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The longer you live in your house, the more obvious it may become that you could use more living space — perhaps for a guest bedroom, home office, or workout space. Your first thought might be to build an addition, but the sticker shock may cause you to shelve that idea and instead consider an attic conversion.

Fortunately, an attic conversion is an idea that may be more economical than a complete home addition. Read on for a full breakdown of the cost to finish an attic.

Should You Convert Your Attic Space?

There are many benefits of converting an attic into usable space, including:

•   The space already exists in your home, making this choice both cost- and time-effective.

•   You don’t need to pour a foundation, again making it a more viable and economical option.

•   Wiring is likely already in place and can be modified to suit your needs.

An attic conversion also allows you to use the entire envelope of your home, rather than wasting potential living space.

Before you fully commit to your attic remodel, though, it’s crucial to make sure your attic has the potential to become a usable living space (more on that below).

Tips on Converting an Attic

One of the first things you might do before converting your attic is to see if your roof is being supported by W-shaped trusses in your attic. If so, building an addition might be a better choice. If your attic contains A-shaped rafters, though, that’s a plus; if there’s enough open space beneath the rafters, then you can potentially convert your attic into usable space.

Other steps to take before an attic remodel include:

•   Check your local building codes to make sure your remodel will fit. The rules vary by area but a typical requirement is that the attic space must be at least 7.5 feet high and over 50% of the floor area. The thickness of the material will also factor into the final headroom and ceiling height. The quickest way to add significant costs to your attic remodel is to be forced to change course mid-project because of a code violation.

•   Determine how you’ll get into the space. Will you need to add a staircase or expand the current one? Stairs that go straight up will need more floor space than, say, spiral staircases. Or perhaps your only option is a pull-down access point; this will limit what furniture and materials you can fit into your attic conversion and how utilitarian the new living space might be.

•   Consider whether you’ll need to add windows. If you’re creating an additional bedroom, codes may require an egress window in case of fires. But even if they aren’t required, you might consider adding windows or punching skylights that open to brighten the space with natural light.

•   Decide how much flooring needs to be reinforced, along with any electrical or plumbing issues. If you ultimately decide that your attic has what’s needed for a successful conversion, it’s time to think both practically and creatively to shape what may well become the most interesting — and potentially challenging — room in your house.

•   Consider your priorities and budget. Once you get a sense of costs (listed below) and what’s most important to you, you’ll want to come up with a budget and a plan for how you’ll pay for the upgrade. If you don’t have enough cash to cover the project, you may want to explore financing. Funding options for finishing an attic include using a credit card (generally the most expensive route), getting a home improvement loan (a type of unsecured personal loan designed for small to mid-sized home renovations), or applying for a home equity loan or line of credit (which uses your home as collateral for the loan).

•   Consult with a professional unless you’re already an experienced builder. Ask friends, family members, and building associations for recommendations and referrals, then request quotes from at least three contractors to understand both possibilities and associated costs. When you contact contractors, ask them for credentials. Compare bids and, tempting as it may be, don’t automatically choose the lowest one. Make sure the contractor describes what will be provided as well as the estimated time frame.

Want to know how much value your attic conversion will bring to the table? Check out SoFi’s Home Project Value Estimator.

How Much Does It Cost to Finish an Attic per Square Foot?

On average, you can expect to pay between $10,600 to $50,000 — or $50 and $150 per square foot — to refinish your attic, according to Angie (formerly Angie’s List). A specialized or high-end attic conversion can cost as much as $200 per square foot.

Overall, costs vary depending on the overall square footage and the materials you use.

How Much Does It Cost to Finish an Attic per Task?

If you hire individual contractors for each aspect of your attic remodel, then it’s easy to see what each portion of the remodel is costing you. However, if you hire a contractor to manage the entire project, you likely won’t receive the project broken down into great detail.

What follows is a breakdown of common costs involved in an attic renovation.

Cost of Walls and Ceilings

New walls and ceilings can effectively transform an unfinished attic into a space that’s both comfortable and livable. Although prices vary by where you live, attic drywall can cost an average of $1,000 to $2,600 to install, with ceilings costing anywhere from $200 to $12,000.

Other aspects to consider: Will you paint the walls and ceilings? Add wallpaper? Do you need trim and crown molding? All of these features will be additional costs and can quickly cause your project budget to skyrocket.

Cost of Flooring

Flooring is another important consideration, so first think about what’s located directly below the attic space. Do you need soundproofing? If a bedroom is located below the attic space, you’ll likely want some sound control. Insulation provides that to some degree, and carpeting adds even more dampening.

The cost of attic flooring will depend on the current state of the attic and what materials you choose. Replacing floor joists to beef up the strength will cost anywhere between $1,000 and $10,000, while installing subfloor will run between $500 and $800. Installing the flooring itself averages between $1,531 and $4,848, depending on material and square footage.

Recommended: Renovation vs. Remodel

Cost of Windows and Skylights

If there currently are no windows in your attic, you may want to add an egress window, which will run you between around $800 and $2,400, as a safety precaution. You also might want windows or skylights to brighten the space with natural light. Expect to pay an average of $2,500 – $5,500 to install an attic window, and $1,000 to $2,400 to add a skylight.

Recommended: How Much Does It Cost to Replace Windows?

