Dec
18
2023
Should I Buy a New or Used Car in 2021?

Should I Buy a New or Used Car? Pros and Cons

By | Budgeting & Goals, Financial Independence, money | Comments Off on Should I Buy a New or Used Car? Pros and Cons

If you’re wondering whether to get a new or used car in the year ahead, there isn’t one single answer. Each car shopper’s situation is likely to vary, and you need to make the decision that best suits your needs and your budget. Factors like the features you’re seeking in a car, price, insurance costs, and depreciation may come into play.

To help you decide where to spend your cash if you plan to buy some wheels, read on. You’ll learn the pros and cons of new and used cars, plus tips for making your choice.

Key Points

•   Choosing between a new or used car involves evaluating multiple factors like features, price, depreciation, and insurance.

•   New cars provide the latest features and warranties but depreciate quickly and are costly.

•   Used cars are more budget-friendly and depreciate more slowly, though they might have reliability issues.

•   The purchase decision often hinges on price and depreciation, with new cars losing value faster.

•   Personal preferences can dictate the better value; new cars for features and warranties, used cars for cost savings.

Pros and Cons of Buying a New Car

For some people, there’s nothing that can compete with the allure of a bright and shiny new car. However, it’s important to consider the pluses and minuses before making your purchase.

thumb_up

Pros:

•   Pristine condition

•   Latest features

•   Warranty and service benefits

•   Multiple financing choices

thumb_down

Cons:

•   Immediate depreciation

•   Higher price

•   Higher insurance costs

•   Limited ability to negotiate

Pros

•   Pristine condition: With a new car, you don’t have to kick as many tires. New vehicles arrive on dealer showroom floors (and at online auto sales platforms) in pristine condition with very few miles on the odometer, so you don’t have to spend time checking for vehicle inefficiencies and maintenance or repair issues.

•   Latest features: Some people may feel “the newer the car, the better.” Here’s why: The auto industry is doing wonders with new vehicle construction, with features like better gas mileage, longer ranges in the case of EV vehicles, and technological advancements that improve vehicle performance. Those upgrades come most notably in car safety, cleaner emissions, and digital dashboards that improve driving enjoyment.

•   Warranty and service benefits: New car owners are typically offered a manufacturer’s warranty when they buy a new car, which typically grades out better than third-party warranty coverage on a used car. Additionally, extended car warranties may be available, and auto dealers are more likely to offer services like free roadside assistance or free satellite radio to lock down a new car sale. Those services and features are harder to get with used vehicles.

•   Multiple financing choices: It’s often easier to get a good financing deal with a new car vs. a used car. That’s because the vehicle hasn’t been driven and should have no structural problems, maintenance, or repair issues. That’s important to auto loan financers, who place a premium on avoiding risk.

Next, learn about the potential downsides of buying a new car.

Cons

Some disadvantages of a new car purchase might sway a buyer’s decision.

•   Immediate depreciation: The moment you drive a new car off the dealer lot, it loses several thousand dollars in value, plus an estimated 20% in the first year of ownership and then 15% annually for the next few years afterward, which is not a fun fact when you are making car payments at the same level month after month.

•   Higher price: Saving up for a car is a big undertaking, and you may owe a lot of money on a new vehicle. The average price for a new car is $47,452 as of late 2024, which is a significant figure.

•   Higher insurance costs: Auto insurers typically deem new cars as being more valuable than used cars and assign auto insurance premiums accordingly. Also, since new cars cost more, auto insurers prefer to see new auto drivers get full coverage and not minimum coverage.

•   Less room to negotiate: New car models may be less negotiable in price than used ones. Because they are the latest shiny new thing, demand may be higher and inventory lower. A dealership may be less likely to knock down the price for this reason, while they might do so on a used car sitting on the same lot.

Recommended: 10 Personal Finance Basics

Pros and Cons of Buying a Used Car

Used cars offer buyers value and savings, which are attractive benefits to drivers who may not have a big budget, but still want to drive a quality vehicle. However, there are other benefits and downsides to consider as well.

thumb_up

Pros of buying a used car

•   Lower price

•   Slower depreciation rate

•   Your down payment may go further

thumb_down

Cons of buying a used car

•   Reliability issues

•   Fewer options

•   Maintenance costs

Pros

•   Lower price: No doubt about it, most used cars sell for significantly less than a new car with the same make and model. You learned above that the average new car is retailing for just under $50,000. How about used cars? The average is currently about $25,571, a considerable savings.

•   Slower depreciation rate: New cars tend to lose value quickly, as noted above, especially if they’re not properly cared for. But used cars tend to depreciate more slowly, especially if they’ve had regular maintenance, and their sustained value makes them a good resale candidate if the owner wants another vehicle, but still wants to make a good deal when selling the vehicle.

•   Your down payment may go farther: Buyers who can manage a robust down payment on a used vehicle can bypass a good chunk of the debt incurred in purchasing the vehicle. It comes down to simple math — if a buyer purchases a $25,000 used vehicle with a down payment of $15,000, there’s only $10,000 left to pay on the vehicle. If a buyer purchases a new vehicle for $48,000, and puts $15,000 down, that buyer still owes $33,000 on the auto loan. Buying a used car could leave more money in your budget to put in a high-yield savings account for emergencies or another purpose.

Cons

When deciding whether to buy a used car or not, these potential disadvantages may also be worth considering.

•   Reliability issues: With a used car, an owner may be getting a quality vehicle — or maybe not. A used car may have spent years on the roads and highways, incurring a fair share of dings, dents, and general wear and tear that may have aged it prematurely, particularly if it hasn’t been maintained well.

•   Fewer options: You may not get the exact make and model you want. The options can dwindle when it comes to buying a used car. Whereas auto dealers can offer a wide range of makes, models, and colors for a new vehicle, those choices can be significantly limited with a used car, truck, or SUV. That could mean that a used vehicle buyer may have to compromise on different factors, in contrast to someone who is buying new and can often get their dream car, down to the last detail.

