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If you’re looking to start or grow a side hustle or small business, you might think a business loan is the right next step. A personal loan, however, is another popular financial product that you also might be able to use. Or it could free up some cash by covering expenses elsewhere in your budget, so you can put more of your income toward funding your business.

Because there are potential benefits and disadvantages to both types of financing, it’s important to understand the differences. You’ll find that information here and be better equipped to decide whether a business loan vs. personal loan might work best for you.

What Is a Personal Loan?

A personal loan is a source of financing that a borrower typically can use for just about anything. (That said, you may need to get approval from your lender if you plan to use the money directly for your business. This is not always possible.)

Typically, you’ll find unsecured personal loans, with the borrower agreeing to pay back the full amount, plus interest, in fixed monthly payments within a predetermined time frame.

Some lenders also offer secured personal loans, however,which means some form of collateral is involved. Also, some offer personal loans with variable interest rates.

How Personal Loans Work

When you apply for a personal loan, you can expect the lender to review your personal financial information — including your credit score, credit reports, and income — to determine your eligibility. In general, the better your credit, the better your chances of receiving a lower interest rate.

Personal loan amounts vary, but some lenders offer personal loans for as much as $100,000.

Although most personal loans have shorter repayment terms, the length of a loan can vary from a few months to several years. Typically, they last from 12 to 84 months.


💡 Quick Tip: Some personal loan lenders can release your funds as quickly as the same day your loan is approved.

What is a Business Loan?

A business loan is a type of financing used specifically to pay for business expenses. It could be used to purchase equipment or inventory, for example, or to fund a new project.

There are many kinds of small business loans available — with different rates and repayment terms — including Small Business Administration (SBA) loans, equipment loans, micro loans, and more. Rates, terms, and loan requirements also can vary significantly depending on the lender.

How Business Loans Work

Applying for a business loan tends to be more complicated than getting a personal loan. For one thing, you’ll likely have to submit more paperwork to back up your application, including your business’s financial statements and an up-to-date business plan. The lender also usually will want to review your personal and business credit scores. And you may have to be more specific about what the loan will be used for than you would with a personal loan.

If your business is brand new, lenders may be reluctant to give you a business loan. Some lenders might ask you to put up some type of collateral to qualify.

Differences Between Business and Personal Loans

There are several factors you may want to evaluate if you’re trying to decide between a personal loan vs. a business loan, including the loan costs, how you plan to use the money, and how much you hope to borrow. Here’s a look at a few basic differences.

Cost Differences Between Business and Personal Loans

Whether you’re considering applying for a business loan or a personal loan to use for your business, it’s important to be clear about how much it could cost you upfront and over the life of the loan.

Interest Rates

Interest rates for business loans can be lower than for the interest rates for personal loans, but the rates for both can vary depending on the type of loan, the lender you choose, and your qualifications as a borrower.

Fees

Fees also can affect the upfront and overall cost of both personal and business loans, so it’s a good idea to be clear on what you’re paying. Some of the more common fees for business loans and personal loans that you might see include origination, application, packaging, and underwriting fees, and late payment and prepayment penalties.

Some fees may be subtracted from the loan amount before the borrower receives the money. But fees also may be folded into a loan’s annual percentage rate (APR) instead, which can increase the monthly payment.

Down Payment

Business loans may be available for larger amounts than a personal loan. For a larger business loan — a substantial SBA loan or commercial real estate loan, for example — you could be required to come up with a down payment. This amount can add to your upfront cost. However, just as with a mortgage or car loan, a larger down payment can help you save money over the long term, because you’ll pay less in interest.

Whether you’ll need a down payment, and the amount required, may depend on your individual and business creditworthiness.

Different Uses for Business and Personal Loans

One of the biggest differences between business vs. personal loans is the way borrowers can use them.

•   A business loan can be used to finance direct business costs, such as paying for supplies, marketing, a new piece of equipment, business debt consolidation, or a business property. But it typically can’t be used for indirect business costs, which means a borrower can’t pay off personal debts with the money or buy personal property with it.

•   Some business loans have a very specific purpose, and the borrowed money must be used for that purpose. For example, if you get an equipment loan, you must buy equipment with it. Or, if you get a business car loan, you must buy a business car with the money.

•   Because you may be able to use the influx of cash for both business and personal expenses, the uses of a personal loan can be very flexible. But personal loans are typically smaller than business loans, and they generally come with a shorter repayment term. It can be helpful to have a clear intent for how the money will be spent and to keep separate records for business and personal expenses.

