Can I Get a Loan Under 18? A Look at Your Options

Individuals under 18 often wonder about securing a loan to meet various financial needs. Navigating the financial landscape as a minor presents unique challenges due to established legal frameworks governing financial agreements. This article explores the legal principles that prevent minors from independently obtaining loans. It also outlines specific situations where funds might be accessible through adult involvement and details alternative methods for young individuals to acquire money.

Legal Requirements for Loan Agreements

Entering into a loan agreement requires “contractual capacity,” which is the legal ability of an individual to form a binding contract. This concept ensures that all parties understand the terms and obligations they are agreeing to. Generally, individuals are presumed to have this capacity once they reach the “age of majority.”

In most of the United States, the age of majority is 18, though a few states set it at 19 or 21. Before reaching this age, individuals are legally considered minors and typically lack the full contractual capacity to enter into loan contracts independently. This protective measure safeguards minors from potentially exploitative financial arrangements, acknowledging their developing judgment.

Contracts, including loan agreements, entered into by a minor are generally “voidable” at the minor’s discretion. This means the minor has the legal right to cancel or disaffirm the contract, either while underage or within a reasonable period after reaching the age of majority. If the minor chooses to void the contract, they are typically released from its obligations, while the other party usually remains bound.

Limited exceptions exist where a minor may be held to a contract, such as agreements for “necessities” like food, shelter, or medical care. However, loan agreements for general purposes do not typically fall under this category. Lenders are often unwilling to issue direct loans to minors due to the risk that the agreement could be legally voided, making it difficult to enforce repayment.

Specific Scenarios for Minors to Obtain Funds

While direct loans to minors are generally not feasible, funds can be accessed with adult involvement. One common method is a co-signed loan, where an adult, typically a parent or guardian with a strong credit history, assumes legal responsibility for the debt. This arrangement allows the minor to indirectly access credit, as the co-signer’s creditworthiness helps secure the loan and may lead to more favorable interest rates.

The co-signer becomes equally liable for the loan; if the primary borrower fails to make payments, the co-signer is legally obligated to repay the debt. This arrangement can also impact both the co-signer’s and the minor’s credit reports, building a credit history for the minor if payments are made on time. Lenders may offer co-signer release options after a certain period of on-time payments, allowing the primary borrower to assume full responsibility.

For educational expenses, student loans offer another avenue, though parental involvement often remains. Federal student loans, for instance, typically require submission of the Free Application for Federal Student Aid (FAFSA), which incorporates parental income information for dependent students. Parents can also take out federal Parent PLUS loans directly, making them solely responsible for repayment.

Private student loans frequently require a co-signer due to the minor’s lack of established credit history. Beyond loans, custodial accounts established under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) allow an adult to manage assets for a minor. These funds belong to the minor but are controlled by the adult custodian until the minor reaches the age of majority, usually 18 or 21, at which point the minor gains full control.

Other Ways to Access Money

Beyond traditional loans, individuals under 18 have several practical avenues to acquire funds and establish a financial footprint. These methods can help young people gain financial independence and build a positive financial history.

Become an authorized user on a parent’s credit card: This builds credit history early. While the primary cardholder retains full legal responsibility, the minor’s credit report can benefit from positive payment history, even before age 18.
Secure a secured credit card (at age 18): This card requires a refundable cash deposit, which typically sets the credit limit. Consistent on-time payments and low credit utilization are reported to credit bureaus, helping build a positive credit score.
Earn income through employment: Minors can find part-time jobs in retail or food service, or explore online opportunities like tutoring or freelance work, subject to labor laws. These experiences provide funds and teach financial management skills.
Receive financial gifts and allowances: In 2024, an individual can gift up to $18,000 without donor gift tax implications, increasing to $19,000 in 2025. Married couples can combine exclusions for a larger tax-free gift per recipient, and the recipient is not taxed.
Apply for scholarships and grants: These offer significant financial assistance that does not require repayment. Awards are based on diverse criteria, including academic performance, financial need, talents, or community involvement. Many opportunities require completing the Free Application for Federal Student Aid (FAFSA).