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You may have seen personal loans advertised as starting at a certain interest rate or annual percentage rate (APR). But when you check your personal loan interest rate, you may find that what is offered to you is significantly higher. Why is that?

The average personal loan interest rate is dependent on several factors, including the amount borrowed, credit history, and income, among others. Average interest rates for personal loans may also differ depending on the type of the loan. Here are some factors that may affect the personal loan interest rate you’re approved for.

Average Personal Loan Interest Rates By Credit Score

The APR for a personal loan is calculated by looking at several factors, including the requested amount, the applicant’s income history, and the reasons for borrowing. One of the biggest factors, however, is an applicant’s credit score. In general, the higher a borrower’s credit score, the lower the loan interest rate they will be offered.

Here’s a look at average personal loan interest rates for different credit scores.

Factors That Can Lower Personal Loan Interest Rates

One thing to know about personal loans is that your unique credit profile will likely affect the interest rate offered to you. Here’s a look at some ways you may be able to qualify for a lower personal loan interest rate.

Improving Credit Score

Improving your credit score can, potentially, be one way to qualify for a personal loan with better rates and terms. Some strategies that can help you strengthen your credit profile include:

•  Checking your credit report It’s a good idea to get copies of your credit reports (you have three — from Equifax, TransUnion, and Experian) and make sure that your personal information — e.g., name, address, phone number, Social Security number — is correct in each one. Also look for any erroneous public record information, such as lawsuits or bankruptcies filed that you were not a part of, and any errors or inaccuracies in the credit accounts section. You can dispute any errors with the credit reporting agency.

•  Lowering your credit utilization ratio Your credit utilization ratio — the amount of debt you have compared to the amount of credit available to you — plays a large part in credit score calculation. Paying down your debt will lower this ratio.

•  Avoiding late payments Late payments can have a large and lasting impact on your credit score. If there are any late payments in your history, you may be able to minimize their impact by creating a record of on-time payments moving forward. Setting up autopay for debt payments is one way to make sure those payments are made regularly and on time.

Secured Versus Unsecured Personal Loans

How a personal loan works depends on the type of personal loan you choose. As you research loan options, you may come across options for secured and unsecured personal loans.

What’s the difference between a secured and unsecured personal loan?

•  A secured personal loan requires the borrower to pledge collateral to guarantee the loan. This collateral is something of value that the borrower owns, such as a car, investments, or a savings account. If the borrower cannot or does not make the loan payments, then the lender can seize that collateral to recoup its losses.

•  An unsecured personal loan, also called a signature loan, is backed by the borrower’s estimated creditworthiness. If the borrower can’t pay back the loan, the lender can’t take any of their property or valuables to recoup its loss. The lender can, however, take other steps to recoup its loss, such as suing the borrower, which may affect the borrower’s credit score and future financial options.

Personal loans are commonly unsecured loans. However, some lenders offer secured personal loans, which can allow borrowers with fair credit to qualify for a loan or get a better rate than they otherwise would with an unsecured loan.

Income and Employment Status

Your income and employment status may affect the rate you’re offered on a personal loan. Lenders generally see borrowers with solid, steady income as lower risk and, therefore, offer them lower rates. If you’re a freelancer, independent contractor, or business owner, you might need additional paperwork to prove your income than you would if you work a W-2 job.

If your income is irregular, having a creditworthy co-applicant may help you get approved for more favorable interest rates. Asking someone to be a co-applicant is a big commitment, though, and having a conversation about all that it entails can help alleviate any concerns of both parties.

Factors That May Increase Personal Loan Interest Rates

Lenders must assess how risky an unsecured loan might be and the likelihood of the loan being paid back. To do that, they look at the applicant’s credit history, employment status, and loan amount requested, among other factors. Here are some things that may lead a lender to think a loan is more risky — and potentially offer a higher rate to the borrower.

Credit Score

An applicant’s credit score is one factor that affects the personal loan interest rate they might be approved for. In general, the lower the applicant’s credit score, the higher the rate of interest they will be offered. Improving your credit over time may make it possible to qualify for a loan with a lower interest rate.

Debt-to-Income Ratio

Debt-to-income (DTI) ratio refers to how much debt someone has in relation to how much income they have. To calculate your DTI, you add up your monthly debts (including mortgage payments, car payments, and credit card payments) then divide that number by your gross monthly income. DTI ratio is expressed as a percentage. In general, the higher your DTI ratio, the riskier you may seem to lenders. Each lender sets its own DTI ratio requirement.

