You may have heard that you should spend three months’ salary on an engagement ring. But that rule of thumb (formulated and advertised by the diamond industry) is now considered pretty outdated.
Instead, it can be a good idea to consider not only your income, but also your savings, current debt, living expenses, partner’s preferences, other costs involved in planning the wedding, and (bottom line) what you feel comfortable spending.
How you plan to pay for the ring can also impact how much you can afford to pay for it. Options include saving up and paying cash, using a credit card, financing the ring through the jeweler, or using a personal loan. And, each payment avenue has its pros and cons.
What follows are some guidelines that can help you figure out how much you should spend on an engagement ring, along with options for covering the cost.
The Average Cost of an Engagement Ring
According to The Knot’s 2022 Jewelry and Engagement Study, the average cost of an engagement ring is around $6,000.
While that number may represent the average, the amount couples actually spend on a ring varies widely. In The Knot’s study, roughly one-third of respondents spent between $1,000 to $4,000 on their engagement ring, and 8% shelled out less than $1,000.
Why do rings vary so much in price? The cost of an engagement ring depends on a number of factors, including the size and quality of the stone, where the gem was sourced, how the gem is set, and the type of metal chosen (such as yellow gold, white gold, or platinum). There may also be markups that come along with a popular brand name.
Diamond engagement rings, sourced from a mine, tend to be the most expensive choice. But there are many other, less costly options, such as lab-grown diamonds, moissanite (a lab-grown gem that looks like a diamond), and semi-precious gemstones (such as tourmaline, morganite, and aquamarine).
Whether you’re in the market for a large, eye-catching dazzler or a more dainty design, the good news is that these days there are ways to accomplish almost any look for a range of price points.
While paying in cash can be the simplest (and often the cheapest) option, it may not be feasible for all couples. Below are some other payment options that you may want to consider, along with their pros, cons, and potential costs.
Financing an Engagement Ring Through Your Jeweler
Many jewelers offer financing options, but just because you’re buying from a jeweler does not mean you have to use the financing they offer. It can be a good idea to take note of the following:
• Promotional offers Some jewelers offer a 0% introductory interest rate during a set period of time. But after that period of time, interest rates may be very high.
• Down payment requirements Some jewelers may require a certain percentage down payment prior to financing.
Financing through a jeweler directly may make sense if you’re confident you can pay back the loan prior to the end of the promotional period. As with any loan, it’s likely that there will be a credit check prior to being approved for financing.
Buying an Engagement Ring With a Credit Card
Putting a large purchase like an engagement ring on your credit card can be a simple solution at the moment, but may become a financial headache in the future. Here are some things you may want to consider before getting out the plastic.
• Interest rate If you put the engagement ring on a card with a relatively high interest rate and don’t pay it off right away, the ring will end up becoming significantly more expensive over time. Also, keep in mind that many credit cards have a variable interest rate, which means the interest rate at the time of purchase could go up.
• Credit-utilization ratio A large purchase like an engagement ring can mean using a significant percentage of credit available on your card. Having a high credit-utilization ratio may negatively affect your credit score.
• Rewards and protections Some buyers like putting large purchases on credit cards because of the consumer protections offered by the card. They also may want to take advantage of the rewards offered by the credit card company. Those rewards, however, may only be worth it if you can pay the amount back in full at the end of the billing cycle or during a 0% interest promo rate.
Using a Personal Loan to Finance an Engagement Ring
A personal loan is another avenue for engagement ring funding. A personal loan from a bank, credit union, or online lender may have a lower interest rate than a jeweler financing program. Personal loans also typically have significantly lower interest rates than credit cards.
A personal loan also works differently than jeweler financing and credit cards. With a personal loan, you’ll get the money in your bank account and can then pay the jeweler as though you were paying in cash. You then pay back the loan (plus interest) in monthly amounts set out in the loan agreement.
Here are some things you may want to consider before using a personal loan to pay for an engagement ring.
• Interest rate In many cases, a personal loan interest rate is fixed, meaning it doesn’t change after the agreement has been signed. This means that you know exactly how much you will need to pay back for the length of the loan.
• Loan terms You may have an option to pick the length of the loan. Shorter loans may mean you’re paying less interest over time but have larger monthly payments.
