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If you’re thinking about buying a car, it’s important to consider how the purchase will fit into your overall financial responsibilities, including student debt. You’ll want to be sure you can afford both the cost of the car and the ongoing expense of driving and maintaining it.

Refinancing student loans to buy a car is one option that may allow you to free up money to put toward the cost of a car or monthly car payments. Here’s what to know about refinancing student loans to buy a car, if you can use student loans to buy a car, and how to make the choice that’s right for you.

Can I Use Student Loans to Buy a Car?

Federal student loans (and many private ones) are for “qualified” educational expenses, such as tuition, room and board, and books and supplies. And while the cost of transportation (for example, commuting to school) is considered a qualified expense, purchasing a car is not.

So can you use student loans to buy a car if you’re using the car to drive to class? No – only an allowance for the cost of driving the car to school would be an eligible expense. It’s an important distinction: A borrower caught misusing student loan funds can face serious repercussions, including having their loan revoked and the balance becoming immediately due.

Some private loans may have broader criteria for what constitutes an educational expense, and fewer penalties for how you use the loans. Still, using a private student loan to buy a car may not be the most efficient or smartest use of funds. You may end up paying more interest than you would on a typical car loan, and then have fewer funds to go toward the educational expenses you need.

So what do you do if you have student debt and need to buy a car? Refinancing may be an option, and can free up money in your budget to open a car loan. Here’s what to consider before refinancing student loans to buy a car.

Recommended: Should I Buy a New or Used Car?

Refinancing Student Loans to Buy a Car

When you refinance a student loan, you pay off all or some of your loans with a new loan with new terms from a private lender. The primary benefit of refinancing is that you can save money over the life of the loan if you’re able to lower your interest rate.

You can also change the terms of your payment, potentially spreading your payment over a longer period of time, and paying less each month. If you go this route, however, you may end up paying more in interest over the life of your loan.

Refinancing student loans can help lower your monthly payments and have more room in your budget to cover the costs of a car. However, it’s important to understand that if you refinance federal student loans, you’ll lose access to federal benefits and protections, such as income-driven repayment plans and forgiveness. If you’re planning to take advantage of any of these federal programs, refinancing is likely not a good option for you.

Pros of Refinancing Student Loans to Buy a Car

Considering the pros and cons of refinancing student loans to buy a car can help you decide if this choice is right for you. You’ll want to be able to cover the costs of the car as you continue to pay your student loans back. Some of the pros of refinancing a student loan to buy a car include:

Lower Monthly Student Loan Payments Can Offset Car Costs

Refinancing your student loans can lower your monthly student loan payment if you’re able to secure a lower interest rate or extend your loan term. A lower monthly student loan payment can mean that you have more funds to cover the costs of buying or maintaining a new car.

Recommended: Guide to Student Loan Refunds

As mentioned, lowering your interest rate can save you money over the life of a loan. Extending your loan term may not save you money, but it can free up cash to have more funds to put toward the costs of a car.

Simplified Payments Can Make Tracking Car Expenses Easier

When you refinance multiple loans into a single new loan, you’ll have one new monthly payment. This can make it easier to keep track of your student loan payments and be sure you’re making them on time.

And if you’re looking for ways to get a car loan, having a simplified student loan payment can make budgeting easier as you add a new loan to the mix. As mentioned earlier, you may find lower interest rates on car loans than what you’re paying on your student loans — another reason using student loans funds toward car expenses may not be the best choice even if they’re allowed according to your loan terms.

Saving Money on Student Loans Can Help Pay for a Car

Many people explore refinancing even when they don’t need to make an immediate purchase like a car. That’s because refinancing may help save money over the life of the loan if you can lower your interest rate.

And while applying for student loans can be arduous, applying to refinance student loans is relatively straightforward. You can check your rate and get an estimate of loan terms before you officially apply, and an application can generally be completed online. You can also compare refinancing rates without triggering a hard credit check—a credit check is only done once a formal loan application is submitted.

Cons of Refinancing Student Loans to Buy a Car

While refinancing student loans to buy a car can be one way to cover car payments when you have existing student debt, there are cons to this option as well. Here are some of the cons of refinancing a student loan to buy a car.

