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If you’re repaying a variety of different debts to different lenders, keeping track of them and making payments on time each month can be time consuming. It isn’t just tough to keep track of these various debts, it’s also difficult to know which debts to prioritize in order to fast track your debt repayment. After all, each of your cards or loans likely have different interest rates, minimum payments, payment due dates, and loan terms.

Consolidating — or combining — your debts into a new, single loan may give your brain and your budget some breathing room. We’ll take a look at what it means to consolidate debt and how it works.

What Is Debt Consolidation?

Debt consolidation involves taking out one loan or line of credit (ideally with a lower interest rate) and using it to pay off other debts — whether that’s car loans, credit card debt, or another type of debt. After consolidating those existing loans into one loan, you have just one monthly payment and one interest rate.


💡 Quick Tip: A low-interest personal loan can consolidate your debts, lower your monthly payments, and help you get out of debt sooner.

Common Ways to Consolidate Debt

Your options to consolidate debt depend on your overall financial situation and what type of debt you wish to consolidate. Here are some common approaches.

Balance Transfer

If you are able to qualify for a credit card that has a lower annual percentage rate (APR) than your current cards, a balance transfer credit card may be one option to consider and can be a smart financial strategy to consolidate debt if you use it responsibly.

Some credit cards have zero- or low-interest promotional rates specifically for balance transfers. Promotional rates are typically for a limited time, so if you pay the transferred balance in full before it ends, you’ll reap the benefit of paying less — or possibly zero — interest.

However, there are some caveats to keep in mind. Credit card issuers generally charge a balance transfer fee, sometimes 3% to 5% of the amount transferred. If you use the credit card for new purchases, the card’s purchase APR, not the promotional rate, will apply to those purchases.

At the end of the promotional period, the card’s APR will revert to its regular rate. If a balance remains at that time, it will be subject to the new, regular rate.

Making late payments or missing payments entirely will typically trigger a penalty rate, which will apply to both the balance transfer amount and regular purchases made with the credit card.

Home Equity Loan

If you own a home and have equity in it, you might consider a home equity loan for consolidating debt. Home equity is the home’s value minus the amount remaining on your mortgage. If your home is worth $300,000 and you owe $125,000 on the mortgage, you have $175,000 worth of equity in your home.

Another key term lenders use in home equity loan determinations is loan-to-value (LTV) ratio. Typically expressed as a percentage, the LTV is similar to equity, but on the other side of the scale: Instead of how much you own, it’s how much you owe. The percentage is calculated by dividing the home’s appraised value by the remaining mortgage balance.

Lenders typically like to see applicants whose LTV is no more than 80%. In the above example, the LTV would be 42%.

$125,000 / $300,000 = 0.42
(To express this as a percentage, multiply 0.42 x 100 to get 42%.)

If you qualify for a home equity loan, you’ll typically be able to tap into 75% to 80% of your equity.

After the home equity loan closes, you’ll receive the loan proceeds in one lump sum, which you can use to pay your other debts.

A home equity loan is essentially a second mortgage, a secured loan using your home as collateral. Since there is a risk of losing your home if you default on the loan, this option should be considered carefully.

Personal Loan

If you don’t have home equity to tap into or you prefer not to put your home up as collateral, a personal loan may be another option to consider.

There are many types of personal loans, but they are typically unsecured loans, which means no collateral is required to secure the loan. They can have fixed or variable interest rates, but it’s fairly easy to find a lender that offers fixed-rate personal loans.

Generally, personal loans offer lower interest rates than credit cards. So consolidating credit card debt with a fixed-rate personal loan may result in savings over the life of the loan. Also, since personal loans are installment loans, there is a payment end date, unlike the revolving nature of credit cards.

There are many online personal loan lenders and the application process tends to be fairly simple. You may be able to use a loan comparison site to see what types of interest rates and loan terms you may be able to qualify for.

When you apply for a personal loan, the lender will do a hard credit inquiry into your credit report, which may temporarily lower your credit score. The lower credit score may drop off your credit report in a few months.

If you’re approved, the lender will send you the loan proceeds in one lump sum, which you can use to pay off your other debts. You’ll then be responsible for paying the monthly personal loan payment.

A drawback to using a personal loan for debt consolidation is that some lenders may charge origination fees, which can add to the total balance you’ll have to repay. Other fees may also be charged, such as late fees or prepayment penalties. It’s important to make sure you’re aware of any fees or penalties before signing the loan agreement.


