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Even though they don’t earn a traditional income from a paying job, retirees can still take out loans. Requirements for retirees to secure a loan might be a little stricter since they may not have traditional employment income, but it’s certainly possible. Loans might be useful when buying a home or a car, paying for a vacation, or covering an unexpected medical bill.

Below, learn loans for retired people — how they work, common types, and where to find them.

What Are Retiree Loans?

A retiree loan is any loan that you take out in retirement. It doesn’t refer to one specific type of loan, but rather a collection of loan types available to anyone in retirement, as long as they qualify.

Qualifying for a loan as a retiree can be more challenging than someone who is still employed full-time, since lenders like to see steady income. But many retirees have reliable sources of income outside of a job that can help them qualify.

Considerations for a Loan

When considering loans for retired individuals, lenders may consider a number of income sources, as well as an applicant’s debt-to-income ratio and credit score.

Retirement Income

One of the main sources of income for seniors who no longer work is their retirement accounts. If you are retired, you might receive regular payments from an IRA, 401(k), pension, and/or Social Security.

Collectively, these accounts make up your retirement income. And they may be significant enough to take out a retiree loan, like a personal loan, car loan, or even a mortgage.

Fixed Income

Retirees may have other sources of fixed income beyond their retirement income. For example, retirees might earn income from investments, earn annuity income, or receive spousal or survivor’s benefits. Retirees may also generate revenue from rental properties.

If any of these are limited sources of income — that is, they’ll run out eventually — the lender might require proof that you’ll at least receive that income for a set number of years. Without that proof, they might not factor in that source of income when determining loan eligibility.

Some retirees continue to work, whether full- or part-time or even as a contractor. If you’ve taken up a side hustle, like driving for a rideshare service or acting as a consultant in the field from which you retired, your 1099 income may also help when applying for a loan in retirement.

Assets

Retirees who have a significant portion of their money tied up in assets may be able to leverage those assets to secure a loan. For example, mortgage lenders might offer a securities-backed loan.

Securities-backed loans offer retirees liquidity without selling their assets. Instead, the lender can claim ownership of your assets — stocks, bonds, and real estate, for instance — if you default on your loan.

Because investment values fluctuate, a lender will likely consider only a reduced value of your assets (up to 70%). This protects them in the event that your assets decrease in value during the life of the loan.

Debt-to-Income Ratio

Lenders consider more than just your income when you apply for a loan, especially in retirement. They’ll also look at your debt — and thus your debt-to-income (DTI) ratio.

Your debt-to-income ratio is a calculation of all your monthly debts divided by your gross monthly income. This might include credit card debt, mortgage payments, car loans, personal loans, and even student loans.

For example, if your monthly debts total $2,000 and your monthly income is $10,000, your DTI ratio is 2,000 / 10,000. That’s 0.20, or 20%.

The higher your DTI ratio, the less likely a lender is to approve you for a loan. While requirements will vary by lender and the type of loan you’re applying for, you’ll likely have a harder time securing a loan if your debt-to-income is 50% or higher.

Credit Score

As with any other loan, lenders will also factor in your credit score when you apply for a retiree loan. By building your credit score, you increase your chances of getting a loan.

In terms of what affects your credit score, five key factors can influence your rating:

•   Credit utilization

•   Payment history

•   Credit history length

•   Credit mix

•   New credit

Retirees generally have longer credit histories, especially if they keep credit cards open and have been paying a mortgage for decades. By paying your bills on time, keeping your credit usage down, and resisting the temptation to apply for new credit cards, retirees may be able to raise their credit scores ahead of applying for a larger loan in retirement.

Where to Find a Retiree Loan

Retirees can look for loans in the same places that other borrowers do. Financial institutions like banks, credit unions, and online lenders generally offer a wide range of loans, from mortgages and car loans to personal loans and debt consolidation loans. Exploring loans online can provide retirees with more options and potentially quicker access to funds. Your own bank or credit union is a good place to start.

Where you get a retiree loan can also depend on the type of loan. For example, if you’re purchasing a new car, the dealership may help you find financing. When you work with a real estate agent to buy a home, they might put you in touch with a lender.

Common Retiree Loans

Retirees have access to a wide range of loans depending on their needs. Here are some of the most common types of retiree loans you might come across:

Home Equity Loan

A home equity loan allows you to borrow against the equity you’ve built in your house. You generally need to have paid off at least 15% to 20% of your home to have enough equity for a loan; the more you’ve paid off, the larger the loan could be.

You might use a home equity loan to fund a renovation project, medical payments, or even debt consolidation. But remember, your house serves as collateral, so it’s important to make your payments.

Reverse Mortgage Loan

Reverse mortgage loans are available to people who are 62 or older who have paid off most of their mortgage or own their homes outright. When you get a reverse mortgage, you retain the title to the home and don’t have to pay the loan (and interest) until the last surviving borrower has moved out permanently.

Reverse mortgage loans are not for everyone. Weigh the pros and cons of a reverse mortgage before moving forward.

Debt Consolidation Loan

Retirees who are struggling with various debts may choose to consolidate in a single loan, ideally at a lower interest rate. Consolidating your debt means only a single monthly payment, but it could extend the number of years it’ll take you to be debt-free.

401(k) Loan

If you’re strapped for cash ahead of retirement, you may be able to borrow from your 401(k) account balance before you start receiving distributions. Doing so has certain tax implications to review with your accountant.

