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If you already have a personal loan but need more funds, you may wonder if you can take out another one. Some lenders will approve you for a second personal loan if you stay under their maximum borrowing cap. You may also be able to get a new personal loan from a different lender, provided you meet their requirements. Already having a personal loan, however, could make it harder to get approved.

Read on to learn more about how many personal loans you can have at once, how stacking personal loans can impact your credit, and alternatives to consider.

Can You Have More Than One Personal Loan at Once?

Technically, there is no limit on how many personal loans you can have. Whether you can get approved for a second or third personal loan will depend on the lender and your qualifications as a borrower.

Some lenders limit the number of concurrent personal loans you can have to one or two. They might also restrict you to a maximum borrowing amount (such as $50,000) across all of the personal loans you hold with them.

If you’re maxed out with your current lender, you may be able to get a new personal loan with a different lender. Generally, lenders don’t reject applicants solely due to having an existing loan. However, they may decline approval if they feel you carry too much debt and might struggle to make an additional payment.

Does It Ever Make Sense to Have Multiple Loans?

There are some situations where it can make sense to have more than one personal loan. If you took out a loan to consolidate credit card debt and then got hit with an unexpected medical or car repair bill, for example, you may be better off getting a second personal loan rather than running up new and expensive credit card debt. Before taking out another personal loan, however, it’s worth checking to see if you might qualify for a lower-cost way to borrow money (more on that below).

If you’re looking to get another personal loan to bridge a gap between your spending and income, on the other hand, taking on additional debt could add to the problem. You may be better off looking at ways to reduce expenses and pay down your existing debt.

Pros and Cons of Taking Out Multiple Personal Loans

If you’re seriously considering taking out a second or third personal loan, it’s wise to familiarize yourself with the benefits and disadvantages of doing so.

Pros of Multiple Personal Loans

On the plus side, pros include:

•   Access to more cash

•   Often a quick approval and disbursement process

•   Ability to use loans for different purposes, such as debt consolidation and a home improvement project

•   Credit building, provided the debts are handled responsibly

Cons of Multiple Personal Loans

Next, consider the downsides of taking out multiple personal loans:

•   Spending more on interest

•   More stress on your budget, perhaps meaning you can’t save as much

•   Increased debt-to-income ratio (DTI)

•   More opportunities to miss a payment, which can negatively impact your credit score

•   Applying for new loans typically lowers your credit score by several points temporarily

Here is this information in chart form:

Pros of Multiple Personal Loans	Cons of Multiple Personal Loans
Access to more cash	Spending more on interest
Quick approval and disbursement	Stress on your budget
Flexible uses	Increased DTI
Credit building if loans are managed responsibly	More opportunity to miss a payment, which can lower your credit score
	Applications require a hard credit pull which can temporarily lower your credit score

Ways Multiple Personal Loans Can Affect Your Credit

Having multiple personal loans can have both negative and positive impacts on your credit, as noted above. Any time you apply for new credit, the lender will do a hard pull on your credit, which can cause a small, temporary dip in your scores. Multiple hard credit inquiries in a short period of time, however, can significantly harm your credit. Late or missed payments can also negatively affect your credit score.

On the plus side, taking out a new personal loan and handling it responsibly (by making on-time payments) can positively influence your credit over time.

Other Potential Complications

Here’s a look at some other ways that having multiple personal loans can affect your finances.

•  Multiple payments: A new personal loan means a new monthly payment. Before you add to your debts, it’s a good idea to review your budget to ensure you can manage an additional monthly loan payment.

•  Debt-to-income ratio: Each personal loan impacts your debt-to-income ratio (DTI). This ratio measures how much of your monthly income goes toward current debt. A higher DTI can make it harder to qualify for other types of loans, such as a mortgage, in the future.

•  Higher interest rates: A lender could approve you for an additional personal loan but at a high annual percentage rate (APR), which is the personal loan’s interest rate blended with applicable fees and charges, because of your existing debt.

Getting Multiple Loans From the Same Lender

Before applying for an additional personal loan from your current lender, it’s a good idea to check their policies. Some lenders limit the number of outstanding personal loans you can take out at one time or cap the total amount you can borrow. In addition, some lenders require that you make a certain number of consecutive on-time payments (such as three or six) toward an existing loan before you can apply for another loan.

If you believe you’ll meet the lender’s requirements for a second personal loan — and you feel comfortable making the additional monthly payment — getting an additional loan from the same lender could be a smart strategy.

Recommended: Average Personal Loan Interest Rates

Qualifying for Another Personal Loan

If you apply for a personal loan with another lender, you won’t have to worry about a cap on the number of loans you have or the combined amount you can borrow. However, you will have to go through the whole application process, and the lender will likely perform a hard credit check. They will factor in how much debt you already carry, even though it may be with another lender.

You can get an idea of whether or not you’ll get approved for an additional personal loan by calculating your current DTI. To do this, simply add up all your current debt payments, including any auto loans, mortgage, credit cards, and student loans. If that number comes close to 50% of your monthly gross (pre-tax) income, another personal loan may not be in the cards. The max DTI for a personal loan is typically 50%. However, many lenders like to see a DTI that is less than 36%.

