SoFi

If you’re dreaming of a home of your own, pulling together a down payment is probably on your financial to-do list. That sum can seem hard to wrangle, but take heart: First-time homebuyers with good credit have an edge. They often can put just 3% down, and they have access to a host of down payment assistance programs. What’s more, there are other ways to gather cash for your property purchase.

In this guide, you’ll learn more about down payments and how to afford one for your first home.

What Is a Down Payment?

Simply put, a down payment is a sum of money, often a percentage of the purchase price, that a buyer pays upfront when purchasing a home or a car.

When talking about buying a home, many people believe that 20% in cash is required, but that’s not the case. Twenty percent is the figure needed to avoid paying PMI, or private mortgage insurance, but there are mortgages available with 3% or even 0% down payments in some situations.


💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.

How to Afford a Down Payment on Your First Home

There are many ways to afford a down payment on your first home. Below, you’ll learn some ways to save up and find low down payment options as well.

But first, consider some general ways to raise cash:

•   Start a side hustle to bring in more income. That could mean driving a rideshare, selling your ceramics on Etsy, walking dogs, or any number of other pursuits. This is a popular strategy: In an April 2024 SoFi survey of 500 would-be homeowners, 41% of people said they had taken on more work or started a side hustle to increase their income.

•   Sell your stuff. If you have gently used items, such as clothing, housewares, electronics, and jewelry, you might get cash by selling them.

•   Automate your finances. Have some money direct-deposited into savings with every paycheck. That can build your down payment, and the money doesn’t go into your checking account, where you might be tempted to spend it.

•   Make a better budget. If you’re not saving at all or as much as you’d like, evaluate your earnings, spending, and saving to optimize that. The 50/30/20 budget rule is one popular budgeting method.

Smart Ways to Save Up for a Down Payment

Here’s the lowdown on how to afford a down payment on a house. Read on before you go shopping for a mortgage.

1. Get a Low Down Payment Conventional Mortgages

Conventional loans, the most common type of mortgage, are offered by private mortgage lenders, such as banks, credit unions, and mortgage companies. If you can find one with a low down payment requirement, that can take some of the pressure off of accumulating a large down payment. Getting prequalified or preapproved by a lender can help you determine your home-buying budget (in SoFi’s survey, more than one in four homebuyers based their budget off a lender’s assessment).

Some points to note:

•   Many lenders allow a down payment of 3% for a fixed-rate conventional conforming loan.

•   To qualify, borrowers usually will need to have a credit score of at least 620 and a debt-to-income ratio of 46% or less, though you might get approved with a DTI of 50%. Income limits may apply.

•   Putting 20% down, however, will allow a borrower to avoid private mortgage insurance (PMI) on a conventional loan.

2. Focus on Government-Backed Loans

If you are a low- to moderate-income borrower or have a lower credit score, you might want to pursue a government-backed loan, like an FHA, VA, or USDA mortgage. These also can have lower down payment requirements.

•   An FHA loan requires as little as 3.5% down on one- to four-unit owner-occupied properties as long as the borrower occupies the building for at least one year. To qualify for 3.5% down, your credit score must be 580 or higher. Someone with a credit score between 500 and 579 may qualify to put 10% down.

•   A VA loan, for veterans, active-duty military personnel, National Guard and Selected Reserve members, and some surviving spouses, requires no down payment. Borrowers can buy a property with up to four units, as long as the borrower occupies the property throughout the ownership. There is no stated minimum credit score, but generally speaking, lenders require a minimum credit score in the low- to mid-600s to qualify.

•   A USDA loan, for properties in eligible rural and suburban areas, also requires no down payment. Lenders typically want to see a credit score of at least 640, and household income can’t exceed 115% of the area’s median household income.

USDA and VA loans typically come with lower interest rates than conventional or FHA loans, but a USDA loan requires a guarantee fee, a VA loan requires a funding fee, and an FHA loan, upfront and annual mortgage insurance premiums (MIP). It pays to understand PMI vs. MIP to gain more insight onto the total costs of your loan.


💡 Quick Tip: A VA loan can make home buying simple for qualified borrowers. Because the VA guarantees a portion of the loan, you could skip a down payment. Plus, you could qualify for lower interest rates, enjoy lower closing costs, and even bypass mortgage insurance.†

3. Down Payment Gifts

“Hey, Mom and Dad (or Great-Aunt Beth), I’d love it if you gave me a large cash infusion to help me buy a house.” It just rolls off the tongue, right? But in fact, one or more loved ones may be willing to pitch in toward your down payment or closing costs. In fact, almost one in four homebuyers (24%) in SoFi’s April 2024 survey had sought financial assistance from family or friends to buy a home.