• Loan costs There may be fees associated with the loan, including an origination fee when the loan begins and a prepayment penalty if you pay off the loan before the end of the agreed-upon term.
• “What if” scenarios Some lenders provide temporary deferment for people facing financial hardship, such as a job loss.
Spending three months’ salary for an engagement ring is a long-standing tradition, but these days there is no one-size-fits-all formula for how much you should spend on an engagement ring. Ultimately, it’s a personal decision and will depend on your current and predicted income, current debt, expenses, savings, and preference.
If paying for an engagement ring upfront in cash isn’t feasible, you may want to look into different financing options and compare their pros, cons, and costs.
Your jeweler may offer financing, for example. Or, you may be able to take advantage of a credit card that has a 0% or low introductory interest rate and pay the balance off before the rate goes up.
Another option is to take out a personal loan. You may be able to find one that offers a more competitive interest rate than other ring financing options. You might also be able to fold in other upcoming costs as part of a wedding loan.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.
SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.
Photo credit: iStock/ljubaphoto
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Sure, savings accounts can be a good place to stow extra cash and build wealth. You’ll typically earn interest, helping your money grow and boosting your progress towards your financial goals.
However, unlike checking accounts, you usually can’t spend straight from a savings account. What’s more, you may find that there are limitations on the number of withdrawals or transfers you can make from out of your savings account.
If you want to avoid getting entangled with savings account rules and restrictions or triggering fees, here’s advice. Read on to learn the ins and outs of spending money from a savings account.
How Does a Savings Account Differ From a Checking Account?
You might think the main difference between a checking account and a savings account is how you view them–namely, one is for now, and one is for later. But the bank also views these two accounts very differently. Here’s a closer look at how savings accounts work vs. checking accounts.
• Savings accounts typically earn interest while checking accounts which generally earn zero or very little interest.
• Savings accounts may come with cash transfer and withdrawal limits. A federal rule called Regulation D used to limit certain types of transactions from a savings account to no more than six per month.
• In the wake of the coronavirus pandemic, the Federal Reserve lifted this rule to allow people to have easier access to their savings. Many banks, however, still enforce the six-per-month cap on savings account transactions.
• Savings accounts don’t usually come with debit cards that can be used to make purchases with money from that savings account. Only a few banks offer this service.
💡 Quick Tip: Don’t think too hard about your money. Automate your budgeting, saving, and spending with SoFi’s seamless and secure mobile banking app.
Can You Write a Check From a Savings Account?
Typically, you can’t write checks from a savings account. Of course, it’s always possible to transfer money from a savings account to a checking account and then write a check from there.
If you want to save money and have the ability to write a check with the money you save, you may want to consider opening up a money market account.
Money market accounts are a type of savings account that often pay a higher interest rate than traditional savings accounts and generally include check-writing and debit card privileges.
However these accounts often come with minimum monthly balances, and falling below the minimum can trigger fees. Like other savings accounts, money market accounts may limit transactions to six per month (which includes writing checks and debit card payments).
Get up to $300 when you bank with SoFi.
No account or overdraft fees. No minimum balance.
Up to 4.00% APY on savings balances.
Up to 2-day-early paycheck.
Up to $2M of additional FDIC insurance.
How to Spend (and Save) With a Savings Account
To take advantage of the interest you’re earning on your savings, and avoid triggering penalty fees or the closure of your account, you may want to keep these savings account spending tips in mind.
Keeping Track of Your Withdrawals
It can be a good idea to find out what your bank’s policy is regarding monthly transactions from savings. Many institutions are sticking with the standard limit of six “convenient transactions” per month, while some are allowing more, such as nine transactions per month.
Convenient transactions include money transfers you make online, by phone, or through bill pay. Transactions, including ATM withdrawals and those that you make in person at the bank, do not typically count towards the monthly cap.
Paying Bills From Your Checking Account
Scheduling automatic bill payments from your savings account may put you over the savings withdrawal limit. It can be a better idea to have automatic bill payments or recurring transfers come out of your checking account.
Withdrawing Money Only for Large Expenses
If you withdraw money from your savings account for everyday spending, it can reduce the amount of interest you earn, and make it harder to reach your savings goals.
It can be wiser to only touch your savings when it’s necessary to cover an emergency expense or a large purchase (ideally, one you’ve been saving up for).
