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The path to homeownership isn’t always a straight line. After all, there are so many factors that could come into play in the rent vs. own debate. Considerations might include how long you plan to stay in a specific home and location, have you saved enough for a down payment, if you are ready for the responsibility that comes with maintaining a house.

However, one of the biggest considerations when thinking about your housing options comes down to the cost of rent vs the cost to own in any town or city. Often referred to as the price to rent ratio, this calculation can be a helpful tool when determining the rent to value ratio in a certain area.

This ratio is a benchmark that can help potential homeowners as they decide whether or not to plunk down their life savings on a home. Here’s exactly what that ratio is and what it looks like in the top five major metro areas in the United States.

What Is the Price to Rent Ratio?

The price-to-rent ratio may sound intimidating, but fear not, it’s easier to break down than you may think. It’s compares cost of rent to mortgage in a ratio format.

Here’s an example for you: Let’s say the average annual rent paid in the city you are considering living in is $3,000 a month and the average property selling price is $1,000,000.

The price to rent ratio would be calculated by taking the $1,000,000 property value and dividing it by 12 months. That equals $8,333.33 a month.

Next, divide that number by the average rent. In this case, that would be $8,333.33 ÷ $3,000. This gives you the price to rent ratio, which in this example is 27.78.

Alternatively, you could divide the median home price by median “yearly” rent, so $1,000,000 / $36,000. This will give you the same price to rent ratio of 27.78.

This rent to price ratio can indicate whether housing may be overpriced in an area. It can also be helpful when estimating whether it is cheaper to buy or rent. Investors who purchase rental properties often look at this ratio before purchasing an investment property to rent out later as well.

The price to rent ratio can sometimes be used as an indicator of an impending housing bubble. Since a substantial increase in this ratio could mean that renting is becoming a more attractive option in that specific housing market.

Understanding what this ratio means and learning how to calculate this ratio for yourself could be useful information as you consider whether to rent or buy.

There are a variety of resources that describe price to rent ratios in different communities that can helpful in determining what areas are best to rent in or to buy across the country. There are even some helpful online calculators that can give you an estimate of the price to rent ratio in specific zip codes.

Price to Rent Ratio: When to Buy and When to Rent?

So, is the theoretical town with a price to rent ratio of 27.78 a better place to buy or to rent?

A price to rent ratio ranging from 1 to 15 typically indicates that it is better to buy than it is to rent in a given community. A price to rent ratio of 16 to 20 indicates it is typically better to rent than buy, and a ratio of rent to home price of 21 or more indicates it is better to rent than buy.

Since the theoretical town falls into 21+ category, it would be a rent friendly community. Of course, like all things in life, there are a few exceptions to this rule, but these are general guidelines to follow when making the all-important housing decision.

Looking for a few real-life ratios? Here are five popular metropolitan areas in the United States and their price-to-rent ratios to help you make a better informed decision on your next move.

New York, NY

According to SmartAsset’s 2019 analysis , New York City’s price to rent ratio is 36.83 based on the equivalent of a $1,000 rental to its $441,987 purchased home counterpart. And, as described above, that makes the city a renter’s market rather than a buyer’s one.

San Francisco, CA

It’s no secret that San Francisco’s housing market is one of the most competitive in the country . So, perhaps unsurprisingly, its price-to-rent ratio is a whopping 50.11 based on a $1,000 rental that is equivalent to a $601,362 purchased home, according to SmartAsset.

Boston, MA

In Boston, SmartAsset found that would-be residents will find a price-to-rent ratio of 29.23 based on that $1,000 rental equivalent to a $350,811 home. While that’s lower than New York and San Francisco, but the price to rent ratio indicates that it may still be a renter’s market.

Denver, CO

Compared to SF and NY, Denver may have a more buyer friendly market, with an estimated price to rent ratio of 25.60 based on a $1,000 rental and a $307,232 home. That still puts it above the threshold for those wavering between renting and buying.

Chicago, IL

One major city to make the list of places where it’s better to buy than rent is Chicago, which scored a 19.99 based on a $1,000 rental and a $239,831 home price.

But not all cities have price to rent ratios as high as these five hot markets. For example, Detroit has one of the lowest price to rent ratios at just 5.35 when comparing a $1,000 rental price and a $64,194 home.

Deciding You’re Ready to Buy

If you decide you’re ready to buy there are ways to make it more financially feasible, no matter your chosen city’s price-to-rent ratio. And that includes looking into mortgage options so you can find the best option. As you embark on your search, consider SoFi.