Some details to know:

•   Under conventional loan guidelines, gift money for a principal or second home is allowed from someone related by blood, marriage, adoption, or legal guardianship, or from a domestic partner or fiance. There’s no limit to the gift, but conventional loans may require borrowers to come up with a portion of the down payment.

•   FHA guidelines allow gift money from relatives, an employer, a close friend, a charitable organization, or a government agency that provides homeownership assistance.

•   With USDA or VA loans, the only people who cannot provide gift funds are those who would benefit from the sale, such as the seller, lender, real estate agent, or developer. A mortgage gift letter signed by donor and recipient will be required, verifying that the down payment funds are not expected to be repaid. A lender may also want to track the gift money.

•   There are also gifts of equity, when a seller gives part of the home’s equity to the buyer to fund all or part of the down payment on principal or second homes. For FHA loans, only equity gifts from family members are acceptable. A signed gift letter will be required.

4. Crowdfunding a Down Payment

Crowdfunding to help buy a house? It’s possible with sites like GoFundMe, Feather the Nest, HomeFundIt, and even Honeyfund (which is set up as a crowdfunder for honeymoons). A couple of details to consider, because fees are often involved when you use these platforms:

•   GoFundMe charges 2.9% plus 30 cents per gift.

•   Feather the Nest isn’t associated with a mortgage lender, so donation seekers can decide where to go for a loan. It charges a fee of 5% for every contribution.

•   HomeFundIt charges no fees, but you must pre-qualify and then use CMG Financial for your home purchase. The site shows a money match toward closing costs for first-time buyers.

•   For Honeyfund, U.S. residents receiving U.S. dollars via PayPal are charged 3.5% plus 59 cents per transaction.

5. Retirement Account Withdrawals or Loans

It might be a good idea to explore all options for getting cash before tapping your 401(k) savings account.

As you probably know, taking money out of your 401k before age 59 ½, or before you turn 55 and have left or lost your job, is met with a 10% early withdrawal penalty and income tax on the amount. So withdrawing money early from this tax-deferred account has a painful cost and impairs long-term growth.

Here are other options if you want to tap retirement savings:

•   Borrowing from a 401k may be possible. Your employer’s plan might let you borrow money from your 401k and pay it back to your account over time, with interest, within five years, in most cases. You don’t have to pay taxes and penalties when you take a 401k loan, but if you leave your current job, you might have to repay the loan in full fairly quickly. If you can’t repay the loan for any reason, you’ll owe taxes and a 10% penalty if you’re under 59 ½.

•   A traditional IRA allows first-time homebuyers to take an early withdrawal up to $10,000 (the lifetime limit) to use as a down payment (or to help build a home) without having to pay the 10% early withdrawal penalty. They still will have to pay regular income tax on the withdrawal.

•   With a Roth IRA, if you take a distribution of its earnings before age 59 ½ and before the account is less than 5 years old, the withdrawal may be subject to taxes and penalties. You may be able to avoid penalties but not taxes if you use the withdrawal (up to a $10,000 lifetime maximum) to pay for a first-time home purchase.

If you’re under age 59 ½ and your Roth IRA has been open for five years or more, a withdrawal of earnings will not be subject to taxes if you use the withdrawal to pay for a first-time home purchase.

Recommended: First-Time Homebuyers Guide

First-Time Homebuyer Assistance Programs

Here’s another way to help make your home-buying dreams come true: State, county, and city governments and nonprofit organizations offer down payment assistance programs to help get first-time homebuyers into homes. (By the way, the definition of who qualifies as a first-time homebuyer is more expansive than it may seem.)

Down payment assistance may come in the form of grants or second mortgage loans with various repayment or loan forgiveness provisions.

HUD steers buyers to state and local programs, and the National Council of State Housing Agencies has a state-by-state list of housing finance agencies; each offers a wealth of information designed to boost housing affordability and accessibility.

First-Time Homebuyer Tips

As you save for your down payment, follow this advice to get ready to become a property owner:

•   Figure out how much house you can afford with a home affordability calculator. You want to budget appropriately. SoFi’s survey showed that 37% of prospective homebuyers used a home affordability calculator to help set their budget.

•   Don’t forget to account for closing costs, which are typically 3% to 6% of your loan amount.

Check your credit score and credit report. Building your credit and eliminating any errors on your report can help you qualify for favorable rates.

Recommended: Most Affordable Places to Live in the US

The Takeaway

How to afford a down payment on your first house? Saving is, of course, part of the equation. But you may not need to accrue that 20% of the purchase price that so many people aim for. There can be mortgages available with as little as 3% or even 0% down. Also, first-time homebuyers may benefit from assistance programs, down payment gifts, and other forms of funding.