Unemployment

A personal loan application will ask for proof of income, usually in the form of W2s or tax returns from prior years. The lender wants to know that a borrower has a steady source of income. If a loan applicant is unemployed, it may be harder — but not impossible — to have a loan approved.

Recent Bankruptcy

Bankruptcy will appear on an applicant’s credit report and can make it challenging to be approved for a personal loan. Applying with a cosigner can make it easier to be approved for a personal loan after recent bankruptcy. But keep in mind that if you are unable to repay the loan, your cosigner would be responsible for the debt.

Is a Personal Loan the Right Choice for You?

Individual circumstances really determine whether a personal loan is the right choice for any one person.

•  A personal loan can be a good option for people who want to consolidate high-interest debt, like that of credit cards, to save money. For this method to be successful, it’s important to discontinue using the credit cards to accumulate more debt.

•  Having a fixed interest rate and steady payment amount can be helpful when using a personal loan to cover a big purchase. A personal loan is installment debt with a payment end date, in contrast to the revolving debt of a credit card.

•  A personal loan is still debt and increases a person’s overall debt load, so it can be a good idea to have a sense of how you’ll repay it. Making late payments or failing to repay the loan can negatively affect your credit score.

SoFi Personal Loan Interest Rate Range

SoFi personal loan rates are fixed, and competitive in comparison to other lenders. Specific interest rates are dependent on several factors, including an applicant’s credit history, credit score, income, and loan amount, among others.

A personal loan rate calculator can be a helpful tool to estimate your personal loan rate and will not affect your credit score. Your offered rate may vary slightly when you officially apply for a loan, but an estimate can give you a good benchmark for comparison.

The Takeaway

Personal loan interest rates vary depending on an applicant’s financial circumstances but can also vary by lender, so it can make sense to shop around for rates. If your credit profile is not as strong as it could be, you may want to work on improving your credit before applying for a personal loan. This can help increase your chances of loan approval, as well as your odds of getting approved for a loan with a favorable interest rate.

Checking your rate for a SoFi Personal Loan is an easy, online process that takes just one minute, and won’t affect your credit score. With no fees required and terms to fit a variety of budgets, an unsecured personal loan from SoFi may be a financial tool that will work for your unique needs.

FAQ

What is a good interest rate on a personal loan?

A good interest rate on a personal loan is considered anywhere from 5.99% to 9.00% APR. However, you generally need excellent credit (750 or above) to get an interest rate under 8.00% APR.

Is 10.00% a good personal loan rate?

Yes. If you have good to excellent credit (690-plus), a 10.00% APR is considered a good personal loan interest rate. It exceeds the average personal loan rate for borrowers with excellent credit, which is 11.30%.

Is 12.00% a good personal loan rate?

Yes, a 12.00% APR is considered a good personal loan rate if you have good credit (690 to 719). It beats the average personal loan interest rate for good credit, which is 15.60%.

Which bank has the lowest interest rate on personal loans?

According to Forbes Advisor, the best low-interest personal loans are currently available from LightStream. SoFI, PenFed, U.S. Bank, and Wells Fargo.

What is a personal loan interest rate?

A personal loan’s interest rate is the cost you pay each year to borrow money expressed as a percentage. The interest rate does not include fees charged for the loan. The annual percentage rate (APR) of a personal loan is the cost you pay each year to borrow money, including fees, expressed as a percentage. The higher the APR, the more you’ll pay over the life of the loan.

When comparing personal loan interest rates, you want to look at APRs to make sure you are comparing the loans apples to apples. A loan with a higher interest rate and low or no fees can actually turn out to be a better deal than a loan with a lower interest rate and high fees.

What is the interest rate on a $40,000 loan?

The interest rate on a $40,000 personal loan will depend on the lender, the loan’s term, and the creditworthiness of the borrower. The APR can range anywhere from 4.60% to 35.99%.

What is a good interest rate for an unsecured personal loan?

A good interest rate for an unsecured personal loan can range anywhere from 7.99% to 9.00%. However, you will likely need to have excellent credit to qualify.