Cost of Heating and Cooling

Your attic conversion might require additional heating and cooling. The price to install an attic fan is around $400 to $900, and a standard window AC costs about $150 to $800 per unit. A skillful contractor could also potentially tie in your current climate control system.

For heat, baseboard heaters run $942 on average. If you need to add HVAC ductwork and vents to extend your home’s AC and central heating systems to the attic, you can, expect to pay anywhere from $1,000 to $5,000.

If your attic is difficult to access during the renovation period, contractors may tack on a surcharge. To get an idea of how much your attic renovation will cost, you may want to use an online home improvement cost calculator.

How Much Does It Cost to Finish an Attic Yourself?

It’s generally cheaper to go the DIY route than to hire a professional — though you will need some know-how. If you’re making minor improvements to your attic space (such as adding an attic fan and cleaning it up, you may be looking at an attic remodel cost as low as $300. However, if you’re looking to make a total transformation, your costs for materials could run as high as $50,000.

Though you’ll certainly save on labor costs, make sure to take into account the time involved if you decide to do it yourself as opposed to bringing in a professional.

Recommended: Four Ways to Upgrade Your Home

How Much Does It Cost to Finish an Attic by Type?

How much it costs to finish an attic will also vary depending on the type of attic space you’re creating. Here’s a look at how much an attic remodel costs by attic type.

Cost of Finishing a Walk-Up Attic

The cost of finishing a walk-up attic generally ranges anywhere from $8,100 and $26,000. Large portions of the costs are typically adding a staircase and installing flooring.

Finishing an Attic as a Storage Space

If you’re finishing an attic to serve as a storage space, your costs are generally a little lower as there isn’t as much polishing involved. Generally, the attic remodel cost for a storage space runs from $4,600 for a simpler setup to $18,900 if the space is larger and you opt for more elaborate storage systems.

Cost to Finish an Attic With a Dormer

Installing a dormer — a window that juts out vertically on a sloped roof — can add in some ceiling height and natural sunlight into an attic. However, it will set you back. On average, the cost to add in a dormer along with finishing the attic can run between $8,800 and $32,400.

Cost to Finish an Attic Above a Garage

The cost to finish an attic above a garage can vary widely depending on what’s involved, such as the installation of heating, insulation, or ventilation. You can typically expect to pay anywhere from $4,600 up to $24,000.

Recommended: Garage Conversion Ideas Worth the Effort

What Factors Influence the Cost of Finishing an Attic?

As you may have guessed from the wide-ranging estimates above, the cost of finishing an attic can vary a lot depending on what’s involved and what materials you use. Here a look at some major factors that can affect how much it costs to finish an attic.

•   Square footage: How large your attic is will play a big role in the total costs involved in remodeling. The bigger an attic is, the more materials required and the more time it will take to finish it, which translates to additional labor costs.

•   Need for structural changes: You’ll also pay extra if your attic is an odd shape or difficult to access. These challenges could call for structural updates, such as the addition of height, the expansion of space, or the creation of a staircase.

•   Intended use: Your planned purpose for your attic will also influence cost. If you just want to add in some additional storage space, you’ll pay a lot less than if you plan to install a full suite complete with a bedroom, bathroom, and closet.

•   Extra features desired: Perhaps unsurprisingly, the more features you want in your newly remodeled attic, the more it will cost you. Big-ticket items include windows, electricity, plumbing, and heating and cooling.

Of course, another factor that influences your cost is whether you need to get financing for the project and, if so, what terms you’re able to secure.

The Takeaway

An attic conversion can be one way to create a unique room and add more usable space to your home. It also tends to be more economical than adding an addition to your house. There are a lot of technical aspects to consider, and before getting started, it’s best to check with your local building department so you know any building or permit requirements upfront. You can then come up with a project wishlist and start soliciting bids from at least three contractors.

At the same time, you’ll want to determine if you’ll pay cash or finance all or some of the project. One financing option you might consider for an attic renovation is an unsecured personal loan. Offered by banks, credit unions, and online lenders, rates are typically lower than credit cards. And unlike a home equity loan or home equity line of credit (HELOC), you don’t need to use your home as collateral to qualify.

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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Generally speaking, the better your credit score, the better your potential loan rates and offers may be. The reason is that your credit score tells lenders how much risk you pose as a borrower. A good credit score may qualify you for what’s known as a prime loan.

Here, what a prime loan is and how it works.

Understanding a Prime Loan

To understand a prime loan, it can help to understand the prime rate. The prime rate is established by banks as the interest rate given to its best customers, generally large corporations that borrow and repay loans on a regular basis This number is based on the federal funds rate set by the Federal Reserve.

The prime rate is a critical financial benchmark. Banks and other lenders typically use it to set interest rates for various consumer products, including credit cards, personal loans, personal lines of credit, auto loans, and home loans. Lenders will use the prime rate as a baseline, then add a margin on top of the prime rate to determine a loan’s interest rate. How much more a borrower will pay above the prime rate will depend on their creditworthiness.

Many loans are based on the prime rate, so it can be a good rate to track if you’re in the market for any type of lending product. For example, if you’re considering a fixed-rate loan, like a mortgage or a personal loan, and the prime rate is currently low, you may be able to lock in a lower rate for the life of your loan. If you’re considering variable-rate debt, like a credit card or home equity line of credit (HELOC), your rate might start low but go up over time if market rates rise. If market rates decline, on the other hand, your rate could go down.

