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What a person does with their money is their business, right? Not always. Lenders are indeed interested in how borrowers plan to use the funds they’re loaned — in fact, the reason for a loan is one of the application questions.

But does loan purpose really matter? Yes. In some cases, your loan purpose can impact whether or not you receive the loan, as well as your loan terms.

Here’s what you need to know when it comes to different uses and types of personal loans, and the best reasons to give for the purpose of your loan.

What Is the Purpose of a Loan?

At its most basic, the purpose of a loan is the reason the applicant wants to borrow money. Even though there are many acceptable uses of personal loan funds, including consolidating debt, paying for a large purchase, or covering the cost of a home renovation, the loan application will likely include a section asking why the applicant is requesting the loan.


💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. One question can save you many dollars.

Why Does the Purpose of a Loan Matter?

Banks consider a number of factors when evaluating an applicant for a loan, such as the amount asked for and the applicant’s credit and employment history, to assess the potential risk of lending money to an individual.

But the borrower’s reason for needing a loan can be a significant factor, too. One reason why is that many financial institutions have certain limitations on how the money they lend can be used. For example, a lender may not allow the proceeds of a personal loan to be used to pay for college tuition, repay another student loan, purchase a home, or start a business. As a result, the best reason to give when applying for a personal loan is one that the lender allows.

The purpose of the loan you’re seeking can also impact the size of the loan the lender will grant, as well the interest rate and term of the loan.

Recommended: What Are the Common Uses for Personal Loans?

How Does Loan Purpose Affect Your Loan?

Your reason for getting a personal loan not only helps determine whether or not you’ll be approved, but can have an influence on the type of loan you can get, as well as the loan amount, and even the interest rate.

Some lenders focus on loans for certain purposes, such as credit card consolidation, while others offer an array of personal loan products that are each tailored to specific use, such as home improvement loans, medical and dental loans, wedding loans, or IVF loans. Each loan type will have loan amounts and terms designed to fit that particular need.

Does the Purpose of a Loan Influence Interest Rates?

It can. Some lenders may set interest rates based solely on the loan amount, the loan term, and the creditworthiness of the applicant. Other lenders might use those factors, plus have interest rate ranges for different loan purposes. For example, a lender might offer better rates (and longer terms) for home improvement loans than they do for debt consolidation loans.

To make sure you’re getting the best deal, you’ll want to shop around and compare interest rates, terms, and fees from lenders that are offering personal loans that match your needs. It’s also a good idea to review credit requirements, such as your credit score, history and income qualifications to ensure you meet the lender’s minimums.

Recommended: Typical Personal Loan Requirements Needed for Approval

Common Reasons for Getting a Loan

People typically have something particular in mind when they decide to borrow money. And while every person sees themselves and their individual needs as unique, it turns out the reasons for taking out a personal loan tend to fall into some fairly common buckets. Here a closer look at some of the most common reasons for getting a personal loan.

Debt Consolidation

The goal of debt consolidation is to save money on interest payments by consolidating high-interest credit card debt with a personal loan with a lower interest rate. If you have strong credit, you may be able to get a debt consolidation loan for a significantly lower rate than you are paying on your credit card balances.

Medical Bills

While health insurance can help pay for expected and unexpected medical bills, it usually doesn’t cover everything. And even when a medical expense is covered, insurance can still leave you with a significant portion of the bill to pay on your own. If that’s money you don’t have on hand right now, a medical loan can help ease the strain on your personal finances.

If you already have several medical debts, a low-interest personal loan could be a good way to consolidate those payments.

Recommended: How To Pay for Medical Bills You Can’t Afford

Home Improvements

While you might first consider a home equity loan or line of credit to cover a home repair or improvement, in some cases, a personal loan might be a better choice. This might be the case if you only need a smaller amount, or you need cash quickly (say your air conditioning or heating system goes out), since you can often get the funds from a personal loan within a few days.

Home improvement loans are also unsecured, making them less risky than home equity loans or credit lines, which use your home as collateral.


💡 Quick Tip: With home renovations, surprises are inevitable. Not so with SoFi home improvement loans. There are no fees required, and no surprises.