Recommended: How To Save Up For a Car

Losing Access to Original Loan Terms

If you refinance your loans, you lose access to the terms of the original loan. This may be important to consider if you’re refinancing federal loans.

Refinancing federal loans not only means potentially missing out on federal forgiveness or repayment programs, but also the opportunity for deferment or forbearance if you qualify.

As mentioned earlier, if you plan to take advantage of federal programs, refinancing is likely not a good option for you. Some people may choose only to refinance private loans.

Repayment May Take Longer

If you extend the length of your student loan term when you refinance to lower your monthly payments to offset the costs of a new car, it will take longer to repay your loan and you may end up paying more in interest over the life of the loan.

Overstretching Your Budget

It’s important to make sure that you can afford any car loan that you take out. If you’re planning on getting a car loan or leasing a car, will you be able to comfortably cover your student loans, the car payment, and other bills? What would happen if you were to lose a job or source of income? Those questions can help you assess whether a car payment would stretch you financially.

A borrower who can’t make the payments risks having the car repossessed and damaging their credit. If you ever think you’ll miss a monthly car payment, reach out to your lender to find out what your options are. Down the road, refinancing your car loan is also an option if you’re able to secure better terms.

Recommended: Passive Income Ideas

Refinancing Your Student Loans With SoFi

When you need a new car, you may need to rethink your finances in order to cover the costs. Refinancing student loans to buy a car is one option that can help you free up funds. You may be able to lower your monthly payments and save money over the life of the loan if you qualify for a lower interest rate. You can calculate your potential savings using a student loan refinance calculator.

Refinancing can be a good option if you’re able to qualify for a lower interest rate and are not planning to use any federal programs. When you refinance a federal loan, you lose access to federal benefits and protections.

If you’re considering refinancing your student loans, SoFi offers flexible terms, competitive rates, and no fees.

Learn more about whether refinancing student loans with SoFi is right for you.

FAQ

Do car dealerships look at student loans?

Your student loans appear on your credit report. If you apply for a car loan from a dealership, then they may be able to see your payment history and your credit score on your credit report. Student loans also count toward your debt-to-income ratio which may affect your ability to secure a car loan.

Does financing a car affect student loans?

Financing a car won’t affect your current student loans, but consider how taking on another loan will impact your finances. It’s important to be certain that you’ll be able to pay both your student loan payments and any new car loan payments on time. Refinancing a student loan can help offset the costs of a new car if you can save money by qualifying for a lower interest rate. It can be a good option if you’re refinancing private loans or not planning to take advantage of any federal programs.

Is it smart to buy a car after college?

Buying a car after college is a personal decision. But keep in mind that a lot can change in a few years, and a new car or a lease may be a liability if your plans change. It may make sense to consider buying a used car or holding off on buying a car until you have a sense of what your commute and lifestyle will look like.

Photo credit: iStock/LeoPatrizi

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 student loan debt can make it harder to qualify for a mortgage, that isn’t necessarily the case for every student loan borrower.

Keep reading to learn more about buying a home when you have student loan debt and how to make the process easier.

How Student Loan Debt Might Affect Buying a Home

Student loan debt isn’t singled out by mortgage lenders, but when someone applies for a mortgage, all of their debt is taken into account when the lender decides whether or not to loan them money and what rates or terms to offer — particularly when it comes to their DTI, or debt-to-income ratio.

More on that in a minute.

Does the Government Have a Student Loan Home Buying Program?

The government doesn’t have a home buying program whose goal is to help people with student loans secure a mortgage, but it does have programs designed to help first-time and repeat homebuyers buy a single-family home, condo, or other primary dwellings, which may be a good fit for borrowers with student loan debt.

FHA loans (guaranteed by the U.S. Federal Housing Administration) are the best known. Applicants with a minimum 580 FICO® credit score qualify for the 3.5% down payment advantage; someone with a 500 to 580 score might be able to get an FHA loan with 10% down.

Lenders of VA loans (backed by the Department of Veterans Affairs or, in the case of Native American Direct Loans, issued directly) and USDA loans (backed or issued by the Department of Agriculture) often accept lower credit scores than would be required for a conventional mortgage.

VA loans usually require no down payment, and USDA loans never do.

