SoFi

Almost 43 million Americans have student loan debt, and borrowers owe an average of $37,853, according to the Education Data Initiative. If you’re grappling with student loan payments and feeling overwhelmed, you may be wondering, “Should I sell my house to pay off debt?”

While the idea may be tempting, it has disadvantages and might negatively affect your financial situation. Read on to learn the benefits and drawbacks of selling your house to pay off student loans, and discover alternative options for repaying your debt.

Understanding the Benefits of Selling Your House to Pay Off Student Loans

A mortgage is the biggest debt most Americans have, and student loans are one of the next biggest. It’s understandable then that some borrowers might consider selling one to help pay off the other. Potential benefits of selling a home include:

•   Getting a lump sum. When you sell your home, you may end up with a decent chunk of money. Of course, you’ll have to pay off your mortgage first, but as long as you have more value in your house than what you owe on your mortgage, you can take the remaining proceeds of the sale and apply it to your student loans. Depending on how much you get from the sale of the property and how much you owe on your loans, you may be able to pay off your student loan debt completely. And if you can’t pay off your loans completely, you may be able to pay off some of them and consider student loan refinancing to help manage the rest.

•   Eliminating monthly payments. By selling your house and paying off your student loans, you get rid of two substantial monthly payments that may have fairly high interest rates. With student loans, some of that interest may have accrued over time. For instance, if you have federal Direct Unsubsidized loans, the interest begins to accrue immediately after the loan is disbursed, and can add up to a sizable amount over time.

•   A financial fresh start. Selling a house can also be a new beginning financially. It could help you get out from under a costly mortgage. You can look for a less expensive place to live, and create a new budget accordingly. Repaying student loans will further dial down the debt you owe. You may also be able to direct more money to your child’s college fund or save more for retirement.

Recommended: Guide to Student Loan Refinancing

Factors to Consider When Selling Your House to Pay Off Student Loans

Along with the potential upsides, however, there are a number of disadvantages to selling your house. It’s important to understand the drawbacks before making such a big decision.

How much you can get for your house is one of the most important factors when determining whether it makes sense to sell. The price you can ask for your home depends on market conditions, supply and demand, and mortgage rates, among other things. Do some research to figure out the current market value of your home. Look at what comparable homes in your area are selling for. Think about whether you could make enough from the sale of your house to pay off what you owe on your mortgage and repay your student loans.

Next, since you’ll need to find a new place to live, explore the different housing options available. You might need to downsize to a more affordable home, move to a less expensive area, or rent instead of buying.

Finally, think about how selling your home could affect your lifestyle. You might end up in a smaller space with less living space, which means you may have to sell some of your furniture. If you have to relocate to a different area, your commute to work might get longer. Think through the various scenarios and make sure you’re comfortable with them.

Navigating the Process of Selling Your House to Pay Off Student Loans

If you decide to move ahead with selling your house, finding the right real estate agent can be critical. Hiring a professional who knows the market can help you price your home for a sale and take some of the stress out of what can be a complex process. Just be aware that there will be costs involved, including a commission to the agent.

You’ll also need to prepare your house for a sale. Clean and declutter your home to make it look bigger and more appealing. Outdoors, mow the lawn, trim the bushes, and generally tidy up so that your house has curb appeal.

Familiarize yourself with the legal and financial aspects of a home sale. For instance, once you have an offer on the house, a potential buyer might ask you to make repairs before they purchase the home. There are also closing costs to consider, as well as the real estate agent’s commission. And if you sell your house for more than you paid for it, you may have to pay capital gains tax (see more on that below). Make sure you understand what’s involved in selling your home and what you are responsible for legally and financially.

Mitigating Challenges and Risks When Selling Your House to Pay Off Student Loans

Talking about selling your home to pay off student loans is one thing. Actually doing it is another. You may feel sentimental about your house, especially if you’ve lived there for a while. As much as you can, try to emotionally detach yourself from your home. Focus instead on the positive, such as getting out of debt and the fresh start ahead of you.

On a more practical level, there may be a capital gains tax on the profit you make from the sale of your home if you sell it for more than you paid for it. Capital gains tax generally depends on your taxable income, your filing status, and how long you owned the home before you sold it. There is an IRS exemption rule, often referred to as a primary residence exclusion, that may help you avoid paying some or all of the capital gains tax. Do some research and check with a financial professional to see if you might qualify for the exclusion.

Exploring Alternatives to Selling Your House to Pay Off Student Loans

Rather than selling your house to pay off student loans, there are some other ways to help manage, and potentially even reduce, your student loan payments. Here are some options to consider.