💡 Quick Tip: Swap high-interest debt for a lower-interest loan, and save money on your monthly payments. Find out why SoFi credit card consolidation loans are so popular.

Is Debt Consolidation Right For You?

Your financial situation is unique to you, but there are several things you’ll want to keep in mind when trying to decide if debt consolidation is right for you.

Debt Consolidation Might Be a Good Idea If …

•   You want to have only one monthly debt payment. It can be a challenge to manage multiple lenders, interest rates, and due dates.

•   You want to have a payment end date. Using a home equity loan or a personal loan for debt consolidation will be useful for this reason because they are forms of installment debt.

•   You can qualify for a zero interest or low-interest rate balance transfer credit card. This may allow you to consolidate multiple debts on one new credit card and save interest by paying off the balance before the promotional rate ends.

Debt Consolidation Might Not Be For You If …

•   You think you’ll be tempted to continue using the credit cards you paid off in the debt consolidation process. This can leave you further in debt.

•   You’ll incur fees (e.g., balance transfer fee or origination fee). If the fees are high, it might not make sense financially to consolidate the debts.

•   Consolidating your debts may actually cost you more in the long run. If your goal is to have smaller monthly payments, that generally means you’ll be making payments for a longer period of time and incurring more interest over the life of the loan.

Recommended: Getting Out of Debt with No Money Saved

Credit Card Debt Relief: How to Get It

Some people seek assistance with getting relief from debt burdens. Reputable credit counselors do exist, but there are also many programs that scam people who may already be overwhelmed and are vulnerable.

Disreputable debt settlement companies may charge fees before ever settling your debt and often make bogus claims, such as guaranteeing that they will be able to make your debt go away or that there is a government program to bail out those in credit card debt.

Even if a debt settlement company can eventually settle your debt, there may be negative consequences to your credit along the way. What’s more, a debt settlement program may require that you stop making payments to your creditors. But your debts may continue to accrue interest and fees, putting you further in debt. The lack of payments may also take a negative toll on your payment history, which is an important factor in the calculation of your credit score.

Recommended: Debt Settlement vs Credit Counseling: What’s the Difference?

Debt Relief: Is it a Good Idea?

What’s a good idea for some people may be a bad idea for others. Whether debt relief is a good idea for you and your financial situation will depend on factors that are unique to you. Working with a reputable credit counselor may be a good way to get some assistance that will help you get out of debt for good and create a solid financial plan for the future.

The Takeaway

Debt consolidation allows borrowers to combine a variety of debts, like credit cards, into a new loan. Ideally, this new loan has a lower interest rate or more favorable terms to help streamline the repayment process.

SoFi personal loans offer 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 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.

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

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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.

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A personal loan is a flexible lending product that can be used for anything from covering the cost of a home repair to consolidating high-interest debt. While there’s no universally required credit score for a personal loan, you generally need a score of at least 610 to qualify, and an even higher score to get a lender’s best rates.

That said, some lenders offer personal loans for no credit, and even for bad credit. To make up for the increased risk, however, they will typically charge high interest rates.

Read on for a closer look at the minimum credit score for a personal loan, how your credit score can impact loan amounts and interest rates, plus other factors lenders look at when considering an applicant for a personal loan.

What Personal Loans Are and How They Work

A personal loan enables you to borrow a specific amount of money to use in virtually any way you like — unlike a mortgage or auto loan which is earmarked for one specific purpose. Personal loans are offered by banks, credit unions, and online lenders and are generally unsecured (meaning you don’t have to pledge an asset to secure the loan).

Common uses of personal loans include home renovations, vacations, weddings, car/home repairs, medical expenses, moving expenses, major purchases, and credit card consolidation.

Once you get approved for a personal loan, you receive the funds in one lump sum up front then repay the money (plus interest) in monthly installments over a set period of time, called the loan term.


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

What You Need to Qualify for Personal Loans

These are a few factors lenders take into consideration when deciding whether or not to offer you a personal loan, as well as how much to offer and at what rate. Here’s a look at what you may need to qualify.

Credit Score

A credit score is a three-digit number (typically between 300 and 850) designed to predict how likely you are to pay a loan back on time based on information from your credit reports. There is no universally set minimum credit score for personal loans but many lenders require applicants to have a minimum score of around 620. To get approved for a lender’s lowest rates, however, you may need a credit score closer to 690.

That doesn’t mean borrowers with lower scores or thin credit are out of luck. Some lenders offer personal loans to applicants without any credit history at all. There are also personal loans on the market designed for applicants with poor or bad credit. Keep in mind, though, that these loans often come with high rates and less-than-favorable terms.

