SoFi

While there’s no official guideline on what makes a salary “good,” a $20,000 salary is not typically enough for a household to live comfortably in most parts of the United States. Certainly, each person’s situation is unique in terms of their assets and expenses, but an individual making $20K a year may have a hard time making ends meet. They might need to rely on assistance from family, friends, and/or the government to afford basic necessities.

A $20,000 salary puts a single person above the poverty threshold for 2024. An individual supporting themselves plus one or more people on $20K a year, however, will live below the poverty threshold. With the record-high inflation we’ve seen in recent years, affording basic needs on a $20,000 salary has become even more challenging.

So is $20K a year good? While a $20,000 salary averages out to more than the federal minimum wage of $7.25/hour for full-time work, it is likely not an adequate income for anyone living independently and especially those with a family. In this piece, we’ll cover:

•   The current American median income.

•   Is $20K a year good?

•   A breakdown of a $20,000 salary.

•   The best and worst places to live on $20,000.

•   Tips for living on $20K a year.

Factors to Determine if a $20,000 Salary Is Good

A $20,000 salary will be challenging for anyone to live on, but a few factors may determine if it can be done — or if it’s impossible:

•   Taxes: If you are filing singly, a $20,000 salary will put you at the 12% federal income tax bracket. You may owe additional taxes for your state, city, and/or school district. For the sake of example, assume a flat 15%. That means, although you make $20,000, you only bring home $17,000 after taxes.

•   Family size: Single individuals without children can make $20,000 stretch more easily. Two or more people living off a $20,000 salary will face more challenges.

•   Location: Money goes further in some places more than others. If you live in an area with a low cost of living, a $20,000 salary may be more manageable. But if you live in a popular city, $20,000 a year may not even cover rent.

•   Debt: If you have debt, it can be more challenging to allocate your limited money to basic necessities and important financial goals, like building an emergency savings fund. If you are dealing with high-interest debt, you probably know how quickly this debt can grow when you are only paying the minimum amount due.

How Does a $20,000 Salary Compare to the American Median Income?

According to the most recent U.S. Census Bureau report, median household income was $80,610 in 2023. Keep in mind, though, that this number represents all households, which may include more than one earner. According to the Bureau of Labor Statistics, median weekly earnings for American workers was $1,117 in 2023, which comes out to $58,084.

Either way, $20,000 is far below either estimate for a median income. If you earn $20,000 and have a domestic partner or spouse who earns additional income, your salaries together might get you closer to the median income level.

Recommended: Is a $100,000 Salary Good?

$20,000 Salary Breakdown

Again, no judgment here: It’s not a matter of if a $20,000 salary is good or bad. To someone just out of high school, $20K a year might look like a good entry-level salary. But anyone who has handled monthly bills like rent and utilities will likely recognize that a $20,000 salary may be insufficient.

Here’s how a $20,000 annual salary breaks down:

•   Monthly income: $1,666.66

•   Biweekly paycheck: $769.23

•   Weekly income: $384.62

•   Daily income: $76.92 based on working 260 days a year

•   Hourly income: $9.62 based on working 2,080 hours a year

These estimates do not account for taxes. In the example above, a $20,000 salary may shrink to $17,000 after Uncle Sam has taken his cut.

Recommended: For other salary conversions, use our Salary to Hourly Calculator.

Can You Live Individually on a $20,000 Income?

It is possible to live individually on a $20,000 income, but you will likely only be able to afford the items on your basic living expenses list if you aren’t able to supplement your income. Living comfortably — with easy access to good health care (including mental health), balanced nutrition, safe housing, and efficient transportation — may be far more challenging on $20,000 a year.

If you make $20,000 a year, you might be able to minimize monthly expenses by looking for government assistance, getting a roommate or moving in with family, cooking at home, and using an online bank account with a high interest rate and automatic savings features.

How Much Rent Can You Afford Living on a $20,000 Income?

Wondering how much you can afford to spend on rent? Researchers have long argued that you should spend no more than 30% of your income on housing. With rising inflation and increasing rent prices, however, that’s not always possible.

If you were to stick to the 30% rule (and forget about income taxes for the sake of the example), that means you can spend $6,000 a year on rent, or $500 a month. But the median cost of rent in the U.S. was $2,100 as of September 2024, according to Zillow. That’s about four times what you could afford on $20K a year.

To afford rent on a $20,000 salary, it’s a good idea to live in a place with a very low cost of living and to have one or more roommates who can help share living expenses of rent and utilities with you. Moving in with family is also a solution if you cannot afford rent on your salary.

Best Places to Live on a $20,000 Salary

If you are making $20,000 a year (or $9.62 an hour), it might be a good idea to explore cities and states with a low cost of living.