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

FAQ

How much should I save for a down payment on my first house?

While many people aim for a 20% down payment to avoid paying PMI, there are mortgages available to qualified buyers with as little as 3% or even 0% down.

Can I borrow money for a down payment on a house?

You might be able to find a personal loan to use for a down payment, or you could see if a relative or significant other has funds to lend you. Check with your lender to see if this source of cash is acceptable, though.

What credit score do I need to buy a house with no money down?

You’ll typically need a credit score of at least 640 for the 0% USDA loan program. VA loans with no money down (and low down payment FHA and conforming loans) usually require a minimum credit score of 580 to 620.

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

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

SOHL-Q324-107

It is possible to use your utility bill payment history to help build credit. However, utility bills, like your gas, water, and power bills, aren’t automatically reported to the credit bureau agencies. To get them reported — and thus to have your utility bills affect your credit score — you’ll typically need to work through a third-party company that reports your utility bill payments so they show up on your credit report.

If you’re interested in making this happen, read on, and also learn other options to help establish your credit score.

How Do Utility Bill Payments Appear on My Credit Report?

Utility bill payments typically do not automatically appear on your consumer credit report. That’s because they’re not considered credit accounts. When you pay for utilities, you are paying for a service, rather than opening and maintaining a line of credit, or borrowing money that you then repay over time.

However, utility bill payments can appear on your credit report if you work with a third-party service that does the reporting on your behalf. These services typically charge a small monthly fee, but there are companies that offer this free of charge. If you’re paying utility bills on time, then getting that information reported to the credit bureaus could help to build credit.

Recommended: What Is a Charge Card?

How Do Utility Bill Payments Affect Your Credit Score?

While utility bill payments don’t appear on your credit report, they still can ding your credit score if you fall behind on payments, and the balance you owe becomes delinquent and goes to collections. Under the Fair Credit Reporting Act, debt can linger on your credit report for up to seven years. Because your payment history makes up a lion’s share of your credit score, a debt that enters collections and then remains on your report can have a significant impact on your credit score.

On the flipside, utility bills also have the potential to build credit. As mentioned, this could occur if you sign up to have your utility payments reported to the three major credit bureau agencies, and you consistently make your payments on time. To ensure this happens, you might consider setting up automatic bill payments.

Utility bills could also help build your credit score if you opt to pay bills with a credit card. Staying on top of your credit card payments is a key determinant of your credit score though, so just make sure to pay off your statement balance on time and in full when it becomes due. That way, you’ll avoid late payment consequences and also dodge paying interest on the utility bill payments charged to your card.

By making credit card payments when they are due, you’ll avoid late payment consequences and also dodge paying interest on the utility bill payments charged to your card.

Can Late Utility Bill Payments Affect Credit?

Late utility bill payments can hurt your credit if you miss enough payments for your account to enter “delinquent” status, after which it would get sent to collections or get handled as a charge-off. If this happens, that information can stay on your credit report for up to seven years. (It can be wise to check your credit report at least once a year, to make sure that it properly reflects your history.)

Similarly, if you sign up for a credit reporting service but then are late on making payments, that late payment activity could negatively impact your score. Often services will not report late payments for utility bills too.

Still, given the potential consequences of late payments, organizing your bills is a good idea to help ensure you pay on time and don’t lose track of due dates.

Recommended: How to Avoid Interest on a Credit Card

What Other Bills Help You Build Credit?

Your payment of the following bills will generally show up on your credit report and as such will have an impact on your credit score:

•   Car payments

•   Credit card payments

•   Student loan payments

•   Mortgage payments

Similarly to your utility bills, some bills have the potential to impact your credit, but don’t automatically show up on your credit report. However, you may be able to sign up for a credit reporting service or pay them using your credit card to have them help build your score. These types of bills include your rent payments, insurance payments, and bills for services like internet and cable.

Other Ways to Build Credit

Beyond your utility bills, there are other ways you can establish credit. This includes:

•   Opening one of the different types of credit cards and then using it responsibly.

•   Taking out an auto loan to pay for your next car.

•   Getting a secured card, which is easier to qualify for than a traditional credit card because it requires a deposit.

•   Taking out a personal loan and then staying on top of payments.

•   Becoming an authorized user on the credit card account of someone with a solid credit history and responsible credit usage.

•   Getting your timely rent payments reported to the credit bureaus.

•   Taking out a credit-builder loan, which gives you the funds once you pay it off.

Recommended: Tips for Using a Credit Card Responsibly

The Takeaway

While paying utilities doesn’t automatically establish credit, it can help your score if you work with a third-party service to have your payment activity reported and pay those bills on time. There are other ways you can build credit from scratch as well, such as taking out a personal loan or opening a credit card account, and then handling payments responsibly.