Student Loan Refinancing

If you have private student loans, or a combination of federal and private loans, student loan refinancing lets you combine them into one private loan with a new interest rate and loan terms. Ideally, you might be able to secure a new loan with a lower rate and more favorable terms. If you’re looking for smaller monthly payments, you may be able to get a longer loan term. However, a longer term means you will likely pay more in interest overall since you are extending the life of the loan.

On the other hand, if your goal is to refinance student loans to save money, you might be able to get a shorter term and pay off the loan faster, helping to save on interest payments. Just be aware that if you refinance federal loans, they will no longer be eligible for federal benefits like federal forgiveness programs.

A student loan refinancing calculator can help you determine if refinancing makes sense for you.

Student Loan Consolidation

If you have federal student loans, a federal Direct Consolidation loan allows you to combine all your loans into one new loan, which can lower your monthly payments by lengthening your loan term. The interest rate on the loan will not be lower — it will be a weighted average of the combined interest rates of all of your consolidated loans. Consolidation can streamline your loan payments, and your loans will still have access to federal benefits and protections. However, a longer loan term means you’ll pay more in interest over the life of the loan.

Income-driven Repayment Plans

With an income-driven repayment (IDR) plan, your monthly student loan payments are based on your income and family size. Your monthly payments are a percentage of your discretionary income, which usually means they’ll be lower. At the end of the 20- or 25-year repayment period, depending on the IDR plan, your remaining loan balance will be forgiven.

Loan Forgiveness Programs

You might be able to qualify for student loan forgiveness through a state or federal program. For instance, with Public Service Loan Forgiveness (PSLF) program, borrowers with federal student loans who work for a qualifying employer such as a not-for-profit organization or the government may have the remaining balance on their eligible Direct loans forgiven after 120 qualifying payments under an IDR plan or the standard 10 year repayment plan.

Also, be sure to check with your state to find out what loan forgiveness programs they might offer.

The Takeaway

Student loan debt can be a major financial burden for borrowers, and selling your home to get out from under that obligation may sound appealing. But selling your house is a major decision. You may be eliminating a mortgage, but you’ll have to find a new affordable place to live. Plus, there are costs involved with the sale of a home and there may be tax implications to deal with as well. Weigh all the pros and cons carefully before selling your home to pay off student loans.

And remember, there are other ways to manage student loan debt, including loan forgiveness, income-driven repayment, and student loan refinancing. Explore all the different options to decide what works best for you. You may be able to reduce your loan payments and keep your home.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

Photo credit: iStock/Quils

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

SOSLR-Q424-003

From unemployment benefits to hardship programs, there are a number of options out there when it comes to managing money during difficult times. One option that people may consider during unemployment is a personal loan. But one important question is: Can you get a loan while unemployed?

While there are personal loans for the unemployed available, it’s important to carefully assess the downsides and the benefits before moving forward. You’ll need to ensure you’ll be able to pay back the loan even if money gets tighter, and you should also be prepared for a more challenging approval process.

Personal Loan Basics

At its most simple, a personal loan is when a lending institution pays out a lump sum of money to a borrower, who then pays back the amount owed plus interest over a predetermined period of time.

Unlike a mortgage or student loan, personal loans aren’t tied to a specific expense. In other words, someone might take out a personal loan to cover the cost of paying for a dream wedding, to remodel a kitchen, or to cover living expenses during a time with low cash flow.

Personal loan amounts can range from $1,000 to $100,000, depending on the lender’s guidelines, the amount a borrower requests, and the borrower’s creditworthiness. While the lender pays out the amount of the loan in one lump sum to the borrower (minus any origination fee), the borrower pays back the loan over time in installments, often over a period of 12 to 60 months.

Personal loans are generally unsecured loans, which means they do not use collateral to secure the loan. Instead, lenders may look at borrowers’ creditworthiness to determine the risk in lending to them and their personal loan interest rate.

Interest rates vary for different borrowers depending on a borrower’s creditworthiness. Average personal loan interest rates can range anywhere from around 5% to over 35%. Interest is paid back alongside the principal amount in monthly payments that are made over the life of the loan.

Recommended: Personal Loan Guide for Beginners

When Should You Consider Taking Out a Personal Loan While Unemployed?

Ideally, you’d avoid taking on debt while you’re unemployed and don’t have regular income coming in from a job. You might first explore any other options available to you to free up funds, whether that’s taking on a side hustle, getting a roommate, or reassessing your budget. However, there are some circumstances when taking out a personal loan while unemployed may be doable, and it can be a better option than resorting to a high-interest payday loan or expensive credit card debt.