Unfortunately, you cannot take out an IRA loan, though if you’re 59 ½ or older, you may be able to make early withdrawals penalty-free.

Personal Loan

You can take out a personal loan for almost anything — wedding costs, home improvements, even credit card debt consolidation. Personal loan interest rates and terms vary depending on the length of the loan.

Just make sure you have the right credit score for a personal loan before applying. Borrowers with poor credit may qualify, but the interest rates can be significantly higher.

Payday Loan

Seniors in retirement may also take out payday loans in an emergency, but keep in mind that there are a lot of risks with payday loans, including high costs.

Requirements for Getting a Personal Loan as a Senior Citizen

Lenders have similar requirements for all applicants, including retirees. The notable difference is that your sources of income will be different from an employed individual receiving a steady paycheck.

Here’s what lenders will generally look for when deciding to approve your loan application:

•   Your sources of income (retirement distributions, Social Security, investment revenue, part-time work, etc.)

•   Age (some lenders may not give out loans to borrowers who are 75 or older)

•   Credit score

•   Debt-to-income ratio

•   Collateral or assets

The Takeaway

Retiree loans refers to any loan you take out in retirement. Depending on your needs and financial goals, it may make sense to apply for a personal loan, home equity loan, 401(k) loan, debt consolidation loan, or other loan type. Retiree loan requirements are similar to those of any other borrower; you’ll just have to demonstrate other sources of income since you’re no longer employed full-time. You’ll also usually need a low debt-to-income ratio and a solid credit score.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

What are retiree loans?

Retiree loans are any type of loan you get in retirement. Retirees may take out personal loans, mortgages or reverse mortgages, home equity loans, and even debt consolidation loans.

What are the requirements for a retiree loan?

Requirements for a retiree loan are similar to those of other borrowers. Lenders will need to see all your sources of income, and you’ll also need a low debt-to-income ratio (generally below 50%) and high credit score (requirements vary by type of loan). You’ll also need assets to back up a secured loan.

Where can I get a retiree loan?

Retirees can look for loans anywhere that other borrowers might apply for a loan. Common retiree loans include home equity loans, 401(k) loans, debt consolidation loans, and personal loans. Because retirees typically no longer have a traditional source of income (i.e., a paying job), they may have to meet additional requirements to qualify for a loan.

Photo credit: iStock/SDI Productions

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.

SOPL-Q425-037

Adding either a guarantor or cosigner to a loan can increase your odds of approval. But while these supportive roles are similar, they are not exactly the same.

Both a guarantor and a cosigner agree to cover a borrower’s debt if the borrower fails to repay what they owe. The key difference is that a cosigner is responsible for the loan right away, whereas a guarantor isn’t responsible for repayment unless the borrower fully defaults on the loan.

Whether you’re looking for a cosigner or guarantor, or thinking of acting as one or the other, there are some key differences both parties need to understand. Here’s a closer look at guarantors versus cosigners.

Is a Guarantor the Same Thing as a Cosigner?

The short answer: No.

Guarantors and cosigners fulfill similar roles: They help make it possible for a primary applicant with poor or limited credit to be approved for a loan by agreeing to take responsibility for the loan should the primary borrower become unable to pay. (These terms can also come into play when someone without a strong credit or income history is looking to rent an apartment.)

But there are some key differences between a guarantor and a cosigner. The biggest is how soon each individual becomes responsible for the borrower’s debt. A cosigner is responsible for every payment that a borrower misses. A guarantor, on the other hand, only assumes responsibility if the borrower falls into default on the loan.

Acting as cosigner versus a guarantor also impacts your credit in different ways. In addition, which role you take on affects how much access you have to information about the loan.

What Is a Guarantor?

A loan guarantor is someone who promises to pay a borrower’s debt if the borrower defaults on their loan obligation. This reduces the lender’s risk and, as a result, they might offer guarantor loans to applicants who wouldn’t qualify on their own.

Unlike a cosigner, a guarantor isn’t responsible for every payment that a borrower misses. They only need to step up when the primary borrower has defaulted on the loan. A default means a borrower has failed to repay the funds according to the initial agreement. With most consumer loans, this typically involves missing multiple payments for several weeks or months in a row.

Simply becoming a guarantor will generally not impact your credit reports and credit scores. But if the loan falls into default, leaving you responsible for all outstanding payments, it will be added to your credit report. If you fail to repay the money owed, your credit rating could be negatively impacted.

Being a guarantor for a rental property is similar to being a guarantor on a loan — it involves you vouching for the tenant. If the tenant is unable to meet their obligations under the tenancy agreement, you (the guarantor) will be legally bound to cover the overdue rent or any damage to the property.

As a guarantor, you have the responsibility of repaying the debt, but you don’t have any legal right to the loaned money, anything purchased with the loan proceeds, or to live in the dwelling if you’re acting as a guarantor on a lease.

What Is a Cosigner?

A cosigner is someone who applies for a loan with someone who may not qualify on their own and takes equal responsibility for the account. For example, many parents act as cosigners on their children’s student loans, since young people tend not to have long and robust credit histories.

Unlike a guarantor, a cosigner’s liability begins right away. Cosigners are responsible for any payments that the borrower misses. If the borrower defaults, the cosigner is also responsible for the full amount of the loan.