•   Maintenance costs: You may pay more for vehicle maintenance. Auto repairs often cost more over time and become more frequent, too, as a car ages. So you may well pay more for maintenance and repairs with a used car. With a very old car, finding parts to complete repairs may also be a challenge. In other words, it may take more time and have you spending more from your checking account to keep the car running.

Is It a Better Value to Buy a New or Used Car?

As noted above, there’s no one-size-fits-all answer to whether a new or used car is the better value, but often, a used car is considered a better value. This is because, with a used car, depreciation has already occurred, meaning the price is lower. In this way, you may be able to get more car for the money you’ve earmarked for this purchase, and the car could have a better resale value. Insurance costs may be lower as well.

Is It Easier to Get Approved for a New or Used Car?

In general, it’s considered easier to get approved for a new car loan vs. one for a used car. That’s because new cars are thought to be less risky since they are new, without wear and tear issues. Their value is thought to be simpler to determine.

It’s worthwhile to consider how your credit score could impact which loan offers you might qualify for:

•   If you have very good or excellent credit (say, 781 or above), your interest rate as of late 2024 would typically be close to 5.08% APR (annual percentage rate) for a new car or 7.41% APR for a used car.

•   If you have good to very good credit (between 661 and 780), your APR for a new car would be close to 6.70% APR and 9.63% APR for a used car.

•   If you have a credit score that’s in the fair range to lower good range (between 601 and 660), you’d likely be assessed an APR of close 9.73% APR for a new car and a 14.07% APR for a used car.

•   If your credit score was between 501 and 600 (in the lower section of the fair range), you may have a more difficult time accessing financing and could expect to be charged close to 13.00% APR for a new car and 18.95% APR for a used car.

•   Have a lower score, in the 300 to 500 range (poor)? You might expect to face challenges getting financing. Those who do offer you a loan could charge close to 15.43% APR for a new car and 21.55% APR for a used car.

Consider Buying a New Car If…

As you make your decision between buying a new or used car, you likely will have your own set of needs and preferences. Here’s when buying new may be your best option:

•   If you can afford what is likely to be the higher price tag of buying a new car and loftier insurance costs (as noted above), then you may want to go ahead and buy the latest model.

•   You want the latest bells and whistles: If you feel you need an auto with certain new features (whether it’s the design or a safety system), then you may opt for this year’s model.

•   If you are financing your purchase, you may be able to get a more favorable APR when buying a new vs. used vehicle. Doing research on how to get a car loan can help you prepare for this path.

Consider Buying a Used Car If…

For some people, though, buying used can be the wiser choice. For instance:

•   If you have a fixed budget, a used car will generally offer a lower price and possibly lower insurance costs, too.

•   Is there a feature you need but can’t afford in a brand new car? A used car may suit your needs. For instance, if you really need a vehicle with a third row of seats but can’t afford one brand new, that may lead you to a used car.

•   If you want to avoid the steep depreciation that comes with buying a new car, a used car may work better for you. It may help to know your car will retain much of its purchase price in the coming years. This could be helpful if, say, you know you’ll be selling the car in a year or two and want to forecast how much you’ll net to put in an online bank account.

By weighing your choices on these fronts, you will likely be able to make the right move, both in terms of the car you buy and how well it fits into the type of budget you use.

As you would with any major purchase decision, you’ll want to shop around, check the book value of preferred vehicles, and look at the car’s maintenance and repair history to ensure it’s in good condition. You may also want to make sure it’s inspected by a trusted mechanic.

Recommended: How to Automate Your Finances

The Takeaway

The choice between a new and used car likely will depend upon your personal preferences and financial situation. New cars may have the latest features and lower maintenance and financing costs, but they tend to be pricier and trigger higher insurance costs. And they will depreciate rapidly. A used car will usually have a lower sticker price but maintenance costs and higher rates on financing should be noted.

As you think about car financing that best suits your needs, you may want to make sure that your banking partner is the right one, too, and is helping your money work harder for you.

Interested in opening an online bank account? 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.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.

FAQ

Do used cars require more maintenance vs. new cars?

You may pay more for maintenance on a used car vs. a new one. Typically, older cars need more work than their younger counterparts.

Are used cars a better deal than new cars?

Used cars can be more affordable than new ones, from the sticker price to the insurance costs, and because they don’t depreciate as rapidly as new cars, they can be a better deal.

What are options to buying a new or used car?

Buying a certified pre-owned car, which has been vetted to be in very good condition, or leasing a car are other options you might consider when thinking about buying a new or used car.

Photo credit: iStock/Ivanko_Brnjakovic

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.

SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, 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 Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found 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.

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

Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

SOBNK-Q424-070

Read more
Dec
09
2023
Living Below Your Means: Tips and Benefits

Living Below Your Means: Tips and Benefits

By | Budgeting & Goals, Financial Independence, money | Comments Off on Living Below Your Means: Tips and Benefits

About one out of four U.S. consumers report living paycheck to paycheck, with no money left at the end of the month to save or invest, according to a survey conducted in 2024.

With so many people barely paying their bills, you may wonder if living below your means — or spending less money than you make — is even possible. The answer is yes, with a sound budget, determination, and some smart strategies. Learn the details here.

Financial experts say the chances of living on less than you make increase if you haven’t yet bought a house or started a family, but don’t stop reading if you’re already in the thick of those responsibilities. Even with those commitments, you can still live below your means, gaining financial freedom with the right mindset and goals.

Key Points

•   Living below your means you spend less money than you earn every month.

•   You can live below your means with a sound budget, determination, and smart money-management strategies.

•   Financial freedom can be achieved by living below your means, even with commitments like a house or family.

•   Living below your means can allow you to save for emergencies and larger purchases, as well as have more financial freedom and confidence.

•   Living below your means can also lead to less stress about money and the ability to build wealth.

What Does ‘Living Below Your Means’ Mean?