Recommended: Secured vs Unsecured Personal Loans: Comparison

Alternatives to Multiple Personal Loans

When you need to cover unexpected expenses, a personal loan (whether for several hundred dollars or a $15,000 personal loan or more) can be a great resource — but it’s not your only option. Here are some alternatives to personal loans you might consider.

0% Interest Credit Card

If your credit is strong, you may be able to take advantage of a credit card with a 0% introductory APR. The promo rate can last up to 21 months; after that, the card will reset to its regular APR.

If you can use the card to cover your costs and repay the balance before the 0% rate ends, it’s the equivalent to an interest-free loan. If you’ll need a significantly longer period of time, however, this route could end up costing more than a personal loan.

Home Equity Loans or Lines of Credit

A home equity loan or home equity line of credit (HELOC) may be worth exploring if you own a home and have built up significant equity. A home equity loan is a single lump sum you repay (plus interest) over time. A HELOC is a revolving line of credit that you can draw from as needed; you pay interest only on what you use.

Home equity loans and HELOCs are secured by your home, which lowers risk for the lender. As a result, they may come with lower interest rates than personal loans. A major downside of this type of loan is that, if you default on the loan, you can lose your home.

Debt Consolidation Loan

A debt consolidation loan is actually a type of personal loan, but it can be used to replace multiple debts with a single, more convenient loan.

Here’s how debt consolidation works:

•  Say, you already have a $5,000 personal loan.

•  You are also carrying credit card debt totaling a few thousand dollars.

•  Getting a new $10,000 personal loan can allow you to eliminate both of those debts. The funds from the new loan would pay off your existing loan and credit card balances, and you would then make payments on your new single personal loans until it’s paid off.

Having one loan vs. many can help some people avoid paying a bill late or missing a payment altogether.

The Takeaway

You can have as many personal loans as you like, provided you can get approved. Some lenders limit the number of loans they’ll extend to an individual at any one time, or cap the total amount one person can borrow. To get an additional personal loan with a new lender, you’ll need to meet their qualification requirements. Having an existing personal loan could make this harder to do. However, you may get approved if your monthly income is sufficient to cover the new payment. Before you jump in, you’ll want to consider how it will impact your overall debt, credit score, and credit history.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

How long should you wait between loans?

A general rule of thumb is to wait at least six months between applying for new credit. Submitting multiple loan applications in a short time frame can result in several hard inquiries on your credit report, which can lower your credit score. It may also signal to lenders that you are in financial distress, which could make it harder to get approved for a new loan.

Do multiple loans affect credit score?

Multiple loans can positively and negatively impact your credit. Each new loan application can result in a hard inquiry on your credit report, which may temporarily lower your score. Having multiple loans can also increase your debt-to-income ratio, which can make you appear less creditworthy to lenders. If you consistently make on-time payments on all of your loans, however, it can positively impact your credit history over time.

What happens if you pay off a loan too quickly?

Paying off a loan early can have mixed effects. While it can save you interest payments, some lenders may charge prepayment penalties, which could offset the benefits of early repayment. When you’re shopping for loans, it’s a good idea to ask if there is an early payoff fee. Some lenders do not charge them.

Paying off a loan early can also have a slightly negative impact on your credit by bringing down your average credit history length and reducing your credit mix.

Paying off a loan early can also have a slightly negative impact on your credit by bringing down your average credit history length and reducing your credit mix.

Is it legal to have multiple personal loans?

There is no federal law against having multiple personal loans. As long as lenders approve you and you handle the debt responsibly, it should not be a problem. However, note that you typically cannot use personal loans for any illegal uses, business purposes, or tuition payments.

Can you be denied a personal loan if you already have one?

Yes, you can be denied a personal loan if you already have one. The lender may have a cap on how much applicants can borrow that you would exceed with a new loan, or your DTI (debt-to-income) ratio may exceed the amount they are comfortable with.

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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.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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 .

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.

This article is not intended to be legal advice. Please consult an attorney for advice.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOPL-Q425-055

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Almost 26 million Americans moved in 2024, which amounts to 7.5% of the country’s population. As you may know, a move can be expensive. Current estimates reveal that a local move for the contents of a three-bedroom home costs approximately $1,250 to $2,200, while a long-distance move is easily twice that, averaging $4,890 according to Moving.com. What’s more, amid the chaos of purging and packing, it’s easy to forget some of the additional moving-related costs you might face.

To help you get organized and budget appropriately, read on for the full story.

Average Moving Costs in the U.S.

The average cost of moving can vary tremendously depending on such factors as how much property you have, what kind of things you are moving (do you have delicate artwork, a piano?), how far you are moving, when you move, and the cost of living in the areas you are moving to and from.

Cost of Moving Locally

That said, the average cost of a local move for the contents of a 3-bedroom home is currently between $1,200 and $2,200. A local move is typically defined as being less than 100 miles and able to be completed in a single day.