The debt account and payment history will appear on both the primary borrower’s credit report, as well as the cosigner’s credit report. And, depending on how the primary borrower manages the account, the loan could help or hurt both the primary borrower’s and the cosigner’s credit scores.

If the primary borrower defaults on the loan, lenders and collections agencies can try to collect the debt directly from the cosigner.

Although the cosigner is legally obligated to make payments if the borrower can’t, they have no rights to the loan proceeds.

A cosigner is not the same thing as a co-borrower in that they don’t have any claim on the loaned asset. Also, unlike a co-borrower, a cosigner’s intention is to boost the creditworthiness of the borrower, not to jointly repay the debt.

Recommended: Getting a $15,000 Personal Loan With Good or Bad Credit

Guarantor vs Cosigner: The Similarities

Both guarantors and cosigners pledge their financial responsibility for the debt to strengthen the primary borrower’s application. And, in both cases, they may become responsible for repaying the debt.

Another thing guarantors and cosigners have in common is that they do not have any right to the loaned money, or assets purchased with the money (one exception: the cosigner on a lease may be entitled to live on-site).

Guarantor vs Cosigner: The Differences

The main difference between a guarantor and a cosigner is the level of legal liability for the debt.

A cosigner is responsible for repayment of the debt as soon as the agreement is final and can request to have loan statements sent to them, so they’ll know right away if any payments have been missed. A guarantor, by contrast, is only responsible for repayment of the debt if the primary borrower defaults on the loan and will only be notified at that point.

There are also differences in terms of credit impacts. A cosigner will have the loan added to their credit report and any positive or negative payment information that the lender shares with the consumer credit bureaus can have a positive or negative impact on their credit. Becoming a guarantor, on the other hand, will not have an impact on your credit unless the primary borrower defaults on the loan.

Recommended: Guide to Unsecured Personal Loans

Personal Guarantor vs Cosigner: Pros and Cons

If you are the primary borrower and deciding between a guarantor and cosigner, the choice may come down to which kinds of loans are available (guarantor loans can be harder to find than loans allowing a cosigner) and what kind of agreement you’re entering into. If you’re signing a lease with a roommate, that person should be a cosigner rather than a guarantor.

If you’re thinking of acting as a guarantor versus a cosigner, here’s a look at the benefits and drawbacks of each.

Pros and Cons of Being a Guarantor

Pros:

•   Helps a borrower obtain a loan more easily

•   Can help a borrower get approved for a larger loan amount or more favorable rates and terms than they would be able to get on their own

•   Helps a borrower build credit and learn how to manage credit responsibly

Cons:

•   Your credit score could be impacted if the borrower defaults on the loan

•   You’ll be liable for the full debt if the borrower defaults on the loan

•   Should the borrower default, your ability to obtain another loan for a different use may be limited

Pros and Cons of Being a Cosigner

Pros:

•   Helps a borrower obtain a loan more easily

•   Can help a borrower get approved for a larger loan amount or more favorable rates and terms than they would be able to get on their own.

•   Helps a borrower build credit and learn how to manage credit responsibly

Cons:

•   Your credit could take a hit if the borrower pays late or misses payments and the lender reports the delinquency to the credit bureaus

•   You will need to make any payments the primarily borrower misses

•   If need to apply for credit for yourself, the lender may deny you because your current debt levels are too high

Recommended: How Do I Get the Best Interest Rate on a Loan?

Do Guarantors Get Credit Checked?

Yes — as part of the application process, the lender will carry out a credit check on you. However, this is normally a “soft” credit check which will not be visible to other companies and won’t impact your credit score. Generally, a guarantor will need a robust credit and income history to make up for the applicant’s shortcomings.

When Is a Cosigner or a Guarantor a Good Option?

Recruiting a cosigner or guarantor can be a good option if you have low credit scores or a limited credit history and are looking to get a personal loan, student loan, mortgage, auto loan, or other type of credit. This can not only help you qualify for the loan but also give you access to better rates and terms than you could get on your own.

Taking out a loan with a guarantor or cosigner — and making regular on-time payments on that loan — can help you build your credit. This can help you qualify for more types of loans and better rates in the future without a cosigner or guarantor.

Just keep in mind that if you ask a trusted friend or family member to act as a cosigner or guarantor and you fail to make timely payments, you could put a significant strain on your relationship. You will also be putting that person in a difficult financial position.

Questions to Ask a Guarantor or Cosigner

One of the weightiest parts of deciding to use a cosigner or guarantor is having to ask someone to do you this favor, which is a big one. It’s important that there’s mutual trust in the relationship between the borrower and cosigner or guarantor, since their actions can have an impact on each other’s finances.

Some questions to ask your cosigner or guarantor before entering an agreement include:

•   Do you have a good credit score and solid financial standing?

•   Are you willing to take on this legal and financial responsibility?

•   What will our long-term agreement be if I, as the primary borrower, fail to make repayments and force you into the legal obligation to do so?

Personal Loans That Allow You to Use a Cosigner or Guarantor

Not all lending institutions allow you to apply for a personal loan with a cosigner or a guarantor. Some only allow co-borrowers. If you aren’t able to qualify based on your own creditworthiness, you may consider asking the lender if they’ll allow a cosigner or guarantor.