If you live below your means, you get by on less money than you earn every month. For example: If your household income is, say, $40,000, but you make ends meet by spending $5,000 less than that amount, you’re left with money to put in your savings account or invest for important goals.

In other words, you aren’t having to borrow money to pay your rent, nor are you building up high-interest credit card debt to cover your monthly spending.

How Much Money Qualifies as Living Below Your Means?

No set amount of money qualifies as living below your means vs. living beyond your means. No matter what your income, living below means is defined as spending less than you earn. If you earn $4,000 every month, but only spend $3,500, then you are living $500 below your means. This makes it possible to build wealth. If you spend $3,900 per month, then you are living $100 below your means.

Any little bit of a cash cushion in your checking account can qualify you as living below your means.

Benefits of Living Below Your Means

Living beneath your means can be a wise financial move — one that pays off in an array of ways. Here are a dozen good reasons to start living on less than you make so you can enjoy the benefits of financial independence.

1. Being Prepared for Emergencies

If you have wiggle room in your finances, you can start putting money into an emergency fund every month and build a safety cushion. This gives you peace of mind when unexpected expenses arise, such as a flat tire, broken washing machine, or a major dental bill.

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

2. Saving for Larger Purchases

Planning a family beach vacation or girls’ weekend away? Will you need a new laptop soon? If you live below your means (for example, driving your trusty old car rather than financing a new model), you will have more breathing room in your budget to save for key expenses. Ordering takeout for your family’s dinner every two weeks vs. every week could add up to $100 or more in monthly savings, which could be better used elsewhere.

3. More Financial Freedom and Confidence

A major benefit of living below your means is gaining financial freedom. When you aren’t living paycheck to paycheck, you won’t feel that money stress. You won’t watch your credit card debt continue to climb upwards. You may, however, see your savings grow.

Living beneath your means can help you be a responsible spender and saver. Achieving this financial discipline will give you a feeling of control and confidence, and it can also open the door to more possibilities.

4. Having a Healthier Lifestyle

Living below your means typically gives you the room to be more mindful about both your spending and your lifestyle. When you watch your pennies, you’re more likely to make meals at home, which can be healthier and have more reasonable portion sizes than, say, a stuffed pizza or bucket of fried chicken delivered to your door.

You may also avoid high-priced gas or Ubers and walk or bike more, which is better for you and the planet.

5. Less Stress and Worry About Money

A recent survey found that 73% of Americans said their number-one worry was, not too surprisingly, money. When you are living below your means, you may well eliminate some of this stress. Having some room in your budget means you don’t have to break out your plastic to buy groceries or see your checking account balance head towards negative territory. Phew!

6. Spending Less Money on Consumerism and Materialism

When you are focused on living beneath your means, you may recognize that constant consumerism is bad for the planet and your pocketbook. More and more of us are embracing the minimalist way of life, bypassing new jeans in favor of thrift-shop pairs. Same goes for cookware, furniture, and books.

Reduce, reuse, recycle is a mantra that’s been gaining ground. Too often, our need for new goods is short and they end up in a landfill, where they never die. Buying used can help prevent this while padding out your savings.

7. Having Funds for a Rainy Day…or a Sunny One

Maybe your favorite armchair’s upholstery rips. Wouldn’t it be nice to have funds available to fix it without feeling money anxiety? Or perhaps the kids would love an overnight stay at a lodge with a water park. If you have been living below your means and setting aside some cash, this may be your moment to forge ahead.

That’s where your rainy day fund or splurge savings come in. Neither of these situations are good uses of an emergency fund, but they can be worthwhile expenses drawn upon other cash cushions.

Recommended: Ways to Be a Frugal Traveler

8. Having the Ability to Build Wealth

When you live below your means, you have a surplus of cash that you can invest to build wealth. One smart move: If your employer has a 401(k) program, sign up. Money will be swept from your paycheck (before you even see it) into a retirement investment account. This is an example of paying yourself first and is also one of the best ways to build future wealth.

Another idea: If you get a raise (nice work!), invest it rather than amping up your spending to account for the extra money, which is called lifestyle creep. Also, if you are not living paycheck to paycheck, when you get a windfall (say, a tax refund), you can also invest that, rather than using it to buy necessities.

10. Developing a Stronger Money Mindset

How do you think about money: with shame, because of debt burdens? Or with pride and contentment, knowing you have cleared the deck and are even socking away some money by living below your means? The more you take control of your finances and improve your money mindset, the better your outlook on life is likely to be.

11. Having Financial Security

When you live below your means, you know you can handle bills without worry and dread over late notices, collection agency phone calls, fees, and service interruptions. Living on a leaner budget also means you can save extra dough for unexpected expenses that pop up. These might include, for example, new clothes for your college roommate’s wedding or fees for a professional class you really want to take.

By living below your means, you are likely taking a giant step or two toward achieving financial security and not feeling on the brink of money trouble.

12. Being Able to Invest Your Money

This is empowering. When you have some extra cash, contact a financial advisor (ask friends and relatives for a referral or see if your bank has one on the team) and consider investing in the stock market, which can be both fun and financially wise.

Historically, the market returns approximately 10% per year, which can boost your long-term savings, such as your retirement fund. Some risk is involved, though.

If you are risk-averse, you might prefer to put some funds into a high-yield savings account that’s insured by the Federal Deposit Insurance Corporation (FDIC). Your money will grow, thanks to the power of compound interest.

Tips for Living Below Your Means

If you’re convinced of the value of living beneath your means, the next step can be to take action to do so. Here are some strategies to make that happen.

Tracking All of Your Spending

Recording where your money goes is the first step to living below your means. For one month, track every dollar that leaves your wallet, from a tip at the coffee place to a gift for your sister. Not just rent and gas, but also pharmacy co-pays, the juice you got on your way to work, and parking meter charges. Look into a free budgeting app to help you stay on task; many financial institutions (such as online banks) provide these for their clients, or there are plenty of third-party options available online.