Cost of a Long-Distance Move

A long-distance move, on the other hand, requires multiple days and covers more than 100 miles. A cross-country move certainly falls into this category, as does a move from, say, Seattle to Chicago. Due to the distance and time involved, this kind of move can be considerably more expensive, with some averages in 2025 coming in at just under $5,000.

Understanding Moving Expenses

While it may not be as fun as, say, budgeting for a wedding, figuring out costs for moving can be similarly complex. There can be numerous aspects to wrangle, from purchasing the proper packing supplies to deciding whether to DIY your move or hire professionals to understanding insurance needs. Consider the following.

Types of Moving Expenses

Here are some of the costs you are likely to incur when moving:

•   Transportation, or actually moving your possessions from point A to point B

•   Moving services, meaning having professionals load, transport, and unload your belongings

•   Packing, which usually involves cartons and bubble wrap (or you might pay to have movers pack delicate or valuable items or, if time is tight or young children are part of the household, to take care of it all for you)

•   Insurance to cover the value of your belongings as they are transported

•   Rent and security deposits. The location you’re moving to may require a security deposit and first month’s rent in advance.

•   Cleaning fees. You may have to pay to have your former and new residences cleaned.

•   Lodging. As you travel from your former home to your new place, you may have to stay a number of nights in a hotel or motel. Some people need to bridge the gap between homes with a short-term rental as well.

•   Storage. You might have to put some items in storage, depending on the timing and specifics of your move.

•   New furniture and appliances. Often, when people move, they discover they need to buy new pieces, whether that means window shades, a fridge, rugs, or a dining table.

Factors That Affect Moving Costs

There are numerous variables when you move, but here are a few key ones to consider:

•   How far you are moving. A move across town will involve less time, effort, and expense than a move across the country (or overseas).

•   How much you are moving. If you are a recent college graduate with just a few pieces of furniture, your move is likely to cost less than, say, a family of four packing up their whole home (basement and attic including) and relocating.

•   Time of year. Summer tends to be the busy season, with students leaving school and finding new places to settle and families wanting to get to their new house before the school year starts. This increased demand can increase prices.

•   Services needed. If you are going to pack the contents of your studio apartment and have a friend with a van to help you move, you’ll likely spend considerably less than you will if you are a family of four who wants movers to pack and transport all your furniture and other items 2,000 miles.

•   Storage. If you have to store all your possessions for a couple of weeks before you can have access to your new place, those costs can add up.

•   Access to locations. Someone whose move involves a single-level home with an ample driveway will likely have a shorter move than someone who lives in a 20th-floor apartment on a crowded city block. And shorter moves are less expensive than longer ones.

Cost of Hiring Professional Movers

Next, take a closer look at one of the biggest expenses of moving: the cost of hiring a professional team to get you to your new home.

As you might guess, the cost of hiring movers can range widely depending on location, distance of the move, and how much you’re moving. Here are some general figures to be aware of, as noted above:

•  For a local move (meaning 100 miles or less), costs typically range from $1,200 to $2,200.

•  For a long-distance move (more than 100 miles), costs are usually considerably higher, ranging from $2,200 to several thousand, with an average of $4,890.

There can be additional fees to consider: extra insurance for valuable items, the cost of packing and moving supplies, the fee for professional packing of items, and special services for moving items like, say, a piano or a pool table. You may also want to calculate how much tipping your movers might cost; omitting that expense could be a budgeting mistake. Recommendations typically say between 10% and 20% of the cost of your move is appropriate.

DIY Moving: Budgeting and Expenses

Thinking of doing your own move? Consider these aspects:

Comparing Truck Rentals and Portable Containers

The cost of renting a truck or van will require funding. As you might guess, the bigger the truck and the longer you use it, the more costly it will be. According to Angi.com, renting a truck costs about $1,000 on average in the U.S.

Keep in mind that you need to resolve what happens to a truck that you might drive a long distance to complete your move. Can you drop it off at a location near your new home, or will you have to pay a fee for its return to its home base?

Packing Materials and Equipment Rental

You’ll also need to budget for packing materials. Online packing calculators can help you determine your needs and the cost, but estimates say that for a small-to-medium home (a two-bedroom apartment or house), you’ll likely need to spend at least a couple hundred dollars on cartons, not including such supplies as bubble wrap ($29 for 300 feet) and tape ($7 per 55-yard roll). Don’t forget some sturdy markers to help you label what’s inside each box.

You might rent reusable boxes (typically plastic ones) to use for your move. Another item that can be wise to rent is wardrobe boxes, which allow you to move clothing that’s hanging in your closet into these boxes for easy transportation.

Moving blankets are another expense. These can cost $20 and up a pop if you purchase them. You may be able to rent them from a moving company to use for your DIY move.

Recommended: Personal Loan Calculator

Extra Moving Costs to Think About

As you get ready to move, don’t overlook these costs (some of which were mentioned above):

Storage Fees

Storage costs for any items that need to be held securely before they can be moved into your new home. You might easily pay between $100 and $300 a month (or much more in a city) for this service. You also might need to pay insurance fees to protect your items.