•   It’s also important to note that some lenders put restrictions on how personal loans can be used, so you should read the fine print before applying and share your plans with the lender if asked.

Differences When Applying for Business and Personal Loans

The criteria lenders look at can be very different when approving a small business loan vs. a personal loan. Here’s what you can expect during the application process.

Applying for a Personal Loan

When you apply for a personal loan, your personal creditworthiness usually plays a large role in the application and approval process.

•   Lenders typically will review a borrower’s credit scores, credit reports, and income when determining the interest rate, loan amount, and repayment term of a personal loan.

•   Generally, you can expect to be asked for a government-issued photo ID, your Social Security number, and/or some other proof of identity.

•   You also may be asked for proof of your current address. And the lender will want to verify your income.

Applying for a Business Loan

When you apply for a business loan, your personal finances still will be a factor, though other aspects of your application will be reviewed carefully.

•   The loan underwriters also will evaluate your business’s cash flow, how long you’ve been in business, your profitability, the exact purpose of the loan, trends in your industry, your business credit score, and more.

•   The lender may ask for a current profit-and-loss statement, a cash-flow statement, recent bank statements and tax returns for the business, your business license and a business plan, and any other current loan documents or lease agreements you might have.

•   You also will have to provide information about your collateral if you are applying for a secured loan.

Recommended: Understanding Credit Score Ranges

Structural Differences in Business and Personal Loans

Knowing the differences in how personal loans vs. business loans are structured could help you decide which is right for you and your business. A few factors that might affect your choice include:

Loan Amount

A business loan may be more difficult to apply for and get than a personal loan, especially if your business is a startup or only a few years old. But if you can qualify, you may be able to borrow more money with a business loan. While personal loan amounts typically top out at $50,000 to $100,000, some SBA loans can go as high as $5.5 million.

Loan Length

You’ll likely find personal and business loans with both short and long repayment terms. But generally, personal loans have shorter terms (typically one to seven years), while some business loan repayment periods can be up to 25 years.

Tax Advantages

If you have a business loan, deducting the interest you pay on the loan may be possible when filing income taxes if you meet specific criteria.

With a personal loan, it might get a little more complicated. If you use the borrowed money only for business costs, you may be able to deduct the interest you paid. But if you use the loan for both business and personal expenses, you would only be able to deduct the percentage of the interest that was used for qualifying business costs.

And you should be prepared to itemize deductions, documenting exactly how you spent the money. Your financial advisor or tax preparer can help you determine what’s appropriate.

Support

Along with the traditional banking services you might expect to get with any type of loan, a business loan also may come with operational support and online tools that can be useful for owners and entrepreneurs.

Risk

When you’re deciding between a personal vs. business loan, it’s also a good idea to think about what could happen if, at some point, the loan can’t be repaid.

•   If your business has financial problems and you have a personal loan, you (and your cosigner, if you have one) could be held responsible for the debt. You could lose your collateral (if it’s a secured loan) or damage your personal credit.

•   If your business defaults and it’s a business loan, the impact to your personal credit would depend on how the loan is set up.

◦   If you’re listed as a sole proprietor or signed a personal guarantee, it’s possible you could be sued, your personal and/or business credit scores could take a hit, and your personal and business assets could be at risk.

◦   If your business is set up as a distinct legal entity, on the other hand, your personal credit score might not be affected — but your business credit score could suffer. And it could be more difficult for you to take out a business loan in the future.

Structural Differences in Business and Personal Loans
	Business Loans	Personal Loans
Loan Amount	Typically come in larger amounts (up to $5 million)	Generally are limited to smaller amounts (up to $100,000)
Loan Length	Usually have longer repayment periods (up to 25 years)	Generally have shorter terms (a few months to a few years)
Tax Advantages	Interest paid on a business loan is often tax-deductible	Interest paid on a personal loan used for business expenses may be tax-deductible
Support	Lenders may offer operational support and online business tools to borrowers with business loans	Lenders may offer more personal types of support to borrowers with personal loans
Risk	Defaulting on a business loan could affect the borrower’s business credit score or business and personal credit scores (based on how the loan is structured)	Defaulting on a personal loan could affect the borrower’s personal credit score

Pros and Cons of Business Loans

There are advantages and disadvantages to keep in mind when deciding whether to apply for a business loan vs. personal loan.

•   A business loan can be more difficult to get than a personal loan, especially if the business is new or still struggling to become profitable.

•   If you qualify for a business loan, you may be able to borrow a larger amount of money and get a longer repayment term.

