SoFi

Maybe the asphalt on your driveway is starting to break apart and is more rocky than you’d like. Or perhaps you desire a fresh look and smoother experience going down your driveway.

Whatever the reason, giving your driveway a makeover can add to your home’s overall aesthetic and boost its functionality. Research reveals that 79% of Realtors thought a home’s curb appeal was essential to attracting potential buyers.

That said, driveway paving comes with a hefty price tag. According to estimates from HomeAdvisor, the cost depends on the size and materials, but can be anywhere from $2,000 to $10,000, with $6,000 being the average.

Can you finance a driveway if you don’t have the cash on hand to cover the costs? The good news is yes, it’s entirely possible. In order to figure out the best choice for you, you’ll want to be clued in on your options. Here, we’ll walk you through different ways to pay for a new driveway.

Understanding the Cost of Driveway Paving

Tracking home improvement costs? As mentioned, the average cost of driveway paving is $6,000. The main factors that determine how much you’ll be doling out are the size of your driveway and the type of material you’ll be using. As you might expect, different materials require a different investment of time and labor to install.

For instance, while gravel driveways are the least expensive to install, you’ll need to periodically replenish the gravel — ideally, every few years. On the flip side, driveways made of paved stone have the highest costs initially but can last the longest.

Recommended: Personal Loan Guide

Personal Loans for Driveway Financing

Personal loans can be a relatively easy route to financing a driveway paving. Most personal loan amounts range from a few hundred dollars to up to $50,000, while a few lenders have up to $100,000 available.

The terms of the loan repayment can be anywhere from one to seven years, and the APR, which is typically fixed, ranges between 8% and 36%. As of August 2024, the average interest rate on a 24-month personal loan hovered around 12.33%.

Personal loans usually have lower interest rates than credit cards, but the interest can make for an expensive way to borrow. Plus, there might be upfront fees, such as an origination fee, which is usually anywhere from 1% to 6% of your loan amount, and in some cases as high as 10%. While longer loan terms can mean lower monthly payments, you’ll be paying more interest for the loan.

Some lenders feature preapproval online and can offer a speedy application process that you can also do online. Once you’ve been approved for a personal loan, you may be able to receive the proceeds of the loan as soon as within one business day.

However, you should be aware that a personal loan for home improvement is an installment loan, which means you’ll receive the funds upfront and are responsible for making monthly payments from the start. When you apply, lenders do a hard pull on your credit, negatively impacting your credit score.

Home Equity Loans and HELOCs

If you’re a homeowner, you can borrow against the equity in your home to take out a home equity loan or home equity line of credit (HELOC) to finance a driveway paving. Both are second types of mortgage, so you’re betting against your house. Home equity loans and HELOCs can be good ways to borrow money for a relatively low interest rate and lower fees.

Currently, the average interest rate on a home equity loan is 8.35%, and the average national interest rate on a HELOC is 8.69%.

Like a personal loan, a home equity loan is an installment loan, so you’ll receive the proceeds for the loan in a single lump sum. From there, you’ll have a fixed monthly payment for which you’re on the hook.

A HELOC is a type of revolving loan. Like a credit card, you’ll be approved for a limit and borrow as you need, up to the limit, for the draw period, which usually lasts 10 years. You pay as you go, and might be able to make interest-only payments during the draw period. Because a HELOC lets you borrow funds as needed, it could be a better fit for ongoing or multiple home improvement projects with an undetermined total price tag.

Unlike unsecured forms of credit, home equity loans and HELOCs can be easier to approve. That said, both types of loans require a hard pull of your credit, which may temporarily bring down your credit score by a few points. And because you’re putting up your home as collateral, if you put a halt on your payments, you risk foreclosure and losing your home.

Recommended: The Top Home Improvements to Increase Your Home’s Value

Contractor Financing and Payment Plans

Another option for financing driveway paving is to borrow directly from a contractor. Some contractors partner with a third-party lender that provides financing options. These may include same-as-cash options (which we’ll get to in a bit) or monthly payments that you pay back over the length of the loan.

The pluses of getting financing from a contractor are that it’s convenient and straightforward. The contractor may be able to offer you a flexible plan to meet your needs in financing for driveway paving. The approval process might also be quicker.

However, minuses of contractor financing may include higher interest rates. Plus, you’re tied to the contractor should issues arise during the project.

Credit Cards and Same-as-Cash Options

You can also use a credit card. If you don’t want to jump through the hoops of applying for a new home improvement loan and have a hard pull on your credit, you could use a credit card to finance a new driveway.

