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Good news for drivers with excellent credit: The average auto loan interest rate for consumers with an 800 credit score is 5.25% for a new car and 7.13% for a used car, according to Experian’s 2024 State of the Automotive Finance Market report.

Consumers with high credit scores tend to secure the best loan rates and terms for any lending products, including auto loans. But many different factors impact the interest rate a borrower receives when they apply for a car loan.

Let’s dive into what auto loan interest rates you can expect, how they differ among lenders, and some steps you can take to get the best deal.

Average Used Car Interest Rate for 800 Credit Score

As mentioned, the average interest rate for a car loan with an 800 credit score is going to be 7.13% for a used car. Experian’s 2024 report found that borrowers with a credit score of 781 or higher access those rates on average.

Having a higher credit score generally leads to getting your hands on the best loan rates and terms. If a borrower has a credit score of 800, that means they have good credit habits that lenders like to see. If you’re just starting your credit journey, there are ways to help build your credit over time.

Factors That Affect Auto Loan Interest Rates

When you apply for an auto loan, lenders take a few factors into consideration when determining the loan amount, interest rate, and loan terms. Here’s a closer look.

Credit Score

Lenders evaluate your credit score to get an idea of how likely you are to make your loan payments on time. Having a high credit score shows that you know how to manage credit responsibly, and as a result, you can often secure a better interest rate. Borrowers with lower credit scores can make lenders nervous, so they’re often charged higher interest rates to balance out the risk.

What affects your credit score? Make consistent on-time payments, avoid hard credit inquiries, and keep your credit utilization ratio low to improve your score over time.

Lender

Whom you choose to borrow money from can impact the interest rate you receive. In general, you’re more likely to secure a better deal by getting a loan from a bank, credit union, or online lender than from a dealership — even if you have a lower credit score.

Amount Borrowed

The amount you borrow can impact your auto loan interest rate. A larger down payment helps lower your loan-to-value (LTV) ratio, which can lead to better loan rates and terms. A money tracker app can help you track and manage your finances.

Length of the Loan

If you can choose the loan term, you may be tempted to pick a long one. After all, the longer your loan term is, the lower your monthly payments will be. While lower payments can help you manage your monthly budget, you’ll end up paying more interest over the life of your loan. Longer loan terms are also often associated with higher interest rates, since there’s an increased risk a borrower defaults or pays off the loan early. You can use a spending app to create a budget that accommodates larger loan payments.

Economic and Market Conditions

Some factors that impact loan rates are out of your control. For example, current economic and market conditions affect the Fed rate, which in turn influences auto loan rates. Lenders also take certain market conditions into consideration, like vehicle demand and how well their current borrowers are repaying their loans on time.

How to Get a Better Auto Loan Interest Rate

If you want to spend as little as possible when you borrow money to finance a car purchase, there are a few ways you can help secure a lower interest rate.

To start, spend some time improving your credit score. Borrowers with a high credit score tend to access better interest rates because they pose less risk to the lender. Regular credit score monitoring can help you find ways to continuously improve your score.

It takes time to build credit, but making a large down payment can help immediately. You can also shop around for a lender to see who can offer you the lowest interest rate.

Recommended: What Is the Starting Credit Score?

How Often Do Auto Loan Rates Change?

Interest rates on lending products like auto loans change daily, so check the current loan rates before you walk onto a car lot. It’s also a good idea to get prequalified or preapproved ahead of time. That way, you have a better idea of what you can afford.

How to Use Average Car Interest Rates

It’s important to remember that average rates are just a helpful guidepost, not a guarantee. Understanding what the average car interest rate looks like can help you evaluate if you’re getting a good deal when shopping around for a car loan.

Where Are Auto Loan Rates Heading?

Unfortunately, there is no crystal ball that can help you predict exactly what auto loan rates will look like in the future. However, making an educated guess is possible. Thanks to recent interest rate cuts by the Federal Reserve, some economists believe we should continue to see auto loan rates drop in late 2024 into 2025.

Ways to Get a Better Car Loan Rate

If you’re looking for ways to get a better car loan rate, consider taking these steps:

•  Buy a more affordable car. Expensive cars come with more expensive car loans. If you can’t make a large down payment on a pricey car, look for a more affordable option.

•  Shop around. Apply for a car loan with a few different lenders to get an idea of which one can offer you the best terms at the right price.

•  Pay off your revolving credit. One quick way to get a credit score boost is to lower your credit utilization ratio by paying off any revolving forms of credit like a credit card or home equity line of credit.