Do Student Loans Affect Your Credit Scores?

When it comes to student loan debt and buying a home, what matters more during the mortgage application process than having student loans is a potential borrower’s credit score.

Credit scores, usually from 300 to 850, are made up of factors such as a history of on-time debt payments, how much debt someone has, and what type of debt it is. Mortgage lenders use FICO scores for applications, with some exceptions.

FICO created different scoring models for Experian, Equifax, and TransUnion, the three main credit reporting bureaus. Mortgage lenders often receive a single report that contains an applicant’s three credit reports and FICO scores.

Student loan debt can help or hurt your credit scores. If you have a history of making on-time payments to your student loans and having them improves your credit mix, that debt could help your credit scores. If you have a history of making late student loan payments, your credit scores can be negatively affected.

Student Loan Debt-to-Income Ratio

Because debt can, clearly, strain a monthly budget, mortgage lenders evaluate the applicant’s DTI ratio. This is one of the factors mortgage lenders take most seriously, as the ratio accounts for how much of your gross monthly income is spent on your debt payments, including student loans.

DTI = monthly debts / gross monthly income x 100

Typically lenders want to see a DTI of 36% or less, though that is not necessarily the maximum.

If your DTI ratio is high and it makes it hard for you to qualify for a mortgage, there are steps you can take to lower your DTI.

Pay Down Your Debts

One straightforward way for aspiring homebuyers to lower their DTI is to pay off more of their student loan debt.

If they can’t pay off the debt in full, they can try to increase their monthly payments or make principal-only payments. Each month as they pay down their debt, their DTI will improve as long as they don’t take on more debt.

Increase Your Income

One way to improve your DTI is to increase your income by applying for a new job, plotting a promotion, or starting a side hustle. An income boost will make the ratio of debt to income smaller.

Increasing your income can serve a second purpose: You can put the extra funds toward debt repayment, which also will decrease your DTI.

Recommended: Passive Income Ideas

Refinance Your Student Loans

Refinancing student loans can be appealing if you can get a lower interest rate or a better-fitting repayment term.

When someone refinances a private or federal student loan, they take out a new loan from a private lender and use it to pay off the existing loan. If you can secure a lower interest rate and keep or reduce the term, you will spend less on total interest and put more money each month toward principal. It might help to crunch some numbers with a student loan refinancing calculator.

A better interest rate when refinancing is not guaranteed, so it’s worth shopping around for the best deal to see if refinancing is worthwhile. Let’s say you find a good deal but later find a better deal. Can you refinance student loans more than once? Indeed.

It’s important to note that although refinancing a federal student loan into a private one can potentially save the borrower money on interest, the conversion will mean losing access to federal deferment, income-driven repayment programs, and public service loan forgiveness.

Borrowers with federal student loans can consolidate them, but doing so doesn’t save money on interest because the new rate for a Federal Direct Consolidation Loan is simply an average of the loan rates, rounded up to the next one-eighth of a percentage point. Still, the consolidation loan remains eligible for federal benefits.

Income-Based Repayment Plan

A potential homeowner who has federal student loans may choose income-based repayment. Those who enroll tend to have big loan balances and/or lower income.

The four income-driven repayment (IDR) plans base payments on family size and state of residence in addition to income. After 20 or 25 years of payments, borrowers are eligible to have any remaining balance forgiven.

An IDR plan lowers monthly payments, which could free up money to save for a down payment. But the longer loan term may slow down progress toward paying off your debt, so it’s worth thinking about how an IDR plan will affect your DTI ratio over time.

Fannie Mae Guidelines

Lenders often follow Fannie Mae guidelines when deciding whether to approve a conventional home loan, which is one not backed by the federal government and is the most common type of mortgage.

Here are some key guidelines:

•  Minimum credit score: 620

•  DTI ratio: usually up to 45%

•  Income: two years of stable income and employment, with some exceptions

•  Down payment minimum: 3%

•  Private mortgage insurance: required when down payment is under 20%

The Fannie Mae HomeReady® Mortgage is an option for low-income first-time homebuyers and repeat buyers. The loan has pricing that is better than or equal to standard loan pricing and has lower than standard mortgage insurance coverage requirements.