These are the five least expensive cities to live in for 2024-2025, per U.S. News:

•   Fort Wayne, Indiana

•   Huntsville, Alabama

•   Wichita, Kansas

•   Springfield, Missouri

•   Davenport, Iowa

Living outside a city altogether is usually more affordable. Consider a rural location in one of these five cheapest states to live in:

•   Arkansas

•   Mississippi

•   Alabama

•   West Virginia

•   South Dakota

Recommended: Typical Monthly Expenses for a Single Person

Worst Places to Live on a $20,000 Salary

On the flip side, there are some major cities that are exorbitantly expensive to live in. If possible, it’s a good idea to avoid living in the following locations when you are living on $20,000 a year:

•   Hartford, Connecticut

•   Los Angeles, California

•   Miami, Florida

•   New Haven, Connecticut

•   New York City, New York

California cities clearly carry a high cost of living, but other states are also expensive. If you have a $20,000 annual salary, it’s a good idea to steer clear of any of the five most expensive states to live in:

•   Hawaii

•   New York

•   California

•   Massachusetts

•   Oregon

Is a $20,000 Salary Considered Poverty?

A $20,000 salary is above the poverty line for an individual, but if you are a couple or a family of three or more people living on a $20,000 salary, the government considers you to be below the poverty line.

These numbers do not consider factors like variable cost of living. A localized poverty line could be more telling, especially if you live in a place with a high cost of living. If you are, say, living in a pricey city and earning $20,000 a year, you might be feeling the financial pinch more.

Tips for Living on a $20,000 Budget

While advocating for a higher salary can infuse your line item budget with more funds, you can’t necessarily count on a raise. Taking other steps now may make it easier to live on your $20,000 salary.

Finding Out What Assistance You Qualify For

If you are making $20,000 or less, you may qualify for government assistance. Here are a few actions to consider taking:

•   Work with the U.S. Department of Housing and Urban Development for assistance with rent, including the Section 8 program.

•   Determine if you are eligible for assistance with grocery bills through the Supplemental Nutrition Assistance Program (SNAP).

•   Research the Low Income Home Energy Assistance Program (LIHEAP) to help with utilities.

•   See if you can lower your phone bill through the Lifeline Modernization Order .

•   Find out if you are eligible for free or low-cost health coverage through Medicaid and the Children’s Health Insurance Program (CHIP).

Coming Up With a Housing Plan

If you do not qualify for rental assistance from the government, you may need to come up with another plan to avoid high rent costs. Roommates can be a good way to keep rent low.

Alternatively, family and friends may be willing to offer free lodging while you save money. While it can be hard to lean on others in this way, it can be a form of financial self-care to do so until you are able to be out on your own. If you do move in with a loved one, just remember to be helpful around the house and chip in with utilities and groceries if you’re able.

Cutting Costs

After reducing your largest cost (rent), it may be possible to reduce other costs in your budget. For example, a car payment, gas, and car insurance can be costly monthly expenses. If you live in an area with great public transportation or are comfortable walking and riding a bike, you may be able to get around without owning your own vehicle.

Other costs you might be able to cut include streaming services, gym memberships, and bills from dining out.

Getting on a Budget

After finding low-cost housing and trimming unnecessary expenses, it’s a good idea to make a monthly budget that accounts for your post-tax income and your monthly expenses.

Not sure how to budget on a $20K salary? Taking care of all necessary bills (housing, utilities, groceries) is the perfect first step. Once you’ve accounted for those monthly expenses, see how much you can allocate to paying down debt or building your savings.

Recommended: How to Save Money From Your Salary

Avoiding the Wrong Kinds of Debt

Taking on debt is often necessary — when buying a house, purchasing a car, or even going to college. But when you make a low salary and struggle to pay the bills, it can be tempting to take out a payday loan or overuse a high-interest credit card.

When possible, it’s a good idea to avoid high-interest loans. In fact, instead of taking on more credit card debt, you may be able to take control of your bad debt by applying for a debt consolidation loan. These are typically personal loans that charge an interest rate that may be significantly lower than your credit cards’ rates. You use the loan to pay off the cards and then you work to eliminate the personal loan.

You might also meet with a counselor from a nonprofit debt counseling organization like the National Foundation for Credit Counseling, or NFCC .

Recommended: Debt Repayment Strategies

Supplementing Your Basic Income

You might also consider ways to bring in more income to pump up your spending power. This could include seeing if additional hours are available at your primary workplace, as well as taking on a seasonal part-time job or starting a side hustle. These are all ways to use some of your leisure time to bump up your income.

