SoFi

Life after law school can be an exciting time as you look forward to your new career. There are plenty of opportunities available to those with a JD. Some avenues to consider include practicing law at a firm, specializing as an attorney in a field like patents, contracts, immigration (and many more), working as general counsel in-house at a corporation, or even pursuing a career in government.

The path you choose depends on the type of law you studied, your interests, and your past experiences. According to the Bureau of Labor Statistics (BLS), the median salary for lawyers in 2021 was $127,990 annually.

Once you find your first post-law school gig, you may also have to start thinking about repaying any law school student loans.

Finding Jobs After Law School

After getting a law degree, what to do really depends on why you decided to go to law school in the first place. Did you have dreams of working at a major law firm, becoming a public defender, or going solo with your own practice?

Maybe you’ve decided you no longer want to practice law and would rather apply your new skills to a relevant career or continue to further your education. If you are considering what to do after law school, you can start by examining what workplace environment you find the most exciting and attainable.

Landing at a Law Firm

A law firm is an obvious choice for where to work after getting your JD. But the size, location, and culture of the law firm can greatly impact your experience and job satisfaction. Attorneys working at smaller firms may offer stronger partnership prospects than larger law firms. However, depending on location, the pay could be comparatively lower, and your training may come in the form of on-the-job experience.

While the path to promotion may be longer at a larger firm, they may have more resources and a higher salary. Depending on your preferences and career interests, a major law firm with a big name might be a better fit to help you find your specialty.

Considering a Clerkship

A clerkship is an important career milestone for many attorneys. Usually taking place under the guidance of a certain judge, a clerkship allows law school graduates to see the inner workings of the legal system. Many are considered prestigious resume boosters and offer valuable first-hand experience working under a judge and a leg up on networking from the start.

There are federal and state court clerkships, but federal opportunities like with Supreme Court or circuit court judges can be more difficult to secure because of their prestige. However, state clerkships can also be beneficial, especially if you plan on practicing in the local area.

Getting an Advanced Degree

If you have a desire to specialize in a specific field of law, staying in school to get a post-JD degree is another avenue to consider after getting a law degree.

You might want to pursue this type of degree after having some relevant work experience, which can help you first figure out what particular field of law you want to study. These specialty degrees include Air and Space Law, Sports Law, Global Food Law, Cannabis Law, and more.

Alternative Careers Outside Law

Pivoting after law school to a different careeris another option to consider when looking at jobs. If you, like many, have graduated with six-figures worth of student loan debt, you’ll obviously want to find a steady job so you can make regular student loan payments.

Other jobs that may fit with the skill set you curated in law school may include political advisor, journalist, lobbyist, and teacher.

Tackling Law School Debt

Depending on your earning potential and chosen career path, it might make sense for you to aggressively pay off your law school debt in 10 years or less, or try to maximize your law school loan forgiveness opportunities.

In order to make your degree count towards your personal and professional goals, figuring out how to approach your debt is a key part of what to do after law school.

Making Payments While Still in School

While the government does not require you to make payments on most federal student loans while still in school, you could consider paying the amount of interest that builds up each month to help keep your student loan debt from growing.

Whether you need to pick up a side hustle or prioritize how much you save, making at least interest payments on your student loans while still in school can help reduce the amount of interest that will capitalize on your student loans. This can ultimately reduce the amount of interest that accrues and help set you up for success after law school.

Sticking to Budget Basics

After your law degree, it can be wise to take stock of your budget and work to balance your goals for savings, emergency funds, credit card payments, and student loans. The average student loan debt from law school currently sits at $180,000, so you’ll want to prioritize making a plan to get these paid off as quickly and efficiently as possible.

Ultimately, you’ll likely want to pick a student loan repayment plan that works for your personal budget, no matter what jobs after law school you are considering. You may decide to pay down debt while also building up a basic emergency fund as part of your financial foundation.

Recommended: How Much Money Should Be in Your Emergency Fund?

Refinancing Law School Loans

Refinancing your law school loans means that a private lender will issue one new loan that effectively pays off your existing federal and/or private student loans. This new loan comes with new terms, ideally with a lower interest rate or shorter repayment period. Instead of paying multiple student loans, such as from undergraduate and graduate school, there is only one new loan to pay off.