The Takeaway

Having student loans doesn’t necessarily make it harder to qualify for a mortgage, but borrowers may find that refinancing or paying off their student loans frees up room in their monthly budget, which can make homeownership more accessible.

Student loan borrowers dreaming of buying a house may want to consider student loan refinancing with SoFi.

FAQ

Does student loan debt have a negative impact on buying a home?

Not necessarily, but student loan debt can lower or nix borrowers’ chances of mortgage approval if their DTI ratio is too high, and late student loan payments can ding credit scores.

Is it possible to buy a home with student loan debt?

Yes, it’s quite possible to buy a home with student loan debt, especially if the mortgage applicant’s income is much higher than their monthly debt payments.

Should you pay down your student loans before buying a house?

It’s not necessary to pay down a student loan before trying to buy a house, but doing so can’t hurt. The student loan balance affects a mortgage applicant’s DTI ratio, and any money freed up in the budget can go toward the down payment, closing costs, or future mortgage payments.

Photo credit: iStock/tonefotografia

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.

Global inflation and supply chain issues have derailed a lot of people’s post-COVID plans, including renovating or remodeling their homes. The cost of remodeling and renovating has risen partly because there’s a shortage of supplies, so retailers have raised prices on the supplies and materials they do have. Plus, the Federal Reserve Bank has raised interest rates in an effort to slow inflation, meaning home improvement loans cost more. This doesn’t necessarily mean homeowners must put off renovations, but it does mean that sticking to your home reno budget may require more creativity and planning.

How to Keep Inflation From Ruining Your Home Renovation Budget

Here are some strategies for keeping inflation from blowing your home reno budget:

1. Understand Renovation vs Remodel

People use the terms renovation and remodel interchangeably, but they are not the same thing. A renovation is fixing up what’s already there; a remodel is changing what’s there. That may mean expanding a room, or converting a pantry to a breakfast nook. Remodeling is usually more expensive because it is more involved and can include the need for permits, whereas renovations are often smaller projects that you can sometimes DIY. Before getting started with either, it can be smart to budget for the level of transformation you can reasonably afford in this economic climate.

2. Invest Wisely

One thing experts agree on is that the best home renovation or remodel investments are projects that can raise the value of a home at resale. Some of these projects include a kitchen or bathroom makeover, expanding outdoor space, and even just replacing the garage door. SoFi’s home improvement ROI calculator can help you identify some of these home investment opportunities.

3. Finance Carefully

Since you’re investing in your home, especially with the idea of improving its value, it’s smart to look for the right partner to help you strategize how to finance your project. It’s possible your project may be eligible for a home equity loan where you borrow against the value of your home for funds. Another financing option is a personal loan. Unlike the home equity loan, a personal loan for home improvement projects requires no collateral.

💡 Learn more about how home improvement loans work.

4. Have a Plan

Home renovation projects notoriously run over budget. Global supply chain issues are making that even worse. Many projects must happen according to a specific sequence, like receiving a delivery of plumbing supplies and scheduling workers before you gut the bathroom. If something goes wrong with the sequencing, it might mean you lose your workers to another job that’s ready to go, or you have to pay extra to expedite shipping. These hold ups can be expensive. That’s why it’s important to plan meticulously before you begin.

5. Be Flexible

Can’t get the Italian granite you were eyeing for the kitchen counters? What about slate, which can be a fourth of the price and can look just as stunning. Or Sintered Stone? Or steel? Deciding from the beginning to be flexible on the things you can, and uncompromising only on the materials or designs that really matter to you, can save you thousands.

6. Consider High Quality Items

Because there is generally lower demand for slightly higher quality and pricier items, those appliances and materials haven’t risen as much in price . So you might have an opportunity to get something you might have considered out of your price range for about the same as the more standard one.

7. Oversee the Project

The typical contractor fee for most general contractors to oversee renovation projects is 20% of the project , so if you’re planning a $50,000 remodel and you do the contracting yourself, you could save $10,000 right off the bat. But it will be your job to source and schedule the experts you need — plumbers, electricians, etc. — and oversee the work. Just remember: It’s not uncommon to pay to have a job done twice during renovations, so it’s wise to stay on top of workers if you choose this option.