Photo credit: iStock/alexsl

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Debt isn’t always due to having made financial missteps. The most cautious, savvy savers among us can see their plans quickly undone by unexpected costs. Medical debt is among the most unexpected and urgent costs anyone can have. The question of how to pay for medical bills can cause enormous stress when there’s no money in the bank to pay hospital and doctor expenses, up front or later on.

There’s no question that medical bills can go from tedious to terrifying fast. Fortunately, if you feel unable to afford medical bills, there are strategies to find relief.

Make Sure the Charges Are Accurate

If you haven’t already, go through each bill line by line to make sure you received the services and medications listed. Mistakes happen — providers can make billing and coding errors, and insurers sometimes deny coverage — so don’t just accept what you see.

It’s important to be prepared to make some phone calls, maybe even write some letters, if you can’t get answers or satisfaction. Yes, your insurance company and service provider should be figuring out all of this for you, but if they don’t, it will be up to you to do so.

You’ll probably find yourself talking to a different person every time, so making a note of each person’s name and the date and time that you spoke will help make your records more complete. Ask for a supervisor if you aren’t getting the help you need.

Don’t Ignore Your Bills

You may have run out of ideas when thinking about how to pay medical bills you can’t afford. But pushing those medical statements into a drawer so you don’t have to look at them is not the answer.

If the billing statements have started to accumulate — or worse, a collection agency is calling — it can be tempting to ignore the situation altogether. But those paths of least resistance can lead to negative consequences.

If your debt goes to collection, that record can stay on your credit report for up to seven years. And to recoup what is owed, the owners of the debt may opt to sue you. If they win their court case, they could garnish your wages or place a lien on your property.

Don’t Use Credit Cards to Pay Off Your Bills

So what to do if you can’t afford medical bills? Even if you’ve decreased your medical debt through negotiation or by having billing mistakes removed, you’ll have to pay the portion of the remaining balance you’re responsible for.

If you have enough available credit on a credit card, that’s one way to pay a medical bill — but unless it’s a very low-interest card, it probably isn’t an ideal option.

•   Interest will accrue each month until the balance is paid in full, which will increase the total amount paid.

•   If you miss a payment or make a late payment, your next billing statement will include a late-payment fee and accrued interest.

•   And if your payment becomes 60 days past due, your interest rate may go up.

Medical Credit Cards

Some providers might offer a medical credit card as a way to manage your payments. That’s not the same thing as a payment plan, so be cautious before signing on. The card may come with a no-interest promotional rate that allows you to make payments without interest for a designated period of time, but you’ll likely be required to pay the full balance by the end of the promotional period or you’ll be charged interest retroactively.

That’s because the interest is typically deferred, not waived, on medical credit cards. And even if you’re just a wee bit short of making full payment, the penalty could be significant.

Balance Transfer Credit Cards

Financial institutions tend to make balance transfer credit cards sound like the answer to every financial problem, but keep in mind that if you can’t pay off the balance within the designated introductory period, your account will revert to the annual percentage rate (APR) you agreed to when you signed up.

Ask Your Provider or Hospital for a Discount

If the costs are, indeed, all yours to pay and you just don’t have the money, you still may be able to get some help.
Nonprofit hospitals are required by federal law to have a written financial assistance policy for low-income patients. The law does not require a specific discount, nor does it specify eligibility criteria, but nonprofit hospitals are required to offer such financial assistance and make their patients aware of it.

Some states also require nonprofit hospitals to offer free or discounted medical services to patients with certain income levels.

With nonprofit or for-profit hospitals, you may be able to work out a payment plan, which, for medical debt, is often interest free. If you’re able to pay the bill, just not all at once, this could be an option to consider.

Negotiate

Negotiating medical bills is possible and often successful. Be prepared to meet with someone in the provider’s financial or billing department. When you’re worried about how to pay off hospital bills, making an appointment to meet someone in person can be a smart move — this is someone who might have the authority to reduce at least some of your balance, and they might offer other options for how to pay medical bills you can’t afford.

You may have to show paperwork proving your current income (a tax return or paycheck) and you should come with an amount in mind that you’re comfortable paying either in a lump sum or over time.

Finding Additional Help Paying for a Medical Bill

Government Benefits

Medicaid and the Children’s Health Insurance Program (CHIP) help to insure families who can’t afford health insurance or can’t get it through their employer. Both programs are joint federal/state programs, but may be called by different names in different states. To apply, you’ll need to provide accurate information about your income and any government benefits you already receive.