The Takeaway

A $20,000 is usually not enough for a family to live on, and it may be difficult for individuals to get by on this salary too. It may be wise to research government assistance, look for roommates to lower housing costs, and build (and stick to) a monthly budget that prioritizes paying down debt and building emergency savings. These steps can help you live on a $20,000 annual income.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Can you live comfortably on $20,000 a year?

It can be difficult for an individual to live comfortably on $20,000 a year. With the right assistance from friends, family, and the government, however, it may be possible to meet basic needs. Families will face more challenges living off $20,000 a year.

What can I afford making $20K a year?

A $20,000 salary may leave room in your budget for the most basic expenses: rent, utilities, transportation, and groceries. Even then, getting government assistance and a roommate might be necessary for managing monthly expenses on $20K a year.

Is $20,000 a year middle class?

According to the most recent data from the Pew Research Center, middle class, middle-income households have incomes ranging from about $56,600 to $169,800. Thus, a family living on $20,000 is not middle class; it’s actually below the poverty level. While an individual earning $20,000 a year is not below the poverty line, they are still not considered middle class.

Photo credit: iStock/svetikd

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.

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.

SOBNK-Q324-098

For many of us, a car is the second-biggest purchase we’ll make, next to a home. The average price a buyer paid for a new car in June 2024 was $48,644, according to Kelley Blue Book. But sticker price isn’t the only thing to consider when budgeting for new wheels. There’s also insurance, maintenance, gas, and depreciation.

Depreciation may not be front of mind for many car buyers. But in fact it’s a major factor in determining how to finance a new car. We’ll explain why, review different loan options, and recommend steps you can take to help you get a great deal.

How To Assess the Value of a Car

You may already know what you want in a new car: the gas mileage, capacity, features. Just as important, you know what you can afford. Or do you? Before heading to a dealership, you’ll want to extensively research the cars you’re interested in.

Once you have an idea of the makes and models you want to test drive, there are a number of services that can offer a baseline estimate for the car’s worth. Edmunds offers a True Market Value (TMV®) guide; Kelley Blue Book provides suggested price ranges based on things like year, model, condition, and mileage (particularly useful for used cars). The National Automobile Dealers Association’s guide focuses on dealers’ sticker prices, and Consumer Reports provides detailed reviews and reports about specific cars.

None of these resources will necessarily tell you the exact price you’ll get, but they can give you some context. It may be helpful to look at listed prices for similar cars in your area. You can even call around for price quotes from dealerships and private sellers, so you’re better equipped by the time you walk onto the car lot.

Got a car to trade in? Here’s how to find out how much your car is worth.

How the Value of Your Car Changes Over Time

A car’s value changes almost from the moment you purchase it: This is called depreciation. The first year is generally the biggest hit, with cars losing around 20% or more of their original value. The loss goes on from there. New cars lose roughly 60% of their purchase price over the first five years of ownership.

Some models depreciate more than others. For instance, cars typically depreciate faster than trucks, and midsize cars depreciate more quickly than smaller cars. It’s smart to research the projected depreciation on the makes and models you’re interested in. Lower depreciation could become a deciding factor when all else is equal.

Recommended: How Much Should I Spend on a Car?

Car Financing Options

One of the biggest car-related costs is the loan itself. Car loans can come either from a traditional bank, online lender, or through a dealership. Here are a few car financing options:

Car Loan

Car loans can be offered directly from a bank, credit union, or online lender, or can be arranged through the car dealer. The average loan rate for a new car for borrowers with good credit is 7.24%, as of July 2024. If you have excellent credit, you may qualify for a lower rate; if you have fair or bad credit, you may pay more. Learn how to check out your credit score for free.

Car loans are “secured” by the car, which means that the car is used as collateral on the loan. Until it’s paid off in full, you don’t own the car outright. So if you default, the lender can seize the car. The qualification process for a car loan can be more difficult than getting an unsecured personal loan, since banks must verify the collateral (think: more paperwork).

Dealer-Arranged Financing

When getting a loan through the dealership, the dealer typically collects your information and offers financing via a finance company owned by the car manufacturer, the dealership, or a third party. Car dealerships are good at helping customers get a car loan quickly, sometimes even without great credit. You may be able to sign a loan and drive off in your new car the same day.

Auto Loan from a Private Lender

Banks, on the other hand, may offer more competitive interest rates or more favorable terms when applying with them directly. However, the application process can be more involved and take longer. Usually, borrowers getting financing from a bank or credit union will get preapproved for a car loan prior to heading to the dealer.

Personal Loan

Another option is to skip car loans entirely and take out an unsecured personal loan. Common uses for personal loans include home repairs, debt consolidation, and other large purchases. On the flip side, a car loan can only be used to pay for a car.

