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When it comes to borrowing money, building up your emergency fund, and performing financial transactions, you have more options than ever before. You can open an account with a traditional bank, set up an online bank account, or choose a neighborhood credit union. Best of all, you can have accounts with multiple institutions, maximizing convenience.
As you’re reviewing your options, you may see some claims that credit unions are better than banks. There’s no one-size-fits-all financial institution that works for every consumer on the planet, but there are some reasons you might want to choose a credit union over a brick-and-mortar or online bank.
Why is a credit union better than a bank for some people? Get the answer to this question, plus an overview of how credit unions work.
A credit union is a nonprofit organization that provides a variety of financial services. Like banks, credit unions are heavily regulated financial institutions. They typically offer the following products and services:
One of the biggest differences between banks and credit unions is that credit unions are nonprofit organizations owned by their members. In contrast, a bank is a for-profit institution owned by a group of shareholders.
Nonprofit and for-profit organizations have different purposes. Due to their nonprofit status, credit unions have cooperative structures. Board members and employees are concerned with the financial well-being of all members. Credit unions also have strong community roots.
The main purpose of a for-profit bank is to make money for shareholders. When there’s a profit motive in place, employees and board members tend to make decisions based on what’s best for shareholders instead of what’s best for customers or communities. For example, employees at Wells Fargo opened thousands of fraudulent accounts to boost the bank’s bottom line, hurting customers in the process.
Another major difference between banks and credit unions is that credit unions have strict membership requirements. Banks want to make as much money as possible, so they tend to offer accounts to anyone who meets some basic criteria. For example, a bank may open a checking account for any adult who doesn’t have a history of writing bad checks.
Credit unions are member-owned, so they have additional requirements. For example, some credit unions require their members to work for the federal government. Others are designed for members of the military or people who live in a specific geographic area. If you don’t meet the membership requirements, you won’t be able to open an account.
Banks and credit unions are both subject to federal regulation, but they’re not regulated by the same agencies. In the United States, the Office of the Comptroller of the Currency charters all banks and monitors their activities. The National Credit Union Administration oversees credit unions.
Both agencies work to ensure consumers receive fair treatment. Federal regulations also protect bank and credit union customers against deceptive business practices, giving you extra peace of mind.
So, why is a credit union better than a bank in some cases? One of the main benefits is that credit unions operate for the good of their members. If you’re invested in the success of your community, joining a credit union can help you contribute to local development.
Credit unions also tend to offer slightly higher interest rates on certain savings and investment products. As of December 2023, credit unions were paying 2.93% on a five-year CD with a $10,000 deposit. In contrast, traditional banks were only paying 2.02%.
In some cases, a credit union also charges lower interest rates on credit cards and loans. The lower your rate, the less you pay in interest over time. At the end of 2023, credit unions charged an average of 12.72% on credit cards, while banks averaged 15%.
If you join a credit union, you may even save money on fees. Traditional banks need to maximize their profits, so they often charge monthly maintenance fees and fees for accessing certain services. You may also have to meet minimum daily balance requirements to avoid additional service charges.
Many credit unions charge no monthly service fees and have no minimum balance requirements. If you have to make a deposit to open your account, the minimum deposit may be just a few dollars. Credit unions may also offer free checks, free mobile banking, and other free services to their members.
Banks and credit unions both have their place in the financial world. If you’re looking for personalized service, lower fees, and better interest rates, consider joining a credit union. You can always set up a traditional bank account if you want to access additional services.
To learn more about financial matters, check out Credit.com’s ultimate guide to personal finance.
Source: credit.com
Want to learn how to make $5,000 fast? Whether you’re in a rush to meet a financial goal this week or aiming for a steady income of $5,000 per month, there are several ways to make it happen. You’ll find different options, from short-term jobs that pay a lot at once to long-term ideas that…
Want to learn how to make $5,000 fast?
Whether you’re in a rush to meet a financial goal this week or aiming for a steady income of $5,000 per month, there are several ways to make it happen.
You’ll find different options, from short-term jobs that pay a lot at once to long-term ideas that bring in money regularly. And, sometimes, combining a few methods can help you reach $5,000 faster.
If you’re looking to make $5,000 fast, you’re not alone. Many people need a big amount of money quickly – for unexpected costs, important purchases, just to save up, or simply to make a stable amount of money regularly.
Below is how you can make $5,000 fast.
If you want to learn how to make $5,000 without a job, then one way may be to flip items for resale.
Flipping items for resale means you buy things at a low price and sell them for more. This could be handmade goods, vintage items (like old games, cameras, clothing, etc.), furniture, sports equipment, appliances, and more.
Look for undervalued items at flea markets, garage sales, yard sales, and thrift stores, and then sell them for a profit. This job involves having an eye to spot valuable items that you think can be resold at a higher price.
You can resell items on eBay, Craigslist, Facebook Marketplace, and more.
I have flipped many, many items for resale over the years, and I think it’s a great way to work from home and make money on your own schedule.
Recommended reading: How Melissa Made $40,000 In One Year Flipping Items
Making $5,000 a month from home is possible by becoming a freelancer.
Freelancers are people who run their own businesses and provide services to other businesses or clients on a contract basis. As a freelancer, you might be hired for onetime projects by businesses or you could secure long-term contract work with a company.
Online freelancing jobs include:
And more.
You can find freelance gigs through networking, reaching out to possible clients through email or phone, creating a freelance listing on Fiverr, searching for gigs on Upwork, and more.
I have personally been a freelancer for years (mainly freelance writing, and, in the past, I have also done freelance social media management), and it’s a great way to earn income while still being your own boss with a flexible schedule.
Recommended reading: 16 Best Freelance Jobs & How To Get Started
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This free 76-minute workshop answers all of the most common questions about how to become a proofreader, and even talks about the 5 signs that proofreading could be a perfect fit for you.
Rover is a website that connects pet owners with pet sitters and dog walkers. You can work this job on weekends all year round or choose to be available only during the summer months – it’s flexible and up to you.
Getting started on Rover is simple. You create a profile highlighting your experience with pets and the services you offer, such as dog walking, pet sitting, and house sitting.
After setting up your profile, customers will send you requests, and you can discuss pricing with them. Rover handles payment processing, and you’ll receive payments directly into your account.
I have two close family members who are professional dog walkers, and they both love this side hustle.
Recommended reading: 7 Best Dog Walking Apps To Make Extra Money
If you have a spare room in your home that you’re not using, you may want to try renting it out either on a short-term basis through Airbnb or Vrbo or by finding a long-term roommate to make extra cash.
I’ve rented out rooms multiple times before to roommates, and it’s a great way to earn extra income from unused space.
Recommended reading: What You Need To Know About Renting A Room In Your House
If you’re looking to make $5,000, finding a food delivery driving gig is a good option.
With companies like DoorDash, Uber Eats, and Instacart, you can start earning money by bringing people their favorite food. It’s flexible too, so you decide when you work and for how long.
Delivery services like Instacart hire personal grocery shoppers, and the average shopper earns $15 to $20 per hour delivering groceries. Drivers are paid per order, and you keep 100% of your tips. You can also pick your own schedule, which means teachers can work in the evenings or weekends, or only during the summer if they prefer.
If you’re looking to make a quick $5,000, selling high-value items can be a smart move. Take a look around your home; you might have things you don’t need that others are willing to buy for a good price.
You could sell an old cell phone, laptop, camera, designer clothes, your car, and more.
There are many different buyers for high-value items – from people like you and me on Facebook, to pawn shops, eBay, and more.
Tutors who specialize in subjects such as math, language, science, graphic design, and more help students improve in those areas.
And, some tutors can make money rather quickly, such as one who specializes in college courses or high-level exams.
Becoming an online tutor depends on the subject you want to teach. Experience in the field is usually required, but there are opportunities for beginners as well. Tutors who teach advanced subjects like calculus or college entrance exams generally earn more than those teaching simpler topics.
Tutoring rates can range from $15 to over $100 per hour, depending on the subject and where you sell your tutoring services.
Stock image websites are popular platforms where photographers can sell their pictures. Customers can buy royalty-free photos for personal or business use, and these images are commonly used in websites, TV shows, books, social media, and more.
One advantage of using stock photo sites is that they can generate passive income. You can take pictures, upload them, and potentially earn money from them for months or even years. You’ll earn a commission every time someone downloads your photos.
Some well-known stock photo websites include Shutterstock, iStock by Getty Images, Adobe Stock, and Dreamstime.
In the world of stock photography, quality is important, but quantity matters too. The more pictures you have in your stock photo portfolio, the more potential you have to earn money.
Recommended reading: 18 Ways You Can Get Paid To Take Pictures
Creating and selling an online course can be a great way to make money quickly, especially if you have knowledge or skills in a high-demand area.
If you have expertise in a certain subject, you can create and sell an online course. Platforms like Teachable and Udemy allow you to develop, host, and sell your course to students. While you may not earn $1,000 immediately, having students enroll over time can generate a substantial income.
I have an online course that I personally sell, Making Sense of Affiliate Marketing. I have also taken many online courses, such as on helping my toddler get better sleep, speech therapy for parents, business courses, blogging courses, and so much more.
There are many different subjects you can teach in an online course, including:
Just like Airbnb transformed the way you can earn money from your spare room, peer-to-peer storage platforms are doing the same for your unused spaces.