That said, credit cards typically have higher interest rates than other types of financing, which ratchet up the costs of your home improvement project. Currently, the average interest rate for credit cards is 21.76%.

Contractors may also offer a “same-as-cash” option. Also known as deferred interest financing, these loans feature a no-interest period, usually between three and six months. However, interest will accrue if you don’t pay off your balance when the promotional period ends. Typical interest rates on “same-as-cash” offers range between 25% to 30%, which makes for an expensive purchase.

If you’re considering the same-as-cash option, you might also want to mull over a zero-balance transfer credit card. Interest also doesn’t accrue on purchases until the end of the promotional period, and these credit cards have zero-interest periods that are up to 20 months, so you could have more time to pay it off.

The Takeaway

Figuring out the best option for financing a driveway improvement means knowing what’s available and weighing the pros and cons of each. Before deciding, estimate how much you anticipate spending on your driveway financing and then pore over your options.

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

How much does driveway paving typically cost?

It depends on the size of your driveway and the materials used, but driveway paving typically costs anywhere from $2,000 to $10,000, with an average cost of $6,000.

Can I use a home improvement loan for driveway paving?

You can use a home improvement loan for a driveway paving project. You’ll want to look for a loan with the amount needed plus the lowest terms and flexible rates possible.

Are there government programs for driveway improvement financing?

Government home repair assistance programs exist, and you’ll need to check if you qualify for a home improvement loan. Eligibility criteria may include income, age, location, property type, and if you belong to a specific group.

Further, single-family housing repair loans and grants can be available at the state, county, and city levels. You’ll need to check locally to see what’s out there and how to qualify for a loan or grant to spruce up your home.

Photo credit: iStock/irina88w

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.

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

^²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

SOPL-Q424-005

Thinking about buying a horse? While it’s an exciting move, it’s also quite an investment. The average cost of a horse can range from a few hundred dollars to over $50,000, sometimes even more depending on the type of horse you’re buying. Using a horse loan, also called equine financing, can help make this purchase more manageable.

Read on to learn what you need to know about getting a horse loan so you can make an informed decision when welcoming a new horse into your family.

Can You Get a Personal Loan for a Horse?

Personal loans offer a flexible way to borrow money for big ticket items, like paying off high-interest debt, completing a home renovation, or even buying a horse. You can find a personal loan through banks, credit unions, and online lenders.

When you get a personal loan, you receive a lump sum of money and then pay it back in monthly installments, which include interest. There are different types of personal loans. Here are some common ones:

•  Secured and unsecured loans: Secured loans are backed by something valuable, like your home or car, while unsecured loans aren’t tied to any assets.

•  Fixed-rate and variable-rate loans: Fixed-rate loans have an interest rate that stays the same, while variable-rate loans have an interest rate that can go up or down based on changes in the market.

•  Single borrower vs. cosigner loans: With some loans, just one person is responsible for payments. But others allow a cosigner, or someone who agrees to help with payments if needed.

Pros and Cons of a Personal Loan for a Horse

To help you decide if a personal loan is a good option to finance your horse, it’s helpful to look at both the pros and cons.

Pros:

•  Personal loans usually have lower interest rates than credit cards. For example, the average rate on a personal loan is around 12.40%, as of October 2024. Meanwhile, the average interest rate on credit cards is closer to 21.76%. This means that unless you qualify for a 0% introductory APR on a credit card, using a personal loan might save you money on interest in the long run.

•  You don’t have to touch your savings. A good rule of thumb is to keep three to six months of income saved for emergencies. If buying a horse empties your savings, you could be in a tough spot if an unexpected expense comes up. A personal loan lets you keep your savings safe while still making your purchase.

•  Wide range of lending requirements. Since each lender has its own criteria, some may approve a personal loan even if your credit score isn’t the best.

Cons:

•  Your debt-to-income ratio will likely go up. Taking on more debt changes the balance between your income and what you owe. Lenders use this debt-to-income ratio (DTI) to decide on your loan approval and interest rate. Most lenders look for a ratio under 36%, so if you make $5,000 a month, your monthly debt should be under $1,800. Some lenders are more flexible, but staying within this limit could improve your chances of getting a competitive rate and terms.

•  You’re taking on additional debt. Buying a horse is a major purchase, so make sure you’re able to repay any money you borrow.

•  Missing or late payments may harm your credit score. Lenders may report late or missing payments to credit bureaus, and this could make your credit score drop. You may also have to pay a late fee, which can add to your costs — especially if it happens more than once.