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

What is the impact of paying your utility bills early on your credit score?

Typically, utility bills are not reported to the credit bureaus and therefore don’t impact your credit score. However, if you work with a third-party service, you could have your utility bills reported. In this instance, paying your utility bills on time could help build your score.

Are utility bill payments reported to a credit reporting service?

Utility bill payments can be reported to a credit reporting service if you sign up for an account and opt in to have your utility bills reported. You might need to pay a monthly fee for this service though.

Photo credit: iStock/tommaso79

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

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

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

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

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOCC-Q125-008

It’s a good idea to regularly review your credit report. Doing so can help ensure that the information used to calculate your credit scores is accurate and up to date. It can also alert you to fraud or identity theft.

Unfortunately, understanding your credit report can sometimes feel like a challenge — especially if it’s the first time you’re doing it. Below, learn how to read a credit report, as well as highlight some common credit report errors to look out for.

What Is a Credit Report?

Your credit report contains a large amount of information about your financial life and payment history. If you have credit cards or loans, for instance, those accounts and how you pay them are included in your credit report. Often, you’ll have more than one credit report, as creditors are not required to report to every credit reporting company.

Credit card issuers and lenders can pull these reports and review them in order to determine your creditworthiness. They will rely on this information to make a decision on whether to loan you money, as well as the terms they’ll offer if they do.

Who Compiles Credit Reports?

Credit reports are created by three national credit reporting agencies: Equifax®, TransUnion®, and Experian®. The information the credit bureaus compile in credit reports comes from creditors — like lenders, credit card companies, and other financial companies — that submit information on your accounts and payment history to the bureaus.

Who Can See Your Credit Report?

Your credit report is accessed whenever a lender (or an employer or landlord) conducts what’s known as a hard credit inquiry. This is when a business accesses your credit report to make decisions about your creditworthiness, likely in order to make a decision about extending a loan (or a job or housing).

Hard credit inquiries will appear on your credit report, so you should recognize any credit inquiries that appear. They may also subtly affect your credit score. Multiple inquiries in a short period of time may signify to lenders that you’re seeking multiple loans, which may bring up concerns about your financial stability.

Your credit report can also be accessed by consumers (like you). The Fair Credit Reporting Act requires each of the credit reporting companies to provide you with a free copy of your credit report, at your request, once every 12 months. As of early 2025, each of the big three credit bureaus is providing weekly free credit reports at AnnualCreditReport.com. Your credit score will not be impacted when you request a copy of your own credit report.

How to Get a Credit Report

As noted above, you have the right to ask for one free copy of your credit report from each of the credit bureaus, at least annually and possibly weekly. There are a few ways you can request it:

•   By visiting AnnualCreditReport.com

•   By calling (877) 322-8228

•   By downloading and filling out the Annual Credit Report Request form, and mailing it to the following address:

    Annual Credit Report Request Service

    P.O. Box 105281

    Atlanta, GA 30348-5281

You also can request credit reports from consumer reporting companies, though these may charge a fee. Additionally, you’re eligible to request free reports under certain circumstances, such as being denied credit or due to potential inaccuracies because of fraud.

Also know that you can only check your own credit report — checking someone else’s credit report is generally illegal.

Recommended: What is a Charge Card?

Reading Your Credit Report

When you get your credit reports, it’s a good idea to read each section closely. Here’s a rundown of the sections you’ll typically find included, so you’ll know what to expect and thus how to read a credit report.

Personally Identifiable Information (PII)

This section of the report is used to identify you. It contains basic information like your name, address, and place of employment. You may also find previous addresses and employer history listed here. Your employment history doesn’t affect your credit score. Rather, it’s included on your credit report only to verify your identity.

When scanning this area you’ll want to make sure that your name, address, and employer match up. Any incorrect or unfamiliar personally identifiable information (like company names you don’t recognize or employers you never worked for) may be a sign of identity fraud.

Credit Summary

This section summarizes information about the different types of accounts you have, including credit cards and lines of credit, mortgages and other loans, and any accounts that have been sent to collections. For each account, your credit report will include the date the account was opened, its balance, its highest balance, the credit limit or loan amount, payment status, and payment history.

As you read this section, make sure that all the information looks familiar. It’s not unusual for a credit report to have slightly dated information, such as a higher balance because you just paid off a bill this month. However, all information should seem recognizable. In particular, you’re looking for:

•   Unfamiliar accounts

•   Late payments that do not align with your records

•   Balances that do not match your records

Recommended: What is the Average Credit Card Limit?

Public Records

The information in this section is pulled from public records and may include debt collections or bankruptcy information.