If you have extra space at home, consider renting it out to local people for storage. This could be a garage, driveway, closet, basement, or attic.
While making $1,000 in a single day from this may be challenging, renting out your space can provide a steady, long-term income when combined with other income sources.
You can use a website like Neighbor to list your available space for rent, potentially earning up to $15,000 per year.
If you need to learn how to make $5,000 dollars in a day, then one option is to sell any expensive jewelry that you may have.
If you’ve got jewelry you no longer wear, selling it can be a quick way to earn some cash. You might have pieces like engagement rings, necklaces, or bracelets tucked away.
Recommended reading: Where To Sell Jewelry: 12 Best Places For Extra Money
Flipping real estate means buying homes that need fixing, making improvements, and selling them for a profit. This can be a way to make $5,000 (and well over that if you are smart and careful!).
To do this type of real estate investment successfully, you may start by focusing on making cost-effective improvements, especially in areas like the kitchen and bathrooms, and address any major structural or safety issues.
Recommended reading: 23 Best Real Estate Side Hustles To Make Extra Money
If you’re looking to make $5,000 online, selling printables is an option.
Printables are digital files that customers can download and print at home, such as grocery shopping checklists, monthly budget planners, wedding invitations, wall art, and more.
I buy printables all the time, and actively search them out at least a few times a month. And, I’m not alone – many people buy printables frequently as well!
I recommend signing up for the Free Workshop: How To Earn Money Selling Printables. This free training will give you great ideas on what you can sell, how to get started, the costs, and how to make sales.
Do you want to make money selling printables online? This free training will give you great ideas on what you can sell, how to get started, the costs, and how to make sales.
Managing Facebook ads for local businesses is an online job where you can earn at least $1,000 per month per client.
Local businesses want to expand their audience through Facebook ads, but many don’t have the expertise to do it effectively. That’s where you come in. By learning this skill, you can sell your services to small businesses and help them reach more customers online.
Plus, this can be a part-time job that you do in your spare time or even a full-time job.
Creating your own ebook can be a way to earn money online, and you likely have knowledge to share (even if you don’t realize it!) or a good story to write about.
Platforms like Amazon KDP (Kindle Direct Publishing) allow you to reach a wide audience without a traditional publisher.
Examples of genres you can write in include romance, travel, self-help, sci-fi, and more.
If you want to learn how to make $5,000 from home, then one of my favorite ways is to start a blog.
Now, starting a blog doesn’t instantly make you $5,000 because it takes time to set it up. However, with time and effort, some bloggers can make $5,000 a month in the future.
A blog is a website filled with articles, similar to what you’re reading now. You can start a blog on various topics like personal finance, recipes, travel, pet care, family life, and more.
You can earn money from a blog by partnering with companies for sponsorships, displaying ads, engaging in affiliate marketing (like promoting products on Amazon), and selling items such as ebooks, candles, T-shirts, and other products directly through your blog.
Blogging is my primary source of income, and I make well over $5,000 a month online. It took about six months to earn my first $100 from my blog, so getting started requires some patience. It then took me about a year to reach a monthly income of around $5,000 from blogging.
You can learn how to start a blog with my free How To Start a Blog Course (sign up by clicking here).
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Want to see how I built a $5,000,000 blog?
In this free course, I show you how to create a blog, from the technical side to earning your first income and attracting readers.
Affiliate marketing is a way to earn money by promoting products or services online, and it’s one of my favorite ways to make $5,000 (or more) fast online.
Affiliate marketing is when someone buys a product through a referral link you share, and you earn a commission.
To start, you will want to find products you genuinely like and believe others will benefit from. Then, sign up for their affiliate program, which will provide you with a unique affiliate link. This link tracks the clicks and purchases made from your recommendation.
Recommended reading: Affiliate Marketing Tips For Bloggers – Free eBook
Starting your own Amazon FBA (Fulfillment by Amazon) business can be a great way to make $5,000 fast.
You can sell items from household goods to clothes, games, electronics, and more.
Selling on Amazon FBA works by you sending the items you want to sell to an Amazon fulfillment warehouse. Amazon stores these items for you until they sell on their platform.
When an item sells, Amazon handles the shipping and sends it directly to the customer. This means you don’t have to worry about packing and shipping the sold items yourself.
Recommended reading: How To Sell Items On Amazon FBA
Creating content for your own YouTube channel can be a fun way to work toward making $5,000 fast.
You can create a YouTube channel about topics such as finance, home improvement, travel, toys, pets, and more. There’s a YouTube channel for almost every interest these days.
Like blogging, this isn’t a guarantee that you’ll make money, and it will definitely take time to reach $5,000. But, it can be a lot of fun, and you get to be your own boss.
Buying a business that’s already bringing in money is a way to possibly skip the tough start-up phase and have a business that is making over $5,000.
Now, existing businesses are typically expensive – someone has done a lot of hard work building a business over years and years, after all. They can cost anywhere from a few thousand to millions or even billions of dollars.
You can start by looking at online marketplaces like BizBuySell or Flippa. They list all kinds of businesses for sale, and you’ll see lots of options from online sites (like retail stores and blogs) to local shops (like bike shops, clothing stores, toy stores, and laundromats).
An example – I was recently in a small local bike shop, and they told me that it was for sale. They earned around $20,000 a month (I’m not sure if that was before or after expenses or anything else), and their shop was for sale for around $500,000. You got all the bikes, parts, customers, etc. with the sale. The building wasn’t owned by them, they had monthly rent and other bills to pay. I’m not going to say if this was a good or bad deal – it’s just an example of a real business that is for sale that I recently came across.
Consulting is when you provide expert advice to individuals or businesses facing challenges. Consultants use their knowledge to understand problems, give advice, and help clients make better decisions from an outside perspective.
Consultants work in fields like management, finance, technology, or marketing. They focus on areas like strategy, process improvement, or restructuring to help clients achieve their goals effectively.
Here’s an example of how a consulting gig works: A company is struggling with managing its products and deliveries. They bring in a consultant who knows a lot about solving these issues. First, the consultant looks at how things are currently done. Then, they suggest better ways to store and ship items. The consultant helps put these ideas into action and teaches the company’s team how to use the new methods. Even after the changes, the consultant keeps an eye on things to make sure everything works well. This helps the company save money and makes sure that customers get what they need on time.
Starting a mobile car detailing business can be a way to earn money quickly. After all, you don’t need a lot to get started, and people are always wanting a good detailer to clean their car.
You’ll want to start by getting quality cleaning supplies like car shampoo, wax, and microfiber towels. You can then set fair prices based on what others charge nearby and promote your services on social media and with local businesses.
Driving for a ride-sharing service like Uber or Lyft can be a way to reach your $5,000 goal quickly.
Here’s how you can work toward earning $5,000 with Uber or Lyft:
While you won’t make $5,000 in one day, driving for a ride-sharing service can be a flexible way to earn money and work toward reaching your financial goal over time.
Below are answers to common questions about how to make $5,000 fast.
If you need to make an extra $5,000 quickly, then selling expensive items that you already own is usually the fastest thing that I recommend doing. This is because you may have expensive things in your home already – like jewelry or electronics – that you can sell and get paid for within just a few days.
Making $5,000 in a single day is hard but not impossible. It may require a combination of having high-value items to sell or landing a big client for your freelance business. It’s about making the right move at the right time with the resources you have.
There are many ways to double $5,000 dollars, but it will depend on how much time you have to double your money, as well as how much risk you want to take on. Some ways will be much more risky than others, such as by investing in stocks or real estate. Due to this, it’s important to research and consider your risk tolerance before investing your money.
Ways to make $5,000 in a month can include freelance writing, blogging, proofreading, bookkeeping, and more.
If you want to make $5,000 fast but not get a job, then the fastest thing to do is typically to sell items around your home that you already have, such as jewelry or electronics. You can also combine a bunch of different side hustles, such as freelancing, selling stuff, running a business, flipping real estate, and even small things like taking online surveys (like Survey Junkie for free gift cards).
Some ways to make $5,000 a day online may include selling courses or other digital products. Now, this will not be an easy thing to do, and it will require a lot of hard work (as well as some luck).
I hope you enjoyed this article on how to make $5,000 fast.
As you read above, there are many different ways to make $5,000. Some are faster than others (such as selling expensive items that you already own), and others may be more of a full-time career (such as freelance proofreading).
What do you want to do to make $5,000 fast?
Recommended reading:
Source: makingsenseofcents.com
If you’re trying to save some money, trimming some discretionary spending categories from your budget can be a good way to start.
But it isn’t necessarily the only or best way to save — especially if reducing or removing things like streaming services, concerts, or monthly massages from your budget makes it harder to stick to your plan.
Instead, it may make sense to track where your money is going for a few weeks and then take a look at all your spending categories to determine which cuts could have the biggest impact.
Spending categories can help you group similar expenses together to better organize your budget. They can come in handy when you’re laying out your spending priorities, deciding how much money to allot toward various wants and needs, and determining whether an expense is essential or nonessential.
Many of the budgets you’ll see online use pretty much the same spending categories, such as housing, transportation, utilities, food, childcare, and entertainment. But you may find it’s more useful to track your spending for a while with a money tracker, and then create some of your own categories. You may choose to drill down to specific bills or go broader, breaking down your budget into just the basics.