•   A business loan also could make it easier to separate your business and personal finances.

•   There could be fewer personal consequences if the business defaults on the loan.

Pros of Business Loans	Cons of Business Loans
Borrowers may qualify for larger amounts than personal loans offer	Applying can require more time and effort
Longer loan terms available	Qualifying can be difficult
Interest rates may be lower	Collateral and/or a down payment may be required
Interest is usually tax deductible	Loan must be used for business purposes only
Lenders may offer more business-oriented support	New businesses may pay higher interest rates
Debt may be the responsibility of the business, not the individual (depending on loan structure)	Responsibility for the debt could still land on individual borrowers

Recommended: Can You Refinance a Personal Loan?

Pros and Cons of Personal Loans

A personal loan vs. business loan can have advantages and disadvantages to consider if you are wondering if you can use one to fund a business.

•   Personal loans can offer borrowers more flexibility than business loans in terms of usage.

•   They’re generally easier to qualify for and may have lower interest rates.

•   One major hurdle may be tracking whether the funds were used for business or personal expenses, which can be crucial, especially for income taxes.

Pros of Personal Loans	Cons of Personal Loans
Application process is usually quick and easy	Lending limits may be lower than business loans
Qualifying can be less challenging than with a business loan because it’s based on personal creditworthiness	Borrower doesn’t build business credit with on-time payments
Can use funds for both personal and business expenses (unless there are lender restrictions)	Defaulting can affect personal credit score/finances
Most personal loans are unsecured	Interest rates are generally higher than for a business loan
Interest may be tax deductible (when funds are used for business)	Shorter loan terms than business loans typically offer

💡 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.

Is a Business or Personal Loan Right for You?

Considering the differences between a personal loan and a business loan can help you decide which is right for your needs. You may want to do some online research, compare rates and terms, and/or ask a financial professional or business mentor for advice before moving forward with this important decision. Here are some things to think about as you look for a loan that’s a good fit for your personal and professional goals.

A business loan may make sense if:

•   You’re seeking a lower interest rate and/or repayment term.

•   You want to keep personal and business expenditures separate.

•   You’ve been successfully running your business for a while.

•   You need more money than you can get with a personal loan.

•   You hope to build your business credit.

•   You want to limit your liability.

A personal loan may make sense if:

•   Your goal is to grow your startup or new business and the loan allows this usage.

•   You plan to use the money for both business and personal expenses.

•   You can find a personal loan with a lower interest rate than a comparable business loan, and the lender approves the loan for business expenses.

•   You want to get the money as quickly as possible.

•   You are seeking a shorter repayment term.

•   You don’t want to secure the loan with collateral.

•   You feel confident about your personal ability to repay the loan.

Recommended: Can I Pay Off a Personal Loan Early?

The Takeaway

If you’re seeking funding to start or grow your business, you may have to decide between personal and business loans. Personal loans are typically easier to apply for and offer quicker access to funds, but often at a somewhat higher interest rate and shorter term vs. business loans. Also, business loans usually offer significantly higher loan amounts and the interest can be tax-deductible. It’s worthwhile to consider the tax and credit implications of each type of loan too, among other factors.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

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

FAQ

Are business loans more expensive than personal loans?

Business loans typically have lower interest rates than personal loans. Still, it’s probably worth comparing both types of loans and the rates lenders are willing to offer you and/or your business before making a final decision between the two.

Is it illegal to use personal loans for business?

Most (but not necessarily all) personal loans can be used for just about anything. Your lender may not even ask how you intend to spend the money. But it’s a good idea to check the lending agreement in case there are any restrictions. And if the lender wants to know the purpose of the loan, you should be honest about your intentions.

Are startup loans personal loans?

There are a few different options for funding a startup, including SBA loans, family loans, or crowdfunding platforms. But if you have good credit and are confident you can make the monthly payments, taking out a personal loan could be an effective strategy for funding a startup, if the loan permits that usage.

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Photo credit: iStock/MicroStockHub

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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 .

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.

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.

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

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If you rent, rather than own, your home, you’re off the hook for homeowners insurance. But you may still need or want renters insurance, which can help cover your assets in the event of a calamity.

Like all other forms of insurance coverage, choosing a renters insurance policy involves choosing a deductible, which will have an effect on your overall policy cost.

Let’s learn more about how a renters insurance deductible works and how to choose one that’s right for your circumstances.

What Is a Renters Insurance Deductible?

