I'm 19 and would like to get a personal loan. I am going to get a job this week, or next week. Would I still be able to obtain a personal loan? I have been told it's not possible. I wanted some second opinions. Thanks.
Its not likely for these reasons:
- You currently don't have an income. How can you payback a loan if you have no income?
- There is no collateral. In the event you do not pay, nothing of value could be used to stand for part of all of the loan.
- There is no stated purpose of the loan. Lets say someone does loan you some money and then you use all of it to buy bubble gum. You chew said gum. That money is lost without likely never to be repaid.
I suppose you might attempt to use some payday lenders to loan you some money, but I think they would be reluctant to do so without a direct deposit coming into your checking account. Using payday lenders is horrible for your financial future, but plenty of people use them.
So, at the tender age of 19, why do you want to start your life "on the wrong foot" by taking loans? Get your job, and perhaps another two or three. Work hard and pay cash for things. If things are needed to start those jobs, and you don't have any money, I would first try charity. Many churches and synagogues run their own thrift stores and will give away merchandise to the needy. They take great joy in helping those that are trying to get their life on track.
Would I still be able to obtain a personal loan? I have been told it's not possible.
In order to answer this, we need to take a step back from your situation and think about how lenders make decisions about whom they lend to.
Lending institutions will vary significantly on the details of how they make decisions, but generally speaking, for most loans to individuals, lenders are concerned about a few big factors:
- Can the borrower afford to pay this loan every month? Loans generally come with monthly payments. The institution lending you the money will want to understand your monthly cash flow to some degree, in order to understand if you can afford the payments. Essentially what they look at is debt to income ratio - roughly speaking, they add up all recurring monthly debts you have, and add up all the reliable sources of income you have (which could be paychecks, income from businesses you own, payments from a trust, or other sources), and compare the ratio of the two numbers. If you have a $250 monthly mortgage payment and you make $1000 a month in income, your debt to income ratio is 25%. Say you're applying for a loan that would incur a $100 monthly payment, your debt to income ratio would jump to 35%. Depending on the type of loan and the other details, lenders will generally have a cutoff above which they won't lend to you.
- Assuming the borrower can afford the loan, how likely are they to actually pay it back, versus defaulting on the loan, or constantly paying late? Sometimes, people have poor life circumstances and lose their income, or they incur a sudden expense that means they can't make payments on a loan. But even people with lots money don't always pay loans they take out. Lenders generally look at an industry-standard credit report, and one of many credit scores, as a way to guess at how reliably you'll pay on a loan you take out. A higher credit score means they consider you more reliable. It's important to note that this is a totally different evaluation than the first point - it's about identifying the risk of lending to you, separately from identifying if you will have the resources to pay the loan.
- The final important factor is generally is there anything of value securing the loan? The difference between, say, a personal loan and a car loan is that if you default on a personal loan, the lender is left with empty hands. But if you default on a car loan, the lender can come take your car. Of course, financial institutions don't like to be in the business of owning cars, they'd rather have you make payments on loans. But there's usually a significant difference in both the requirements and the terms between personal loans and secured loans (generally, for consumers, secured loans are either vehicle loans or mortgages secured with real estate).
Now that we've reviewed those factors, we can examine your situation.
- Can you prove that you can afford to make payments on this loan? You've stated that you do not (currently) have an income. Most banks like to see a consistent history of paychecks from your employer, which you do not have. Unless you have another source of reliable income, which you can prove will be stable for the life of the loan, you will likely fail this requirement, because your debt to income ratio is essentially "error, divide by zero".
- Can you prove that you will reliably make the payments on the loan? You haven't mentioned your credit score, but given how young you are, and under the assumption that you don't have a long credit history, it probably isn't very good. Some lenders will allow fairly low credit scores on personal loans, but the interest rate is likely to be very high (in the teens).
- Is there anything to secure the loan? "Personal" loan generally implies unsecured - you haven't stated that this loan is for buying a car or a house, so we can assume it's unsecured, which unfortunately makes it even less likely that you will be able to find someone willing to lend you this money.
Some lenders will implement this decision process in software, and will nearly always just do what the software tells them. Other institutions (commonly, small credit unions or community banks) may have loan officers with some degree of flexibility in terms of overriding the decision process based on special conditions. In fact, I got approved for my first loan (a mortgage) mere weeks after starting my first real job, before receiving my first paycheck - with "income" verified by way of a letter from the CEO of my employer outlining the terms of my employment contract. Of course, this is far from the norm, and not something you should expect - especially given that you have many factors against you - but ultimately, no one can accurately answer this question other than the specific lender(s) you're trying to borrow from.
It depends how much, probably.
I needed $1'000 back when I was 18. I told them I started my job in 5 weeks; and I got it. It was with Desjardins, in Canada; in case might change something.
But if I asked for $6'000... I'm not entirely sure they would have accepted.
You're saying you're "going to get a job this week", as in you have it and will start this week? Then if you have a paper to prove it, technically you "have" the income coming your way. However, if you meant you "might" get one this week... well that might not be enough for them.
If they'll accept or not all depends on the Risk you represent. The more you can prove you're no risk, the better the odds.