Something Else

There are many other reasons for taking out a personal loan, such as helping a family member, funding a move, or paying for a wedding or funeral.

Planned vs Unexpected Expenses

Some expenses can be expected and planned for accordingly, while others come up out of nowhere and require a sudden influx of cash. Either way, a personal loan can be a convenient way to finance these expenses without disrupting your savings or relying on high-interest credit cards.

What to Consider

Planned expenses, such as home renovations, weddings, or vacations, can benefit from a personal loan’s predictable repayment schedule. You can budget for the monthly payments and avoid dipping into your savings or using high-interest credit cards. However, you’ll want to factor the cost of the loan into the total cost of your purchase or project to see if it makes sense to finance it now or wait until you have enough savings.

Unexpected expenses, on the other hand, by nature arise suddenly and without warning. Medical emergencies, car repairs, or home repairs are examples of unexpected expenses that may require immediate financial assistance. Personal loans can provide a quick source of funds to cover these expenses, but it’s essential to carefully review the terms and conditions of the loan.

Smaller vs Larger Expenses

How much money you can get with a personal loan will depend on the lender, your credit score, income, debt-to-income ratio, and other factors, but the max amount you can typically get ranges from $500 to $100,000. This wide range can make a personal loan a viable source of financing for both small and large expenses.

What to Consider

When using a personal loan for smaller expenses, it’s important to borrow only what you need and can afford to repay. You generally want to avoid taking out any more than needed, as this can lead to unnecessary debt. It’s also a good idea to compare loan offers to find the most competitive interest rates and terms.

For larger expenses, such as home renovations or debt consolidation, personal loans can provide a lump sum of money with a fixed interest rate and repayment term. This can help you budget for the expense and avoid the pitfalls of high-interest credit card debt. But be sure to compare loan offers and choose the one that best suits your needs.

Recommended: 11 Types of Personal Loans & Their Differences

One-time vs Ongoing Expenses

Personal loans can also be used to cover one-time expenses, such as a major purchase. They can also be used to cover ongoing expenses, like a wedding, medical bills, or a home renovation. However, for ongoing expenses, you might want to consider a personal line of credit as opposed to a personal loan.

What to Consider

Funds from a personal loan are disbursed in one lump sum, and interest is paid on that sum according to a fixed repayment schedule.

If the loan purpose is an expense that is ongoing or variable, a personal line of credit might make sense financially, since interest is only charged on the amount drawn at any one time, and money borrowed can be repaid on a more flexible basis. Lines of credit tend to come with variable instead of fixed interest rates, however, so the overall amount due may be hard to predict.

Loans To Pay Off Other Loans

A common use for personal loans is to consolidate high-interest debt. By taking out a personal loan to pay off other loans or credit card debt, you can potentially lower your overall interest rate and simplify your monthly payments.

What to Consider

When using a personal loan to pay off other loans, consider any origination fees or prepayment penalties associated with the new loan. It’s also important to calculate the total cost of the new loan, including interest rates and fees, to ensure that it offers a better financial solution than your existing debt. Additionally, consider your repayment ability to ensure that you can comfortably afford the new loan payments.

Personal Loan Approval

The length of time from application to personal loan approval can vary by lender. On average, approval can take up to three business days for an online lender and up to seven business days for a bank or credit union. Some online lenders, though, offer same-day approval.

Some things that can make this a quicker process are making sure your credit report is free of errors and having required documents ready when the lender requests them. Loan applications that don’t have unusual circumstances, e.g., self-employment income verification or a high debt-to-income ratio, are more likely to be approved faster than those that do.

Once a personal loan application has been approved by the lender, the funds may be made available to the borrower in just a few days or up to a week, depending on the type of lender. Some online lenders may disburse funds the same day as approval.

The Takeaway

There are, indeed, different types of loans for different purposes. Applicants may have their own reasons for wanting a loan, but lenders will want to know what the funds will be used for. There may be certain loans better suited to certain funding needs than others, and a lender will likely want to make sure the loan suits the purpose.