If you have renters insurance and wind up needing to file a claim, the insurance company will still expect you to pay some of the cost. That out-of-pocket expense is called your deductible, and is separate from the premium you pay on a regular basis to keep the policy active.

For example, say you have a renters insurance policy that covers up to $20,000 worth of your belongings in the event of a covered loss. If your deductible is a flat $500, you’d pay $500, and the insurance company would pay $19,500 toward replacing your belongings.

Your deductible might also be calculated as a percentage of your property coverage. So in this example, if your deductible is 2%, you’d pay $400 (2% of $20,000) and the insurer would pay out $19,600.

Your premium, on the other hand, is the amount you pay monthly or annually in order to support the policy. In the case of renters insurance, that might be about $200 a year, or around $20 or less a month.


💡 Quick Tip: Online renters insurance can cover your belongings not just at home but also in your car and on vacation.

Choosing a Renters Insurance Deductible

You may be happy to know that you have some agency when it comes to choosing your renters insurance deductible. While many policies offer flat deductible options of either $500 or $1,000, certain companies do offer lower or higher amounts. Occasionally, you may even find a program available with a $0 or 0% deductible, which means you wouldn’t pay anything out of pocket if you were to make a claim.

Paying less during a time of loss probably sounds like an unmitigated good thing. But there is a bit of a catch. Generally speaking, the lower your deductible, the higher your premium, which means you’re paying more on a regular basis for a benefit you might get if a loss occurs.

On the other hand, if you hedge your bets and go for a high deductible, your regular premium payments will be lower — but you’ll be on the hook for a lot more if you do need to file a claim.

Recommended: What Does Renters Insurance Cover and How Does it Work

How Does Your Renters Insurance Deductible Affect Your Premiums?

While the inverse relationship between deductibles and premiums is fairly standard, other factors do play into your specific renters insurance costs.

For example, your insurer may cut you a break if you have certain security equipment installed, such as an alarm system or smoke alarm. On the other hand, if you live in what’s deemed a high-risk area or your credit score could use some work, your available coverage options may be more expensive, even if you choose a high deductible.

Renters Insurance by State

Because different states have different risk levels, both for criminal activity and natural damage, the average cost of renters insurance varies depending on what state you’re in. Here are the average monthly renters insurance premiums by state, per data from the Zebra:

•  Alabama: $23

•  Alaska: $15

•  Arizona: $20

•  Arkansas: $26

•  California: $18

•  Colorado: $17

•  Connecticut: $24

•  Delaware: $21

•  District of Columbia: $20

•  Florida: $21

•  Georgia: $22

•  Hawaii: $20

•  Idaho: $16

•  Illinois: $20

•  Indiana: $28

•  Iowa: $14

•  Kansas: $21

•  Kentucky: $17

•  Louisiana: $38

•  Maine: $12

•  Maryland: $19

•  Massachusetts: $18

•  Michigan: $22

•  Minnesota: $13

•  Mississippi: $26

•  Missouri: $24

•  Montana: $19

•  Nebraska: $16

•  Nevada: $17

•  New Hampshire: $14

•  New Jersey: $19

•  New Mexico: $19

•  New York: $26

•  North Carolina: $23

•  North Dakota: $13

•  Ohio: $18

•  Oklahoma: $23

•  Oregon: $16

•  Pennsylvania: $19

•  Rhode Island: $24

•  South Carolina: $18

•  South Dakota: $14

•  Tennessee: $19

•  Texas: $32

•  Utah: $14

•  Vermont: $9

•  Virginia: $18

•  Washington: $14

•  West Virginia: $24

•  Wisconsin: $14

•  Wyoming: $11

Keep in mind that your specific monthly price will vary further based on your city and even your neighborhood, as well as many other factors. Check with your insurer for actual insurance premium prices available to you.

Recommended: Why Do Landlords Require Renters Insurance?

Renters Insurance Overview

Renters insurance can be a truly valuable tool if you suffer a loss as a renter. While it doesn’t cover the structure of your home the way homeowners insurance does — the building’s owner is responsible for those costs — renters insurance does cover your belongings in case of damage or theft. It also covers personal liability costs in the event that someone is injured while at your home and sues you.

Some landlords require renters insurance, while others don’t. But for most renters, it’s a good idea to at least consider it, especially since it’s usually pretty affordable. (Many renters insurance programs cost less than $200 per year or about $15 to $20 monthly.)

Do keep in mind that renters insurance, like all types of insurance coverage, doesn’t cover everything.

What Does Renters Insurance Cover?