If you missed a credit card payment due date and have any debt collections and bankruptcy on your record, it’s important to remember that they won’t stay there permanently. The following statutes of limitations apply to different types of debt, restricting how long the information will remain on your credit report:

•   Chapter 13 bankruptcy: Removed seven years after the filing date

•   Chapter 7 bankruptcy: Removed 10 years after the filing date

•   Late payments: Removed seven years after they occur

•   Payment defaults: Removed seven years after they occur

If you see information that’s not familiar, you’ll want to flag it, since this could be a sign of identity theft. You may also want to flag any information that is still on your credit report after the statute of limitations has expired.

Credit Inquiries

Credit inquiries list all parties who have accessed your credit report within the past two years.
These could be from lines of credit you opened, such as applying for a credit card, or from applying for a loan.

Both hard inquiries and soft inquiries will appear, though they have different impacts on your credit — hard inquiries will affect your credit, whereas soft inquiries will not. You can distinguish the two types of inquiries based on how they appear on the report:

It’s a good idea to make sure you recognize any recent credit inquiries, as they can be a red flag for identity theft.

Why Credit Reports Are Important

Your credit report can play a critical role in determining your financial future. That’s because creditors will refer to your credit report to decide whether to approve you for a loan or a credit card and, if so, what terms they’ll offer you, including the interest rate. In other words, your credit report will help determine whether you’ll get the auto loan you need to purchase a new car or the mortgage necessary to purchase a home. And if you’ve used a credit card responsibly, that could help open the door to additional lines of credit.

It’s not just creditors looking at your credit report either — landlords, insurers, potential employers, and even phone and cable companies may look at your credit report as part of their vetting process. This is why it’s so important to understand what information your credit report contains, so you can know what information these potential parties can learn from viewing it.

Recommended: How to Avoid Interest On a Credit Card

What Information Is Not Found on Your Credit Reports?

One surprising piece of data that you may be surprised to find out credit reports do not include is your credit score. Beyond that, your credit report will not contain the following information:

•   Salary

•   Employment status

•   Marital status

•   Spouse’s credit history, if applicable

•   Assets, such as bank account balances, investments, or retirement accounts

•   Any 401(k) loans

•   Public records outside of bankruptcy

•   Medical information

•   Expired information

•   Race or ethnicity

•   Religious beliefs or information

•   Political affiliates

•   Disabilities

What To Do If You Find Errors on Your Credit Report

None of the information on your credit report should look unfamiliar. In fact, one of the main reasons you want to read your credit report is to make sure that your credit report matches your records.

But sometimes, there can be discrepancies. If you detect an error on your report, such as a payment incorrectly reported as late, you’ll want to file a formal dispute. You’ll need to dispute credit report errors with both the credit reporting company and the entity that provided the information (such as a credit card company).

When writing a dispute letter, you’ll want to include:

•   A clear explanation of what is wrong in the credit report.

•   Supporting documentation showing the information is inaccurate (such as a copy of a paid bill).

•   A request for the information to be fixed.

By law, the credit reporting company must investigate your dispute and notify you of its findings.

If you notice an error that suggests identity theft (such as unknown accounts or unfamiliar debt), it’s a good idea to sign up with the Federal Trade Commission’s (FTC’s) IdentityTheft.gov site in addition to alerting the credit bureaus. The FTC’s tool can help users create a recovery plan and figure out next steps, which may include placing a security freeze on your accounts.

The Takeaway

It’s easy and free once a year (or more often) to gain access to your credit reports from the three major bureaus. Reviewing your credit report can give you a chance to correct any errors, and make sure your credit report is an accurate representation of your financial situation. It can also alert you to any fraudulent activity. In addition, reading your credit report can help you understand how creditors see you as a borrower and identify any potentially problematic information that may negatively impact your creditworthiness.

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

When should you check your credit report?

The Consumer Financial Protection Bureau (CFPB) recommends checking your credit report at least once a year to ensure there are no errors and that all information is up-to-date. You might consider checking them even more frequently than that though to have the most accurate picture of your current financial situation.

What do the numbers mean on a credit report?

Your credit report may contain a variety of different numbers. This can include your name identification number, your Social Security number, the IDs for addresses associated with your credit, phone numbers, account numbers, and more. It can help to go through section by section if you’re unclear as to what a particular number means.

What should I look for on a credit report?

When reading your credit report, you’ll want to look out for any changes to your personal information, such as changes to account details, inquiries, or data available in public records. Keep your eye out for any errors or anything that otherwise seems amiss, as this could be a sign of fraud.

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

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

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

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

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.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOCC-Q125-007

Many people send and receive funds via their checking account, the hub of their financial life. But not everyone has an account. In fact, an estimated 4.2% of U.S. households (approximately 5.6 million) were “unbanked” in the most recent year studied, according to the FDIC’s latest data. This means that, in these households, no one held a checking or savings account at a financial institution such as a bank or credit union.

