Can You Take Out a Loan at 17? Your Legal Options

A 17-year-old seeking a loan faces legal hurdles due to age restrictions on contracts. The ability to enter into a legally binding contract is generally reserved for individuals who have reached the age of majority, which is 18 in most states. This framework protects minors, who may not fully understand financial commitments. Consequently, direct loan agreements with minors are typically not enforceable by lenders.

The Age Requirement for Loans

The age of majority, set at 18 in most U.S. states, signifies when an individual gains full legal capacity. This includes the ability to enter into binding contracts, such as loan agreements. Minors lack this legal capacity.

Contracts entered into by minors are “voidable” at the minor’s discretion. This means a minor can choose to cancel or honor the agreement. Lenders are unwilling to issue loans directly to a 17-year-old because the minor could legally disaffirm the loan at any time, leaving the lender without recourse for repayment.

Obtaining a Loan With Adult Support

Given the legal limitations, the most common and practical way for a 17-year-old to access loan funds involves the support of a legally adult individual. One primary method is through a cosigner, typically a parent or guardian. When a loan is cosigned, the adult assumes legal responsibility for the debt, meaning they are equally obligated to repay the loan if the primary borrower, the 17-year-old, fails to do so.

Another approach involves an adult taking out a loan solely in their own name and then providing the funds to the 17-year-old. In this scenario, the loan is a direct obligation of the adult to the lender, and the 17-year-old has no direct legal relationship with the financial institution. While this bypasses the minor’s contractual limitations, it places the entire legal and financial burden on the adult. Clear, albeit informal, agreements between the 17-year-old and the adult regarding repayment expectations are important in these situations.

Loans for Educational Expenses

Specific types of loans are often accessible to individuals under 18, particularly those related to post-secondary education. Federal student loans, such as Stafford Loans, are typically applied for by the student, but parental involvement is almost always required for dependent students who are 17. The Free Application for Federal Student Aid (FAFSA) process requires parental financial information for most applicants under 24, affecting eligibility and aid amounts.

Parent PLUS Loans allow parents to borrow directly to help cover their child’s educational costs, with the loan solely in the parent’s name. Private student loans, offered by banks and other financial institutions, also represent an option for educational funding. However, these loans almost universally require a creditworthy adult cosigner for a 17-year-old, similar to other types of private loans, to mitigate the lender’s risk due to the minor’s limited contractual capacity.

Other Ways to Access Funds

Beyond traditional loan structures, a 17-year-old has several alternative methods to acquire necessary funds. Earning income through part-time employment is a direct way to generate money for expenses, fostering financial independence. Many opportunities exist for teenagers, from retail and food service jobs to freelance work, allowing them to save or spend their earnings as needed.

Scholarships and grants offer another significant avenue, particularly for educational or specific project needs, as these do not require repayment. These funds can be awarded based on academic merit, extracurricular activities, financial need, or specific talents. Family agreements, such as allowances for chores or contributions towards larger purchases, provide informal financial support without the complexities of formal loans. While secured personal loans, which use collateral like a car title, exist, they are generally not available directly to minors due to the same contract enforceability issues, even with collateral, unless an adult is involved in the agreement.