Recommended:Where to Get a Personal Loan

How to Qualify for a Horse Loan

Before applying for a personal loan, here are a few questions to ask yourself:

•  How much do you need to borrow?

•  What can you afford to pay each month? (A personal loan calculator can help you determine potential monthly payment amounts based on interest rates and terms.)

•  How long do you need to pay it back?

Once you have a good idea of what you’re looking for, it’s wise to check your credit score since lenders use it to decide if you qualify. You can get a free copy of your credit report once a week from the major credit bureaus — Equifax, Experian, and TransUnion — at AnnualCreditReport.com. Take a look to make sure everything is accurate, and address any errors you see.

Ready to apply for your equestrian loan? See which lenders offer prequalification, which will give you an idea of the rates and terms you could qualify for before applying. To prequalify, you’ll typically need to provide basic information like your ID, address, income, and employment status.

Each lender has different requirements, so prequalifying with a few different lenders could help you find the best rates and terms. Once you choose a lender, they’ll guide you through the application process. They’ll likely do a hard credit check at this point, which may lower your credit score slightly, but this is usually only temporary.

Once you’re approved, the lender will ask you to sign a loan agreement. If you have any questions, make sure to speak with your lender.

Recommended:How Hard is It to Get a Personal Loan?

Tips for Successfully Repaying Your Horse Loan

Bringing your new pony home is a great feeling, but it also means it’s time to start repaying your loan. To streamline the process, here are a few strategies to help you repay the amount you borrowed.

Make a Budget

Setting a budget helps you see where your money is going and how much you’ll have left after each loan payment. Budgeting apps can make this easier by tracking your spending, setting limits, and even creating savings goals.

Set Up Autopay

To ensure you never miss a payment, consider setting up autopay. This way, your loan payment is automatically taken out of your account each month without any extra effort. Some lenders even offer discounts for using autopay.

Combine Your Debts

If you have multiple loans or debts, you might consider combining them into a single loan. This is called debt consolidation, and it involves taking out a separate loan to pay off your debt balances. Consolidating your debt can make paying down debt more manageable.

Make Extra Payments

If you want to pay off your loan faster, you could try making extra payments or switching to biweekly payments. By paying off your loan early, you can potentially save money on interest. But check with your lender to see if there’s a fee for early payoff.

Alternative Financing Options

Horse loans aren’t the only way to finance your purchase. Here are a few other options to consider:

Savings

If you can wait a bit before buying a horse, saving up for this big purchase can be a smart move. First, decide how much you’ll need, then set a timeline for reaching that goal. You may also want to consider setting up automatic transfers, which can help you put your savings on autopilot.

Keeping your money in a separate account, like a high-yield savings account, can also help it grow over time. Just keep in mind that once you have the horse, you’ll still need a budget for ongoing care and maintenance.

Horse Rental

Buying a horse comes with extra costs for things like care, food, and shelter. If you’re not ready for these ongoing expenses, renting a horse could be a better option. This way, you can enjoy riding without the full commitment.

Sharing Ownership

You could also consider sharing ownership with someone you trust and splitting the cost of the purchase and ongoing care of the horse. However, keep in mind that if the co-owner decides to back out of the arrangement, you might be responsible for all the expenses yourself, which could be financially burdensome.

Credit Card

Using a credit card to buy a horse might work if you have a high enough credit limit. But keep in mind, credit cards usually come with high interest rates, so if you can’t pay off the full balance right away, you could end up paying more in interest than with other financing options.

However, if you have good credit, some credit cards offer a 0% introductory APR. This lets you avoid interest — provided you pay off the balance before the introductory period ends. If you can’t pay it off by then, you may face a higher interest rate.

Other Factors to Consider Prior to Buying a Horse

Buying a horse is only the beginning of the costs involved. Depending on where you live, your horse’s needs, and other factors, caring for a horse can average between $8,600 to $26,000 per year.

For starters, horses need regular vet visits, a place to live, food, and lots of daily care. So before buying a four-legged friend, make sure you know your horse’s health history, and you have a reasonable budget set aside for yearly expenses.

Here are a few other important things to keep in mind:

•  Lifespan: Horses usually live between 25 and 30 years. Owning one is a long-term commitment that should be carefully considered.

•  Time: Horses need plenty of attention each day. If you’re short on time, you might have to hire someone to help care for your horse.

•  Training and equipment: Horses need plenty of exercise, which requires pricey equipment like saddles, blankets, bridles, and lead lines.

•  Transportation: If you plan to show or travel with your pony, remember that you’ll need a way to transport them, which adds to your ownership costs.