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.

FAQ

Why is it important to know the purpose of a loan?

Lenders may want to know the purpose of a loan so they can assess the risk of lending. Also, some lenders have limitations on how the money can be used. Borrowers will also want to consider the purpose of a loan to make sure they apply for the right type of loan for their needs.

What are examples of the purpose of a loan?

There are many reasons why people apply for personal loans. These include: debt consolidation, medical and dental expenses, IVF treatment, home repairs/improvements, weddings, large purchases (like appliances or furniture), car repairs, and more.

What happens if I use my loan for a different purpose?

Some loans are meant to be used for a certain purpose, such as auto loans or mortgages. Personal loans, however, can be used for many purposes, and a lender may not check to see if the funds are being used as intended on the loan application. But it’s a good idea to review the loan application to understand any restrictions on the use of the funds.

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.

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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.

Benefits of 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.

Access to Funds

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

Build Up Your Credit History

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.

Cons of Loans for 18-Year-Olds

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.

Limited Loan Amounts

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.

Potentially High Rates

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.

Risk of Getting Into Debt

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?

Is a Co-Signer Required When Applying for Loans as an 18-Year-Old?

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.

Understanding Your Loan Status

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

Private Lender Loan Requirements for 18-Year-Olds

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.

Credit Score

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.

Debt and Income

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.

Tips for Getting Loans as an 18-Year-Old

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 Your Savings

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.

Show Proof of Income

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.

Apply for a Lower Amount

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.

The Takeaway

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.

FAQ

Are there loans for 18-year-olds without a job?

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.

Are there loans for 18-year-olds without credit?

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.

Can I get a loan as an 18-year-old?

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.

How can I build credit as an 18-year-old?

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.

Photo credit: iStock/SeventyFour

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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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.

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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There’s a saying that you have to spend money to make money. But what if you can’t get the money you need for a significant purchase, such as a car or a house?

Accessing credit can be challenging for borrowers who haven’t established a credit history or have mismanaged debt in the past. One option to consider: credit-builder loans.

This financial product is designed to help people with limited or poor credit histories access a modest loan amount and increase their credit scores by repaying it over time. A credit-builder loan doesn’t require a credit score for borrowers to qualify. And it provides an opportunity to restore your credit through affordable loan payments.

Here’s a closer look at this type of loan.

How Does a Credit-Builder Loan Work?

Credit-building loans use monthly repayments to help credit-challenged borrowers build credit. In other words, it’s a personal loan to build credit. Here’s a breakdown of how they work.

First, the primary purpose of a credit-builder loan is for borrowers to demonstrate responsible borrowing behavior over time. As a result, this loan type doesn’t give the borrower a large sum to immediately use, as with a traditional loan.

Instead of providing an upfront lump sum to the borrower, a credit-builder loan requires the lender to deposit the loan amount in an interest-bearing account. The borrower can’t access the funds until they pay off the loan through monthly installments. These loans range from amounts of $300 to $1,000.

Remember, credit-builder loans usually have an interest rate and fees. Therefore, your monthly payment will incorporate the principal, loan origination fees, and interest. The lender might return some of the interest to you at the end of the loan, but every lender differs on the specifics. Therefore, it’s vital to carefully read the terms and conditions of the loan agreement to understand the loan’s total cost and the perks.

The credit-building loan term typically ranges from 6 months to 2 years. Once the loan matures and you’ve made all the required payments, you’ll receive the amount (minus any interest or fees per the loan terms) in the collateral account.

Lastly, building credit takes time, so patience and consistency are key. Improving your credit through this loan can open up opportunities for future loans, credit cards, and other financial products. However, only some financial institutions offer credit-builder loans, so you may need to shop around to find one.


💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. SoFi personal loans come with no-fee options, and no surprises.

How Can a Credit-Builder Loan Help You Build Credit?

When you take out a credit-building loan, you make monthly payments towards the total amount. Your lender reports your payments to the credit bureaus, contributing to a higher credit score.