Building Your Savings
A savings account can help you work towards your financial goals, such as creating an emergency fund, making a downpayment on a home, or going on a great vacation. In some cases, you may even want to have different savings accounts for different goals.
To help achieve those goals faster, you may want to set up an automatic transfer from your checking account into your savings account on the same day each month (perhaps after your paycheck gets deposited). It’s perfectly fine to start slowly. Even small monthly deposits will add up over time.
💡 Quick Tip: Want a simple way to save more everyday? When you turn on Roundups, all of your debit card purchases are automatically rounded up to the next dollar and deposited into your online savings account.
Maximizing the Interest You Earn
The higher the interest rate, the faster your savings will grow. That’s why it can be worthwhile to do some research into which institutions and which types of savings accounts are paying the highest rates.
Some options you may want to look into include: A high-interest savings account, money market account, certificate of deposit (CD), checking and savings account, or an online savings account.
The Takeaway
Savings accounts generally aren’t designed for making frequent transactions. Instead, their main purpose is to provide a safe place to store money for the medium- to long-term. This is one of the key differences between checking and savings accounts.
Savings accounts still allow you to have access to your money, of course. To avoid exceeding transaction limits, you can visit the bank in person or use the ATM to make withdrawals or initiate transfers (since these transactions typically don’t count towards transaction caps).
To make the most out of your savings account, you may also want to look for an account that pays a higher-than-average interest rate.
Open a SoFi Checking and Savings Account
Another savings option you may want to consider is opening a checking and savings account, which can combine the best features of each kind of financial vehicle.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.
SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
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.
You want to become a homeowner but aren’t sure how you’re going to save up for your down payment. Typically, you’re going to need at least 3% to 5% for a down payment for a conventional mortgage, or 20% on a loan that doesn’t require private mortgage insurance.
Fortunately, there are a number of methods you can use to stash away money for your future home. Here are some of the best ways to save for a house and get one step closer to your dream.
1. Creating a Budget
Living on a budget may not be easy, but in the long run it can help you save money to put toward a home purchase. Creating a budget to track where your money is going is a good first step in a house savings plan.
Some effective ways to do this are recording expenses in a spreadsheet or using a budgeting app to determine your spending practices and identify where changes can be made to meet your savings goal.
💡 Quick Tip: Want to save more, spend smarter? Let your bank manage the basics. It’s surprisingly easy, and secure, when you open an online bank account.
2. Using Cash Envelopes
The theory behind this method is that it may be harder to part with cash than it is to swipe a debit or credit card. The cash envelope budgeting method involves distributing cash each month (or pay period) into envelopes based on categories you establish. When you’re out of cash for each category, you stop spending.
3. Deleting Your Stored Cards
Do you store your payment information on Amazon or other e-commerce stores? If so, it’s time to consider deleting them from each store or from your browser settings. If you have to manually input your card each time you want to make a purchase, you may just stop spending so much money online.
4. Downsizing Your Life
Another one of the tips for saving for a house involves downsizing your life. This could mean moving to a smaller rental or to a more affordable area of town. Just keep in mind that there is always a flip side to downsizing. For instance, your smaller apartment may not include parking, so you might be taking on an expense you didn’t have before. Moving to a different part of town might mean spending more on transportation costs getting to work each day. It’s a good idea to weigh the pros and cons before making any big decisions.
5. Setting Up Automatic Transfers
Reaching your savings goals might happen faster by setting up automatic transfers from checking account to savings account each time you’re paid. If your paycheck is direct-deposited, you may also be able to split the deposit into more than one account, on a percentage or dollar-amount basis.
6. Postponing Vacation
This method can reap plenty of savings if your usual vacation is a costly one. Instead of taking a big trip, a staycation may be entertaining and less expensive. Check out your local newspaper’s website to find free activities and events in your area. Art museums sometimes offer free admission days, and area nature trails are generally free and can be a good way to have fun and get exercise in one fell swoop. Now is the time to be creative since you’re working on your house savings plan.
7. Tackling Your Debt
If you get 4.50% APY in your high-yield savings account, but you carry a credit card balance with an interest rate of 23.99%, it may make more sense to put your money towards your debt right now rather than savings.
8. Eating at Home
Dining out is expensive. The average American household spends more than $3,000 per year on eating out. By skipping the takeout and restaurants and cooking your meals at home, you can add that money to your house savings plan.
