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In today’s economic climate it’s no great secret that the younger generation often find themselves facing serious financial difficulty. Whether you’re about to embark on a new adventure at University or are looking to secure employment, it all seems to cost money – and a lot of it!
Of course, another key problem facing most 18 year olds is that they tend to have no credit history. What this essentially means is that finance companies won’t be able to assess their credit worthiness nor will they be able to see a clear repayment history. It can be a vicious circle and almost a similar scenario to finding employment. It’s much harder to achieve without any experience – yet it’s a question of someone giving you a break to get that experience!
What’s more, at this age credit options can be further limited since the applicant is unlikely to have any assets or security – such as a house – that the lender could secure the loan against. These are otherwise referred to as “secured loans” since the lender can enforce a sale of the property in the event that the borrower defaults on the finance arrangement. “Unsecured loans”, on the other hand, often have much higher interest rates since they’re not secured on anything and the lender may have more difficulty in recovering the loan monies if anything goes wrong.
One thing to remember when you’re considering any lending options is that all subsequent repayments are monitored by credit reference agencies such as Experian and Equifax. Consequently, should you fail to make a repayment on time then this will leave a negative footprint on your credit history which may make it difficult to obtain credit in future (or certainly without paying extortionate interest rates). You need to avoid a poor or bad credit score because once you’ve got one they can be very difficult to undo.
You should also be aware that if a lender issues legal proceedings to recover any monies due to them, then you could end up with a County Court Judgment. Not only does this mean that the lender might be able to instruct bailiffs to attend at your property but it’ll also be shown on your credit history and stays on record for a period of 6 years, making it highly unlikely that you’ll be offered credit until it’s been satisfied in full.
All that said, the brighter news is that it’s not all doom and gloom! Most reputable lenders now offer a wide range of lending options which include (but are not limited) to the following:
Pay Day Loans: These are an ideal solution if you’re looking for a quick, short-term fix. They’re usually offered for smaller amounts and tend to be repaid on your next pay day (hence the name), so they’re usually repaid within the month and on a specified date. They’re quick, they’re simple and they’re ideal if you need a bit of extra cash.
Some pay day loans are also available for students – particularly those with part-time employment – and funds are often available on the same day. If you need to guarantee money – perhaps, for example, as a deposit to a new landlord – then student pay day loans can prove to be an ideal solution.
Instalment Loans: These type of loans enable you to borrow a much higher amount and, as the name suggests, you’ll repay it by way of monthly instalments. What’s more, aside from the interest there are usually no other fees to pay so they’re a great way of building up a good credit score.
Guarantor Loans: These tend to be popular with younger applicants since lenders will naturally be more reluctant to lend to someone with either no credit history or a poor credit history. Consequently, if you’re able to secure a Guarantor (such as a parent or family friend), you may be able to get a loan at a much more favourable interest rate. Guarantors are usually homeowners and the loan will usually be secured on any property they own so it’s important that they understand the implications of this since any failure to meet monthly instalments can result in the lender enforcing their charge against the property.
Whatever type of loan you’re considering, always remember to check the small print and make sure you’re clear on what you’re signing up for. Another good tip is to ask your lender whether there are any early repayment penalties (particularly on longer term loans). If there are then you may end up paying over the odds when you don’t necessarily need to. If you’re unclear on anything then don’t be afraid to ask. Any good regulated lender will be more than happy to assist you with any queries you might have and ultimately ensure that the product you choose is the right one for both you and your pocket!