Budgeting

Once you know what you spend in a given month (including debt payments), compare this to your take-home income. Re-evaluate what you truly need and what can be eliminated in your quest to live below your means.

Some expenses are fixed, like a monthly mortgage or commuter fare. But others are more variable. Take a close look at grocery bills, streaming services, dining out, and shopping. Consider a town library card vs. buying books; making your own iced tea vs. spending $4 to have the barista pour one; and perhaps give up your gym membership in exchange for free online-taught workouts or jogging in a local park.

Recommended: The 50/30/20 Budget Rule

Creating a Financial Plan

Take time to consider your lifestyle and goals; you can do this solo or with a financial planner. Things to consider are your short-, medium-, and long-term aspirations (from funding a wedding to building a robust retirement fund), boosting an emergency savings fund, having an investment portfolio, and possibly an estate plan.

When you trim expenses and live below your means, you can sock money away to achieve all this and more.

Downsizing

Could you consider downsizing? Moving to a smaller space or more affordable city, trading in your gas guzzler for a greener car? These moves can reduce the cost of your monthly needs and deliver the wiggle room in your budget you seek.

You might also consider selling things you no longer want or need, whether that’s gently worn clothing, furniture sitting in your basement, or an iPad you haven’t touched in months. Depending on the item, you might be able to sell it on eBay, Etsy, Facebook Marketplace, Poshmark, or ThredUP, among others.

Eliminating Unnecessary Expenses

Get serious about axing unnecessary expenses. In addition to ditching a cappuccino-a-day habit, scroll through your monthly credit card statement and cancel any excess services. You may have forgotten how many streaming services you signed up for during the early days of the pandemic, or perhaps you are paying for a fax or postage service you almost never use, or a meal-kit plan that keeps raising its prices. Keep what you cannot part with, and trim the extras to bring your spending in line. It’s a key aspect of living within your means.

Having Multiple Streams of Income

While cutting costs is one way to help live beneath your means, another tactic is to increase your income. More money coming in, minus your current spending, should yield some spare cash. Perhaps you could take in a roommate for a while, or start a part-time gig (whether dog-walking or website design) in your free time. One of the benefits of a side hustle in bringing in extra funds.

Organizing Bills and Monthly Expenses

Above all, when learning to live below your means, stay organized at tracking money in and money out. As noted above, use an online finance tool (easy to find from your bank, in the app store, or online). This can help you always know where you stand financially as unexpected expenses and bills pop up.

Improving Your Money Mindset

Take stock of, and pride in, what you do day by day to live below your means. Recognize your progress, no matter how minor. Every dollar you don’t spend is helping you live below your means.

Hopefully, you can bid farewell to money shame (which can lead to overspending and still more money shame), FOMO spending, and splurge-related regrets. You will be more aware of where your money goes and hopefully on a path to building wealth.

The Takeaway

Living below your means, or spending less than you earn, is possible with the right budgeting steps and a healthy money mindset. Following a trimmer budget on your existing income can help you put away funds for important milestones, such as the down payment for your first house. It can also help you get past living paycheck to paycheck and accumulating credit card debt.

Interested in opening an online bank account? 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.


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.

FAQ

What is considered living above your means?

Living above or beyond your means is defined as spending more money than you earn. Three signs of this pattern: Running out of money and having to use credit cards to get through the month; not having an emergency fund; and not having money in savings.

Why is it important to live below your means?

Living below your means is important for your mind and your finances. Instead of overspending, you’ll be able to set money aside for tangible goals, from a savings cushion to a college fund. When you conserve money rather than blowing it, you can reap the reward of watching it grow, building your wealth, and reducing your financial stress.

Does living below your means deprive you of fun?

Living below your means does not deprive you of fun. You can save for and budget for splurges like vacations and dining out; the important part is making that intentional and not going into debt. You’ll also find plenty to see and do for free or at a low cost, from bike rides to free town concerts.

Photo credit: iStock/fotostorm

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.

SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, 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 Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found 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.

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

Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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.

SOBNK-Q424-061

Read more
Dec
07
2023

Financial Health: What It Is and 7 Ways to Improve It

By | Budgeting & Goals, Debt Payoff, Financial Independence, money | Comments Off on Financial Health: What It Is and 7 Ways to Improve It

When you think about your health, your mind likely goes first to your physical health and then maybe your mental and emotional health. But there is another key component to your overall well-being, and that’s your financial health.

While you may never discuss it with your doctor —- and may go months or years ignoring it —- your financial wellness has a significant impact on your daily life, as well as your future. What’s more, having poor financial health can in turn affect your physical and mental health.

But what exactly is financial health? How do you measure it? And, more importantly, how do you achieve it? Read on to learn all about financial health, from how to assess it to how to improve it.

Understanding Financial Health

Financial health is defined as the current state of your monetary situation, such as your credit, debt, savings, investments, and income. Being financially healthy means you can meet your monthly financial obligations, are on track to achieve your financial goals, and have enough cash in the bank to be able to absorb a financial setback.

Indications of Financial Health

Below are six signs that your finances are in good health:

•   You make enough money to cover your monthly expenses

•   You pay all of your bills on time

•   You have no debt or have debt that is manageable and being repaid on schedule

•   You’re saving enough to meet your short- and long-term goals

•   Your credit score is strong enough to help you qualify for whatever loans you might need at low rates

•   You feel comfortable with your financial situation

💡 Quick Tip: Want to save more, spend smarter? Let your bank manage the basics. It’s surprisingly easy, and secure, when you open an online bank account.

Metrics and Measurements

There are several core components of financial health. Here’s a look at how to measure the current state of your finances and discover areas where you may need improvement.

•   Your debt-to-income ratio: Carrying too much debt can be harmful to your financial health. Lenders use a calculation called debt-to-income ratio (DTI) that compares a person’s monthly debt payments to their monthly gross income to determine how manageable someone’s debt load is. Lower is generally better. Lenders often like to see DTI ratios of 36% or less.