Recently, several government agencies jointly issued a rule banning surprise billing and balance billing. This ban, which already applied to Medicare and Medicaid billing, is being extended to employer-sponsored and commercial insurance plans.

•   Surprise billing happens when a patient is seen by a provider who, unknown to the patient, is not in their insurance network of covered providers and bills for their services at an out-of-network rate.

•   Balance billing is when a provider bills the patient for the remainder of a medical bill after the patient and the patient’s insurance company has paid their respective portions.

State Sponsored Programs

Each state has a program to help with medical bills and costs. Search by state on the State Health Insurance Assistant Programs site for details. Some states do offer programs other than Medicaid or CHIP, but it might take some research to find the right fit for your situation.

Private Assistance Programs

Some nonprofit financial assistance programs help pay certain medical expenses for specific conditions, such as cancer, leukemia, and others. There are also organizations that provide financial assistance with general medical costs like copays, deductibles, or prescriptions.

Medical Loan

Another solution for how to pay for medical bills may be an unsecured personal loan, which might have a lower interest rate (depending on the rate you’re approved for) and more flexible repayment terms than a credit card.

One advantage of a personal loan for medical expenses is that it might give you some leverage when you’re trying to negotiate a medical bill. You may be able to negotiate a discount for a lump-sum payment rather than stretching out the payment over time.

Some disadvantages of using an unsecured personal loan to pay medical bills are you’ll still have to pay interest on the loan, and loan approval may be difficult if you have poor credit.

The Takeaway

Taking a step back and looking at all your options is the best way to get started figuring out how to pay medical bills you can’t afford. You can often deal with these sometimes unexpected costs by using multiple methods and resources: checking your bill for accuracy, negotiating the balance due, and seeking out financial assistance if you can’t afford to pay what is owed.

If a personal loan is an option you choose, consider a SoFi Personal Loan. An unsecured personal loan from SoFi has competitive, fixed rates and a variety of terms. The loan application can be completed online, and you can find your rate in just a few minutes.

Check out SoFi Personal Loans to help pay for medical debt

FAQ

How long do I have to pay a medical bill?

Typically, doctors, hospitals, and other healthcare providers give a billing statement with a due date, often within 30 days. However, payment terms can vary, depending on insurance coverage, individual agreements, and local regulations.

If you’re unable to pay the bill in full by the due date, it’s a good idea to contact the healthcare provider or billing department to discuss possible payment arrangements or ask about financial assistance programs that may be available.

What is the minimum monthly payment on medical bills?

The minimum monthly payment depends on the provider and agreed terms. Some providers allow payments based on affordability, while others set a fixed amount or percentage of the total balance.

What happens if you don’t pay your medical bills?

Initially, the healthcare provider may send reminders or contact you to request payment. Late fees or interest charges may be applied to the outstanding balance. If the bill remains unpaid for an extended period, the healthcare provider may transfer the account to a collection agency. The collection agency will then pursue the debt, which can include phone calls, letters, and reporting the delinquent debt to credit bureaus.

Do medical bills affect your credit score?

Unpaid medical bills can potentially impact your credit, but not right away. Health care providers typically don’t report to credit bureaus, so your debt would have to be sold to a collection agency before it appears on your credit report. Generally, this doesn’t happen unless your bill is 60, 90, or 120+ days past due.

Even after your bill goes to collections, the consumer credit bureaus give you a full year to resolve your medical debt before the collection account is added to your credit history. And, if the unpaid bill is under $500, they won’t add the account to your credit report and it won’t impact your score.

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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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A trust can simplify the transfer of what is often a person’s most valuable asset: their real estate. It can keep a home out of the probate process and allow it to become the property of loved ones or a charity upon your death.

For many households, home equity represents their largest financial asset, and it has burgeoned. U.S. homeowners with mortgages saw their equity increase by $1 trillion at the end of 2022 compared with a year before, according to CoreLogic, a provider of property insights.

Here, a closer look at protecting one’s assets by putting a house into a trust.

Why Put a House in a Trust?

There are two main reasons: avoiding the probate process and protecting your property if you become incapacitated.
Put simply, probate is a court review of a deceased person’s will and assets. This involves resolving any claims against the estate, paying remaining debts, and distributing the decedent’s assets to their designated heirs.