While there are many advantages to refinancing student loans, refinancing federal student loans means that you will not be able to take advantage of benefits like income-driven repayment plans and Public Service Loan Forgiveness. So it may not make sense if you are taking advantage of one of these benefits or plan to in the future.

The Takeaway

Life after law school can mean something different for everyone. Whether you pursue a private practice, family law at a small firm, or corporate law at a large one, there are many career opportunities to pursue.

Law school may also mean taking on a significant amount of student loan debt. Refinancing could be an option that helps you spend less in interest over the life of the loan if you’re able to qualify for a more competitive interest rate or secure a shorter term. If you’re interested in student loan refinancing, consider SoFi. Refinancing with SoFi can be completed online and there are no application fees, origination fees, or prepayment penalties.

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.

Are you a parent who is committed to helping your kids get through college and minimizing higher education costs as much as possible? Have you been asking yourself, is private school tuition tax deductible?

The good news is that it may be possible to lower education costs by using tuition tax breaks. Even if the money comes out of your pocket at first, you might be able to recoup some of those dollars come tax time. There are currently two tuition tax credits for parents to consider: the American Opportunity Tax Credit and the Lifetime Learning Credit.

With each of these programs to make private school tuition tax deductible, the parent would need to claim their student as a dependent on their taxes, as well as meet some pretty specific rules for each program. To get started, it’s smart to understand the rules and requirements of each and know that not every filer is going to qualify for these programs.

This article is for informational purposes only, offering a high-level overview of the available tuition-related tax credits and deductions. For parents wanting to take a deep dive into the particulars of tax programs, talking to a licensed tax professional about tax credits and deductions is critical.

What’s the Difference Between a Tax Deduction and Tax Credit?

For those dealing with student loan debt and wondering, can you write off private school tuition?, it’s important to understand the difference between a tax deduction and a tax credit. A deduction can reduce the amount of your taxable income. For example, if you made $80,000 in gross income in a given year and had $15,000 in deductions, you’d have $65,000 in taxable income.

A tax credit, on the other hand, can help provide a dollar-for-dollar reduction in income taxes you owe. For example, a $2,000 tax credit would reduce your tax bill by $2,000.

When compared dollar for dollar, tax credits can sometimes be more valuable than a similar tax deduction. A nonrefundable tax credit qualifies a taxpayer for a reduction up to the amount that they owe. With a refundable credit, a taxpayer could receive a refund even if they do not owe any tax.

The American Opportunity Tax Credit

So, is private school tuition tax deductible? It could be. Parents with a child or children they claim as dependents who are in the first four years of their undergraduate education may qualify for the American Opportunity Tax Credit (AOTC).

The AOTC is a credit for tuition and other qualified educational expenses paid for during an eligible student’s initial four years of their college education. The AOTC doesn’t apply to students in their fifth year and beyond.

The AOTC is worth up to $2,500 per eligible student. Because it is a tax credit, it should directly reduce the filer’s tax bill—not their taxable income. As of this writing, if the credit happens to bring the filer’s tax bill to zero, they may qualify to have 40% of any remaining amount of the credit (up to $1,000) refunded to them.

To qualify for the AOTC, there are additional requirements for both the parent and the student. According to the IRS, for the student to be eligible for the AOTC, they must be pursuing a degree or other recognized educational credential, be enrolled at least half time for at least one academic period beginning in the tax year, not have claimed the AOTC for more than four tax years, and do not have a felony drug conviction at the end of the tax year. Again, the AOTC only applies to undergrad students in their first four years.

To currently qualify as a parent, your modified adjusted gross income must be $80,000 or less ($160,000 or less if married filing jointly) in order to claim the full credit. If your modified adjusted gross income is between $80,000 and $90,000 ($160,000 and $180,000 if married filing jointly), you would be eligible for a reduced credit.

Recommended: Private Student Loans Guide

Lifetime Learning Credit

The Lifetime Learning Credit (LLC) is another possibility for parents paying for school for a child they claim as a dependent.

Like the AOTC, the LLC is a tax credit. The LLC is more expansive in the coursework it covers, which is helpful because college is not for everyone. The LLC credit can be applied to qualified tuition and education expenses for eligible students enrolled in a qualifying educational institution. This includes undergraduate, graduate, and professional schools—including courses to acquire job skills.