Debt-to-Income Ratio

Lenders will also look closely at an applicant’s debt-to-income (DTI) ratio, which measures the percentage of a person’s monthly income that goes to debt payments. You generally want your DTI to be as low as possible because that indicates that your income is well above what you need to cover your monthly expenses.

If you’re applying for a personal loan, lenders typically want to see a DTI of 35% to 40% or less. A lender might allow a higher DTI, however, if you have a strong credit score or other compensating factors, like enough money in your savings account to cover several months of living expenses.

Income

To make sure that borrowers have the cash flow to repay a new loan, lenders typically have minimum income requirements for personal loans. Income thresholds vary widely by lender — some require applicants to earn at least $45,000 per year, while others have a minimum annual income requirement of just $20,000. Lenders don’t always disclose their income requirements, so you may not be able to discover these minimums before you apply for a personal loan.

Lenders see your income by looking at your monthly bank statements, last two years of tax returns, and pay stubs. Some lenders also require a signed letter from an employer. If you are self-employed, you can provide tax returns or bank statements to show proof of income.


💡 Quick Tip: With average interest rates lower than credit cards, a personal loan for credit card debt can substantially decrease your monthly bills.

Personal Loan Options by Credit Score

When it comes to having the right credit score for a personal loan, there is no one set score that disqualifies someone from getting their hands on one. That said, having a FICO® Score in the good range (670-739) or higher gives applicants the widest range of lending opportunities and the most favorable interest rates. Take a closer look at how different FICO credit score ranges can affect lending opportunities.

FICO Credit Score Range	Rating	Lending Opportunities
800+	Exceptional	Wide variety of lending products, favorable interest rates, larger loan amounts
740-799	Very Good	Wide variety of lending products, favorable interest rates, larger loan amounts
670-739	Good	Wide variety of lending products, good loan amounts, fair interest rates
580-669	Fair	Can qualify for some lending products with slightly higher interest rates
<580	Poor	Limited lending opportunities, smaller loan amounts, typically high interest rates

Exceptional

An exceptional credit score qualifies applicants for the widest variety of personal loan options, the most favorable interest rates, and larger loan amounts.

Very Good

Having a very good credit score qualifies applicants for most if not all of the same rates and lending opportunities as exceptional applicants.

Good

Having a good credit score puts a borrower near or slightly above the average of U.S. consumers, and most lenders consider this a good score to have. Applicants shouldn’t struggle to find a personal loan, but they may not be approved for the lowest interest rates.

Fair

Because a fair credit score is below the average score of U.S. consumers, many lenders will approve loans with this score, but rates and terms might not be as desirable as they are for higher scores.

Poor

A poor or “bad” credit score is well below the average score of U.S. consumers and demonstrates to lenders that the applicant may be a lending risk, which greatly limits the applicant’s borrowing options. If they do qualify for a personal loan they likely can expect to be approved at high interest rates.

Alternatives to Personal Loans

If your credit score makes it difficult to qualify for a personal loan, you may want to explore alternative lending options. Here are some to consider.

•   Credit card cash advance: Consumers with credit cards may be able to request a cash advance from their credit card, which can make it easy to get access to cash quickly. These cash advances typically come with higher interest rates than a regular credit card purchase.

•   Peer-to-peer loans: There are some web-based lending sites that offer some flexibility in qualification requirements. Since these sites are not lenders, and more like matchmakers, they may help you find an investor who is willing to look at other factors besides your credit score.

•   Cross-collateral loans: If you already have a loan secured by collateral with a lender (such as auto loan or mortgage), you may be able to qualify for another loan with the same lender using that same collateral. However, not all lenders allow cross-collateral loans. And there are risks involved for borrowers. To have a lien released from the asset used as collateral, you typically need to pay both loans in full.

Personal Loan Rates From SoFi

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.

FAQ

Is a different credit score required for loans of different sizes?

Generally, the higher your credit score, the larger the loan you can qualify for. Maximum amounts for personal loans range from $500 to $100,000. If you have strong credit, you may qualify for a larger loan than you need. Be sure to consider how much you can afford to repay each month before deciding what size loan to take out.

Can you get a personal loan without having a credit score at all?

There are some personal loans on the market with no credit check. Since the lender can’t rely on your credit history, they will typically focus on other indicators of your ability to pay back the loan, such as your income, employment history, rental history, and any previous history with the lender.

When applying for a personal loan with no credit check, you’ll want to carefully weigh the benefits against the costs. Lenders will often charge higher interest rates and impose more fees to lessen their risk.