Getting a personal loan with a cosigner or guarantor can make it much easier to qualify for a loan because, in the eyes of the lender, a second person agreeing to take on responsibility for the loan lessens the risk of lending to you.

The Takeaway

Guarantors and cosigners fulfill similar roles for a loan applicant, strengthening the application by taking on some level of financial responsibility for the loan.

A cosigner takes on responsibility for your payments right away, while a guarantor won’t get involved in the loan unless you end up missing several payments and are considered in loan default.

Either option could help you qualify for a personal loan with lower interest rates and better terms than you might be able to get on your own. Note: SoFi does not currently offer personal loans with guarantors.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

Does being a guarantor affect your credit?

Yes, being a guarantor can impact your credit. It can have a negative effect on your credit if the borrower misses payments. It can also affect your ability to secure future loans since it increases your debt-to-income ratio.

What are the disadvantages of being a guarantor?

Being a guarantor can add to your debt-to-income ratio, which can lower your credit. Also, if the borrower defaults, you are liable for the loan, and your credit can also be negatively impacted.

Are guarantors and cosigners the same thing?

Both guarantors and cosigners are responsible for a loan along with the other person who took out the funds, but a guarantor is only liable if the primary borrower defaults. A cosigner is responsible right away.

Photo credit: iStock/FreshSplash

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.

SOPL-Q425-031

Many Americans are finding tiny houses, or those that measure several hundred square feet in size, are a great way to live. They can be both economical and eco-friendly, and some people say they simplify life, which can bring many benefits.

If you’re curious about tiny houses or are currently contemplating one, it’s important to know that financing these dwellings may be different than securing a traditional mortgage. Here’s a guide to tiny houses and how to secure funds to buy or build one.

What Is a Tiny House?

A tiny house is often defined as a home that is between 100 and 400 square feet. In contrast, the median size of a single-family American home is currently 1,834 square feet as of October 2025, according to the Federal Reserve Bank of St. Louis data. That’s almost five times bigger than the biggest tiny home. Here are some other facts to know about this kind of dwelling.

•   Owners live in their tiny homes themselves, rent them out, use them as a small vacation home or even build them as an accessory dwelling unit (ADU) on the same lot as their primary residence. Tiny homes may be on wheels, or they may sit on a fixed foundation.

•   Prefab homes can be delivered complete to the site, or there are modular homes that require some assembly on site. Those who would rather build their own house can hire an architect or draw up plans to their own specifications. There are small homes in all kinds of styles, from a classic Colonial or Victorian to a ranch style or A-frame or ultra-modern design.

•   Local zoning rules will determine whether or not a person can build or move into a tiny home. And building codes will determine things like ceiling height.

•   Tiny houses may not have good resale value since they are such a specific type of home and are often highly customized. Before buying a tiny house as an investment property, it might be wise to consult a real estate investment professional.

Tiny House Pricing

In 2025, the average sales price for a single-family home was about $534,100, according to U.S. Census Bureau data. Tiny homes cost quite a bit less, with an average of $82,500. That price can vary up and down depending on the size of the home, materials used, and amenities (yes, some tiny homes have luxe, spa-style bathrooms, for example). The price of the building is not the only thing to consider.

Buyers of tiny homes must factor in the price of buying or leasing land on which to place the home if they don’t already own it, as well as the cost of hooking it up to utilities.

If the tiny home is on a foundation, there may be state and local property taxes to pay. If the tiny house is on wheels, though, there likely won’t be property tax assessed.

Recommended: Is Buying a House a Good Investment?

Financing the Land

If property needs to be purchased to have a place to put a tiny home, an option for financing is a land loan. There are three types of land loans: raw land loans, unimproved land loans, and improved loans.

•   Raw land loans are for land that’s completely undeveloped with no electricity, roads, or sewer access.

•   Unimproved land loans are for properties that have more access to amenities like utilities, but lack utility meters.

•   Improved land loans are for land with access to roads, water, and electricity.

The size of the down payment and the interest rate of the loan will depend on what type of loan is needed. For example, lenders may consider raw land to be a riskier option than improved land and require a bigger down payment and higher interest rates.

Mortgages for Tiny Homes

Qualifying for a home loan for a tiny home may be tricky. Some lenders may not be willing to offer first or second mortgages for tiny home financing. However, if a tiny home has a foundation and complies with local building codes, it may qualify for certain mortgages.

Tiny homes may also qualify for what is known as a “chattel mortgage,” a mortgage for moveable personal property. The tiny home acts as security for the loan, and the lender effectively becomes the owner of the tiny home until the loan is paid off and ownership is transferred back to the borrower.

This differs from traditional mortgages that are secured by a lien on the property. Because the size of the loans are typically small, chattel mortgages may have relatively short terms, though interest rates may be relatively high.

Personal Loans

A personal loan can allow individuals access to money that they can use for any personal, family, or household purpose, from paying off credit cards to an effective tiny house loan. Depending on the lender, loan amounts can range from a few thousand dollars to $100,000. When the applicant is approved for a personal loan, they’ll receive the loan amount in a lump sum and pay it back in installments with interest.

Personal loans may be secured or unsecured. Unsecured loans are not backed with any collateral, and the interest rates currently range from about 6% to 36%, depending largely on the borrower’s credit score.