9. Making Your Own Coffee
It’s a cliche, but it’s true: If you skip the lattes, you could boost your savings. The average American spends $92 per month on coffee, which adds up to about $1,100 per year. Purchasing a coffee maker and brewing your own cup of joe as opposed to hitting up a coffee shop every day will likely improve your home savings plan.
10. Using Coupons at the Grocery Store
Looking for coupons for items you normally buy anyway can trim your grocery bill. Coupons can be found on coupon websites and on brands’ websites.
Just because you want something doesn’t mean you need to have it right away. Waiting to buy things when they go on sale is another one of the best tips for saving for a house. Along with looking at stores’ advertised sales, you could always create a Google alert to find out when things go on sale by typing in your favorite stores’ names + sales on Google Alerts.
12. Using Promo Codes
Promo codes are like coupons for online purchases. Browser extensions that search the web for deals can bring those promo codes to you and save you precious search time and effort.
13. Cutting Out Cable
Cable television can be a major monthly expense for some households, sometimes hundreds of dollars every month. One of the best ways to save is to cut the cord, switch to streaming services, and potentially pay much less per month on your favorite entertainment by saving on streaming services.
14. Canceling Your Subscriptions
You may be spending money on monthly subscriptions without realizing how much. Canceling subscriptions to things like lifestyle boxes you aren’t using anymore or magazines you don’t read can add up to significant savings.
15. Making the Most of the Library
The local library is a fantastic resource. You can borrow books, magazines, and movies instead of buying them, and some libraries even offer access to free audiobooks. Libraries are funded by taxes, so you’re probably already contributing to this resource—there’s little reason to pay twice for items it provides as a public service.
16. Canceling Your Gym Membership
Gym memberships can be pricey, but exercise is not. Using free, online workout videos and things in your home as exercise equipment (e.g., stepping on your stairs, doing wall or table pushups, or using a chair for barre exercises), or walking around your neighborhood can save money over a gym membership.
17. Shopping Around for Insurance
You may be overpaying for insurance. Comparing rates and getting different quotes for your car, renter’s, pet, health, and other types of insurance can ensure you’re getting the best deal possible.
18. Steering Clear of Checking Account Fees
Is your bank charging you a monthly maintenance fee just to keep your account open? If so, it might be worth looking into switching banks or asking your bank how you can avoid these fees. For example, if you have a direct deposit into the account or maintain a minimum daily account balance, you may be eligible for a fee-free account.
19. Selling Your Stuff
Do you have things you never use anymore? Could they fetch some cash? Holding a garage sale or selling your stuff online might net a few dollars to add to your house savings plan. You’ll probably want to buy new things for your new home anyway, and selling your old things will allow you to save up.
20. Asking Your Boss for a Raise
During your annual performance review, consider asking for a raise, highlighting your accomplishments and why you deserve more money. Be specific about improvements you’ve made to the company by backing up your accomplishments with data.
21. Switching to a Better Job
If you aren’t making enough money in your current position, then consider switching to a higher-paying job. It’s a good idea to keep your current job until you find a new one, though.
22. Taking on a Side Hustle
If you have the time and energy, earning extra money on nights and weekends with a side hustle might be an option. For instance, you could start a dropshipping business, take up freelancing, or do affiliate marketing.
23. Signing Up for a Travel Rewards Credit Card
If you need to travel or you are still planning a vacation, using a travel rewards credit card may be a good idea. These cards offer certain rewards for different categories such as travel, gas, and dining out, and allow you to put your rewards towards flights, hotels, rental cars, and more. Plus, many of them offer other ways to save, such as providing you with rental car and baggage delay insurance or no foreign transaction fees.
With a cash-back credit card, you can earn cash rewards every time you spend. Putting that cash back toward a statement credit or bank transfer will help accelerate your savings.
25. Renting Your Spare Room
If you have an extra room in your apartment that you aren’t using, you could get a roommate or list it on a rental site to reduce your overall living expenses. Just make sure that you get permission from your landlord before inviting anyone else to move in.
26. Renting Out Your Storage Space
Another one of the best ways to save for a house is to rent out your unused storage space on a peer-to-peer site. You could generate income without having to do much work at all, and you won’t have to live with someone else—just their stuff.
