Qualifying for a bank loan can be tough when you’re 19 years old and haven’t established an extensive work or credit history. However, just because you don’t have a credit score doesn’t mean you aren’t a good credit risk. Simply paying your cell-phone bill on time could be enough to get a lender to take a second look.
One of the major factors a lender considers before deciding whether to give you a loan is having enough income to repay them. If you can't afford the payments, you aren’t going to get a loan. On your part, determine whether the lender is offering repayment terms you can handle. Find out from the start how much you'll be paying back over the life of the loan and check the interest rate on offer. Getting a lower rate means paying back less money. Make sure you look presentable and businesslike when you apply. First impressions count.
Credit matters big time when it comes to getting a loan and your past payment history plays a huge part in calculating your credit score. If you haven’t built much of a credit history, a lender will probably charge a higher interest rate and won’t lend you as much money. You can work on improving your credit score before applying for a loan by paying off delinquencies and debts. If your history is still an issue, ask a parent or a relative with good credit to cosign on a loan. Doing so means a big obligation on their part because they're equally responsible for the loan if you don't make the payments, so ask nicely.
When applying for a loan, the bank will want to know why you need the loan. In addition, lenders feel a lot better if you have something they can take as partial or full payment if you default on the loan. However, at 19 you may not have a lot of assets, which might require creating some. Although banks usually won’t use a savings account as collateral, some accept a certificate of deposit to secure a loan. If you're borrowing money to buy a car, the bank can use the car as collateral and repossess it if you default.
Increase your chances of getting approved by opening a credit-card account and paying the balance in full each month. If you can swing a small car loan to start, making loan payments on time for two years can boost your credit score. You may have a better chance of qualifying for a short-term loan that doesn't require collateral. Having at least two years of steady employment helps your chances, too. Since the bank will want proof of income, have recent pay stubs handy when you apply, as well as W-2 forms and federal income tax returns.
- Bankrate: Lenders Looking for Good Risk In Bad Credit Score
- Bankrate: Using Savings Account as Collateral
- Trulia: What Do Lenders Look for on Loan Applications?
- USA.gov. "Credit Reports and Scores." Accessed March 19, 2020.
- Consumer Financial Protection Bureau. "What Is a Credit Score?" Accessed March 19, 2020.
- Fannie Mae. "B3-6-02: Debt-to-Income Ratios (08/07/2019)." Accessed March 19, 2020.
- Consumer Financial Protection Bureau. "Create a Loan Application Packet." Accessed March 19, 2020.
- Office of the Comptroller. "Interagency Statement on Meeting the Credit Needs of Creditworthy Small Business Borrowers." Accessed March 19, 2020.
- Consumer Financial Protection Bureau. "Does a Credit Inquiry Have a Different Impact on My Score if I’m Approved or Denied?" Accessed March 19, 2020.
- Consumer Financial Protection Bureau. "What Is a Debt-to-Income Ratio? Why Is the 43% Debt-to-Income Ratio Important?" Accessed March 19, 2020.
- Federal Trade Commission. "Credit Scores." Accessed March 19, 2020.
- Experian. "What to Do If Your Loan Is Denied." Accessed March 19, 2020.
Amber Keefer has more than 25 years of experience working in the fields of human services and health care administration. Writing professionally since 1997, she has written articles covering business and finance, health, fitness, parenting and senior living issues for both print and online publications. Keefer holds a B.A. from Bloomsburg University of Pennsylvania and an M.B.A. in health care management from Baker College.