Not having a bank account can make it more challenging to send and receive money, but it’s not impossible. Here, you’ll learn how you can move funds around without a bank.

6 Ways to Send Money Without a Bank Account

With all those factors in mind, here are specific options you may have to send or receive funds if you haven’t opened an online bank account or traditional one:.

1. Peer-to-Peer (P2P) Payment Apps & Mobile Wallets

Here’s one idea for how to send money to someone without a bank account: with peer-to-peer payment (P2P) apps (such as PayPal or Venmo) and mobile wallets, or digital wallets, which are smartphone apps where you can store your debit and credit cards. Apple Pay, Google Pay, and Samsung Pay are a couple of examples you may have heard of.

These services offer a way to pay a friend without cash exchanging hands. Or you might receive funds. Some points to note:

•   There are often no fees involved, and you may enjoy cash back and other rewards for completing a transaction with your linked card.

•   Both the sender and receiver typically must have the same digital wallet for the transaction to be free. If you have PayPal or Venmo, your recipient usually needs to have them too in order to do a peer-to-peer or P2P transaction. However, you may be able to use, say, Visa+ to move money between PayPal and Venmo without fees.

•   Fees may apply when using extras like expedited transfers or paying by credit card or sending money internationally.

•   Mobile wallets can get all sorts of information as you use them — your name, mailing and email addresses, mobile number, records of your calls and texts, your contacts and calendar, the unique ID number of your mobile device, account information, what you buy and where and for how much. Not everyone is comfortable with sharing all of that personal data.

2. Money Orders

Money orders may seem like they’ve gone the way of the dinosaur, but they still serve a purpose, including offering a way to send money without a bank account (or to someone who is unbanked). Some details:

•   You get one from the post office or stores like CVS and Western Union, among others.

•   They may not be the fastest way to send money without a bank account.

•   The recipient will need to show identification to cash it.

•   Prices vary depending on the service you use and how much money is sent, but they can be reasonably priced. For instance, at the post office, you may pay $2.25 for a money order up to $500 and $3.60 for one that’s more than $500, up to $1,000. By the way, money orders are typically capped at $1,000. You could buy multiple ones if you need to transfer more than that amount.

3. Prepaid Debit Cards

A prepaid debit card is another way to move money when a person doesn’t have a bank account. It shares some features of a credit card, debit card, and gift card.

•   It is a debit card that’s been pre-loaded with money, and you can generally use it at any retailer (online or in person) that accepts credit cards.

•   Prepaid debit cards may be associated with credit card networks; think MasterCard or Visa, for example. This means they can be used anywhere that accepts that kind of plastic.

•   These cards may be riddled with fees. For instance, you might get hit with a fee for card activation, making a purchase, adding money to the card, and/or withdrawing money at an ATM. You’ll want to read the fine print because these fees may make prepaid cards a less attractive option.

4. Physical Cash or a Personal Check

Cash can be a super-simple way to transfer funds, even if you don’t have a bank account, provided you can safely hand over the bills. If the two parties involved are in different locations, this becomes a lot riskier. Mailing cash is probably never a wise move.

Personal checks are also a time-honored way to transfer money, and easy to access if you have a checking account. The person who receives it can then cash the check, perhaps paying a fee since they don’t have a bank account. But if you use mail to send the payment, a lost check situation can occur or a check might be stolen. So, there could be some risk involved.

5. Money Transfer Services (like Western Union or MoneyGram)

Money transfer services can be a solid option for sending money to someone without a bank account. In fact, no bank account is required for either the sender or recipient. It’s easy. In addition to in person retail outlets, you can now access money transfer services like Western Union and MoneyGram online.

•   It’s a quick transaction; money can arrive as early as the same day.

•   You have some flexibility, such as sending money transfers to a debit card or a mobile wallet.

•   Pay attention to fees, though, as they vary and depend on the amount you’re sending and more. Promotions may be offered that allow for fee-free transfer of cash.

6. Postal Service (for Sending Cash or Money Orders)

As noted above, you can get money orders at your local post office in denominations of up to $1,000 and current fees of two or three dollars. This provides a secure way to move money, whether one or both lack bank accounts.

Another option using the postal service is to send cash through the mail, but this is strongly discouraged. If money gets lost or stolen in transit, you are unlikely to recover it. If you do decide to send money through the mail, know that it’s heavily regulated. Amounts over $500, for instance, must be sent by registered mail.