Secured loans are backed by collateral, such as personal savings, a car, or another home owned by the same borrower. They typically come with a lower interest rate than their unsecured counterparts. However, it’s important to note that if a personal loan is defaulted on, the borrower’s assets could be seized by the lender to repay the debt.

Home Equity Loans

The equity someone may have built up in a home they already own can be tapped to finance a tiny home for use as a vacation home, rental property, or ADU. A home equity loan is a fixed amount of money secured by a borrower’s home.

Usually, up to 85% of the equity accumulated in a home can be borrowed, though actual loan amounts will also depend on the applicant’s income and credit history. The home equity loan is repaid with monthly payments over a fixed term. And if the borrower fails to repay, the lender can foreclose on the house.

A home equity line of credit (HELOC) may be another option to finance a tiny home. HELOCs differ from home equity loans in that the borrower doesn’t receive a single lump-sum payment from the lender.

Rather, a HELOC gives the borrower access to a line of credit that can be drawn down, paid back, and drawn down again, if need be, within a certain time period. The HELOC is secured by the borrower’s home, so as with a home equity loan if the debt is not paid, the lender can use the home as collateral.

Loans From Tiny House Builders

A tiny house builder or contractor may be able to help secure financing through unsecured loans based on an applicant’s credit score, or secured loans backed by the value of the tiny home. These tiny-house loans may have longer terms and lower starting interest rates than personal loans, but they may require a downpayment.

RV Loans

If the tiny house has wheels and is certified as an RV by the Recreational Vehicle Industry Association, an RV loan may be another option for financing. Online lenders, banks, and credit unions may all offer RV loans. In many cases, the tiny house will serve as collateral for the loan, the same way a car would serve as collateral in an automobile loan.

Recommended: Guide to Buying, Selling, and Updating Your Home

The Takeaway

If you’re in the market for a tiny house, you may need to think beyond traditional mortgages. Home equity, HELOC, and personal loans, among other options, may be available forms of financing that can set you on your way to owning the tiny house of your dreams.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

How big is a tiny home?

Tiny homes are typically between 100 and 400 square feet.

How much does a tiny home cost?

Currently, the average cost of a tiny home is about $82,500, but there’s considerable variation depending on location, size, style, and other factors.

How to afford a tiny home?

There can be several ways to finance a tiny home, including possibly a mortgage loan, home equity loan, HELOC, builder loan, RV loan, or personal loan.

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

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

SOPL-Q425-029

If you’re looking to start or grow a side hustle or small business, you might think a business loan is the right next step. A personal loan, however, is another popular financial product that you also might be able to use. For instance, by using it to free up some cash elsewhere in your budget, you could put more of your income toward funding your business.

Because there are potential benefits and disadvantages to both types of financing, it’s important to understand the differences. You’ll find that information here and be better equipped to decide whether a business loan vs. personal loan might work best for you.

What Is a Personal Loan?

A personal loan is a source of financing that a borrower typically can use for just about any legal personal purpose. That said, you typically cannot use the money from a personal loan directly for your business. You might instead use the lump sum to consolidate credit card debt, which could free up funds in your overall budget to put back into your business.

Typically, you’ll find unsecured personal loans, with the borrower agreeing to pay back the full amount, plus interest, in fixed monthly payments within a predetermined time frame.

Some lenders also offer secured personal loans, however,which means some form of collateral is involved. Also, some offer personal loans with variable interest rates.

How Personal Loans Work

When you apply for a personal loan, you can expect the lender to review your personal financial information — including your credit score, credit reports, and income — to determine your eligibility. In general, the better your credit, the better your chances of receiving a lower interest rate.

Personal loan amounts vary, but some lenders offer personal loans for as much as $100,000.

Although most personal loans have shorter repayment terms, the length of a loan can vary from a few months to several years. Typically, they last from 12 to 84 months.

What is a Business Loan?

A business loan is a type of financing used specifically to pay for business expenses. It could be used to purchase equipment or inventory, for example, or to fund a new project.

There are many kinds of small business loans available — with different rates and repayment terms — including Small Business Administration (SBA) loans, equipment loans, micro loans, and more. Rates, terms, and loan requirements also can vary significantly depending on the lender.

How Business Loans Work

Applying for a business loan tends to be more complicated than getting a personal loan. For one thing, you’ll likely have to submit more paperwork to back up your application, including your business’s financial statements and an up-to-date business plan. The lender also usually will want to review your personal and business credit scores. And you may have to be more specific about what the loan will be used for than you would with a personal loan.

If your business is brand new, lenders may be reluctant to give you a business loan. Some lenders might ask you to put up some type of collateral to qualify.

Differences Between Business and Personal Loans

There are several factors you’ll want to understand when considering the difference between a personal loan vs. a business loan, including the loan costs, how you plan to use the money, and how much you hope to borrow. Here’s a look at a few basic differences.

Cost Differences Between Business and Personal Loans

Whether you’re considering applying for a business loan or a personal loan, it’s important to be clear about how much it could cost you upfront and over the life of the loan.

Interest Rates

Interest rates for business loans can be lower than for the interest rates for personal loans, but the rates for both can vary depending on the type of loan, the lender you choose, and your qualifications as a borrower.

Fees

Fees also can affect the upfront and overall cost of both personal and business loans, so it’s a good idea to be clear on what you’re paying. Some of the more common fees for business loans and personal loans that you might see include origination, application, packaging, and underwriting fees, and late payment and prepayment penalties.