Generally, renters insurance offers coverage in the following four categories:

•  Personal property: This covers your possessions.

•  Personal liability: This would take care of the medical or legal fees you might incur if someone is hurt while at your home.

•  Loss-of-use or additional living expenses: This covers the money you’d need to spend to find yourself a place to stay and food to eat if your home was, for some reason, rendered unlivable.

•  Additional coverages: These may be purchased to cover items and services that wouldn’t otherwise be eligible for coverage on your policy (such as lock replacement).

Keep in mind also that certain high-value categories of items may have coverage limits, though these can often be exceeded if you purchase a separate rider or endorsement for them. These categories may include cash, jewelry, watchers, fur clothing, and firearms.


💡 Quick Tip: It’s important to create an inventory of your personal possessions in case you ever need to file a renters insurance claim. One easy way to do that is to walk through your home and photograph all your belongings — especially anything of value.

The Takeaway

Renters insurance is a kind of insurance that can cover your belongings and personal liability if you’re a renter. Like other forms of insurance, a deductible likely applies. The lower the deductible you choose, the higher your premium is likely to be.

While insurance isn’t anyone’s favorite bill to pay, it’s the kind of thing you’re grateful for when you do turn out to need it.

Looking to protect your belongings? SoFi has partnered with Lemonade to offer renters insurance. Policies are easy to understand and apply for, with instant quotes available. Prices start at just $5 per month.

Explore renters insurance options offered through SoFi via Experian.

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Photo credit: iStock/Edwin Tan

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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The average annual pay for a mental health therapist in the U.S. is $75,895, according to employment website ZipRecruiter.

But there are many factors that can influence this number, including experience, specialty and location. If you’re interested in starting a career as a therapist, employment demand is expected to be strong so it’s likely there’s good job security.

Here’s a closer look at what a therapist does and how much money they can make in a year.

What Is a Therapist?

If you like talking with people and helping them work through issues to improve their lives, a career as a therapist might be a good fit.

Therapists generally specialize in working with specific groups of people or in certain areas. For instance, some might concentrate on working with children, older adults, or married couples, or with people who need help with issues like eating disorders or drug abuse. Therapists can work in different settings, including health practitioner offices, hospitals, schools, private practices, and home health care services.

It can be a long path to becoming a therapist. Therapists need an undergraduate degree and typically have a master’s degree in psychology or in a related field or specialty. There are also hands-on experience requirements through supervised clinical work. States have different requirements when it comes to obtaining a license, but the process usually involves filling out an application and passing an exam.

There are other skills that go beyond education that help make a good therapist. Soft skills like strong communication and organization skills, being a good listener, and having empathy and patience are also important to being successful in the profession.

💡 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.

Therapist vs. Psychologist

The title “therapist” is often used broadly to include various professions. It’s sometimes used interchangeably with “psychologist,” but there are differences between the two.

The educational requirements are heftier for those interested in pursuing a career as a psychologist. Psychologists typically need a doctoral degree in psychology and to pass certain exams to be able to secure a license.

There is strong demand for psychologists. The Labor Department forecasts employment of psychologists to grow 6% from 2022-2032. Over that decade, there’s projected to be about 12,800 openings a year.

How Much Do Therapists Make Starting Out?

When you’re just starting out as an entry-level mental health therapist after all those years of education and clinical work, you can expect to earn an average of total pay of around $46,600 a year, according to data from Payscale. As you grow in your career and gain one to four years of experience, the average compensation increases to $50,677.

But keep in mind that there are a lot of considerations when it comes to determining a good entry-level salary, including location, experience, skill level, specialty, and demand.

What Is the Average Salary for a Therapist

Wondering how much a therapist makes after they’ve been working for a few years? The average annual salary for a mental health therapist in the U.S. was $75,895, according to ZipRecruiter. Here’s how that breaks down: $36.49 an hour or $6,324 a month.

For marriage and family therapists, the median annual pay was $56,570, according to data from the Labor Department. The growth rate for therapists in this field is expected to grow 15% from 2022-2032 — a lot faster than the average.

There’s a large range in how much a therapist can make, with ZipRecruiter seeing the top earners (those in the 90th percentile) making $118,000 annually.

Note that while some therapists will choose to bill by the hour, when it comes to compensation, there’s a difference between being paid salaried vs paid hourly.

Recommended: What Is Competitive Pay?

What Is the Average Therapist Salary by State?

Wondering how a therapist’s salary compares to the highest-paying jobs in your state? Here’s a breakdown of what the average annual salary of mental health therapists by state.