Moving Insurance

Moving insurance protects your possessions if they are lost or damaged. The cost can vary from a few hundred to a few thousand dollars; it’s typically 1% of the total estimated cost of your move. Some of the features impacting the cost of moving insurance include the value of your items, how much coverage you want, how large (or small) a deductible you opt for, and how far your move is.

Packing and Moving Supplies

In addition to the packing and moving supplies mentioned above, such as cartons, tape, and blankets, don’t forget about dollies and hand trucks to get boxes from one location to another. You might also need special crates for artwork and equipment to wrap and move musical instruments.

Travel Expenses

It can be easy to overlook your own travel expenses as your household furnishings get loaded onto a moving van to travel to a new destination. You may be in a situation in which you fly cross-country but need to ship your car (the average cost of shipping a car is $1,150). Or maybe you’ll drive vs. ship your car, triggering gas, lodging, and road food costs.

And, while not technically a travel expense, you might need temporary housing at your destination or to pay a security deposit if you rent a home. These costs can add up, meaning you may have to dip into savings or perhaps take out a personal loan (sometimes called a relocation loan) to cover your costs.

Tips for Reducing Moving Expenses

Here are some ways you can bring down your moving costs (some were already referenced above):

Downsize and Declutter

Downsize as much as you can before moving. The less you have, the faster and cheaper your move can be. Also, when you declutter, you might be able to get cash for your gently used unwanted items. There are many places where you can sell your stuff, in person or online.

Reuse Boxes and Packing Materials

Here’s a packing and moving tip that can help you save a bundle: Find affordable or free moving materials. Options can include getting free cartons and other supplies from friends and family, sourcing boxes from local retailers, or renting things like plastic containers, wardrobes, and moving blankets vs. purchasing them.

Consider Timing

Did you know when you move can impact the cost? If possible, schedule your move to avoid the busy, pricey summer high season. Moving in fall or winter, when demand is lower, can help you save money.

Recommended: Get Your Personal Loan Approved

The Takeaway

Moving is a major financial commitment, but it doesn’t have to break the bank. When planning a move, first decide whether you’re going to DIY or hire pros. Then make a list of other expenses: packing supplies, transportation and travel expenses, and other potential costs. You may need to tap your savings or take out a personal loan to afford these charges.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

What financing options are available to cover moving costs?

When moving, you can fund your expenses with savings, take out a personal loan (also called a moving or relocation loan), or see if your employer offers any assistance. It can be wise to avoid high-interest credit cards.

What’s the difference between a DIY move and a full-service move?

When undertaking a DIY move, you are typically responsible for renting or borrowing a van, getting packing materials and packing items, and loading and unloading your possessions. With a full-service move, professional movers can help pack, if you like, as well as load, transport, and unload items. A DIY move may be cheaper, but it’s typically much more time-consuming and you could put yourself and your items at more risk.

How are moving costs calculated?

Moving costs are based on several factors, such as how much and what sort of property you’re moving, how far you are moving, whether you need help packing, what time of year you are moving, and what the prevailing cost of living is like in the areas involved.

Are moving costs tax-deductible?

For most Americans, moving costs are typically not tax-deductible. For those in the military, some unreimbursed expenses may be deductible.

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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.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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 .

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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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.

SOPL-Q425-051

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You may feel proud of yourself for paying off a debt early, but doing so could trigger prepayment fees (ouch). The best way to avoid those charges is to read the fine print before you take out a loan that involves this kind of fee.

If you neglected to do that, however, it doesn’t necessarily mean you’re stuck with a prepayment penalty. Read on to learn ways to avoid paying loan prepayment penalties.

What Is a Prepayment Penalty?

A prepayment penalty is when a lender charges you a fee for paying off your loan before the end of the loan term. It can be frustrating that a lender would charge you for paying off a loan too early. After all, many people may think a lender would appreciate being repaid as quickly as possible.

While that’s true in theory, in reality, it’s not that simple. Lenders make most of their profit from interest, so if you pay off your loan early, the lender is possibly losing out on the interest payments that they were anticipating. Charging a prepayment penalty is one way a lender may recoup their financial loss if you pay off your loan early.

Lenders might calculate the prepayment fee based on the loan’s principal or how much interest remains when you pay off the loan. The penalty could also be a fixed amount as stated in the loan agreement.

Can You Pay Off a Loan Early?

Say you took out a $5,000 personal loan three years ago. You’ve been paying it off for three years, and you have two more years before the loan term ends. Recently you received a financial windfall and you want to use that money to pay off your personal loan early.

Can you pay off a personal loan early without paying a prepayment penalty? It depends on your lender. Some lenders offer personal loans without prepayment penalties, but some don’t. A mortgage prepayment penalty is more common than a personal loan prepayment penalty.

Recommended: When to Consider Paying off Your Mortgage Early

Differences in Prepayment Penalties

The best way to figure out how much a prepayment penalty would be is to check a loan’s terms before you accept them. Lenders have to be upfront about how much the prepayment penalty will be, and they’re required by law to disclose that information before you take on the loan.

Personal Loan Prepayment Penalty

If you take out a $6,000 personal loan to turn your guest room into a pet portrait studio and agree to pay your lender back $125 per month for five years, the term of that loan is five years. Although your loan term says it can’t take you more than five years to pay it off, some lenders also require that you don’t pay it off in less than five years.

