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Each person handles their money in a unique way. Some people are laser-focused on saving and building their nest egg. Others believe that money is there to be spent on fun and satisfying purchases and experiences. Taking this money personality quiz can help you uncover your money style. That, in turn, can be a way to learn about your strengths and weaknesses and manage your cash that much better.

By knowing your money M.O., you can take steps to enhance your financial status. Ready? Read on for the details.

What’s Your Money Personality?

Steady Saver

Did the money personality quiz say you’re a steady saver? That likely means that you are well aware of your monthly budget and how much cash is coming in and going out. In addition, you are probably following the standard financial advice to save at least 10% or 20% of your take-home pay.

You may well be investing that in a 401(k) and getting a company match and putting funds into an IRA, too.

You are the kind who may have multiple bank accounts, with savings for various short- and long-term goals, such as the down payment on a home and your toddler’s future educational needs. Heck, you might even brag a little to friends and family about how much you have socked away.

Overall, you have some very impressive financial habits down pat. Keep up the good work. However, are you missing out on living your best life? There is the possibility that you may be overdoing it and being perhaps a tad too rigid. Does saving for Junior’s college fund mean the family can’t take a vacation for the next 17 years? Check in with yourself, and make sure you aren’t overly focused on your future goals.

Super Spender

To cut to the chase, you love the things that money can buy. Nothing wrong with that! Omakase dinners at that new Japanese restaurant, the perfect new dining table, the latest mobile device, and baby’s first Disney vacay: There are plenty of things that your income can buy that make daily life delightful and memorable.

But when you see money as simply a conduit for experiencing the best here and now, you are likely risking a couple of very important things:

•  You may be incurring debt.

•  You may not be planning for your future.

•  You may be succumbing to lifestyle creep vs. building wealth.

So here are some steps to take:

•  Consider whether you are saving towards the important milestone goals that many people aspire to, such as the down payment on a home, a college fund for your kids, and a healthy retirement account.

Meeting with a financial advisor may be a wise move to get you on track for saving for these aspirations and perhaps learning more about the fine points of investing.

•  Take a look at your budget, or make one if you don’t yet have one. Among the various budgeting methods is the popular 50/30/20 rule, which says to put 50% of your take-home towards needs, 30% to wants, and 20% towards savings and additional debt payments.

•  Check in with your credit card debt. You don’t want your balances and credit utilization ratio to get too high. If you find you are facing challenges, consider a snagging balance transfer credit card offer, using a lower-interest personal loan to pay off credit card debt, or working with a nonprofit credit counseling agency to reduce your load.

The Money Shunner

If the money personality quiz indicates that you’re a money shunner, it may mean you are not comfortable with financial matters so you choose to look the other way. Many people feel stressed when thinking about money, whether because they don’t think they are good with numbers or they don’t have a solid base in personal finances (after all, you probably didn’t sit through a budgeting basics class in high school).

But if you tend to avoid money matters, you could be missing opportunities to reach your personal goals and gain a sense of security.

To gain financial literacy, you can dip into self-education. Your bank may have a library of content, or you can try well-respected books, magazines, newsletters, and podcasts. You might also take a class, whether in person or online.

In addition, meeting with a financial advisor could be helpful.

You may also want to pay more attention to your budget and understand your income and how much you’re spending and saving. These steps can help you make friends with your money and get it to work harder for you.

Recommended: Getting Back on Track After Going Over Budget

The Takeaway

A money personality quiz can reveal what your relationship with your finances is like. It can help identify whether you tend to be focused on saving (perhaps too much so), spend a bit too freely, or don’t pay enough attention to your cash. By tweaking your approach, you could build your financial literacy and wealth. Making sure you have the right advisors and banking partner are other important facets of this.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What are some common money personality types?

There are different ways to categorize money personalities. You may see ones that use the terms spender, saver, and avoider, among others.

How do I know if my money style is too much about spending?

Typical signs that your money style involves too much spending can be having a large amount of credit card debt, living paycheck to paycheck, and not saving enough (or at all).

If my money style is a saver, isn’t that good?

Saver can be an excellent habit and can help you reach your financial goals and be prepared for whatever comes your way. However, you likely don’t want to go overboard and should enjoy your earnings as well.

Photo credit: iStock/stockfour

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
^Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

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.

SOBNK-Q425-027

There are seven federal tax brackets for the 2025 tax year, ranging from 10% to 37%. As a general rule, the more you earn, the higher your tax rate. And the higher your income and tax rate, the more money you will probably owe the IRS (Internal Revenue Service) in taxes.

How much you’ll pay in federal tax on your 2025 income (due in 2026) will depend on which bracket your income falls in, as well as your tax-filing status and other factors, such as deductions.

