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When you purchase a home, you must pay closing costs, which are the fees the lender charges to recoup loan processing costs. These can add up to a hefty sum, typically 3% to 6% of your mortgage amount.

Typically, you can take out a personal loan to cover those closing costs and help you across the finish line of a property purchase. You can often tap other funding sources as well. Take a closer look at the pros and cons of using a personal loan for closing costs, plus the alternatives, so you can decide what’s best for your needs.

What Are Closing Costs?

Closing costs are processing fees that you pay to your lender, either as the buyer or seller in a real estate transaction:

•   Buyers: Buyers typically pay between 3% and 6% of the total loan amount in closing costs. Buyers must pay this amount out of pocket, so it’s important for them to have a plan for how they’ll access the money before they get to the closing table.

•   Sellers: If sellers contribute to closing costs (say, to negotiate a home sale), those fees usually get taken out from the sale proceeds.

Here’s an example: If you plan to buy a home with a $300,000 loan, as the buyer, you’ll need to bring between $9,000 and $18,000 to the closing table. If you were the seller, you’d see that amount taken out of the costs you’d pocket from the sale.

Fees Associated with Closing Costs

Closing cost fees may include:

•   Application fee: Lenders sometimes charge a one-time fee for borrowers to submit a loan application.

•   Credit report fee: A credit report or credit check fee covers the cost to dig into your credit report, which shows your credit history. Your lender uses the information it uncovers to decide whether to approve your loan and how much they’ll lend you.

•   Origination fee: You pay this fee to the lender to process the loan application.

•   Appraisal fee: A fee paid to a professional to appraise the home based on an evaluation to determine its fair market value.

•   Title search: A title search looks into public records to determine who actually owns the property and who has liens on the property (for example, an unpaid contractor’s lien for work done on the home).

•   Title insurance: Title insurance protects you from financial loss and legal expenses in case the home has a bad title.

•   Underwriting fee: Underwriting is the process of reviewing your finances to determine the risk of offering you a mortgage, and the fees cover this process.

•   Property survey fee: Property survey fees cover the cost of checking the boundaries and easements of a property. This process shows exactly where the property’s perimeter is and what the property includes.

•   Attorney fee: You will probably need to hire a lawyer to review the terms in your purchase contract and handle your closing.

•   Discount points: Discount points are a way to balance your upfront costs and your monthly payment. If you use points to pay more upfront, you’ll likely have a lower interest rate, meaning that you could pay less monthly and over your loan term.

•   Homeowners insurance premiums: Homeowners insurance provides financial protection if your home undergoes a disaster or accident. You must typically show your lender that you have paid homeowners insurance.

•   Mortgage insurance: If you have a down payment of less than 20%, you will often have to pay mortgage insurance, a fee per month that protects your lender if you were to default. You’ll also have to pay a version of mortgage insurance on Federal Housing Administration (FHA) and U.S. Department of Agriculture (USDA) loans. You may have to pay these insurance fees with your closing costs in addition to your monthly payments, particularly for the FHA and USDA loans.

•   Property tax: Homeowners pay property tax to state, county, and local authorities for schools, roads, and other municipal services. You may have to pay a portion of your property tax at closing.

•   Homeowners association (HOA) fees: If you plan to move to a neighborhood that has an HOA, or an organization that makes and enforces rules for a neighborhood, you may owe HOA fees at closing. The seller may pay these on a prorated basis.

•   Per-diem interest: Per-diem interest refers to the interest a lender charges for the days between a closing date and the first day of your billing period.

•   Transfer tax: State or local governments often charge real estate transfer taxes, meaning that they charge when properties transfer ownership.

•   Recording fee: State and local governments charge recording fees to legally record your deed, mortgage, and other home loan documents.

Note that this isn’t an exhaustive list of closing costs — you may be on the hook for other fees as well.

Can You Use a Personal Loan for Closing Costs?

First, it’s important to understand how a personal loan works. It is usually funded by a bank, credit union, or online lender. You can typically use the money however you want — there aren’t as many restrictions on personal loans compared to, say, student loans. After you receive a personal loan, you pay it back with regular, fixed payments (with interest) over a specified term.

As mentioned above, you can use the cash as you see fit. So, yes, you can use a personal loan for closing costs. However, you can’t use it for a down payment, and you must tell your lender that you’ll go this route and borrow to pay the closing costs. The lender will include it in your debt-to-income (DTI) ratio, which is the amount of debt you have relative to your income.

Applying for a personal loan can involve prequalifying with several lenders and comparing them, gathering required documents (ID, proof of address and income, Social Security number, and education history), filling out the loan application, and receiving your funds after approval. You may be able to get a personal loan in one to three days.