The lender makes money off the monthly interest you pay on your loan, and if you pay off your loan early, the lender doesn’t make as much money. Loan prepayment penalties allow the lender to recoup the money they lose when you pay your loan off early.

Mortgage Prepayment Penalty

When it comes to different types of mortgages, things get a little trickier. For loans that originated after 2014, there are restrictions on when a lender can impose prepayment penalties. If you took out a mortgage before 2014, however, you may be subject to a mortgage prepayment penalty. If you’re not sure if your mortgage has a prepayment penalty, check your origination paperwork or call your lender.

Checking for a Prepayment Clause

Lenders disclose whether or not they charge a prepayment penalty in the loan documents. It might be in the fine print, but the prepayment clause is there. If you’re considering paying off any type of loan early, check your loan’s terms and conditions to determine whether or not you’ll have to pay a prepayment penalty.

How Are Prepayment Penalties Calculated?

The cost of a prepayment penalty can vary widely depending on the amount of the loan and how your lender calculates the penalty. Lenders have different ways to determine how much of a prepayment penalty to charge.

If your loan has a prepayment penalty, figuring out exactly what the fee will be can help you determine whether paying the penalty will outweigh the benefits of paying your loan off early. Here are three different ways the prepayment penalty fee might be calculated:

1. Interest costs. If your loan charges a prepayment penalty based on interest, the lender is basing the fee on the interest you would have paid over the full term of the loan. Using the previous example, if you have a $6,000 loan with a five-year term and want to pay the remaining balance of the loan after only four years, the lender may charge you 12 months’ worth of interest as a penalty.

2. Percentage of balance. Some lenders use a percentage of the amount left on the loan to determine the penalty fee. This is a common way to calculate a mortgage prepayment penalty fee. For example, if you bought a house for $500,000 and have already paid down half the mortgage, you might want to pay off the remaining balance in a lump sum before the full term of your loan is up. In this case, your lender might require that you pay a percentage of the remaining $250,000 as a penalty.

3. Flat fee. Some lenders simply have a flat fee as a prepayment penalty. This means that no matter how early you pay back your loan, the amount you’ll have to pay will always be the prepayment penalty amount that’s disclosed in the loan agreement.

Recommended: Debt Payoff Guide

Avoiding a Prepayment Penalty

Trying to avoid prepayment penalties can seem like an exercise in futility, but it is possible. The easiest way to avoid them is to take out a loan or mortgage without prepayment penalties. If that’s not possible, you may still have options.

•   If you already have a personal loan that has a prepayment penalty, and you want to pay your loan off early, talk to your lender. You may be offered an opportunity to pay off your loan closer to the final due date and sidestep the penalty. Or you might find that even if you pay off the loan early and incur a penalty, it might be less than the interest you would have paid over the remaining term of the loan.

•   You can also take a look at your loan origination paperwork to see if it allows for a partial payoff without penalty. If it does, you might be able to prepay a portion of your loan each year, which allows you to get out of debt sooner without requiring you to pay a penalty fee.

For example, some mortgages allow payments of up to 25% of the purchase price once a year, without charging a prepayment penalty. This means that while you might not be able to pay off your full mortgage, you could pay up to 25% of the purchase price each year without triggering a penalty.

Some lenders shift their prepayment penalty terms over the life of your loan. This means that as you get closer to the end of your original loan term, you might face lower prepayment penalty fees or no fees at all. If that’s the case, it might make sense to wait a year or two until the prepayment penalties are less or no longer apply.

When it comes to your money, you don’t want to make any assumptions. You still need to do your due diligence by asking potential lenders if they have a prepayment penalty. The Truth in Lending Act (TILA) requires lenders to provide documentation of any loan fees they charge, including a prepayment penalty. Also, under the TILA, consumers have the right to cancel a loan agreement within three days of closing on the loan without the lender taking any adverse action against them.

The Takeaway

A prepayment penalty is one fee that can be avoided by asking questions of the lender and looking at the loan documents with a discerning eye. This may hold true both when you are shopping for a loan and when you are paying your loan off.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

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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.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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.

SOPL-Q425-067
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If you carry some debt, you’re not alone. The total household debt in the U.S. rose to $18.59 trillion in the third quarter of 2025, according to the latest statistics from the Federal Reserve Bank of New York.That includes everything from mortgages to credit card balances to student loans.

If you’re among the ranks of those with outstanding debt and want to pay it off, here are strategies to help you do just that.

What Is Considered Outstanding Debt?

Outstanding debt refers to any balance on a debt that has yet to be paid in full. It is money that is owed to a bank or other creditor.

When calculating debt that’s outstanding, you simply add all debt balances together. This could include credit cards, student loans, mortgage loans, payday loans, personal loans, home equity lines of credit, auto loans, and others. You should be able to find outstanding balance information on your statements.