When people look at tax charts, however, they often assume that having an income in a particular tax bracket (such as 22%) means that all of your income is taxed at that rate. Actually, tax brackets are “marginal.” This term means that only the part of your income within each range is taxed at the corresponding tax rate.

Read on to learn how to use the 2025 tax chart to figure out how much you owe, plus tips on how to lower your tax bracket.

What Are Tax Brackets?

A tax bracket determines the range of incomes upon which a certain income tax rate is applied. America’s federal government uses a progressive tax system: Filers with lower incomes pay lower tax rates, and those with higher incomes pay higher tax rates.

There are currently seven tax brackets in the U.S. which range from 10% to 37%. However, not all of your income will necessarily be taxed at a single rate. Even if you know the answer to “What is my federal tax bracket?” you are likely to pay multiple rates.

Also note that the income levels have been adjusted in 2025 vs. 2024 to take into account the impact of inflation and other factors. So even if you made the same amount in 2025 as in 2024, you are not necessarily in the same bracket. Similarly, the IRS updated the income tax brackets for 2026, as well, which apply to taxes filed in 2027.

💡 Quick Tip: Banish bank fees. Open a new bank account with SoFi and you’ll pay no overdraft, minimum balance, or any monthly fees.

How Do Tax Brackets Work?

Whether you’re filing taxes for the first time or have been doing so for decades, you may wonder how you know what tax bracket you’re in.

While there are seven basic tax brackets, your income doesn’t necessarily get grouped into one level in which you pay that rate on all of your income. This only happens if your total income is in the lowest possible tax bracket.

Otherwise, the tax system is also graduated in such a way so that taxpayers don’t pay the same rate on every dollar earned. Instead, you pay higher rates on each dollar that exceeds a certain threshold.

•   For example, if your taxable income is $50,000 for 2025, not all of it is taxed at the 22% rate that includes incomes from $48,475 to $103,350 for single filers. Some of your income will be taxed at the lower tax brackets, 10% and 12%. Below, you’ll find a specific example of how this works.

In addition to knowing which tax bracket you’re in, it’s important to be aware of standard deductions that are applied when calculating taxes. (This is separate from common payroll deductions, such as health insurance.) The standard deduction will lower your taxes owed.

For income earned in 2025, the standard deduction is $15,750. for unmarried people and for those who are married, filing separately; $31,500 for those married, filing jointly; $23,625. for heads of household. (There may be tax benefits to marriage beyond your bracket, by the way.)

There are additional deductions that may lower your taxable income, too, such as earmarking certain funds for retirement.

In addition to federal taxes, filers may also need to pay state income tax. The rate you will pay for state tax will depend on the state you live in. Some states also have brackets and a progressive rate. You may also need to pay local/city taxes.

Example of Tax Brackets

According to the 2025 tax brackets (the ones you’ll use when you file in 2026), an unmarried person earning $50,000 would pay:

•   10% on the first $11,925, or $1,192.50

•   12% on the next $36,550 ($48,475 – $11,925 = $36,550), or $4,386

•   22% on the next $1,525 ($50,000 – $48,475 = $1,525), or $335.50

Total federal tax due would be $1,192.50 + $4,386 + $335.50, or $5,914

This doesn’t take into account any deductions. Many Americans take the standard deduction (rather than itemize their deductions).

2025 Tax Brackets

Below are the tax rates for the 2026 filing season. Dollar amounts represent taxable income earned in 2025. Your taxable income is what you get when you take all of the money you’ve earned and subtract all of the tax deductions you’re eligible for.

Not sure of your filing status? This interactive IRS quiz can help you determine the correct status. If you qualify for more than one, it tells you which one will result in the lowest tax bill.

2025 Tax Brackets For Unmarried People

According to the IRS, for tax year 2025, there is a tax rate of:

•   10% for people earning $0 to $11,925

•   12% for people earning $11,926 to $48,475

•   22% for people earning $48,476 to $103,350

•   24% for people earning $103,351 to $197,300

•   32% for people earning $197,301 to $250,525

•   35% for people earning $250,526 to $626,350

•   37% for people earning $626,351 or more

2025 Tax Brackets For Married People Who Are Filing Jointly

Tax rate of:

•   10% for people earning $0 to $23,850

•   12% for people earning $23,851 to $96,950

•   22% for people earning $96,951 to $206,700

•   24% for people earning $206,701 to $394,600

•   32% for people earning $394,601 to $501,050

•   35% for people earning $501,051 to $751,600

•   37% for people earning $751,601 or more

2025 Tax Brackets For Married People Who Are Filing Separately

Tax rate of:

•   10% for people earning $0 to $11,925

•   12% for people earning $11,926 to $48,475

•   22% for people earning $48,476 to $103,350

•   24% for people earning $103,351 to $197,300

•   32% for people earning $197,301 to $250,525

•   35% for people earning $250,526 to $375,800

•   37% for people earning $375,801 or more

2025 Tax Brackets For Heads of Household

Tax rate of:

•   10% for people earning $0 to $17,000

•   12% for people earning $17,001 to $64,850

•   22% for people earning $64,851 to $103,350

•   24% for people earning $103,351 to $197,300

•   32% for people earning $197,301 to $250,500

•   35% for people earning $250,501 to $626,350

•   37% for people earning $626,351 or more

Recommended: How Income Tax Withholding Works

Lowering Your 2025 Tax Bracket

You may be able to lower your income into another bracket (especially if your taxable income falls right on the cut-off points between two brackets) by taking tax deductions.

•   Tax deductions lower how much of your income is subject to taxes. Generally, deductions lower your taxable income by the percentage of your highest federal income tax bracket. So if you fall into the 22% tax bracket, a $1,000 deduction would save you $220.

•   Tax credits, such as the earned income tax credit or child tax credit, can also reduce how you pay Uncle Sam but not by putting you in a lower tax bracket.

Tax credits reduce the amount of tax you owe, giving you a dollar-for-dollar reduction of your tax liability. A tax credit valued at $1,000, for instance, lowers your total tax bill by $1,000.

Many people choose to take the standard deduction, but a tax expert can help you figure out if you’d be better off itemizing deductions, such as your mortgage interest, medical expenses, and state and local taxes.

Whether you take the standard deduction or itemize, here are some additional ways you may be able to lower your tax bracket as you think ahead and prepare for tax season:

•   Delaying income. For example, if you freelance, you might consider waiting to bill for services performed near the end of 2025 until early in 2026.

•   Making contributions to certain tax-advantaged accounts, such as health savings accounts and retirement funds, keeping in mind that there are annual contribution limits.

•   Deducting some of your student loan interest. Depending on your income, you may be able to deduct up to $2,500 in student loan interest paid in 2025.

It can be a good idea to work with an accountant or tax advisor to see if you qualify for these and other ways to lower your tax bracket.

Recommended: 10 Personal Finance Basics

The Takeaway

The government decides how much tax you owe by dividing your taxable income into seven chunks, also known as federal tax brackets, and each chunk gets taxed at the corresponding tax rate, from 10% to 37%.

The benefit of a progressive tax system is that no matter which bracket you’re in, you won’t pay that tax rate on your entire income. If you think you might get hit with a sizable tax bill, you may want to look into changing your paycheck withholdings or, if you’re a freelancer, making quarterly estimated tax payments.

You may also want to start putting some “tax money” aside each month, so you won’t have to scramble to pay any taxes owed when you file in April. A high-yield savings account could be a good option for this purpose.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Has anything changed from 2024 to 2025 tax brackets?

Yes, the IRS has adjusted tax brackets for tax year 2025 to reflect the impact of inflation and other factors.

Has anything changed from 2025 to 2026 tax brackets?

Yes, the IRS reviews and adjusts tax brackets each year, including for tax year 2026 (which is filed in 2027). This is done to help protect taxpayers from an unintentional increase in taxes as a result of inflation.

What is a marginal tax rate?

The marginal tax rate refers to the highest tax bracket that you possibly fall into. However, your effective tax rate averages the taxes you owe on all of your income earned. For this reason, your effective tax rate will likely be lower than your marginal rate.

How do deductions affect your tax bracket?

Deductions lower your taxable income. The more deductions that are taken, the more of your earnings are taxed at reduced brackets.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
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.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOBNK-Q425-050

Qualifying for a personal loan when self-employed can present some challenges. Self-employed individuals may find it difficult to produce traditional documentation — such as W-2s or pay stubs — used to verify income. And their income may not be steady, as it is with 9-to-5 workers. But that doesn’t necessarily mean you’re out of luck if you’re seeking a quick infusion of cash. Here’s a look at some ways to get a personal loan when you’re self-employed.

How to Get a Personal Loan If You’re Self-Employed

A personal loan is a type of installment loan that can be used for nearly any personal expense, including home improvements, a vacation, or consolidating your credit card debt. If you’re considering making a big purchase, like buying an engagement ring, a personal loan can be an alternative to using a high-interest credit card when you don’t have the means to pay the balance off right away.

Personal loans are typically unsecured, meaning a lender won’t require collateral. However, they can also be secured, usually by the asset purchased with the loan. Unsecured loans are usually approved based on the financial standing and creditworthiness of the borrower.

In addition to looking at an applicant’s credit history, lenders will also typically consider a potential borrower’s income when deciding whether or not to approve a loan and, if so, what the rates and terms will be. Those who are self-employed may find it more difficult to show proof of income, especially if their income fluctuates from month to month and year to year.