By personalizing your spending categories, you may be able to put together a budget that’s more manageable — and, therefore, one you’re more likely to stay with.
To customize your spending categories, it can help to gather as much information as possible about where your money is actually going.
You can start by looking at old bank and credit card statements to get a good picture of past spending. Your bigger spending categories should be easier to figure out. Those bills are often due on the same day every month and are usually about the same amount. But you’ll also want to keep an eye out for expenses that come just once or a few times a year (such as taxes, vet bills, etc.). And, if you use cash frequently, you’ll want to determine where that money went, too.
A tracking app can help you grasp the hard truth about your spending as you move forward. That cute plant you bought for your windowsill? Pitching in for a co-worker’s going-away gift? Those little splurges can add up before you know it.
Once your spending picture comes into focus, you can divide your expenses into useful personal budget categories, and start thinking about what you might be able to trim or cut out altogether.
💡 Quick Tip: When you have questions about what you can and can’t afford, a spending tracker app can show you the answer. With no guilt trip or hourly fee.
Although it can be effective to organize your spending categories in a way that’s unique to you, there are a few basic classifications that can work for most households when making a budget: They include:
• Housing: This category could include your rent or mortgage payment, property taxes, homeowners or renters insurance, HOA fees, etc.
• Utilities: You could limit this to basic services like gas, electricity, and water, or you might decide to include your cell phone service, cable, and WiFi costs.
• Food: This amount could be limited to what you spend on groceries every month, or it could include your at-home and away-from-home food costs.
• Transportation: Your car payment could go in this category, along with fuel costs, parking fees, car maintenance, car insurance, public transportation, and DMV fees. You could also include the cost of Uber rides.
• Childcare: If you need childcare while you work, this cost would be considered necessary spending. If it’s for a night out, you may want to move it to the entertainment or personal care category.
• Medical Costs and Health Care: This could include your health insurance premiums, insurance co-pays and prescription costs, vision and dental care, etc.
• Clothing: Clothing is a must-have, of course, but with limits. You may want to put impulse items in a separate category as a nonessential or discretionary expense.
• Travel: This category would be for any travel that isn’t work-related, whether it’s a road trip or a vacation in Paris.
• Entertainment: You could get pretty broad in this category, but anything from streaming services and videogames to concerts and plays could go here.
• Personal: This might be your category for things like salon visits, your gym membership, and clothes and accessories that are more of a want than a need.
• Gifts: If you’re a generous gift-giver, you may find you need a separate category for these expenses.
• Savings and investments: Though it isn’t “essential” for day-to-day life, putting money aside for long- and short-term goals is a must for most budgets.
• Emergency fund: This will be your go-to for unexpected car repairs, home repairs, or medical bills.
• Debt repayment: Student loan payments, credit card debt, and other balances you’re trying to pay off could fit in this category.
The idea of making a budget can be daunting, particularly if you’re trying to fit your needs and wants into spending categories that aren’t suited to how you live. Here are some pros and cons to using categories for spending that might keep you motivated and help you avoid potential budgeting pitfalls.
• More control: Creating a budget with spending categories that match your lifestyle can help you put your money toward things that really matter to you.
• Less stress: If you’re living paycheck to paycheck even though you know your income is sufficient to cover your needs, a budget with realistic spending categories can help you see where your money is going.
• Better planning: Whether you’re trying to save for a vacation, wedding, house, retirement, or all of the above, including those goals in your spending categories will help ensure they get your attention.
• May feel limiting: Working with a budget can feel restrictive, especially if you’ve been winging it for a while or aren’t including enough discretionary spending.
• Time consuming: It might take some trial and error to find a budget system that works for you. And if you’re budgeting as a couple, you’ll likely have to work out some compromises when determining your spending categories.
• Requires maintenance: Budgeting isn’t a one and done. You’ll be more likely to succeed if you consistently track your spending to make sure you’re hitting your goals.
Often when you see or hear budgeting advice, it tends to focus on cutting back on small extras — $6 daily lattes at your favorite café, for example, or those weekly Happy Meals for the kids. Some other top spending categories that traditionally are among the first to hit the chopping block include:
• Gym memberships
• Dining out
• Subscription services you don’t use anymore
• Cable
• Personal care services you can do at home for less, such as manicures and pedicures
• Alcoholic beverages
• Cigarettes and vaping products
• Vacations
But it can also be useful to review, and potentially cut back on, how much you’re budgeting for basic living expenses, such as:
• Clothing and shoes
• Utility bills
• Groceries
• Insurance
• Cars
• Cellphones and computers
• Rent
As you create your spending plan, keep in mind that it doesn’t have to be like anyone else’s. If you track your expenses and use that information to create your personalized budget, you may have a better chance of building a plan you can stick with.
Here are some more steps to consider as you get started:
• Be realistic. It may take a while to get to your goal, but doing even a little bit consistently can make a difference. Know yourself and do what you can.
• Don’t forget irregular expenses. Bills that you pay every month can be easy to remember. (You might even put them on autopay to make things more convenient.) But infrequent expenses such as tax bills can get away from you if you don’t include them in your spending categories.
• Avoid spending more than you have. Knowing how much you’ll have left after taxes each month is an important part of successful planning. An emergency fund can help you stay on track when unexpected expenses pop up.
• Leave room for fun. Eliminating date nights and small splurges completely could make it much harder to stay with your plan.
• Pay yourself. Make saving and investing goals a separate spending category.
• Find a budgeting method that works for you. Whether it’s the popular 50/30/20 budget — which divides your after-tax income into needs, wants, and savings — or a detailed spending breakdown with multiple categories, try various budgeting methods until you find one that motivates you.
💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.
Want to save some money but know you need to make some changes? Monitoring where your money is going every month can help you create a spending plan with categories that are customized to your needs, wants, and goals. A plan that’s realistic, but not too restrictive, can give you the kind of control and motivation you need to get and stay on track financially.
Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.
With SoFi, you can keep tabs on how your money comes and goes.
The four main spending categories for most budgets are housing, food, utilities, and transportation. Once you’ve established how much you’ll need to cover these costs, you can move on to planning for other expenses.
The 50/30/20 rule is a budgeting method that allocates your take-home income to three main spending categories: needs or essentials (50%), wants or nonessentials (30%), and saving or financial goals (20%).
A successful budget usually includes accurate income and spending projections, realistic and personalized spending categories, consistent and frequent check-ins, and solid savings goals.
Photo credit: iStock/mapodile
SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Source: sofi.com
Series I Savings Bond rates are set to change on May 1, 2024, when the new rates will be announced. To give some perspective, for Series I Bonds issued from November 2023 through April 2024, the yield (composite rate) was 5.27% for six months after the issue date. So, is now a good time to buy I bonds?
Investors with a long-term savings outlook who are looking for a safe investment may want to consider investing in Series I Savings Bonds, commonly known as I Bonds. I Bonds are similar to most bonds in that they are essentially a loan to an entity (in this case the U.S. government), with the promise to return your money with interest. I Bonds are different in that they may offer some tax breaks as well. Here are nine important things to know before you invest in I Bonds.
For those looking for low-risk investment returns, I Bonds may be a good option, but they are not traditional fixed-income securities. I Bonds are a type of savings bond offered by the U.S. Treasury and backed by the full faith and credit of the U.S. government. They are unique in that they offer two types of interest payments: a fixed rate and a variable rate, which together provide the bond’s composite rate.
The fixed-rate portion is determined when the bond is purchased, and remains the same for the life of the bond. The variable rate gets adjusted twice a year (i.e., May and November), based on inflation rates. Investors may hold I Bonds for up to 30 years.
In May 2022, when inflation was high, I Bonds paid up to 9.62%. But as inflation cooled, the variable rate dropped. As mentioned, I Bonds issued from November 2023 through April 2024 have a composite rate of 5.27% for six months after the issue date, until the variable rate changes again.
💡 Quick Tip: Help your money earn more money! Opening a bank account online often gets you higher-than-average rates.
Because I Bonds are backed by the U.S. government they have a low risk of default and offer tax-advantaged interest income. Furthermore, the principal is guaranteed. This means (unlike traditional, non-government bonds) that the redemption value will never decrease. This is one of the advantages of savings bonds as a whole. As a result, I Bonds are considered low-risk investments.
Tax-efficient investors may want to consider certain I Bond features. Because I Bonds are exempt from municipal or state taxes, this can be a boon for some investors. That said, while federal taxes usually apply, they could be deferred until the bond is ultimately sold or matures; whichever happens first.
Additionally, I Bond investors may use the interest payments for qualified higher education expenses, and receive a 100% deduction (this is called the education exclusion). Some restrictions apply, including:
• You must cash out your I Bonds the year that you want to claim the education exclusion.
• You must use the interest paid to cover qualified higher education expenses for you, your spouse, or your dependent children the same year.
• You cannot be married, filing separately.
Investors who are familiar with the Series E Bond may also find I Bonds appealing. While Series E Bonds are no longer available from the Treasury, they can still be purchased from other investors who currently hold them. Historically, Series E bonds were also known as defense or war bonds.
Series E bonds were replaced by Series EE bonds (aka “Patriot Bonds”) in 1980. Today, like Series I Bonds, investors can buy EE Savings Bonds from TreasuryDirect .