•  Check your credit report for errors. You can check your credit score and report without paying. Once a year, check for errors that are harming your credit report and dispute any that you believe should be removed.

Recommended: How Often Does Your Credit Score Update?

The Takeaway

In 2024, the average used car loan interest rate for an 800 credit score is 5.25% for a new car and 7.13% for a used car. That said, these are just averages. The car you choose to buy, your down payment amount, your credit score, and the lender you work with can all impact what your actual interest rate ends up being. It’s a good idea to spend some time working on improving your credit score and to shop around for the right lender to avoid overspending on interest.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

What car loan interest rate can I get with an 800 credit score?

You can expect to find an average interest rate of 5.25% if you have an 800 credit score and are applying for a new car loan. Buying a used car? You can expect to encounter an average interest rate of 7.13%.

Is 800 a good credit score to buy a car?

Having a credit score of 800 is considered excellent. As a result, you can expect to access favorable auto loan rates and terms.

What is the average interest rate on a 72-month car loan?

It can be difficult to gauge exactly what a 72-month car loan interest rate will be, but it is safe to say it will cost more than a shorter-term loan. Choosing a 72-month car loan will result in lower monthly payments, but also in paying more interest.

Is 7% interest rate high for a used car?

A 7.00% interest rate for a used car is about average for borrowers with good credit.

What is a bad APR for a car?

As of Q3 2024, the average 60-month new car loan APR is 8.40%, according to the Federal Reserve Board. If you are offered an interest rate higher than that amount, you may want to work on improving your credit score before accepting a loan offer.

Is 5.90% APR good for a 72 month car loan?

If you can manage to secure a 5.90% APR for a 72-month car loan, you likely have a great credit score and a large down payment on your side.

Photo credit: iStock/Thx4Stock

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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

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

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

SORL-Q424-019

A typical 18-year-old has an average credit score of 681, according to Experian data from June 2024. The score is considered good and can help borrowers qualify for some credit cards and loans, though they could pay higher interest rates.

Learn what a credit score is, how it can vary by age, and the steps you can take to improve yours.

What Is a Credit Score?

Your credit score is a three-digit number that reflects how likely you are to responsibly manage credit and pay it back on time. It’s based on information from your credit reports, which are created by the three major credit bureaus: Equifax, Experian, and TransUnion. With this information and other personal details you provide on your application, lenders can determine whether to approve you for a loan or credit card.

Most people have more than just one score, and each score can vary based on the source of the data being used, when that data was calculated, and the scoring model (for instance, FICO® vs. VantageScore).

Recommended: FICO Score vs Credit Score

Average Credit Score by Age 18

There’s no single starting credit score for people who are just beginning their credit journey. However, early scores tend to be in the good (670-739) or fair (580-669) range. The average credit score for 18-year-olds — 681 — falls well within the good range.

What Is the Average Credit Score?

If you’re an 18-year-old with a credit score of 681, it can be useful to see how your score compares to other borrowers in the country. According to Experian, the average adult in the U.S. has a credit score of 715.

Average Credit Score by Age

It makes sense that a younger consumer would have an average score that’s below the national average. After all, it takes time to build credit, and as the chart below shows, credit scores tend to rise with age.

What’s a Good Credit Score for Your Age?

It can be tempting to compare your credit score to your peers’ average score. But a more effective way to determine whether your three-digit number is good is by checking how credit scoring companies classify it. FICO defines a “good” credit score as one between 670 and 739, while VantageScore considers scores between 661 and 780 as “prime.”

Another approach: Ask yourself if your credit score is high enough to help you achieve your goals, like renting an apartment or buying a car. If so, then it’s reasonable to think your score is good.

How Are Credit Scores Used?

Your credit score helps lenders evaluate your potential credit risk, and it’s used for a variety of purposes. When you apply for a credit card or loan, for instance, a lender will look at your credit score to help decide whether to extend credit and what interest rate and credit limit to offer.

Scores may also be used by landlords to screen potential tenants and by utility companies to determine how much of a deposit you’re required to pay for services.

Factors Influencing the Average Credit Score

Understanding what affects your credit score is a key part of strategically improving your credit. FICO, which is used by 90% of lenders, considers the following factors when calculating your score:

•  Payment history. This includes whether you make payments on time or have a pattern of late payments. It also takes delinquencies, default, collections, and bankruptcies into account.

•  Amount owed. Your score is influenced by the amount you’ve borrowed on each account compared to your available credit as well as your total amount of outstanding debt.

