Young people often need a loan to set up their own home or to buy a car. The prerequisite for every loan for young people is that they are of legal age. The lending to minors is prohibited in principle, this prohibition is not repealed by the consent of the parents.
Although the family court may authorize lending to younger persons in exceptional cases, with the permission of the parent or guardian at the same time. However, judges at family courts largely reject such applications, so that regulations on early borrowing have little practical effect.
The bank loan for young people
Most financial institutions provide a first loan for young people already during their studies or during their training by granting a repayment credit. As a rule, a regular receipt of payment is sufficient, whereby the BAföG and the training allowance are considered as such. It is also possible to apply for a credit card for young adults, especially since some issuers actively address them as a target group. In most cases, they also grant students, skilled students and trainees an initial credit line of € 1,000, including the option of a partial payment.
Credit card disbursement and part payment are among the most flexible, but also the most expensive, loans and should only be used for short periods of time. For credit-based loans, young people usually pay a high lending rate. Although the private credit does not provide details for determining its score, it can be seen that it automatically lowers it for consumers under the age of 25. For this reason, offers as credit for young people, a financial institution that calculates the same fixed interest rate to all customers with identical maturities and loan amounts. In addition, attention must be paid to the general handling of young credit customers.
While some banks are hesitant, other financial institutions offer credit to young people as a means of attracting customers even at discounted rates. For young people in education or studies, it is advantageous for the lending, if the bank in addition to the main income and the support from the parents in the budget account. This is the case for some banks, but not for others.
If it is not possible to lend to the young person on the grounds that the income is too low, borrowing together with the parents is a co-applicant. Admission as a guarantor is also possible, but for the credit bank, there is an additional risk compared to joint borrowing. Courts have repeatedly declared parental guaranties immoral and thus ineffective if they have acted for the Bank recognizably for emotional reasons and have overtaxed the guarantee statement financially.
Promotional loans for young people
KfW Bank offers flexible and at the same time affordable credit for young people studying or attending a recognized technical college. The loan is paid in monthly installments, the amount of which the recipient may change twice a year. There are no other requirements for borrowing. Individual commercial banks make similar offers but often have higher credit security requirements than the Förderkreditanstalt. The main advantage of all promotional loans is that the repayment only takes place after the end of the studies or the technical school education.
The interest rate is variable on the one hand, but also limited by a fixed maximum rate on the other hand. In the final phase of the study, the student loan can be supplemented by a degree program. For students, half of the BAföG payments are credits, while the other part is not repayable as a grant. For BAföG approval, their own income as well as the parental income must not exceed the established limits, so that in fact a low credit rating in terms of household income is the prerequisite for lending. Another advantage of the BAföG loan is that the repayment obligation is capped at € 10,000.
Alternatives to bank loans for young people
As a mail-order customer, it is easy to make an installment agreement that represents a dedicated loan for young people. Only a few dealers ask new customers and average order values for their income. Most of them are satisfied with obtaining private credit information, whereas unlike full banks they only receive data on any negative features and not on existing liabilities.
Private credit agencies also offer the possibility of taking out loans for young people. The members registered there as lenders pay particular attention to social criteria in their decisions and whether they want to support the stated purpose. They are signing a request for a loan for young people precisely because they are having difficulty getting a loan from ordinary banking institutions.