An interesting feature of Series EE Savings Bonds is that, over a 20-year period, these bonds are guaranteed to double in value. And should the interest not be enough to double the value, the U.S. Treasury will top it up, giving the bond an effective interest rate of 3.5% per year during that period.
While I Bonds don’t offer the same guarantee, your principal is guaranteed and the bonds are designed to keep pace with inflation.
Investors can purchase electronic I Bonds online through TreasuryDirect in denominations over $25. The maximum amount of electronic I Bonds someone can purchase is $10,000 per calendar year.
In paper format, investors may use their tax refund to purchase up to $5,000 a year.
In general, the primary risks in buying bonds revolve around redemption. What if you need your money before maturity?
I Bonds are generally a long-term investment. To start with, investors must understand that they have their money locked up for one year. After that, investors who redeem their I Bonds before they’ve held the bond for five years will forfeit the last three months of interest. (You can redeem an I Bond after five years with no penalty.)
As a result, those looking for a shorter-term investment may want to consider investing in Treasury bills.
💡 Quick Tip: If you’re saving for a short-term goal — whether it’s a vacation, a wedding, or the down payment on a house — consider opening a high-yield savings account. The higher APY that you’ll earn will help your money grow faster, but the funds stay liquid, so they are easy to access when you reach your goal.
One possible advantage of investing in stocks, mutual funds, and ETFs is that investors could potentially make a profit if the stock or fund does well. For instance, historically, stocks have been shown to be one of the best ways to build wealth over time. However, there is also risk involved, and you could lose money if the investment performs poorly.
TIPS, or Treasury Inflation-Protected Securities, are also a type of government bond designed to protect investors from inflation. The principal amount of a TIPS bond will increase with inflation, while the interest payments remain fixed. I Bonds are similar to TIPS but offer additional protection against deflation.
To maximize your return on investment when purchasing I Bonds, it is essential to understand the differences between the two interest rate components of the bond, and how they can play out over time.
I Bonds offer a fixed interest rate, which remains the same for the life of the bond, and the inflation-protection component, which adjusts with changes in inflation rates twice per year.
So if you buy an I Bond, the composite rate would be the same for the first six months after the issue date. After that, your rate would adjust with the current inflation rate. If inflation goes up, so would the rate of return. If inflation goes down, the bond’s inflation rate would likewise decrease.
And if you hold onto your I Bond for 10, 20, or 30 years, you would likely see some years with higher inflation rates and some years with lower inflation rates.
To be eligible to buy I Bonds you must be:
• A United States citizen, no matter where you live,
• A United States resident, or
• A civilian employee of the United States, no matter where you live.
Also, investors can only purchase I Bonds with U.S. funds. You cannot buy them with foreign currency.
If you’re looking for a generally safe and reliable investment option, I Bonds may be worth considering. They offer tax breaks and other benefits that can make them a low- risk choice for your long-term savings goals. That said, because I Bonds come with a composite rate of return, it’s hard to predict how much your money will actually earn over time.
With I Bonds, your principal is guaranteed. If you buy a $1,000 I Bond, no matter what happens, you will get your $1,000 back.
If you’re interested in savings vehicles, there are alternatives to government bonds, including savings accounts with a higher APY (annual percentage yield). By exploring your options, you can choose the best option — or options — for you.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall. Enjoy up to 4.60% APY on SoFi Checking and Savings.
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4.60% APY
SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
SOBK-Q224-1837041
Source: sofi.com
Consumers may not know it, but financial institutions often rely on “bundled” credit reports to make more fully informed decisions before lending an individual money.
That process is known as a tri-merge credit report (also known as a three-in-one credit report.) The merged report can give the lender a more complete picture of an applicant’s financial situation, since each credit report may contain slightly different information.
You can’t request a merged credit report on your own but you can ask a lender to share their tri-merged report with you. Read on to learn more about what tri-merged credit reports are and how they can impact your chances of getting a loan.
A tri-merge credit report simply combines three credit reports from the three largest credit reporting bureaus — Experian, Equifax, and Transunion — and consolidates them into one credit report for creditors and lenders. They are most commonly used in the mortgage lending sector where more information is required to properly assess larger loans.
Creditors often rely on three-in-one credit reports because they want a thorough review of an applicant’s credit history, an outcome a lender may not get with input from just one credit reporting agency.
💡 Quick Tip: Need help covering the cost of a wedding, honeymoon, or new baby? A SoFi personal loan can help you fund major life events — without the high interest rates of credit cards.
A tri-merge credit report gives those lenders what they need – a comprehensive overview of a credit applicant using information from three credit reports, instead of one or two credit reports.
By combining all three credit scoring formulas and outcomes into a single credit report, creditors can get an expanded and more complete look at a credit applicant’s financial history (including payments and credit usage), based on the information included in the tri-merge credit report.
Recommended: Common Credit Report Errors and How to Dispute Them
Each credit scoring company has its own formula for calculating credit scores and one model may place more importance on one factor, such as payment history, while another may not. Also, different types of loans have different scoring methods.
The most commonly used credit scoring model is the FICO® Score, a base score that has a range of 300 (lowest score) to 850 (highest score). But within the FICO models, there are industry-specific ranges.
• FICO® Auto Score Range is 250 to 900
• FICO® Bankcard Score Range is 250 to 900
• FICO® Mortgage Score Range is 300 to 850
VantageScore is another credit scoring model used by all three major credit reporting bureaus.
FICO Score and VantageScore base their calculations on different aspects of a person’s financial history.
• FICO uses factors that are in a credit report, such as payment history of credit accounts, how much debt a person has, how long credit accounts have been open, how often new credit inquiries happen and how often new credit accounts are opened, and the mix of credit account types.
• Vantage uses the same criteria as FICO, but places different levels of importance on each. Vantage also looks at additional factors that might not appear on a person’s credit report, such as rent and utility payments. Using factors such as these makes it possible for people who don’t have much of a credit history to have a credit score and be able to access consumer credit.
Lenders use credit scores and other information in the loan approval process.
Tri-merge credit reports offer creditors the same look and feel as a standard consumer credit report, with a few differences.
For starters, the third-party provider creating the three-in-one credit report culls the credit reports from each of the three primary credit-reporting firms (Experian, Equifax, and TransUnion) and pulls the most pertinent information for use in the tri-merge credit report.
In its final form, the tri-merge credit report includes the following sections.
• An upfront summary that provides information on the credit applicant in capsule form.
• A full section on the credit applicant’s financial accounts, focusing on larger accounts like mortgages, credit cards, auto loans, and any types of personal loans.
• Data on the applicant’s credit payments history, any open accounts, any history of late or no credit payments, any tax liens or bankruptcies, and the applicant’s credit utilization ratio (i.e., the applicant’s outstanding credit balance divided by the total amount of revolving credit the applicant has available).
A tri-merge credit report may also include a specific credit report from any of the three major credit reporting agencies, based on the specific credit analysis needs of the mortgage lender who uses the three-in-one report.
Tri-merge credit reports are more commonly used in mortgage lending than personal loan lending. But if you’re applying for a large personal loan — some lenders offer personal loans up to $100,000 — the lender may look at a tri-merge credit report to get a comprehensive picture of your creditworthiness. The tri-merge credit report will include any current or past personal loans and your payment history on those. The lender will use that information to determine approval for the loan you’re applying for.
💡 Quick Tip: Choosing a personal loan with a fixed interest rate makes payments easy to track and gives you a target payoff date to work toward.
Different lenders approach the risk of lending money with different tolerance levels, just as they each have different credit score requirements. A loan applicant whose credit reports don’t include late payments and unmanageable debt loads will likely be approved for a loan with favorable terms and lower interest rates.
Alternatively, a loan applicant whose credit report shows a large amount of existing debt and a history of late or missed payments may be offered a high interest rate and less favorable terms.
Because lenders that use a tri-merge credit report to assess an applicant’s creditworthiness are looking at a comprehensive picture, it’s in the best interest of the applicant to clean up their credit reports from each of the three major credit bureaus before they begin applying for a loan.
Recommended: Typical Personal Loan Requirements Needed for Approval
Any official lender review of a tri-merge credit report will be a hard inquiry and will temporarily impact your credit score. In general, each hard credit inquiry can decrease a credit score by five points.
The severity of any credit score decline due to a hard pull largely depends on the applicant.
A consumer with a strong credit report may see less of a credit scoring decline than one with a weak credit report. Multiple credit report hard inquiries can be a reason why a consumer with a weak credit history may see their credit scores decline moderately.
Recommended: Soft vs Hard Credit Inquiry: What You Need to Know
Tri-merge credit reports are available to lenders, but not generally to individuals. A lender may be willing to share with you the tri-merge credit report they pulled in your application process. A credit counselor who offers first-time homebuyer programs may also be able to pull a tri-merge credit report for you in a credit review process, but there may be a fee for that service.
However, you can — and it’s a good idea to do this — request a free copy of your credit report from AnnualCreditReport.com.
You can request a free copy of your credit report once a week from each of the three major credit bureaus. Reviewing all three of your credit reports will give you much of the same information as is included in a tri-merge credit report.
Tri-merge credit reports can prove highly useful to mortgage and other lenders looking for a comprehensive review of an applicant’s credit history.