If you’re considering a personal loan while unemployed, you should first assess whether you’ll realistically be able to make on-time payments on your loan each month. Not doing so can lead to late fees and impacts to your credit score. You may even consider crunching the numbers using a personal loan calculator to determine if a personal loan would net you any savings over another borrowing option.

It’s also important to understand what lenders will look for when determining whether to approve you for a loan while unemployed. You’ll generally need a strong credit history and credit score to qualify. Additionally, lenders will want to see some income in order to prove you’ll be able to make monthly payments. Without a regular paycheck coming in during unemployment, this could be Social Security benefit payments, disability income, money from investments, or even your spouse’s income, among other alternatives.

Pros and Cons of Unemployment Loans

Taking out a personal loan may seem appealing to someone who is temporarily out of work because it might be relatively quick to secure and can come with lower interest rates than credit cards. But as with all financial decisions, it’s important to understand the pros and cons of taking out a personal loan while unemployed before applying.

Pros of Personal Loans for Unemployed Individuals

•   Personal loans can be more flexible than other types of loans. The money from a personal loan can be used for almost anything.

•   It may be less costly than other borrowing options. A personal loan may come with lower rates than a credit card, which can be a major benefit when it comes to saving money. Additionally, the fixed rate of a personal loan can help borrowers budget for monthly payments.

•   You could consolidate existing debt. Sometimes called debt consolidation loans, this type of personal loan can help borrowers save money if they can secure a lower interest rate than they’re currently paying on their credit cards. Additionally, debt consolidation loans can streamline multiple payments into one monthly payment. Keep in mind, however, that continuing to use credit cards after obtaining a credit card consolidation loan can lead to debt continuing to pile up.

•   They can help you deal with unexpected expenses. Personal loans may be an option for borrowers facing unexpected expenses, like medical bills or moving costs.

Cons of Personal Loans for Unemployed Individuals

•   It will likely be harder to qualify for a loan while unemployed. Lenders look at a variety of factors when determining whether to offer a borrower a loan, like income, debt-to-income ratio, credit history, and credit score. If a borrower is unemployed, they won’t necessarily have income to show, and their debt-to-income ratio might be much lower than it would be with a stable income.

•   Lenders may charge higher interest rates. Some lenders may offer higher interest rates to unemployed personal loan borrowers. This is because of the additional perceived risks of lending to someone who is unemployed.

•   Borrowers are taking a risk. Consider your ability to pay a higher interest rate or make monthly payments while you’re unemployed. Borrowers could face late fees for missed payments and more fees if the loan is sent to collections, not to mention a hit to their credit score if they’re unable to make payments.

Does SoFi Offer Personal Loans for Unemployed People?

SoFi does offer personal loans for unemployed individuals, assuming applicants meet other conditions. If you are not currently employed, it’s necessary to meet one of the two following eligibility criteria:

•   Have sufficient income from other sources

•   Have an offer of employment to start within the next 90 days

Beyond these conditions regarding employment and income, SoFi also has a number of other requirements that borrowers must meet. Additionally, SoFi will consider an applicant’s financial history, credit score, and monthly income vs. expenses.

Improve Your Chances of Getting Approved for a Personal Loan While Unemployed

If you’re hoping to get a personal loan as an unemployed person, there are steps you can take to increase your odds of getting your loan approved.

For one, it helps to familiarize yourself with your own financial situation. Check your credit score to see if it falls within a lender’s requirements, assess your current sources of income now that you’re unemployed, and take a look at how your current monthly debt payments compare to your monthly income. These are all factors that lenders will take into account when determining whether to approve the loan application, so the better they look, the better your chances that the lender’s answer will be a yes.

If you’re not confident you can get approved for a personal loan with your financial situation as is, you might consider taking some of the following actions:

•   Minimize your debts: If your debt-to-income ratio is way out of whack, that could lower your odds of approval. Consider ways you could cut costs, whether that’s downsizing your home, moving in with a friend or family member in the meantime, or selling off a car that’s saddling you with monthly payments.

•   Consider adding a cosigner: Another option could be to ask a friend or family member with good credit and a steady income to serve as a cosigner. Adding them to your application may make it likelier that a lender will view you favorably. (Cosigning can also help build your credit.) Just remember that if you fail to make timely payments on your loan, you could damage your cosigner’s credit and stick them with the payments — not to mention the harm it could do to your relationship.