Usually, buying a car with a personal loan is not the best course of action. But there are rare circumstances where it may make sense, such as if you plan on restoring an old car as a passion project. Cars in need of repair can be difficult to finance with a traditional auto loan.

For most car buyers, however, interest rates on any type of personal loan are typically higher than on car loans. Another thing to consider is the repayment period. In general, car loans extend over seven years, whereas a personal loan is typically repaid in three to five years.

Getting your personal loan approved can take time, but prequalification is available. Many people get prequalified before going into the dealership, so they have an idea of how much buying power they have.

Strategies for Getting a Car Loan

As you look for a car loan that meets your needs, here are some strategies that can help.

Do Some Research

Before heading to the dealer, shop around for loans to see the interest rates and terms you may qualify for. Lenders review factors like a borrower’s credit score and financial history to inform their borrowing decisions. So part of your research will go into understanding your credit.

Recommended: What Credit Score Do You Need to Buy a Car?

Prepare a Down Payment

A larger down payment can save you money on your loan. Down payments reduce the amount you have to borrow, which reduces what you spend on interest over time. Trading in a vehicle of substantial value accomplishes the same thing, while reducing the down payment you need to put up.

A higher down payment is helpful for another reason: It can help you avoid a situation down the road where, due to depreciation, the balance of your loan is greater than the value of your car. This is variously called negative equity, being underwater, or an upside-down loan. To avoid this situation, run the numbers to make sure your down payment (or trade-in) is high enough to offset the expected depreciation on your vehicle.

That said, negative equity isn’t usually a bad thing. It only becomes a problem if your car is stolen or totaled, and the payout from your insurance company isn’t enough to pay off your loan balance. (Gap insurance is designed to cover your remaining debt.) Some drivers are comfortable with being upside-down for a short period, while others prefer not to take a chance.

Consider Getting Prequalified for a Loan

Getting prequalified for a car loan helps the borrower understand what kind of car payment they can afford. Prequalification can also be used as a tool in negotiations with the dealer. In some cases, the dealer may be willing to offer a more competitive financing option.

Just keep in mind that prequalification isn’t a done deal: The loan offer is still subject to change.

The Takeaway

For many people, buying a car outright with cash isn’t an option. With an auto loan, the car acts as collateral to secure the loan. A higher down payment can save you money on interest over the life of the loan. It can also help you avoid “negative equity” down the road — where the value of the car is less than the balance of your loan. However, this is only a problem if your car is stolen or totaled, and your insurance company’s payout doesn’t cover your loan obligation. In some circumstances, it’s possible to use an unsecured personal loan to purchase a car, such as when you’re looking for a vintage car to fix up as a passion project.

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.

SOPL-Q324-032

Thrift Savings Plans (TSPs) are retirement plans for federal employees and members of the uniformed services. They offer the same kinds of benefits and tax advantages that private employers can offer their employees through a 401(k).

Like 401(k)s, TSPs allow savers to take out loans from their own savings. Borrowing against your retirement can be risky business, so it’s important to understand the ins and outs of TSP loans before you make a decision.

What Are Thrift Savings Plan Loans?

A TSP loan allows federal workers and uniformed service members to borrow from their retirement savings. They must pay interest on the loan; however, that interest is paid back into their own retirement account. In 2024, interest rates are 4.50%, typically lower than the rate private employees pay on 401(k) loans.

Before you can borrow from your account the following must be true:

•  You have at least $1,000 of your own contributions invested in the account.

•  You must be currently employed as a federal civilian worker or member of the uniformed services.

•  You are actively being paid, as loan repayments are deducted from your paycheck.

•  You have not repaid a TSP loan in full within the last 30 days.

How Do Thrift Savings Plan Loans Work?

There are two types of TSP loans. General purpose loans may be used for any purpose, require no documentation, and have repayment terms of 12 to 60 months.

Primary residence loans can only be used to buy or build a primary residence. They must be repaid in 61 to 180 months, and they require documentation to qualify. You cannot use primary residence loans to refinance or prepay an existing mortgage, add on to or renovate your existing home, buy another person’s share in your home, or buy land only.

Recommended: Recommended: Common Uses for Personal Loans

Pros and Cons of a Thrift Savings Plan Loan

As you weigh whether or not it’s a good idea to borrow from your retirement savings, consider these pros and cons.

Pros of a TSP Loan

Chief among the advantages of borrowing from a TSP are the relatively low interest rates compared to most other loans.

What’s more, you can get access to funds pretty quickly and repayment is simple, coming from payroll deductions. Also you don’t need to submit to a credit check to qualify for the loan.

Cons of a TSP Loan

Despite the benefits, borrowing from a TSP is often considered a last resort due to certain disadvantages.

First and foremost, when you borrow from your retirement you are removing money from your account that would otherwise benefit from tax-advantaged compounding growth.