Some fees may be subtracted from the loan amount before the borrower receives the money. But fees also may be folded into a loan’s annual percentage rate (APR) instead, which can increase the monthly payment.

Down Payment

Business loans may be available for larger amounts than a personal loan. For a larger business loan — a substantial SBA loan or commercial real estate loan, for example — you could be required to come up with a down payment. This amount can add to your upfront cost. However, just as with a mortgage or car loan, a larger down payment can help you save money over the long term, because you’ll pay less in interest.

Whether you’ll need a down payment, and the amount required, may depend on your individual and business creditworthiness.

Different Uses for Business and Personal Loans

One of the biggest differences between business vs. personal loans is the way borrowers can use them.

•   A business loan can be used to finance direct business costs, such as paying for supplies, marketing, a new piece of equipment, business debt consolidation, or a business property. But it typically can’t be used for indirect business costs, which means a borrower can’t pay off personal debts with the money or buy personal property with it.

•   Some business loans have a very specific purpose, and the borrowed money must be used for that purpose. For example, if you get an equipment loan, you must buy equipment with it. Or, if you get a business car loan, you must buy a business car with the money.

•   With a personal loan, you have tremendous flexibility in how you use the loan, although that usually does not include business purposes. Rather, you can use a loan to pay off credit card debt, fund a home improvement, or pay an unexpected medical or car repair bill. Personal loans are typically smaller than business loans, and they generally come with a shorter repayment term. It can be helpful to have a clear intent for how the money will be spent and to keep separate records for business and personal expenses.

Differences When Applying for Business and Personal Loans

The criteria lenders look at can be very different when approving a small business loan vs. a personal loan. Here’s what you can expect during the application process.

Applying for a Personal Loan

When you apply for a personal loan, your personal creditworthiness usually plays a large role in the application and approval process.

•   Lenders typically will review a borrower’s credit scores, credit reports, and income when determining the interest rate, loan amount, and repayment term of a personal loan.

•   Generally, you can expect to be asked for a government-issued photo ID, your Social Security number, and/or some other proof of identity.

•   You also may be asked for proof of your current address. And the lender will want to verify your income.

Applying for a Business Loan

When you apply for a business loan, your personal finances still will be a factor, though other aspects of your application will be reviewed carefully.

•   The loan underwriters also will evaluate your business’s cash flow, how long you’ve been in business, your profitability, the exact purpose of the loan, trends in your industry, your business credit score, and more.

•   The lender may ask for a current profit-and-loss statement, a cash-flow statement, recent bank statements and tax returns for the business, your business license and a business plan, and any other current loan documents or lease agreements you might have.

•   You also will have to provide information about your collateral if you are applying for a secured loan.

Recommended: Understanding Credit Score Ranges

Structural Differences in Business and Personal Loans

Knowing the differences in how personal loans vs. business loans are structured could help you decide which is right for you and your business. A few factors that might affect your choice include:

Loan Amount

A business loan may be more difficult to apply for and get than a personal loan, especially if your business is a startup or only a few years old. But if you can qualify, you may be able to borrow more money with a business loan. While personal loan amounts typically top out at $50,000 to $100,000, some SBA loans can go as high as $5.5 million.

Loan Length

You’ll likely find personal and business loans with both short and long repayment terms. But generally, personal loans have shorter terms (typically one to seven years), while some business loan repayment periods can be up to 25 years.

Tax Advantages

If you have a business loan, deducting the interest you pay on the loan may be possible when filing income taxes if you meet specific criteria.

With a personal loan, it might get a little more complicated. If you use the borrowed money only for business costs, you may be able to deduct the interest you paid. But if you use the loan for both business and personal expenses, you would only be able to deduct the percentage of the interest that was used for qualifying business costs.

And you should be prepared to itemize deductions, documenting exactly how you spent the money. Your financial advisor or tax preparer can help you determine what’s appropriate.

Support

Along with the traditional banking services you might expect to get with any type of loan, a business loan also may come with operational support and online tools that can be useful for owners and entrepreneurs.

Risk

When you’re deciding between a personal vs. business loan, it’s also a good idea to think about what could happen if, at some point, the loan can’t be repaid.

•   If your business defaults and it’s a business loan, the impact to your personal credit would depend on how the loan is set up.

◦   If you’re listed as a sole proprietor or signed a personal guarantee, it’s possible you could be sued, your personal and/or business credit scores could take a hit, and your personal and business assets could be at risk.

◦   If your business is set up as a distinct legal entity, on the other hand, your personal credit score might not be affected — but your business credit score could suffer. And it could be more difficult for you to take out a business loan in the future.

Pros and Cons of Business Loans

There are advantages and disadvantages to keep in mind when deciding whether to apply for a business loan vs. personal loan.

•   A business loan can be more difficult to get than a personal loan, especially if the business is new or still struggling to become profitable.

•   If you qualify for a business loan, you may be able to borrow a larger amount of money and get a longer repayment term.

•   A business loan also can make it easier to separate your business and personal finances. {Personal loans typically can only be used for personal expenses, as the name indicates.)

•   There could be fewer personal consequences if the business defaults on the loan.

Recommended: Can You Refinance a Personal Loan?

Pros and Cons of Personal Loans

A personal loan vs. business loan can have advantages and disadvantages to consider.