Probate can be a lengthy and costly process. In the absence of a will, the probate court divides the estate according to the state’s succession laws. These proceedings often require hearings and a variety of legal and court fees, which can significantly chip away at the estate before it reaches the heirs.

Even with a will in place, probate is often necessary for your heirs to have the right to carry out your will. Things can become further complicated if the estate includes property in multiple states or the will is contested.

Putting property in trust can avoid probate altogether. A trust designates a successor trustee to manage the estate, as well as beneficiaries to receive assets, after your death. The trust can include clear instructions and conditions for allocating assets. This can help reduce the time and cost to pass your home to your heirs.

It’s also worth noting that trusts can safeguard assets if you become incapacitated and are unable to care for yourself. A trust can be created to take effect in this situation, thus allowing a family member or loved one to manage your estate and assets in your best interests. If you recover, you can resume the role of trustee for the estate.

Recommended: What Is a Trust Fund?

Do You Need a Trust If You Have a Will?

Only one in three U.S. adults has a will, according to one recent report. And even if you have created one, you may wonder whether you are handling your assets properly. For instance, you may ask yourself, “Should I put my house in a trust?” The answer will depend on your own financial goals and the needs of your heirs.

Who you intend to inherit your house is an important factor to consider. Federal estate and gift tax law permits the transfer of a house and other wealth to a spouse without tax liabilities. However, passing on a house to children or relatives of a subsequent generation can be more complex.

A trust goes into effect once you sign it and is generally more difficult to challenge than to contest a will. Placing a house in a trust also avoids the probate process — it’s not uncommon for the courts to take months or a year to settle a will, especially for larger estates.

Wills and trusts can be complementary tools for estate planning. For instance, a will can take care of smaller assets like family heirlooms that aren’t covered by the trust. Also, wills can be structured to move assets into a trust when you die.

💡 Quick Tip: Buying a home shouldn’t be aggravating. SoFi’s online mortgage application is quick and simple, with dedicated Mortgage Loan Officers to guide you through the process.

Types of Trusts for Estate Planning

There are multiple options available for putting your house in a trust. It’s important to consider financial goals, your beneficiaries’ needs, and creditor concerns when creating a trust.

Here’s an overview of common types of trusts, including how they work for passing on a house or other property. The basic kinds are revocable and irrevocable and they are typically part of an estate planning checklist.

Revocable Trust

Also known as a living trust, a revocable trust gives grantors more control in the management of their assets while alive. They’re still responsible for tax payments and reporting on investment returns.

If desired, a grantor can make changes or dissolve a revocable trust after it’s created. Getting remarried or buying a home could be possible reasons for altering a revocable trust.

Usually, the grantor (establisher) serves as the trustee (manager for beneficiaries), and a named successor only takes control if that person dies or becomes incapacitated.

A revocable trust becomes irrevocable upon the grantor’s death. A revocable trust does not protect a house and other assets from creditors while the grantor is alive.

Irrevocable Trust

An irrevocable trust differs in that it can’t be modified by the grantor without the approval of all beneficiaries. You effectively give up control and ownership of any assets placed in an irrevocable trust.

So why put your house in a trust with such rigid conditions? Irrevocable trusts can offer greater security for beneficiaries and render assets untouchable to creditors. Plus, you’re not subject to estate taxes because the assets are no longer yours.

Before permanently forfeiting assets to an irrevocable trust, it could be beneficial to consult a lawyer or find a financial planner.

Recommended: Average American Net Worth by Age and Year

Other Types of Trusts

Aside from the two broad categories of trusts, there are more specialized options to address specific needs. Here are some additional types of trusts to consider.

• Charitable Trust: This type of trust transfers assets to a designated nonprofit organization or charity upon the grantor’s death. A charitable trust can be housed within a standard trust to allocate a portion of assets to a nonprofit while leaving the rest for family members or other heirs.

• Testamentary Trust: A trust can be created within a will, often for minors, with defined terms that take effect after your death. This is a type of revocable trust, as changes can be made up until death. It’s worth noting that a testamentary trust does not avoid probate court. The executor will probate the will and then create the trust.

• Generation-Skipping Trust: Instead of passing on a house to your children, you can use a generation-skipping trust to transfer assets to your grandchildren. This is more common for estates that exceed the federal estate tax threshold ($12.92 million in 2023) to avoid some estate tax payments down the line.