If you leave your job with an unpaid loan, you will have 90 days to repay it. Fail to meet this deadline and the entire loan may be reported as income, and you’ll have to pay income taxes on it.

In addition, TSP loans are not reported to the credit reporting bureaus, so they don’t help you build credit.

Does a Thrift Savings Plan Loan Affect Your Credit?

TSP loans are not reported to the three major credit reporting bureaus — TransUnion, Equifax, and Experian — so they do not affect your credit score.

Recommended: How Do I Check My Credit Score Without Paying? 

How Long Does a Thrift Savings Plan Loan Take to Get?

Applying for a TSP is a relatively simple process. You can fill out an application online on the TSP website . There is a $50 processing fee for general purpose loans and a $100 fee for primary residence loans. Borrowers who are married will need spousal approval before taking out a loan.

Once the application is approved, borrowers typically receive the loan amount via direct deposit or check within three business days.

How Much Can You Borrow From a Thrift Savings Plan?

The minimum you have to borrow with a TSP loan is $1,000. Rules for determining your maximum are rather complicated. You’ll be limited to the smallest among the following:

•  Your own contributions and their earnings in your TSP.

•  $50,000 minus your largest loan during the last 12 months, if any.

•  50% of your own contributions and their earnings, or $10,000, whichever is greater, minus your outstanding loan balances.

According to these rules, $50,000 is the most you can borrow, and you may be limited to as little as $1,000.

Should You Take Out a Thrift Savings Plan Loan?

Because a TSP loan can have a lasting effect on your retirement savings, you’ll want to be sure to exhaust all other loan options before deciding to apply for one. If you are experiencing financial hardship or poor credit has made it hard for you to qualify for another type of loan, a TSP may be worth exploring.

Thrift Savings Plan Loan Alternatives

Before choosing a TSP loan, take the time to research other alternatives.

Credit Card

Credit cards typically carry very high interest rates. The average interest rate as of August 2024 is 27.62%. That said, if you use a credit card to make a purchase and pay off your debt on time and in full at the end of the billing cycle, you will not have to pay interest on your debt.

Credit cards only get expensive when you carry a balance from month to month, in which case you’ll owe interest. What’s more, the amount of interest you owe will compound. In order to carry a balance, you must make minimum payments or risk late penalties or defaulting on your debt.

Recommended: Differences and Similarities Between Personal Lines of Credit and Credit Cards

Passbook Loan

Passbook loans allow you to borrow money at low interest rates, using the money you have saved in deposit accounts as collateral. That money must remain in your account over the life of the loan. And if you default on the loan, the bank can use your savings to recoup their losses.

Signature Loan

Unlike passbook loans, signature loans do not require that you put up any items of value as collateral. Also known as “good faith loans,” signature loans require only that you provide your lender with your income, credit history, and your signature. Signature loans are considered to be a type of unsecured personal loan.

Personal Loan

A personal loan can be acquired from a bank, credit union, or online lender. They are typically unsecured loans that don’t require collateral, though some banks offer secured personal loans that may come with lower interest rates.

Loan amounts can range from a few hundred dollars to $100,000. These amounts are repaid with interest in regular installments.

Personal loans place few restrictions on how loan funds can be spent. Common uses for personal loans range from consolidating debt to remodeling a kitchen.

The Takeaway

For borrowers in a financial pinch, TSP loans can provide a low-interest option to secure funding. However, they can also have a permanent negative impact on retirement savings, so it makes sense for borrowers to explore other options as well.

SoFi offers low fixed interest rates on personal loans of $5,000 to $100,000 and no-fee options.

FAQ

What does TSP loan stand for?

TSP stands for Thrift Savings Plan, a retirement account the federal government offers to its civilian employees and members of the uniformed services.

What is a TSP loan?

A TSP loan allows Thrift Savings Plan holders to borrow from their retirement account. Loans are repaid automatically through payroll deductions, and interest payments are made back to the account.

How long does it take to get a TSP loan?

Once processed, the proceeds of your TSP loan will generally be disbursed within three business days.

Photo credit: iStock/SDI Productions

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.

SOPL-Q324-029

It’s an honor to be asked to be a member of a friend’s or family member’s wedding, but it also comes with a cost. Between buying/renting attire, attending pre-wedding events, and purchasing gifts, it can run around $1,650 to be a bridesmaid and $1,600 to be a groomsman.

Just one wedding can take a bite out of your budget, not to mention the familiar scenario of attending several weddings in one year. We’ll help you understand the expenses that go into being a part of the big day so you can prepare and budget well in advance.

How Much Does It Cost To Be a Bridesmaid?