•   Personal loans can offer borrowers more flexibility than business loans in terms of usage, though those uses must typically be for personal expenses, such as paying for a home renovation or a vacation.

•   They’re generally easier to qualify for and may have lower interest rates.

•   One major hurdle may be that you cannot use them for any business expense in most situations. You could use them to free up cash in your budget which you might then apply to a business purpose.

Is a Business or Personal Loan Right for You?

Considering the differences between a personal loan and a business loan can help you decide which is right for your needs. You may want to do some online research, compare rates and terms, and/or ask a financial professional or business mentor for advice before moving forward with this important decision. Here are some things to think about as you look for a loan that’s a good fit for your personal and professional goals.

A business loan may make sense if:

•   You’re seeking a lower interest rate and/or repayment term.

•   You want to keep personal and business expenditures separate.

•   You’ve been successfully running your business for a while.

•   You need more money than you can get with a personal loan.

•   You hope to build your business credit.

•   You want to limit your liability.

A personal loan may make sense if:

•   Your goal is to use the money for personal purposes, which might free up funds in your budget for business expenses.

•   You plan to use the money for both business and personal expenses.

•   You can find a personal loan with a lower interest rate than a comparable business loan, and the lender approves the loan for business expenses.

•   You want to get the money as quickly as possible.

•   You are seeking a shorter repayment term.

•   You don’t want to secure the loan with collateral.

•   You feel confident about your personal ability to repay the loan.

Recommended: Can I Pay Off a Personal Loan Early?

The Takeaway

If you’re seeking funding to start or grow your business, you may decide to apply for a business loan. Another approach: You might apply for a personal loan, which could be used for personal purposes, freeing up money in your budget that could go toward your business. Personal loans are typically easier to apply for and offer quicker access to funds, but often at a somewhat higher interest rate and shorter term vs. business loans. Also, business loans usually offer significantly higher loan amounts and the interest can be tax-deductible. It’s worthwhile to consider the tax and credit implications of each type of loan too, among other factors.

FAQ

Are business loans more expensive than personal loans?

Business loans typically have lower interest rates than personal loans. However, these two loans aren’t interchangeable: one is for business uses, the other for personal expenses.

Can I use a personal loan for business?

Most (but not necessarily all) personal loans can be used for just about any personal use. Check the fine print, and follow the lender’s guidelines.

Are startup loans personal loans?

There are a few different options for funding a startup, including SBA loans, family loans, or crowdfunding platforms. But if you have good credit and are confident you can make the monthly payments, taking out a personal loan could be an effective strategy for funding a startup, if the loan permits that usage.

Photo credit: iStock/MicroStockHub

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

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

SOPL-Q425-040

College cost of attendance is an estimate of the total cost of attending college for one academic year. It includes the cost of fall and spring tuition, books, supplies, room and board, transportation, loan fees, and other miscellaneous expenses.

Here’s how to calculate the cost of attendance, why it matters, and how it can affect financing an education.

The Cost of Attendance for College

The cost of attendance (COA) for college is an estimate of the total cost of attending a college for one year, and is often referred to as the “sticker price.” It includes both direct expenses (those billed by the university like tuition, fees, and on-campus housing) and indirect expenses (those not billed by the school such as books, supplies, transportation, and personal expenses).

Cost of attendance is used to help colleges determine the amount of financial aid a student is eligible for, including grants, scholarships, and federal student loans.

💡 Quick Tip: You can fund your education with a competitive-rate, no-fees-required private student loan that covers up to 100% of school-certified costs.

The Difference Between Cost of Attendance and Tuition

Tuition covers the actual cost of academic instruction. COA, on the other hand, includes other expenses the student will likely incur while attending college. COA includes things like room and board, books and supplies, and transportation costs.

Schools are required to publish the COA on their website so the information is readily accessible to students. Schools also generally publish more than one COA. For example, state universities may list a COA for in-state vs. out-of-state students. Most colleges will provide multiple COAs based on different student scenarios, such as living on or off campus.

The COA is calculated by financial aid offices using previous student spending, surveys, and local cost data. Your actual costs may be different than the COA.

What Is the Average College Cost of Attendance?

According to the College Board, the average cost of attendance at public four-year institutions in 2025-2026 was $30,990 for in-state students and $50,920 for out-of-state students. The average cost of attendance at private nonprofit four-year institutions in 2025-2026 was $65,470.

Think of COA as a rough budget for the year. It includes tuition and fees, along with expenses outside the classroom like food, transportation, and supplies.

According to The College Board, the average published cost for tuition and fees for the 2023-24 school year was $11,260 for students at public four-year institutions with in-state tuition and was $41,540 for students at private nonprofit four-year universities.

Recommended: What is the Average Cost of College Tuition?

What Does Cost of Attendance Include?

A college or university’s COA includes:

•  Tuition (the amount you owe to attend college for classes and instruction)

•  Fees (additional charges to cover the costs of certain services)

•  Housing (the cost of living on campus)

•  Meal plans (the cost to dine on campus)

•  Institutional health insurance (if required)

•  Indirect expenses (textbooks, a reasonable amount for a laptop, local transportation, and other personal expenses).

Recommended: Ways to Cut Costs on College Textbooks

Finding a School’s Cost of Attendance

Hunting down a university’s COA is an important first step in calculating the expenses around college and how to pay for it. Since legislation passed in 2011, it’s mandatory for U.S. two-year and four-year institutes to share the COA on their websites. However, that doesn’t mean it’s always easy to find.