• Spendthrift Trust: If you’re concerned about how your beneficiaries will manage their inheritance, you can use a spendthrift trust to set stricter terms. For example, you could define a date or age when beneficiaries gain access to certain assets.

💡 Quick Tip: There are two basic types of mortgage refinancing: cash-out and rate-and-term. A cash-out refinance loan means getting a larger loan than what you currently owe, while a rate-and-term refinance replaces your existing mortgage with a new one with different terms.

Should I Put My House in a Trust?

It’s important to understand the implications of having a house in trust before making a binding decision. Here, the main advantages and drawbacks.

Benefits of a Trust

Bypassing the hassle, delays, and costs associated with probate is a leading reason for using a trust.

Probate expenses can vary by location and the size of the estate but traditionally include legal fees, executor fees, appraisal fees, and other administrative costs. While probate costs will vary depending on the size of the estate and the state you live in, they can often be 4% to 7% of the estate or more.

You may also want to avoid probate to keep the details of your estate private. Probate is a public process that can reveal your estate’s worth and chosen beneficiaries.

Trusts are also useful tools for providing a financial safety net for children in the unexpected event that both parents die. A trustee manages the assets on behalf of any minor beneficiaries. Terms can be set to transfer control of assets held in the trust to children when they reach a certain age.

Putting certain assets in a trust could help some seniors qualify for Medicaid. If you’re 65 or older, your home and furnishings are usually exempt from the asset limit to qualify, but the threshold is low: around $2,000 in most states.

Disadvantages of a Trust

Setting up a trust can be complex. There are usually more costs in creating a trust than a will.

With a revocable trust, you need to track income from assets held in the trust to report on your personal tax returns. If you designate a third-party trustee to manage the trust, maintenance costs could add up over time.

And if you put just your home in a trust, your other assets will still be subject to the probate process.

When a house is the only large asset, buying a house from a family member is a possible alternative. Though this can be contentious among relatives, it’s another option to pass on a valuable asset to the family while providing some financial security.

The Takeaway

Estate planning isn’t always easy. Putting your house in a trust is one strategy to reduce the time and costs associated with inheritance. Probate costs can eat up 4% to 7% of an estate, and putting assets into a trust can help avoid that. Even if you put a house in a trust, however, you are still liable for any mortgage payments due, which you may be able to lower via refinancing.

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

Photo credit: iStock/BrianAJackson

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Whether trying to consolidate debt with a personal loan or thinking about a loan to pay for a major life event, taking on debt is a financial move that warrants some consideration.

It’s important to understand the financial commitment that taking on a personal loan — or any other debt — entails. This includes understanding interest rates you might qualify for, how a loan term affects the total interest charged, fees that might be charged by different lenders, and, finally, comparing offers you might receive.

Shopping around and comparing loans can increase your confidence that you’re getting the best interest rate on a loan.

What’s a Good Interest Rate on a Loan?

You may see advertisements for loan interest rates, but when you get around to checking your personal loan interest rate, what you’re offered may be different than rates you’ve seen. Why is that? A loan company may have interest rate ranges, but the lowest, most competitive rates may only be available to people who have excellent credit, as well as other factors.

When shopping around for a loan, you can generally check your rate without affecting your credit score. This pre-qualification rate is just an estimate of the interest rate you would likely be offered if you were to apply for a loan, but it can give you a good estimate of what sort of rate you might be offered. You can compare rates to begin to filter potential companies to use to apply for a loan.


💡 Quick Tip: SoFi lets you apply for a personal loan online in 60 seconds, without affecting your credit score.

Getting a Favorable Interest Rate on a Loan

The potential interest rate on a loan depends on a few factors. These may include:

•   The amount of money borrowed.

•   The length of the loan.

•   The type of interest on your loan. Some loans may have variable interest (interest rates can fluctuate throughout the life of the loan) or a fixed interest rate. Typically, starting interest rates may be lower on a variable-rate loan.

•   Your credit score, which consists of several components.

•   Being a current customer of the company.

For example, your credit history, reflected in your credit score, can give a lender an idea of how much a risk you may be. Late payments, a high balance, or recently opened lines of credit or existing loans may make it seem like you could be a risky potential borrower.