•  Credit history length. Keep older accounts open. This adds to the length of your credit history, which can positively impact your score.

•  Credit variety. Having a diverse mix of credit types, like retail cards, credit cards, student loans, and personal loans, shows you can responsibly juggle revolving and installment credit payments.

•  New credit and inquiries. Too many new credit lines or inquiries in a short period can be a red flag that you’re financially overextended.

How to Build Your Credit Score

Working on the factors described above is a good way to build credit and maintain a strong credit score.

The biggest factors affecting your FICO Score are payment history (35%) and credit use (30%). VantageScore gives more weight to payment history and depth of credit, which includes length of credit history and credit mix. With that in mind, one impactful way to raise your score is to pay your bills on time, every time. Consider setting up payment reminders on your mobile device, or enroll in autopay so you don’t miss a due date.

Keeping your unpaid credit card balances as low as possible can also bolster your credit over time. And keep your credit use at less than 30% of your available credit limit. A good place to start is learning how to lower credit card utilization.

It’s also wise to go through your credit report at least once a year via AnnualCreditReport.com and fix any errors you see. You can also check your credit score for free through some banks, credit card issuers, and Experian.

Recommended: Why Did My Credit Score Drop After a Dispute?

How Does My Age Affect My Credit Score?

Your age has no direct impact on your credit score, but there tends to be a connection between age and the average credit score. Generally speaking, the older you are, the more likely you are to have a higher average credit score.

That’s because older individuals are more likely to have a longer credit history than younger consumers. And chances are, they have a more diverse credit mix, too. Both of those things can help bolster a borrower’s creditworthiness.

What Factors Affect My Credit Score?

As we mentioned, a number of factors go into determining your credit score. The five most impactful ones are:

•  Payment history

•  Amounts owed

•  Length of credit history

•  Credit mix

•  New credit

It’s worth noting that your credit score updates once a month. If you’re working to boost your numbers, it could take a little time before you see the results.

At What Age Does a Credit Score Improve the Most?

There’s a correlation between older age and a higher credit score. According to Experian data, Gen Z consumers (age 18-25) have the lowest credit score, at 680, while the Silent Generation (age 77+) has the highest credit score, at 760.

Tips for Building Your Credit Score

If you’re just starting your credit journey, consider these strategies to build your score incrementally and over time:

•  Start your credit use slowly. Opening a secured credit card at 18 years old can be an effective way to establish your credit, as it has some guard rails. Card issuers require a deposit which acts as your card’s credit limit. You can then use your secured credit card up to your limit, and the issuer reports your payment data to the credit bureaus. This builds your credit history without the risk of overspending.

•  Use an app to manage your finances. A spending app can help you see how you’re balancing your income and spending habits across multiple financial accounts, including credit accounts. It can also help you keep track of upcoming bills.

•  Check on your credit score regularly. Checking in on the health of your credit score doesn’t have to cost you. Financial tools, like a money tracker app, often show you your credit score as a complimentary feature.

The Takeaway

The average credit score by age 18 is 681. If you’ve achieved a score that’s at or near there by age 18, then you’re in a good place. If your score is below 681, there are steps you can take to give it a boost, including paying bills on time, limiting new credit applications, and paying off debts.

Remember that your credit score can fluctuate, depending on your repayment and borrowing patterns. It’s a good idea to get into the practice of keeping track of your credit score and disputing any inaccuracies you see.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

What credit score is needed to buy a $300K house?

For a conventional loan, you’ll typically need a minimum credit score of 620. Some mortgage loans, like an FHA loan, might accept a minimum credit score of 500 for home financing.

Is 650 a good credit score?

A 650 FICO credit score is considered a “fair” credit rating and is lower than the average credit score in the U.S. However, some lenders are willing to offer financing to consumers with this score.

Is a 900 credit score possible?

No. The two most commonly used U.S. consumer credit scoring models, FICO and VantageScore, set their maximum score at 850.

How rare is an 800 credit score?

Among U.S. consumers, only 21% of borrowers have a FICO score between 800 to 850, while 25% of consumers have scores between 740 and 799.

Is a 600 credit score at 18 good?

A 600 FICO score, which is considered “fair,” is below the average credit score of individuals ages 18 to 26. The average 18-year-old has a 681 score.

What is the average credit line for an 18-year-old?

The average credit card limit for an 18-year-old is $12,899, according to Q3 2023 Experian data. Among all generations, Generation Z has the lowest average credit card limit.