While the average bridesmaid can spend $1,650 to be a part of the bridal party, costs vary significantly depending on location of the wedding, number of events, and dress code. Before you agree to participate as a bridesmaid (or maid of honor), it’s important to consider what costs you may be responsible for.

Recommended: What Are Personal Loans Used For?

The Dress

Etiquette dictates that bridesmaids cover the cost of their dress, shoes, and any accessories the bride has selected for them to wear. According to The Knot’s 2023 Real Weddings Study (which surveyed nearly 10,000 couples who wed in 2023), the average bridesmaid dress cost is $130 per person.

You’ll likely also be responsible for any alterations, which can run from $45 to $150, depending on what adjustments are needed. While there are ways you can save — such as renting a dress — that decision is often not up to the bridesmaid.

Recommended: 2024 Wedding Cost Calculator with Examples

Hair and Makeup

Traditionally, if the bride requests everyone in the party have their hair and makeup done in a certain style, she will cover the cost. If, on the other hand, bridesmaids are given the option to opt in or do their own thing, the bridesmaids generally cover the cost of getting glammed up for the big day. The average cost of wedding hair for bridesmaids is $95, tack on another $90 for makeup.

Bachelorette Party

Bachelorette parties have gotten more elaborate in recent years. Typically, every attendant pays for their own expenses, while also splitting the cost to cover most, or all, of the bride’s expenses.

According to The Knot, the average cost of a bachelorette party in 2023 was $1,300 per person. Of course, the cost of attending a bachelorette party varies significantly depending on the type, location, and length of the event. Celebrations that last between one to two days cost, on average, $1,135 per attendee, while those that go on for three to four days can run $1,630. Also, the farther you need to travel to the event, the more you’ll need to spend. Guests who travel to the bachelorette party locale by plane spend an average of $2,000, while those who travel by personal car spend an average of $900 to attend the event.

Wedding Travel and Accommodations

For the wedding itself, the bridal party is typically expected to cover the costs of travel and accommodations, which can vary significantly depending on the location of the event and length of stay (with members of the bridal party possibly needing to arrive early or stay late).

On average, wedding guests who need to travel outside of their town or city to attend a wedding spend around $456 on travel and accommodations. You could end up spending significantly more if you’re covering travel costs for yourself and other family members, or if the wedding involves long-distance travel. When the wedding is local, travel costs are likely to be minimal.

Recommended: Guide to Saving Money on Hotels for Your Next Vacation

Gifts

Bridesmaids traditionally give shower and wedding gifts, which add to the cost of being in someone’s wedding. According to The Knot, the average bridesmaid bridal shower gift cost between $50 and $75, while the average bridesmaid wedding gift lands at around $170. A group gift may allow you to spend less while giving something nicer than you could afford on your own.

What Does the Maid of Honor Pay For?

Being the maid of honor generally doesn’t cost more than being a bridesmaid, but it does come with additional duties and a greater commitment of time. Generally, the maid of honor is there to assist with any tasks she can take off the bride’s to-do list. They may be involved in planning pre-wedding events and generally take charge of communicating with other members of the wedding party.

In some cases, the maid of honor might plan the shower and help cover the costs. However, these days, the cost of a wedding shower is more commonly covered by family.

Recommended: How to Save for Your Dream Wedding

What Do Groomsmen Pay for?

Groomsmen typically pay for their wedding attire, the cost to attend a bachelor party (which may include sharing the cost for the groom’s attendance), the cost to attend the wedding (which might involve travel and accommodations), as well as a wedding gift. Here’s a look at what it all adds up to.

Formalwear or Tuxedo Rental

Just like bridesmaids generally pay for their dresses, groomsmen typically pay for their wedding day clothing. This might be a suit, tuxedo, shirt and slacks, or another type of attire selected by the groom or couple. Typically the groomsmen’s attire is purchased or rented, but in some cases, a groom will let their wedding party choose from their own wardrobe, which can be a more affordable option.

If you need to rent a tux for the event, costs vary depending on what style, design, brand, and accessories you’ll need to wear. On average, you can expect to pay between $100 and $250 to rent a tux for the standard period.

Bachelor Party

Groomsmen normally take part in planning the bachelor party and may cover their own costs and the groom’s. According to a recent survey by The Knot (which included roughly 500 respondents who attended, or plan to attend, a bach party in 2023), the average cost of a bachelor party is $1,400 per person. The survey also found that the average bachelor celebration lasts for two days, and roughly one-fifth of attendees are flying to the party destination. Indeed, 29% of those surveyed are actually spending $2,000 (or more) to celebrate in a major metro city.

For guests who drove or were planning to drive to the event’s location, spending was less — averaging $1,000 per attendee.