Prime Loan Borrowers

The term “prime” is also used by lenders to refer to high quality in the consumer lending market — including borrowers, loans, and rates. Prime loans generally have a competitive interest rate and are offered to borrowers who have a low default risk and good or better credit scores. The opposite of prime is subprime, a term for riskier loans with a higher interest rate.

According to the Consumer Finance Protection Bureau (CFPB), borrowers with a credit score of 660 to 719 are generally considered prime borrowers. Those with scores above 720 are considered “super-prime” borrowers, and will receive even more favorable interest rates.

Here are the five credit score categories for borrowers:

Knowing your credit score can help you assess the category you will fit in.

Prime Loan Rates

As of May 20, 2024, the current official prime rate is 8.50%, according to The Wall Street Journal’s (WSJ’s) Money Rates table, which aggregates prime rates charged throughout the U.S. and in other countries. The prime rate is typically three percentage points higher than the federal funds rate, set by the Federal Reserve.

Each bank has the ability to set its own prime rate, but most base it off the national average listed under the WSJ prime rate.

Prime rates for consumer loans, however, aren’t the same as the “prime rate” that is used for a bank’s top corporate customers. Since consumers generally do not have the same resources as large companies, banks typically charge them the prime rate plus a surcharge based on the product type they want and their qualifications as a borrower. For example, a credit card interest rate might be the prime rate plus 10%.

How Does the Prime Loan Rate Affect You?

The prime loan rate affects everyone. From buying a car to buying a house to opening a credit card, the benchmark prime loan rate will have an influence on how much interest you’ll pay. You may be more vulnerable to prime loan rate fluctuations if you have a lot of variable interest loans, like credit card debt. As the prime rate climbs, so too might the APR of your cards. When you see a prime rate hike, it can mean that your APR will quickly rise as well.

Conversely, when the prime rate falls, some people use that time to refinance a mortgage or lock in a rate for a loan, like a personal loan or an auto loan.

Because the prime rate affects credit cards, some people who carry a high credit card balance who have good credit may consider using a personal loan to consolidate their credit card debt. This is one popular use for personal loans and can potentially help you save money on interest, depending on the rates offered.

What Is the Difference Between a Prime Loan and Subprime Loan?

Prime rates for consumer lending products are what lenders charge individual borrowers with good or better credit scores. Borrowers with lower credit scores are considered subprime borrowers and can apply for subprime lending with higher (or subprime) rates. Here’s a closer look at the differences between prime vs. subprime loans.

Interest Rates

Interest rates are one of the most obvious differences between a prime and subprime loan. But even within the prime lending category there may be subcategories that receive different interest rate offers. For example, a prime borrower with a credit score near super-prime territory may receive more favorable rates than a borrower whose credit is close to subprime.

Recommended: 8 Reasons Why Good Credit Is So Important

Repayment Periods

A subprime borrower may also have fewer options when it comes to repayment periods. They may have a shorter repayment period at a higher interest rate than a prime borrower.

Down Payments

A prime borrower may have a low, or no, down payment required for a loan. But subprime borrowers may have to make a substantial down payment to qualify for a loan. This is especially true for loans like car loans or mortgages.

Loan Amounts

Prime borrowers may have access to greater loan amounts than subprime borrowers.

Fees

Non-prime borrowers may also have to pay more loan fees than a prime borrower. This may be due to the types of loans they can access. If they can’t get a loan from a traditional bank, a subprime borrower may seek payday loans or other loans that come with sky high interest rates and fees.

Recommended: How Does a Subprime Personal Loan Work?

What Do You Need To Qualify for a Prime Loan?

You generally need a credit score of 660 higher to qualify for a prime loan. If your score is 720 or above, you may qualify for super-prime loans. That said, a lender will typically look at more than your credit score to determine whether you qualify for a prime or better loan. Other factors that can impact your loan rates and terms include your income, employment status, and how much debt you currently carry.

Recommended: Debt-to-Income Ratio (DTI): How to Calculate It

The Takeaway

The prime rate is out of your control. But you do have some control over the actual interest rate you’ll pay for a loan. One key factor is your credit score. If you’re not currently considered a prime borrower, building your credit before you apply for new credit can help you have the most competitive loan options, whether you’re researching mortgages, credit cards, or personal loans.

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.

FAQ

What does prime mean in loans?

The term “prime” is used in consumer lending to refer to high quality borrowers, loans, and rates. Prime loans generally have a competitive interest rate and are offered to borrowers who have a low default risk and good or better credit scores. The opposite of prime is subprime, a term for riskier loans with a higher interest rate.

Is there a difference between prime loans and subprime loans?

Yes. Prime loans come with competitive interest rates and favorable terms and are generally offered to people whose credit scores are in the 660 to 719 range. (Borrowers with credit scores above that are considered super-prime borrowers and may be given even better rates and terms.) Borrowers with lower credit scores are considered subprime borrowers and may only be able to access loans with high interest rates and less favorable terms.

What is the current loan prime rate?

As of May 20, 2024, the current official prime rate is 8.50%, according to The Wall Street Journal’s Money Rates table.

Photo credit: iStock/Imagesrouges
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.

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.

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

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

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The average credit card balance in the U.S. increased by 10% in 2023 to $6,5013, according to Experian’s 2023 Consumer Credit Review. And according to a November 2023 Bankrate survey, a full 49% of cardholders carry credit card debt from month to month. Considering the average credit card interest rate in the U.S. today is 24.71%, carrying a credit card balance can get costly. The question is, how do you get out from under high-interest credit card debt?