By merging the credit report analysis of the three major credit reporting agencies, creditors and lenders are getting a fully-formed outlook they likely wouldn’t get by relying on a single credit reporting agency.
For consumers, the key takeaway on three-in-one credit reports is simple – take a disciplined and diligent stance on your credit, review your credit reports on a regular basis, and ensure key issues like on-time payments and credit utilization rates are in good standing.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.
SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.
A tri-merge credit report is a credit report combining information from the three major credit bureaus, Equifax, Experian, and TransUnion.
When a tri-merge credit report is pulled during the formal loan application process, it will be a hard inquiry on the applicant’s credit report.
No. Tri-merge credit reports are available to lenders, not individuals, and they’re mainly used in the mortgage loan process. If you’re working with a credit counselor, you may be able to have a tri-merge credit report pulled during a credit review process.
Photo credit: iStock/Irina Ivanova
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SOPL0324004
Source: sofi.com
The U.S. seems to have dodged a recession, but elevated interest rates, rising prices and shrinking savings continue to imperil many Americans’ financial security. Borrowing hasn’t been this expensive in 20 years and, to add insult to injury, it’s harder to get financing or credit, too. Half of Americans who’ve applied for a loan or financial product since March 2022 (when the Fed started raising its key benchmark rate) have been rejected, according to Bankrate’s recent credit denials survey).
But amid still-high mortgage rates and home prices, there’s a silver lining for homeowners. The rise in property values has increased the worth of their home equity, or outright ownership stake. You can borrow against that equity to meet new expenses — or settle old ones.
Two options to tap into your equity are home equity loans and home equity lines of credit (HELOCs). They may not be as well-known as other financing options (in Bankrate’s credit denials survey, only 4 percent of Americans have applied for one since March 2022), but they have several advantages.
If you’re a homeowner needing cash, here are 10 reasons to use home equity — some better than others. In each case, we’ve noted the pros and cons.
Amount the average mortgage-holder had in home equity as of year-end 2023, up $25,000 from 2022
Source:
ICE Mortgage Technology
Tapping your home’s equity can help you cover significant expenses, improve your financial situation or achieve any other money goal. The interest rates on a home equity loan or HELOC are usually lower than those on other forms of financing, and you can often obtain more funds with an equity product compared to a credit card, which might have a lower limit, or a personal loan. Home equity loans and HELOCs are also repaid over a longer term, meaning you’ll have more manageable payments month to month.
There aren’t any restrictions on how to use equity in your home, but there are a few ways to make the most of a home equity loan or HELOC. Here are 10 ways to use your home equity, along with their pros and cons.
Home improvement is one of the most common reasons homeowners take out home equity loans or HELOCs. Besides making the home more comfortable, upgrades could make it more valuable.
“Home equity is a great option to finance large projects like a kitchen renovation that will increase a home’s value over time,” says Glenn Brunker, president of online lender Ally Home. “Many times, these investments will pay for themselves by increasing the home’s value.”
Another reason to consider a home equity loan or HELOC for renovations: You could deduct the interest paid on the loan, assuming you itemize your deductions on tax return.
A home equity loan or HELOC can help you fund higher education or continuing education, whether for you, your children or other loved ones. This route typically only makes sense, however, when home equity rates are lower than student loan rates. That doesn’t happen often, especially compared to federal student loans.
Consider, too, the type of education you’re financing. Someone obtaining a teaching certification, for example, might be able to get the cost covered by their future employer. Some public service professions are also eligible for student loan forgiveness after a period of time. In these cases, it wouldn’t be smart to put your home on the line with an equity loan.
Americans’ credit card debt is skyrocketing. According to Bankrate’s recent credit card survey, nearly half (49 percent) of credit card holders carry a balance from month to month, up from 39 percent in 2021. Given their average interest rate of 22.75 percent, paying down that debt can be tricky — and expensive.
A HELOC or home equity loan can be used to pay off the plastic, along with other high-interest loans. “This is another very popular use of home equity, as one is often able to consolidate debt at a much lower rate over a longer term and reduce monthly expenses significantly,” says Matt Hackett, operations manager at mortgage lender Equity Now.
4. Emergency expenses
Many financial experts agree you should have an emergency fund to cover three to six months of living expenses, but that’s not the reality for many Americans, according to Bankrate’s 2024 annual emergency savings survey. If you find yourself in a costly situation — maybe you’re facing large medical bills or unexpected home repairs — a home equity loan or HELOC can be one way to stay afloat.
However, this is only a viable option if you have a plan for how to repay the debt. While you might feel better knowing you could access your home equity in case of an emergency, it still makes smart financial sense to set up and start contributing to an emergency fund. Plus, the application process for a HELOC or home equity loan takes time (though it’s speeded up of late: Some online lenders, such as Better, are offering approval decisions within one day). In a true emergency when you need cash fast, you’d need to already have the loan in place to use it.
The average cost of a wedding in 2023 was $35,000, according to the planning site The Knot — up $5,000 from 2022. For some couples, it might make sense to take out a home equity loan or HELOC to cover this expense, rather than a wedding loan, a type of personal loan. That’s because the interest rates on personal loans are typically higher than interest rates for home equity loans and HELOCs.
The major disadvantage, however: You’d be putting your home on the line for a discretionary expense. This can be risky if you don’t have a solid plan to repay the loan. It also tacks on interest to an expense that didn’t have interest to begin with, ultimately costing you more.
If you do go this route, be careful not to take out more than you need. If you’re unsure of the total tab for your big day, a HELOC is the better option.
Some business owners use their home equity to start or grow their company. If you need capital, you might be able to save money on interest by taking equity out of your home instead of taking out a business loan. Before you commit, though, run the numbers. A return on investment isn’t guaranteed, and you’re putting your house on the line.
It’s possible to use home equity to invest in the stock market or buy a rental property — though both propositions are risky and require serious care and consideration. A well-qualified borrower might be able to take out a home equity loan on an investment property, as well.
Consider the interest rate on home equity borrowing, especially if you’re using the funds for investment purposes. “With interest rates of 9 percent, 10 percent or even higher, this is no longer low-cost debt,” says Greg McBride, CFA, Bankrate’s chief financial analyst. “At rates that high, it is a tough hurdle to clear to get a positive return on your investment.”
If your retirement savings are falling short, tapping home’s equity can help supplement your income so you can better manage expenses. These funds can be used to cover bills, emergency expenses or even home improvements to make you more comfortable as you age. A big caveat: This strategy relies on your ability to repay the loan or HELOC. If you’re not yet drawing Social Security, you might be able to repay HELOC funds with the benefit money later on. If you’re fully retired and struggling to make ends meet, however, it’s possible you won’t have the means to repay the debt, even if you have a HELOC you don’t have to pay back right away.
There are other roadblocks to this strategy, too: If you’re still paying your first mortgage, tapping your equity adds to your expenses and puts you in debt that much longer. It might also be harder to even get an equity loan if your income has decreased in retirement.
Traveling can come with a steep price tag, and tapping your home’s equity could help cover the costs without having to increase your credit card debt. Even the best vacations don’t last forever, though, and home equity debt can linger for decades, so weigh your decision carefully. Is the trip worth potentially risking your house to pay for?
It’s possible to use your home equity for big-ticket purchases, but it doesn’t add up in many cases. Home equity loans have much longer repayment terms than auto loans, for example, resulting in lower monthly payments, but much more interest over time. Cars are also depreciating assets, meaning your car will be worth much less than you paid for it by the time you finish repaying the equity loan.
Source: bankrate.com
The median pay for professional photographers is $40,170 per year, according to the most recent data from the Bureau of Labor Statistics. That said, there is a broad range of earning possible, depending on what kind of photographer a person is and where they live.
Photography may become a more in-demand skill in the future, given what a visual culture exists today. Over the next decade, it’s anticipated that photographers will see job demand increase by 5% between 2022 and 2032, which is greater than the average for all professions.
Read on to learn more about the salary and other facets of a career as a photographer.
A photographer combines technical expertise with creativity and composition skills to produce photographic images. Photographers can get paid to take wedding, family, or pet portraits; cover news events; work for businesses and brands shooting products; or create art — among many other types of photography work.
Many photographers are also skilled in editing photos. If a photographer works for themselves, they can also be responsible for running their business and everything that entails, from advertising to accounting to operations. There are so many directions a photographer’s career can take. Some photographers also teach the art of photography, help plan creative direction for photo shoots, or use drone technology to capture shots from the sky.
💡 Quick Tip: Online tools make tracking your spending a breeze: You can easily set up budgets, then get instant updates on your progress, spot upcoming bills, analyze your spending habits, and more.
When they are earning an entry-level salary, how much money a photographer makes is typically on the low end of the spectrum. Their earnings will likely grow as they gain skills and experience and make connections in the industry.
The lowest 10% of photographers earn less than $12.98 per hourly pay. That may be a good starting point if you are wondering about starting salaries.
Keep in mind that photographers in different locations and areas of focus will make an array of salaries. For instance, someone who takes baby portraits for new parents in a small town will likely never earn as much as a high-fashion photographer in a major city who is being paid by corporate clients. The latter could make $100,000 a year or considerably more.
Recommended: What Trade Makes the Most Money?