Can getting a personal loan affect a credit score?

Getting a personal loan can affect credit scores both positively and negatively. Applying for a personal loan typically results in a hard credit inquiry, which may cause a small, temporary drop in your credit score. On the flip side, taking out a personal loan can have a positive impact on your credit by increasing your credit mix. Making on-time payments can also improve your credit profile. (Late payments, however, can have a negative impact on your credit.)

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Photo credit: iStock/Moyo Studio

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.

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

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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

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

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

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We aren’t born with a credit history and, ironically, one of the only ways to build a credit history is to take out credit — which can be hard to do if you don’t have any credit history. Does that mean if you have little to no credit history, you can’t get a personal loan?

Not necessarily. But you may have a harder time qualifying for a loan with favorable interest rates. Read on to learn why a credit score is such an important factor in the loan application process, how to qualify for a personal loan without a substantial credit history, and how no-credit-check personal loans work.

What a Personal Loan Is and How It Works

Personal loans are a type of lending product that allows consumers to borrow money to use for a wide variety of purposes. There are typically few limitations on what you can use a personal loan for, unlike a mortgage or student loan that dictates what the borrower can spend the borrowed funds on.

Personal loans are available through banks, credit unions, and other lending institutions. With this type of loan, you receive the proceeds (or principal) in one lump sum then repay it, plus interest, in fixed monthly installments over the term of the loan.


💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. SoFi personal loans come with no-fee options, and no surprises.

What Is a Credit Score?

A credit score is a three-digit number used to predict how likely you are to pay your bills on time. Your credit scores (yes, you have more than one) are calculated using information from your credit reports. Different companies use different credit scoring models, but most take the following factors about a person’s financial history into account:

•   Bill-paying history

•   Current unpaid debt

•   Number and type of loan accounts you currently have

•   How long current loan accounts have been open

•   How much available credit is currently being used

•   New applications for credit

•   Financial events like debt in collections, bankruptcies, or foreclosures

When you apply for a loan, the lender will typically take your credit score into account to determine if they should lend you money, how much money they should lend you, and at what interest rate. The higher someone’s credit score is, generally the easier it is to qualify for lending products with low interest rates.

There are many different types of credit scores and scoring models. Your credit score depends on the credit scoring model used by the lender you’re applying with. Each lender also has its own personal loan credit score requirements.

How Do You Find Your Credit Score?

While you may not be able to track down every potential credit score you have, there are some easy ways to learn your FICO® credit score, which is one of the most widely used credit scoring models. This can give you an idea of what your scores likely look like across the board.

•   Credit card or other loan statements: You can often find your credit score by looking at your monthly credit card or loan statements or by logging into your account online.

•   Nonprofit counselors: If you’re working with a nonprofit credit counselor or HUD-approved housing counselor, those professionals can often provide you with a free copy of your credit report and credit score.

•   Credit score services: You may be able to get your credit score for free from a credit score service as part of a free trial. But be careful about getting locked into a service that charges a monthly fee.

•   Credit reporting agencies: You can buy your score directly from the credit reporting companies.

Recommended: How To Read A Credit Report

What You Can Do if You Don’t Have a Credit Score

If you’re trying to get a personal loan with little to no established credit, you may run into some challenges. Here are some steps that can help.

Establishing Credit

First-time personal loans for no-credit-history borrowers can be hard to get. To get around this hurdle, you’ll want to start establishing credit. One way to do this is to become an authorized user on a trusted friend’s or family member’s existing credit account. Another way is to apply for a secured credit card backed by collateral. With each option, as you make on-time payments, you’ll begin to establish a credit history.

Finding a Cosigner

Another option that can make it easier to qualify for credit products without a strong credit history is to add a cosigner (or co-applicant) to a loan or credit card. When lenders see that someone else (someone with good credit) is willing to make payments on the original borrower’s behalf (if they fail to do so), they have a lot more confidence in lending them money.

Using Collateral

Adding collateral to a personal loan means that the lender has something they can seize and use to recoup their losses if the borrower defaults on their payments. For example, auto loans are secured by the car the loan is financing. Before using collateral, a borrower needs to make sure they can make their loan payments on time each month or they risk the lender taking possession of their collateral.

Personal Loan Options With No Credit History

If a borrower is really struggling to find a personal loan because they don’t have a credit history, they can pursue a loan that doesn’t require a credit check. This type of lending product does exist but often comes with high interest rates and fees to make up for the risk the lender feels they are taking on.

