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How to get a loan as a first-time borrower

Written byKoyo Loans
First published22nd June 2021
  • What are some good reasons to get a loan for first-time borrowers?
  • What is the minimum age to get a loan?
  • What types of loans are available to young people?
  • How can I get a loan for the first time with no credit history?
  • Which bank has the easiest personal loan approval process?
  • Can you get a loan if you just started working?
  • Can you get a loan if you’re a student?
  • Next steps

Taking out a loan for the first time can be daunting. And unfortunately, the way credit scoring tends to work means that the odds are usually stacked against younger borrowers (not always though – more on that later).

In this article, we’ll answer the following questions:

  • Is it a good idea for younger borrowers (18 and over) to take out a loan?
  • What are some good reasons to borrow?
  • What are the options available to younger borrowers?
  • What should younger borrowers look out for, and what are some ways to maximise your chance of approval?

Before we get started though, if you’re over 21, looking for a flexible personal loan of £1,500-12,000 and want to get started right away, you can take a look at our loan calculator or make an application at www.koyoloans.com. Representative APR 27%

If not, read on!

What are some good reasons to get a loan for first-time borrowers?

There are lots of sensible reasons for a personal loan, especially for younger borrowers.

In general, younger borrowers are in a tricky situation: on the one hand, they’re likely to have some major costs coming up. This could include a first car, paying for education, furnishing a flat or even funding a wedding. On the other hand, younger borrowers haven’t had as much time to build up the savings needed to pay for these.

Working out whether a loan is a good or bad idea will depend mostly on your circumstances, but there are some general rules that can help. Firstly, remember that almost all forms of credit cost money – so it’s better to use savings, or delay the purchase until you have enough cash to pay for it, if that’s an option.

Secondly, borrowing shouldn’t be used to fund a lifestyle or purchases that aren’t sustainable – it’s a bad idea to use credit to live beyond your means. Rather, it should be used only when necessary, to bring forward important purchases.

Lastly, the golden rule: borrow only what you can comfortably afford to repay. Be realistic here, and consider what would happen if your circumstances change.

You can apply these rules to an example: buying a used car at a good price in order to be able to take a job in the next town makes a lot more sense than buying a flashy car on credit when you don’t have a job lined up.

Related post: Considering a loan to cover a medical procedure? Our detailed guide on medical loans covers everything you need to know about loans for medical treatment, with alternative options and insider info on how to find the best option for you.

What is the minimum age to get a loan?

Age is one of the factors that affects eligibility for a loan, and most forms of credit are available only to borrowers aged 18 or over. However, some lenders have higher age requirements, such as Koyo, which only considers borrowers aged 21 or over.

Are there any loans available for 18 year-olds?

Yes. At 18, your choice might be slightly restricted, but you’re still likely to be eligible for the majority of loans.

Are there any loans available for 21 year-olds?

Absolutely. At 21, age is no longer likely to be a limiting factor, meaning you should be eligible for almost all loans.

Of course, irrespective of your age, there are still other factors that lenders will consider, such as your credit history, employment status and loan purpose.

What types of loans are available to young people?

So long as you’re 18 or above, you should be eligible for all types of loans, although some providers will only accept applications from older borrowers.

We’ve listed out some of the most common lending options below. All of these forms of credit are regulated by the FCA (Financial Conduct Authority), meaning that companies offering these loans must be authorised by the regulator, giving borrowers additional peace of mind.

Here we haven’t focused on mortgages for first-time home buyers: that’s because homeownership or getting on the property ladder requires a different approach, and it’s unlikely that a personal loan will help you in this scenario.

Unsecured personal loans

An unsecured personal loan is probably what you picture when you think of a loan. You borrow an agreed amount, which you receive as a lump sum, and then make fixed monthly payments in order to pay it back – plus interest, of course.

The “unsecured” bit means that the lender can’t take control of your assets (such as your home) if you miss a payment. The opposite is true for secured loans, but since young borrowers are unlikely to have bought a house, they’re also less likely to be eligible for secured loans.

If you want to know more about personal loans in general, take a look at our full guide: what is a personal loan?

Guarantor loan

Guarantor loans work like personal loans – in that you borrow a lump sum and then repay it in instalments – but with one key difference: a guarantor (usually a family member) agrees to step in if you fail to make repayments.

This kind of credit is aimed at people who would struggle to get a conventional personal loan – if you want to know more, we’ve written a detailed guide to guarantor loans and alternatives.