The average salary for a photographer can depend a lot, as already noted, on where someone lives. While the median annual income for this role is $40,170, the following table illustrates how the state a photographer chooses to work in can impact their potential earnings and determine if it’s a high-paying job.
What is the Average Photographer Salary by State for 2023
State | Annual Salary | Monthly Pay | Weekly Pay | Hourly Wage |
---|---|---|---|---|
Oregon | $48,870 | $4,072 | $939 | $23.50 |
Alaska | $48,629 | $4,052 | $935 | $23.38 |
North Dakota | $48,622 | $4,051 | $935 | $23.38 |
Massachusetts | $48,041 | $4,003 | $923 | $23.10 |
Hawaii | $47,595 | $3,966 | $915 | $22.88 |
Washington | $46,501 | $3,875 | $894 | $22.36 |
Nevada | $45,979 | $3,831 | $884 | $22.11 |
South Dakota | $45,953 | $3,829 | $883 | $22.09 |
Colorado | $45,377 | $3,781 | $872 | $21.82 |
Rhode Island | $45,265 | $3,772 | $870 | $21.76 |
New York | $43,131 | $3,594 | $829 | $20.74 |
Delaware | $42,656 | $3,554 | $820 | $20.51 |
Vermont | $42,118 | $3,509 | $809 | $20.25 |
Virginia | $42,039 | $3,503 | $808 | $20.21 |
Illinois | $42,025 | $3,502 | $808 | $20.20 |
Maryland | $41,311 | $3,442 | $794 | $19.86 |
Nebraska | $40,429 | $3,369 | $777 | $19.44 |
Missouri | $40,178 | $3,348 | $772 | $19.32 |
California | $40,067 | $3,338 | $770 | $19.26 |
South Carolina | $39,831 | $3,319 | $765 | $19.15 |
Pennsylvania | $39,512 | $3,292 | $759 | $19.00 |
New Jersey | $39,430 | $3,285 | $758 | $18.96 |
Oklahoma | $39,153 | $3,262 | $752 | $18.82 |
Maine | $39,132 | $3,261 | $752 | $18.81 |
Wisconsin | $39,049 | $3,254 | $750 | $18.77 |
North Carolina | $39,009 | $3,250 | $750 | $18.75 |
New Hampshire | $38,424 | $3,202 | $738 | $18.47 |
Idaho | $38,328 | $3,194 | $737 | $18.43 |
Texas | $38,071 | $3,172 | $732 | $18.30 |
Kentucky | $37,948 | $3,162 | $729 | $18.24 |
Wyoming | $37,814 | $3,151 | $727 | $18.18 |
Minnesota | $37,716 | $3,143 | $725 | $18.13 |
Michigan | $37,565 | $3,130 | $722 | $18.06 |
New Mexico | $37,504 | $3,125 | $721 | $18.03 |
Indiana | $37,314 | $3,109 | $717 | $17.94 |
Ohio | $36,661 | $3,055 | $705 | $17.63 |
Arizona | $36,543 | $3,045 | $702 | $17.57 |
Connecticut | $36,357 | $3,029 | $699 | $17.48 |
Mississippi | $36,102 | $3,008 | $694 | $17.36 |
Iowa | $36,056 | $3,004 | $693 | $17.34 |
Montana | $35,992 | $2,999 | $692 | $17.30 |
Arkansas | $35,860 | $2,988 | $689 | $17.24 |
Alabama | $35,543 | $2,961 | $683 | $17.09 |
Utah | $35,026 | $2,918 | $673 | $16.84 |
Tennessee | $35,001 | $2,916 | $673 | $16.83 |
Kansas | $33,992 | $2,832 | $653 | $16.34 |
Georgia | $33,110 | $2,759 | $636 | $15.92 |
Louisiana | $32,930 | $2,744 | $633 | $15.83 |
West Virginia | $30,515 | $2,542 | $586 | $14.67 |
Florida | $29,303 | $2,441 | $563 | $14.09 |
💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.
While photographers can often choose to set their own rates, they are also usually self-employed and therefore responsible for securing their own benefits. For instance, they won’t have access to an employer-sponsored 401(k) plan or healthcare benefits. There are some exceptions to this rule. For example, if a photographer works for a large corporation or photo studio, they may receive access to traditional employee benefits like paid time off and a retirement plan contribution match.
Other considerations can be how a career as a photographer can impact your lifestyle. If you are a news photographer, you may find that you have to be available for extended periods, whenever a situation comes up that needs documenting. If you are a travel photographer, which can sound like a dream job, you likely won’t have a typical week-to-week schedule. And if you are a wedding photographer, you will likely be spending many weekends shooting ceremonies vs. kicking back with your family.
There are some photography jobs, such as taking pictures of a product, that may not involve that much social interaction, but many kinds of photography careers do involve working with people non-stop. For this reason, it may not be the best job for antisocial people.
The main advantage of a photographer’s salary is there is no real cap on how much they earn. For example, in-demand wedding photographers or photographers who license their images for products can all demand high rates for their work. On the flip side, their salaries are often not consistent, which can be very stressful. Also, when you are self-employed, taxes can take a bite out of your earnings.
Recommended: What Is Competitive Pay?
Working as a professional photographer can be a creatively fulfilling, fun, and lucrative career. Worth considering, though: How much a photographer stands to make depends a lot on their specialty, where they live, and their level of experience.
See exactly how your money comes and goes at a glance.
It is possible to earn $100,000 or more a year as a photographer — the sky really is the limit when it comes to income potential in this field. However, the median annual income for this role is $40,170, but photographers can earn more over time as they gain experience and a strong reputation in their industry.
Many people who pursue a career in photography do so because it is a creative pursuit they are truly passionate about. Many positions can provide flexibility and fun experiences (say, if you are a travel or wedding photographer).
It can be very hard to find a job as a photographer if you don’t have the skill set required to get the job done well. Taking some time to build a strong portfolio of your work and then marketing your business can make it much easier to get hired.
Photo credit: iStock/ivan101
SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.
*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
SORL0124030
Source: sofi.com
A home equity loan is a lump sum of money you can borrow at a fixed rate based on the equity, or ownership stake, in your home. If you already paid off 15% to 20% of your house, this one-time installment loan can be used to cover major expenses, from home renovations to paying off debt.
Home equity loans have fixed interest rates, so your monthly payments are predictable and easy to budget for. But because your home acts as collateral for the loan, you could risk foreclosure if you fall behind on repayments.
I’ve spoken with experts about the advantages and disadvantages of home equity loans, how they work and where to find the best rates. Here’s what I’ve uncovered.
Here are the average rates for home equity loans and home equity lines of credit as of March 27, 2024.
Loan type | This week’s rate | Last week’s rate | Difference |
---|---|---|---|
10-year, $30,000 home equity loan | 8.73% | 8.73% | None |
15-year, $30,000 home equity loan | 8.70% | 8.70% | None |
$30,000 HELOC | 9.01% | 8.99% | +0.02 |
Though home equity loan rates will vary depending on the lender and loan type, their rates are generally lower than personal loans or credit card annual percentage rates.
Home equity loan rates aren’t directly set by the Federal Reserve, but adjustments to the federal funds rate impact the borrowing cost for financial products like home equity loans and home equity lines of credit, aka HELOCs.
Since March 2022, the Fed has hiked its benchmark rate a total of 11 times in an attempt to slow the economy and bring inflation down, driving home equity loan rates up alongside. Though the Fed has kept interest rates steady since last summer, home equity loan rates have remained elevated for borrowers. Home equity rates are likely to stay high until the central bank begins cutting interest rates, projected for later this year.
With home equity loans, you tap into your equity without giving up the rate on your primary mortgage, making them a popular alternative to cash-out refinances. If you use a home equity loan to install solar panels or renovate your kitchen, you get the added benefit of increasing your home’s value.
“Most homeowners with mortgages in 2024 are choosing home equity loans or HELOCs, instead of a cash-out refinance, to avoid losing their attractive interest rates,” said Vikram Gupta, head of home equity at PNC Bank.
Lender | APR | Loan amount | Loan terms | Max LTV ratio |
---|---|---|---|---|
U.S. Bank | From 8.40% | Not specified | Up to 30 years | Not specified |
TD Bank | 7.99% (0.25% autopay discount included) | From $10,000 | 5 to 30 years | Not specified |
Connexus Credit Union | From 7.20% | From $5,000 | 5 to 15 years | 90% |
KeyBank | From 10.29% (0.25% autopay discount included) | From $25,000 | 1 to 30 years | 80% for standard home equity loans, 90% for high-value home equity loans |
Spring EQ | Fill out application for personalized rates | Up to $500,000 | Not specified | 90% |
Third Federal Savings & Loan | From 7.29% | $10,000 to $200,000 | Up to 30 years | 80% |
Frost Bank | From 7.3% (0.25% autopay discount included) | $2,000 to $500,000 | 15 to 20 years | 90% |
Regions Bank | From 6.75% to 14.125% (0.25% autopay discount included) | $10,000 to $250,000 | 7, 10, 15, 20 or 30 years | 89% |
Discover | 6.99% for 1st liens, 7.99% for 2nd liens | $35,000 to $300,000 | 10, 15, 20 or 30 years | 90% |
BMO Harris | From 8.84% (0.5% autopay discount not included) | From $25,000 | 5 to 20 years | Not specified |
Good for nationwide availability
U.S. Bank is the fifth largest banking institution in the US. It offers both home equity loans and HELOCs in 47 states. You can apply for a home equity loan or HELOC through an online application, by phone or in person. If you want a loan estimate for a home equity loan without completing a full application, you can get one by speaking with a banker over the phone.