In some cases, loans that don’t require credit checks, like payday loans, can be predatory, so consumers should make sure they know what they’re getting into when taking out this type of personal loan.

Applying for a Personal Loan With No Credit

Some lenders offer personal loans with no credit check. Since they can’t rely on your credit history, they will typically focus on other indicators of your ability to pay back the loan, such as your income, employment history, rental history, and any previous history with the lender. When applying for a personal loan with no credit check, it’s important to read the fine print and carefully weigh the benefits against the costs. Lenders will often charge higher interest rates and impose more fees to lessen their risk.


💡 Quick Tip: With average interest rates lower than credit cards, a personal loan for credit card debt can substantially decrease your monthly bills.

Checking Your Personal Loan Rate

If you’re in the market for a personal loan, it’s a good idea to research different lenders to find one that’s best for your needs. As you compare lenders, take note of their minimum credit requirements, loan amounts, repayment terms, funding time, and whether or not they offer joint, cosigned, or secured loans (which may help you get a lower rate).

Once you’ve identified a few lenders you prefer, it’s time to prequalify – this only involves a soft credit check and gives you a preview of the loan offers you may receive, including your estimated annual percentage rate (APR).

SoFi offers personal loans with 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.

FAQ

Can someone with no credit score get a personal loan?

Some lenders offer personal loans with no credit check. These lenders will look at other indicators of your ability to pay back the loan, such as your income, employment history, rental history, and any previous history with the lender. No credit check loans may come with higher rates and fees, though, so you’ll want to read the fine print.

How hard is it to get a personal loan with no credit score?

It isn’t necessarily hard to get a personal loan without a credit score, as personal loans for no-credit-history borrowers do exist. The bigger challenge is to get approved for a personal loan with a low interest rate and that doesn’t require collateral or a cosigner.

Do no-credit-score, no-cosigner loans exist?

Yes, loans that don’t require a credit check or a cosigner do exist. However, these loans may come with sky high interest rates and less-than-ideal terms.

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Photo credit: iStock/Yaroslav Olieinikov

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.

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

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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.

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Life is expensive. And unfortunately, with a wide array of funeral-related costs, so is death. So much so, in fact, that some people turn to funeral loans to pay for it.

While you may be able to use a loan to pay for the casket, headstone, flowers, and other expenses, there are other ways to make this challenging part of life more affordable.

Read on to learn more about funeral loans and alternatives worth considering.

What Are Funeral Loans?

Funeral loans are basically personal loans marketed towards people who are facing funeral costs. That is to say, they’re a form of unsecured debt. This means they may be harder to qualify for — and come with higher interest rates — than debt that carries collateral, like a mortgage or an auto loan.

Although it may be marketed as a funeral loan, chances are you’re just getting a personal loan, which means you will probably be able to use the funds for just about anything you want. That said, it’s always worth checking with the bank or lender to ensure there aren’t any stipulations as to how the money gets spent.

How Does a Funeral Loan Work?

A funeral loan works much like other types of unsecured debt: You simply apply for the loan amount you need and, if you qualify, the lender will deposit the amount in your bank account (or cut you a check).

You then pay back the balance, plus interest, over the course of a set term, or loan lifespan, usually somewhere between two and 12 years.

You’ll pay the loan in monthly installments, like most other bills. Depending on your lender’s policies, you may be able to pay off the loan in full earlier. But always check to ensure you won’t get penalized for doing so.

Recommended: What Is a Short-Term Loan? The Ultimate Guide

Average Funeral Cost

So why are people going into debt just to send off their dearly departed? Funerals are expensive, that’s why.

According to data from the National Funeral Directors Association (NFDA), the median cost of a funeral burial in 2021, the last data available, was $7,848 — and only about $1,000 less for funerals with cremations.

Caskets alone can cost thousands of dollars. What’s more, most funeral homes still require them to be placed in a concrete burial vault to make landscaping easier — to the tune of another $1,500 or so.

That might explain why people are becoming more interested in green, or natural, burials, which can cost significantly less. Depending on the specific services and location, the total bill could be as little as $500.

Still, it makes sense that some bereaved people end up turning to funeral loans to get through this time, which is tough both emotionally and financially.

Pros and Cons of Funeral Loans

Like any other financial product or decision, funeral loans have both drawbacks and benefits to consider. Let’s take a quick look with a chart, and then dive deeper into the specifics.