One method to consider is taking out a personal loan (ideally with a lower rate than you’re paying on your credit cards) and using the funds to pay off your credit card debt. If you’re currently paying off multiple cards, this approach also simplifies repayment by giving you just one bill to keep track of and pay each month. Still, there are pros and cons to consider if you’re thinking about getting a personal loan to pay off credit cards. Read on to learn more.

How Using a Personal Loan to Pay Off Credit Card Debt Works

Personal loans are a type of unsecured loan. There are a number of uses of personal loans, including paying off credit card debt. Loan amounts can vary by lender and will be paid to the borrower in one lump sum after the loan is approved. The borrower then pays back the loan — with interest — in monthly installments that are set by the loan terms.

Many unsecured personal loans come with a fixed interest rate (which means it won’t change over the life of the loan), though there are different types of personal loans. An applicant’s interest rate is determined by a set of factors, including their financial history, credit score, income, and other debt. Typically, the higher an applicant’s credit score, the better their interest rate will be, as the lender may view them as a less risky borrower. Lenders may offer individuals with low credit scores a higher interest rate, presuming they are more likely to default on their loans.

When using a personal loan to pay off credit card debt, the loan proceeds are used to pay off the cards’ outstanding balances, consolidating the debts into one loan. This is why it’s also sometimes referred to as a debt consolidation loan. Ideally, the new loan will have a lower interest rate than the credit cards. By consolidating credit card debt into a personal loan, a borrower’s monthly payments can be more manageable and cost less in interest.

Finally, using an unsecured personal loan to pay off credit cards also has the benefit of ending the cycle of credit card debt without resorting to a balance transfer card. Balance transfer credit cards offer an introductory rate that’s lower or sometimes even 0%. This might seem like an appealing offer. But if the balance isn’t paid off before the promotional offer is up, the cardholder could end up paying an even higher interest rate than they started with. Plus, balance transfer cards often charge a balance transfer fee, which could ultimately increase the total debt someone owes.

Recommended: Balance Transfer Credit Cards vs Personal Loans

Understanding Credit Card Debt vs. Personal Loan Debt

At the end of the day, both credit card debt and personal loan debt are both simply money owed. However, personal loan debt is generally less costly than credit card debt. This is due to the interest rates typically charged by credit cards compared to those of personal loans.

The average credit card interest rate is 24.71%. Meanwhile, the average personal loan interest rate is 12.21%. Given this difference in average interest rates, it can cost you much more over time to carry credit card debt, which is why taking out a personal loan to pay off credit cards can be an option worth exploring.

Keep in mind, however, that the rate you pay on both credit cards and personal loans is dependent on your credit history and other financial factors.

Taking Out a Loan to Pay Off Credit Card Pros and Cons

While on the surface it may seem like taking out a personal loan to pay off credit card debt could be the best solution, there are some potential drawbacks to consider as well. Here’s a look at the pros and cons:

How Frequently Can You Use Personal Loans to Pay Off Credit Card Debt?

Taking out a personal loan to pay off credit cards generally isn’t a habit you want to get into. Ideally, it will serve as a one-time solution to dig you out of your credit card debt.

Applying for a personal loan will result in a hard inquiry, which can temporarily lower your credit score. If you apply for new loans too often, this could not only drag down your credit score but also raise a red flag for lenders.

Additionally, if you find yourself repeatedly re-amassing credit card debt, this is a signal that it’s time to assess your financial habits and rein in your spending. Although a personal loan to pay off credit cards can certainly serve as a lifeline to get your financial life back in order, it’s not a habit to get into as it still involves taking out new debt.

So You’ve Decided to Apply for a Personal Loan to Pay Off a Credit Card. Now What?

The steps for paying off a credit card with an unsecured personal loan aren’t particularly complicated, but having a plan in place is important. Here’s what you can expect.

Getting the Whole Picture

It can be scary, but getting the hard numbers — how much debt is owed overall, how much is owed on each specific card, and what the respective interest rates are — can give you a sense of what personal loan amount might be helpful to pay off credit cards.

Choosing a Personal Loan to Pay off Credit Card Debt

These days, you can do most — or all — personal loan research online. A personal loan with an interest rate lower than the credit card’s current rate is an important thing to look for. Origination fees, which can add to a person’s overall debt and possibly throw off their payoff plan, is another thing to watch out for.

Paying Off the Debt

Once an applicant has chosen, applied for, and qualified for a personal loan, they’ll likely want to immediately take that money and pay off their credit card debt in full.

Be aware that the process of receiving a personal loan may differ. Some lenders will pay off the borrower’s credit card companies directly, while others will send the borrower a lump sum that they’ll then use to pay off the credit cards themself.

Hiding Those Credit Cards

One potential risk of using a personal loan to pay off credit cards is that it can make it easier to accumulate more debt. The purpose of using a personal loan to pay off credit card debt is to keep from repeating the cycle. Consider taking steps like hiding credit cards in a drawer and trying to use them as little as possible.

Paying Off Your Personal Loan

A benefit of using a personal loan for debt consolidation is that there is only one monthly payment to worry about instead of several. Not missing any of those loan payments is important — setting up autopay or a monthly reminder/alert can be helpful.