SoFi Mortgages offer qualifying borrowers competitive rates and no hidden fees. Plus some people can qualify for a loan with as little as a 10% down payment. You can find out if you pre-qualify for a mortgage in just a few minutes. That way, when the right home comes along—at the right price—you’ll be ready.

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.

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.

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.

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

SOMG19037

If you get a job with a governmental agency or not-for-profit organization and you have federal student loan debt, you may be able to receive loan forgiveness under the Public Service Loan Forgiveness (PSLF) program.

Currently, if you qualify for this program, and make 120 payments under a qualifying repayment plan while working full time for an employer that falls within PSLF parameters, then the government will forgive the remaining balance of your Direct Loans.

List of Public Service Jobs

You may be asking: What is a public service job? What type of job would qualify me for PSLF?
According to the office of Federal Student Aid, the answer to those questions is that qualifying public service employment is not about your specific role, it’s about who employs you. Their list of public service organizations includes:

•  government organizations at any level (federal, state, local, or tribal)

•  not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code

•  other types of not-for-profit organizations that are not tax-exempt under Section

•  501(c)(3) of the Internal Revenue Code, if their primary purpose is to provide certain types of qualifying public services

•  serving as a full-time AmeriCorps or Peace Corps volunteer

Bullet point three mentions jobs that have a primary purpose of providing “certain types of qualifying public services.” To have the potential to qualify for the PSLF program under this option, you’d need to work for an employer that has at least one of the following as a primary purpose:

•  Emergency management

•  Military service

•  Public safety

•  Law enforcement (this includes “organizations that are publicly funded and whose principal purposes include crime prevention, control or reduction of crime, or the enforcement of criminal law”)

•  Public interest law services (this refers to “legal services provided by an organization that is funded in whole or in part by a local, state, federal, or tribal government”)

•  Early childhood education (this includes “licensed or regulated child care, Head Start, and state funded pre-kindergarten”)

•  Public service for individuals with disabilities

•  Public service for the elderly

•  Public health (this includes “organizations that employ nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health support occupations, as such terms are defined by the Bureau of Labor Statistics”)

•  Public education (this includes “services that provide educational enrichment or support directly to students or their families in a school or a school-like setting”)

•  Public library services

•  Other school-based services

There are a few types of employers whose employees do not qualify for PSLF. They are:

•  Labor unions

•  Partisan political organizations

•  For-profit organizations, including for-profit government contractors

•  Not-for-profit organizations that:

◦  Are not tax-exempt under Section 501(c)(3) of the Internal Revenue Code

◦  Do not provide a qualifying public service as their primary function

You can also use a tool provided by StudentLoans.gov to see if you potentially qualify for forgiveness under the PSLF program.

Why You Might Choose the Public Service Path

Working in public service can feel wonderful, knowing that you’re helping to make your community a better place.

Although you can accomplish that by working a for-profit job and also volunteering for a cause that matters, when you work in one of the public service jobs, this is what you’re doing as your vocation, full time—and you can still choose to volunteer for causes you care about on the side.

Pros and Cons of the PSLF Program

While there are advantages to going the public service route and potentially qualifying for PSLF, it is not a guarantee that you will qualify and that it will be worth it in the long run.

The main advantage to PSLF is that after a set time, the balance of your Direct Loans could be forgiven. And the forgiven amounts in this program aren’t typically considered income, which would mean you wouldn’t be taxed on the forgiven amount—that isn’t true of all of the loan forgiveness programs.

You may also pay less on your federal loans each month because you must use an income-driven repayment plan to be eligible to receive PSLF, and that can help with cash flow.

However, as we mentioned above, you may qualify only if you work for certain types of employers. And to take advantage of PSLF, you’ll need to work full-time for a qualifying employer for 10 years and make 120 qualifying payments—and make sure, every year (or if you switch employers), you submit an Employment Certification Form. You also may need to jump through additional hoops to qualify; PSLF is not awarded automatically.

It’s also worth considering that if you work for a for-profit employer, you might make more money than you would at a public service job, which could allow you to pay off your student loan debt more quickly. If you aggressively paid off your student loans in fewer than 10 years, it’s possible that you could pay less in interest than if you made 120 payments under this forgiveness program.

And, if you enroll in the program but then stop working for a qualifying employer, you could end up with a larger outstanding balance because of accumulated interest from the income-driven repayment plan (more loan payments means more interest payments).

