When you are young, it can be difficult to have a foot in the financial ladder. Whether you want to leave home for the first time or you have just left university, there are many things to consider. Financial concerns are usually at the top of most people’s list and many young people are worried about having difficulties, not necessarily in terms of money, but in terms of access and use of credit.
What can young people do?
One of the concerns of many young people is that they may not have access to a personal loan because of a lack of credit history. Although lack of credit history may be a problem, lenders understand that young people need to open their first credit account at some point. As a result, personal loans and other credit products may still be available to young people. Lack of credit history prevents a lender from assessing risk, youth can only borrow a certain amount or be subject to a higher interest rate to compensate for the risk incurred by the lender.
A number of loan options may be available for youth to help them access the financial ladder and take their first steps into adulthood.
Credit Cards vs. Personal Loans
Credit cards or hire-purchase contracts if they are looking to buy a car are other forms of loans that can be offered to young people. Credit cards are the most common form of borrowing in Australia, and while they may offer a useful financial solution for young people, there is much to consider before applying for and using them. Some of the things to consider as a young credit applicant include:
- Due to your lack of credit history, you may only be able to access a very small credit limit.
- If you have no experience managing finances so far in your life, it can be difficult to manage and manage credit card expenses and pay off the balance on a regular basis.
- As with a personal loan, you may be subject to a higher interest rate as lenders seek to offset their risks.
At the same time, we have to accept the fact that you have to control your finances at some point, and it is best to do this with a credit card with a credit limit of € 300 rather than € 3,000. Showing that you are a reliable borrower with credit cards at an early age is also great for establishing your credit history. You may be able to access a higher credit limit and a lower interest rate.
What advantages could a personal loan offer as an alternative to a credit card for a young person?
“For some people, it’s hard to underestimate the benefits of a personal loan when you consider their flexibility. You can not only request that the loan amount matches the value you need, but you can also request a repayment period tailored to your financial situation. ”
You can get everything at once
If you are settling in your own home for the first time, it can be discouraging to think of everything you need to buy. First you have the deposit and rent for the first month, then all the furniture you need, before you set up utility payments and think about your usual grocery store. When you realize that you need to buy new clothes for the dream job that you have finally gotten, the reality of the “real world” can quickly be felt.
If you used a credit card, you could have a low credit limit and only be able to buy a few items at a time. On the other hand, with a personal loan, you may be able to determine what you need, consider borrowing enough to cover it, get everything you need and continue your life while paying back the loan.. Any anxiety you feel about your life could quickly be forgotten, and if you follow your loan repayments, you will probably also have a favorable credit history.
The flexible nature of personal loans
For some people, it’s hard to underestimate the benefits of a personal loan if you consider their flexibility. You can not only request that the loan amount matches the value you need, but you can also request a repayment period tailored to your financial situation. Although you may need more time to pay and end up paying higher interest than you would ideally want, you will probably be a reliable borrower and should not over-spend financially for the duration of the term. of your loan.
Regardless of the type of loan you use, being a responsible borrower at an early age can help you build your credit history to the point where you can access a wider variety of credit products and higher value. late in life..
If you would like to discuss the types of loans made available by CashNow, contact us now to speak to one of our personal loan experts.
WARNING: This article contains only factual information and general comments. As a result, it does not take into account your goals, your financial situation or your needs. Before taking any action, evaluate the appropriateness of this information in relation to your personal situation and always obtain the relevant disclosure documents before applying for a particular product.