27. Making Your House Savings Plan Known
Your Aunt Mildred may always get you boxes of chocolates for your birthday, and your dad might give you gift cards for Amazon. But letting your family and friends know you’re trying to save for a home might plant the seed for them to give you cash instead. If you’re getting married, this is a time to tell people about your plans so that instead of registry gifts, they might give you cash for your future home.
28. Opening a High-Yield Savings Account
Putting your money into a regular savings account may not result in much of a return. However, putting money in a high yield savings account may net more interest and get you closer to reaching your savings goals. A high-yield savings account typically offers 20 to 25 times the national average of a typical savings account.
If you’ve been doing your taxes on your own every year, you may have missed potential tax savings you might be eligible for. A tax professional may be able to maximize your savings, possibly resulting in a larger refund, or minimize taxes you owe.
30. Saving Your Tax Refund
If you get a tax refund, consider saving it instead of spending it. The money can be a nice addition to your down payment, possibly even earning interest in high-yield savings account until you need it.
31. Changing Your Tax Withholding
Among the best ways to save for a house is by keeping more money from your paycheck. If your withholding is too high, the IRS is essentially holding your money for you all year round. Instead of getting a large tax refund, keeping your money now and investing it in an interest-bearing account will help you save up for your home.
The Takeaway
Saving for a house takes some time and effort, but there are many different ways to do it. For instance, by eating out less, you could potentially save thousands of dollars a year. Launching a side hustle could increase your income. And opening a high-yield savings account, which typically offers considerably higher interest rates than a traditional savings account, could also help your money grow — and help you achieve your dream of home ownership.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.
Photo credit: iStock/Talaj
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.
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.
4.00% APY
SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
Your borrowing power refers to how much credit you can get based on your financial history, including your credit history and score. Having strong borrowing power is essential if you ever want to get a mortgage, car loan, personal loan, or any other type of financing. It can also help you qualify for loans and credit cards with more favorable rates and terms. What follows are 10 effective strategies to boost your borrowing power and increase your financial opportunities.
How to Boost Your Borrowing Power
Whether you’re interested in borrowing money to make a major purchase or using a personal loan to consolidate high interest debt, here are some simple ways to increase your borrowing capacity.
1. Check Your Credit Reports
Lenders determine how much they will lend you (and if they will lend to you at all) primarily based on your credit score and history. So a great first step is to get copies of your three credit reports, and read each one over carefully. This allows you to see where you stand, as well as check for any mistakes or inaccuracies (like payments marked late when you paid on time or someone else’s credit activity mixed with yours).
You can request free copies of your credit reports from three major credit bureaus — Equifax, Experian, and TransUnion — through AnnualCreditReport.com . If you find any errors, you’ll want to file a dispute with the appropriate credit agency.
2. Be a Responsible Borrower
To show creditors that you are a safe bet, you’ll want to make sure you pay all of your bills on time. Also try to keep your credit card balances low — this impacts your credit utilization ratio (the percent of available credit you are actually using), which has a significant impact on your credit score. To calculate your credit utilization, add up all of your revolving credit balances and credit limits, divide your total balance from your total limit, and multiply that number by 100 (to get a percentage). Ideally, you want to keep credit utilization below 30%.
3. Show Financial Stability
Stability and consistency in your financial and employment history can bolster your borrowing power. Lenders generally prefer borrowers who maintain a consistent residence and have a steady job and a reliable income source. This showcases your reliability as a borrower and boosts your chances of getting approved for loans with favorable terms.
4. Consider a Co-Borrower
If your individual borrowing power is limited, using a co-borrower (such as a spouse or a family member) can significantly enhance your chances of loan approval. A co-borrower is a joint applicant who shares ownership of the loan and responsibility for payments. (This is in contrast to a cosigner, who is only liable for the loan if the primary borrower fails to make payments.) Depending on the co-borrower’s income, they may be able to help you qualify for a higher loan amount, as well as better rates and terms.
5. Shop Around
Lenders vary in terms of how much they loan out, and to whom, so it’s a good idea to explore multiple lenders, including traditional banks, online lenders, and credit unions, and compare loan options before making a decision. Some lenders will allow you to “prequalify” for a loan, which can give you a good idea of how much of a loan they will offer you and at what rate. This only requires a soft credit check and won’t impact your credit score.