As you shop around for funds, you’ll likely want to consider what credit score you need for a personal loan at a given interest rate. Also consider the length of the loan term; this can typically range from one to seven years.

Recommended: Guide to Personal Loans

Pros of Taking Out a Personal Loan for Closing Costs

Here are some of the key benefits of taking out a personal loan for closing costs.

•   Collateral not required: Personal loans are often unsecured loans, meaning that you don’t have to put an asset up in order to receive the loan. Therefore, if you fail to repay the loan, your lender will not claim the asset to repay your debts.

•   Quick approval: It usually doesn’t take long to get a personal loan once you’ve been approved. After you submit your application and materials, it might take just a day to get the personal loan, though it could take longer.

•   Flexible repayment options: You can tap into flexible repayment plans, including no prepayment penalty, meaning that the lender won’t penalize you for paying off the loan early.

Cons of Taking Out a Personal Loan for Closing Costs

Next, consider the downsides of using a personal loan to cover closing costs.

•   DTI increase: Lenders will look at your overall debt under a microscope, so taking on a personal loan may factor into your overall debt. It may signal to the lender that you aren’t in a good financial position since an additional loan could raise your DTI ratio. It might keep you from being approved for a mortgage or could result in a higher mortgage interest rate.

•   Additional loan payment: You might find it tricky to repay a personal loan in addition to a mortgage payment. Consider whether you can comfortably make both payments every month.

•   High interest rates: There is the potential for high interest rates if you have poor credit. This can make it more challenging to afford a personal loan.

Recommended: Personal Loan Requirements

Alternatives to a Personal Loan for Closing Costs

You may have options vs. getting a personal loan for closing costs. Consider how else you might handle those fees.

•   Roll them into your mortgage: You may be able to add your closing costs to your mortgage, but this means you’ll increase the principal balance of your loan. This will increase both the principal and the interest you’ll pay over your loan term and also translates to higher monthly payments.

•   Ask for a waiver: Your lender may be willing to waive certain fees. For example, they may reduce certain processing fees. There’s no guarantee, but it can be worth asking. That might help you out with your final closing cost amount.

•   Ask the seller to pay: As mentioned previously, sellers may pay for some of the closing costs if they’re eager to ensure that the property sale doesn’t fall through.

•   Tap into assistance programs: Many state and local governments offer down payment and closing cost assistance programs for moderate- to low-income home buyers. Look into your state’s housing finance agency, your city or county website, the U.S. Department of Housing and Urban Development (HUD), or check with your lender to learn more about your options.

•   Use gift money: Do you have a generous grandparent or parent who wants to help you cover your closing costs? Your state may have rules and regulations attached with gift money (especially ensuring that it’s an actual gift). Check with your lender to learn more.

The Takeaway

You can typically use a personal loan to pay for closing costs, the fees that can cost 3% to 6% of your home loan amount when you purchase a property. While this can be a convenient source of funding that is typically unsecured (meaning no collateral is required), it can raise your DTI and add to your monthly financial burden. It’s wise to carefully consider all the pros and cons, as well as alternative funding sources, when deciding whether to use a personal loan for closing costs.

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

Is it smart to finance closing costs?

Whether it’s smart to finance closing costs depends on your personal situation. For example, for some people who can handle the additional monthly payment, it may be a convenient move. On the other hand, getting a personal loan may increase your DTI, so your mortgage lender might charge you a higher interest rate or deny you the loan altogether.

Can I put closing costs on a credit card?

While you’ll usually use a cashier’s check, certified check, or wire transfer to pay for closing costs, you can put some closing costs on a credit card, such as attorney, appraisal, and survey fees. Check with your lender to learn more about which fees you can put on a credit card. (Also note that using your credit card in this way can raise your credit utilization rate and potentially lower your credit score.)

What is not an acceptable source of funds for closing?

Closing costs are typically paid by a cashier’s or certified check or by wire transfer. Funds for these could be acquired by such sources as a government program or a personal loan. Less frequently, credit cards, debit cards, and personal checks may be accepted for some closing costs.

About the author

Melissa Brock

Melissa Brock is a higher education and personal finance expert with more than a decade of experience writing online content. She spent 12 years in college admission prior to switching to full-time freelance writing and editing. Read full bio.

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-Q324-010

If you have a Perkins Student Loan you may be eligible for Perkins loan forgiveness. That means you could have your Perkins loan debt partially or fully canceled so that you no longer need to pay it.

Read on to find out how Perkins loan forgiveness works and whether you might qualify.

What Are Perkins Loans?