In addition, there is no limit on the number of years where a person can claim the LLC, compared to the AOTC’s four years per student.

Similar to the AOTC, there is an income limitation to who qualifies for the LLC credit. To claim the full credit in 2022, a parent’s modified adjusted gross income must be below $80,000 (or $160,000 if married filing jointly). If your modified adjusted gross income is between $80,000 and $90,000 ($10,000 and $180,000 if married filing jointly), you could be eligible for a reduced credit.

Parents cannot file for both the LLC and the AOTC for the same student in the same tax year, so it is a choice between one or the other. Also, a student can’t file for either of these if their parents have already filed for a credit for the same expenses.

Recommended: Are Student Loans Tax Deductible?

Other Education-Related Deductions

Parents who have taken out loans for their child’s education and put money toward student loans may also qualify to deduct the interest payments on those loans.

One of the basics of student loans is that borrowers pay interest on the loans. The deduction includes both required and voluntary interest payments.

Filers may be able to deduct up to $2,500 in student loan interest expenses. You do not need to itemize your taxes in order to qualify for the deduction.

Aside from deductions, another way to possibly lower your student loan payments is by refinancing student loans. When you refinance, you replace your current student loans with a new loan.

One of the advantages of refinancing is that you may be able to get a lower interest rate or better terms that could lower your monthly payments. However, be aware that if you refinance student loans, they become ineligible for federal protections and programs like income-driven repayment. Also be aware that you may pay more interest over the life of the loan if you refinance with an extended term.

If you decide that refinancing is an option that might help you save on student loan payments, SoFi offers loans with flexible terms, low fixed or variable interest rates, and no fees.

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.

While using your credit card can be an easy and convenient way to make purchases, you’ll need to be on the lookout for would-be thieves. The level of credit card fraud that occurs is staggering. According to recent data from industry publication The Nilson Report, payment card losses amounted to $27.85 billion in 2019.

To protect yourself from credit card fraud, you might consider a virtual credit card. We’ll talk about what a virtual credit card is, their advantages and downsides, and how to get a virtual credit card.

What Is a Virtual Credit Card?

A virtual credit card is a temporary, disposable credit card that can be used when making online purchases. Their intent to safeguard your actual credit card numbers from fraudsters. In turn, it could protect your credit card from hackers.

Virtual credit cards are made for temporary use. When you use a card online, the retailer can only see and store the temporary credit card number, adding another layer of protection should a data breach occur.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score

How Do Virtual Credit Cards Work?

Not all credit card networks issue virtual credit cards. If a virtual credit card is offered, you can request a temp credit card from the bank through your online account. When you get a virtual credit card, the 16-digit number is randomly generated, and comes with a security code and expiration date. This information is tied to your account.

A major perk of a virtual credit card is that they’re intended for temporary use. These cards typically expire after a day, although some have a 12-month expiration date. A new 16-digit credit card code can be generated for each transaction.

Virtual Credit Card vs Digital Wallet

The major difference between virtual wallets and digital wallets is that with a digital wallet, you would store the exact credit card numbers as what’s on your credit card. When you make a purchase with a digital wallet, however, many digital wallets store a temporary card number.

Another major difference between the two is where they can be used. You can use a virtual credit card for any online purchase where credit cards are accepted. A digital wallet, on the other hand, can only be used at retailers where digital wallet payments are accepted, which might not be everywhere.

Recommended: When Are Credit Card Payments Due

Pros and Cons of Virtual Credit Cards

Here’s an overview of the advantages and drawbacks of using virtual credit cards, which we cover in more detail below.

Recommended: Tips for Using a Credit Card Responsibly

Pros

Here are the major upsides of using virtual credit cards:

•   Greater protection from fraudsters: Your actual 16-digital credit card number, payment information, and personal information is safeguarded when using a virtual credit card. In the case that a hacker steals your virtual card number, that number will expire shortly. Plus, the hacker won’t have access to your personal information or identity.

•   Flexibility in use: You can change your temp card number as often as you like, at the drop of a hat, and create new card numbers for different retailers. You can even set spending limits or freeze your account without the same changes being reflected in your actual credit card account.