State	Average Salary
Alabama	$55,535
Alaska	$75,842
Arizona	$65,716
Arkansas	$59,437
California	$72,117
Colorado	$68,023
Connecticut	$74,203
Delaware	$68,126
Florida	$55,479
Georgia	$64,601
Hawaii	$77,511
Idaho	$62,082
Illinois	$70,696
Indiana	$65,737
Iowa	$75,470
Kansas	$65,997
Kentucky	$60,521
Louisiana	$65,619
Maine	$66,004
Maryland	$69,120
Massachusetts	$79,870
Michigan	$65,064
Minnesota	$78,700
Mississippi	$68,666
Missouri	$64,585
Montana	$63,047
Nebraska	$62,663
Nevada	$80,187
New Hampshire	$64,267
New Jersey	$82,592
New Mexico	$74,183
New York	$77,089
North Carolina	$59,880
North Dakota	$73,997
Ohio	$73,378
Oklahoma	$65,700
Oregon	$78,617
Pennsylvania	$64,507
Rhode Island	$74,257
South Carolina	$65,582
South Dakota	$74,053
Tennessee	$71,824
Texas	$63,977
Utah	$71,494
Vermont	$68,905
Virginia	$69,153
Washington	$77,294
West Virginia	$55,583
Wisconsin	$81,874
Wyoming	$66,016

Source: Zippia

Therapist Job Considerations for Pay and Benefits

Helping people better themselves and overcome problems can be a very fulfilling line of work. And there’s a need for more people to work in the mental health field.

For example, employment growth for substance abuse, behavioral disorder and mental health counselors is expected to increase 18% from 2022-2032, according to the Department of Labor. Because of these strong employment growth projections, being a therapist likely comes with job security.

Becoming a therapist can also bring scheduling flexibility, especially if you run your own practice. Being able to set your own hours can result in a better work-life balance. However, some therapists might have to offer after-hour sessions to work around clients’ schedules.

Working one-on-one with people and forging relationships can also be a satisfying perk, but it can also be emotionally stressful. That’s why this profession might not be the best fit if you tend to be more introverted.

Recommended: 15 Entry-Level Jobs for Antisocial People

Pros and Cons of Therapist Salary

The educational requirements for a therapist are higher than other professions, which could mean you graduate with a hefty debt load that can put pressure on future earnings.

However, your earnings potential increases as you gain more experience and the pay is higher than other occupations. The Labor Department reported that the median weekly earnings of full-time workers were $1,118 in the third quarter of 2023 The average weekly pay for a mental health therapist in the U.S. was $1,459 in November 2023, according to ZipRecruiter.

The pay and benefits can differ depending on where a therapist works. For instance, joining a bigger practice or hospital could bring about additional benefits like retirement savings plans and health care benefits compared to smaller or a solo practice.

The licensure requirements to become a therapist can be time consuming. Each state has its own licensing requirements that you’ll have to navigate. There can also be continuing education requirements in order to maintain your license.

💡 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

Becoming a therapist can be very rewarding on a personal, professional, and financial level. Be prepared for the path it takes to get to this career: an undergraduate degree, a master degree in a specialized area, clinical experience, the state license and exam process, and continuing education.

To help decide if this is the right career path, evaluate what’s important to you in your career and if it’s financially feasible. For some workers, a $100,000 salary is good, while others might need more or less depending on their cost-of-living.

Take the time to evaluate your budget. The education requirements could mean taking out student loans, which can put strain on your budget. Online tools like a money tracker app can help you create a spending plan that’s right for you.

FAQ

What is the highest-paying therapist job?

According to the Bureau of Labor Statistics, a therapist can earn upwards of $111,800 a year.

Do therapists make $100k a year?

While a typical mental health therapist makes around $75,895 a year, it is possible to earn $100,000 or more a year. Salaries often vary depending on experience, specialization, and location.

How much do therapists make starting out?

Early in their career, a therapist earns an average of $46,600 a year, according to Payscale. But with more experience, compensation can increase to $50,677.

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Photo credit: iStock/LightFieldStudios

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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According to the Bureau of Labor Statistics, the median pay per year for a real estate agent in May 2022 was $52,030. However, agents can earn much more if they buy and sell properties in a high-income area with expensive real estate, such as New York or California, or if they build a highly successful business.

Here’s a look at what real estate agents do, the different types of agent jobs possible, how much they earn, and the factors affecting their salaries.

What Are Real Estate Agents and What Do They Do?