Good for price transparency
Primarily operating on the East Coast, TD Bank offers home equity loans and HELOCs in 15 states. You can apply for a TD Bank home equity loan or HELOC online, by phone or by visiting a TD Bank in person. The online application includes a calculator that will tell you the maximum amount you can borrow based on the information you input. You can also see a full breakdown of rates, fees and monthly payments. No credit check is required for this service.
Good branch network
Connexus Credit Union operates in all 50 states, but it offers home equity loans and HELOCs in 46 states (excluding Alaska, Hawaii, Maryland and Texas). The credit union has more than 6,000 local branches. To apply for a home equity loan or HELOC with Connexus, you can fill out a three-step application online or in person. You won’t be able to see a personalized rate or product terms without a credit check.
Good online application user experience
Based in Cleveland, KeyBank offers home equity loans to customers in 15 states and HELOCs to customers in 44 states. Aside from a standard home equity loan, KeyBank offers a few different HELOC options. The KeyBank application allows you to apply for multiple products at one time. If you’re not sure whether KeyBank loans are available in your area, the application will tell you once you input your ZIP code. If you’re an existing KeyBank customer, you can skim through the application and import your personal information from your account.
Good option for high debt-to-income ratio limits
Spring EQ was founded in 2016 and serves customers in 38 states. Spring EQ offers home equity loans and HELOCs. Spring EQ doesn’t display rates for its home lending products online — you must complete an application to see your personalized rate. The Spring EQ loan application process is simple though. Customers can see an extensive breakdown of their loan term and rate options without needing to undergo a credit check or provide their Social Security number.
Good option for rate match guarantee
Third Federal Savings & Loan first opened in 1938. Today, the bank offers home equity loans in eight states and HELOCs in 26 states. Third Federal offers a lowest rate guarantee on its HELOCs and home equity loans, meaning Third Federal will offer you the lowest interest rate relative to other similar lenders or pay you $1,000. You can apply for a home equity loan or HELOC on the Third Federal website. You won’t have to register an account to apply, but you’re still able to save your application and return to it later.
Good option for Texas borrowers
Frost Bank’s home equity loans and HELOCs are only available to Texas residents. You can apply for a home equity loan or HELOC on the Frost Bank website, but you’ll need to create an account. According to the website, the application will only take you 15 minutes.
Good rate discounts
Regions Bank is one of the nation’s largest banking, mortgage and wealth management service providers. Regions offers home equity loans and HELOCs in 15 states. You can apply for a Regions home equity loan or HELOC online, in person or over the phone. You’ll have to create an account with Regions to apply. Before you create an account, though, you can use the bank’s own rate calculator to estimate your rate and monthly payment.
Good option for no fees or closings costs
Discover is known primarily for its credit cards, but it also offers home equity loans — available in 48 states. The lender does not offer HELOCs at all. You can apply for a home equity loan from Discover online or over the phone. The application process takes approximately six to eight weeks in total, according to Discover’s website.
Good option for second liens
BMO Harris products and services are available in 48 states (all but New York and Texas). BMO Harris offers home equity loans and three variations of a HELOC. You can apply for a home equity loan or HELOC online or in person, but in order to get personalized rates, you’ll have to speak with a representative on the phone. Getting personalized rates doesn’t require a hard credit check.
Home equity loans from BMO Harris are only available as second liens. If you have already paid off your mortgage, a rate-lock HELOC from BMO Harris may be a better option.
A home equity loan is a fixed-rate installment loan secured by your home as a second mortgage. You’ll get a lump sum payment upfront and then repay the loan in equal monthly payments over a period of time. Because your house is used as a collateral, the lender can foreclose on it if you default on your payments.
Most lenders require you to have 15% to 20% equity in your home to secure a home equity loan. To determine how much equity you have, subtract your remaining mortgage balance from the value of your home. For example, if your home is worth $500,000 and you owe $350,000, you have $150,000 in equity. The next step is to determine your loan-to-value ratio, or LTV ratio, which is your outstanding mortgage balance divided by your home’s current value. So in this case the calculation would be:
$350,000 / $500,000 = 0.7
In this example, you have a 70% LTV ratio. Most lenders will let you borrow around 75% to 90% of your home’s value minus what you owe on your primary mortgage. Assuming a lender will let you borrow up to 90% of your home equity, you can use the formula to see how that would be:
$500,000 [current appraised value] X 0.9 [maximum equity percentage you can borrow] – $350,000 [outstanding mortgage balance] = $100,000 [what the lender will let you borrow]
A standard repayment period for a home equity loan is between five and 30 years. Under the loan, you make fixed-rate payments that never change. If interest rates go up, your loan rate remains unchanged.
Second mortgages such as home equity loans and HELOCs don’t alter a homeowner’s primary mortgage. This lets you borrow against your home’s equity without needing to exchange your primary mortgage’s rate for today’s higher rates.
Home equity loans have fixed interest rates, which is a positive if you’re looking for predictable monthly payments. The rate you lock in when you take out your loan will be constant for the entire term, even if market interest rates rise.
A home equity loan is a good choice if you need a large sum of cash all at once. You can use that cash for anything you’d like — it doesn’t have to be home-related.However, some uses make more sense than others.
Experts don’t recommend using a home equity loan for discretionary expenses like a vacation or wedding. Instead, try saving up money in advance for these expenses so you can pay for them without taking on unnecessary debt.
One lump sum payment of total loan up front.
Fixed interest rate, meaning you won’t have to worry about your rate rising over the repayment period.
Typically lower interest rate than credit cards or personal loans.
Little to no restrictions on what you can use the money for.
Your home is used as collateral, meaning it can be taken from you if you default on the loan.
If you’re still paying off your mortgage, this loan payment will be on top of that.
Home equity loans can come with closing costs and other fees.
May be hard to qualify for if you don’t have enough equity.
Home equity loans and HELOCs are similar but have a few key distinctions. Both let you draw on your home’s equity and require you to use your home as collateral to secure your loan. The two major differences are the way you receive the money and how you pay it back.
A home equity loan gives you the money all at once as a lump sum, whereas a HELOC lets you take money out in installments over a long period of time, typically 10 years. Home equity loans have fixed-rate payments that will never go up, but most HELOCs have variable interest rates that rise and fall with the prime rate.
A cash-out refinance is when you replace your existing mortgage with a new mortgage, typically to secure a lower interest rate and more favorable terms. Unlike a traditional refinance, though, you take out a new mortgage for the home’s entire value — not just the amount you owe on your mortgage. You then receive the equity you’ve already paid off in your home as a cash payout.
For example, if your home is worth $450,000, and you owe $250,000 on your loan, you would refinance for the entire $450,000, rather than the amount you owe on your mortgage. Your new cash-out refinance home loan would replace your existing mortgage and then offer you a portion of the equity you built (in this case $200,000) as a cash payout.
Both a cash-out refi and a home equity loan will provide you with a lump sum of cash that you’ll repay in fixed amounts over a specific time period, but they have some important differences. A cash-out refinance replaces your current mortgage payment. When you receive a lump sum of cash from a cash-out refi, it’s added back onto the balance of your new mortgage, usually causing your monthly payment to increase. A home equity loan is different — it doesn’t replace your existing mortgage and instead adds an additional monthly payment to your expenses.
Although it varies by lender, to qualify for a home equity loan, you’re typically required to meet the following criteria:
You’ll want to consider what type of financial institution best suits your needs. In addition to mortgage lenders, financial institutions that offer home equity loans include banks, credit unions and online-only lenders.
“Select a lender that makes you feel comfortable and informed with the home equity loan process,” said Rob Cook, vice president of marketing, digital and analytics for Discover Home Loans. “Look at what tools a lender makes available to borrowers to help inform their decision. For many borrowers, being able to apply and manage their application online is important.”
One option is to work with the lender that originated your first mortgage as you already have a relationship and a history of on-time payments. Many banks and credit unions also offer discounted rates and other benefits when you become a customer.
Some lenders offer lower interest rates but charge higher fees (and vice versa). What matters most is your annual percentage rate because it reflects both interest rate and fees.
Ensure the specific terms of the loan your lender is offering make sense for your budget. For example, be sure the minimum loan amount isn’t too high — be wary of withdrawing more funds than you need. You also want to make sure that your repayment term is long enough for you to comfortably afford the monthly payments. The shorter your loan term, the higher your monthly payments will be.
“Costs and fees are an important consideration for anyone who is looking for a loan,” Cook said. “Homeowners should understand any upfront or ongoing fees applicable to their loan options. Also look for prepayment penalties that might be associated with paying off your loan early.”
No matter what, it’s important to talk to numerous lenders and find the best rate available.
Applying for a home equity loan is similar to applying for any mortgage loan. You’ll need both a solid credit score and proof of enough income to repay your loan.
1. Interview multiple lenders to determine which lender can offer you the lowest rates and fees. The more companies you speak with, the better your chances of finding the most favorable terms.