Photo credit: iStock/sorrapong

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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

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

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

SORL-Q424-030

If you’re in the market for a new (or new-to-you) set of wheels with plans to finance it, predicting your interest rate will help you figure out the total costs of the loan. According to recent Experian data, the average interest rate for a new car loan for someone with a 750 credit score is 6.87%. For a used car, the average interest rate is 9.36%.

In general, the higher the interest rate, the more expensive the loan. But what exactly does an interest rate mean for your wallet, and how can you get a lower score? We’ll look at the ins and outs of what factors can impact the interest rate on your auto loan and what you can do to get a better rate.

Average Used Car Interest Rate for 750 Credit Score

As we discussed above, drivers with a 750 credit score who are shopping for a used car can expect to pay an average interest rate of 9.36%.

A score of 750 is considered very good and is a sign to lenders that you’re able to successfully manage your credit. This means you could qualify for credit cards and loans and better-than-average lending terms. If your credit score isn’t where you’d like it to be, there are steps you can take to build your credit over time.

Factors That Affect Auto Loan Interest Rates

Several variables play into the interest rate on your car loan. Let’s look at the most common ones:

Credit Score

Your credit score can play a major role in determining your interest rate. Usually, the higher your credit score, the lower your interest rate. On the flip side, the lower your score, the higher your rate.

Case in point: Based on Experian data, the average interest rate for used-car borrowers with a deep subprime credit score (500 or under) is 21.55%. Meanwhile, the average interest rate for those with super prime credit (781 and above) is 7.13%.

Lender

Whether you go through a bank, credit union, online lender, or dealer, the car loan interest rate you’re offered is influenced in part by where you get your loan. Interest rates vary widely by lender.

Amount Borrowed

When you borrow a large amount of money, you’re considered a greater risk to the lender. That’s because they stand to lose more if you aren’t able to pay back the loan. In turn, a lender may decide to charge a higher interest rate on a larger loan.

Length of the Loan

Typically, the longer the loan term is, the higher the interest rate. That’s because there’s more time for your financial circumstances to shift, and you might have a harder time keeping up with your payments down the line. Conversely, shorter loan terms typically have lower interest rates.

Economic and Market Conditions

Decisions made by the Federal Reserve can influence the lending rates on car loans. The strength of the economy and larger market trends may also play into what interest rates are offered. For instance, the higher the inflation rate, the greater the chances that interest rates rise.

How to Get a Better Auto Loan Interest Rate

There are a number of measures you can take to improve your chances of getting a better auto loan insurance rate.

A good place to start is to focus on building your credit. This means staying on top of bill payments, keeping your credit usage low, and only applying for credit when necessary, among other things.

You can also spend some time improving your credit score. Regular credit score monitoring can help you find ways to boost your score.

Finally, shop around for a lender to see which one can offer you the lowest interest rate.

Recommended: What Is the Starting Credit Score?

How Often Do Auto Loan Rates Change?

Auto loan interest rates change daily and can vary based on the lender, loan amount, market conditions, and other factors. It’s a good idea to check your auto loan rate at different points of your shopping journey. Also, recheck your auto loan rate if you decide to get a new car instead of a used one or change the loan term or amount.

How to Use Average Car Interest Rates

Knowing the average car loan interest rates — and the average interest rate for a car loan with a 750 credit score, if that’s your situation — can help give you an idea of what you’ll pay for your used set of wheels.

To figure out the total cost of the car, factor in the interest rates, fees, routine maintenance and repairs, gas, and registration and title fees. You’ll also want to determine your monthly payments, which include the loan amount, interest rate, and repayment term. That way, you can gauge what’s an affordable amount to cover each month.

Where Are Auto Loan Rates Heading?

While it’s impossible to say where exactly auto loan rates will be in the coming months, they have gradually increased over the past several years. According to Experian, in Q2 of 2024, the average interest rate for new car loans was 6.84%, and 12.01% for used cars. Compare that to Q2 of 2019, when the average interest rate for new car loans was 5.70% and 9.34% for used cars.

However, you may be able to get more for your money if you’re planning to buy a car in the months ahead. The Federal Reserve is expected to lower its benchmark rate multiple times in late 2024 into 2025, which will likely impact borrowing costs for a new car.

Ways to Get a Better Car Loan Rate

Here are some ways you can help improve your odds of receiving favorable car loan rates:

Build Your Credit

Your credit score isn’t the only factor a lender considers when determining your interest rate, but it’s an important one. Generally speaking, the higher your score, the lower your interest rate will be. A good first place to start is to check your credit score to see where you stand.