Student loan borrowers may have federal or private student loans, or a combination of both types. Perkins loans are low-interest subsidized federal loans for students with exceptional financial need.

The federal student loan interest rate on Perkins loans was a fixed 5%. The government covered the interest that accrued on these loans while students were in school.

Perkins Loans are no longer offered — the program ended in 2017. However, borrowers who have Perkins loans are still required to repay them. In certain situations, these borrowers might qualify for certain federal benefits like Perkins loan forgiveness or Perkins loan cancellation to help get out of student loan debt.

Perkins Loan Forgiveness Options

Borrowers may be eligible for Perkins student loan forgiveness if they work full-time in public service jobs such as education, military service, and law enforcement. Here are details about the different federal Perkins loan forgiveness options.

Teaching Service Cancellation

If you teach in a public or nonprofit school, you may be able to get Perkins loan cancellation. Perkins loan cancellation for teachers forgives up to 100% of your Perkins loans if you are a special education teacher, work in a low-income school district, or teach certain subjects, such as math, science, or a foreign language.

If you’re eligible, a percentage of your Perkins loan balance and the interest it accrues will be canceled annually over five years in the following increments: 15% for your first and second years of teaching, 20% for your third and fourth years of service, and 30% for your fifth year of teaching.

You may also qualify for Perkins loan cancellation if you’re a speech pathologist, a librarian, or work in an educational role in a Head Start program and you started working on or after August 14, 2008.

Public Service Cancellation

You may qualify for forgiveness of your Perkins loans if you work in certain nonprofit public service jobs and fields, such as:

•   Child or family services agency: Those employed in an educational job in a child or a family services agency may be eligible for complete loan cancellation after five years of service. Qualifying jobs include working at a prekindergarten or child-care program for students in low-income communities.

•   AmeriCorps VISTA or Peace Corps volunteer: Individuals who serve as VISTA or Peace Corps volunteers for four years may qualify for up to 70% Perkins loan cancellation.

Military Service Cancellation

Members of the military can potentially qualify for Perkins loan forgiveness. Military service members may be eligible for up to 50% loan cancellation for four years of service if their active service ended before August 14, 2008. Those whose active duty began on that date or later might qualify for up to 100% loan cancellation for five years of service.

Law Enforcement and Corrections Officer Cancellation

If you’re a law enforcement officer, correctional officer, or firefighter, you might qualify for up to 100% loan cancellation if you serve five years full-time at an eligible law enforcement agency or federal, state, or local firefighting agency. Firefighters must have started work on or after August 14, 2008.

Recommended: Student Debt by Major

Eligibility Requirements for Forgiveness

The requirements to qualify for Perkins loan forgiveness can be fairly stringent. Generally, you must be employed full-time to be eligible for Perkins loan forgiveness. You’ll also need to meet the following requirements:

•   Elementary or secondary teacher: Teachers (including supervisors, administrators, researchers, and curriculum specialists) may qualify as long as they work full-time for a full academic year or two half-years at different schools within 12 consecutive months. They can also teach part-time at two or more schools. To be eligible, educators must work in a low-income district or service agency in a teacher shortage area.

•   Special education teacher: To qualify, these teachers need to work at a public or nonprofit elementary or secondary school in speech and language pathology or audiology, physical therapy, occupational therapy, psychological and counseling services, or recreational therapy.

•   Preschool or prekindergarten teacher: Eligible educators must work full-time in a prekindergarten or child-care program and they must have started on or after August 14, 2008.

•   Law enforcement, correctional officer, or first responder: These individuals must work five years in their respective fields. Firefighters need to have started on or after August 14, 2008.

•   Attorney: Lawyers who work full-time for five years for a federal public or community defender organization may qualify for Perkins loan forgiveness. They must have started on or after August 14, 2008.

•   Military: Members of the military may be eligible for up to 50% loan cancellation for four years of military service if their active service ended before August 14, 2008, or up to 100% loan cancellation for five years of service if their active service duty began on or after August 14, 2008.

•   Health care: If you’re a full-time nurse or medical technician, or work with people with disabilities, you may qualify for up to 100% Perkins loan cancellation.

Forgiveness Application Process

If you believe you qualify for forgiveness, you’ll need to apply for cancellation or discharge of your Perkins loans. To do this, contact the school that originally issued your Perkins loan or reach out to your loan servicer. They will provide the forms and instructions for the type of cancellation or student loan discharge you may be eligible for. Be aware that you will need to show proof that you work in a qualifying public service job.