A New York Times article, published in May 2018 (“Public Servants Do Get Student Loan Forgiveness. Meet One of the First.”) includes stories from people who struggled to first qualify for the program, and then to get “coherent status updates.”

One doctor mentioned in the article handed her paperwork off to her mother, an attorney, and neither of them could navigate the process successfully. Another person who is struggling to glean the benefits of the program is an attorney who actually works for the Department of Education, which administers the program.

Another challenge is that the PSLF program focuses only on federal student loans so, if you also have private ones, they aren’t eligible for PSLF, even if you work in one of the qualifying public service jobs. Getting loan forgiveness for private loans is highly unlikely, although you may be able to talk to your private lender to obtain more temporary relief measures, such as loan deferment or forbearance if necessary.

In fact, the only times when loan forgiveness seems to happen with private loans is typically under exceptionally dire circumstances, such as if the borrower becomes completely disabled or dies. Even then, there isn’t a formal process for forgiveness.

What to Do If PSLF Isn’t Right for You

So, what do you do if you don’t qualify for PSLF or if you have private loans? One option is to refinance your student loan debt. If you have a good credit history and solid income potential (among other important financial factors), then you might qualify for a lower interest rate, which can reduce the amount of money you’d pay over the life of the loan.

Some lenders, like SoFi, will consolidate federal and private student loans, and then refinance them into one loan. This means that your new lender would pay off all of your old loans, and then, based on terms you agree to, issue a brand new loan to you.

If you refinance your federal loans with a private lender, you would then lose the potential for any federal benefits, including PSLF and income-driven repayment plans, so it’s important to do your homework first: consider your short-term and long-term needs; make sure you’re getting the lowest rate possible; ensure that the lender has the loan programs (fixed/variable) and terms you need; check to see if you’ll have to pay any fees; see what benefits you can gain with your new lender; and find out if the lender you’re considering will first do a soft credit pull before you apply (so you can see what rates you qualify for) that won’t have the potential to affect your credit rating.

Student Loan Refinancing with SoFi

It’s important to remember that you should review all federal repayment options first before refinancing with a private lender. If you do choose to refinance with a private lender, consider SoFi.

At SoFi, you can consolidate federal student loans with private ones, refinancing them into one convenient loan. Plus, there are no hidden fees. And SoFi offers member discounts and career counseling, among other potential benefits. You can use SoFi’s student loan refinancing calculator for an estimate of how much you might save.

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.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi 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.

SOSL19086

Debt happens. Sometimes you need to rely on a credit card or loan to meet the demands of life’s expenses. But if you hold a sizable amount of credit card debt, have defaulted on a loan, or have failed to pay an unexpected emergency room bill, it’s important to know what could come next.

To help provide a broad understanding of what might happen if your debt goes into collections, we’re going to take a look at the Fair Debt Collection Practices Act (FDCPA). Look, maybe it’s not the most compelling-sounding document, but a general understanding of the FDCPA could help over the course of your financial life.

It’s important to remember that if you have specific questions about debt collection laws or the FDCPA, it would be best to consult your tax attorney and financial advisor. This article is merely an overview of the debt collection process and should not be taken as advice. We want the following intel to serve as background info—nothing more. With that in mind, here is a closer look at the world of debt collection.

What the FDCPA Doesn’t Cover

If you’re facing serious debt and are being contacted by debt collectors, it’s important to understand your rights. The FDCPA is essentially the Federal Trade Commission’s (FTC) rule book on how debt collectors can interact with consumers. Typically, debt collectors are thoroughly schooled in the ways of FDCPA, because they have to comply with it when collecting on consumer debts. However, the FDCPA does not apply to the following:

•  Creditors (i.e., the lenders you originally took the debt from)

•  Corporate or commercial debts (this means the FDCPA doesn’t apply when a large company defaults on their debt)

•  Business-related debts (even for consumers, the FDCPA does not extend to debts incurred for business expenses)

P.S.: More exceptions might apply here, and for more information, you can consult your tax attorney and review the FDCPA in full.

Now that we’ve got a handle on where the FDCPA doesn’t come into play, let’s look at rules the FDCPA lays out for debt collector-consumer interaction:

Debt Collectors Cannot Harass the Consumer

In accordance with the FDCPA , debt collectors can’t “harass, oppress, or abuse” the consumer in attempts to collect their payment.

Debt Collectors Can Contact You Multiple Ways

Debt collectors can contact you to collect a debt using multiple methods of communication including by phone, mail, email, or even text messages.