Budgeting Debt Payoff

Before embarking on paying off credit card debt, a good first step is making a budget, which can help you better manage their spending. You might even find ways to free up more money to put toward that outstanding debt.

If you have more than one type of debt — for instance, a personal loan, student loan, and maybe a car loan — you may want to think strategically about how to tackle them. Some finance experts recommend taking on the debt with the highest interest rate first, a strategy known as the avalanche method. As those high-interest-rate debts are paid off, there is typically more money in the budget to pay down other debts.

Another approach, known as the snowball method, is to pay off the debts with the smallest balances first. This method offers a psychological boost through small wins early on, and over time can allow room in the budget to make larger payments on other outstanding debts.

Of course, for either of these strategies, keeping current on payments for all debts is essential.

Where Can You Get a Personal Loan to Pay off Credit Cards?

If you’ve decided to get a personal loan to pay off credit cards, you’ll next need to decide where you can get one. There are a few different options for personal loans: online lenders, credit unions, and banks.

Online Lenders

There are a number of online lenders that offer personal loans. Many offer fast decisions on loans, and you can often get funding quickly as well.

While securing the lowest rates often necessitates a high credit score, there are online lenders that offer personal loans for those with lower credit scores. Rates can vary widely from lender to lender, so it’s important to shop around to find the most competitive offer available to you. Be aware that lenders also may charge origination fees.

Credit Unions

Another option for getting a personal loan to pay off credit cards is through a credit union. You’ll need to be a member in order to get a loan from a credit union, which means meeting membership criteria. This could include working in a certain industry, living in a specific area, or having a family member who is already a member. Others may simply require a one-time donation to a particular organization.

Because credit unions are member-owned nonprofits, they tend to return their profits to members through lower rates and fees. Additionally, credit unions may be more likely to lend to those with less-than-stellar credit because of their community focus and potential consideration of additional aspects of your finances beyond just your credit score.

Banks

Especially if you already have an account at a bank that offers personal loans, this could be an option to explore. Banks may even offer discounts to those with existing accounts. However, you’ll generally need to have solid credit to get approved for a personal loan through a bank, and some may require you to be an existing customer.

You may be able to secure a larger loan through a bank than you would with other lenders.

Recommended: Credit Unions vs. Banks

The Takeaway

High-interest credit card debt can be a huge financial burden. If you’re only able to make minimum payments on your credit cards, your debt will continue to increase, and you can find yourself in a vicious debt cycle. Personal loans are one potential way to end that cycle, allowing you to pay off debt in one fell swoop and hopefully replace it with a single, more manageable loan.

Remember, however, personal loans aren’t for everyone. While they typically have lower interest rates than credit cards, they are still debt and need to be considered carefully and used responsibly.

Ready for a personal loan to pay off credit card debt? With lower fixed interest rates on loans of $5K to $100K, a SoFi Personal Loan for credit card debt could substantially decrease your monthly bills.

FAQ

Can you use a personal loan to pay off credit cards?

Yes, it is possible to use a personal loan to pay off credit cards. The process involves applying for a personal loan (ideally one with a lower interest rate than you are paying on your credit cards) then using the loan proceeds to pay off your existing credit card debt. Then, you will begin making payments to repay the personal loan.

How is your credit score impacted if you use a personal loan to pay off credit cards?

When you apply for a personal loan, the lender will conduct what’s known as a hard inquiry. This can temporarily lower your credit score. However, taking out a personal loan to pay off credit cards could ultimately have a positive impact on your credit if you make on-time payments, if the loan improves your credit mix, and if the loan helps you pay off your outstanding debt faster.

What options are available to pay off your credit card?

Options for paying off credit card debt include:

•   Taking out a personal loan (ideally with a lower interest rate than you’re paying on your credit cards) and using it to pay off your balances.

•   Using a 0% balance transfer credit card.

•   Exploring a debt payoff strategy like the snowball or avalanche method.

•   Consulting with a credit counselor.

•   Enrolling in a debt management plan.

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 .

SOPL-Q224-1909641-V1

Renting out a room in your house can be a good source of extra income but generally isn’t something you want to do on a whim. From legal and financial considerations to aesthetics, there are lots of things to think about before offering the space to a potential housemate.

Here are some things to consider before renting out a room in your house.

What Are Some Room Rental Options?

Renting out a room in your house doesn’t have to mean having one long-term renter, although that’s certainly one way to go. Here’s a look at a few different rental options.

Short-term Rental

One option you might consider is offering short-term rentals through a service such as Airbnb or Vrbo. This could be a good option if you live in an in-demand tourist area or have a home in an out-of-the-way locale that might attract someone looking for a place to relax and unwind. Some travelers prefer to stay somewhere that feels more like a home than a hotel.

Recommended: 25 Things to Know When Renting Out an Airbnb

Long-term Rental

Having a housemate who is planning to rent a room in your home for an extended period of time can be one way to have a steady income for that time period. It’s a good idea to have a formal rental agreement that clearly outlines expectations of both parties.

Furnished or Unfurnished Rental

Whether to offer a furnished or unfurnished space will probably be determined by the type of renter you’re looking for. If you live in a college town, prospective renters might not have any furnishings of their own, so will likely be looking for a furnished rental. As with a short-term rental mentioned above, a furnished rental will probably be a given. A potential long-term housemate, though, may have their own furnishings to bring to the space.