Wedding Gift

Groomsmen are generally expected to give the couple a wedding gift, though they are not expected to spend more on a gift than other guests do. According to The Knot’s 2023 Real Wedding Guest Study, wedding party members spend an average of $160 on their gifts. If you want to save money, consider chipping in for a group gift with other wedding party members.

The Takeaway

It’s not unusual for a bridesmaid to spend $1,650, including the dress, bachelorette party, and gifts. Groomsmen may spend just a little bit less ($1600) for a rental tux, bachelor party, and wedding gift. Keep in mind, however, that the cost to be in someone’s wedding can run much higher or lower, depending on the location and style of wedding.

If you haven’t saved up enough money to be in a friend’s or family member’s wedding in advance, there are better options than throwing it all on a credit card. Personal loans are designed to help cover life’s big events. SoFi Personal Loans offer low fixed rates, no-fee options, and a quick and easy online application process. Checking your rate takes just a minute.

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.

SOPL-Q324-038

Starting a new business requires a good idea, customers who want your product or service, and money to get you off the ground. A personal loan to start a business can be one option for funding your business, especially if you don’t yet qualify for a small business loan.

Let’s walk through the difference between personal loans and business loans, the advantages and disadvantages of using a personal loan for business, and some alternative options to explore.

What Is a Personal Business Loan?

Personal loans for business are offered by some banks, credit unions, and online lenders. While many loans will specify what you can spend the money on — a mortgage must be used to buy a house, for example — the sum you receive from a personal loan can be used in several ways. That said, it’s important to confirm with your lender whether its personal loans can be used for business expenses, as some lenders do not allow this.

Your personal loan interest rate is based on various financial factors, including your financial history, income, and credit score. Generally, the higher a person’s credit score, the more likely they are to receive a personal loan with favorable terms and interest rates. Applicants with lower credit scores may have more difficulty qualifying for low interest rates. Lenders tend to see them as at greater risk of defaulting on their payments. To offset that risk, they might charge a higher interest rate.

Personal Business Loans vs. Small Business Loans

Borrowing money to pay for business expenses is a decision that takes some consideration. There are different reasons you might want or need a business loan, many lenders to choose from, and different lending options to compare. Some things to think about if choosing between a personal loan for business or a small business loan include:

Recommended: Business Loan vs. Personal Loan: Which Is Right for You?

Benefits of a Personal Loan for Business

Taking out personal loans for business purposes can offer several advantages over other financing options.

Ease of Qualification

If your business is brand new, it can be tricky to get a business loan and may be easier to qualify for a personal loan. Banks offer personal business loans based on your personal income and credit score. On the other hand, you’ll be asked for a lot of information during the business loan application process, including your personal and business credit score, annual business revenue and monthly profits, and your length of time in business. The longer your business has existed, the more likely you are to have a record of revenue and profit — and the more likely you are to qualify.

Faster Funding

The length of time it takes to get approved for a personal loan and receive funding will vary by lender. Online lenders are typically faster than traditional banks and credit unions. You are likely to receive funding within seven business days.

By contrast, the process for a business loan can be much slower. For example, it can take 30 to 90 days to receive funding from a Small Business Administration (SBA) loan.

Potential for Low Interest Rates

If you have strong credit, personal loans can have lower annual percentage rates (APRs) than other financing products — such as credit cards. While it can be useful to have a business credit card, you’ll pay a relatively high rate If you carry a balance from month to month. Credit cards may also have penalties and fees that personal loans may not have, such as penalty APRs that go into effect if you make a late payment, over-limit fees if you spend more than your credit limit, annual fees, and more.

Flexibility and Versatility

Personal loans have few restrictions on how you’re allowed to use the money you borrow. You can use them for anything from debt consolidation to home repairs to a veterinary bill.

Recommended: 11 Types of Personal Loans & Their Differences

Disadvantages of a Personal Loan for Business

Despite the potential advantages of using a personal loan to help you start your business, there are drawbacks.

Some Lenders Don’t Allow Personal Loans for Business

Some lenders place restrictions on how personal loans can be used. It’s wise to be transparent about your intention to use the personal loan for business expenses and confirm if the lender permits it.

In some cases, it may not be. However, it’s far better to be honest about how you plan to use a loan than risk breaching the loan agreement. If you end up using a loan in a prohibited way, your lender could force you to immediately repay the full amount of the loan with interest.

Lower Loan Amount Limits

Personal loans generally offer borrowing limits as low as $1,000. They can go as high as $100,000 for larger personal loans. For small businesses, this might be plenty. But if you own a larger business that needs more money, you might benefit more from a loan specifically designed to meet business financial needs. Small business loans generally have lower interest than personal loans.