The Takeaway

Taking out a horse loan can be a smart way to finance a new pony. But before signing a loan agreement, it’s important to understand how equine financing works and to compare your options. Also, keep in mind the ongoing costs of horse ownership.

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

How much can I borrow with a personal loan for a horse?

The amount you can borrow for a horse loan depends on factors like your credit score, your lender, and other financial details like your income. Personal loan amounts usually range from $1,000 to $100,000. Before applying, figure out what you can afford and what you’re likely to qualify for.

What is the typical repayment period for a horse loan?

Repayment terms vary by lender, but you can generally find personal loans with terms between two and seven years. Keep in mind that while longer terms may make the monthly payment more affordable, you may end up paying more in interest than you would with a shorter loan term.

Are there any additional costs associated with a horse loan?

Besides interest, some lenders charge extra fees, like an origination fee, which is usually a percentage of your total loan amount. Lenders might also charge a late fee if you miss a payment, so check with your lender to understand all potential fees.

Photo credit: iStock/AzmanJaka
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-Q424-007

When investors evaluate which bonds to buy, they often take a look at yield to maturity (YTM), the total rate of return a bond will earn over its life, assuming it has made all interest payments and repaid the principal.

Calculating YTM can be complicated. Doing so takes into account a bond’s face value, current price, number of years to maturity and coupon, or interest payments. It also assumes that all interest payments are reinvested at a constant rate of return. With these figures in hand, they will be better equipped to understand the bond market and which bonds will offer the greatest yield if held to maturity.

What Is Yield to Maturity (YTM)?

The yield to maturity (YTM) is the estimated rate investors earn when holding a bond until it reaches maturity or full value. The YTM is stated as an annual rate and can differ from the stated coupon rate.

The calculations in the yield to maturity formula include the following factors:

•   Coupon rate: Also known as a bond’s interest rate, the coupon rate is the regular payment issuers pay bondholders for the right to borrow their money. The higher the coupon rate, the higher the yield.

•   Face value: A bond’s face value, or par value, is the amount paid to a bondholder at its maturity date.

•   Market price: A bond’s market price refers to how much an investor would have to pay for a bond on the open market currently. The price buyers pay on the secondary market may be higher or lower than a bond’s face value. The higher the price of the bond, the lower the yield.

•   Maturity date: The date when the issuer repays the principal is known as the maturity date.

The YTM formula assumes all coupon payments are made as scheduled, and most calculations assume interest will be reinvested.

💡 Quick Tip: Before opening an investment account, know your investment objectives, time horizon, and risk tolerance. These fundamentals will help keep your strategy on track and with the aim of meeting your goals.

How to Calculate Yield to Maturity

Calculating yield to maturity can be done by following a formula — but fair warning, it’s not simple arithmetic!

Yield to Maturity (YTM) Formula

To calculate yield to maturity, investors can use the following YTM formula:

In this calculation:

C = Interest or coupon payment
FV = Face value of the investment
PV = Present value or current price of the investment
t = Years it takes the investment to reach the full value or maturity

Example of YTM Calculation

Here’s an example of how to use the YTM formula.

Suppose there’s a bond with a market price of $800, a face value of $1,000, and a coupon value of $150. The bond will reach maturity in 10 years, with a coupon rate of about 14%.

By using this formula, the estimated yield to maturity would calculate as follows:

The Importance of Yield to Maturity

Knowing a bond’s YTM can help investors compare bonds with various maturity and coupon rates, and ultimately, what their dividend yield could look like. For example, consider two bonds of varying maturity: a five-year bond with a 3% YTM and a 10-year bond with a 2.5% YTM. Investor’s can easily see that the five-year bond is more valuable.

YTM is particularly useful when attempting to compare older bonds sold in a secondary market, which can be priced at a premium or discounted — meaning they cost more or less than the bond’s face value. Understanding the YTM formula also helps investors understand how market conditions can impact their portfolio based on the investment they select. Since yields rise when prices drop (and vice versa) as seen on a yield curve, investors can forecast how their investment will perform.

Additionally, YTM can help investors understand how likely they are to be affected by interest rate risk — the danger that the value of a bond may be adversely affected due to the changes in interest rate. Current YTM is inversely proportional to interest rate risk. That means, the higher the YTM, the less bond prices will be affected should interest rates change, in theory.