6. Pay Down Existing Debt
Reducing your existing debts can have a positive impact on your credit score. Not only that, it enhances your debt-to-income (DTI) ratio, a key factor considered by lenders. Your DTI ratio measures how much of your monthly gross income goes toward debt payments. This gives lenders insight into your ability to make another monthly payment and how large a payment you could handle.
To calculate your DTI, add together your fixed monthly payments (like mortgage/rent, auto loans, credit cards, and other personal loans), then divide that number by your gross monthly income (the amount you earn before taxes and other deductions). As a rule of thumb, lenders prefer a DTI ratio of 36% and under to approve you for a loan.
7. Increase Your Income
Another way to improve your DTI is to increase your income. Even if you have a large amount of debt, a high enough income can often offset it. As long as you have enough money coming in to handle your current debt and take on a new loan, a lender may not cap how much you are able to borrow.
If you have some time before you need to apply for a loan, you might look into ways to bump up your income, such as taking on a side hustle, asking for a raise, or looking for a new job that pays a higher salary. This could help you qualify for a larger loan amount.
8. Don’t Leave Any Income Out
As mentioned above, your income plays a key role in how much you can borrow. So you want to be sure to include all sources of income, including:
• Monthly salary
• Alimony
• Child support
• Side-gig income
• Rental income
• Investment property income
Including all of your income can lower your DTI ratio, increasing your borrowing power.
9. Consider a Longer Loan Term
Generally, the longer your loan term, the lower your monthly payment. A longer loan term — and lower monthly payment — may allow you to borrow more money with less impact on your DTI ratio, giving you eligibility for a larger loan. However, you’ll want to keep in mind that extending the term of a loan typically means paying more in interest over the life of the loan, increasing your total borrowing cost.
10. Consider Offering Collateral
You may be able to borrow more with a secured vs. an unsecured loan. With a secured loan, you put up something valuable (such as property, a vehicle, or a savings account) as collateral. The lender can take possession of this collateral if you fail to pay back loan funds as agreed. This lowers risk for the lender and, as a result, they may be willing to offer you a larger loan and/or a lower rate. If you’re already offering collateral, offering something of more value might boost the amount you’re approved for.
The Takeaway
If you’re thinking about applying for a loan for a large purchase, to consolidate other debts, start a business, or for any other purpose, it’s a good idea to look into ways to improve your borrowing power. You can start doing this right away by reviewing your credit reports, staying on top of your bills, paying down debt, using only a portion of your credit card limits and, if possible, boosting your income.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.
SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.
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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.
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 .
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If you’re buying a new car or a used one, you will likely face the decision of whether or not to purchase an extended warranty.
An extended warranty typically covers the cost of certain repairs after the manufacturer’s standard warranty (which usually lasts three years or 36,000 miles, whichever comes first) expires.
These policies can help you breathe a little easier, knowing that if your vehicle needs a pricey repair in the future, some or all of the cost could be covered.
On the other hand, an extended warranty can be expensive in and of itself and usually don’t cover every possible repair. So it could wind up being a big expense that doesn’t really pay off.
In this guide to extended car warranties, you’ll learn about what these policies do, their pros and cons, and whether one might (or might not) make sense for you.
What is an Extended Car Warranty?
When buying a new car, it likely comes with a manufacturer’s warranty. An extended warranty is an optional plan you can buy to help you pay for the cost of certain repairs your vehicle may need while you own it, after that original warranty expires. You may be able to get an extended warranty when buying a new or used car (the latter may depend on whether the policy is transferable; more on that in a minute.)
• Extended car warranties, also called extended service contracts, typically cover the price of major repairs or replacements (with exclusions) for a certain number of years or number of miles.
• The extended warranty usually begins when the manufacturer’s warranty expires, but sometimes the two overlap.
• While these plans are often offered at the point of sale, you can typically purchase them any time until the original manufacturer’s warranty expires.
• Extended warranties are also offered by third-party vendors.
If you’re interested in getting an extended car warranty for a new or leased car, it can be worth going online to compare policies from independent providers to see exactly what each one covers, what’s excluded, and how much it costs. This can help you decide which warranty would work best for you and whether it is worth getting.
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What Does an Extended Car Warranty Cover?