What to Consider When Sending Money

As with all financial services, you don’t want to rush and just go with the first method available. Each option you review will probably have its pluses and minuses. If you are trying to send or receive money without a bank account, do your research. Consider these important factors as you move toward making your decision.

Speed and Reliability

Reputation matters, always — and especially with something as important as money. You want to use services that are known for getting cash from point A to point B in a reasonable amount of time and that have a solid track record for reliability. You can start by asking your inner circle of friends and family to hear what they use. You can read online reviews as well at trusted sites. Key things to consider are whether money transfers were completed successfully, on time, and without excessive charges.

Fees and Transfer Costs

Without a bank account, you may not have the ease of, say, having your paycheck direct-deposited via Automated Clearing House (or ACH), using a debit card, or sending a wire transfer. In fact, you may have to spend time and money to send or receive some cash. So read the fine print on the options you are considering to make sure you’re clear on the fee structure.

When it comes to how to transfer money from one account to another, what will you be charged for and what’s free? Will there be certain criteria to meet in order for a transaction to be done without fees? You don’t want any surprises.

Security

Security is critical. When it comes to cash changing hands, you want to feel confident about safety. You don’t want to risk your hard-earned dough getting stuck in the ether somewhere or vanishing entirely. Look into what layers of protection are in place, such as two-step authentication, data encryption, and an adequate privacy policy. Fraud and identity theft do happen these days, so safeguarding financial information is a must.

Can You Send Money Online for Free?

You may be able to send money online for free without a bank account. Try using P2P apps like Cash App, PayPal, or Venmo or digital wallets like Apple Pay/Google Pay. You may also be able to use a service such as Western Union/WorldRemit without fees in some cases, such as on a promotional basis.

The Takeaway

Having a bank account can be a cornerstone of good money management, but there are a number of Americans who don’t have one. If, for whatever reason you are without one or you want to transfer money with someone who doesn’t have an account, there are still ways to send and receive money. These include digital wallets, money orders, money transfer services, and other options. Some will have fees and security risks, among other downsides. Take your time to explore the safest, most convenient, and affordable choice for your situation.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What’s the easiest way to send someone money without a bank account?

There’s no one single easiest way to send money without a bank account. For one person, a money order might be simplest; for another, using a P2P payment app could be the easiest.

How can someone receive money if they don’t have a bank account?

There are a number of options for a person to receive money if they don’t have a bank account. These include a money transfer service, prepaid debit card, mobile wallet, or money order.

Are there free ways to send money without a bank account?

You may be able to send money for free without a bank account by using a P2P app (PayPal or Venmo, for example) or a digital wallet, like Apple Pay.

How can I send money to someone without a debit card?

To send money to someone without a debit card, you might use P2P apps, digital wallets, a money order, a personal check, or cash, among other options.

What is the safest way to send money to someone without a bank account?

There are many secure ways to send money to someone without a bank account. These can include prepaid debit cards, P2P payment apps, mobile wallets, money transfer services, and money orders. Some people will feel more secure with electronic transfers, while others may prefer a physical payment via prepaid debit card or money order.

Photo credit: iStock/santypan
SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
^Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

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.

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Are you a member of the military? Whether you’re on active duty or a veteran, serving in the Reserve or National Guard, you have unique opportunities to build financial security. Taking advantage of things like military discounts and special mortgage loans can help you save money. There are also a number of other actions military members and their families can take to protect and grow their finances. Here’s what you need to know.

The Importance of Saving Money in the Military

Saving money is always a good thing when planning for your future. Members of the military — whether single, in a relationship, or married with kids — may especially benefit from making some careful money moves now. This helps ensure that your finances are in good shape after the final deployment ends.

11 Tips for Military Members to Manage Their Money

Wondering how to save money while in the military? We’ve got 11 money management tips that you may find useful if you’re a military member thinking about your financial future.

1. Creating a Budget

Having a monthly budget is a good way to track your expenses against your income. While it may be tempting to spend all of your paycheck each week during deployment, you might want to consider funneling away some money into savings or retirement to help achieve long-term financial goals and build wealth. A budget can help you do this, whether you use a journal, a spreadsheet, or an app to keep tabs on your money.

Budgeting for beginners can be overwhelming, but it’s an important step. Seeing your finances laid out in a clear budget makes it easier to determine how much you can afford to set aside from your paycheck, whether it’s to pay down debt or build your savings.

Recommended: 50/30/20 Budget Calculator

2. Opening a Savings Account

As part of your budget, it’s a good idea to open a savings account, if you don’t already have one. You can set aside money here for everything from a down payment on a house after your service to a new car to a wedding. If you intend to leave money in the account for the duration of your deployment, it’s especially wise to find a high-yield savings account that pays an above-average interest rate on your deposits.