•   Your credit score: Having a strong credit score is an indicator of good financial health. Factors that impact your score include amounts you owe on your debt accounts, repayment history, your credit mix, and the length of credit history. FICO® Scores range from 300 to 850. Having a score above 700 is generally considered good credit, while above 800 is considered excellent.

•   Your emergency fund: A key measure of financial health is having enough cash in the bank to weather unexpected setbacks like a medical emergency, car breakdown, or job loss. Experts generally agree that you should have an emergency fund with three to six months’ worth of living expenses saved.

•   Your retirement savings: Because there are so many variables, it’s hard to know exactly how much you need to save for retirement. One rule of thumb is to aim to save at least 1x your salary by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67. Check how your savings compares to ideal retirement savings by age to know if you’re on track or if you need to catch up.

Improving Financial Health

You might feel that achieving optimal financial health is a long way off. Don’t get discouraged. The good news is that implementing just a few good financial habits — such as tracking your spending and saving at least something each month -– can boost your financial well-being right away, and even more so over time.

Below are seven practical tips to help you move forward.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


1. Get on a Budget

When it comes to money in and money out each month, many of us leave it to chance — and hope that the numbers work out. Taking some time to actually crunch the numbers and set up a monthly budget, however, can help ensure that you are living within your means, spending in line with your priorities, and working towards your future goals.

A simple way to get started is to collect the last few months of financial statements and calculate the average amount coming in (after taxes) each month, and average amount going out each month. Subtract the latter from the former and see what you get. If you’re spending more than you are bringing in, or it’s so close there is little left over for saving, you may want to take a closer look at your spending.

There are many different types of budget but one simple guideline you might consider is the 50/30/20 budget. With the approach, you divide your monthly take-home income into three categories: 50% goes to needs (essentials), 30% goes to wants (nonessentials), and 20% to savings and debt repayment (beyond the minimum payment).

2. Track Your Spending

Keeping tabs on how much you are spending each month, and on what, is crucial to financial wellness. Indeed, tracking spending can be both eye-opening and motivating. You might notice, for example, that you’re spending more than you think for certain things, or that your spending is out of line with your priorities. You might also spot some immediate areas for improvement.

One easy way to track spending is to put a budgeting app on your phone (many are free for the basic service). Budgeting apps typically connect with your financial accounts (including bank accounts, credit cards, and investment accounts), track spending, and categorize expenses so you can pinpoint exactly where your money is going.

3. Create a Plan for Debt

Credit cards and similar high-interest consumer loans can drag down your financial health by making it harder to meet your monthly expenses — and even harder to save for future goals. Paying off high-interest debt is an important investment in your financial future.

If you have multiple balances racking up high interest charges, here are two popular strategies that can help you whittle them down to zero.

The snowball method: With the snowball method, you list your debts by size then put an extra monthly payment towards the loan with the smallest balance, while continuing to pay the minimum on the others. Once the smallest debt is paid, you put your extra payment towards the next smallest balance, and so on.

The avalanche method: Using the avalanche method, you list your debts in order of interest rate then focus extra payments towards the debt with the highest interest rate, while continuing to pay the minimum on the others. Once that debt is paid off, you put your extra payments to the debt with the next-highest interest rate, and so on.

4. Look for Ways to Cut Expenses

Trimming back your expenses helps you increase your disposable income, giving you more money to put toward your goals. It also makes it easier to stick with your budget and avoid going into debt.

You might comb through your expenses to look for some easy ways to cut back. While you may assume your “needs” costs are fixed, it may be possible to shop around for a better price on certain monthly essentials, like insurance or a phone plan. Or, maybe you don’t need to drive to work but could spend less by taking public transportation or carpooling with a coworker.

It’s often even easier to find places to cut back in your nonessential sending. For example, you might decide to get take-out less often and cook more nights a week, get rid of streaming services you rarely watch, and/or jog outside instead of going to a gym. Every dollar you save is one more you can put towards saving and debt repayment.

5. Automate Saving

Tackling financial health can feel overwhelming, and it’s not likely something you want to be thinking about all the time. Fortunately, it’s easy to put one of the best financial health-boosters — saving at least something each month — on autopilot.

There are two ways to do this: One is to have a portion of your direct deposit go right into a savings account. The other is to set up a recurring transfer from your checking to your savings on the same day each month (ideally, right after you get paid). You can’t spend what you don’t see. And, chances are, you won’t even miss it.

To help your savings grow faster, consider putting this money in an online savings account. Since online institutions generally have lower overhead than traditional brick-and-mortar banks, they tend to offer better rates and low (or no) fees.

💡 Quick Tip: Want a simple way to save more everyday? When you turn on Roundups, all of your debit card purchases are automatically rounded up to the next dollar and deposited into your online savings account.

Build Your Emergency Fund

Without an emergency cash cushion, an unexpected expense (like a car repair or large medical bill) or loss of income can quickly derail your finances. You may be forced to rack up expensive credit card debt. This can put you in a debt spiral that can be difficult to get out of, and take a long-term toll on your financial health.

Even if you do have an emergency fund, it’s wise to periodically check in to make sure it’s sufficient. A good rule of thumb is to keep at least three- to six-months’ worth of living expenses in the bank. (If you’re self-employed or work seasonally, you may want to aim for six- to 12-months worth of expenses.) Ideally you want to keep this money in a savings account that earns a competitive rate but allows you to easily access your money when you need it.

Invest More of Your Income

If you’re putting just a small percentage of your paycheck into your 401(k), or other retirement fund, consider stepping it by 1% or 2% right now. While 1% is a small percentage of your annual earnings today, after 20 or 30 years it can make a big difference in your account balance when you retire. That’s because the longer you give your money a chance to grow, the better.

You might also ask your employer to automatically increase your contribution by a set percentage each year. As your income increases, those extra percentage points of income likely won’t be missed — but they’ll have a big impact on your retirement savings. Your future self will thank you.

Recommended: When Should You Start Saving for Retirement?

