Human needs are insatiable but resources to meet those needs are limited. People need extra money from time to time to augment their income and sometimes meet emergency needs that come up.
Most often, people assume that young adults do not need as much money as older folks but the truth is that they do. Before now, many banks or financial institutions did not consider the fact that people in the young adult age group would need loans. They only thought of people who need mortgage and auto loans.
These days however, there are financial products for people who have needs other than buying a house or car. These lån 18 år (loans for 18 year olds) are part of the products that are targeted to these set of people.
In this article, we will discuss the basics of this product and how one can benefit from it.
What Is Forbrukslån 18 År?
This is a financial product through which a bank or financial institution provides access to funds for people who are 18 years and older. This is a personal loan that can be used for anything that the consumer wants; this can either be a vacation, debt consolidation, home improvement or a capital intensive project.
These loans most often have interest rates that are higher than other loans such as auto and mortgage loan. In addition to that they are unsecured which means that the borrower does not need to put down any asset as collateral. This is also one reason why the interest rate is higher.
Borrowers are advised to consider the terms and condition of any loan that they are thinking of committing to. Factors such as interest rate and repayment duration are important considerations. You also need to borrow only the amount that you need and also have the ability/capacity to repay.
Requirements to Access Consumer Loans for 18 Year Olds
When consumers apply for any kind of credit facility, there are things that the lender looks out for before they approve the application. Although applications are considered based on individual merit, there are benchmarks that everyone is measured by. Below are some of the basic requirements:-
Norwegian laws that regulate financial transactions such as loans stipulates that anyone that’s up to 18 years is qualified to apply and be approved for loans. This doesn’t mean however that they are under any obligation to approve the loan. Every bank reserves the right to approve or reject an application because they are the ones taking the risk. Similarly, the lender has the right to set the age limit.
Every bank has their income requirement but there are some rare occasions where some banks don’t set any income requirement. Some banks would demand proof of a fixed income that’s consistent. Others would just demand that the borrower has an income that’s measurable.
The stipulation by law in Norway however, is that the borrower cannot be approved for a loan that is more than 5 times their annual income. Additionally, your income must be in the range of NOK 100,000 and NOK 250, 000. In all, the amount you are approved for as a loan depends on your annual income. So the higher you earn, the higher your chances of getting approved for larger sums of money.
Some examples of fixed income include the following:-
- Monthly salary
- Benefits from social security such as disability benefit and pension.
Norwegian citizens are required to present their BankID or other documents that validate their citizenship. For non-citizens, they have to show proof of residency (a document that proves that they have lived in the country for at least 3 years). Additionally, they have to show that they have paid tax in the country for a minimum of 3 years.
Good Credit Sore
Your credit score determines whether a bank will approve your application for loan or not. Credit score is rated from 1-100 in Norway. A good score is between 71-100 and with this score, you stand the chance of getting a loan with highly favourable terms and conditions and relatively low interest rates.
Factors to Consider Before Taking Out a Loan
The ease of accessibility to loans has landed a lot of people in debts. This is because a good number of them did not count the cost before taking out a loan. You need to find out whether taking a credit facility is the way to go and if not, what are the alternatives that you can explore?
With careful thought and consideration, you will make an informed decision. Below are key factors to consider:-
Overall Cost of the Credit Facility
When considering the overall cost of a loan, you must ensure that you are comparing different loans so as to get the lowest rates. What you should be looking out for is the effective interest rate; this covers all the fees, interest rate and associated costs.
The interest rate is often determined after the finances of the applicant have been assessed. Normal interest rates are between 5 and 20% but for consumer loans for 18 year olds, the interest rates are higher. This is because they are considered a high risk bracket for the lender.
Consider how long it will take you to repay the loan. For young adults, longer repayment duration is recommended so that the monthly payments will be low. Note however, that a longer repayment period most often amounts to more money paid out in interest at the end of the day.
The advantage of a long repayment period is that your monthly payment is lower and thus you wouldn’t need too much adjustment to be made to your monthly expenditure to meet your obligation.
Purpose of the Loan
This should actually be the first point of consideration. You need to determine what you want to use the loan for. Two things that this will do for you is help you know the appropriate loan to apply for and to ascertain whether to take out a loan or not.
After due consideration, you may realize that you can hold off on the project or venture and save up money to execute it. You may even decide that the loan and its attendant cost Is not worth it. An example of taking out the appropriate credit facility for the right purpose is a student loan.
If you need money to finance your education, the best option is a student loan because of the advantages that it comes with. With this specific credit facility, you do not have to pay off the debt until you start working and earning an income. But if you take out a consumer credit facility, you will not enjoy that benefit.
How to Choose the Best Loan for 18 Year Olds
Most 18 year olds are not financially savvy enough to make a decision on the best credit facility for them. However, there are ways to ensure that you get the best deal if you are in this category. One of the most stress free options is to work with a loan agent.
A loan agent is a licensed professional that works with banks or financial institutions to help consumers to access loans. These professionals have affiliations with a good number of lenders; some as many as 20 of them. This makes it easy for them to sieve through as many options as possible to get the best deal for their clients.
Below are tips for people who prefer to go through the whole process themselves:-
- Check out as many options as possible and compare the overall costs of each option
- Make your comparison with the same parameters
- Look out for the repayment duration that suits your monthly budget
- Look out for lenders that allow prequalification. This will help you apply for as many options as possible without hurting your credit score.
- Apply with a co-signer. This helps you leverage the person’s credit score and financial history. Click here to understand more about applying for loan with a co-signer.
In this article, we have discussed in details, the basics of consumer loans for 18 year olds and young adults. We believe the information shared here will go a long way to help you make an informed decision if you are in this age bracket. So you would do well to bear them in mind as you navigate the world of consumer loans and other credit facilities.