Real estate agents help buyers and sellers conduct transactions involving residential or commercial property. They usually work under a broker, who takes care of the management and branding of a real estate group. The real estate agent’s role is to find clients, help them search for properties, and then guide the price negotiations between the buyer and seller. In addition, they may help coordinate the legal transactions involved and prepare documentation.

Real estate agents are licensed professionals in the states where they work. The real estate agent is usually paid through commission, which is a percentage of the property’s sales price. How much commission they earn depends on the brokerage, the state, and property values. Some agents are licensed brokers, meaning they can work independently.


💡 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.

The Different Types of Real Estate Agents

There are different types of real estate agents depending on their licenses and the types of property they work with. The main types of agents are realtors, brokers, listing agents, buyer’s agents, commercial agents, and residential agents.

Realtor

A Realtor® is a licensed real estate agent who is a member of the National Association of Realtors (NAR), which requires them to adhere to a code of ethics.

Broker

Brokers are licensed as such and tend to earn higher salaries and have more freedom in their career choices. They do not necessarily need to be tied to a larger brokerage firm.

Listing Agent

Listing agents are called “seller’s agents” because they represent the seller in a real estate transaction. These agents find buyers for property and try to sell a property at the highest price possible for the seller.

Buyer’s Agent

The buyer’s agent represents the buyer in a real estate transaction. They will try to find the right property for the buyer and negotiate the lowest possible price.

Commercial Agent

A commercial real estate agent primarily sells, rents, or buys commercial real estate, such as retail space, warehouses, office buildings, industrial, and mixed-use space. These agents typically know the local commercial real estate market well and might be involved in property management.

Residential Agent

A residential real estate agent primarily buys and sells homes, condos, and units in apartment complexes. They need a good grasp of the local residential real estate market, the amenities an area offers, and what type of home best suits their clients.

It’s worth noting that being a real estate agent can be a good job for a “people person” vs. a job for introverts. An agent will often have to discern a buyer’s or seller’s needs, draw them out, and spend a lot of time hand-holding clients through the ups and downs of a real estate deal.

Recommended: Which Trade Makes the Most Money?

How Much Do Starting Real Estate Agents Make?

The entry-level salary for real estate agents reported by various sources is varied. According to McKissock Learning, a group that provides learning solutions for licensed real estate professionals, agents earn an average of around $55,000 after being in business for one year.

The amount depends, of course, on many variables, not least of which is how hard the agent works and how many hours they devote to their real estate profession. The area where they work and the kinds of properties they sell will also make a difference, especially when earning commission.

Starting salaries for agents are typically in the ballpark of $52,030, which is close to some of the national averages for the job. However, according to McKissock Learning, after one to three years, the income of a real estate agent could rise to around $80,000. The longer you work as an agent and develop a clientele, the higher your salary might be.

Also, consider the cost of living and housing prices where a real estate agent works. Real estate agents typically earn money via commission (say, 5% of the property’s sale price, which may be divided between a couple of agents, such as the listing agent and the buyer’s agent). This can make a tremendous difference: One real estate agent might be selling homes that sell in the range of $300k, while another might sell multi-million dollar waterfront homes in Hawaii. The latter will likely earn much more competitive pay.

What Is the Average Salary for a Real Estate Agent?

How much does a real estate agent make a year? According to the Bureau of Labor Statistics, the median salary for a real estate agent in May 2022 was $52,030, while real estate brokers earned a median salary of $62,000.

Salaries will vary depending on where an agent works (the state), their licenses, and how hard they work. Brokers tend to earn more than agents.

How much does a real estate agent make per sale? This is a critical factor regarding their income. An agent who works in New York City, prime areas of Los Angeles or Palo Alto, or in Hawaii will likely earn a higher net commission per sale because average property prices are high. (For the very high-end professionals, being a real estate agent could be among the highest paid jobs per state.) Because agents earn more the more properties they sell, how much time they spend on their business can also be a major factor affecting their earnings.

The table below shows the average real estate agent salary for 2022 (the most recent year available) based on data from the Bureau of Labor Statistics.