The low borrowed amount (also called the principal) makes the payments small and manageable. This feature helps borrowers with limited resources successfully pay the loan. Late payments and failure to pay the loan will hurt your credit, so it’s crucial to pay on time and take on a loan with affordable payments.

How to Apply for a Credit-Builder Loan

Applying for a credit-builder loan involves gathering information and choosing the option that best fits your circumstances. Here are the steps you should take.

Check Your Credit Report

Before applying for a credit-builder loan, it’s a smart move to check your credit report. You can get a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once a year through AnnualCreditReport.com. Reviewing your report will help you understand your current credit situation and set goals.

Research Lenders

Not all financial institutions offer credit-builder loans, so you’ll need to research various banks, credit unions, and online lenders. It’s recommended to find a lender that reports to all three credit bureaus to ensure the loan gives you the maximum benefit.

Then, you can ask each lender for information about their credit-builder loan products. Carefully read and understand the terms and conditions of the available loans. Pay attention to details such as the interest rate, fees, monthly payment amount, length of the loan term, and how much accrued interest you’ll receive at the end.

Gather Necessary Documents and Apply

Different lenders have different application requirements, but generally, you will need to provide:

•   Personal identification (e.g., driver’s license, passport)

•   Social Security number

•   Proof of income or employment

•   Information about your current financial situation

•   Monthly housing payment amount

•   References

Remember, a conventional credit check might not be necessary to qualify. Instead, the lender can review your banking history. Positive banking activity such as a checking account with a consistent balance can help your application. On the other hand, a history of bounced checks and unpaid loans can hinder your application.

Make On-Time Payments

If the lender approves your application and sets up the credit-builder loan, you’ll start making monthly payments on the agreed-upon date. Doing so will allow you to build a positive credit history.

Repay the Loan in Full

If you repay the loan successfully, you’ll finish in a span between six months and two years, depending on the loan. After you make the final payment, you’ll receive the principal plus any applicable interest. In addition, your credit history will reflect the on-time payments you worked hard to make.

Credit-Builder Loan Requirements

There are no credit score requirements for credit-builder loans because the goal is for borrowers to improve substandard credit histories. That being said, lenders may charge fees to provide the loan and impose requirements regarding your banking habits.

With credit-builder loans, lenders prefer borrowers with a banking history that demonstrates healthy financial practices. For instance, writing checks that clear instead of bounce is helpful for your application. In addition, little debt and a positive bank account balance are favorable markers. Lenders usually use a borrower activity report from a company like ChexSystems to review this information.

Is a Credit-Builder Loan a Good Idea?

A credit-builder loan can be a good idea for individuals with limited or poor credit histories. It’s essentially a personal loan to build credit. For example, if you’re new to credit and have little or no credit history, a credit-builder loan can help you establish a positive credit history.

Similarly, if you’ve had past financial difficulties that have resulted in a lower credit score, a credit-builder loan can be a tool for gradually boosting your credit score.

However, existing high debt balances may disqualify you from a credit-builder loan. This type of loan may also be insufficient in these situations and exacerbate your current problems because it adds another monthly payment to the pile.

Remember, using a personal loan to build credit can take time, so it’s crucial to be patient and not expect immediate results. It may take several months or even longer to see significant improvements in your credit score with this loan type.

In addition, the payments will work against you if you’re late, so the loan is only beneficial if you can afford the extra monthly expense. Lastly, you can’t access the borrowed funds until you pay off the loan, meaning you won’t receive money for immediate expenses after applying. So, if you’re looking for an infusion of cash to shore up your bank account or consolidate debt, a different loan product is likely a better idea.


💡 Quick Tip: Swap high-interest debt for a lower-interest loan, and save money on your monthly payments. Find out why SoFi credit card consolidation loans are so popular.

The Takeaway

A credit-builder loan is an effective tool for individuals aiming to build their credit profile. By emphasizing responsible borrowing behavior over time, this type of loan differs from conventional loans, as the loan amount is securely held in an interest-bearing account until you pay it off through monthly installments.

This loan type can benefit new borrowers without a credit history. However, it may not be suitable if you have existing high debt balances or need immediate financial assistance. Ultimately, understanding your financial circumstances and goals will help determine whether a credit-builder loan is the right choice for you.