One way to look for the COA online is to simply put “[NAME OF SCHOOL] + COST OF ATTENDANCE” into a search engine.

Or anyone can go the old-school route and call a college’s financial aid office to get the information over the phone.

A school will also include its cost of attendance on a student’s financial award letter.

College Cost of Attendance List

The COA for colleges can vary widely depending on a school’s location, whether it is private or public, and other factors. Some programs may have additional fees and costs (like lab fees) which could increase the cost of attendance for certain majors or programs.

The following table provides an overview of the published COA for undergraduate students living on-campus at several schools around the country during the 2025-2026 school year. Costs are for first-year undergraduates and assume the student will be living on campus.

*2022-2023 school year COA.

Can I Borrow More Than the Cost of Attendance?

No, you typically cannot borrow more than the cost of attendance (COA) because student loans are generally capped at the COA, minus any other financial aid you receive. This limit ensures you don’t borrow more than you need for your educational expenses.

💡 Quick Tip: It’s a good idea to understand the pros and cons of private student loans and federal student loans before committing to them.

Cost of Attendance and Net Price

Net price is the actual amount a student is expected to pay after grants and scholarships have been deducted from the cost of attendance. It represents the “real” cost to the student because it subtracts gift aid, which doesn’t need to be repaid, from the total cost.

Colleges typically have a net price calculator on their websites. You enter your information into the calculator and it will show you what students like you currently pay to attend the college. This number isn’t binding but can give you an idea of what types of aid are available at that school. The numbers you get from the net price calculator isn’t binding on the college, but it can give you a good idea of what types of aid you’ll be eligible for at that school.

Paying for College

While net price may be lower than COA, it may still be shockingly high. The question remains, how will you pay for college?

Students often rely on a variety of financing options. A great first step is to fill out the FAFSA®. This is how students can apply for all forms of federal aid, including federal grants, scholarships, work-study, and federal student loans. If your financial aid package isn’t enough to cover the cost of attending your chosen college, there are other funding options to consider. Here are some to keep in mind:

Private Student Loan

Private student loans are available through banks, credit unions, and online lenders. Interest rates and loan terms are generally determined by an applicant’s personal financial factors such as credit score and income. Consider shopping around at a few different lenders to find the best rate and terms for your personal situation.

Applicants without an extensive credit history or a relatively low credit score may find that adding a cosigner to their application can help them qualify for a loan or qualify for more competitive rates and terms.

For those interested in pursuing a graduate degree, there are student loans for graduate programs available, too.

Credit Card

Schools may allow students to pay for their tuition with a credit card. Most schools do charge a fee (often between 2% to 3%) for this convenience, which can offset any rewards you may be earning on your credit card. In addition, credit cards have fairly substantial interest rates. Therefore, paying for tuition with a credit card may not make the most financial sense.

On the other hand, when credit cards are used responsibly, they can be helpful tools to help students establish and build their credit history. Students could use credit cards to pay for books, food, gas, or other transportation costs. Be sure to pay attention to interest rates and pay off your credit card each month to avoid credit card debt.

Personal Savings

If you have been saving for college, using those funds to pay for tuition or other college costs can help you avoid borrowing for college. When you borrow student loans to pay for college, you’ll end up paying interest, which increases the total cost of your education. By paying for some expenses with savings, you may be able to reduce the overall bill.

Scholarships

Often awarded based on merit or other personal criteria (like gender, ethnicity, hobbies, or academic interest), scholarships are available from a variety of sources, including employers, individuals, private companies, nonprofits, communities, religious groups, and professional and social organizations. You can find out about opportunities through your high school guidance office, the financial aid office of your chosen college, and by using an online scholarship search tool.

The Takeaway

The cost of attendance (COA) is a vital metric for anyone planning to attend college. It represents the estimated total yearly cost including both direct costs like tuition and fees, and indirect costs such as housing, books, and personal expenses.

While the COA can seem daunting, it’s important to remember that the “net price” — what you actually pay after grants and scholarships are applied — is often much lower. By thoroughly researching a school’s COA, using net price calculators, and exploring all available funding options, including federal aid, scholarships, savings, and private student loans, you can make informed decisions to cover your education costs responsibly.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

What does cost of attendance mean for college?

The cost of attendance (COA) is an estimate for the total cost of attending a college for a single year. The COA includes tuition, room and board, books and supplies, transportation, and other miscellaneous personal costs. The items required for inclusion in the COA are outlined by federal law and each college or university is required to publish the details for the college’s COA on the school website.

What is the difference between cost of attendance and tuition?

A school’s tuition is the price for academic instruction. The cost of attendance includes the cost of tuition in addition to other expenses including room and board, books and supplies, transportation, and more.

How much does college cost per year?

The cost of college can vary based on many factors including your location, whether you attend a private or public university, if you receive in-state vs. out-of-state tuition, and the type of program you are enrolled in. According to the College Board, the average cost of attending a four-year nonprofit private institution was $65,470 during the 2025-26 school year. During the same time period, the average cost for tuition and fees at public four-year institutions with in-state tuition was $30,990.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Bank, N.A. and its lending products are not endorsed by or directly affiliated with any college or university unless otherwise disclosed.

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