Just as you may wonder, “What does car insurance cover?” you may be curious to know, “What does an extended car warranty cover?” Exactly what the policy covers will vary with every provider and the type of warranty you choose.
The only way to know for sure is to carefully read the extended warranty policy agreement, but here are some general rules of thumb.
What It Covers
Extended warranties typically cover the major mechanical parts of your car, such as:
• Engine
• Transmission
• Steering
• Suspension
• Clutch
• Air-conditioning
• Electrical systems, including in-car audio and navigation systems.
So if your engine blows or oil starts leaking, it will likely be covered. Coverage may not be 100%, however, and you may have to pay a deductible before coverage kicks in.
Some policies also offer add-ons like 24/7 roadside assistance, rental car reimbursement, trip interruption service, and tire protection.
What It Doesn’t Cover
Generally, extended warranties won’t cover routine maintenance or damage caused by normal wear and tear, such as:
• Oil changes
• Replacing the timing belt (unless it fails before the recommended replacement time)
• New tires
• New brakes
• Windshield wipers.
If an item isn’t listed in the policy, you can assume it’s not covered.
How Much Does An Extended Car Warranty Cost?
Pricing will vary depending on the type of vehicle, what the plan covers, what the deductible is, and the length of the contract. The upfront cost of the warranty can range from $1,000 to $3,000 or more. If you’ve been saving up for a new car, that can be a significant additional expense.
If you purchase a car warranty from a dealer and include it in your financing, you are likely also going to pay interest, which will increase the total cost of the warranty.
You might have to pay a deductible every time you submit a claim, plus kick in money for a portion of the bill.
Get up to $300 when you bank with SoFi.
No account or overdraft fees. No minimum balance.
Up to 4.00% APY on savings balances.
Up to 2-day-early paycheck.
Up to $2M of additional FDIC insurance.
Pros and Cons of Extended Car Warranties
Whether you should get an extended car warranty or not is a personal decision. It will depend on how reliable the car is and, if you’re buying a used car, how old the car is. It will also depend on how well you would be able to manage if your car encountered a problem that will be costly to fix.
Here are some pros and cons you may want to consider when making the decision.
Pros of an Extended Car Warranty
First, the potential upsides of an extended car warranty.
• You may save money. If your car needs a very costly repair that’s covered under your extended warranty, you could save money. Instead of paying the entire bill out of pocket, you’d only be responsible for covering the deductible (if you have one) and then the warranty provider would pay for all or most of the rest.
• It provides peace of mind. If you’re worried about how you would cover a car repair bill, having an extended warranty can make you feel less money stress over something going wrong with your car. If your plan also incorporates roadside assistance, you won’t have to worry about breaking down on the road.
• It can make your car more attractive to a future buyer. If you plan to sell your car down the road, a transferable warranty can make your car more appealing to prospective buyers.
Con of an Extended Car Warranty
Now, some of the downsides of extended car warranties to consider.
• You may never use it. Many people who purchase an extended car warranty don’t wind up using it. And if they do, the cost of the repairs they need may be less than the cost of the warranty.
• There may be overlap. If the coverage period of the extended warranty overlaps with the manufacturer’s warranty, you may end up paying for coverage you’re already getting at no cost.
• Exclusions and limitations. Every contract comes with fine print that specifies how you can use the warranty. For example, the provider might deny coverage for a problem caused by normal wear and tear or reduce the payout based on your car’s depreciation. You may also be required to take the car to certain auto repair shops to be covered.
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Are Extended Car Warranties Worth It to You?
If you are trying to decide whether a car warranty is worth it, here are a few times it may be a good investment.
1. When Your Car Is Unreliable
If you were to buy a car you were leasing and you know it tends to have a certain kind of issue (maybe the A/C is temperamental), then an extended warranty might be a good idea.
2. When You Are Worried About Getting a Big Repair Bill
If you know that you couldn’t handle a large repair bill if you were to receive one, it might be wise to get an extended car warranty. Yes, it will cost you, but it could help you avoid incurring high-interest credit card debt at an inopportune time.
3. When You Are Planning to Keep Your Car for a Long Time
Perhaps you are planning on selling your vehicle and then buying or leasing a car in the next year or two. In that case, it might not be worth it to purchase an extended car warranty.
