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Are There Loans for 18-Year-Olds With No Credit History?

Are There Loans for 18-Year-Olds?
Lauren Ward
Lauren WardUpdated August 13, 2022
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
For 18-year-olds with no credit, it may seem like the odds of getting a personal loan are slim. But that’s not necessarily the case. While it is more difficult to get a loan as an 18-year-old, it is far from impossible. Many lenders prefer borrowers who have a strong credit score and a history of on-time payments. Because 18-year-olds are unlikely to have either of these things, it can make getting approved more challenging. However, it can be done.Read on to learn about the types of loans for 18-year-olds with no credit history — plus strategies to increase the odds of getting approved, as well as what to expect during the application process.

Is a Cosigner Required When Getting Loans for 18-Year-Olds?

A personal loan for an 18-year-old may require a cosigner, but not all lenders deem it necessary. A cosigner is a person who agrees to take equal responsibility with the primary borrower for the loan. This means both the cosigner and the borrower are responsible for the monthly payments. If payments are late or delinquent, both parties will see a drop in their credit score.If you are able to get a loan without a cosigner, just be aware that it will probably have a lower loan amount and a higher interest rate.

Are there any advantages or drawbacks to getting a cosigner?

There are certain advantages and disadvantages of personal loans that you should know about.  In terms of cosigners, there are two distinct advantages. First, having a cosigner improves a borrower’s odds of getting approved for a loan. Plus, if the cosigner has a strong credit score, that could allow you to get access to more funds at lower interest ratesCosigners come with some drawbacks as well. For instance, if the cosigner’s score is low or they have a history of late payments, it’s possible they won’t be helpful in getting you a loan. Plus, if the loan goes into default, the primary borrower and the cosigner will see their credit scores drop as a result since they are both legally responsible for the loan. 

Understanding Your Loan Status 

The personal loan application process is the same with most lenders. It typically involves three steps: 
  1. Pre-approved: This means the lender has taken a quick look at your qualifications, and is encouraging you to apply. However, a hard credit check has not yet been done, so you are not guaranteed to be approved for the personal loan.
  2. Application: You submit all of the required financial documents to initiate a formal application. The lender then reviews all of your information and performs a hard credit check, verifying that all of the information you provided is accurate. 
  3. Final decision: Depending on the lender, you may hear back instantly or within a week. With the final decision, you will either be approved or denied for the loan.
If you’re approved, you will likely have to sign a loan agreement along with closing documents. Funds should be delivered to you shortly thereafter. How fast you receive money you’re borrowing depends on your preferred method (check or electronic debit).If you’re denied, keep shopping. It does not mean that every lender will turn down your loan application.  There is another loan status you may see during the application process. If you’re wondering what does conditionally approved mean?, this designation signifies that an underwriter has reviewed your information and thinks you are likely to have your loan application approved. However, they can’t yet give you the official go-ahead. Only once you submit all of the appropriate documents and they are reviewed through a hard credit check, will your loan application be approved (or denied). Recommended: How Does a Personal Loan Work? 

Private Lender Loan Requirements for 18-Year-Olds

Personal loan requirements vary from lender to lender, but here are some of the most common factors you should consider.

Credit Score

There isn’t a minimum threshold for credit scores when it comes to personal loans because there are many types of lenders, including private lenders, on the market who work with a variety of different credit profiles. Not every lender caters to borrowers with strong credit. There are many who work exclusively with low-to-no credit borrowers. 

Debt

18-year-olds are unlikely to have much debt, but it is possible. Lenders look at debt when considering you for a loan because debt comes with monthly payments. The more such payments you have, the more likely you are to be late on your personal loan payment.To get a personal loan, lenders prefer that borrowers have a DTI (debt-to-income) lower than 36%. The types of debts that affect your DTI include:
  • Credit card payments
  • Auto loan payments
  • Rent
  • Mortgage payments
  • Student loan payments
  • Alimony or child support payments
  • Personal loan payments
To calculate your DTI, add up all of your debts and divide that amount by your gross income (the amount you make before taxes are taken out). 

Income 

Unless you’re applying for a student loan, the lender will expect you to have some form of income so that you can make regular monthly payments. For many 18-year-olds, this is likely to come in the form of hourly wages. However, lenders also accept non-traditional forms of income, which may include:
  • Spouse’s income
  • Self-employment
    • Regular contract or gig work
  • Public assistance
    • Social security disability
  • Investments
    • Interest
    • Dividends
  • Alimony
  • Financial aid
    • Grants
    • Work study
    • Scholarships
  • Insurance payments
    • Worker’s compensation
    • Long-term disability
  • Allowance from guardians or parents

Collateral

Many personal loans don’t require collateral. While this can be helpful to an 18-year-old’s favor because they may not have a house or car in their name, the downside is that unsecured personal loans often come with lower loan amounts and higher interest rates. If you do have collateral that is legally owned by you, you may want to try to get a secured personal loan. However, if you don’t make the loan payments, the lender can take whatever collateral you put up.In addition to a house or car, the types of accepted collateral lenders may accept include:
  • Stocks
  • Bonds
  • Jewelry
  • Fine art
  • Collectibles
  • Precious metals
  • Future paychecks
  • Antiques
  • Life insurance policies
  • Cash savings
  • Certificate of deposit
Recommended: What Can Be Used as Collateral for a Personal Loan?

The Takeaway

It is possible for an 18-year-old to get a personal loan. To increase your chances, find a creditworthy cosigner if you can. Having a cosigner may make it easier to get your loan approved. Plus, you’ll also likely get a higher loan amount and a lower interest rate. Rates for personal loans can vary from lender to lender. Lantern by SoFi can help make the process easier for you. With one loan application, you can see and compare different lenders’ loan terms and choose the best one for you and your situation. 
Photo credit: iStock/sturti
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.LCPL0322003

Frequently Asked Questions

Are there loans for 18-year-olds without a job?
Are there loans for 18-year-olds without credit?
Can I get a loan as an 18-year-old?

About the Author

Lauren Ward

Lauren Ward

Lauren Ward is a personal finance expert with nearly a decade of experience writing online content. Her work has appeared on websites such as MSN, Time, and Bankrate. Lauren writes on a variety of personal finance topics for SoFi, including credit and banking.
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