The Takeaway

Just as with your physical health, establishing and maintaining good habits is key to achieving good financial health.

Some habits that can significantly boost financial wellness include setting up a simple budget, tracking spending, automating savings, building an emergency cash reserve, paying down expensive debt, and investing more of your earnings.

No matter what your income or current state of financial health, putting some smart money habits into place now can go a long way toward boosting your financial security, reducing stress, and building wealth over time.

Interested in opening an online bank account? 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.


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.

SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, 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 Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.

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.

SOBK1023034

Read more
Dec
01
2023

How Much Does It Cost to Start a Business?

By | Building Your Career, invest, Life & Career, money, personal_loan, SMB | No Comments

Looking to start your own business? You’re not alone. Some 76% of Gen Z and millennials dream of being their own boss, according to a 2022 Microsoft report.

While launching your own business allows you plenty of professional freedom, it can also be expensive. As you’re creating your business plan, one question you’ll likely face early on is, how much does it cost to start a business?

The average small business owner spends around $40,000 in their first full year. But that amount can vary based on a number of factors, including the size, type and location of your business.

Let’s take a closer look at the startup costs of different types of businesses and common ways to cover the expenses.

Key Points

•   Starting a business involves various costs, with the average small business owner spending about $40,000 in the first year.

•   Costs can vary significantly based on the business size, type, and location.

•   Typical expenses include payroll, office space, inventory, and licensing fees.

•   Funding options include personal savings, loans from friends and family, outside investors, and business loans.

•   Effective planning and understanding of startup costs are crucial for setting a solid financial foundation.

Typical Small Business Startup Costs

The old adage is true: You have to spend money to make money. And unfortunately, some of the biggest business costs can come during the startup phase, when you are defining your business goals, finding a location, purchasing domain names, and generally investing in the infrastructure.

In order to make sure your business is on firm financial footing, it’s important to estimate your small business startup costs in advance. Here are some common ones to keep in mind:

Payroll

Many small businesses start out as a company of one. But if you’re planning on having employees, salary will likely be one of the biggest costs you’ll have. After all, offering an attractive pay and benefits package can help you recruit and retain top talent.

In addition to wages, you might also want to budget for other types of payroll costs, such as overtime, vacation pay, bonuses, commissions, and benefits.

Office Space

No matter what your business is, you’ll need somewhere to work. Are you leasing a storefront, or will you buy a membership to a co-working space or startup incubator? If you’re planning to work from home, consider whether your new business will increase your internet or utility bills.

And don’t forget about the supplies you’ll need to do the work. Depending on your business, this could include things like computers, phones, chairs and desks, paper supplies, or filing cabinets.


💡 Quick Tip: Some lenders can release funds as quickly as the same day your loan is approved. SoFi personal loans offer same-day funding for qualified borrowers.

Inventory

If you’re starting a business that sells products, you’ll need to have some inventory ready to go. Calculating stock as part of your start-up costs ensures that you can buy your product in advance, so that you’re ready to serve customers from day one.

Licenses, Permits, and Insurance

Some businesses, especially storefronts and restaurants, require more legal leg work than others.

For example, if you’re starting a native-plants landscaping business, will you need a permit? If you’re starting a new bar, will you need a liquor license? Licenses and permits vary by city and state, but most come with an application fee.

Likewise, your new business may require one or more insurance policies to protect you in case of future litigation, so be sure to factor in the cost of monthly premiums.

And don’t forget about the costs associated with registering your business. Whether you plan to set up shop as a sole proprietorship, corporation, limited liability corporation or other business entity, you’ll need to pay a nominal fee. The amount will depend on the state where you operate.

And if you plan on enlisting the help of a lawyer, accountant or tax professional to get your business up and running, add those potential costs to your budget as well.

Advertising

Getting the word out about your new business is one of the most important things you can do to ensure that business starts off strong. Whether you want to advertise on social media or take out a billboard, your startup costs should reflect money you plan to put toward taking out ads for your business.

Awarded Best Personal Loan by NerdWallet.
Apply Online, Same Day Funding

Differences in Startup Costs Based on Industry

The actual cost of starting a small business can vary by business and industry. Here’s what you might be looking at if you want to start a few common types of small businesses.

Online Business Startup Costs

Like brick and mortar stores, the cost of doing business online varies depending on the type of business you have. But in general, you’ll need to budget for things like:

•   Web hosting service and domain name

•   Web design and optimization

•   E-commerce software

•   Payment processing

•   Content creation and social media

If you’re selling products, you will need to invest in inventory and shipping. If you’re providing services, you may need to hire employees. All of these costs can be significant.

However, one benefit of starting your small business online is that you may be able to keep other costs low. For example, if you can conduct business from home, you may not need to rent office space, which can be a major savings. If you’re able to do the work without purchasing inventory or hiring employees, the startup costs can be even lower.

Average startup cost: $500 to $20,000 or more (depending on your business)

Storefront Startup Costs

If your business idea requires a physical space, your startup costs might range from $1,000 for a small kiosk inside a mall or park to more than $69,000 for something like a home goods store.

Although $69,000 might seem like a daunting number, remember that many smaller, independently owned stores began with a much smaller budget.

Average retail startup cost: $39,210

Restaurant Startup Costs

If you’re betting on bringing in bank by selling your grandma’s famous bánh mì, you could be looking at startup costs of anywhere from $40,000 for a used food truck or cart to up to $3.7 million to buy a franchise restaurant. Typically, small restaurant costs, including coffee shops, fall somewhere in the $80,000 to $3000,000 range.

Average startup cost: $375,000

How to Finance Your Startup Business

Many who want to start a business are overwhelmed by the initial costs, but there are several ways to fund your passion project.

Friends and Family

Perhaps one of the most common ways to raise money for your small business is to ask friends and family to invest in you.

Friends and family loans can be ideal for financing a new small business because you can negotiate low-interest rates, flexible pay-back schedules, and avoid bank fees. Of course, borrowing money from friends and family can quickly become complicated by family drama, so make sure to agree on conditions before taking out a family loan.