State	Real Estate Agent Mean Wage
Alabama	$58,840
Alaska	$72,290
Arizona	$61,330
Arkansas	$66,750
California	$77,430
Colorado	$79,610
Connecticut	$71,830
Delaware	$53,690
District of Columbia	$96,070
Florida	$56,580
Georgia	$55,130
Hawaii	$57,310
Idaho	$49,830
Illinois	$44,510
Indiana	$64,610
Iowa	$69,210
Kansas	$52,970
Kentucky	$55,050
Louisiana	$46,690
Maine	$62,380
Maryland	$69,810
Massachusetts	$79,060
Michigan	$62,990
Minnesota	$57,280
Mississippi	$72,900
Missouri	$47,670
Montana	$58,120
Nebraska	$53,090
Nevada	$73,990
New Hampshire	$94,810
New Jersey	$82,090
New Mexico	$50,920
New York	$93,950
North Carolina	$55,370
North Dakota	$63,620
Ohio	$45,570
Oregon	$58,680
Pennsylvania	$56,760
Puerto Rico	$58,850
Rhode Island	$71,490
South Carolina	$65,160
South Dakota	$74,323*
Tennessee	$42,041*
Texas	$77,320
Utah	$60,830
Virginia	$69,510
Washington	$72,080
West Virginia	$55,230
Wisconsin	$57,930
Wyoming	$74,820

Source: Bureau of Labor Statistics[CB6]
*Data from Salary.com

Real Estate Agent Job Considerations for Pay and Benefits

There are, as you might guess, an array of factors that contribute to a real estate agent’s pay and career opportunities. Consider the following points.

The Cost of Becoming Licensed

Pre-licensing real estate classes may cost around $300. These classes are necessary to prepare for the real estate exam.

An established agent may also have to pay brokerage fees, which could be from $25 to $500 a month. A broker will take a commission on an agent’s real estate earnings or charge a monthly fee.

Marketing Costs

A realtor must likely market their services, which could cost around $600 a year or considerably more in competitive markets. It could cost more at the outset as the agent builds their brand and presence in the area they intend to work in. Or, as a real estate agent builds their client base, they might upgrade and begin to invest more in videos and social media to boost their profile.

Initially, an agent may do better working under a brokerage. A brokerage already has a customer base to draw from and an established brand name that will help an agent’s reputation. A brokerage will expect some commission in return, but it could be a valuable partnership.

Economic Conditions

The real estate market is infamous for its volatility. In a “hot” market, properties can sell quickly at high prices (often elevated by bidding wars), and estate agents can earn high commissions.

However, in times of recession, homes sit on the market longer, prices can slump, and real estate agents may earn much less.

Because most people buy a home using a mortgage loan, interest rates heavily influence the market. High interest rates deter people from borrowing and slow down the real estate market.

Recommended: Is $100,000 a Good Salary?

Pros and Cons of Making a Living as a Real Estate Agent

A real estate agent is often an entrepreneur. That means they are in control of their business, but how much they earn depends on how much time they put in, their expertise and creativity, and other factors.

Here are some advantages and disadvantages of making a living as a real estate agent.

Pros of Making a Living as a Real Estate Agent Real	Cons of Making a Living as a Real Estate Agent
As entrepreneurs, agents are in control of their day.	An agent’s income can be irregular and depends on economic and market conditions.
Agents can set their own schedules and work as hard or as little as they like.	Income may be limited by the area where the agent works and the types of property available.
A commission-based salary can be lucrative if an agent works in the right area and the market is favorable.	Real estate agents often work weekends and evenings to accommodate clients’ needs.

The Takeaway

The typical real estate agent’s salary is $52,030, according to data from the Bureau of Labor Statistics. However, that figure can vary greatly depending on where an agent works, their skill, and how hot the market is. Agents in major cities and who specialize in luxury properties can do very well.

When working as a real estate agent, it’s important to balance such concerns as marketing, building your client base, and adjusting to fluctuating economic conditions. These and other factors can impact cash flow, for better or for worse.

FAQ

How to make $100,000 your first year in real estate?

It’s possible to make $100,000 a year in real estate or put together enough deals to take in that amount of income. Factors that will help include working in an area where house prices are high, setting a strategy, and marketing your services well to generate leads.

How much do Realtors make in California?

The mean salary for Realtors in California as of May 2022 was $77,430, according to the Bureau of Labor Statistics. According to ZipRecruiter, the national average for 2023 was around $91,000. Realtors in California may earn more than the national average because property prices are often high, which leads to higher commissions on sales.

How much money does a real estate agent make a year?

How much a real estate agent earns in a year will depend on where and how they are licensed, the number of clients they represent, and the property prices in their area. According to the Bureau of Labor Statistics, the median salary for a real estate agent in May 2022 was around $52,030, while real estate brokers earned a median salary of $62,000.

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Photo credit: iStock/Pekic

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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

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.

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