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.

Photo credit: iStock/Weekend Images Inc.

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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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.

SOPL1023015

The average cost of a dozen eggs in the U.S. is $3, according to data from the U.S. Bureau of Labor Statistics (BLS). Though higher than in previous years, it’s still lower than the $4.82 consumers paid on average in January of 2023, when concerns about egg shortages sent the cost of eggs skyrocketing.

Why does knowing the cost of a dozen eggs today matter? If you’re trying to manage your household budget, then keeping food costs as low as possible might be a priority. Where you live can play a part in determining how much you’ll pay for a dozen eggs.

What Is the Average Cost of a Dozen Eggs Today?

On average, Americans are paying $3 for a dozen Grade A large eggs, based on the BLS data. That price reflects the most recent Consumer Price Index (CPI) data available as of February 2024. The CPI Consumer Price Index tracks prices for a basket of consumer goods and services over time.

In tracking egg price data, the CPI looks at average numbers by city, rather than state. Prices are based on the cost of a dozen eggs only and don’t take into account pricing for smaller or larger quantities of eggs sold, or pricing for different sizes of eggs. The CPI’s egg price data offers a snapshot of how egg prices have moved up or down over time. While prices increased sharply in the beginning of 2023, the average cost of a dozen eggs has since declined. Whether you live alone or are supporting a family, these types of fluctuations can impact your grocery budget.

It’s important to keep in mind that average reflects all prices from high to low, while median reflects the middle price. Median prices for eggs or other consumer goods and services may be higher than the average price.


💡 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.

Average Cost of Eggs by State for 2023

If you’re interested in what is the average cost of a dozen eggs by state, you might be surprised at just how much prices can vary from one location to the next. The following table breaks down the average cost of a dozen eggs in all 50 states, according to pricing data from Instacart collected in December 2022. Note that the figures below were captured during the egg shortage, when prices were high, and may not reflect the latest CPI price data.

Where the Cost of Eggs Is Highest

As evidenced by the price data, some states are more expensive than others when it comes to what you’ll pay for a dozen eggs on average. In descending order, here are the 10 states that had the highest cost overall for a dozen eggs:

•   Hawaii

•   Florida

•   Alabama

•   Nevada

•   California

•   Arizona

•   Georgia

•   Wyoming

•   Maine

•   Colorado

In each of those states, shoppers paid $5.70 or more on average for a dozen eggs. Hawaii is the most expensive state to buy eggs, with the average cost of a dozen eggs nearing $10.

Where the Cost of Eggs Is Lowest

Where is the average cost of a dozen eggs the cheapest? Shoppers paid the least for a dozen eggs in these states:

•   Missouri

•   Nebraska

•   Indiana

•   Ohio

•   Kansas

•   Iowa

•   Kentucky

•   Pennsylvania

•   Alaska

•   West Virginia

In these states, the average cost of eggs was below $5 per dozen. As you can see, most of these states are located in the central, southern, and eastern U.S., though Alaska is the outlier. Assuming food costs are lower overall in these states, the average grocery budget for a family of 5 is likely to be less compared to the states where eggs are more expensive.

Why Did the Cost of Eggs Increase

The spike in egg prices that peaked in 2022 was largely fueled by scarcity. An outbreak of avian flu sent egg production into decline as more than 43 million laying hens were lost to the disease or depopulation efforts. With fewer eggs in supply but demand not easing, egg prices began to rise. Prices began to decline as egg inventory increased following the end of the outbreak.

Prices began to decline as egg inventory increased. However, the ongoing outbreak and strong demand have helped keep prices high. Inflation can also be pointed to as a contributing factor to rising egg prices. In simple terms, inflation is a rise in prices for things consumers buy, like eggs and other household items. Knowing how to find the inflation rate and what’s considered to be a normal range matters for making the most of your money.

When inflation is higher, everything costs more and your money doesn’t go as far. A difference of a few cents in the price of a dozen eggs might not seem like much. But when everything else is going up in price too, and inflation doesn’t appear to be easing any time soon, it can take a serious toll on your wallet.