8. Do Something Yourself

Using skills you already have, or picking up a few through online videos and in-person workshops, can save you some time and money. If you decide you can do the job yourself, and it isn’t one that requires permitting and licensing, you may be happy with your results. Doing it yourself does have its risks such as not ending up with the quality you could have by using a professional. On the other hand, if you have some skills, you might do a better job than a mediocre contractor who isn’t as invested in your home as you are.

9. Vet Your Craftsman

Hiring someone who does a poor job or damages your home is a common risk of home renovation projects. Shopping for carpenters, painters, plumbers, and others solely on the basis of price can very easily lead to problems, which can require more time and investment on your part to correct. Choosing a contractor that’s skilled and reliable requires taking the time to look at portfolios, ask questions, and seek recommendations and reviews.

10. Collect a few Bids

It can take more time, but getting bids from several different companies is a smart way to help keep your renovation costs low. Not only does this type of “shopping” give you options for how much you can pay for specific tasks, but it can also give you an idea of how different contractors would approach your project.

11. Shop Wisely

It can be easy to order items online or pick up everything from your local home remodeling store, but high shipping costs and limited in-store options can actually increase your expenditures. If you’re looking to minimize costs, settling for what’s most convenient isn’t likely to help you. Instead, taking the time to shop around thoroughly and think creatively about your renovation plans can help save you a bundle.

12. Price Match

If you find an appliance online that you really love, you may want to try bringing a copy of that ad to your local retailer, and asking them to match the deal. This way you not only save yourself shipping costs, but you also get the best price for the item you prefer.

13. Try Repurposing

Before you spend money replacing what you have, consider transforming your items instead. Perhaps you could refinish or paint your kitchen cabinets instead of replacing them. Changing the hardware and interior panels are also simpler options that can reflect your style. Sometimes small changes can result in big transformations.

14. Consider Salvaged Materials

You can sometimes save big using salvaged materials. Secondhand shops like Habitat ReStores can sell old kitchen cabinets, flooring, light fixtures, plumbing fixtures, and furnishings for a fraction of the original sale price. You can even find unused paint, hardware, and art. For additional options, online sites like Craigslist and Facebook Marketplace can provide useful, previously used items as well.

15. Be Creative Side

Pinterest can be a great source of budget friendly renovation ideas. You can spend a few hundred dollars on a mason jar light fixture; or you could make your own. How about creating a room divider with used pallets? Necessity is often the mother of invention, and you may discover a creative side you didn’t know you had by looking for creative design solutions.

The Takeaway

Inflation and supply chain problems can make home renovations and remodeling on a budget much more challenging, but not impossible. If you choose the best projects for added value; plan and shop for materials and craftspeople with care; and are willing to be creative and flexible, you can wind up investing less money, time and worry.

If your home renovation budget is a tad bit short of your dream, a home improvement loan from SoFi could give you the extra boost you need. With no collateral, no fees and the opportunity for same-day funding, SoFi can help get your project up and running in no time.

Photo credit: iStock/LightFieldStudios

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.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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.

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.

SOPL0622011

Maybe you’ve just bought a house, or maybe you’ve had your house for decades and love everything about it — except for the extremely outdated kitchen, built before the days of marble top counters, stainless steel appliances, and kitchen islands. Renovating your kitchen can get expensive fast, but with inflation, materials cost even more than usual, so it can be tougher to control expenses. Luckily, there are a few strategies you can use to get the updates you crave, without emptying your pockets.

How to Keep Inflation From Ruining Your Kitchen Renovation

1. Setting A Budget

Like most people, you probably already have a budget in mind. That’s a good start, but even with a spending limit in place, it’s smart to use a tool like this home renovation cost calculator to get an estimate of what your kitchen reno will ultimately cost, and make sure your budget will truly cover it. These calculators allow you to choose from basic to extremely bespoke changes, and they consider the cost of labor and raw material, generally with a 20% margin for the contractors. (And contractors can cost much more than you may expect!)

2. Being Flexible

Be flexible about your upgrades. It’s not uncommon to have to cut back on some of your plans due to price hikes, sold out materials or surprise developments during construction. Expect to make compromises. If your dream project begins to get pricey, consider focusing on just one or two aspects of your reno that are most important to you, and saving other changes for another time.