If your credit score is not where you’d like it to be, it may make sense to take some time to focus on increasing your credit score. Some ways to do this are:

•   Analyzing your credit report and correcting any errors. If you haven’t checked your credit report, doing so before you apply for a loan is a good first step to making sure your credit information is correct. Then you’ll have a chance to correct any errors that may be bringing down your credit score.

•   Work on improving your credit score, if necessary. Making sure you pay bills on time and keeping your credit utilization ratio at a healthy level can help improve your credit score.

•   Minimize opening new accounts. Opening new accounts may temporarily decrease your credit score. If you’re planning to apply for a loan, it may be good to hold off on opening any new accounts for a few months leading up to your application.

•   Consider a cosigner or co-applicant for a loan. If you have someone close to you — a parent or a partner — with excellent credit, having a cosigner may make a loan application stronger. Keep in mind, though, that a cosigner will be responsible for the loan if the main borrower does not make payments.

Recommended: Personal Loan Calculator

Comparing Interest Rates on Personal Loans

When you compare loan options, it can be easy to focus exclusively on interest rates, choosing the company that may potentially offer you the lowest rate. But it can also be important to look at some other factors, including:

•   What are the fees? Some companies may charge fees such as origination fees or prepayment penalties. Before you commit to a loan, know what fees may be applicable so you won’t be surprised.

•   What sort of hardship terms do they have? Life happens, and it’s helpful to know if there are any alternative payment options if you were not able to make a payment during a month. It can be helpful to know in advance the steps one would take if they were experiencing financial hardship.

•   What is customer service like? If you have questions, how do you access the company?

•   Does your current bank offer “bundled” options? Current customers with active accounts may be offered lower personal loan interest rates than brand-new customers.

💡 Quick Tip: Fixed-interest-rate personal loans from SoFi make payments easy to track and give you a target payoff date to work toward.

Choosing a Personal Loan For Your Financial Situation

Interest rates and terms aside, before you apply for a loan, it’s a good idea to understand how the loan will fit into your life and how you’ll budget for loan payments in the future. The best personal loan is one that feels like it can comfortably fit in your budget.

But it also may be a good idea to assess whether you need a personal loan, or whether there may be another financial option that fits your goals. For example:

•   Using a buy now, pay later service to cover the cost of a purchase. These services may offer 0% interest for a set amount of time.

•   Transferring high-interest credit card debt to a 0% or low-interest credit card, and making a plan to pay the balance before the end of the promotional rate.

•   Taking on a side hustle or decreasing monthly expenses to be able to cover the cost of a major purchase or renovation.

•   Researching other loan options, such as a home equity loan, depending on your needs.

Recommended: Avoiding Loan Origination Fees

The Takeaway

A loan is likely to play a big part in your financial life for months or years, so it’s important to take your time and figure out which loan option is right for you. And it’s also important to remember that interest rate is just one aspect of the loan. Paying attention to details like potential fees, hardship clauses, and other factors you may find in the small print may save you money and stress over time.

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.

Photo credit: iStock/Prostock-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.

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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An uncontested DIY divorce could cost $300. For a messy, high-stakes parting, add zeros (knowing that the sum will be short of Jeff Bezos’ $38 billion). When the nuptial knot frays, average divorce costs add up to several thousand. So how much does divorce cost, really?

In 2023, the mean cost of divorce is $7,000, but the average ranges from $15,000 to $20,000, according to Forbes. However, all kinds of factors, from attorney fees to assets, influence the bottom line.

Here are details about types of divorce and what to expect cost-wise with each.

How Much Does It Cost to Get a Divorce?

The cost of a divorce can depend on which state you live in, how amicable the parting is, and whether you work with a divorce attorney, own property together, and have children, among others.

Most cases settle before going to trial. Here are common costs if you need to prepare for a divorce.

💡 Quick Tip: SoFi lets you apply for a personal loan online in 60 seconds, without affecting your credit score.

Without an Attorney

A DIY uncontested divorce is the cheapest option. You and your spouse submit paperwork to your local family court, then fill out and file required documents.

DivorceNet found that the median cost of a DIY divorce is only $300. That could be because many filers who don’t hire a lawyer have no contested issues.

With an Attorney

A lawyer can only work with one client at a time, so two attorneys are required if both spouses want their own representation.

A divorce attorney will usually ask for a retainer, or down payment, of $2,500 to $5,000, and will charge from that. If the retainer runs out, the lawyer may bill by the hour. Hourly fees may range from $150 to $500 or more per hour, according to LegalZoom.