Outside Investors

When we hear about startup companies, we frequently hear about so-called “angel investors” sweeping in to fully fund new businesses. But there are other practical ways to fund your small business with outside investors.

Some small businesses use crowdfunding platforms to find investors who each contribute a small amount, and others use startup funding networks to find investors looking to fund their specific type of business. Outside investors want to know that your business is likely to succeed, so you’ll need a solid business plan to land outside funders.

Personal Savings and Investments

Most people end up covering some of their small business start-up costs out of their own pocket. Self-funding your new business venture can be the most convenient option. After all, if you’re your own funder, you don’t have to worry about family drama or picky investors. And putting your own money on the line can be an extra motivation to make sure that your business is set up to succeed.

Of course, it can seem overwhelming to save up enough money to fund your small business. Luckily, there are simple strategies to effectively manage your money.

Business Loans

If you’re looking to purchase equipment, inventory, or pay for other business expenses, a business loan might make sense for you.

There are various types of small business loans available, each with different rates and repayment terms. Note that in some cases, lenders may be reluctant to give loans to a brand-new business. You might need to put up some type of collateral to qualify for funding.

Personal Loans

A personal loan can be used for just about any purpose, which can make it attractive for entrepreneurs who want to turn their passion project into a reality. These loans are usually unsecured, which means they’re not backed by collateral, like a home, car, or bank account balance.

Personal loan amounts vary. However, some lenders offer personal loans for as much as $100,000. Most personal loans have shorter repayment terms, though the length of a loan can vary from a few months to several years.

While there’s a great deal of latitude with how you use the funds, you might need to get your lender’s approval first if you intend on using the money directly for your business.


💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. One question can save you many dollars.

The Takeaway

Going into business for yourself can be personally and professionally fulfilling. But it can also be expensive, especially if you’re starting from scratch. Estimating your startup costs early on can help ensure you’re on solid financial ground from the get-go. Labor, office space, and equipment are among the biggest expenses facing many entrepreneurs, but there are smaller fees and charges you’ll likely need to consider.

Fortunately, small business owners have no shortage of options when it comes to covering startup costs. Dipping into personal savings, or asking friends and family to invest are popular choices. Taking out a business loan or personal loan is another way to help finance a new business. The money can be used for a variety of purposes, and that flexibility can be especially useful when you’re just starting out.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

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

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

SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, 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 Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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.

SOPL1123001

Read more
Nov
28
2023

What Is Buy Now, Pay Later?

By | Budgeting & Goals, money | Comments Off on What Is Buy Now, Pay Later?

Buy now, pay later (or BNPL) is a kind of installment payment plan. It can give consumers the option of making a big purchase today and spreading out payments over subsequent weeks or months, possibly interest-free. You may find these services offered under such names as Afterpay, Affirm, or Klarna.

Many of the country’s largest retailers — including Saks Fifth Avenue, Target, Walmart, and Amazon — offer buy now, pay later services. This kind of short-term financing can be helpful for shoppers hoping to buy an item over time, but there are pros and cons to purchasing this way.

Here, take a closer look at BNPL, its benefits and drawbacks, and whether it’s a good option for you.

What Is a Buy Now, Pay Later Plan?

Buy now, pay later is a way of purchasing an item in which you pay it off over time. It’s similar to layaway, but you get to take possession of the item right away rather than wait until it’s fully paid off.

For instance, if you are buying a new refrigerator with all the bells and whistles, using BNPL means you can get the fridge delivered ASAP and pay it off over time. With layaway, you’d have to wait until your series of payments were made and then, and only then, would you get the appliance.

A couple of other important points to note:

•   BNPL can come with fees and interest, depending upon the particular program you use. In this way, it may be similar to using a credit card and not paying the full balance off at the end of the month.

•   Most buy now, pay later services run a soft credit check (which won’t affect your score) or no credit check at all. Since they don’t require strong credit, these plans can be an appealing option for consumers with a poor credit rating or no credit history.

•   Buy now, pay later services make money by charging interest and fees on delinquent payments. These lenders also typically charge the merchants fees. Retailers are often okay with this because these financing programs allow customers to spend more at their store, either in person or online.

💡 Quick Tip: Don’t think too hard about your money. Automate your budgeting, saving, and spending with SoFi’s seamless and secure online banking features.

The Rise of BNPL Services

You may wonder how popular buy now, pay later services are? Currently, there are approximately 79 million Americans paying for merchandise this way, and research indicates that the percent of adults using this method has risen from 18% in summer of 2022 to 20% in summer 2023. The fact that one in five people in the US are paying by BNPL shows that this has become a popular option.

How Buy Now, Pay Later Works

If you are wondering how BNPL works, here’s an example. Say you want to buy a $300 Vitamix Blender, but you hesitate to fork over the entire purchase price upfront. When you click on one of these buy now, pay later apps or sign up at checkout, you can purchase and receive the item right away. You are usually able to break up the $300 into several (often four) equal, interest-free payments. Typically the first payment is due at checkout, and the remaining three are each due two weeks apart.

Process of BNPL

When opting for BNPL (a form of a short-term loan), you’ll likely be asked for some credentials, such as name, address, phone number, birthdate, and Social Security number. A soft credit check, which does not impact your credit check, is typically conducted to approve or reject your request to use these installment payments. If you get the green light, payments are typically deducted via your credit card, debit card, or bank account.

You will see this kind of BNPL option offered in various ways, whether you’re shopping for handmade jewelry on Etsy or booking a vacation.

BNPL and Fees

Short-term BNPL programs often don’t involve the consumer paying any interest or fees over, say, four payments. However, with longer-term BNPLs, interest may be charged, potentially at a high rate. In addition, if you don’t make payments on time, you can be hit with fees.