3. Getting Creative

To keep your costs down, try thinking outside the box. Say the countertop you really want is way out of your budget. Perhaps your contractor may know where to find salvaged materials at a deep discount. Or the cabinets you had your eye on have jumped in price. Opting to reface instead of replace your existing cabinetry could be a reasonable, cost-effective approach. Being open to these kinds of options can really help keep your spending in check.

4. Doing It Yourself

DIY can be a great way to keep inflation from ruining your kitchen budget … if you know what you’re doing. There are millions of how-to videos online with detailed instructions on everything from putting in new flooring to installing sinks. One of the largest costs of any renovation is labor, and you can reap some significant savings by doing some of the things yourself, and saving the really hard stuff for a contractor. Keep in mind, though, that taking on tasks outside of your abilities could end up costing you in the end, so be realistic about what projects you can handle and which are better left to the professionals.

💡 Recommended: How Much Does it Cost to Remodel a House?

5. Considering Temporary Fixes

Can you update your cabinets and countertops with removable materials? Or perhaps a new coat of paint and some new pulls? Peel and stick wallpaper has become particularly popular due to its variety and flexibility. It comes in countless prints from wood grain to marble, and can be used as a backsplash, on countertops, kitchen cabinets, and yes, walls. Incorporating one of these simple changes can give your kitchen a fast and financially friendly refresh.

6. Renovating vs Remodeling

Yes, there’s a difference, and the distinction is important. If you are remodeling, you are changing the physical space, breaking down walls, removing cabinetry, etc. Remodels are almost always more labor intensive, require more materials, possibly permits, and definitely more of your contractor’s time, so they are almost always more expensive, even without inflation. Renovating, however, means you are updating what already exists. In this scenario, it’s often easier to pick your battles — keep the cabinets but change the countertop, for instance. So, if you really want to keep costs down, you may want to consider renovating cosmetic features instead of remodeling.

7. Consider a Loan

If you can’t wait to renovate but don’t have all the cash you need, you could consider getting a personal loan to cover the costs. If you’ve made enough mortgage payments, tapping into your home equity could be another option for funding your project. There are both benefits and drawbacks to borrowing so be sure to read the fine print, keep a close eye on interest rates and do your best to keep your project on track and under budget.

8. Increase Your ROI

Tapping into a mortgage refi or getting a personal loan might seem risky, but it can make sense if you’ve considered how much your home improvement may boost the value of your home when it comes time to sell it. Using a home improvement ROI calculator can help you estimate how much value you can add to your home after a renovation or remodel.

Another metric you may want to consider is the return on investment, for a particular project. Boosting your curb appeal — that is, the exterior of the house — can give you the most bang for your buck. So can things like replacing a garage door, sprucing up the yard and landscaping, and even painting the exterior of the house. And even a minor kitchen renovation can boost your home’s value, potentially offsetting any inflation costs you may incur.

9. Choosing The Right Contractor

Once you’ve decided what you want to do and what you can afford, it’s time to find a good contractor to execute your vision. This one decision can make or break the entire project, so it’s wise to ask for personal referrals. If that’s not an option, you can always search the top-reviewed contractors in your area. And just like comparing prices at the grocery store, getting estimates from at least three contractors can help you save.

The Takeaway

Inflation might be sky high right now, but it doesn’t have to stop you from having the kitchen of your dreams. Whether you are going for a full remodel or a few cosmetic changes, there are ways to update the look of your kitchen without breaking the bank.

And should you decide to pick up a personal loan to cover those costs, be sure to budget a little extra for the “just-in-case.” SoFi’s home improvement loans range from $5K to $100K and can cover just about any kitchen project. Plus, with no collateral and same day funding, you can kick off your project sooner and can find yourself cooking in your new kitchen in no time.

Photo credit: iStock/sturti

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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.

SOPL0622012

Spending money on purchases is a part of daily life (groceries, for instance) and can be a pleasure (those cool new boots you’ve been eying for weeks). But for some people, shopping gets out of hand and becomes impulsive or compulsive shopping. They literally “can’t resist” buying and find themselves purchasing often and when they don’t really need anything.