When Will the Cost of Eggs Go Down?

According to the CPI data, egg prices have declined from the peak they reached in January 2023. While eggs are more expensive than they were a couple of years ago, relief might be on the horizon. In its food price outlook, the USDA predicted that egg prices would drop 2.8% in 2024.

Monitoring prices for different goods and services can help you stay on top of your budget. Making and sticking to a spending and savings plan is one of the most basic steps for building wealth and increasing your net worth. Being able to measure your liquid net worth can give you an idea of how well you’re doing financially when it comes to accumulating assets and paying down debt.

Tips on How to Shop for Cheap Eggs

Shopping for eggs on the cheap can save you money and make it easier to live below your means. Living below your means benefits you in a few ways. For one thing, you may be less reliant on credit cards to cover expenses if you always have extra cash in your budget. And for another, it can make it easier to adapt to economic changes that can affect your budget and spending.

With that in mind, here are a few quick tips to help you pay less for eggs.

•   Shop the farmer’s market. Buying eggs locally from a farmer’s market vs. a supermarket could save you money if you’re able to find lower prices. You may even be able to work out a barter or trade with a local farmer or neighbor who has a backyard flock, which could allow you to get eggs for free.

•   Choose store brands. Store-brand products, including eggs, typically cost less than name-brand ones. If you’re not partial to any one egg brand, you may save a little money by choosing your local store’s brand.

•   Buy eggs in bulk. Buying in bulk could save you money if you’re paying a lower unit price per egg. But the catch is that you have to be sure you’re actually going to use them all; otherwise, you could be wasting money.

•   Use fewer eggs. A simple way to save money on eggs is to not consume as many. For instance, you might opt to get your daily protein from other sources or swap out your favorite baking recipes for ones that don’t incorporate eggs.

•   Shop with coupons and cash back apps. Couponing may seem tedious but supermarkets make it easier by allowing you to load digital coupons to your store loyalty card. You can pair coupons with a cash back app that pays you a percentage back when you shop at partner grocery stores, which can add to your savings.

💡 Quick Tip: We love a good spreadsheet, but not everyone feels the same. An online budget planner can give you the same insight into your budgeting and spending at a glance, without the extra effort.

The Takeaway

The average cost of a dozen eggs might not be something you think about on a day-to-day basis. But knowing how much you’ll pay for eggs matters when it’s time to go to the grocery store and do your weekly shopping. Keeping an eye on egg prices and implementing some different hacks for finding cheap eggs can help you keep your food budget in check.

FAQ

How much did a dozen eggs cost in 2023?

As of July 2023, the average cost of a dozen eggs was $2.09, according to Consumer Price Index data. Overall, egg prices were on the decline by mid-2023 after peaking at $4.82 on average per dozen at the beginning of the year.

What state has the most expensive eggs?

According to December 2022 pricing data from Instacart, Hawaii residents pay the most for a dozen eggs. On average, a dozen eggs there costs just under $10.

Do eggs last longer than sell by date?

Eggs can stay fresh past the sell by date, but there are limits on how long you’ll be able to use them. A simple way to tell if an egg is fresh is to place it in a glass or bowl of water. Eggs that float to the surface are no longer fresh, while ones that lie flat on their side are the freshest.

Photo credit: iStock/nd3000

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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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Babies can change a parent’s life in all kinds of wonderful ways. But make no mistake, raising a child doesn’t come cheap. As many new families discover, one of the biggest costs they face is diapers.

Newborns go through as many as 10-12 diaper changes per day, and a typical disposable diaper costs anywhere from $0.20 to $0.30. This means on an average day, a parent may spend $2 to $3 just on diapers.

It’s no wonder some parents are looking into cheaper — and potentially more environmentally friendly — alternatives, such as cloth diapers. Here’s more about both types of diapers, the cost of cloth diapers vs. disposable diapers, and what the potential savings could mean for a family’s budget.

What Are Disposable Diapers?