•   Transactions are posted to your account: While the credit card number is a temporary one, credit card charges made with your virtual card do show up on your credit card statements. In turn, you can keep better track of all purchases, whether using a virtual card with temporary numbers or your actual credit card number. This tie to your account also means you can get cash back rewards with a credit card even if it’s temporary.

•   Ability to customize how long the number stays active: Depending on the credit card issuer, you might be able to customize the length of time a virtual card number stays active. Or, you can set a specific spending limit. This might come in handy if you’re using a joint credit card, or if you use a virtual credit card for recurring monthly purchases.

Cons

There are also drawbacks to virtual credit cards that are important to take into account as well. These include:

•   Generally can only be used online or over the phone: Due to their nature and intent, virtual credit cards generally can only be used online and for some over-the-phone purchases. So it won’t offer fraud protections when you use your credit card for brick-and-mortar purchases. However, if you link your virtual credit card to your digital wallet, you might be able to use your virtual credit card at select physical locations.

•   Might be more challenging to use for certain purchases: If you’re using a virtual card to book a flight or hotel reservation, and the card number expires after 24 hours, it could get a little prickly when the hotel asks for the same credit card number. In those cases, you might need to call your bank, or consider using a permanent credit card.

•   Might be harder to get a refund: Another scenario when using a virtual credit card can be more complicated is when a refund is issued and the retailer can’t refund the amount to a virtual card after it has expired. In that case, you might have to opt for a store credit instead.

•   Requires extra legwork to get: If you want to take advantage of the added security of a virtual credit card number, you might have to make a bit more effort than just swiping your card. You’ll have to contact your issuer each time you want to get a temp credit card number, and stay on top of short usage windows.

Recommended: What is the Average Credit Card Limit

How Is a Virtual Credit Card Number Generated?

Virtual credit card numbers are randomly generated sequences that are linked to your existing credit card account, just like an authorized user on a credit card would be. In some cases, to access the virtual card number, you’ll need to download the virtual card issuer’s app. Other issuers may allow you to do so through their website or through the existing banking app.

Depending on the credit card issuer, you might receive a virtual card number for different merchants. Or, you might receive a randomized 16-digital credit card sequence to use for any merchant.

The number might be good for 24 hours, after which you’d need to request a new number. Some virtual credit cards allow you to choose when a credit card is set to expire. For instance, you might choose for it to expire after a day of use, or after several months so you can use the same virtual card for recurring purchases.

Tips for Protecting Your Identity Online

Even using a virtual credit card number doesn’t make you immune to theft. Here are some ways to protect your identity and virtual credit card online:

•   Sign up for a credit monitoring service. This will help you detect any suspicious behavior.

•   Use a virtual private network (VPN). For a more secure connection, connect to a VPN when using public WiFi.

•   Create unique passwords. Passwords to online merchant accounts should not only be unique, but a combination of letters and numbers.

•   Set up alerts on your virtual credit card. Setting up alerts on your credit card for online purchases can make you immediately aware of fraudulent activity.

•   Use trusted, known sites. For instance, check to see if the site is secure and has “https” instead of “http” in the URL.

•   Don’t buy into credit card loss protection. If you receive an unsolicited email or call from someone claiming to be from the security department of a credit card company and asking you to activate the protection features on your card, beware. It’s a scam. You don’t need it, as credit cards typically have built-in liability protection.

Recommended: What is a Charge Card

Virtual Credit Card Alternatives

If your credit card issuer doesn’t offer a virtual credit card, or you don’t think it’s a good fit for you, here are some other options:

•   Prepaid credit cards: If concern when using a credit card for a purchase is top of mind, a prepaid credit card is a reloadable card that you can use for purchases. Note that while these are a safe way to make purchases, prepaid credit cards come stacked with fees and don’t help you build credit.

•   Gift cards: A gift card is also a safe way to make purchases online without fraudsters accessing your personal information or credit card number. Gift cards can be used for particular merchants or anywhere the credit card network with which the gift card is associated is accepted.

The Takeaway

A virtual credit card can provide an extra layer of protection and prevent your credit card and personal information from getting into the wrong hands. However, you can typically only use virtual credit cards for online purchases and some purchases over the phone. Plus, they usually can only be used temporarily, often for one day.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

Is a virtual credit card secure?