They Can Collect for a Number of Outstanding Debts

Consumer debt collectors aren’t limited to collecting for credit card debt. They can also collect for auto loans, medical bills, student loans, mortgages, and other household debts. However, as noted above, they cannot collect for business debts.

They Can Ask Your Friends and Family How to Reach You

While debt collectors cannot discuss your debt with anyone else (with the potential exception of your spouse and your attorney), they can ask others for your address, your home phone number, and where you work. However, collectors can typically only contact them once.

Collectors Must Provide Information in Writing

Once a debt collector has contacted you, they have five days to send you a written notice stating how much money you owe, the name of the creditor you owe it to, and what you can do if you don’t think this debt is yours.

Collectors Must Verify Your Debt

If you are being contacted about debt you don’t believe is yours, the FDCPA notes that you must send the debt collector a letter within 30 days of receiving their letter, clearly communicating that you’re not liable for that money.

The collector then needs to send you written verification of the debt, for example, a copy of a bill for the amount you owe, before the agency can start contacting you to collect the money again.

They Can Take Money from Your Paycheck

A debt collector can obtain a court order for garnishment, directing that your wages or benefits be seized to repay your debt.

They can also seek a court order allowing them to take money from your bank account. It’s important not to ignore any lawsuit filed by a debt collector against you.

They Can’t Call You at All Hours

There are restrictions in place that limit when and where debt collectors can contact you. For instance, they can’t call before 8 a.m. or after 9 p.m. (consumer’s local time), unless you specifically give them permission.

They also can’t call you at work, if you tell them you aren’t allowed to get calls at work.

They Must Stop Contacting You if You Ask

If you send a debt collector a letter by mail, asking them to stop contacting you, then they can only contact you to tell you about a specific action they are taking, such as filing a lawsuit.

If you send a letter stating you’ve hired an attorney to represent you, the collector must communicate with your attorney. However, the FTC recommends you talk with the debt collector at least once to confirm whether they are talking about debt that you actually owe.

They Can’t Lie

Debt collectors can’t lie just to get your attention. Any information a debt collector shares with you must be accurate.

They cannot embellish the amount of money you owe or misrepresent themselves by saying they’re attorneys or government representatives. They also can’t threaten you with a false arrest or legal action.

They Must Abide by Laws

Collectors cannot engage in unfair practices such as trying to collect extra interest or fees beyond what you owe. They cannot deposit a post-dated check early, and they cannot threaten to take your property without obtaining a court order.

If you believe a debt collector has broken a law, you can sue them in state or federal court for damages such as lost wages and medical bills. You can report violations to your state attorney general’s office , the Federal Trade Commission , or the Consumer Financial Protection Bureau .

About SoFi

If you’re reading this, it might be because you’re worried about keeping up with debt payments—whether that’s payments on credit card debt, student loan debt, or another loan. The ideal scenario, of course, is getting that debt under control before it goes into collections. And one way to do that is by tracking your spending and effectively organizing your finances so that you can stay on top of your debt payments.

SoFi Relay is a complimentary product that can help you track your spending, view all of your accounts on one dashboard, and set debt payoff goals. You can leverage SoFi Relay to keep your debt payoff plan on track, such that you’re spending more time crushing your debt and less time worrying about default.

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

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 Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, LLC and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.

SOPL18160

They make you laugh, and they make you cry. You worry about them when they’re out of sight, and even when they’re in plain view. You desperately hope they grow up strong, healthy, and ready to tackle life’s challenges.

After all, they are your pride and joy. Children make parents do some pretty selfless things, and one of the more beneficial thing you could do is plan for their financial future. But how do you do that with everything else you have to worry about in your life?

Fortunately, there are some fairly simple financial tools to help you meet your goals, whether you’re saving for a college education, a once-in-a-lifetime summer camp, or a down payment for their first home.

Depending on your situation, some options might be obvious good choices, while others come with caveats you might want to know about before investing.

With a little background knowledge, you could find an investment plan for your child’s future. An investment for a child could also provide a great education in financial responsibility.

Let’s look at some of the choices.

Custodial Accounts

A simple custodial savings account in your child’s name could be a good start as an investment for a child. When a baby is born, everybody from Grandma to Uncle Joe may want to contribute to the account. Unlike college savings plans , which require the funds be used for education, custodial accounts offer a lot of flexibility.