•   Consider adding a co-borrower: There are some similarities between a cosigner and a co-borrower. For instance, when you use a co-borrower, you leverage that person’s income, credit score, and financial history to help you qualify for a loan. But unlike a cosigner, a co-borrower is equally responsible for paying back the loan and will share ownership of any property the loan is used to purchase.

•   Increase your income: While this might seem like an impossibility if you’ve recently lost your job, there are other ways to approach adding sources of income while you’re on the job search. You could pick up a side hustle or get a roommate. Also take the time to review what counts as income for credit card applications — you might find you’ve forgotten to include something. (Remember, unemployment benefits count as income.)

Recommended: Guarantor vs. Cosigner: What Are the Differences?

The Takeaway

If you’re interested in personal loans for unemployment, you might want to consider all the pros and cons before taking one on. If a personal loan sounds like it might be the right solution, do a little bit of preparation beforehand. It’s never a bad idea to figure out exactly how much you want to borrow in advance. But remember — you should only borrow the amount you need.

Taking a look at the affordability of monthly payments may also help you determine how much to borrow. Additionally, you may wish to pull up your financial documents and take a peek at your current credit score and overall financial health before applying for a personal loan.

If you’re ready to apply for a personal loan, it’s important to look for one that meets your specific needs and to find a lender willing to work with unemployed borrowers, if that’s your current situation.

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

FAQ

Can you use a personal loan as an unemployment loan?

Yes, it is possible to use a personal loan as an unemployment loan. However, in order to qualify for a personal loan while you’re unemployed, you’ll still need to meet a lender’s eligibility requirements. This generally includes demonstrating some type of regular income.

What are the benefits of using an unemployment loan?

While risky, a loan for an unemployed person does offer a number of benefits, including flexibility in how the funds are used, potentially lower costs than other borrowing options, and the choice to consolidate existing debt. A personal loan could also come in handy if unexpected expenses arrive, such as a surprise medical bill or an unanticipated move.

Are there any fees associated with unemployment loans?

Personal loans for unemployed people can absolutely carry fees. Which fees apply will depend on the lender. Common fees you could face include origination fees, late fees, and prepayment penalties.

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.

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.

SOPL-Q424-010

A typical 18-year-old has an average credit score of 681, according to Experian data from June 2024. The score is considered good and can help borrowers qualify for some credit cards and loans, though they could pay higher interest rates.

Learn what a credit score is, how it can vary by age, and the steps you can take to improve yours.

What Is a Credit Score?

Your credit score is a three-digit number that reflects how likely you are to responsibly manage credit and pay it back on time. It’s based on information from your credit reports, which are created by the three major credit bureaus: Equifax, Experian, and TransUnion. With this information and other personal details you provide on your application, lenders can determine whether to approve you for a loan or credit card.

Most people have more than just one score, and each score can vary based on the source of the data being used, when that data was calculated, and the scoring model (for instance, FICO® vs. VantageScore).

Recommended: FICO Score vs Credit Score

Average Credit Score by Age 18

There’s no single starting credit score for people who are just beginning their credit journey. However, early scores tend to be in the good (670-739) or fair (580-669) range. The average credit score for 18-year-olds — 681 — falls well within the good range.

What Is the Average Credit Score?

If you’re an 18-year-old with a credit score of 681, it can be useful to see how your score compares to other borrowers in the country. According to Experian, the average adult in the U.S. has a credit score of 715.

Average Credit Score by Age

It makes sense that a younger consumer would have an average score that’s below the national average. After all, it takes time to build credit, and as the chart below shows, credit scores tend to rise with age.

What’s a Good Credit Score for Your Age?

It can be tempting to compare your credit score to your peers’ average score. But a more effective way to determine whether your three-digit number is good is by checking how credit scoring companies classify it. FICO defines a “good” credit score as one between 670 and 739, while VantageScore considers scores between 661 and 780 as “prime.”

Another approach: Ask yourself if your credit score is high enough to help you achieve your goals, like renting an apartment or buying a car. If so, then it’s reasonable to think your score is good.

How Are Credit Scores Used?

Your credit score helps lenders evaluate your potential credit risk, and it’s used for a variety of purposes. When you apply for a credit card or loan, for instance, a lender will look at your credit score to help decide whether to extend credit and what interest rate and credit limit to offer.

Scores may also be used by landlords to screen potential tenants and by utility companies to determine how much of a deposit you’re required to pay for services.

Factors Influencing the Average Credit Score

Understanding what affects your credit score is a key part of strategically improving your credit. FICO, which is used by 90% of lenders, considers the following factors when calculating your score:

•  Payment history. This includes whether you make payments on time or have a pattern of late payments. It also takes delinquencies, default, collections, and bankruptcies into account.