However, if you are in it for the long haul, so to speak, you might benefit from an extended warranty. Over the years, repairs can inevitably crop up. This kind of policy might help you organize your bills better and afford to pay them.
One point to note: With an extended car warranty, it may be especially important to keep up with the cost of car maintenance. Not maintaining your car properly could lead to the insurance becoming void.
5 Tips for Choosing an Extended Car Warranty
If you decide an extended warranty makes sense for you, it’s a good idea to look at the policy contract closely — this is where you’ll find the fine print that spells out all the rules and exceptions — and not just the glossy brochure or the online advertising.
If the seller won’t show you this info before you sign on the dotted line, it can be wise to take your business elsewhere.
Here are some things you may want to look for in a contract before you sign.
1. Check the Deductible
Look at the deductible: You might have to pay $100 or more out-of-pocket every time you get a repair, before the coverage kicks in. It’s wise to know what you are signing up for.
2. Understand Whether the Policy Is Transferable
This is a consideration if you are thinking of selling your car down in the future. Typically, these contracts aren’t transferable if you sell to a dealer. So if you are thinking you might want to offload your vehicle before too long, definitely weigh this factor.
3. Know How the Service Contract Pays Out
In some cases, you may have to foot the bill and then file a claim to get reimbursed. With this scenario, it’s possible that after you pay for a repair, the claim can be rejected. If this feels like a challenging prospect, you may want to review a variety of extended warranties and see if there is one (or some) that offer a better fit.
4. Delve into the Exclusions and Requirements
You will need to read the fine print to find out what repairs are and aren’t covered and other limitations or restrictions. If, say, you have a particular concern (such as the example above, with a car that has temperamental air conditioning), you will want to make sure you are covered.
5. Check Where You Can Go for Repairs
Manufacturer-backed contracts typically require that you go to a dealer. Third-party vendors may have restrictions on where you can take your vehicle, or they may let you choose the repair shop. It’s wise to see what options are available and which extended car warranty best suits your needs.
Typically, you will have a choice between an extended car warranty from the original equipment manufacturer (or OEM) and one that comes from a third party.
The OEM will be the car brand, such as Toyota or Ford? What exactly is a third-party extended car warranty? It means that a company that is not the car brand is offering you this policy. It might be an insurance or a warranty company.
Third-party policies are similar to and possibly less expensive than OEM ones, but look carefully at these points. Third-party coverage can be more restrictive and limited:
• Are there limitations regarding what is covered?
• Do you have your choice of where your car will be repaired, or will the policy dictate that?
• Does the policy specify that OEM parts must be used, or could any type be used?
• What is the deductible?
• Will you have to pay for repairs out of pocket and then be reimbursed?
By sizing up these factors, you can find a policy that suits you best.
An extended warranty could add thousands of dollars to the purchase of a car but can, in some circumstances, offer additional protection that makes it a wise buy. However, your circumstances will play a key role in whether an extended car warranty is worth it.
If you would have trouble covering the cost of a major repair and/or worrying about car expenses keeps you up at night, the cost of one of these contracts might be worth the peace of mind it can bring.
If you’re buying a vehicle with a reliable track record, however, it might make sense to skip the warranty and, instead, set aside the money you’d spend on it, and then use the funds for needed repairs.
If you don’t end up using all of it for your car, you can keep saving it or use it for something else.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.
FAQ
Do you really need a car warranty?
Nearly all cars come with a warranty that lasts 36 months or 36,000. Whether to get an extended warranty can depend on how much you want that peace of mind, whether you feel you couldn’t afford a major repair otherwise, and if you feel your car is unreliable.
Is it worth it to get an extended car warranty?
Whether an extended car warranty is worth it depends on your personal situation and your car. If your car tends to need a fair number of repairs or if you plan on owning it for a long time, or if you worry you wouldn’t have funds available for repairs, it can be a wise move. But if you don’t like paying for a policy you may never use, it may not be a good fit.
What are the disadvantages of an extended warranty?
In terms of the cons of an extended warranty, consider that it will probably cost at least $1,000 or more and have a deductible. It may have limitations about what is covered, it may not stipulate that original equipment manufacturer (OEM) parts be used, it may not allow you to pick where the repair is done, and you may have to pay out of pocket and then get reimbursed.
SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