Some credit card issuers, banks, credit counselors, and spending apps offer free credit scores. They’ll also alert you when your score changes and give you insights into what caused your score to go up or down.

To build up credit, stay on top of your payments, lower your credit utilization, and avoid taking out credit unless absolutely necessary. It’s not an overnight process, but putting in the effort and taking the right steps make for steady progress.

Recommended: What Affects Your Credit Score?

Work With Lenders You Know

If you have an existing loan with a lender, that longstanding relationship could help boost your odds of getting more favorable rates. Sit down with your lender and see what kind of car loan rates you might qualify for.

Shop Around

Different lenders have different lending criteria and a range of available financing. Do your homework and get quotes from several lenders for the same loan amount and repayment term. That way, you can compare your rates side by side.

Opt for a Shorter Loan Term (If Possible)

A shorter loan term poses less risk for lenders and could translate to a lower rate for you. A shorter term can also mean larger monthly payments, so play around with different loan terms to see how much you might owe on your car loan each month in different scenarios.

Save for a Larger Down Payment

Because higher loan amounts mean higher interest rates, see if you can shore up funds for a larger down payment. That can bump down the rate on your auto loan. (A money tracker app can help you set budgets and monitor spending.)

Get a Cosigner

A cosigner with strong credit may help boost your odds of landing a lower interest rate. However, should you fall behind on your payments, the cosigner is on the hook financially to pay what is due. You’ll want to have a discussion about each person’s role and responsibilities beforehand.

The Takeaway

Getting your head around the average used car loan interest rate for a 750 credit score can help you determine how much you’ll be paying on interest on a car should you get financing. In turn, it can give you a stronger handle on the total cost of the car.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

How common is an 825 credit score?

According to Experian, 21% of consumers have a credit score between 800 and 850, which is considered exceptional.

How many people have a 900 credit score?

Nobody has a 900 credit score. That’s because standard credit scores range from 300 to 850. That said, FICO created industry-specific FICO® Score models that range between 250 and 900, but these models have very limited use.

How rare is an 800 credit score?

About a quarter of Americans (22%) have a credit score of 800 or higher, which falls within the “Excellent” range.

What is a bad APR for a car?

A bad APR on a car is typically associated with lower credit scores. For instance, the average interest rate for used-car borrowers with a credit score of 500 or under is 21.55%.

What is a good interest rate on a 72-month car loan?

According to MarketWatch, the average interest rate for new cars on a 72-month car loan is 6.86%, and 12.80% for used ones. An interest rate that falls below that is considered better than average.

Is 750 a good credit score to buy a car?

A 750 credit score is in the “Very Good” range and considered above average. With that score, you can usually qualify for more competitive interest rates, larger loan amounts, and more flexible repayment terms.

Photo credits: iStock/Drazen Zigic

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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

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

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

SORL-Q424-020

Whether you’re buying a home or an investment property, it’s important to understand property ownership rights in real estate. Each type of real property has a classification of ownership that determines what can be done with that asset. A freehold estate refers to real property where the owner has full ownership rights, allowing the property to be passed down indefinitely.

In this guide, we’ll take a closer look at the definition of freehold estates and the implications for property owners.

Definition of Freehold Estate

What is a freehold estate? A freehold estate is an estate in land that has an undefined duration of ownership, while a non-freehold estate involves leased property rights with a specific termination date.

In other words, an owner of a freehold estate has exclusive and indefinite rights to the property. This means that it can be passed on to heirs or beneficiaries for any amount of time. The specifics depend on the type of freehold estate, which we’ll elaborate on below.

Types of Freehold Estates

There are three main types of freehold estates: fee simple absolute, fee simple defeasible, and life estate. Conditions for ownership and how the property may be used vary between each type.

•  Fee simple absolute: This is the most common type of freehold estate. It gives property owners complete rights to a property title in perpetuity and to use the land without restriction, as long as you pay property taxes and avoid violating any active easements and local land use regulations.

•  Fee simple defeasible: This type of freehold estate operates similarly to fee simple absolute but with more restrictions. For example, fee simple defeasible could require that a farm remain as agricultural land. If a buyer violates these conditions, even after closing, the property could legally revert back to the seller or a specified heir or third party. Keep these conditions in mind if making an offer on a home with a fee simple defeasible situation.

•  Life estate: This type of estate is a form of joint ownership that allows a grantee to receive the title to a property upon the grantor’s death, rather than going through probate. Life estates are often created by property owners who want to streamline the process of giving their home or land to a child or heir after they pass. The grantor may continue occupying their home, but selling the property or mortgage refinancing would require the grantee’s approval.