What Financial Considerations Are There?

For some people, the sole reason for renting a room in their house is to have some extra income. With income, though, generally come expenses.

Return on Investment

It’s not likely that a spare room is ready for a renter without some updating and perhaps even some repairs. Keeping a record of how much money you spend preparing the space will help you determine if you’re coming out ahead financially. It may take some time to recoup the money you spend before you make a profit. And it’s a good idea to have a record of any ongoing expenses you incur to make sure you’re charging enough rent to offset those costs.

Recommended: What Is Considered a Good Return on Investment?

Taxes

In most cases, there will be income tax implications, so it’s wise to treat renting a room in your house as a business of sorts. As such, it’s a good idea to consult a tax professional who can answer detailed questions about rental income.

The IRS considers rental of part of your property, such as a spare room, as taxable income. And, like some business expenses, there are expenses related to this type of rental that are tax deductible. Any deductions claimed must be directly related to the portion of the home that is used for rental purposes and is generally calculated as a percentage of the home’s total square footage.

Recommended: 25 Tax Deductions for Freelancers

Are There any Legal Considerations?

It’s wise to look at your state’s landlord-tenant laws as a first step. Some states are more landlord friendly, while other states have a wide range of protections for tenants, putting more limitations on landlords’ rights.

Even if you’re just renting out a room to an acquaintance, you’ll likely still be considered a landlord and must adhere to regulations that apply to your situation. The Fair Housing Act protects potential tenants from discrimination except in limited circumstances. Shared housing is one of those circumstances because the government concluded that sharing one’s personal space has “significant privacy and safety considerations” in a U.S. Court of Appeals ruling.

Neighborhood Restrictions

Aside from governmental legal considerations, it’s a good idea to check your apartment lease or your neighborhood or homeowner’s association, if you have one, as some homeowner’s associations may have regulations about leasing all or part of your home. If you’re renting a home or apartment, your lease may specify whether you’re allowed to sublease or if you’re restricted from doing so.

Your homeowner’s insurance policy may also include a clause related to leasing part of your home. Some companies may allow you to rent a room in your home without any change to your policy, while others may disallow it completely. There’s a chance you may see an increase in your premium, as well. To be on the safe side, it’s a good idea to let your insurance agent know of any change in your home’s occupancy.

Recommended: Condo vs Townhouse

Screening Tenants

Finding the right person to share your personal space may take some time. You likely have certain things you’re looking for in a potential renter along with other things that might be deal-breakers. Maybe you’re looking for a non-smoker who has a solid rental history. A rental application is one tool that can help you find a housemate that fits the bill.

You may want to run a credit check and a background check on any applicants who are truly interested in renting a room in your house. These checks generally have fees associated with them, and it’s a good idea to specify in the rental application who will be responsible for paying for credit and/or background check.

The applicant’s permission is required to run either of these checks and they are entitled to know if the results of either a credit or background check resulted in the denial of their rental application. It’s important to make sure you’re complying with fair housing laws when screening potential tenants and aren’t discriminating against certain applicants.

Rental Agreement

Having a formal, written lease in place will go a long way in protecting both you and your renter. A thorough agreement might include:

•   The leasing period — it’s typical for a lease to be for one year, but if you’re renting a room to college students, you may consider a shorter lease for the duration of the school year. This section might specifically note the move-in and move-out dates.

•   Rent amount — including the due date, how you would like to collect it, and any late fees you might charge.

•   Security deposit — the amount and conditions for returning or withholding it at the end of the lease.

•   Utility costs — are they included in the monthly rent or will the renter be responsible for paying their share of the total bills?

•   Shared spaces — expectations around common areas like the kitchen, living room, and bathroom.

•   Pets — are they allowed or not, as well as policies about pet messes and noise.

•   Cleaning and maintenance — will the renter be responsible for regular house cleaning, including private and common areas, and home maintenance, inside or out?

•   Parking — if there is a parking space available, is it included in the rent or is it a separate charge?

Covering a wide variety of things in a rental agreement can go a long way in avoiding misunderstanding and miscommunication between you and your tenant. Having an attorney review the agreement is a good way to make sure you’re not missing important elements. Lease agreements are legally binding contracts when signed by both parties.

It’s also a good idea to do a walk-through of the room with the tenant before signing the lease and again before they move out. Any damage can be documented (e.g., carpet stains, scratches on woodwork, torn window screen, among other things) so it’s clear that the tenant isn’t responsible for that damage. A final walk-through can be done before the tenant moves out, during which any additional damage can be documented and accounted for.

What Are the Costs of Renting a Room in Your House?

You may encounter costs preparing a room to be rented as well as ongoing expenses related to having another person living in the home.

Preparing the Room for Rental

Safety for you and your tenant are important concerns. You may want to make sure doors and window locks are in good working order. Your tenant will likely want their room to be private, so a keyed lock on their door can go a long way to easing any concerns they might have about living in someone else’s home. Providing a combination safe for the tenant’s valuables might be a nice gesture.

Installing locks on doors to any areas you don’t want your tenant to have access to is another layer of safety you may want to consider.

Fixing loose railings, sticking doors or windows, flooring trip hazards, and doing other home maintenance that could become safety issues is important in making your home and the individual room an attractive rental prospect for tenants.

You may want to make some cosmetic changes, too.

