make the purchases you want.
• Build your credit history. By making your repayments on time, you get to build your credit history. This can help you get better credit in the future. Of course, this can backfire if you fail to make your repayments on time. This can have long-term repercussions for you.
• You're getting into a long-term credit contract. Taking any kind of loan puts you in debt to another person or organisation. Taking a loan comes with risks. These risks include getting into debt. Make sure you budget and schedule your repayments.
• Limited loan amounts and types of loans. Having little or no credit history limits how much you can borrow. You run the risk of not being able to borrow enough for your needs. There are also a limited number of loans you can apply for. For instance, you may be ineligible for most forms of unsecured finance.

How can I improve my credit score?

Your credit score is updated every month. This means that everything you do to improve it now will have an impact in the long run. You can take the following steps to improve your credit score:

• Demonstrate good financial habits. Good financial habits include paying off your debts on time. This can include utility bills, phone and Internet bills and any other outstanding bills you have. No matter how small the debt, you should ensure it's paid on time. If you've been late on payments of $150 or more for over 60 days, your credit score will be impacted.
• Keep a good account history. Don't overdraw your account and make sure your direct debits are honoured.
• Save. Having savings and saving regularly shows that you're able to manage money. To the lender, it demonstrates that you'll be able to manage regular loan repayments. All these are indicators that you're financially responsible.
• Don't apply for too many loans. If you make too many credit applications in a short period of time, this can affect your score.

Can a 17 year old get a loan in Australia?

To be eligible for a loan, you'll need to be at least 18 years of age. But if you're 17 and wish to apply for a loan, you could opt for a guarantor personal loan.

Here, an adult such as your parent or relative will provide a guarantee that the loan will be paid. This means that they take the responsibility of making the repayments in case you fail to do so. You can read more about it here.

If you can help it, you should avoid getting into debt, particularly at such a young age. This is because you'll be entering into a financial contract you'll have to meet. It can affect your credit score if you're unable to meet your repayments, or if a lender rejects your application. This can make it harder for you to get credit in the future.

If you're looking for financial help, it may be a better option to look into whether you can apply for programs like Youth Allowance. If you need help paying for your education, StudyAssist programs like HECS-HELP could cover your tuition.

If you're in a position to do so, it may be a good idea to start with family and see if they can tide you over. A loan may be difficult to get, and even in the best of circumstances, even if you're of age and have a good credit history, a loan should always be the last option.

How can I apply for a personal loan?

🖩 Calculate how much you can afford to borrow. You should take into consideration the fees, interest rate and repayment terms. You can use a personal loan calculator for this.

🔎 Start comparing lenders and loan products. Include interest rates, fees and terms in your comparison.

✅ Select lender. Select a lender which gives you the best rates and terms that suit your budget.

🖨️ Organise and prepare the required documentation. This can include proof of identification, income and bank statements.

🔓 Apply for a loan. Click "Go to site" to start the application process.

📅 Schedule your repayments. Make sure you pay on time. Most lenders will ask for direct debit payments, so make sure you have the money in your account. You can be charged a default fee if you miss a payment or fail to pay.

Frequently asked questions

• What do I need to apply for a loan?

  Lenders will have their own requirements. Generally you will need to provide some form of identification, such as a driver's licence or proof of age card. You'll need to provide personal and contact details. You'll also need to provide information about where you work, your income and other financial details.

• How can I get the lowest rates?

  The best way to get the lowest rates is by comparing loans. Compare interest rates offered by different lenders and find the loan you're eligible for with the lowest rates. Remember to check the comparison rate, which includes fees. The comparison rate is more representative of the true cost of the loan.

• I applied for a loan but was rejected. How quickly can I apply for another one?

  Every application you make for any form of credit will apply on your credit file and affect your credit score. Applying for too many loans at once will negatively affect your credit score. It will also act as a red flag to lenders, who may reject you for further loans. You may want to wait to make another loan application, especially if you have limited to no credit history. You should work towards improving your score. Check your score regularly to see if you're in the clear.