Rights Associated with Freehold Estates

A freehold estate is the highest degree of property ownership, giving the owner the right to use the land for any lawful purpose, unless otherwise restricted by an encumbrance or fee simple defeasible ownership.

With a freehold estate, the property owner has an unlimited duration of ownership. They have the right to sell their home or property, lease it to others, and pass it down to heirs.

Freehold vs. Leasehold Estates

There are non-freehold estate arrangements to become familiar with, too.

If you’ve ever rented an apartment, you’re likely familiar with the concept of a lease agreement. A leasehold estate operates on the same principles. Put simply, it refers to a tenant’s exclusive right to occupy a property for a specific period of time.

When comparing a leasehold and a freehold estate, the key difference is the duration of the occupant’s rights. Leasehold estates are temporary and dictated by the terms of the lease, while freehold estates grant an indefinite duration of ownership.

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Creation and Transfer of Freehold Estates

If you own a home or property, you already are in possession of a freehold estate. How the property is transferred will depend on the type of freehold estate. One way to transfer ownership is through a life estate.

Setting up a life estate can be done through a life estate deed. This legal document is filed with your local recording office to ensure the other person, known as the remainderman, is added to the deed. Again, using a life estate helps an heir receive the property faster by avoiding probate. Creating a life estate is serious business, and it is not the only way to transfer property to avoid probate, so it’s wise to consult an estate planning expert before you sign anything.

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Limitations on Freehold Estates

There are limitations to any type of property ownership, including freehold estates. Of note, there could be a legal claim against a property from a party other than the owner, known as an encumbrance.

There are multiple types of encumbrances, including easements, liens, and encroachment.

An easement grants land use rights or property access to a third party. For example, a utility may have an easement to run a gas line through a property, or an easement can grant access to a shared driveway. This might have an impact on how much a house is worth.

Properties may be encumbered by a lien, which gives another party the right to seize the property for nonpayment of a debt, such as home mortgage loans, property taxes, or homeowners association fees. Since the estate serves as collateral, the property can be sold if needed to recoup unpaid debts.

Encroachments can also limit the use of freehold estates. An encroachment occurs when a neighbor has built a structure that intrudes on a property, limiting its full use.

During the homebuying process, in addition to ordering a home inspection, buyers typically request a formal title search to make sure there aren’t any encumbrances or claims against the property, which could delay closing.

Freehold Estates in Different Jurisdictions

Freehold estates exist in different jurisdictions in the U.S. and abroad. In the U.S., they are dictated by state and local laws.

Local zoning outlines how a property can be used in a specific area, as well as building dimensions and characteristics. Some common types of zoning include residential, commercial, agricultural, and industrial. Residential zoning may also differentiate between single-family and multifamily properties.

Freehold Estates in Estate Planning

Freehold estates are often referred to as “estates of inheritance”, since the estate is transferred to the owner’s heirs upon death. Including freehold estates when doing estate planning can give peace of mind that loved ones will have fewer legal and financial hurdles to deal with. Otherwise, the transfer of property and other assets can get held up in probate court.

The Takeaway

Buying real estate is a major investment. Freehold estates provide owners with indefinite property rights, though there can be limitations depending on encumbrances and the type of freehold estate arrangement.

Unless you’re a real estate professional, some of these terms may go beyond your needs. However, understanding your rights as a property owner and if there are any claims against your property is essential for protecting your investment when you are buying a home or other property.

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

FAQ

How does a freehold estate differ from fee simple ownership?

Fee simple ownership is a type of interest that property owners can have in a freehold estate. Fee simple ownership lets you do as you wish with a property, barring any liens or local laws, while the other types of freehold estates carry more conditions for how a property is used and transferred.

Can a freehold estate be taken away by the government?

A freehold estate could be taken by the government through eminent domain, or when the owner dies if there aren’t any heirs or beneficiaries. Eminent domain allows governments to claim private property if it’s necessary for public use and after compensating the owner.

Are there any restrictions on selling a freehold estate?

A freehold estate can be sold or bequeathed as the owner sees fit, without conditions and restrictions. However, there may be specific restrictions for how the property is used if conditions were set by the seller. This is known as fee simple defeasible ownership.

Photo credit: iStock/Kirpal Kooner

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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 article is not intended to be legal advice. Please consult an attorney for advice.

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

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Consumers often use cashier’s checks for larger purchases because they offer the recipient of the funds extra security. That’s because cashier’s checks are guaranteed by a bank, rather than the purchaser.