Savings can be used for almost anything—a European vacation, car for college, pre-college expenses—as long as it is for the benefit of the child. Just remember, any money in an investment account for a child is irrevocably in their name and for their benefit . You can’t take it back.

A custodial account could be a great vehicle for children to learn how to invest. In fact, if you’re wondering how to buy stock for a child to help them learn about money, a custodial account might be a great investment account for a child. You could pick a company they would be excited to follow, like Disney or McDonald’s, and let them watch over time.

Custodial accounts, also known as Uniform Gift to Minors Act (UGMA) and Uniform Transfers to Minors
Act (UTMA) accounts, don’t have a limit to how much you can invest. While contributions aren’t tax-deductible, there may be a tax advantage because it’s in the child’s name.

But that advantage might quickly turn into a disadvantage if unearned income from dividends, gains, or interest reaches a certain amount. Then the account is subject to the Kiddie Tax , which Congress enacted to prevent abuse of the financial vehicle by parents. With a custodial account, you can gift up to $15,000 in 2019 for each child; double that if you’re married and filing jointly. Above that you’re liable for the federal gift tax .

While you can use the money in the account to pay for various things your child needs, one caveat is that the child gets full control when they reach the age of majority, usually 18 or 21 years of age.

Custodial accounts might be good for modest, defined goals, such as paying for education, orthodontia, or academic camps, for example. If there is a sizable sum of money in the account, consider whether you want to transfer that amount, unregulated, to someone of such a young age. In that situation, one idea might be to have a lawyer draw up a trust to set up specific parameters you can live with.

If the thought of giving up control is too much for you, you could set up a guardian account in your name so you can decide how the money is spent. Essentially, it’s a way to earmark funds to give to your child down the road.

College Savings Accounts

A Coverdell education savings account or a 529 savings plan could be a worthy option for a child. They offer two ways to pay for educational costs, whether college or K–12 schooling. The Coverdell allows you to contribute up to $2,000 a year for education expenses. While contributions are not tax deductible, withdrawals are tax-free.

Coverdells have two areas where they might have a slight advantage over 529 accounts: You can select from a wide range of investments and the money you withdraw can be used for any qualifying education expenses, such as books, tutors, and equipment.

The 529 college savings plan tends to be a popular way to save for college. You can make larger contributions than you can with a Coverdell account, and any withdrawals for qualified education purposes are tax-free.

As of 2018, Congress allows withdrawals of up to $10,000 for K–12 tuition. Not all plans or states that sponsor 529 plans are in line with the new rules , so you might want to ask a tax expert or the manager of the plan about your options.

IRAs

Custodial (Traditional)

Custodial IRAs are another investment option for a child. They work just like a traditional IRA, so when your child has earned income from a first job, babysitting, or other work, they (or you) can contribute up to $5,500 annually . Starting early might be a way to teach them about the power of financial stewardship.

With a traditional custodial IRA, your child will pay ordinary income tax when they withdraw the money in retirement, and they must begin doing so at age 70½ . Contributions are also tax deductible, which probably won’t benefit them if their income is still low or they don’t meet the $12,000 standard deduction threshold requiring them to pay federal income tax.

Both traditional and Roth custodial IRAs convey to the child at the age of majority (18 to 20 years of age, depending on the state).

Roth

Just like traditional IRAs, contributions to a Roth IRA also grow tax-free over the years and have the same contribution limits—however, the Roth could be an investment possibility for your child if you value flexibility. Whether you’re saving for college or retirement, it might offer more advantages for your child over the decades than a traditional IRA.

While you still pay tax on each contribution, all withdrawals are tax-free , which could be a big benefit to your child, assuming they’ll be in a higher tax bracket at retirement. There is no required minimum distribution when they must start withdrawing.

One of the biggest advantages to a Roth is that your child could use the contributions for any reason besides retirement. But two special perks of the Roth include the ability to pay for certain higher education expenses and withdraw up to $10,000 to buy their first home. On the other hand, if withdrawn before retirement, earnings can be taxed and your child could be penalized in addition.

Growing Wealth for Your Children

When it’s time to get serious about saving—for college, retirement, or something else—you could set up an account with SoFi Invest®. It’s easy to open an investment account with SoFi, and you’ll have access to complimentary financial advisors and other benefits to help your family save for a bright future.

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 Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, LLC and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
SOIN19042

Illness and injury are an unfortunate (and scary!) fact of life, but once you’re patched up after surgery or a lengthy hospital stay, you want to focus on your recovery, not worrying about how on Earth you’re going to pay off any medical debt.

