Getting your first loan is exciting. You can buy a car or take out a credit card to carry for emergencies. It is possible to qualify even if you have bad credit or none at all. Here is a guide to obtaining bad credit loans and setting yourself up to have great credit in the future.
How Old Do I Have To Be To Get A Loan?
In the UK, you must be 18 years old to get a loan. You must also be a resident of the UK.
What Type Of Credit Can A Younger Person Obtain?
The good news is, you can start developing great credit habits even before you turn 18 years of age.
Saving Money- A young person of any age can open a savings account. This is the absolute best way to learn about compounding interest and the value of good money management. Be An Authorized User- A parent may get an extra copy of their credit card for a family member with no minimum age. This allows them access to emergency funds or to buy essentials like books or gas. Just be sure not to teach spending without accountability when the bill comes due.
Pre-paid Credit Cards- This type of credit card allows the consumer to deposit a small sum of money. The card spends just like a credit card and you must keep track of your balance. These prepaid cards sometimes are reported to the credit bureau or can be automatically converted to a real credit card at the age of 18. This is a great way to teach accountability and good credit practices.
How To Get A Loan For The First Time?
When you are first getting started, you will take out bad credit loans and use them to establish a good credit score. Here are some tips for taking out those first loans.
Know the interest rate- The rate will be higher than prime rate loans, be sure to clarify what the rate will be. Start Small- Since the loan will be expensive, consider taking out a series of small loans and paying them on time. This way you will qualify for a better rate when you decide to finance your dream car. Don’t Max Out Credit Cards- The total balance should remain below 35% of the total available balance.
If you pay the card off in full, there is no interest charge. Pay Extra Early- If you can afford it, pay a little extra on your loans. The earlier you do this, the more you will save. Don’t Be Late- The whole point of getting bad credit loans is to improve your credit score. Late payments are not only expensive but they increase the likelihood of bad credit ratings or default.
Use Credit Wisely
Taking out bad credit loans is a great way to start building credit. Make sure you have the income and ability to pay the loan back. Keep track of your credit by checking it online once a year for free. Follow these simple tips and you will always be able to use credit to finance your purchases and to save you during sudden emergencies.