Open Banking loan

When you apply for a loan, almost all lenders will look at your credit report, which focuses on your track record of repaying loans. If you’re a first time borrower, that’s a problem, because by definition you haven’t had the chance to make repayments on a previous loan.

Open Banking lenders solve this problem: instead of focusing on your past, they use Open Banking technology to securely view your real income and outgoings. This means that they can base lending decisions on real-world affordability, rather than what credit agencies say about you.

Because of this, Open Banking lenders such as Koyo can be a good option for younger borrowers who haven’t had a chance to build up a credit history yet.

a visual guide to how Open Banking loans can help younger borrowers

For more about Open Banking and how it affects lending, take a look at our full guide: Open Banking explained.

Credit cards

Credit cards are a little more complicated: rather than borrowing a fixed sum, you can use a credit card to make purchases. At the end of the month, you can either pay the balance off in full or carry it over. If you carry it over, the rate of interest can be very high, so it’s best to pay it off each month if you can.

Credit cards can actually be a good way to build up a credit score, but only if you use it responsibly and pay it off each month. Failing to do so will have the opposite effect.

Student loans

A student loan is a way to borrow money if you’re enrolled in education – typically university. It’s a relatively cheap way to borrow (compared to other forms of credit) but still carries a significant cost, which increases the longer you take to pay it off.

One thing to note is that you don’t start paying off student loans until you start earning – and when you do, it’s subtracted automatically from your salary.


If you have a current account, your bank might allow you an overdraft, which can be a few hundred or even a few thousand pounds. It generally carries a low interest rate and can be a useful way to manage occasional costs. However, it’s designed as something to be dipped in and out of, rather than long term credit.

One to avoid: payday loans

Payday loans are designed to be paid back over a short time, and have a very high interest rate. The high rate of interest isn’t the only drawback though: they also leave a mark on your credit history, making it harder to get credit again in the future. Because of this, it’s best to avoid payday loans if you can.

How can I get a loan for the first time with no credit history?

If you have no credit history, most lenders will find it more difficult to work out whether or not you’re a good person to lend money to.

That means that, relative to a borrower with a better credit rating, you’ll face:

  1. Less choice

  2. Higher interest rates

  3. Lower maximum loan amounts

However, while you’ll have less choice, your age alone shouldn’t mean that you find it impossible to access credit.

In practice, by carefully shopping around, you should be able to find one or more loan options that work for you, regardless of your age. And if you’re struggling, it may be worth looking at some of the options mentioned above, in particular Open Banking lenders.

It’s also possible to build up your credit score, for example by making sure that you’re on the electoral roll, making sure your rent payments count, and using a credit card (being careful to pay off the balance in full each month).

Which bank has the easiest personal loan approval process?

It’s tough to say which bank or building society is the “easiest” to get a loan with because each bank (and each lender, for that matter – banks aren’t the only people who lend out money) has different criteria. For example, one lender might prefer borrowers who have a steady job, while others might prefer borrowers who want to borrow for a long period of time.

The only way to find out is to shop around – but be careful not to make too many “hard” applications, which show up on your credit history. Many lenders – including Koyo – do an initial “soft” search, which doesn’t leave a footprint.

However, one thing to bear in mind is that most banks will find it easier to lend to their existing customers since they’ll naturally know a little more about you. For example, if you have a long-standing current account with Barclays, they’re more likely to view you favourably for a loan than HSBC.

So, the bank with the easiest personal loan application process is likely to be your existing bank account provider.

Can you get a loan if you just started working?

Sure – although it’s likely to be more difficult compared to taking out a loan when you already have a long, steady career history.

That being said, it might be worth waiting a little longer before you take out a loan. If you can build out a longer employment history (even just by a few months) – that way, you can provide recent payslips, and will have more (and better) borrowing options to choose from.

Can you get a loan if you’re a student?

Absolutely – student loans, covered above, are very common.

However, students will usually find it harder to access other forms of borrowing. That’s because banks and other financial services companies want to lend money to people who can pay it back. If you’re a student, it’s unlikely that you have an income (for the moment, at least) so you’re off limits to most lenders.

While international students in the UK can’t access conventional student loans, it’s worth noting that there are other lenders set up to provide this kind of finance – however, the amount repayable can be very high.

Next steps

Now that you know how loans for young people work, you’re ready to take a look at your options.

A great place to start is Koyo. If you’re over 21 and you’re looking for a flexible personal loan of £1,500-12,000, you can take a look at our loan calculator or make an application at www.koyoloans.com. Representative APR 27%

And if there’s anything we haven’t answered though, let us know in the comments section below!

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