•  Amount owed. Your score is influenced by the amount you’ve borrowed on each account compared to your available credit as well as your total amount of outstanding debt.

•  Credit history length. Keep older accounts open. This adds to the length of your credit history, which can positively impact your score.

•  Credit variety. Having a diverse mix of credit types, like retail cards, credit cards, student loans, and personal loans, shows you can responsibly juggle revolving and installment credit payments.

•  New credit and inquiries. Too many new credit lines or inquiries in a short period can be a red flag that you’re financially overextended.

How to Build Your Credit Score

Working on the factors described above is a good way to build credit and maintain a strong credit score.

The biggest factors affecting your FICO Score are payment history (35%) and credit use (30%). VantageScore gives more weight to payment history and depth of credit, which includes length of credit history and credit mix. With that in mind, one impactful way to raise your score is to pay your bills on time, every time. Consider setting up payment reminders on your mobile device, or enroll in autopay so you don’t miss a due date.

Keeping your unpaid credit card balances as low as possible can also bolster your credit over time. And keep your credit use at less than 30% of your available credit limit. A good place to start is learning how to lower credit card utilization.

It’s also wise to go through your credit report at least once a year via AnnualCreditReport.com and fix any errors you see. You can also check your credit score for free through some banks, credit card issuers, and Experian.

Recommended: Why Did My Credit Score Drop After a Dispute?

How Does My Age Affect My Credit Score?

Your age has no direct impact on your credit score, but there tends to be a connection between age and the average credit score. Generally speaking, the older you are, the more likely you are to have a higher average credit score.

That’s because older individuals are more likely to have a longer credit history than younger consumers. And chances are, they have a more diverse credit mix, too. Both of those things can help bolster a borrower’s creditworthiness.

What Factors Affect My Credit Score?

As we mentioned, a number of factors go into determining your credit score. The five most impactful ones are:

•  Payment history

•  Amounts owed

•  Length of credit history

•  Credit mix

•  New credit

It’s worth noting that your credit score updates once a month. If you’re working to boost your numbers, it could take a little time before you see the results.

At What Age Does a Credit Score Improve the Most?

There’s a correlation between older age and a higher credit score. According to Experian data, Gen Z consumers (age 18-25) have the lowest credit score, at 680, while the Silent Generation (age 77+) has the highest credit score, at 760.

Tips for Building Your Credit Score

If you’re just starting your credit journey, consider these strategies to build your score incrementally and over time:

•  Start your credit use slowly. Opening a secured credit card at 18 years old can be an effective way to establish your credit, as it has some guard rails. Card issuers require a deposit which acts as your card’s credit limit. You can then use your secured credit card up to your limit, and the issuer reports your payment data to the credit bureaus. This builds your credit history without the risk of overspending.

•  Use an app to manage your finances. A spending app can help you see how you’re balancing your income and spending habits across multiple financial accounts, including credit accounts. It can also help you keep track of upcoming bills.

•  Check on your credit score regularly. Checking in on the health of your credit score doesn’t have to cost you. Financial tools, like a money tracker app, often show you your credit score as a complimentary feature.

The Takeaway

The average credit score by age 18 is 681. If you’ve achieved a score that’s at or near there by age 18, then you’re in a good place. If your score is below 681, there are steps you can take to give it a boost, including paying bills on time, limiting new credit applications, and paying off debts.

Remember that your credit score can fluctuate, depending on your repayment and borrowing patterns. It’s a good idea to get into the practice of keeping track of your credit score and disputing any inaccuracies you see.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

What credit score is needed to buy a $300K house?

For a conventional loan, you’ll typically need a minimum credit score of 620. Some mortgage loans, like an FHA loan, might accept a minimum credit score of 500 for home financing.

Is 650 a good credit score?

A 650 FICO credit score is considered a “fair” credit rating and is lower than the average credit score in the U.S. However, some lenders are willing to offer financing to consumers with this score.

Is a 900 credit score possible?

No. The two most commonly used U.S. consumer credit scoring models, FICO and VantageScore, set their maximum score at 850.

How rare is an 800 credit score?

Among U.S. consumers, only 21% of borrowers have a FICO score between 800 to 850, while 25% of consumers have scores between 740 and 799.

Is a 600 credit score at 18 good?

A 600 FICO score, which is considered “fair,” is below the average credit score of individuals ages 18 to 26. The average 18-year-old has a 681 score.

What is the average credit line for an 18-year-old?

The average credit card limit for an 18-year-old is $12,899, according to Q3 2023 Experian data. Among all generations, Generation Z has the lowest average credit card limit.