Soft and ultra absorbent, disposable diapers are designed to hold waste products of babies and young children. They were invented in the 1940s and widely adopted in the 1980s, when they became more practical and affordable. Today, some 95% of parents in the U.S. use disposable diapers for their infants.

The three layers of this type of diaper include a soft layer against the baby’s skin, an inner layer made of a super absorbent polymer that holds moisture, and a waterproof outer layer so the diaper doesn’t leak.


💡 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.

How Much Do Disposable Diapers Cost?

As the chart below shows, the cost of disposable diapers can vary widely by brand. Keep in mind that you may pay more or less for your diapers, depending on where you live and shop and whether you decide to buy in bulk.

Pros and Cons of Disposable Diapers

As you figure out which type and brand of diaper works best for you and your family, there are some general pros and cons of disposable diapers to keep in mind.

Pros

•   Convenient

•   Less laundry than cloth diapers

•   Highly absorbent

•   Caregivers may be more familiar with using a disposable diaper

Cons

•   Can be expensive

•   Contributes to waste in landfill

•   May contain adhesives, dyes, fragrances, or chemicals, which can irritate baby’s skin

Disposable Diaper Factors to Consider

Price is a big factor, yes. But if you’re thinking about starting a family, there are other considerations to think about when it comes to disposable diapers.

Health and Comfort

One of the most important factors in the disposable vs. cloth diaper debate is finding a solution that keeps you and your baby happy and healthy. If you don’t have the time for extra laundry, for instance, disposable diapers may be the way to go.

Convenience

Disposable diapers are convenient, especially when you’re on the move. Just toss the waste away in the nearest garbage can.

Price

Babies go through a lot of diapers. An infant generally requires up to 12 diaper changes a day for the first year, and a toddler needs around eight. This means parents should expect to purchase around 3,000 diapers per year.

How much of a dent could that put in the household budget? Let’s do the math: Disposable diapers typically cost between $0.20 to $0.30 each, which means new parents should plan on budgeting around $870 per year.

Environment

According to the EPA, disposable diapers account for more than 4.1 million tons of waste each year. Those diapers tend to end up in landfills, and the materials don’t easily degrade. If you’re uncomfortable with that thought, you may want to consider cloth versions. However, keep in mind that they require energy and water to clean.

Recommended: Common Financial Mistakes First-Time Parents Make

What Are Cloth Diapers?

Cloth diapers are made of cloth that’s absorbent, reusable, and washable. They usually have at least two layers, including a waterproof outer layer to keep the diaper from leaking and an inner absorbent layer. There are several different types:

•   Flats: Flat diapers are a flat piece of thick fabric without an absorbent middle that can be folded in a number of ways around the baby. They are secured with safety pins or snaps.

•   Prefolds: Prefolds are rectangular-shaped pieces of fabric with an absorbent middle. They’re secured with safety pins unless snaps are sewed in.

•   Fitted. Fitted diapers are an absorbent cloth diaper that’s fitted with elastic at the legs and waist but does not have a waterproof cover.

•   Pockets. Pocket diapers have a pocket on the inside of the diaper for an absorbent insert as well as an outer waterproof layer.

•   All-in-ones (AIO). AIO diapers have an outer waterproof layer and inner absorbency, but there is no removable insert. AIOs are the cloth diaper equivalent of a disposable diaper since all of the layers are built in.

•   All-in-twos. Like a combination of AIOs and pocket diapers, all-in-two diapers have an insert, but it sits directly on the baby’s skin instead of in a pocket.

•   Hybrid. A hybrid diaper has a disposable insert with a reusable cover. They create more waste and are more expensive than other types of cloth diapers.

How Much Do Cloth Diapers Cost?

There’s typically a large upfront investment in cloth diapers and accessories, such as a wet bag, pail liner, or cloth wipes. Depending on the type of cloth diapering system you use and how much you’re planning to buy, you could end up spending between $390 and $1,250. Flat cloth diapers, for instance, cost around $2 each. If you’re planning on purchasing a fitted cloth diaper, be prepared to spend more. A typical one costs around $15 each.