Partial vs. Full Cancellation

Perkins loans may be forgiven up to 100% of the amount owed, or up to 70% or 50%. Generally speaking, those employed in certain public service occupations as noted above, who started working before August 14, 2008, may qualify for 50% forgiveness rather than up to 100%. Individuals who worked for four years as AmeriCorps VISTA or Peace Corps volunteers may be eligible for up to 70% Perkins loan cancellation. Check with your loan servicer about the specific details of your forgiveness situation.

If you are eligible for 100% forgiveness, your debt will be forgiven in the following increments over five years, as long as you remain employed in your qualifying job:

•   15% of the original loan amount for first and second years

•   20% of the original loan amount for third and fourth years

•   30% of the original loan amount for the fifth year.

Common Challenges in Obtaining Forgiveness

Obtaining forgiveness can be a demanding process. First, you must meet all the eligibility requirements to qualify. And being approved for forgiveness may take months. In the meantime, you will need to keep paying your Perkins loans to avoid missing payments. If you default on your loans, you may not be eligible for forgiveness.

Perkins Loan Discharge Options

If Perkins loan forgiveness isn’t an option for you, you might qualify for Perkins loan discharge in certain circumstances. These circumstances include:

•   Bankruptcy

•   Total and permanent disability

•   Death

•   Your school closed while you were getting your degree

If one of these situations applies to you, you may be eligible for total and immediate discharge of your Perkins loans. Contact your school’s financial aid office or your loan servicer for the forms and instructions to apply for discharge.

Alternatives If You Don’t Qualify for Forgiveness

If you are not eligible for Perkins loan forgiveness, there are other repayment options as well as forgiveness and assistance programs you can explore. Here are some alternatives to Perkins loan forgiveness.

Income-Driven Repayment Plans

Federal income-driven repayment (IDR) plans base your payments on your income and family size and often result in a lower monthly payment. On these plans, your loans may be forgiven after 20 or 25 years of qualifying payments.

While Perkins loans are not eligible for IDR plans, if you consolidate your Perkins loans with a Federal Direct Consolidation Loan, you can then enroll in an IDR plan.

Public Service Loan Forgiveness

Under this program, if you work full-time for a government or nonprofit organization, you may be eligible for forgiveness after 120 qualifying payments under a qualifying repayment plan, such as IDR.

Just as with IDR plans, Perkins loans are not eligible for Public Service Loan Forgiveness unless you consolidate them with a Federal Direct Consolidation Loan.

Student Loan Repayment Assistance Programs

Some states and various organizations offer student loan repayment assistance programs (LRAPs) for those who work in high-need occupations and shortage areas. Check with your state or any professional organizations you belong to to see what LRAPs they might have and if you may qualify.

Student Loan Refinancing

When you refinance student loans, you replace your old loans with a new private loan that ideally has lower rates and more favorable terms if you qualify for them. That could help make your payments more manageable. However, refinancing federal student loans means that you’ll lose access to federal benefits, so make sure you won’t need these programs before moving ahead.

Recommended: Student Loan Payment Calculator

The Takeaway

Borrowers may qualify for Perkins loan forgiveness if they work full-time in certain public service jobs and meet other eligibility requirements. If approved, they may be able to have up to 100% of their Perkins loans forgiven.

If forgiveness isn’t an option for you, there are alternatives that could help you repay your Perkins loans, such as an income-driven repayment plan or a student loan repayment assistance program. Another method to consider is student loan refinancing, especially if you can qualify for a lower interest rate or more favorable terms. Explore all the options available to make an informed decision about the best choice for you.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

FAQ

What are the eligibility requirements for Perkins loan forgiveness?

To be eligible for Perkins loan forgiveness, borrowers must work full-time in certain public service jobs such as teaching, military service, health care, and law enforcement, for five years, or in certain nonprofit jobs for four years. In addition, each occupation and field has specific requirements. Check with the school that issued your Perkins loan or your loan servicer for more information.

How long does it take to have Perkins loans forgiven?

In most cases, you’ll need to work full-time for five years in specific public service jobs before your Perkins loans are forgiven. Typically, the loans will be forgiven in the following increments: 15% of the original loan amount in the first and second years, 20% in the third and fourth years, and 30% in the fifth year.

Is Perkins loan forgiveness taxable?

Generally speaking, Perkins loan forgiveness is currently not taxable on a federal level. However, that may change. While forgiven student loan debt is typically considered taxable by the IRS, the American Rescue Plan of 2021 made forgiven debt temporarily exempt from federal income taxes. But this federal tax-exempt status only applies to loans forgiven between January 1, 2021 and December 31, 2025.

About the author

Melissa Brock

Melissa Brock is a higher education and personal finance expert with more than a decade of experience writing online content. She spent 12 years in college admission prior to switching to full-time freelance writing and editing. Read full bio.

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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 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.