Photo credit: iStock/sorrapong

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.

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

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

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.

SORL-Q424-030

If you’re in the market for a new (or new-to-you) set of wheels with plans to finance it, predicting your interest rate will help you figure out the total costs of the loan. According to recent Experian data, the average interest rate for a new car loan for someone with a 750 credit score is 6.87%. For a used car, the average interest rate is 9.36%.

In general, the higher the interest rate, the more expensive the loan. But what exactly does an interest rate mean for your wallet, and how can you get a lower score? We’ll look at the ins and outs of what factors can impact the interest rate on your auto loan and what you can do to get a better rate.

Average Used Car Interest Rate for 750 Credit Score

As we discussed above, drivers with a 750 credit score who are shopping for a used car can expect to pay an average interest rate of 9.36%.

A score of 750 is considered very good and is a sign to lenders that you’re able to successfully manage your credit. This means you could qualify for credit cards and loans and better-than-average lending terms. If your credit score isn’t where you’d like it to be, there are steps you can take to build your credit over time.

Factors That Affect Auto Loan Interest Rates

Several variables play into the interest rate on your car loan. Let’s look at the most common ones:

Credit Score

Your credit score can play a major role in determining your interest rate. Usually, the higher your credit score, the lower your interest rate. On the flip side, the lower your score, the higher your rate.

Case in point: Based on Experian data, the average interest rate for used-car borrowers with a deep subprime credit score (500 or under) is 21.55%. Meanwhile, the average interest rate for those with super prime credit (781 and above) is 7.13%.

Lender

Whether you go through a bank, credit union, online lender, or dealer, the car loan interest rate you’re offered is influenced in part by where you get your loan. Interest rates vary widely by lender.

Amount Borrowed

When you borrow a large amount of money, you’re considered a greater risk to the lender. That’s because they stand to lose more if you aren’t able to pay back the loan. In turn, a lender may decide to charge a higher interest rate on a larger loan.

Length of the Loan

Typically, the longer the loan term is, the higher the interest rate. That’s because there’s more time for your financial circumstances to shift, and you might have a harder time keeping up with your payments down the line. Conversely, shorter loan terms typically have lower interest rates.

Economic and Market Conditions

Decisions made by the Federal Reserve can influence the lending rates on car loans. The strength of the economy and larger market trends may also play into what interest rates are offered. For instance, the higher the inflation rate, the greater the chances that interest rates rise.

How to Get a Better Auto Loan Interest Rate

There are a number of measures you can take to improve your chances of getting a better auto loan insurance rate.

A good place to start is to focus on building your credit. This means staying on top of bill payments, keeping your credit usage low, and only applying for credit when necessary, among other things.

You can also spend some time improving your credit score. Regular credit score monitoring can help you find ways to boost your score.

Finally, shop around for a lender to see which one can offer you the lowest interest rate.

Recommended: What Is the Starting Credit Score?

How Often Do Auto Loan Rates Change?

Auto loan interest rates change daily and can vary based on the lender, loan amount, market conditions, and other factors. It’s a good idea to check your auto loan rate at different points of your shopping journey. Also, recheck your auto loan rate if you decide to get a new car instead of a used one or change the loan term or amount.

How to Use Average Car Interest Rates

Knowing the average car loan interest rates — and the average interest rate for a car loan with a 750 credit score, if that’s your situation — can help give you an idea of what you’ll pay for your used set of wheels.

To figure out the total cost of the car, factor in the interest rates, fees, routine maintenance and repairs, gas, and registration and title fees. You’ll also want to determine your monthly payments, which include the loan amount, interest rate, and repayment term. That way, you can gauge what’s an affordable amount to cover each month.

Where Are Auto Loan Rates Heading?

While it’s impossible to say where exactly auto loan rates will be in the coming months, they have gradually increased over the past several years. According to Experian, in Q2 of 2024, the average interest rate for new car loans was 6.84%, and 12.01% for used cars. Compare that to Q2 of 2019, when the average interest rate for new car loans was 5.70% and 9.34% for used cars.

However, you may be able to get more for your money if you’re planning to buy a car in the months ahead. The Federal Reserve is expected to lower its benchmark rate multiple times in late 2024 into 2025, which will likely impact borrowing costs for a new car.

Ways to Get a Better Car Loan Rate

Here are some ways you can help improve your odds of receiving favorable car loan rates:

Build Your Credit

Your credit score isn’t the only factor a lender considers when determining your interest rate, but it’s an important one. Generally speaking, the higher your score, the lower your interest rate will be. A good first place to start is to check your credit score to see where you stand.