When you’re creating a family budget, it can help to see how much you’re spending on diapers — and everything else. A spending app can help you keep an eye on your finances.

Pros and Cons of Cloth Diapers

The diaper type you choose ultimately comes down to preference and budget. However, there are some benefits and drawbacks you may want to consider as you make your decision.

Pros

•   Reusable

•   May have a smaller environmental footprint

•   Produces less waste

•   Softer fabric and natural fibers that may be more breathable

•   Attractive designs

•   Can help you decrease diapering costs, especially when going from one child to two

Cons

•   Larger upfront cost

•   Inconvenient

•   Requires more laundry

•   Require more electricity and water

•   Many daycare center will not accept cloth diapers

Cloth Diaper Factors to Consider

Beyond the cost of disposable diapers vs. cloth, there are other important factors to consider.

Health and Comfort

Cloth diapers are usually made from breathable fabrics, like cotton and hemp, which can feel soft on baby’s skin. Proponents also tout the benefits of the diaper’s natural materials, which generally don’t have artificial materials, such as plastic, absorbent gelling materials, or adhesives.

Convenience

While you can certainly manage a cloth diaper change when you’re on the go, it’s usually not as convenient as a disposable diaper. (You’ll need to carry the soiled diaper in a wet bag until you get home and can drop it in the washing machine.) What’s more, if you’re planning to use daycare, check if the center will accept cloth diapers — many don’t.

Price

Cloth diapers can cost anywhere from $2 to $21 each. If you plan on buying 25 diapers for each size your child will need — newborn, small, medium, and large — then you could spend between $700 and $2,100 on 100 diapers.

Recommended: How Much Does it Cost to Raise a Child to 18?

Environment

Cloth diapers have a different environmental impact than disposable diapers. Instead of piling up in a landfill, a cloth diaper is washed and used over and over again. However, they can use up twice as much water to produce as a disposable diaper. Plus, you’ll need to use electricity and water to launder dirty diapers, which could be an issue if you live in a state that experiences droughts or routinely restricts water or energy usage.

Cost of Cloth Diapers vs Disposable Diapers

Cloth diapers can require a significant upfront investment of anywhere from $390 to $1,250 — and that’s not including the cost of extras, such as using a diaper laundering service. However, that initial fee may end up being less than the $870 per year many parents spend on disposable diapers.

Reasons to Choose Cloth Diapers vs Disposable Diapers

As with many other parts of parenting, there’s no one-size-fits-all solution when it comes to diapering. However, if cost is a determining factor — and your caregiver or daycare center is on board — cloth diapers may be the way to go. Plus, since this type of diaper is washable and reusable, it means it’s one less item ending up in a landfill.


💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.

The Takeaway

Disposable diapers are incredibly popular among parents and for good reason. They’re convenient, highly absorbent, and, compared to cloth diapers, less expensive. On average, parents spend around $870 per year on diapers. And while it’s true that cloth diapers do require a hefty upfront investment of $390 to $1,250, they may have a smaller environmental footprint. Plus, they’re usually made of fabric that’s softer, breathable, and more natural, which some parents may prefer. All of those factors are important when you’re budgeting for a baby.

That said, diapers are just one line item in the family budget. Whether you’re saving up for their college education or looking for ways to lower monthly bills, using a money tracker app can help you manage your overall spending and saving.

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.

FAQ

Is it cheaper to use cloth diapers or disposable?

It depends on how much use you get out of your cloth diaper. However, generally speaking, over time, it’s cheaper to use reusable cloth diapers, even when accounting for the cost of electricity and water needed to launder dirty diapers.

What is the average cost of cloth diapers per month?

Cloth diapers have a larger upfront cost but a lower monthly cost. If an initial investment of $500 is spread out over 30 months, for example, the cost comes out to around $17 per month.

How many disposable diapers does one cloth diaper replace?

The average baby uses 8,000 diapers by the time they’re potty trained. And let’s say you invest in 100 cloth diapers, or 25 diapers for each size your child will need until they’re potty trained. This means each cloth diaper could potentially replace up to 80 disposable diapers.

Photo credit: iStock/FotoDuets

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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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