At a Glance
Some young adults can find barriers to accessing credit, whether it’s because of limited credit history, confusing loan terms and high-cost lenders. Understanding how affordability is assessed, how credit scores can influence certain lending decisions and what to look for in higher-cost borrowing can be helpful. It can also be useful to explore practical steps for building positive credit habits and to understand how regulated lenders provide clear and transparent credit options.
Ethical Lending for Young Adults
Having access to affordable credit can influence a young adult’s financial situation. From covering emergency expenses to building a solid credit history, knowing how to borrow effectively is a skill that can be valuable.
However, with so many lenders, loan types and confusing terms, it’s easy to feel overwhelmed or make decisions that could lead to costly mistakes.
In this blog, we’ll explain what young adults really need to know before taking out any form of credit. You’ll learn how to spot fair lenders, understand interest rates, compare repayment options and identify features like hidden fees or high-cost loans.
With the right knowledge about credit, young adults can access credit more safely and responsibly, protecting long-term financial well-being.
Understanding What ‘Affordable Credit’ Really Means
Affordable credit simply means borrowing money in a way that doesn’t strain your budget or lead to long-term debt problems. It’s credit with interest rates that reflect the customer’s circumstances, have clear terms and repayment structures that are explained, with no early repayment fees.
It’s easy to assume a loan is “affordable” just because the monthly payment looks small, but true affordability comes from understanding the total cost over time. This includes APR, interest, fees, and how long you’ll be paying it back.
When credit is genuinely affordable, it’s suitable for your circumstances and avoids unnecessary cost. Understanding this difference can help you choose safer borrowing options and lenders.
How Credit Scores Often Affect Lending Options
Generally, credit scores matter more than young adults realise because they influence many financial products and services. A good score might help you borrow with a lower interest rate, cheaper credit card or have a better chance of being approved for a rental agreement or phone contract.
A poor score, on the other hand, can make borrowing more expensive or limit your options entirely.
This is because most lenders use your credit score to judge how reliable you are at paying money back, so even small habits, like paying bills on time, can make a big difference.
However, at Salad, we take a different approach. We use Open Banking in our initial assessment. That means applying for one of our loans won’t impact your credit score, and if successful, we’ll report your loan to the CRAs (Credit Reference Agencies).
Common Barriers Young Adults Face When Borrowing
There are often many challenges when it comes to accessing credit as a young adult. One of the biggest barriers is having a limited or non-existent credit history, which makes it hard for most lenders to assess reliability.
Young people are also more likely to have lower or irregular income, especially if they’re just starting their career or studying whilst working part-time. This might mean less loan options or higher interest rates. On top of that, confusing terms, hidden fees, and the lack of financial guidance can make the borrowing process feel overwhelming.
Learning about these barriers early can help young adults better prepare and choose lenders with transparent terms. It’ll help them better understand whether credit is appropriate for their circumstances.
How to Spot and Avoid High-Cost Lending Options
High-cost lending options can look convenient, but they often come with significantly higher interest rates and fees. To spot them, you could check the APR - if it’s unusually high, it indicates higher borrowing costs.
Additionally, watch out for misleading loan representations, pressure to borrow more or fees that aren’t clearly explained. If the repayment seems too large for your budget, it’s probably not affordable.
To avoid these traps, it’s best to compare lenders, read the fine print and choose regulated providers who offer transparent terms. This may help you avoid unnecessary costs in the long run.
Building Healthy Credit Habits from the Start
Building healthy credit habits early can support long-term financial stability. You can start by paying all your bills on time, as even small delays can affect your credit score. Additionally, only use credit that you can afford to repay, and avoid borrowing more than you need.
You should also keep an eye on your credit report, so you can spot mistakes or signs of fraud, as many people only notice issues when they’re rejected from borrowing.
It’s also good to use credit responsibly and keep your credit card balance low. Over time, these small habits can help build trust with lenders and might make it easier to access affordable credit when you need it most.
For Transparent, Regulated UK Lending, Choose Salad
Available to employed UK residents over 18, if you’re looking for support getting your finances back on track, we may be able to help.
As one of the largest CDFI consumer lenders in the UK, we recognise that credit scores don’t always reflect someone’s full financial situation. That’s why we use an Open Banking-based assessment to evaluate your unique financial circumstances.
Applying for one of our new loans doesn’t impact your credit score. We use Open Banking in our initial assessment. If successful, we report your loan to the CRAs (Credit Reference Agencies). Your credit score won’t hold you back from being eligible.
To learn more about how our personal loans work, visit our product pages.
