Are you eighteen years old? Are you perhaps interested in taking out a consumer loan? While most young people consider this notion impossible, some Norwegian banks accept loan applications from candidates of this age.
Naturally, there are certain limitations imposed on eighteen-year-old borrowers, such as the loan amount they can borrow or the presence of a co-borrower. Anyhow, there are plenty of other factors that determine one’s creditworthiness besides his/her age, like the credit history, income, collateral, down payment, employment history, liquid assets, loan term, etc.
If banks are not satisfied with any of these aspects, they might turn down your application or impose high interest.
The information below will help you discover whether 18-year-olds can get a loan.
The first factor lenders look for in loan applicants is their age. Some banks in Norway allow applicants to get a consumer loan at the age of eighteen, but most of them require borrowers to be at least 23 years of age. The most appropriate option for young individuals is to collaborate with a loan broker to assist them with the application process.
Borrowers can use an agent free of charge, as these agents are paid by the banks they collaborate with. There is no difference to lenders if borrowers submit an application on their own or through a lending agent. The agents take the role of intermediaries by sending the best offers to applicants and assisting them in choosing the most suitable option.
Norwegian banks are permitted to set their own age requirements when it comes to the age of the applicants. Even though the most usual requirements are for borrowers to be at least twenty years old, many banks decide to collaborate with applicants who are two years younger. Some banks, however, impose more rigorous requirements, such as setting the limit at twenty-three or even twenty-five years.
As far as the loan amount is concerned, the lowest sum is NOK 5,000 at some moneylenders, whereas other lenders offer NOK 25,000 as a minimum sum. There are numerous informative sites offering information on consumer loans, such as forbrukslån.no – 18 year old applicants, explaining the possibilities for young borrowers. The exact loan amount young individuals can borrow depends on the type of security and total debt.
Another important aspect for 18-year-olds to have in mind is to find a co-borrower. These applicants are usually allowed to apply for a loan only if they have found a co-borrower in order for the risk to get reduced.
The co-borrower must be at least eighteen years of age and meet the lender’s requirements in view of the place of residence and income. Both the borrower and co-borrower are not permitted to have payment remarks. A lot of banks have a specific requirement for the co-borrower to be the spouse of the borrower.
Apart from the age, lenders consider multiple other factors in the approval process, such as the credit history of candidates. The credit score is calculated on the basis of credit report data and serves as a prediction of the likelihood of borrowers to repay the money. Moneylenders place their focus on aspects like recent credit applications, outstanding debts, delinquent accounts, etc.
Credit reports might have a tremendous effect on the interest rate. The more blemishes moneylenders find while going through the reports, the higher the rate. Since 18-year-olds have no detailed credit history to show, lenders shift their main focus to the other aspects.
Another factor lenders take into account is the income of applicants. Individuals with high incomes are considered less risky by moneylenders, as they seem more capable of paying their obligations. Banks are specific in their requirements regarding the debt-to-income ratio. It refers to the number got after dividing the monthly debt payments by the gross monthly income of borrowers.
Furthermore, in most cases, the debt-to-income ratio is supposed to be forty-three percent or lower. Sometimes, lenders are flexible with this aspect, especially when the income of applicants is high. The following link, https://www.thebalance.com/how-to-calculate-your-debt-to-income-ratio-960851, explains how to calculate your debt-to-income ratio. A potential way to reduce this ratio before the application process starts is by paying off some of your existing debt.
Collateral is another factor considered by banks and other moneylenders, whose role is to provide security in case a person defaults on his/her loan. Consequently, loans with collateral have received the name secured loans. The interest is normally lower, as moneylenders can recoup their money at any time through the collateral.
In addition, the value of the collateral plays a major role in the sum you will be approved to borrow. Nevertheless, collateral is mainly required when individuals apply for a mortgage or an auto loan. Hence, the collateral is usually the house or car you plan to buy. Your inability to keep up with your payments might eventually lead to getting the property or vehicle seized by the bank.
Consumer loans, however, rarely require collateral, as the amount borrowed is not as high as the sum, you would need for a brand-new vehicle or home. Therefore, Norwegian banks require a co-borrower whose credit history is good enough to provide the necessary security.
While moneylenders are most interested in the income of borrowers, they also inquire about any potential liquid assets they might have. These assets are named liquid, as they can be converted into cash rather quickly, including stocks, bonds, money savings, etc.
Such assets reassure lenders that borrowers will be able to cover their monthly installments even when faced with temporary setbacks, such as losing their job. Applicants whose liquid assets are large enough to cover the credit cost are believed to be more secure, thus offered lower rates.
The size of the down payment is another factor worthy of the attention of moneylenders. Deposits vary in size based on the sort of loan. Some of them do not even require a down payment, while others are not approved in the absence of a deposit.
Additionally, applicants whose credit history is not spotless are usually obliged to provide a larger down payment. In contrast, if you plan to make a large deposit without being requested, chances are, you will pay less in interest.
Another thing moneylenders factor in while scanning applications is the loan term. The financial circumstances of applicants are not likely to alter in a period of a year or two, which is not the case with someone’s financial situation after a ten-year period or longer. Therefore, lenders are more skeptical about lending money to individuals who need a long repayment period.
Therefore, you should expect to be offered a shorter repayment term, which results in a high monthly payment. Regarding young applicants, the repayment terms provided to these borrowers are usually shorter when compared to adults.
Finally, moneylenders tend to review the employment history of applicants to evaluate their income stability. People with a history of unemployment might be charged higher interest despite the fact of being currently employed.
The bottom line
All these factors are closely inspected by banks and other moneylenders, according to NerdWallet.
Nevertheless, even 18-year-olds have a chance of getting loan approval!