Types of Outstanding Debt

Outstanding debt can take a few different forms. Here are some key types to know about:

•   Secured debt: This is debt that’s backed by an asset or collateral. For instance, with a mortgage, your home is the collateral; with an auto loan, your car secures the loan. If you default on your loan, the lender may seize your collateral.

•   Unsecured debt: This is a debt that is not backed by collateral. The lender offers you money, to be paid back with interest, based on their evaluation of your creditworthiness. Examples of this kind of debt include most personal loans as well as credit card balances.

•   Revolving debt: With this kind of debt, you can borrow up to a certain limit. Credit cards and HELOCs (home equity lines of credit) are examples of this kind of debt. If, say, you have a $10,000 limit and you spend $9,000 of it, you only have $1,000 remaining to access. But if you make a payment of $3,000 toward your debt, you’ll have $4,000 available to spend.

•   Installment debt: With installment debt, the lender disburses a lump sum, which the borrower pays back over time with interest. Examples of this kind of outstanding debt include mortgages and personal loans.

Recommended: What Is the Average Debt by Age?

How to Find Outstanding Debt

When paying off outstanding debt, a good first step is to track it all down and account for it to understand the total.

As you move through your debt payoff journey, you may find it helpful to start a file (hard copies or digital) for your statements and correspondence. Also, you could create a list or input information into a spreadsheet. Organizing your information is necessary for building a debt payoff strategy.

It can be a good idea to build a list of all debts with the most useful information, such as the outstanding balance, the interest rate, the monthly payment, the type of debt, and the creditor. If you have an installment loan, such as a personal loan, the principal amount of the loan is another helpful piece of information.

What If I Can’t Find All My Outstanding Debts?

If you feel as though you’ve lost track of some debts, you may want to start by requesting a credit report.

Checking Credit Reports and Account Statements

In this case, you’ll want to get your credit report from at least one of the three major reporting agencies, Experian®, TransUnion®, or Equifax®. You are currently legally entitled to one free copy of your credit report from each of the three agencies per week. It’s easy to request a credit report from AnnualCreditReport.com.

(If you’re curious about just your score, you might also see if your financial institution offers credit score monitoring. This could be an easy way to keep tabs on your creditworthiness.)

A credit report includes information about each account that has been reported to that particular agency, including the name of the creditor and the outstanding debt balance.

It is possible that some outstanding debts may have been sold to a collection agency. The name of the original creditor may be included on the credit report. Some outstanding debts, however, may not appear on a credit report. Creditors are not required to report to the agencies, but most major creditors do. That said, a creditor could choose to report to none, one, two, or all three of the agencies. If you’re in information-collecting mode, you may want to consider requesting reports from more than one agency or from all three.

Another step in accounting for outstanding debt is to review all the account statements that may come your way, scan your checking account statements for automatic withdrawals (for example, for any payment plans you may have forgotten about), and review payment apps. This can help you see what debt you are carrying.

Outstanding Debt Amounts

Aside from how a debt is structured — revolving or installment debt; installment or lump sum — it can also be thought of as “good” debt or “bad” debt.

•   Good debt: Generally, if borrowing money (and thus incurring debt) enhances your net worth, it’s considered good debt. A mortgage is one example of this. Even though you might incur debt to purchase a home, the value of the home will likely increase. As it does, and as you pay down the mortgage balance, your net worth has the potential to increase.

•   Bad debt: On the other hand, if debt taken on to purchase something that will depreciate, or lose value, over time, that is considered bad debt. Going into debt to purchase consumer goods, such as cars or clothing, will not enhance your net worth.

In terms of how much outstanding debt is too much, know this: Each person has a unique financial situation, level of comfort with debt, and ability to repay debt. What one person may be able to justify may be completely unacceptable to another.

How Does an Outstanding Debt Impact Your Credit?

Outstanding debt can impact your credit in a few ways. Here’s a closer look.

Debt-to-Income Ratio (DTI)

During loan processing, lenders may consider the applicant’s debt-to-income ratio (DTI), which compares how much you owe each month to how much you earn. Lenders will often look at this number to determine their potential risk of lending. Different lenders have different stipulations about this ratio, so asking a potential lender about theirs is a good idea.

Calculating DTI is done by dividing monthly debt payments by gross monthly income.

•   Monthly debt payments can include rent or mortgage payment, homeowners association fee, car payment, student loan payment, and other monthly payments. (Typically, monthly expenses such as utilities, food, or auto expenses other than a car loan payment are not included in this calculation.)

•   Gross income is the amount of money you earn before taxes and other deductions are taken out of your paycheck.

Someone with monthly debt payments of $2,000 and a gross monthly income of $8,000 would have a DTI of 25% ($2,000 divided by $8,000 is 25%).

Generally, a DTI of 35% or less is considered a healthy balance of debt to income.

Credit Utilization Ratio

Another way that debt impacts your credit: your credit utilization ratio. This ratio expresses how much of your revolving credit limit you are using. For instance, if your credit limit on your two credit cards totals $40,000 and you are carrying a balance of $10,000, your ratio is 25%. You are using a quarter of what is available.

Ideally, a person’s credit utilization would be 10% of less, but up to 30% is considered acceptable. Go over that amount, and lenders may see you as financially unstable and living beyond your means. This can negatively impact their willingness to extend more credit at a favorable rate.