Common BNPL Providers

If you’re curious about buy now, pay later providers, here are some of the names you may see:

•   Addi

•   Affirm

•   Afterpay

•   Apple

•   Klarna

•   Laybuy

•   Limepay

•   Mastercard

•   PayPal

•   Revolut

•   Splitit

•   Sunbit

💡 Quick Tip: Bank fees eat away at your hard-earned money. To protect your cash, open a checking account with no account fees online — and earn up to 0.50% APY, too.

Advantages of Buy Now, Pay Later

Now that you know what is buy now, pay later purchasing, here’s a closer look at the pros of this kind of payment service.

Enhancing Purchasing Power

Buy now, pay later can allow you to buy something pricey without paying for it upfront. You get to take the item home and have the subsequent payments paid via credit card, debit card, or bank account. Unlike layaway plans, you don’t have to wait until the item is fully paid for before taking possession.

Saving Money

Some BNPL programs may offer consumers the opportunity to save on a major purchase. For instance, if you were to buy a new couch with BNPL and pay it off over four months, drawing funds directly from your bank account, you might fare better financially than if you bought it with your credit card and didn’t pay your balance in full. In this scenario, BNPL could help you avoid paying interest on your credit card.

By reading the fine print of a BNPL offer, you may be able to avoid interest and late fees, depending on which service you use.

Quick Approval

If you apply for BNPL, you typically don’t need to wait more than a few seconds to be approved. This can be considerably quicker than seeking a line of credit via other means.

Recommended: Can You Build Credit With a Debit Card?

Considerations Before Using BNPL

Now that you know about the upsides of BNPL services, dig into the potential drawbacks.

Potential for Overspending

This type of payment plan can be so appealing, it may entice people who are already struggling to pay their bills to splurge. It can be quick to apply and be approved, and consumers may overlook the possibility of being charged interest and fees (or even being put in for collection) if payments are late.

Paying Interest and Fees

If a BNPL plan is paid off as planned, the shopper may not incur any interest or fees. But if funds aren’t paid on time or a longer-term plan is chosen, an interest rate of up to 36% may be assessed. Late fees can run anywhere from one dollar to 25% of the purchase price. As you see, it can wind up being a very expensive proposition if you cannot stick to the original schedule of paying for your item.

BNPL and Your Credit Score

The other factor to consider is that BNPL may mean that you miss the opportunity to build your credit score. For instance, if you make on-time payments with a credit card, it can contribute to building your score. Those payments are reported to the credit bureaus, but many BNPL providers do not update the bureaus about funds they receive on-time.

Possible Loss of Rewards

You can earn credit card rewards and cash back if you use your plastic to pay for a purchase. When you pay via a BNPL service, you miss out on that opportunity.

Comparing BNPL With Other Payment Options

If you’re contemplating using BNPL on a major purchase, take a moment to compare options.

Credit Cards vs BNPL

As noted above, BNPL plans may be able to help you avoid credit card interest fees if you pay the amount due on time and don’t wind up adding it to the balance on your plastic.

However, these plans could encourage you to overspend and possibly add to your credit card debt. In addition, if you pay your BNPL bills on time, you may be missing out on the opportunity to build your credit score. You may also not receive the cash back or other rewards that could be coming your way when you use your credit card.

Personal Loans vs BNPL

If you are making a single big purchase and feel confident you can stick with the terms of paying off a buy now, pay later plan, that may be a fine option.

However, if you are, say, redoing a kitchen and need to replace every major appliance, you may not want to wade into that many BNPL payments. If you can’t wait to save the money from your salary either, you might want to look into a personal loan, which can offer a more affordable interest rate vs. credit cards, and help you pay for what you need.

Worth noting that you will likely have a hard credit check vs. a soft pull if you go the personal loan route.

Is BNPL Right for You?

To decide if a BNPL is right for you, consider the following:

•   Is a buy now, pay later offer encouraging you to buy something you really cannot afford right now?

•   Do you feel confident you can fulfill the schedule of BNPL payments, avoiding interest and fees?

•   Do you really want or need to take the item home now vs. later via layaway?

•   Is it a concern that you will probably miss out on the opportunity to build your credit by paying with a credit card?

•   Are you comfortable with using BNPL vs. a credit card and thereby not reaping any of the rewards you might get via using plastic?

The Takeaway

Buy now, pay later plans can allow people to make purchases that they might not be able to easily afford otherwise. If you purchase an item this way, you will be spreading your payments out over a number of weeks or even months. This can be an attractive option; most of the time, there will be no interest.

However, your installment payments won’t build your credit history, and if you miss payments, you’ll likely be stuck with fees and may damage your credit score.

Another way to afford a major purchase is to simply save up in advance by putting some money aside each month in your bank account until you have enough to pay in full.

Interested in opening an online bank account? 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.


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.

Photo credit: iStock/Mikolette

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.

SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, 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 Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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.

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 .

SOBK1023035

Read more

CATEGORIES

  • All
  • No categories
Close modal

See what SoFi can do for you and your finances.

Select a product below and get your rate in just minutes.

Student Loan
Refinancing

Personal
Loans

Online
Investments

Other

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or other eligible status, be residing in the U.S., and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates reserved for the most creditworthy borrowers. If approved, your actual rate will be within the range of rates at the time of application and will depend on a variety of factors, including term of loan, evaluation of your creditworthiness, income, and other factors. If SoFi is unable to offer you a loan but matches you for a loan with a participating bank, then your rate may be outside the range of rates listed above. Rates and Terms are subject to change at any time without notice. SoFi Personal Loans can be used for any lawful personal, family, or household purposes and may not be used for post-secondary education expenses. Minimum loan amount is $5,000. The average of SoFi Personal Loans funded in 2023 was around $33K. Information current as of 2/26/24. SoFi Personal Loans originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org). See SoFi.com/legal for state-specific license details. See SoFi.com/eligibility for details and state restrictions.

✝ 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.

©2024 Social Finance, LLC All rights reserved.
TLS 1.2 Encrypted
Equal Housing Lender