Pros of Funeral Loans	Cons of Funeral Loans
Convenience — you can get the money fast so you can worry about everything else	Interest can add up substantially over time, and rates can be high for unsecured loans
May make it easier to afford higher-quality funeral services or enact a loved one’s last wishes	Taking out a loan may impact your credit score or credit history
Depending on your creditworthiness, a funeral loan may carry a lower interest rate than credit cards	You’ll be committed to repaying the loan for a relatively long period of time — likely at least a year or two, and up to 10 — which means less money available monthly to make ends meet.

Pros of Using a Loan to Pay for a Funeral

Here’s a closer look at some of the benefits of using a funeral loan.

Convenience and Payment Time Frame

When you apply for a funeral loan, there’s a good chance you’ll have the money in your hands quickly. In some cases, you could get the money on the same day, though the vast majority of lenders will have the funds to you within five business days or so.

Afford Quality Funeral Services

As discussed, funerals are expensive, and for some families, skimping on a casket or service simply isn’t an option. If funds are tight, a funeral loan may be able to help you pay for a more robust celebration of a loved one’s life.

May Be Better Than Credit

Although personal loans tend not to have the cheapest interest rates, they often have lower interest rates than credit cards do. If you’ll need time to pay off the debt, a funeral loan may be a better option than a credit card from a financial perspective.

Cons of a Funeral Loan

As discussed, there are drawbacks to funeral loans, too. Here are some of those to keep in mind.

Interest Rate

Borrowing money isn’t free, and since funeral loans are a form of unsecured debt, they tend to have higher interest rates than, say, a mortgage.

When considering a funeral loan, ask the company to provide documentation that shows how much you’ll pay in total, including interest and fees, over the entire lifetime of the loan. Even at a relatively low interest rate, it can add up faster than you think.

For example, if you took out a $10,000 funeral loan at a 10% interest rate, with a five-year term, you’d end up paying more than $2,700 in interest. That much might pay for the entire cost of the casket today.

Potential Impact on Credit Score

LIke any other type of loan or line of credit, taking out a funeral loan will show up on your credit report. Depending on your other factors, it may decrease your score. (That said, in some cases, it might also help, since having a mix of different credit types is considered a benefit.)

Financial Commitment

A funeral loan is a financial commitment that you’ll likely be repaying over a long period of time — between two and up to 10 years or even more in some cases. As important as properly memorializing passed loved ones is, it’s also critical to ensure that paying off a funeral loan won’t substantially impact your financial life in the long run.

Who Is Eligible for an Emergency Loan for a Funeral?

While anyone can apply for a funeral loan, your credit history will determine whether or not you’re eligible. Again, since unsecured debt is riskier for banks, they may carry higher minimum credit scores for funeral loans than other types of products.

However, depending on the lender you choose and the rest of your credit profile, you may be able to qualify with a score as low as 620.

Recommended: Financial Hardship Loans: What Are They and How Can You Apply?

Can You Get Funeral Loans With Bad Credit?

Again, a bad credit score can make it more challenging to qualify for a funeral loan, but you may still be eligible depending on the rest of your financial profile.

How Much Can You Borrow for a Funeral Loan?

Many personal loan companies offer large amounts of up to $50,000 or $100,000. But it’s usually a good idea not to borrow more than you actually need to pay for funeral expenses. After all, whatever money you borrow will need to be repaid, along with interest.

Alternatives to Help Pay for Funeral Costs

While a funeral loan is one option for funding funeral costs, there are alternatives that may be less expensive and more accessible for you and your loved ones. Here are a few to consider:

•   Ask for what you need. If you speak to the funeral director at the funeral home you’re working with, you may be able to work out a payment plan or use multiple different types of payment—such as cash, checks, and credit cards—in order to avoid taking out a funeral loan.

•   Use the loved one’s life insurance. If the person who’s passed away has life insurance, the death benefit might be used to help pay for their funeral costs.

•   Consider different types of services. As discussed above, a green or natural burial is often less costly than traditional burials. Cremation can also be more affordable than traditional burial.

•   Consider using a home equity loan. Borrowing against the value of your home still entails going into debt. However, because it’s a secured loan (your home is used as collateral), you may score a lower interest rate than you would on a funeral loan.

💡 Quick Tip: In a climate where interest rates are rising, you’re likely better off with a fixed interest rate than a variable rate, even though the variable rate is initially lower. On the flip side, if rates are falling, you may be better off with a variable interest rate.

The Takeaway

Funeral loans are essentially personal loans used to pay for funeral costs. While they are one way to pay for the goods and services associated with death, other alternatives, like setting up a payment plan with the funeral director, may be more beneficial for the living in the long run.