Payment History and Delinquencies

Whether you pay your bills on time also impacts your credit. Making payments on time is the single most important factor when it comes to your credit score. It accounts for 35% of your rating. In fact, late (or delinquent) payments that are reported to the credit bureaus can stay on your report for seven years, although their impact can diminish over time if you make timely payments.

It can be wise to use autopay or set up reminders to ensure you don’t pay your creditors late or skip payments entirely.

Should I Pay Down Outstanding Debt?

Barring extenuating circumstances, it’s a good idea to make regular, consistent payments on your debt. Whether or not you decide to pay the debt back on an expedited schedule is up to you.

Some may not feel the need to aggressively tackle their outstanding debt. They may be just fine to continue paying off a balance until the loan’s maturity date. This may apply to people with manageable debt payments, those who have debts with lower interest rates, or those focusing on other financial goals.

For example, someone with a low-interest-rate mortgage loan may not feel the need to pay it down faster than the agreed-upon schedule. So they continue to make regular, scheduled payments that make up a manageable percentage of their monthly budget. Therefore, they are able to work on other financial goals in tandem, such as saving for retirement or starting a fund for a child’s college.

Other scenarios may call for a more aggressive strategy to pay down debt. Some reasons to consider an expedited plan:

•   Your debt levels, and therefore monthly payments, feel unmanageable.

•   You’re carrying debts with higher interest rates, like credit cards.

•   You want to avoid missed payments and added fees.

•   You simply want to have zero debt.

You’ll also want to keep in mind that carrying a large debt load could negatively affect your credit. One factor in a credit score calculation is the ratio between outstanding debt balances and available credit on revolving debt, like a credit card — the credit utilization rate.

Using no more than 30% of your available credit is recommended. So, if a person has a $5,000 credit limit on a card, that would mean using no more than $1,500 at any given time throughout the month. Using more could result in a ding on their credit score.

Carrying debt also means paying interest. While some interest may not be avoidable, it’s generally a sound financial strategy to pay as little in interest as possible.

Credit cards tend to have some of the highest interest rates on unsecured debt. The average interest rate on a credit card was almost 22% according to Experian as of November 2025. With high rates, it’s worth seriously considering paring back debt balances.

Outstanding Debt Management Strategies

The next step is to pick a debt reduction plan.

Two popular strategies for paying off debt are called the debt snowball and the debt avalanche. Both ask that you isolate one source of debt to focus on first.

Simply put, you’ll make extra payments or payments larger than the minimum monthly payment on that debt until the outstanding balance is eliminated. You’ll continue making the minimum monthly payment on all your other debts.

Debt Snowball

A debt snowball payoff plan involves listing all of your debt in order of size, from smallest to largest, ignoring interest rate. You then put extra funds towards the debt with the smallest balance, while making the minimum required payments on the rest. Once that debt is paid off, you put extra money towards the next-smallest debt, and so on.

The idea here is that there’s a psychological boost when a card is paid off, so it makes sense to go after the smallest first. That way, when a person works up to the card with the next highest balance, they can focus singularly on it, without a bunch of annoying, smaller payments getting in the way of the ultimate goal.

It’s called a snowball because the strategy starts small, gaining momentum as it goes.

Debt Avalanche

Alternatively, the debt avalanche method starts by listing debt in order of interest rate, from highest to lowest. You then put extra money towards the debt with the highest interest rate. Because this source of debt costs the most to maintain, it is a natural place to focus. Once that debt is paid off, you focus your extra payments towards the debt with the next-highest interest rate.

The debt avalanche is the debt payoff strategy of choice for those who prefer to look at things from a purely mathematical standpoint. For example, if a person has one credit card with a 27% annual percentage rate (APR) and another with a 22% APR, they’d focus on that 27% card with any extra payments, no matter the balance.

Of course, it is also possible to modify these strategies to suit personal preferences and needs. For example, if one source of debt has a prepayment penalty, maybe it drops to the bottom of the list. If there’s a particular credit card you tend to overspend with, perhaps that’s a good one to focus on.

Debt Consolidation Strategy

The two methods described above aren’t your only options. You might also pursue debt consolidation, in which you combine multiple debts into a single, more convenient loan, possibly with a lower interest rate.

For example, if you are carrying a balance on two or three credit cards, you might apply for a personal loan to pay off credit card debt. In this case, the debt consolidation loan, if approved, would be used to pay off the credit card balances. Then, instead of making monthly payments to the credit card companies, you would pay just your personal loan. This can simplify your financial life, and the new loan could offer a lower interest rate vs. credit cards.

Outstanding Debt Payoff Methods

Once you decide on a strategy, whether it’s one discussed above or something that works better for your financial situation, you’ll need to figure out where the money will come from to pay down outstanding debt.

A good first step is to simply list your monthly income and expenses. If you find that you have enough money to begin making extra payments toward your outstanding debt balances, then you might choose to start right away.

Some people choose to keep a 30-day spending diary to get a clear picture of what they spend their money on. This can be a good way to pinpoint areas you might be able to cut back on to have more money to apply to outstanding debt.