Both compulsive and impulsive shopping can negatively impact your finances and personal life, though they are not the same thing. If you feel as if you can’t control your spending and your money management is suffering from it (such as debt is piling up), know that you can take steps to regain control.

Here, you’ll learn:

•   What compulsive shopping is

•   Causes of compulsive shopping

•   What impulsive shopping is

•   Causes of impulsive shopping

•   How to take control of compulsive or impulsive shopping

What Is Compulsive Shopping?

Compulsive shopping is defined as an uncontrollable desire to shop, resulting in a person investing large amounts of time and money in the activity. People who shop compulsively tend to make purchases regardless of whether they need or want an item — or can actually afford it.

Compulsive shopping, or compulsive buying behavior (CBB), is considered a mental health condition that can have negative consequences financially and personally. It can become a preoccupation and involve the loss of self-control. Compulsive shoppers may use excessive spending as a coping method to mask feelings of low self-esteem, stress, and anxiety. They may feel a high when buying something but often experience disappointment and guilt afterwards.

Characteristics of compulsive shopping include:

•   Obsessive research over coveted items

•   Making unnecessary purchases

•   Potentially dire financial issues as a result, such as bankruptcy, credit card debt, and foreclosure

Causes of Compulsive Shopping

Approximately 6% of adults experience compulsive shopping, which can express a variety of emotional needs and wants, such as:

•   Perfectionism. The shopper may be focused on finding the perfect item, which brings them feelings of satisfaction once discovered.

•   Desire to be in control. Purchasing items can make them feel as if they have achieved something when other aspects of their life are not well managed.

•   Childhood trauma, neglect, or abuse. If a person has endured this kind of pain, buying items may feel like a reward that offsets this negativity.

•   Feelings of loneliness and depression. Buying items can be an exciting mood-lifter; a kind of high.

•   Mood, anxiety, or personality disorders. Compulsive shopping can be a self-soothing behavior.

What Is Impulsive Shopping?

Impulsive shopping is somewhat different from compulsive shopping, though some mental-health professionals consider them to be aspects of the same issue. Impulsive shopping tends to happen when a person gets caught up in the moment and spontaneously buys something. It’s a purchase without any forethought, planning, and it’s often not within a person’s budget.

People who impulse-shop are usually influenced by external triggers, such as seeing an item on sale or positively responding to a store’s atmosphere. Everyone indulges in some impulse-fueled retail therapy now and then. However, when these immediate gratification purchases become habitual, the behavior can morph into something uncontrollable and financially damaging. When it has this kind of negative impact, it nudges into the realm of a disorder.

Causes of Impulsive Shopping

Impulsive shopping can have a variety of causes, including:

•   Wanting to ease negative feelings or improve one’s mood with a “pick-me-up”

•   A need for fun or entertainment

•   Lower levels of self-control

•   Fear of missing out (FOMO) on items or experiences other people have

•   Materialism; placing value on owning possessions

Compulsive vs Impulsive Shopping: What’s the Difference?

While these two behaviors’ names may sound similar, they are actually distinct. Here are the key differences when one compares impulsive vs. compulsive shopping:

Tips for Combating Compulsive or Impulsive Shopping

Impulsive and compulsive shopping can tip into the danger zone and ruin your budget and financial fitness. They can also take up too much mental space. If you have entered that realm and perhaps are carrying a hefty amount of debt, taking control of the situation can feel overwhelming. But there is help. Consider these suggestions on how to get started if you think you’re a shopaholic:

Seeking Some Professional Help

Individual counseling with a mental health professional can help you get to the emotional root of your buying issues. Psychotherapy, such as cognitive behavioral therapy (CBT), can effectively treat these shopping behaviors. Medication may also help manage unwanted or intrusive thoughts about shopping. Group therapy can also be beneficial.

Paying Close Attention to Spending Habits

Figuring out your particular shopping triggers can help you avoid or eliminate them. For instance, when buying, do you use credit cards instead of paying with cash or a debit card? Make shopping a priority over paying bills? Grocery shop without making a list? Being honest about how and why you may engage in certain overspending behaviors is vital to understanding the issue. Changing spending habits can then help you manage your finances better.

