Youngsters who have never acquired loans or even had a credit card before may find borrowing money intimidating.
Securing the funds you need to get started on your financial future can be incredibly challenging if you have little to no financial history or a bad credit score.
While several credit card companies and financial institutions might make it hard for youths to access loans due to no credit history, other lenders are ready to help.
Most online lending platforms provide installment loans approval to people of any age and with all sorts of credit histories.
This post tackles why young people struggle to acquire credit and the alternatives available to circumvent that problem.
Can I Get An Installment Loan In My 20s?
Young people in their 20s can be hesitant to apply for loans due to the notion that youngsters struggle to get loan approvals. However, this isn’t always the case, as most top lenders provide installment loans to youths.
Why Is It Harder For Youngsters To Get Loan Approvals?
Most financial institutions may be reluctant to lend young people money because of the following reasons:
1. Lack Of Credit Score
Most credit card companies and lenders need proof that they can trust you to borrow money. Creditors can find this evidence in your credit report, which has your credit score and financial history.
Lenders use these reports to determine if you have a history of repaying debts in good time. Since most youths have little borrowing history, there’s no proof of them clearing debts, and hence no score.
In most instances, youths with bad credit scores have a record of defaulting on repayments. Hence, they find it challenging to borrow again.
2. You Haven’t Used Your Credit For The Past 2 Years
Credit bureaus need your credit utilization history to generate your score. You have to use your credit once in a while and pay off your loans. Failing to use your credit for more than two years will deactivate your account, and you’ll lose your credit history.
3. You’ve Never Used Credit Accounts
You have to use any credit type to have a credit score. Scoring models use credit and debit card records to evaluate your worthiness. Therefore you can’t get a score without using a credit account.
If you are a young person with no credit and require financing, you can:
1. Consider Taking Out An Online Installment Loan
Most conventional creditors are usually reluctant to give young people loans. However, some lenders disregard age and are willing to give anyone loans as long as they can repay them.
Fortunately, personal loans have no limitations; you can use them for anything. You don’t have to put up any valuable asset as collateral with these loans.
Credit rating is the most critical aspect when applying for an online personal loan. Having a good credit score increases your chances of qualifying for a loan.
Looking for a suitable online lender can be a tedious and time-consuming process. Luckily, broker platforms like Heart Paydays can match you with suitable installment loan lenders.
Most online creditors don’t conduct credit checks. They use other factors to gauge if you can repay your loan in time. The following aspects are assessed when you apply for Installment loans at Heart Paydays:
- Your bank account records.
- Tax returns.
- Your debt ratio.
- Income statements.
Online lenders will give you a loan regardless of your age; after establishing that you can make timely repayments.
Installment loans have a different repayment model when compared to payday loans. With installment loans, there’s more than one payback date.
Installment loans are very flexible, and you get larger loan amounts with a repayment plan that suits your financial situation and individual needs.
2. Try Using A Secured Credit Card
If you prefer having a credit card to taking out a loan, a secured credit card is an excellent option for you.
Secured credit cards are different from conventional credit cards as they have a limit. The limit is calculated based on the money you deposit on the card.
This is a way of protecting the credit card issuer.
For conventional credit cards, the credit amount determines your credit rating.
If you have a secured card, repayments reflect on your credit reports once you pay off the balance. This means that having a secured card can help build your credit profile.
3. Consider Getting A Co-Signer
If you are in your 20s and find it hard to find a willing creditor, applying for a loan with a cosigner might be a good option.
Relatives or friends can serve as a cosigner provided they are responsible adults.
Ideally, a co-signer should be someone you are close to since much trust is needed to sign such an agreement. This contract is a big responsibility for both the borrower and the cosigner.
The cosigner will have to make the repayments if you fail to clear your debt. This is a lot to ask from anyone regardless of your relationship.
Additionally, both parties will get a negative score on their credit report. Use this option only if you’ve exhausted all other alternatives.
If you are young and find it difficult to get a loan, there’s no need to throw in the towel.
There are numerous options at your disposal in the loan market. Simply do thorough research on the options available and determine what suits your needs best.