If your existing budget is already tight and won’t accommodate extra payments, you might consider looking for some other financial strategies.

Increasing Income

Sometimes the answer is to make more money. Granted, this can be easier said than done. But some people can get a part-time job, start a side hustle, or sell things they no longer need or want to raise cash. You might also think about looking for a new, higher-paying job or asking for a raise at your current job.

Using Personal Savings

Tapping into money you’ve saved can be another way to pay down outstanding debt. Savings account interest rates, even high-yield savings accounts, generally pay much less interest than you’re paying on your outstanding debts. Keeping enough money in a savings account as an emergency fund is recommended, but if you have a surplus in your personal savings, putting that money toward your debt balances is a good way to make headway on outstanding debt.

Consolidating With a Credit Card

Using a credit card to pay off debt may seem like an unwise choice, but it can make sense in some situations. If your credit score is healthy enough to qualify for a credit card with a zero- or low-interest promotional rate, you might consider transferring a higher-rate balance to a card like this.

The benefit of this strategy is having a lower interest rate during the promotional period, potentially resulting in savings on the overall debt.

There are some drawbacks to credit card balance transfers though. One is that promotional periods are limited, and if you don’t pay the balance in full during this period, the remaining debt will revert to the card’s regular rate. Also, it’s typical for a promotional-rate card to charge a balance transfer fee, which can range from 3% to 5%, or more, of the balance transferred. This fee will increase the amount you will have to repay.

Consolidating With a Personal Loan

As noted above, using one new loan to pay off multiple outstanding debt balances is another debt payoff method. A personal loan with a lower overall rate of interest and a straightforward repayment plan can be a good way to do this.

In addition to one fixed monthly payment, a debt consolidation loan provides another benefit — the balance cannot easily be increased, as with a credit card. It’s easy to swipe a credit card for an additional purchase, potentially undoing the progress you’ve made on your debt repayment plan.

To consolidate your outstanding debt with a personal loan, you might want to look around at different lenders to get a sense of what interest rates they might offer for you. Typically, lenders will provide a few options, including loans of different lengths.

Negotiating With Creditors

One other alternative is to reach out to creditors and try to negotiate with them. Some lenders may be interested in negotiating with borrowers who are struggling with debt. Doing so can help them recoup some if not all of the money they are owed. You might call your creditor, explain your situation, and see if they will reduce your interest rate, shift your loan terms, pause payments for a time, or otherwise help you pay what you can.

There are also debt settlement companies that are third parties. These offer to negotiate with creditors on your behalf, often advising clients to withhold payments for a period of time, which can cause their credit score to drop. Proceed with caution as these companies can charge high fees and results are not guaranteed.

When to Seek Professional Help

In some situations, you may want to get professional help with your debt. Perhaps you are feeling overwhelmed, barely able to make minimum payments, dealing with collections agencies, and finding the amount you owe rising. When this kind of stressful scenario occurs, you may find relief by reaching out for qualified assistance.

There are several types of professionals who might help. You could reach out to a nonprofit credit counseling agency (NFCC and FCAA are two to consider) for guidance on managing your debt. You could consult a financial advisor or financial therapist for advice and insights into how you can avoid future debts. If you are facing legal action, such as foreclosure, a debt attorney could be your best resource.

Do check references and make sure you are working with a well-regarded professional or organization so this difficult situation doesn’t become more challenging.

The Takeaway

Outstanding debt can be a heavy burden. Many people owe large amounts of debt but don’t know how to start making a dent in their balances. A good place to begin is by identifying your current income and expenses to see your overall financial picture. From there, you may decide to focus on paying down certain debts over others. You can then choose the best paydown method for your financial situation, whether that means using the debt avalanche technique or taking out a personal loan.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

What is the best method to pay off outstanding debt?

There is no single best method to pay off outstanding debt. Much depends on an individual’s unique situation and financial profile. For some, a debt snowball or avalanche method works well; others will prefer a debt consolidation loan, balance transfer card, or a consultation with a credit counseling agency. Research your options to find the best fit.

Can outstanding debt be negotiated or settled?

Yes, you may be able to negotiate or settle outstanding debt. You can contact your creditors directly yourself, or work with a debt settlement company (but be sure you understand the fees involved and that they may not be successful). In these situations, you can expect your credit score to be significantly lowered.

Does paying off outstanding debt build your credit score?

Yes, paying off outstanding debt typically has a positive impact on your credit score. This happens because you are lowering your credit utilization, meaning you are not owing as much vs. your credit limits. However, paying off debt could trigger a small decrease in your score as well, since it might reduce your credit history and mix, which contribute to your score.

How long does outstanding debt stay on your credit report?

Negative debt information can stay on your credit report for up to seven years and, in the case of bankruptcies, up to 10 years.

What happens if you ignore outstanding debt?

Ignoring outstanding debt can lead to serious financial and legal consequences. For instance, your credit score could drop significantly, collection agencies could pursue payment, you might have your salary garnished, and/or you could face the loss of an asset used as collateral on a loan.

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