Loans for 18-year-olds

I'm 18 and need a loan. What are my options?

While 18-year-olds are eligible for personal loans, younger borrowers are less likely to have regular income, a history of savings or any credit history. And this makes it harder to get a loan.

You may have to work a little harder to prove you're a good borrower. And you could try some of the following options:

1. Get 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, who you may already have a history with. This history could include transaction accounts, travel cards, or any other banking product.

Banks offer a variety of personal loans, including secured and unsecured loans. You may have a better chance with a secured loan, as providing collateral will make you seem less risky to lenders.

2. Get a secured car loan

If you're looking to purchase a car, a secured loan may be a good option. The loan will be secured against the car you are purchasing, allowing the lender to recoup their losses if you default on the loan.

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.

3. Apply with a guarantor or make a joint application

A guarantor loan means someone signs onto the loan alongside you. You are still responsible for meeting the payments however, if you are unable to, your guarantor will be obliged to pay instead.

Your guarantor will need to approved by the lender, and often they will ask that it is your parent, guardian, or close relative. They will also need to prove that they will be able to financially meet their obligations through their own credit history and financial stability.

Similarly, a joint application loan also has someone sign onto the loan with you. However, in this situation they are equally obliged to meet payments, as opposed to only if you are unable to. With this loan type, the asset you buy will shared by you both so only enter into this agreement with someone you trust personally and financially.
Here are some loans that accept guarantors. There are also joint application personal loans.

4. Try a pay on demand app

Pay on demand is a type of short term loan, allowing you to borrow a portion of your pay cheque before your payday. Sometimes your employer will have an agreement directly with these lenders that you can access, however, there are also apps that allow you to do this independently. In exchange for accessing a portion of your pay cheque early, you'll have to pay a fee.

This is not a long term financial solution. While the fees may seem fairly small, they can add up significantly if you frequently use an app or service like this.

5. Go for a small short term loan (in an emergency)

These are loans with short terms and small borrowing amounts, also known as payday loans. They are more expensive than regular loans, and should never be a long term financial solution due to their price. They do however have much more flexible eligibility criteria.

These loans are highly regulated in Australia, so you can only borrow up to $2000. It is best to use these loans only in an emergency, and only for as much as you need.

How do I compare loan options at 18 years old?

It's always important to compare loan products before applying, as even minor differences in features can save you money. You can learn more about the features to look out for in personal loans in our dedicated guide to personal loans, but these are the key things to compare.

• 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 how much 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 is the interest rate, and also includes the loan's fees and charges. 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 comparison rate as some loans may advertise low rates, but charge high fees.
• Fees. Some fees are not included in the comparison rate, as they are only charged in certain circumstances. Of these fees, the two most common are late payment (or dishonour) fees, and early repayment or break fees - which are only payable if you want to pay off your loan early.
• 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. As a general rule, a longer loan term means you pay less each month but more overall.
• Borrowing amounts. This is the size of the loan, outlining the minimum and maximum borrowing amounts. It's generally a bad idea to take out multiple personal loans, so ensure the one you apply for meets your needs.
• Flexible repayments. Depending on the lender, loan repayments can be made weekly, fortnightly or monthly. It's important to know 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.

Tips to improve your chances for a loan at 18

Show you have savings

Saving shows that you're financially responsible and can meet your loan repayments.

Avoid over-using Buy Now, Pay Later

While not every lender looks at this, Buy Now, Pay Later products are a form of debt and using too many, or using them too often, can negatively affect how lenders see you.

Apply for a secured loan

Secured loans are less risky for lenders as they can repossess the asset you use to secure the loan, covering the cost. Secured loans also come with lower interest rates than unsecured loans.

Apply for a lower amount

If you apply for too much with little or no credit history, especially without a high enough consistent income, you could face an automatic rejection. Applying for a lower amount can reduce the risk of rejection.

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.

Why compare personal loans with Finder?

Addicted to details. We know taking out a personal loan is something you'll be hooked up with for a while. That's why we put hours into research for this guide (and still do at least once a month)

Rates obsessed. Lenders come in all shapes and sizes, that's why we don't just track the big banks, but all the digi folk too. Pretty much everyone but your parents to be honest.

Cash for whatever you need. Lending rates verified from 180+ products day and night. Whether you're buying a car, rennovating your home or heck just ready to let loose with the spending - we got you.

Frequently asked questions about taking out a personal loan at 18

• 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.

• Can I apply for a loan if I'm 17 years old?

  17 year olds generally can't take out loans. It could be possible to take out a a guarantor personal loan, but your guarantor would have to have good credit, meet income requirements and be above the age of 18.

  If you can help it, you should avoid getting into debt, particularly at such a young age. Failing to meet your repayments could affect your credit worthiness, making it harder to take out loans 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 it is an option, it is also best to see if you can borrow money from family.

• How do I build my credit score at 18?

  Your credit score is updated every month. This means that everything you do to improve it when you're as young as 18 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.

• 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.

Written by

Rebecca Pike

Senior writer

Rebecca Pike is Finder's senior writer for money. She joined Finder after almost four years writing for business publications in the mortgage and finance industry, including three years as editor of Mortgage Professional Australia. She regularly appears as a money expert on programs like Sunrise and Today, as well as across radio and newspapers. She also holds ASIC-recognised certifications in Tier 1 Generic Knowledge and Tier 2 General Advice Deposit Products. See full bio

Rebecca's expertise

Rebecca has written 198 Finder guides across topics including:

• Home loans
• Cost of living
• Budgeting