Unfortunately, printing technology has improved over recent decades, making it easier for scammers to print fraudulent cashier’s checks at home and trick unsuspecting consumers into accepting them as legitimate forms of payment. Knowing how to spot a fake cashier’s check is crucial to avoiding these scams.

Learn how cashier’s checks work, common scams using them, and how to protect yourself.

What Is a Cashier’s Check?

A cashier’s check is a check issued and guaranteed by a bank or credit union. This typically instills confidence in the recipient that the check won’t bounce when they deposit it at their own financial institution. They are common in real estate transactions and when making large purchases.

When you deposit a cashier’s check in your checking account, the money usually clears faster than a traditional personal check. Cashier’s checks can be more secure because they are more challenging to forge — though it’s not impossible.

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How Do Cashier’s Checks Work?

Cashier’s checks are like a prepaid check. If you need to pay someone with a cashier’s check, you can go to your bank to purchase one. The money will immediately leave your account, and you can give the cashier’s check to the person or business as payment. When they deposit the cashier’s check, your bank will release the funds to cover the cost.

•   If you don’t have a bank, you may still be able to get a cashier’s check from a financial institution. Rather than withdraw the funds from your account, the bank would instead require that you pay cash to have a cashier’s check issued.

•   Cashier’s checks are usually not free. On top of the amount to be paid with the check, banks usually charge around $8 to $15 to issue a cashier’s check.

4 Common Cashier’s Check Scams

Just as there are many types of bank fraud in general, cashier’s check scams run the gamut, but most follow a similar structure. Typically, a fraudster will give you a fake cashier’s check that looks real, and they’ll ask you to deposit it and then send some money back to them. Afterward, the bank will discover that the original cashier’s check was fake — and you’ll owe all the money back, including the amount you sent to the scammer.

Here are the specifics on a few common scams to watch out for:

Employment Scams

Two popular employment scams include fake cashier’s checks:

•   Mystery shopper scam: In this scam, the fraudster will hire people to report on the quality of various money transfer businesses as mystery shoppers. As part of the assessment, the victim of the scam will receive a cashier’s check to deposit at a local bank, then send the money back to the employer through a money transfer service (say, a wire transfer) to evaluate the service. After sending the cash back to the fake employer, the victim will learn from the bank that the cashier’s check was fraudulent. Instead, the funds sent to the scammer came out of the “real” funds in their bank account.

•   Work-from-home scam: Another employment scam involves hiring remote employees and sending them an overpayment. The supposed employer might send a starting bonus via cashier’s check. The fake employer just asks that new employees pay an account activation fee to cover the cost. If successful, the scammer will receive the funds for this fee before the victim realizes the cashier’s check is fake.

In addition, some remote work scams may be overpayment scans, described below.

Windfall Scams

Windfall scams are common and often involve a cashier’s check. In a popular scheme, scammers will lead victims to believe they’ve won the lottery (usually a foreign lottery); in others, victims will learn they’ve received an inheritance.

To claim the earnings, however, the victim must pay taxes and fees. They’ll cash the fake cashier’s check they have been sent and wire money to the scammer before learning that the cashier’s check was fake. You’ll then have to repay the bank — and be out the money you paid the fraudster.

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Purchase and Overpayment Scams

The overpayment scam is a common type of cashier’s check fraud. If you sell a product to someone online, like through an online auction or marketplace (eBay, Craigslist, Facebook Marketplace), the scammer may send you a cashier’s check for more than the purchase price.

When you point this out to the scammer, they’ll apologize, say they made a mistake, and ask you to send the difference back to them. After you send them some money, you’ll discover that the original cashier’s check was fake — so you’ll have lost money as well as the product you’re selling.

In other cases, the buyer may give you a cashier’s check for the right amount. You’ll ship them the product, only to later discover the check was fake. While you aren’t out any money, you’re still out the product.

Overpayment scams may also take the form of remote work scenarios. You will be sent a check and then be asked to forward a portion of it to another party as part of your “new job.” Alas, if you do so, you could discover the check was a fake and the money you forwarded is now lost.

Property Rental Scams

If you are a landlord renting out a property, be wary of cashier’s checks. In some cases, scammers may offer to pay the first and last months’ rent payment plus the security deposit without ever seeing the property — often because they claim they are moving for a new job and need a place fast.

They’ll send you the money via cashier’s check, then back out of the rental, saying the job fell through. The scammer will offer to let you keep the security deposit but ask if you’d be willing to wire any of the prepaid rent back. Only after sending the money will you realize the scammer paid you with a fake cashier’s check.