•   Painting the walls a neutral color may allow a prospective tenant to imagine their belongings in the room, instead of bright colors that might be a distraction to them. Using an easy-to-clean paint finish, like satin instead of flat, may also save you some effort after your tenant moves out.

•   If the room is carpeted, you might consider having the carpet cleaned, either professionally or using your own carpet cleaner. If the room is furnished with upholstered furniture, it can also be cleaned. Doing so will help the room look and smell fresh.

•   If you’re renting a furnished room, make sure the furnishings are clean and in good condition. Even used furniture can be presentable.

•   If the tenant will have a private bathroom space, the fixtures should be as modern as possible, but more importantly, clean and working. If the faucet drips, if the bathtub leaks, if the toilet runs — make the repairs before renting the room.

•   Is the bathroom a shared space? You might consider adding some baskets or other types of storage for the tenant’s personal hygiene products. Making a cabinet available for their own use would be nice if there is space to do so.

•   Cleaning, decluttering, and updating other shared spaces such as the living room and kitchen can make your home look more inviting, possibly increasing your chances of finding a renter.

•   You might consider adding some storage space for a tenant’s use. It could be as simple as a stand-alone cabinet or a designated area in a basement or garage. The rental agreement could specify what isn’t allowed to be stored (e.g., no hazardous chemicals) and how much storage space is allotted. A prospective tenant might feel more comfortable storing belongings if the space is able to be secured.

Recommended: 20 Renter-Friendly House Updates

Increased Utility Costs

An extra person living in the house will likely increase utility usage. Costs for gas, electric, water, sewer, and other utilities will probably be more than you typically pay without an extra person in the house. You may want to calculate your average utility costs over the past year to have an idea what an extra person’s use might add to those costs.

Some landlords include the cost of utilities in the cost of rent, while others might require the tenant to cover a percentage of each monthly utility bill. When renting out a room in your house, it may not be convenient to have separate utility connections for a renter.

Covering the Cost of Making Your Room Rental Ready

Depending on how much work needs to be done, getting a room in your house ready for someone to rent could be a few hundred dollars or a few thousand dollars. You may be able to keep costs down by doing some of the work yourself, but you might need to hire a professional contractor for some tasks you don’t have the skills to tackle or don’t feel comfortable doing on your own. It can help to think of this as an investment with a potential for a return in the form of rental income.

Taking some time to save money for the expense of getting a room in your house rental ready can be a smart choice. It can at least be one way to pay for some basic tasks, while considering other funding sources for more expensive repairs.

If you don’t have cash on hand, you could put all these expenses on one or more credit cards. But because credit cards carry such high interest rates, you might want to avoid racking up a credit card bill you can’t pay down any time soon.

Homeowners who have equity in their homes might consider taking out a home equity loan or home equity line of credit. These secured loans use your house as collateral. The application process can be lengthy and typically requires an appraisal of your home. Also, you risk losing your home if you don’t repay the loan.

Another option is to apply for a personal loan. Personal loans are typically unsecured loans, which means you don’t have to put up any collateral to qualify for them. Many personal loans also have fixed interest rates.

The Takeaway

From your personal comfort level for sharing your space with someone to financial and legal considerations, there are lots of things to consider before deciding to rent out a room in your house. You may need to complete some repairs to make the space safe for a tenant, and there may be some decor updating necessary to interest potential renters. However, you can likely more than make up for these upfront costs in rental 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.

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

SOPL-Q224-1908123-V1

Renting a car with a credit card is easier than renting a car without a credit card, but both methods are possible at many major car rental agencies. Car rental companies typically put customers through more hoops to rent a car without a credit card.

In this guide, we’ll cover how to rent a car without a credit card — but also explore the potential perks of paying for a rental car with a credit card, when possible.

Is It Possible to Rent a Car Without a Credit Card?

So do you need a credit card to rent a car? Technically, no, you do not have to have a credit card to rent a car. It’s possible to rent a car with a debit card at some major rental agencies. Some agencies even accept prepaid gift cards, cash, or money orders as a form of payment at the end of the rental.

Each rental agency has its own stipulations about paying by debit card. Some franchises may not follow corporate policy, so it’s always a good idea to call the specific rental agency location to ask about payment options before arriving at your destination.

Common requirements for customers paying for a rental without a credit card include:

•   Security deposit: Many agencies will put a hold on your debit card for the cost of the rental, plus an additional amount. You will not be able to use the money being held for the duration of your trip, which can make funding your vacation more challenging.

•   Credit check: If you are paying with a debit card (or cash), some rental car agencies may perform a credit check. This could result in a hard inquiry on your credit report, which might temporarily lower your score.

•   Identification: Renting a car without a credit card might mean that the rental agency needs to see multiple valid forms of ID.

•   Age: While 25 is often the magic number to rent a car, it is possible to rent a car as a younger driver. Many agencies charge “young driver fees” to do so. However, if you are renting a car with a debit card, agencies may not allow drivers under the age of 25.

•   Proof of return travel: If renting from an airport with a debit card, many agencies want to see a ticketed return travel itinerary as an extra assurance that you will return with the car.

•   Logos: Some rental car agencies require debit or prepaid cards to carry the logo of a major credit card company, like Mastercard, Visa, or Discover.