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.

FAQ

How can I get money for an unexpected funeral?

While using a funeral loan is one way to access funds for an unexpected funeral, there are other options to consider. Examples include the deceased’s life insurance, prepaid funeral plans, funeral assistance programs, and even crowdfunding.

How much is a home equity loan for a funeral?

A home equity loan allows you to borrow against the value of your home that you already own — that is, its equity — to pay for expenses, including funeral expenses, in cash. However, this type of arrangement will only work if you own substantial equity in your home, and it does come with its own costs from the lender.

What credit card will pay for a funeral?

While you could technically use just about any credit card to pay for a funeral, if you’re looking to avoid paying interest, it might be a smart move to take out a new card with a promotional 0% interest period. That way, you’d have that time period — likely a year — to pay back the funeral expenses without being subject to high interest. Beware, though: When the promotional period runs out, you’ll still be on the hook for interest if any of the balance is left over.

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Photo credit: iStock/shapecharge

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Coverage and pricing is subject to eligibility and underwriting criteria.
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Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, SoFi Technologies, Inc. (SoFi) and SoFi Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under LadderlifeTM policies. SoFi is compensated by Ladder for each issued term life policy.
Ladder offers coverage to people who are between the ages of 20 and 60 as of their nearest birthday. Your current age plus the term length cannot exceed 70 years.
All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.

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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.

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The joy our furry and feathered friends add to our lives is priceless. But pet ownership does come at a dollars-and-cents cost. From basics like adoption fees and food to expensive emergency veterinary care, being a pet parent can be, well, ruff on your bank account.

Pet loans are one way to pay for the expenses of having a pet, but it’s usually a good idea to consider alternatives before going into debt.

Read on to learn about how pet loans may be able to help you meet the financial demands of pet ownership and what other options are available.

What Is Pet Financing?

Pet financing refers, essentially, to taking out a personal loan to pay for the cost of owning a pet. While some banks may market the loans specifically as pet loans, they work the same way.

A personal loan is unsecured debt, which means the bank doesn’t have any collateral to turn to in the event the loan is not repaid. This means that personal loans, including pet loans, may have stricter eligibility requirements and higher interest rates.


💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. SoFi personal loans come with no-fee options, and no surprises.

Cost of Owning a Pet

While the specifics will depend on what kind of pet you own — a fish costs a lot less to feed and care for than a Great Dane — all types of pet ownership come with some costs involved. Here are some of the common expenses you may encounter:

•   Purchase or adoption fees, which can vary significantly. Buying a purebred puppy could cost thousands of dollars, while an adoption fee might be a nominal $25 for a cat at the shelter.

•   Regular veterinary check-ups and vaccines, which pets need in order to be safe (and, in the case of the rabies vaccines in some U.S. states, legal to keep)

•   Food, which can run the gamut from cheap kibble to expensive raw or fresh foods

•   Supplies you need to keep your pet safe and happy, like food and water dishes, beds, crates, litter boxes and litter, collars and leashes, or treats.

•   Veterinary care or medical procedures that may cost far more than regular upkeep, like dental work or surgery to repair a broken bone

What Can I Use a Pet Loan For?

Because a pet loan is basically just a personal loan, you can use the money for pretty much anything you want. (If the bank you’re borrowing from is offering a pet loan specifically, you can check and ensure that there are no rules or restrictions around what the money can be used for.)

Here are some of the most common ways you might use the funds from a pet loan.

Pet Purchase Financing

If you’re purchasing a pricy purebred, or if the setup phase of pet ownership comes at a steep cost (i.e., if you’re getting into saltwater fish tanks), you might want to use the money from your pet loan to fund the purchase or adoption of your pet.

Pet ownership tends to be more expensive in the first year or so than in subsequent years, since new pets may often need to be spayed or neutered or have their first rounds of puppy or kitten shots. Using a pet loan to get into pet ownership may make sense if you know you’ll have the money to pay back the loan and afford continued care throughout the pet’s life.

Pet Health Care Financing

Just as with humans, health-care related costs for pets can be high. The average cost of routine vet care can be as much as $350 on average during the first year of pet ownership, and $250 per year after that.

That may not sound like much. But alongside other major expenses, like food — which can run as high as $500 or more per year on its own — vet bills can really add up, and may be a reason some owners choose to take out a pet loan.