Tips for Spotting Fake Cashier’s Checks

Wondering how to spot a fake cashier’s check? Here are a few tips:

•   Check the bank name: Some scammers utilize real banks’ names and information, which makes it harder to differentiate between a real and fake cashier’s check. But a dead giveaway is a cashier’s check with a fake bank name. A quick online search can help you identify a bogus name.

•   Check the postmark: If you received the check in the mail, the postmark city should match the city of the supposed bank.

•   Verify the amount: A cashier’s check for the incorrect amount could be the sign of a scam in the works, such as an overpayment ruse.

•   Look for security features: Real cashier’s checks use a combination of security features, like color-changing ink, security threads, and watermarks. While fake cashier’s checks might contain these as well, a check without these hallmarks is an obvious indication of a scam.

•   Check the payee name: If the payee’s name line is blank, you are probably in possession of a fake cashier’s check.

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Tips for Avoiding Cashier’s Check Scams

Knowing how to spot a fake cashier’s check can be helpful, but here are some tips for avoiding scenarios where you’d receive a fraudulent cashier’s check altogether:

•   Only accept cashier’s checks from people you know and trust.

•   Consider a traceable online payment system for doing business, instead of a cashier’s check.

•   Accept cashier’s checks only for the agreed-upon amount, never more.

•   Use your judgment: If someone is sending you money you weren’t expecting, especially if they’re a stranger, it’s likely too good to be true.

•   Don’t agree to send anyone money until you’ve verified with your bank that the cashier’s check has cleared and was free of fraud.

Verifying Cashier’s Checks

If you are accepting this kind of check, it’s important to learn to spot a real vs. fake cashier’s check and keep your eyes peeled for signs of fraud. A good way to avoid a cashier’s check scam can be to verify the check with the issuing bank. You can call or visit the bank in person, if there’s a branch nearby.

Just don’t use the phone number that might be printed on the questionable check, as it may go to the scammer. Instead, search for the bank online, find its legitimate website, and call the customer service number. Provide the check number, issue date, and amount — and the bank should be able to verify if the check is legitimate.

Do Victims of Cashier’s Check Fraud Have Any Recourse?

If you have already sent money to a scammer in an untraceable way, like via wire transfer, you may not be able to get your money back. Banks can deduct the amount of the fraudulent check from your account or require you to pay for the amount you withdrew using the fraudulent check. Some points to note:

•   You can report the fraud to the United States Postal Inspection Service (if the check came in the mail), your state or local consumer protection agencies, and the Internet Crime Complaint Center.

•   You can contact the bank whose name appeared on the fake cashier’s check, as well as the bank where you deposited the fake cashier’s check. Additionally, you’ll want to notify the platform on which you first encountered the scammer (for example, an apartment rental site or an online marketplace).

•   Submit a formal complaint to the Federal Trade Commission (FTC), and file a police report with the local police.

These steps may help you resolve the case and/or prevent the scammers from perpetuating more fraud.

Recommended: What Is an E-Check?

The Takeaway

Cashier’s checks are a legitimate form of payment often used in high-dollar transactions or to add a sense of confidence between buyers and sellers who don’t know each other. However, they can be easy for scammers to forge, so it’s important to stay alert when receiving a cashier’s check as payment. Knowing the difference between a real vs. fake cashier’s check can be an important skill in protecting your finances.

FAQ

How can I verify if a cashier’s check is real?

You can inspect a cashier’s check for obvious signs that it’s a fake, like a missing payee name, a fake bank name, and incorrect amounts. But if you’re dealing with a more sophisticated fake cashier’s check, your best bet is to find the bank online, call their customer service number, and ask them to confirm the check’s authenticity.

What happens if you deposit a fake cashier’s check?

Once the bank discovers that the cashier’s check you deposited was fake, they’ll deduct that amount from your account or seek repayment some other way. In instances where you’ve sent some money back to the scammer, you’ll be out that money. In instances where you sold goods to a scammer, you’ll unfortunately be unlikely to get the item back.

Can a bank tell if a cashier’s check is real?

Bank tellers may also have difficulty determining if a cashier’s check is fake or real. While they can spot the more obvious signs, more sophisticated scammers can slip fake cashier’s checks past bank tellers. Internally, banks eventually discover that the cashier’s check is fake (usually a couple of weeks later when it’s returned unpaid), long after the fraudster has gotten away with their scam.

Photo credit: iStock/Richard Stephen

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.

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

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