A reader survey by Nolo, a publisher that specializes in legal content, found that the average cost of a divorce handled by a full-scope attorney was $12,900, with $11,300 of that lawyer fees. The median, though, was $7,500, including $7,000 in attorney fees.

Of course, the longer it takes to reach a final judgment, the higher your heap of attorney fees will be.

Recommended: Understanding Divorce and Retirement Accounts

Mediation

If you’re dealing with a more convoluted situation and don’t feel comfortable filing yourself, but don’t want to shell out money for a divorce lawyer, you could consider working with a mediator.

In this form of divorce, both spouses work with a neutral third party who has a handle on the financial and legal aspects of divorce and oversees the process.

A non-attorney mediator may charge $100 to $350 an hour, with a couple’s total mediation bill coming in anywhere from $3,000 to $8,000, according to DivorceNet.

Free or low-cost mediation services are often provided by courts, nonprofit organizations, and bar associations.

Collaborative Divorce

In this hybrid of mediation and a traditional divorce using lawyers, each spouse is represented by a collaborative divorce attorney. The goal is to help both parties work toward a mutually satisfactory outcome and, if children are involved, one that keeps their best interests in mind.

Both parties commit, in writing, to using cooperative dispute resolution techniques.

If the process fails, both attorneys must withdraw from the case, and the couple will need to hire new lawyers and continue through family law court proceedings.

Consulting Attorney

If you can’t afford to hire a full-scope divorce attorney, you might be able to hire a consulting attorney for specific tasks. The average total fees for consulting attorneys were $4,600, and the median was $3,000, Nolo’s survey found.


💡 Quick Tip: Fixed-interest-rate personal loans from SoFi make payments easy to track and give you a target payoff date to work toward.

Who Pays for the Divorce?

Most of the time, each spouse pays their own attorney fees and costs.

In select cases involving income disparities or one party unnecessarily complicating the proceedings, a judge may order a spouse to pay his or her partner’s divorce costs, LegalZoom says.

The following are some of the factors that affect the costs of a divorce.

Child Custody

In a contested divorce, the issue of child custody will likely come up. If the couple is able to agree on a child custody schedule that works for both parents, that is usually the easiest path forward.

For divorces involving children that require an attorney to iron out custody details, costs tend to increase significantly thanks to the additional time spent working with parents to reach an agreement.

A contested divorce involving custody could also include working with a court-assigned professional, who may interview the parents and children, observe each parent at home with the kids, and make an evaluation based on their findings.

A county custody evaluation could cost between $1,000 and $2,500. A private review could run $15,000 or more, according to DivorceNet.

Real Estate

Couples who share a property may require the help of real estate attorneys or agents who focus on helping couples ascertain the disposition of their homes.

A home appraisal is an unbiased, third-party estimate of a property’s value. It can cost between $300 and $450.

Sometimes couples opt to refinance the mortgage on the marital home into one name, releasing the other spouse from obligation. The cost of refinancing can be several thousand dollars.

Alimony

Another potential consideration in a divorce may be alimony, or spousal support.

If both individuals can’t agree on the amount of payment and the time payments are to be made, the court may have to step in.

That can involve litigation and a review of debts and finances. Since the process requires legal counsel, alimony decisions can quickly drive up divorce expenses.

Do Divorce Lawyers Offer Payment Plans?

Some family lawyers do offer payment plans. The time to ask about that is during an initial consultation.

In most situations, paying for a divorce can be a major stressor.

If you and your spouse are on OK terms and have savings, you could consider pooling together as much as you can to put toward divorce costs. You could also ask to borrow money from relatives or friends. In some cases, couples may know that divorce is looming and start saving for it ahead of time, as unpleasant as that may be.

Some people may opt to put their divorce costs on a credit card and pay the debt over time, with interest. An option that may be more cost-effective is a personal loan.

A personal loan has several potential advantages. The interest rate could be lower than a credit card, depending on your credit score. Most personal loans come with a fixed interest rate, which makes budgeting easier.

And a personal loan might allow you to borrow a significant amount of money and have several years to pay it off.

The Takeaway

How much does a divorce cost? A good answer might be: More than most people hope it will be. Let’s just say average divorce costs are in the thousands.

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 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.

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

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