Recommended: Are You Bad with Money? Here’s How to Get Better

Having an Accountability Mentor

Get some support: A financial counselor, advisor, partner, family member, or friend can assist you on your journey to curb compulsive or impulsive spending. Try taking a trusted, non-judgmental confidant with you when you go shopping. Ask them to help rein you in if you start overbuying. You can also consider having them hold onto your credit cards to eliminate access, chat regularly with you to keep tabs on your progress, and be a sympathetic listener when you need to talk through your feelings.

National 12-step program support groups such as Debtors Anonymous (especially if you’ve racked up credit card debt) and Spenders Anonymous are also an option. They can connect you with others who are dealing with similar issues.

Setting a Budget

Creating and sticking to a budget allows you to gain control over your spending. A well-thought out budget will help with personal accountability and achieving financial discipline. Since life needs to be about balance and we all need to spend money on something fun here and there, try to set yourself up with the flexibility to splurge sometimes. This will help keep you from feeling completely deprived.

One suggestion is to consider incorporating the 50/30/20 budget rule. This guideline recommends spending up to 50% of your after-tax income on must-haves (say, housing, car payments, utilities, healthcare, and groceries). Then, take 30% of your money and reserve it for wants such as dinners out, vacations, concert tickets, electronics, and clothing. The remaining 20% should be allocated for investments, an emergency fund, debt repayment, or savings.

Recommended: 10 Personal Finance Basics

Minimizing Temptation

Many stores are carefully designed to get you to shop and spend, perhaps to an extreme. If a store’s atmosphere — the design, the scents, the music — tends to get you buying, avoid it. Don’t walk down the streets filled with your favorite shops; try to escape the triggers that make you shop too much. If you often spend free time at the mall or online shopping, sign yourself up for a class, take up a new sport, volunteer, or find other ways to fill the hours.

Online promotional discounts, coupon codes, and the ease of electronic transactions can make compulsive or impulsive shopping easier and more appealing. Go ahead and unsubscribe from retailer emails.

Curbing social media exposure can help, too. Research suggests ads and posts from social media influencers and seeing purchases from people in your social networks may encourage a “keeping up with the Joneses” mentality, often leading to impulsive and compulsive buying.

Starting a No-Spend or 30-Day Savings Rule

A quick way to stop spending money is to freeze any non-essential spending for an entire month. Commit to a 30-day shopping ban on things such as clothing, make-up, tech gadgets, or take-out, and see how much extra money you have at the end of the month. The difference may be eye-opening and help you break the cycle.

Successfully controlling your spending can provide a feeling of accomplishment and a confidence boost. Participating in a no-spend challenge can even become a fun game; you can involve other budget-conscious friends and know you’re all in it together.

Recommended: Using a Personal Loan to Pay Off Credit Card Debt

The Takeaway

Although there are differences between compulsive and impulsive shopping, both can seriously affect your financial and personal life. Facing your impulsive or compulsive shopping habits can be daunting, but taking positive, concrete steps is likely to help conquer the problem. Getting past this spending issue, whether by shifting your behaviors or seeking professional help, can be a positive step, both for you personally and for your finances.

Want to get a better handle on your spending? Get started today by signing up for a SoFi Checking and Savings account. You can easily track your weekly spending on our dashboard. What’s more, when you open a SoFi online bank account with direct deposit, you’ll earn a competitive APY and pay no fees, so your money could grow that much faster.

FAQ

Is breaking a budget a sign of compulsive shopping?

Breaking your budget is not necessarily a sign of compulsive shopping. However, if you regularly deviate from your budget, spend money allocated for needs on wants, and find yourself saddled with credit card debt, you may need to rein in your compulsive spending. Analyze your shopping habits and budget to understand your behavior better.

Is making an impulse purchase a bad thing?

The reality is, most of us make occasional impulse buys, and they are not always such a bad thing. However, if this kind of shopping becomes habitual and leaves you with debt, pay attention and take steps to improve the situation.

How do I limit impulse purchases?

One way to limit impulse purchases is to avoid stores or websites where you know you tend to overspend. Also, ask yourself, “Do I need this or do I just want it?” when tempted to make a purchase. If the answer is the latter, wait 24 hours, and see if you still really want it. Your desire may dwindle during that cooling-off period.

Photo credit: iStock/jacoblund

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