Shorter Repayment Terms

Lending periods for personal loans vary. Typically, you can find loans with term lengths of 12 months to five years. Compared to some small business loans, this is a relatively short period. Consider that for SBA loans, maximum terms can be as much as 25 years for real estate, 10 years for equipment, and 10 years for working capital or inventory.

Potential to Affect Personal Credit Score and Assets

If you take out a personal loan and can’t make monthly payments, you are putting your personal credit at risk. Missed payments may harm your credit score, which can make it more difficult for you to access funding in the future.

Recommended: What Is Considered a Bad Credit Score?

Fewer Tax Deduction Opportunities

Generally, the interest you pay on a personal loan is not tax deductible, unlike the interest paid on business loans. However, there’s an exception if you use the proceeds of a personal loan for business purposes.

However, this can get a bit tricky, as you may only deduct interest on the portion of the loan used for business expenses. So if you use any of that money to remodel the primary bathroom in your home, for example, interest on that portion can’t be deducted.

How to Get a Personal Loan for Business

Securing a personal loan for business purposes involves several key steps. The process looks like this:

1.   Assess your finances: Begin by looking at your personal credit score, income, and overall financial health. This will give you insight into the likelihood of qualifying for a personal loan and the interest rates you might get.

2.   Choose a lender: Look for banks, credit unions, and online lenders that offer personal loans suitable for business purposes. Make sure they allow you to use personal loan funds for business expenses. Compare interest rates, loan terms, and fees to find the best lender for your needs.

3.   Prepare your documents: Gather documents like proof of income, tax returns, identification, and any business-related information required for your application.

4.   Submit your application: Complete the loan application process with your chosen lender. Be honest about your intention to use the loan for business expenses. This transparency helps avoid potential issues in the future.

5.    Review loan terms: Once your application is approved, carefully review the loan terms, including the interest rate, repayment schedule, and any associated fees. If everything looks good to you, accept the loan terms to move forward with the funding process.

Alternatives to Personal Business Loans

Personal loans might not be ideal for everyone and aren’t the only funding option for your small business. It may be worth considering small business loans or other types of business loans as alternatives.

Small Business Loans

Small business loans are offered through online lenders, banks, and credit unions. There are various options available, each designed for specific purposes. For example, a working capital loan is designed to help you finance the day-to-day operations of your business. An equipment loan can help you replace aging technology and buy new equipment.

SBA loans are guaranteed by the Small Business Administration, whose aim is to help small businesses start and grow. If you aren’t able to make your payments, the SBA will step in and cover up to 85% of the default loss. By reducing risk in this way, the organization helps businesses get easier access to capital.

Shopping around for the best small business loans rates is a good way to compare lenders and find the one that works best for your unique financial needs.

Business Lines of Credit

A business line of credit is revolving credit, similar to a credit card. You have a set credit limit and only pay interest on the amount you’re currently borrowing, making it a more economical option than a term loan for some business owners. As you repay the funds, they are available to borrow again.

Another advantage to a line of credit over a term loan is the ability to use a check to pay vendors who do not accept credit cards.

Business Credit Cards

Business credit cards can be useful for separating personal and business expenses. They also usually have higher credit limits than personal credit cards, which gives you more flexibility to make larger business purchases. Plus, they may offer rewards, perks, and bonuses. It’s important to keep in mind, however, that credit cards tend to have higher interest rates than other types of business financing.

Recommended: Can You Get a Business Credit Card Before You Open Your Business?

Merchant Cash Advance

A merchant cash advance (MCA) is an alternative form of financing for businesses that get revenue through credit card sales. With an MCA, a business can borrow a lump sum of money and repay the lender with a percentage of future credit card transactions. The repayment amount is larger than the advance, since the lender charges a fee. In some cases, MCA fees can significantly exceed interest rates on other types of business loans.

The Takeaway

Can you use a personal loan to start a business? Perhaps. Taking out a personal loan may be one way to fund your small business needs. However, some lenders do not allow a personal loan to be used for business purposes. It’s a good idea to explore alternatives, such as a small business loan or line of credit.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

FAQ

Can a personal loan be used for business?

Yes, you can use personal loans for business if the lender allows it. It’s important to check with the lender to ensure there are no restrictions on using the loan for business expenses.

Can I write off a personal loan if used for my business?

You can typically write off the interest on a personal loan used for business purposes, but only the portion directly related to business expenses. Personal loan principal repayments are not tax-deductible.

Does the SBA offer personal loans?

No, the Small Business Administration (SBA) does not offer personal loans. The SBA provides various loan programs designed specifically to support small businesses, such as SBA 7(a) loans and SBA 504 loans.

Photo credit: iStock/fizkes

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

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

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

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.

SOSMB-Q324-027