A virtual credit card offers added protection as you aren’t using your actual credit card number when making purchases. This helps prevent fraudsters from accessing your actual credit card number and sensitive information. Instead, you receive a temporary 16-digit code with its own expiration date and security code.

Can I get an instant approval for my virtual credit card?

Some virtual credit cards do offer instant approval. Once you receive your random credit card code, you usually can use it right away.

Can you get a virtual credit card anonymously?

No, you won’t be able to obtain a virtual credit card anonymously. You’ll need to request a virtual credit card by logging on to your existing credit card account. Once you make a request, you’ll receive your virtual credit card.

Photo credit: iStock/nesharm
SOCC0422008

Figuring out how to save money for grad school can feel overwhelming, but it doesn’t have to be. In fact, it’s possible to save for grad school without picking up a side hustle or taking on more debt — if you plan ahead and adjust your current budget.

Here’s how to save money for grad school and help make it more affordable.

Strategies to Save Up for Grad School

1. Splitting Up Your Paycheck

If you are currently working and get regular paychecks, one of the simplest ways to start saving for grad school is to automate as much of the process as possible. If your workplace has direct deposit, you could contact HR and see if you are able to add another bank account, and designate a certain amount from every paycheck to go into your savings account.

It can be as much or as little as you’d like, but putting the money directly into savings makes it harder to spend right away. By automating your savings account, you eliminate the hassle of manually parting with it.

If your company doesn’t offer the option to split your paycheck to multiple accounts, you can contact your bank directly or check online to see if they offer a recurring transfer. Banks are typically able to set up transfers for you automatically on your payday.

To decide how much to save for grad school, review your monthly budget before starting. If you don’t have one, put one together.

2. Opening a Separate Savings Account

While you shouldn’t necessarily open a new account for every savings goal in your life, as that could get messy fast, setting up a new, separate savings account with your bank for grad school is another way to potentially maximize your money.

Opening a new account with a specific goal of how much to save for grad school could help you keep track of the goal and make your progress tangible. Having a separate account specifically for school can also help you manage and keep track of spending on books and other school-related costs.

These first two ideas can work together to get you progressing on your savings goal. It can be intimidating to commit to allocating some of your budget for savings, but if you make the process regular and automatic, you may be surprised to find how little you miss that extra cash.

3. Don’t Forget Financial Aid

The Free Application for Federal Student Aid is not just for student loans—you could also receive work-study and grants by filling out the FAFSA®. Just like undergraduate applications for federal financial aid, students must demonstrate need, be a U.S. citizen or eligible noncitizen, and be enrolled or accepted as a regular student pursuing a degree beyond a bachelor’s.

However, when graduate students fill out the FAFSA, they may be considered independent, meaning their parents’ income is no longer taken into consideration.

Recommended: Independent vs Dependent Student: Which One Are You?

For some people, this might actually mean they are eligible for more financial aid as an independent individual. The amount a student is awarded will be based on factors including their income and financial assets. Students cannot be in default on a prior student loan to be eligible for additional aid.

Regardless of dependency status, graduate students may be eligible to receive PLUS Loans. These unsubsidized loans can be taken out in amounts up to the cost of attendance, but be aware you can’t have an adverse credit history to qualify.

There’s also the option of financial aid that isn’t typically repaid, in the form of scholarships or other grants, or scholarships from your state based on field of study, interest, or school type.

File your FAFSA as soon as possible after October 1, the year before each enrollment period. Since there are limited funds, the sooner you file, the better chance you may have of getting the most aid possible.

4. Checking With Your Current Employer

Even if you are not in a career where your employer is expected to pay for a graduate degree, a lot of companies may offer some contribution to ongoing education if it’s possible to show that it will be relevant to your job.

Tuition reimbursement varies depending on your company and industry, but some may offer tuition assistance to their employees. While it might not cover your entire graduate school cost, a tuition reimbursement benefit from your company could significantly lower the amount you need for school, which in turn could lower your dependence on loans.

If you have existing student loan debt from your undergraduate education, check to see if your company offers employees a match (up to a certain amount yearly) on payments made toward student loan debt every year. In this way, employers can make a regular contribution to help with your student loan balance, while you make your regular payments, too.