The following rental car agencies allow you to rent a car without a credit card at participating franchises if you meet their specific requirements (though note this is not an exhaustive list):

•   Alamo

•   Avis

•   Budget

•   Dollar

•   Enterprise

•   Hertz

•   National

•   Sixt

•   Thrifty

•   Turo

Recommended: Buying a Car with a Credit Card

Why Rental Car Agencies Typically Require a Credit Card to Rent a Car

Why do you need a credit card to rent a car at some agencies, and why do others impose a number of requirements for debit card payments? Here are the reasons rental car agencies require a credit card or other information.

Proof of Reliability

Having a credit card inherently demonstrates to a rental car agency that a creditor trusts you enough to borrow their money. Because rental car agencies can ascertain your creditworthiness from a credit card in your name, they don’t need to run a credit check before loaning you a $25,000 piece of machinery.

Ability to Collect Repair Fees

If you return the car damaged, the rental car agency will need to pay for these repairs. Car insurance (whether through your own policy, credit card travel insurance, or the agency’s policy) may cover most of the charges, but you still might owe a deductible. Without proper insurance, there is a risk that the repair costs will exceed your security deposit.

Though you can rent a car without a credit card, if you pay with a debit card, the rental agency runs the risk of your checking account not having enough funds to cover the cost. There is a better chance the agency can charge your credit card without hitting your credit limit.

Ability to Collect Tickets and Fees

Similarly, if you go through any electronic toll booths or receive a ticket without being pulled over (e.g., through a traffic camera), the rental car agency can charge your credit card to pay the outstanding balance. Again, they face less risk of maxing out a credit card than overdrawing a checking account, which is why some agencies prefer customers renting a car with a credit card.

Benefits of Using a Credit Card for a Car Rental

Here are just a few potential perks of swiping your credit card for a car rental:

•   It’s easier. As discussed above, renting a car without a credit card can complicate the process.

•   You might have insurance. Some travel credit cards offer car insurance when you use them to pay for a rental car. Research your card’s policy carefully to understand what coverage it provides and how to use it. For example, many credit cards with travel insurance require that you decline the rental agency’s insurance; some only offer secondary insurance, meaning you need to file claims through your own auto insurance first.

•   You might get discounts. Some credit cards offer special discounts at select car rental agencies. Check your card’s policy to understand where and how to get discounted rates.

•   You could earn rewards. As mentioned above, you might qualify for cash back rewards when you opt to cover your rental car with a credit card payment. Other cards may pay out rewards as miles or points. Travel credit cards might even offer extra points for travel-related expenses, like rental cars.

Typical Rental Car Credit Card Interest Charges

When you rent a car, the agency typically puts a hold on your credit card for a set amount, often the value of the rental car agreement; this is commonly called a security deposit. During the rental period, these funds will count toward your credit limit.

When you return the car, the agency will charge you the amount of the rental, plus any fees incurred during the rental (damages, extra days, late drop-off, etc.). If the initial hold was more than the final cost of the rental, the agency will put that amount back on your card.

Because you pay interest on money borrowed with a credit card, it’s possible you might incur interest on the held security deposit. However, paying off a credit card in full every month is a smart strategy for avoiding interest charges given how credit cards work.

Recommended: When Are Credit Card Payments Due?

The Takeaway

Renting a car with a credit card makes the process much easier and can have benefits for the renter as well. However, it is possible to rent a car without a credit card. Just be prepared to take additional steps to get behind the wheel.

Whether you’re looking to build credit, apply for a new credit card, or save money with the cards you have, it’s important to understand the options so you can use your credit card responsibly.

SoFi Travel has teamed up with Expedia to bring even more to your one-stop finance app, helping you book reservations — for flights, hotels, car rentals, and more — all in one place. SoFi Members also have exclusive access to premium savings, with 10% or more off on select hotels. Plus, earn unlimited 3%** cash back rewards when you book with your SoFi Unlimited 2% Credit Card through SoFi Travel.

FAQ

Do I need a credit card for rental car insurance?

You do not need a credit card to purchase rental car insurance. While using a credit card makes it easier to secure a rental, most agencies allow you to pay upon your return with a credit card, debit card, or even cash, a gift card, or a money order. That includes the cost of insurance provided by the rental agency.

However, many car insurance providers cover rental cars in their policies, especially in the United States. Check with your agent to see if you’re covered. Additionally, some credit cards offer rental car insurance when you use them to pay for the rental. Your credit card benefits administrator can explain how, if, and when coverage applies.

Is it easier to rent a car with a credit card or debit card?

Renting a car with a credit card is easier than renting a car with a debit card. Many agencies will let you rent with a debit card; they just have additional requirements for you to meet before renting.

What form of payments are accepted for renting a car?

While rental agencies generally prefer credit cards for payment, some agencies allow you to book and rent a car with a debit card. Upon return, you may be able to pay for the car with a prepaid gift card, cash, or money order.

Can I use someone else’s credit card to rent a car?

If you use someone else’s credit card to rent a car, that person must be present to pick up the rental and be the main driver. If you intend to drive the rental, you will likely have to pay a fee for an additional driver, as you can’t be listed as the primary driver when using someone else’s credit card.

Photo credit: iStock/skynesher

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When you use your SoFi Credit Card to make a purchase on the SoFi Travel Portal, you will earn a number of SoFi Member Rewards points equal to 3% of the total amount you spend on the SoFi Travel Portal. Members can save up to 10% or more on eligible bookings.