Pet Surgery Financing

We all hope our four-legged friends never need major medical care, but when they do, it can be just as worrisome for our wallets as our hearts. For instance, even a routine surgery like a spay can cost up to $600 at a private veterinary practice. And if your dog needs a dental cleaning — which is done under anesthesia— the cost may jump tp $1,500 or higher

So using a pet loan to pay for a pet’s surgery can make a lot of sense, though there are still other alternatives to consider (which we’ll get into below).

Pet Care Financing

As anyone who has a dog or cat who can’t or won’t travel knows, pet care can be expensive, particularly if you’re paying for overnight pet-sitting for several days in a row.

Whether you’re boarding your kitty or pup or enlisting the help of a professional pet watcher, you might spend around $50 per night or more. This adds up quickly when you factor in other costs of travel. That’s why pet care might be another reason to take out a pet loan.

Pet Store Financing

For pet owners, a trip to the pet store can feel like being a kid in the candy shop. But most of the items you can purchase cost far more than a nickel or a quarter.

You could use a pet loan to purchase supplies from the pet store, such as feeding dishes, bedding, treats, and toys. (If you’re hoping to finance your own pet store, on the other hand, you’d probably want to look into a business loan.)

Can I Get Pet Financing With Bad Credit?

Like any type of financing, the better your credit, the easier it is to get a pet loan — especially since, again, it’s an unsecured form of debt and therefore riskier for the bank.

While many factors about your financial situation will be assessed, like your income, other current debts, and job stability, you’ll likely need a credit score of at least 610 or higher to qualify. And some banks may have a higher minimum credit score than that.

💡 Quick Tip: Generally, the larger the personal loan, the bigger the risk for the lender — and the higher the interest rate. So one way to lower your interest rate is to try downsizing your loan amount.

Reasons to Take Out a Pet Loan

From a financial stability perspective, it may be a good idea to avoid going into debt to take care of your pet, though in some cases, a pet loan may be the best option.

For example, if you need to take out a loan to afford a pet at all, it might be worth waiting until you’re in a stronger financial state before getting into pet ownership.

But if you already have a pet and are facing unexpected medical costs, taking out a pet loan may make more financial sense than, say, going into credit card debt for treatment. Still, a personal loan can impact your overall financial situation in a multitude of ways, so it’s worth considering all your options before making a plan.

Alternatives to Pet Loans

If you’re considering taking out a pet loan, here are some alternatives to put on the table before you sign the paperwork.

•   Pet insurance can help lower the overall cost of veterinary care from the start. However, like human insurance, you may need to be careful to work with a vet who’s in-network in order to glean any savings.

•   A veterinary payment plan may be available at your local clinic and may even offer 0% interest options based on your financial need. If you work with a private veterinary clinic, it’s worth asking if they have payment plans available, even if they don’t advertise them.

•   Veterinary schools and low-cost clinics may offer the same care at a lower cost, whether to help new veterinarians with their training or simply to provide options for lower-income pet owners in the community.

•   Savings can be a good option if you have an ample emergency cushion saved up, and may allow you to avoid going into debt. However, if your pet loan is at a low enough interest rate and you’re still working on building up an emergency savings fund, you might not want to break into it for Fido.

•   Credit cards are another option that allow you to pay off large bills over time, and some credit cards offer a promotional 0% interest period. That said, if you are unable to pay off the debt in full before the promotional period ends, you may be stuck with an APR of 20% or higher, and that kind of interest rate can make it even more challenging to get out of debt.

The Takeaway

A pet loan can help you finance some of the costs of pet ownership. But keep in mind it’s still a form of debt, so it’s worth carefully considering alternative options before you sign up.

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.

FAQ

Can I take out a loan for a dog?

If your credit history is strong enough, you may be able to take out a pet loan — a type of personal loan — to pay for the cost of adopting or purchasing a dog, or any of the costs associated with their care thereafter. However, if you can’t afford to own a dog out of pocket, you’ll want to think carefully about whether or not it’s a smart financial move.

What credit score do you need for pet financing?

While each bank has its own specific requirements around minimum credit scores, for most personal loans, including pet loans you won’t be able to qualify with a score lower than 610. (Of course, your credit score isn’t the only thing that matters. The bank will also look at your income, existing debts, job stability, and more.)

What do you do if you can’t afford to keep your pet?

There are many options available to those who’ve found they can’t afford to keep their pets. While turning your pet over to a humane shelter or otherwise rehoming them with a trustworthy family is one way to go, you may also be able to lower the cost of pet care by visiting low-cost veterinary clinics or taking out a pet loan.

Photo credit: iStock/AleksandarNakic

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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.

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.

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