2. Have at least 15% to 20% equity in your home. If you do, lenders will then take into account your credit score, income and current DTI to determine whether you qualify as well as your interest rate.
3. Be prepared to have financial documents at the ready, such as pay stubs and Form W-2s. Proof of ownership and the appraised value of your home will also be necessary.
4. Close on your loan. Once you submit your application, the final step is closing on your loan. In some states, you’ll have to do this in person at a physical branch.
As of March 27, average home equity loan rates are 8.73% for a $30,000 10-year home equity loan and 8.70% for a $30,000 15-year home equity loan — higher than the average rate for a 30-year fixed rate mortgage, which is currently 7.01%. Both home equity rates and mortgage rates started off at historic lows at around 3% at the beginning of 2022 and have been consistently climbing in response to the Federal Reserve aggressively raising the benchmark interest rate.
Most lenders will allow you to borrow anywhere from 15% to 20% of your home’s available equity. To calculate your home equity, subtract your remaining mortgage balance from the current appraised value of your home. How much equity a bank or lender will let you take out depends on a number of additional factors such as your credit score, income and DTI ratio. For most homeowners, it can take five to 10 years of mortgage payments to build up enough tappable equity to borrow against.
A home equity loan can affect your score positively or negatively depending on how responsibly you use it. As with any loan, if you miss or make late payments, your credit score will drop. The amount by which it will drop depends on such factors as whether you’ve made late payments before. However, HELOCs are secured loans that are backed by your property, so they tend to affect your credit score less because they’re treated more like a car loan or mortgage by credit-scoring algorithms.
Lenders are currently offering rates that start as low as 5% to 6% for borrowers with good credit, but rates can vary depending on your personal financial situation. A lender will base your interest rate on how much equity you have in your home, your credit score, income level and other aspects of your financial life such as your DTI ratio, which is calculated by dividing your monthly debts by your gross monthly income.
Home equity loans can be used for anything you choose to spend the money on. Typical life expenses that people usually take out home equity loans for are to cover expenditures such as home renovations, higher education costs like tuition or to pay off high-interest charges like credit card debt. There’s a bonus for using your loan for home improvements and renovations: the interest is tax deductible.
You can also use a home equity loan in the event of an emergency like unplanned medical expenses. Whatever you chose to use your loan for, keep in mind that taking out a large sum of money that accrues interest is an expensive choice to carefully consider, especially because you’re using your home as collateral to secure the loan. If you can’t pay back the loan, the lender can seize your home to repay your debt.
We evaluated a range of lenders based on factors such as interest rates, APRs and fees, how long the draw and repayment periods are, and what types and variety of loans are offered. We also took into account factors that impact the user experience such as how easy it is to apply for a loan online and whether physical lender locations exist.
Source: cnet.com
If you’re an 18-year-old with no credit history, you can get a loan, but your choices may be more limited. You may have to tap into alternative options and sources, such as loans with a cosigner.
That’s because lenders like to lend to people with a history of borrowing and on-time payments. Oftentimes, young people just starting out have no credit history. This means they have no credit accounts in their name or haven’t used credit for a long period of time and the information has been removed from their credit history. Without credit, it can be difficult to access loans or credit cards, rent an apartment or buy a house, and obtain certain subscriptions.
Let’s take a closer look at loans for 18-year-olds.
Two important benefits of getting a loan as an 18-year-old include gaining access to funds and building up credit history.
The obvious benefit of getting loans as a young person is that you will have access to the money you need. Depending on the type of loan you get, you may be able to use the funds for a variety of purposes, including:
• Education
• Purchasing big-ticket items, such as a car
• Personal expenses, such as medical or wedding expenses
Loans allow you to start building up your credit history, which can help you meet goals such as:
• Getting a cellphone
• Accessing utilities in your name
• Qualifying for a credit card
• Getting good rates on insurance, a mortgage, or auto loan
Plus, establishing a strong record of borrowing and repayment can position you well for future borrowing.
💡 Quick Tip: Need help covering the cost of a wedding, honeymoon, or new baby? A SoFi personal loan can help you fund major life events — without the high interest rates of credit cards.
While there are benefits to getting a loan when you’re 18, there are downsides to consider as well. Let’s take a closer look at a few.
You may not be able to borrow a large loan amount when you’re young and just starting out. For example, if you want to purchase a $500,000 home as an 18-year-old and have no credit history, you’ll likely have difficulty qualifying for this type of loan.
It’s possible to get a loan with no credit as a young person, but lenders may charge a higher interest rate than if you had an established credit history.
Why is that the case? Lenders try to assess your risk level when you apply for anything from a personal loan to a credit card. If they can’t see evidence that you have successfully made loan payments, they may not grant you a loan or they may compensate for that risk by charging you a higher interest rate.
Some lenders consider other aspects of your profile beyond credit history, including whether you can comfortably afford your payments.
According to a consumer debt study conducted by Experian, Generation Z (those aged 18-26) had a non-mortgage debt average of $15,105 in 2023. This includes credit cards, auto debt, personal loans, or student loans.
While carrying any level of debt can be stressful, there are also financial implications to consider. For starters, if you don’t pay off your balance in a timely way, interest can start to build. Credit cards tend to carry higher interest rates than home or auto loans. This means wiping out credit card debt could take a long time if you only pay the minimum amount.
Then there are potential penalties to be mindful of, such as late fees. You may also face collection costs if you don’t pay your bills, which will remain on your credit report and potentially impact your credit score for years.
Recommended: Why Do People Choose a Joint Personal Loan?
Not all lenders require a cosigner, so be sure to ask if you’ll need one. In most cases, a loan without a cosigner will likely have a lower loan amount and a higher interest rate.
What exactly is a cosigner? Simply put, it’s a person who agrees to take responsibility for a loan alongside the primary borrower. If one person fails to make payments, it will affect the other person’s credit score.
Applying for a loan with a co-borrower or cosigner can be a quick way to get accepted for a loan.
Like many financial processes, applying for a loan involves multiple steps. Here’s a general idea of what’s involved:
• Pre-approval: Pre-approval means that your lender takes a look at your qualifications (including a soft credit check). A soft credit check is an inquiry of your credit report.
• Application: In this part of the process, you submit a formal application, and your lender will verify your information.
• Conditional approval: You may also get conditional approval for your loan, which means the lender may likely approve you to get a loan as long as you meet all the requirements.
• Approval or denial: Finally, you’ll either get approved or denied for the loan.
Your lender should be clear with you at every step of the application process.
Recommended: How to Get Approved for a Personal Loan
There are no hard-and-fast requirements that encompass private lender requirements. However, lenders generally look at an applicant’s credit score, debt, and income.
There’s no universally set minimum credit score requirement for a loan because rules can vary by lender. It’s worth noting that low-to-no-credit borrowers may be able to access a loan.
Lenders will check to see how much debt you have and calculate your debt-to-income (DTI) ratio, which ideally should be less than 36%. To figure out your DTI, lenders add up your debts and divide that amount by your gross income.
Lenders will also look at your income to ensure you can make monthly payments on your loan. This can include income from your job, a spouse’s income, self-employment, public assistance, investments, alimony, financial aid for school, insurance payments, and an allowance from family members.
If you’re ready to get a loan as a young person, you can take steps to help boost your odds of getting approved.
Show the lender what you’ve saved in your accounts, which may include:
• High-yield savings accounts
• Certificates of deposit (CDs)
• Money market account
• Checking or savings accounts
• Treasuries
• Bonds, stocks, real estate, and other investments
Demonstrating savings can help you show that you can repay your loan.
Lenders will likely require you to provide proof of income so they can see how you’ll pay for your loan. But remember, this doesn’t mean just the money you earn from a job. Consider other types of income you receive. For instance, you may not initially think of alimony as a source of income, but a lender might.
Lenders may deny your loan if you choose to borrow more money than you can realistically repay. So if you’re young and have no credit history, you may be able to increase your chances of getting a loan if you apply for a lower amount. You may also want to consider this strategy if you’re denied for a loan and want to reapply.
💡 Quick Tip: Just as there are no free lunches, there are no guaranteed loans. So beware lenders who advertise them. If they are legitimate, they need to know your creditworthiness before offering you a loan.
While most 18-year-olds don’t have a large income or lengthy credit history, that doesn’t mean you can’t qualify for a personal loan. Just remember that funding choices may be more restricted, and you might not qualify for a large amount. If you’re having trouble getting approved, you may want to consider asking someone to cosign the loan, showing proof of income and savings, or applying for less money.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.
SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.
You can get a loan without a job. However, you’ll need to show a lender that you have some form of consistent income, such as through investments, alimony, financial aid, or another source of cash flow.
Yes, loans do exist for 18-year-olds with no credit history. But note that even if you qualify for a loan without credit, it may be a lower amount than you could qualify for if you had a lengthy credit history. You may also not be able to get a low interest rate.
Yes, 18-year-olds can get a loan. Your age matters less than your credit history and credit score — or the availability of a cosigner. Keep in mind that you may have trouble getting a loan if you don’t meet a lender’s qualifications. Contact a lender to learn more about your options.
If you want to start building credit, it may be worth exploring a secured credit card. Similar to a debit card, this type of credit card requires you to put down a cash deposit to insure any purchases you make. For example, putting down a $1,000 deposit, and that becomes your starting credit line on your card.
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Source: sofi.com