Some credit card issuers, banks, credit counselors, and spending apps offer free credit scores. They’ll also alert you when your score changes and give you insights into what caused your score to go up or down.

To build up credit, stay on top of your payments, lower your credit utilization, and avoid taking out credit unless absolutely necessary. It’s not an overnight process, but putting in the effort and taking the right steps make for steady progress.

Recommended: What Affects Your Credit Score?

Work With Lenders You Know

If you have an existing loan with a lender, that longstanding relationship could help boost your odds of getting more favorable rates. Sit down with your lender and see what kind of car loan rates you might qualify for.

Shop Around

Different lenders have different lending criteria and a range of available financing. Do your homework and get quotes from several lenders for the same loan amount and repayment term. That way, you can compare your rates side by side.

Opt for a Shorter Loan Term (If Possible)

A shorter loan term poses less risk for lenders and could translate to a lower rate for you. A shorter term can also mean larger monthly payments, so play around with different loan terms to see how much you might owe on your car loan each month in different scenarios.

Save for a Larger Down Payment

Because higher loan amounts mean higher interest rates, see if you can shore up funds for a larger down payment. That can bump down the rate on your auto loan. (A money tracker app can help you set budgets and monitor spending.)

Get a Cosigner

A cosigner with strong credit may help boost your odds of landing a lower interest rate. However, should you fall behind on your payments, the cosigner is on the hook financially to pay what is due. You’ll want to have a discussion about each person’s role and responsibilities beforehand.

The Takeaway

Getting your head around the average used car loan interest rate for a 750 credit score can help you determine how much you’ll be paying on interest on a car should you get financing. In turn, it can give you a stronger handle on the total cost of the car.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

How common is an 825 credit score?

According to Experian, 21% of consumers have a credit score between 800 and 850, which is considered exceptional.

How many people have a 900 credit score?

Nobody has a 900 credit score. That’s because standard credit scores range from 300 to 850. That said, FICO created industry-specific FICO® Score models that range between 250 and 900, but these models have very limited use.

How rare is an 800 credit score?

About a quarter of Americans (22%) have a credit score of 800 or higher, which falls within the “Excellent” range.

What is a bad APR for a car?

A bad APR on a car is typically associated with lower credit scores. For instance, the average interest rate for used-car borrowers with a credit score of 500 or under is 21.55%.

What is a good interest rate on a 72-month car loan?

According to MarketWatch, the average interest rate for new cars on a 72-month car loan is 6.86%, and 12.80% for used ones. An interest rate that falls below that is considered better than average.

Is 750 a good credit score to buy a car?

A 750 credit score is in the “Very Good” range and considered above average. With that score, you can usually qualify for more competitive interest rates, larger loan amounts, and more flexible repayment terms.

Photo credits: iStock/Drazen Zigic

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.

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

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

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.

SORL-Q424-020

Whether you’re buying a home or an investment property, it’s important to understand property ownership rights in real estate. Each type of real property has a classification of ownership that determines what can be done with that asset. A freehold estate refers to real property where the owner has full ownership rights, allowing the property to be passed down indefinitely.

In this guide, we’ll take a closer look at the definition of freehold estates and the implications for property owners.

Definition of Freehold Estate

What is a freehold estate? A freehold estate is an estate in land that has an undefined duration of ownership, while a non-freehold estate involves leased property rights with a specific termination date.

In other words, an owner of a freehold estate has exclusive and indefinite rights to the property. This means that it can be passed on to heirs or beneficiaries for any amount of time. The specifics depend on the type of freehold estate, which we’ll elaborate on below.

Types of Freehold Estates

There are three main types of freehold estates: fee simple absolute, fee simple defeasible, and life estate. Conditions for ownership and how the property may be used vary between each type.

•  Fee simple absolute: This is the most common type of freehold estate. It gives property owners complete rights to a property title in perpetuity and to use the land without restriction, as long as you pay property taxes and avoid violating any active easements and local land use regulations.

•  Fee simple defeasible: This type of freehold estate operates similarly to fee simple absolute but with more restrictions. For example, fee simple defeasible could require that a farm remain as agricultural land. If a buyer violates these conditions, even after closing, the property could legally revert back to the seller or a specified heir or third party. Keep these conditions in mind if making an offer on a home with a fee simple defeasible situation.

•  Life estate: This type of estate is a form of joint ownership that allows a grantee to receive the title to a property upon the grantor’s death, rather than going through probate. Life estates are often created by property owners who want to streamline the process of giving their home or land to a child or heir after they pass. The grantor may continue occupying their home, but selling the property or mortgage refinancing would require the grantee’s approval.

