Loans for young adults and people with no credit history
It is notoriously difficult for young people with no credit history to find a loan lender willing to accept them, even though they may be in a well paid job.
Most personal loan lenders, certainly those offering the most competitive deals, don't like taking too many risks, and people who have no credit history or a sparse credit file are regarded as undesirable borrowers because loan providers have no evidence to base a decision as to whether they are a safe bet. People who've not borrowed before have not built up a track record of repayments so lenders find it almost impossible to get a picture of how reliable they might prove to be in terms of repaying a loan which routinely leads them to reject applicants who fall under this umbrella.
Perhaps you've come across this article because you've already been turned and are looking for alternatives? The good news is there are some personal loan providers who actively target applicants who have limited credit history including young people. These providers will look upon you more favourably and will happily consider your application providing you are able to afford the repayments. The drawback is as a person entering into borrowing for the first time you'll have to pay a premium in terms of interest charges. The personal loan providers who do operate in this market do charge rates much higher than those compared with lenders who offer loans to those with better credit scores, but crucially they are still cheaper than their short term or pay day lending counterparts.
If you are a young adult with a lack of credit history, you will be grouped, as far a most lenders are concerned, with those who have borrowed but who have defaulted as your credit score will be similar. It can be disheartening when you're faced with rejection or only have a limited number of borrowing options, but the key is to target your application appropriately and once accepted for a loan, keep up with the repayments as this will help you build a solid credit history which will give you greater options when you want to get a loan in the future.
Maybe you're in your first job, perhaps after graduating from university and have not borrowed before and want to take out a loan to cover an unexpected bill or to pay for a car or other large expense? Use the search form above to locate providers who are more amenable towards applicants with low credit scores due to insufficient borrowing history.
Carla is a 22 year old university graduate who recently found a new job, but it is twenty miles from her home. She needed a car in order to travel there and back each day. The car needed to be reliable and comfortable. Carla had savings of £1,500, but was looking to borrow £2,000 to add to this in order to get the car that suited her needs. Carla approached her bank but because she has a lack of credit history they decided not to help her on this occasion. She then turned to a specialist lender and took out a loan of £2,000 with an interest rate of 48.5% APR with repayments over 2 years. The loan allowed Carla to get the car she wanted and assuming Carla keeps up with the monthly repayments her credit score should improve appreciably, meaning the next time she needs to borrow she should be in a much stronger position to get a loan with a lower rate of interest.
Greg is 23 and is engaged to Lucy 22, they are both in relatively stable jobs but have never needed to borrow before. Both left college and were lucky enough to both end up in full time employment within a short space of time. Greg is an electrician and Lucy an executive personal assistant and both were living at home with their parents until recently. They decided to move into together and had saved up enough to cover the deposit on an unfurnished flat to rent, however they needed a loan to cover the costs of some furniture and electrical items such as a TV and washing machine. As a consequence of their inactive credit report, their banks were reluctant to advance them £1500, so instead they approached a provider who specifically lends to people with no credit history.