3. Automating Your Savings

Once you have a savings account, you might benefit from automating your savings, if your financial institution offers this. When you set up automatic transfers from checking to savings, the money gets whisked away before you see it sitting there, connected to your debit card, and tempting you to spend it.

4. Avoiding Overspending

An important reason to create a budget is to avoid overspending, especially with credit cards. When you build a budget, you’ll be able to identify how much you can safely spend each month while working toward your goals. Whether actively deployed or in between deployments, it’s a good idea to rein in any unnecessary expenses and recognize common reasons for overspending.

Before making a major purchase, you might try the 30-day rule: Wait a full 30 days to see if the urge to buy the item passes. If it does, you’ve avoided an unnecessary expense.

5. Utilizing Military Resources (Like Military Discounts)

How else to save money in the military? Many retailers, restaurants, and services offer discounts to members of the military, usually if you provide military identification. While military discounts may seem small, they can add up over time. They can be especially helpful when making larger purchases, like a new car.

Some businesses extend military discounts to spouses as well. If you are deployed with a spouse back home, make sure your partner knows to ask about military discounts when shopping as well.
Wondering how to find the best military discounts? One route is to check out Military.com’s discount page and subscribe to their deals and discounts newsletter.

6. Shopping on Base

Shopping on base can be a great way to scale back your expenses as a member of the military. For example, gas is typically cheaper on base, and you can usually get great discounts on groceries by shopping at the commissary because it doesn’t charge a sales tax.

Recommended: Feeling Guilty About Spending Money?

7. Investing in Education

If you want to pursue education after your service, check out the GI Bill. This bill can help veterans pay for college, graduate school, and training and certification programs. Head to the VA website to find out how you can take advantage of this education assistance and potentially save money by being in the military.

You can also see if you qualify for military student loan forgiveness.

8. Taking Advantage of Veterans Administration (VA) Home Loans

Buying a home can be a stressful experience, from saving for a down payment to getting approved for a mortgage loan to making an attractive offer fast enough to actually get the house you want.

As a servicemember, veteran, or surviving military spouse, you likely have unique access to a Veterans Administration (VA) home loan through private lenders.

When you purchase a home using a VA home loan, you typically don’t need a down payment, you’ll get a low interest rate, you won’t have to pay for private mortgage insurance, and closing costs are limited. And this isn’t a one-time deal: You can use a VA home loan for multiple homes over the course of your life.

9. Getting a Life Insurance Policy

The U.S. Department of Veterans Affairs offers Servicemembers’ Group Life Insurance (SGLI). In fact, if you qualify as a servicemember, the VA automatically signs you up (but note – it isn’t free!). You can update the life insurance coverage as you see fit, change your beneficiaries, and extend coverage beyond your service, all by logging in with your CAC or DS Logon.

Learn more on the official SGLI page . But remember: SGLI is not your only life insurance option during and after your service. You might find better terms by shopping around for other life insurance policies.

10. Learning About Tax Breaks

The IRS offers unique tax benefits to members of the U.S. Armed Forces. These include tax breaks, tax deadline extensions, free tax help from volunteers, and more. If you’re unsure of how your service affects your tax situation, browse the free IRS resources or work with a certified tax professional.

Recommended: Tax Write-Offs for Young Adults

11. Planning for Retirement

Retirement may seem like a long way off, especially if you have just enlisted. But it’s a good idea to start planning for retirement early to maximize your income in retirement. A popular option for members of the military is the Thrift Savings Plan (TSP), a federally sponsored retirement and investment plan. This plan is akin to an employee-sponsored 401(k). Some members of the military supplement this coverage with other retirement plans.

The Takeaway

Managing your money wisely while serving in the military can set you up for a secure future. Smart moves to make during your service include setting up a budget, saving for future expenses and retirement, and taking advantage of military discounts and programs designed exclusively for servicemembers.

If you’re looking for a new banking partner, see what SoFi has to offer. When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Is it easy to save money in the military?

Saving money while in the military can be easy if you take advantage of several helpful military programs, including VA home loans, military discounts, federally sponsored retirement plans, and even cheaper gas and groceries on base.

What expenses do military members have?

Members of the military may incur the same expenses as the average person, including housing, food, and clothing. However, in addition to a servicemember’s paycheck, the Department of Defense also offers allowances that members of the military can use for basic necessities, which can help lower daily expenses.

How much do military members earn?

Members of the military make different amounts depending on their rank and years of service. However, servicemembers’ full payment includes not only their basic pay and military benefits but also military allowances, which go toward the cost of basic necessities like food and housing. Military members, whether servicemembers or officers, can earn additional pay through the Department of Defense’s Special and Incentive Pays program.

Photo credit: iStock/YakobchukOlena

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
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.

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