Rights Associated with Freehold Estates

A freehold estate is the highest degree of property ownership, giving the owner the right to use the land for any lawful purpose, unless otherwise restricted by an encumbrance or fee simple defeasible ownership.

With a freehold estate, the property owner has an unlimited duration of ownership. They have the right to sell their home or property, lease it to others, and pass it down to heirs.

Freehold vs. Leasehold Estates

There are non-freehold estate arrangements to become familiar with, too.

If you’ve ever rented an apartment, you’re likely familiar with the concept of a lease agreement. A leasehold estate operates on the same principles. Put simply, it refers to a tenant’s exclusive right to occupy a property for a specific period of time.

When comparing a leasehold and a freehold estate, the key difference is the duration of the occupant’s rights. Leasehold estates are temporary and dictated by the terms of the lease, while freehold estates grant an indefinite duration of ownership.

Recommended: Mortgage Calculator With Taxes

Creation and Transfer of Freehold Estates

If you own a home or property, you already are in possession of a freehold estate. How the property is transferred will depend on the type of freehold estate. One way to transfer ownership is through a life estate.

Setting up a life estate can be done through a life estate deed. This legal document is filed with your local recording office to ensure the other person, known as the remainderman, is added to the deed. Again, using a life estate helps an heir receive the property faster by avoiding probate. Creating a life estate is serious business, and it is not the only way to transfer property to avoid probate, so it’s wise to consult an estate planning expert before you sign anything.

Recommended: Mortgage Interest Deductions

Limitations on Freehold Estates

There are limitations to any type of property ownership, including freehold estates. Of note, there could be a legal claim against a property from a party other than the owner, known as an encumbrance.

There are multiple types of encumbrances, including easements, liens, and encroachment.

An easement grants land use rights or property access to a third party. For example, a utility may have an easement to run a gas line through a property, or an easement can grant access to a shared driveway. This might have an impact on how much a house is worth.

Properties may be encumbered by a lien, which gives another party the right to seize the property for nonpayment of a debt, such as home mortgage loans, property taxes, or homeowners association fees. Since the estate serves as collateral, the property can be sold if needed to recoup unpaid debts.

Encroachments can also limit the use of freehold estates. An encroachment occurs when a neighbor has built a structure that intrudes on a property, limiting its full use.

During the homebuying process, in addition to ordering a home inspection, buyers typically request a formal title search to make sure there aren’t any encumbrances or claims against the property, which could delay closing.

Freehold Estates in Different Jurisdictions

Freehold estates exist in different jurisdictions in the U.S. and abroad. In the U.S., they are dictated by state and local laws.

Local zoning outlines how a property can be used in a specific area, as well as building dimensions and characteristics. Some common types of zoning include residential, commercial, agricultural, and industrial. Residential zoning may also differentiate between single-family and multifamily properties.

Freehold Estates in Estate Planning

Freehold estates are often referred to as “estates of inheritance”, since the estate is transferred to the owner’s heirs upon death. Including freehold estates when doing estate planning can give peace of mind that loved ones will have fewer legal and financial hurdles to deal with. Otherwise, the transfer of property and other assets can get held up in probate court.

The Takeaway

Buying real estate is a major investment. Freehold estates provide owners with indefinite property rights, though there can be limitations depending on encumbrances and the type of freehold estate arrangement.

Unless you’re a real estate professional, some of these terms may go beyond your needs. However, understanding your rights as a property owner and if there are any claims against your property is essential for protecting your investment when you are buying a home or other property.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

How does a freehold estate differ from fee simple ownership?

Fee simple ownership is a type of interest that property owners can have in a freehold estate. Fee simple ownership lets you do as you wish with a property, barring any liens or local laws, while the other types of freehold estates carry more conditions for how a property is used and transferred.

Can a freehold estate be taken away by the government?

A freehold estate could be taken by the government through eminent domain, or when the owner dies if there aren’t any heirs or beneficiaries. Eminent domain allows governments to claim private property if it’s necessary for public use and after compensating the owner.

Are there any restrictions on selling a freehold estate?

A freehold estate can be sold or bequeathed as the owner sees fit, without conditions and restrictions. However, there may be specific restrictions for how the property is used if conditions were set by the seller. This is known as fee simple defeasible ownership.

Photo credit: iStock/Kirpal Kooner

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.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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

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

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 content is provided for informational and educational purposes only and should not be construed as financial advice.

SOHL-Q424-006