5. Considering Schools Abroad

Schools in Europe, South America, and Africa may be significantly less expensive than universities in the United States, which can help with saving for grad school. But, before enrolling in graduate school abroad, make sure you understand how your industry will accept and transfer over any foreign degrees. You’ll want to make sure that your grad school degree is a decent ROI.

While the cost of living might be higher in some other countries, international graduate programs can also save you time; some PhD programs in Europe are only three to four years, as compared to six or seven in the U.S.

6. Refinancing Current Student Loans

If you are currently paying off undergraduate student loans, the idea of juggling paying for grad school and paying off undergrad loans may seem daunting. It’s helpful to get your current debt situation under control before saving for grad school. One option you might want to consider that could potentially result in monthly savings is student loan refinancing.

Refinancing your student loans could possibly result in a lower interest rate, which could mean lower monthly payments (depending on the loan term), potentially freeing up room in your monthly budget. A lower interest rate might also mean spending less money over the life of the loan. Note: You may pay more interest over the life of the loan if you refinance with an extended term.

However, it’s important to know that loan refinancing means you’re no longer eligible for federal student loan forgiveness, deferment, and income-driven repayment.

A lower overall interest rate could help you with your goal of saving money to pay for graduate school, helping to make your savings goals more manageable as you embark on this exciting next step in your career. A student loan refinance calculator can help you figure out if refinancing makes sense for your situation.

The Takeaway

Graduate school doesn’t necessarily mean taking on more debt. Those looking to focus their savings plan for graduate school can review their monthly budget and automate as much of their savings as possible.

Additional options to pay for college include federal student aid including federal student loans, scholarships, grants, and work-study. Some students may even consider pursuing their graduate degree abroad to attend a more affordable university. And refinancing is an option that could help some students with undergraduate loans reduce their interest rate.

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.

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.

SOSL0423022

We take our household appliances for granted. Ovens, refrigerators, dishwashers, washers, and dryers — they’re all essential for everyday life, but we just always expect them to work. When one finally breaks down and we realize it’s time to buy a new, expensive replacement, it can be a bitter pill to swallow.

But what if you don’t have the cash on hand to pay for a new appliance? That’s where appliance financing, also called an appliance loan, comes in.

What Is Appliance Financing?

Appliance financing refers to buying a new appliance on credit. Rather than paying out of pocket for a new appliance, you’ll pay it off over time in monthly increments, like a house or car payment.

While this means you don’t have to spend money from your emergency fund or borrow money from a relative to pay for a replacement fridge or washer, it does mean you might face additional fees, like interest.

You can get appliance financing in a number of ways, including taking out a personal loan, paying for the appliance with your credit card, and exploring in-store financing, such as in-store appliance loans or rent-to-own options.

How Does Appliance Financing Work?

When you can’t afford a new appliance but need one because your old one has broken down and is beyond repair (or not worth the cost of repair), you can take out an appliance loan. How this type of financing works depends on the method of financing you use.

For example, if you pay for the appliance with a credit card, you’ll simply make your credit card payments as you would for any other purchase. But if you take out a personal loan from a bank or credit union, you’ll have a set number of years to pay off the loan, and there may be certain fees on top of the interest charged.

Methods of Appliance Financing

There are a few key ways of paying for an expensive appliance you can’t afford.

Personal Appliance Loans

You can take out a personal loan from a financial institution for almost anything, including home renovations, a wedding or vacation, debt consolidation, and, yes, even a new appliance.

Credit score requirements for a personal loan vary depending on the lender. Often, borrowers with bad credit can still qualify for personal loans, but interest rates and fees may be higher.

Additionally, lenders might have origination and prepayment fees, so it’s a good idea to read a lender’s loan details thoroughly before signing on the dotted line.

Personal loan terms generally range from two to seven years. Monthly payments will be higher on a shorter loan, but interest rates are typically lower — meaning you’ll spend less on interest over the life of the loan.

Recommended: What Is a Signature Loan?

Credit Cards

If you have a credit card with a high enough limit, you can also pay for an appliance with your card. Just keep in mind your credit card’s APR, or annual percentage rate — if you can’t pay off the balance in full by the due date, you may rack up interest charges quickly.