Medical debt can be overwhelming, and according to a 2018 study published by Health Affairs, it’s not just older Americans who are managing debt from medical bills.

It is actually Millennials who are racking up the most medical debt—11% of all people who had a medical bill go to collections in 2016 were just 27 years old. So how can you pay off medical bill debt and hopefully stay out of collections? There are several different options available that may help you manage your medical debt with minimal pain, so you can focus on feeling better.

Before we dive in, we should mention we realize the nature of medical debt is often very sensitive. These strategies are merely a collection of tips and commonplace ideas found through our research on the internet.

This article shouldn’t be considered advice in any sense; every person’s situation is unique, which means it’s always a good idea to check in with a professional before taking action yourself. With that said, let’s dive into what we found.

Medical Debt Payment Plans

Medical care can be expensive, especially if you’re facing a chronic condition with ongoing costs or a major surgery or hospital stay. One plan of action you might consider is contacting your medical provider to see if they offer payment plans.

Some providers offer payment plans that allow you to make payments on your medical bill over time, paying it off in installments. Talking to your healthcare provider or a hospital billing department can be a great first step to figuring out if there is a payment plan you can take advantage of when it comes to medical bill debt.

Of course, one major downside to payment plans is that not all medical providers or medical offices offer payment plans and may require full payment when services are rendered.

Likewise, some medical providers may only let you set up a payment plan in advance, which means that a payment plan might not be a solution for any medical debt you’ve already accrued. And of course, some payment plans may still be too prohibitively expensive to pay every month, even if you’re paying over time.

Using A Medical Credit Card

If you’re looking at a medical bill that you can’t pay out of pocket, you may be tempted to reach for a credit card. Before you hand over whatever card is in your wallet, you might want to consider looking into credit cards specifically designed to be used to pay for medical care.

Medical credit cards sometimes offer low or no interest for a predetermined period of time, which means that you may be able to pay your medical bill with the credit card and then pay off the card before it accrues interest.

But be careful—if you can’t pay off the credit card before the interest-free period is over, you might face high-interest charges, which could actually end up making your medical bills more expensive.

Consider pulling out the calculator and doing some math to see if you can afford to pay off your medical bills during the interest-free period before you decide to put the costs on a medical credit card. This can help you determine how useful a medical credit card might be in your specific situation.

Negotiating Directly With The Hospital

If you’re facing a big bill from the hospital, one thing to consider is reaching out directly to the hospital billing department to see if you can negotiate the total amount of your medical bill.

While it’s not precisely like haggling for a used car, most hospitals have a financial department that might be able to help you determine if you qualify for any cost deductions or discounts.

One other thing to keep in mind is that cash might just still be king. Some hospitals and medical providers might give you a discount just for paying in cash. This can be a good option if you can afford to make the payments in one lump sum and want to avoid any extra fees.

Taking Out A Personal Loan

Taking out a personal loan might also be a solution to managing medical debt. While personal loans are often overlooked, they may offer more benefits than credit cards, like lower interest rates and more flexibility.

In order to use a personal loan to pay off medical bill debt, you’d borrow money from a lender which you’d use to pay your medical debt, then you’d pay that money back to the lender over time in regular monthly payments. Like other types of loans and financing, lenders generally look at your personal financial history and ability to repay (among other factors) when deciding if you qualify for a personal loan and determining your interest rate.

Unlike other types of financing, however, a personal loan can be used for almost everything—from paying off a hospital bill to paying for your groceries while you’re out of work due to an injury or illness.

If you’re wondering how to clear medical debt from multiple sources, a personal loan might help. You may be able to use a personal loan to consolidate numerous medical debts into one monthly payment. This could work by taking out a medical loan and using it to consolidate different medical bills, which allows you to focus on paying off just one debt instead of managing multiple varying deadlines every month.

When searching for personal loans to pay for medical debt, be sure to read the fine print. Some providers may charge origination fees to process your loan, or prepayment fees if you pay off your loan early.

Also be wary if interest charges in your search, as high-interest charges could add more money paid over the life of the loan.

One other potential benefit of using personal loans is that the application process is relatively simple and you can usually find out your eligibility pretty quickly. With SoFi personal loans, it just takes a few minutes to check your rate. And with SoFi, there are no fees required.

There’s no way around it—medical bills can be hard to deal with. But making a plan for repayment you help you get on your way to financial and physical wellness.

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.

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