Unless you were born into money, chances are, you’ve caught yourself wishing you were either born into a really rich family or your parents were a little bit more careless with their money. Because when you’re young and frankly not intelligent enough to spend money efficiently, a loan (if you understand the implications of it) seems really desirable.

You get money upfront, and you get to pay it back over time, in small repayments. Seems like the perfect solution to buying more games for your PlayStation and getting some gadgets on the side? But as we all grow up to realize, loans aren’t all that easy to pay back and thank God there’s an age limit on when we can actually apply for a loan.

Because if kids were enabled to take out loans, businesses and people who actually need them might not have enough to go around, since kids would be taking them out left and right to fuel their purchases of Doritos, PS5’s and Pokémon cards and memorabilia. Which reminds us, how old do you have to be to get a loan?

The answer is pretty simple. Of the legal age to sign a binding document. Now you might ask, what is the legal age and what is a binding document? Because there are always loopholes that one can use to skirt around, but this road does not have one.

If you’re 16 and need a loan, you just can’t walk up to a bank and write on the loan application ‘Need a lot of money to buy two consoles, a 4k OLED TV and some banging stereo equipment’. This wont work, you have to get to the right age to apply for one, and even then, the above-mentioned statement would not get you the loan. But humorous banter aside, what is the legal age to sign a binding document, and for that matter, what is a binding document? Let’s get into it,

The legal Age to Get a Loan

The legal age to get a loan is not determined as being inherently 18, or being the age when a person can get a loan issued out to them. It is actually an umbrella law, one that requires that a person be of a certain age before he/she can be accepted in a legally binding document. You see, before this ‘legal age’, a person is not considered mature enough to understand the right and wrong and the implications of their actions.

And since a binding document is legally mandated and the other party has the right for litigation should the person not comply, therefore, law demands that a person be of a certain age before they can be interred into a binding agreement.

For the US and a majority of other countries, the legal age is 18 years old. While you may get your driver’s license at 16 and are able to function a lot better in society before 18 years, this is a universal age when to get yourself legally interred into a binding document, you need to be at least 18 years of age. 

Why is There an Age Limit on Getting a Loan Issued?

Because as stated beforehand, as legislature goes, a person is not supposed to get into a legally-binding agreement with any party if he/she is not able to determine 

  • The good and bad, right and wrong.
  • The gravity and the importance of a legally-binding document.
  • The implication if said document or agreement is not honored.

These three points are the basis of the universal adult franchise, the legal precursor that to function and be considered as an adult, an individual needs to have crossed the age of 18. And when said age has been reached, he/she is free to pursue in interring into a legally-binding document with any other party.

How Old Do You Have to Be to Take Out a Loan?

In one word, 18 years old. Or whatever the legal age in your country is. Now, legal age is many times considered to be determined by the age of consent, which is true to an extent. Legally speaking, consent is sort of an unwritten legally-binding document, which is to be honored by both the parties and can be struck down in the court of law if challenged unlawfully. 

However, state regulations also come into play, especially in countries like the USA, where state legislation governs most of the banking and the loaning procedure. For instance, in many states of the US, a certain amount can be loaned to 18-year-olds. For proper and official loan procedures, the borrower needs to be at least 21, whereas some states allow lenders to lend openly and freely to 18-year-olds. 

Co-signing Of Loans For 18-year-Olds

This is particularly applicable for residents of the United States, where it is very common for parents or legal guardians to co-sign loans (like student loans) for their children, who are of the legal age of 18 years but need to be backed by an adult and a financially responsible parent or guardian. 

While an adult of the legal age of 18 is perfectly capable and within the bounds of law to apply for a loan, banks always require a collateral for loans, especially loans aside from the usual requirement of people of their age group like student loans.

And since 18-year-olds don’t have big mansions just lying around or really anything to post as collateral, what banks usually do is make a parent or guardian co-sign the loan, which means that the collateral will now be provided by the parent or guardian, while the amount is free to be used by any one of the party; it can either be used by the parent or the child (however, some banks require that the amount be sued for the stipulated purpose; be it education or any other purpose mentioned in the application).

Also Read: Getting Loans with no Bank Accounts or Credit Check

This co-signing is especially prevalent in the United States but since it isn’t legally mandated elsewhere in the world, many private banks do practice this to ensure lending stays at a reasonable interest rate. 

Can you Get a Loan at 16 Years of Age?

No. Again, due to the technicality of the legal age of interring in a legally-binding document, you can get a driver’s license at 16, but you’re not of the legal age to get a loan issued in your name.

For a person of 16 years of age, however, there are many other options that one can use, with the primary one being the option of taking out student loans. However, in this case, the parents or guardians would not be the co-signers, but rather the original beneficiaries of the loan that’s being taken out.

And since legally the child is still a minor, he/she is not supposed to have a say in the matter and is legally not allowed to spend the money without the consent of the original signing authority on the document. 

This ensures that the loan amount is spent by financially responsible adults on needs stipulated clearly by the guidelines set by the loan issuing authority, the state and the intention as mentioned in the original loan application.

How to Get a Loan Without a Co-Sign

Getting a loan without a co-sign is difficult, but not impossible. Assuming you are of the legal age and have the right intentions to do with the amount, you can get a loan amount without a co-sign if you’re dedicated enough. It also helps that the state you live in has not got stringent laws over collateral for a loan or parents or guardians acting as co-signers.

Either way, getting a loan issued without a co-sign requires, at the borrower’s part, a plan that indicates that the money will be spent on an appreciating asset and will not be blown away on anything that isn’t considered the above. A good example of this would be a car; while it is by no means an appreciating asset, it is a thing of considerable utility, especially for a student or a young professional just starting out in a job.

Therefore, taking out a student to purchase a car for a college student or a young graduate and new professional is common enough that banks actually lend out money for this very specific purpose. There are even FAQs on websites of different banks which can guide you through the whole process.

Similarly, if you’re taking out a loan for the purposes of getting an education, a degree, it will be seen as an appreciating asset, since that degree will go a long way towards helping you earn money to pay back to the bank. Remember that this is not an ethical decision; banks only have that policy of appreciating assets because they want a guarantee that the loan will be paid off along with the interest on it.

Also Read: How to Get Quick Cash Loans with No Bank Account?

If it were possible, they’d give loans out for every person’s whims and wishes, but then getting the money back with interest isn’t very much guaranteed. 

Giving out loans and then receiving repayments with interest is the lifeblood of the banks. They earn money that way and function much due to the repayments. Therefore, it is suffice to say that lending is one of the banks’ strong suits and they will lend money out. However, when it comes to repayments, banks want a guarantee that the money they’re lending you out is to be repaid in full plus the interest, which is why they usually ask for a collateral to be posted at the time of the loan.

But since 18-year-olds don’t have houses they can get a mortgage on, they have to make do with the fact that the money they’re lending will be spent on an appreciating asset, which will in turn help the borrower earn money to pay the bank back with interest. 

To get a loan without a co-sign, simply make a strong enough case that the money you would be borrowing is to be used on a good cause, an appreciating asset or one of absolute necessity. There also needs to be an appropriate reason as to why your parents or guardians cannot co-sign; saying they don’t support me getting a loan will not work, so you will have to be truthful to the loan officer.

Start off with the requirement, the purpose of the getting the loan and finish with how this money will help you appreciate your worth as a whole, and how this loan will go a long way towards helping you pay off the loan. 

Do all this and your loan getting approved will have more chances. Then you can use the loan money to pay for your education, get a car or prove to be a useful member of the society.