If you have a cash back or travel credit card, you could earn significant rewards by paying for an appliance on credit. For instance, refrigerators cost anywhere from $430 to $10,600. A 3% cash-back rewards card would earn you $318 on the purchase of a $10,600 fridge.

In-Store Financing

Many retailers offer their own financing options for large appliances, often via a store credit card. Unlike other credit cards, these cards are closed-loop, meaning you can only use them at that store.

These stores, like Lowe’s and Home Depot, may offer special perks for financing with them. This could include no interest if you pay in full within a set number of months or a percentage discount off the purchase price.

Some retailers may also offer rent-to-own options. In this scenario, you’d make a weekly or monthly payment until you’ve paid off the appliance. If you miss a payment, the store will take the appliance back. Rent-to-own fees can be high, making it more expensive for consumers by the time the appliance is paid off.

What Can Appliance Financing Be Used For?

You can use appliance financing for any kind of home appliance, but it’s generally not a good idea to take out a loan for luxury appliances like espresso makers and immersion blenders. Instead, experts advise only taking on loans for appliances that are considered more of a necessity, like:

•   Ovens and stovetops

•   Microwaves

•   Dishwashers

•   Refrigerators

•   Kitchen sinks

•   Washing machines

•   Dryers

Pros and Cons of Appliance Financing

Thinking about using appliance financing for your next household purchase? Let’s weigh the pros and cons:

Pros

Appliance financing offers the following upsides:

•   No waiting: When your washer or oven breaks down, you need a replacement. Sure, you can go to the laundromat and rely on microwave dinners temporarily, but ultimately, you’ll need to purchase a new appliance. If you don’t have the money in your bank account or are saving for other goals, you can instead take out an appliance loan or pay with your credit card to ensure you get the appliance you need without having to wait.

•   Home renovation: If you’re doing a larger home renovation, like remodeling your kitchen, you may be purchasing all-new appliances. Those costs can add up quickly. By using a personal loan for appliances — or even a home renovation loan for the entire project — you can get everything you need, rather than replacing appliances one at a time.

•   Rewards: If you finance your appliance with a rewards credit card, you may earn cash back or miles on your purchase. Or, if you use in-house financing from the store, you may qualify for special terms or even a discount.

Cons

Meanwhile, consider these downsides of appliance financing as well:

•   Higher cost: When you take out a loan for home appliances, you’ll likely pay more for the appliance through interest and fees. Even if you put it on a credit card, you could incur fees if you don’t pay off the balance in full by your next statement due date.

•   Credit score requirements: While bad-credit borrowers can typically get a personal loan, some consumers with low credit scores may have trouble qualifying for in-house financing or credit cards without high fees.

•   Temptation to spend beyond means: Making a low monthly payment instead of paying the full price upfront can create the illusion of affordability. That means you might be tempted to buy an expensive appliance that’s actually outside your budget — after all, the monthly payment looks manageable. Just remember that you’ll have to make that monthly payment for several years.

Recommended: How to Pay for Emergency Home Repairs

The Takeaway

Appliance financing makes it possible to purchase a new appliance when your old one breaks down and you don’t have the cash on hand. Whether you need a new refrigerator, washer and dryer, oven, or dishwasher, an appliance personal loan, in-store financing, or credit card might be the way to go.

Thinking about funding your new appliance with a personal loan from SoFi? You’ll enjoy competitive SoFi personal loan interest rates, and same-day funding. Check out your personal loan rate in just 60 seconds.

FAQ

Which appliances can be financed?

You can finance virtually any appliance if you qualify for a personal loan or pay with a credit card. Retailers that offer in-house financing may only offer their programs for specific appliances, however. Before financing, just keep in mind that it’s not a good idea to finance luxury appliances that you don’t need or can’t afford. Instead, most experts advise using appliance financing for necessary appliances priced within your means, such as a refrigerator or washing machine.

What is the credit requirement for an appliance loan?

Credit requirements for appliance loans vary depending on the type of loan. Borrowers with bad credit typically can find personal loans for appliances, though these will come with high interest and fees. Rent-to-own programs don’t have a credit check. But if you want to take advantage of a retailer’s in-house financing, you may need a credit score of 580 or higher, though requirements vary by store.

Photo credit: iStock/Talaj

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

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