Yield to Maturity vs Yield to Call

With a callable, or redeemable bond, issuers can choose to repay the principal amount before the maturity date, halting interest payments early. This throws a bit of a wrench into the YTM calculation. Instead, investors may want to use a yield to call (YTC) calculation. To do so, they can use the YTM calculation, substituting the maturity date for the soonest possible call date.

Typically a bond issuer will call a bond only if it will result in a financial gain. For example, if the interest rate drops below a coupon rate, the issuer may decide to recall the bond to borrow funds at a lower rate. This situation is similar to when interest rates drop and homeowners refinance their home loans.

For investors that use callable bonds for income, yield to call is significant. Suppose the issuer decides to call the bond when the interest rates are lower than when the investor purchases it. If an investor decides to reinvest their payout, they may have a tough time finding a comparable bond that offers the yield they need to support their lifestyle. They may feel it necessary to take on more risk, looking to high-yield bonds.

💡 Quick Tip: It’s smart to invest in a range of assets so that you’re not overly reliant on any one company or market to do well. For example, by investing in different sectors you can add diversification to your portfolio, which may help mitigate some risk factors over time.

Yield to Maturity vs Coupon Rate

While a bond’s coupon rate is another important piece of information that investors need to keep in mind, it’s not the same as yield to maturity. The coupon rate tells investors the annual amount of interest that a bond’s owner is set to receive — the two may be the same when a bond is initially purchased, but will likely diverge over time due to changing economic and market conditions.

Limitations of Yield to Maturity

The yield to maturity calculation does have limitations.

Taxes

It’s important to note that YTM calculations exclude taxes. While some bonds, like municipal bonds and U.S. Treasury bonds, may be tax exempt on a federal and state level, most other bonds are taxable. In some cases, a tax-exempt bond may have a lower interest rate but ultimately offer a higher yield once taxes are factored in.

As an investor, it can be especially helpful to consider the after-tax yield rate of return. For example, suppose an investor in the 35% federal tax bracket who doesn’t pay state income taxes is considering investing in either Bond X or Bond Y. Bond X is a tax-exempt bond and pays a 4% interest rate, while Bond Y is taxable and pays 6% interest.

While the 4% yield for Bond X remains the same, the after-tax yield for Bond Y is 3.8%. While it seemed like the less lucrative of the two options up front, Bond X should ultimately yield a higher return after taxes.

Presuppositions

Another YTM limitation is that it makes assumptions about the future that may not necessarily come to fruition. Specifically, it assumes that a bondholder will hang on to the bond until its maturity date, which may or may not actually happen. It also assumes that profits from the investment will be reinvested in a uniform manner — again, that may or may not be the case.

The Takeaway

Using the yield to maturity formula can help investors compare bond options with different coupon and maturity rates, market and par values, and determine which one offers the potential for a higher yield. But calculating the YTM is not an exact science, especially when you’re gauging the return on a callable bond, say, or adding the impact of taxes to the mix.

YTM is just one tool investors can use to determine which bond may best serve their financial needs and goals. One alternative to choosing individual bonds is to invest in bond mutual funds or bond exchange-traded funds (ETFs). Investors can also speak with a financial professional for guidance.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

FAQ

What is a bond’s yield to maturity (YTM)?

A bond’s yield to maturity is the total return an investor can anticipate receiving if the bond is held to its maturity date. YTM calculations assume that all interest payments will be made by the issuer and reinvested by the bondholder at a constant rate of interest.

What is the difference between a bond’s coupon rate and its YTM?

A bond’s coupon, or interest, rate is fixed from the moment an investor buys it. However, the same bond’s YTM can fluctuate over time depending on the price paid for it and other interest prices available on the market. If YTM is lower than the coupon rate, it may indicate that the bond is being sold at a premium to its face value. If it’s lower, it may be that the bond is priced at a discount to face value.

What is yield to maturity and how is it calculated?

Yield to maturity refers to the total return an investor can expect or anticipate from a bond if they hold it to maturity. It’s calculated using variables including the time to maturity, a bond’s face value, its current price, and its coupon rate.

Why is yield to maturity important?

The yield to maturity formula can give investors an idea of what they can expect in terms of returns from their bond holdings. But again, there are some assumptions the calculation takes into account, so an investor’s mileage may vary.

Is a higher YTM better?

A higher YTM may be better under certain circumstances. For example, since a higher YTM may indicate a bond is being sold for less than its face value, it may represent a valuable opportunity to invest. However, if the bond is discounted because the company that offered it is in trouble or interest rates offered by other investments are more appealing, then a high YTM might not be such a good thing. Investors must research investments carefully and understand the full story before they buy.

SoFi Invest®