Self-Employed Loan Requirements

Loan requirements for self-employed individuals will be similar to the typical loan requirements for any borrower as determined by the lender. In addition to evaluating factors like the applicant’s credit score, many lenders will require proof of income.

Typically, the requirements for personal loan approval include pay stubs and W-2s to verify income, which most self-employed people can’t provide. It is possible for self-employed individuals to show proof of income, but it may require a little more legwork, as you’ll learn below.

One point worth noting: In general, lenders are looking for borrowers who have income stability, and it can help if the borrower has been working in a single industry for at least two years. A shorter employment history as a freelancer could be seen as indicating that you are a borrowing risk.

Showing Proof of Income When Self-Employed

Those who are self-employed have a couple of options for showing a lender they have sufficient and reliable income. Here are a few options that self-employed individuals could provide as income documentation.

Tax statements: Self-employed individuals can use their tax returns from the prior two or three years to offer proof of income. These forms include your income earned and taxes paid for those tax years. Lenders often view tax documents as a reliable source of income proof because they are legal documents.

Bank statements: Bank statements could be used if there is a regular history of deposits that illustrate consistent income.

Profit and loss statement: If you own your own business, this document (called a P & L) provides an overview of your costs, expenses, and revenue.

Court-ordered agreements: These may include things like alimony or child support.

Keep in mind that each lender will likely have their own application requirements. Contact the individual lender if you have specific questions on the types of documentation they’ll accept.

Consider Having a Cosigner

In the event that you are still struggling to gain approval for a personal loan with your self-employed proof of income, one option is to consider adding a cosigner. A cosigner is someone who agrees to pay back the loan should you, the primary borrower, default on making payments.

A cosigner can be a close friend or family member, ideally one who has a strong credit history who will strengthen your loan application. Given that a cosigner’s responsibilities are significant, this is not an undertaking to enter into without considerable thought and trust.

Build Your Credit Score Before Applying

Before applying for a personal loan (or any loan, for that matter), it can be wise to check your credit score. If it’s not at least in the good range, you may want to wait to apply for your loan until you can positively impact your rating. In general, the higher your score, the lower the interest rate and more favorable the terms you’ll be offered.

Key ways to build your score include always making payments on time, keeping your credit usage low, having a good credit mix and long credit history, and not applying for too much credit in a short period of time.

Compare Lenders Who Work With Self-Employed Borrowers

As you look for a personal loan, you may want to do an online search for lenders who explicitly say they work with self-employed borrowers. These financial institutions are likely to have systems in place that tailor the process to those who don’t, say, have W-2s. This can make application and approval simpler.

Prepare a Strong Loan Application Package

In addition to gathering the necessary documentation for your application (as detailed above), also consider ways to strengthen your package for a loan as a self-employed person. These include making sure you keep your personal and business finances separate, so you can accurately reflect your financial situation. If you are going to have a cosigner on the loan, ask them to prepare their paperwork as well.

Understand and Avoid Predatory Lenders

As you hunt for a personal loan when self-employed, you may come across unscrupulous predatory lenders, which typically offer no-credit-check loans at exorbitant interest rates (into the triple digits) and with steep fees. Often, they state the interest rate in a way that doesn’t reveal just how high it is (say, they cite a weekly payment vs. the monthly payment most people are accustomed to). They may use high-pressure tactics, such as saying the offer is only good for a very limited time.

If you are struggling to get approved due to a low credit score or lack of steady income, these lenders may seem to offer you a solution. Beware: These predatory lenders can keep you trapped in a cycle of growing debt.

Recommended: Guarantor vs. Cosigner: What’s the Difference?

Why It’s Difficult for the Self-Employed to Get a Personal Loan

It can be more challenging for self-employed individuals to provide proof of income to lenders, which can make it more challenging for them to get approved for a personal loan. But it’s important to note that each loan application is unique, and employment status is just one consideration.

For example, a self-employed individual who has a stellar credit history and who has been self-employed for a few years may be in a better position to apply for a personal loan than someone who has just transitioned into managing their own business.

The Income Challenge

Proving consistent and stable income can be the biggest challenge when getting a personal loan as a self-employed individual. Because you may not be guaranteed the same payment each pay period, lenders may request specific documentation in order to verify the fact that you have enough cash coming in to make payments on the loan. Some lenders may request tax returns for several years in order to verify your income.

Consistency Matters

Consistency in income is another major hurdle when seeking a loan for the self-employed. It’s not uncommon for self-employed people to experience fluctuation in their income. While some slight fluctuation may be acceptable to a lender, for the most part they are looking for consistent payments getting deposited into your account, even better if there is an increasing trend over time.

Higher Scrutiny During the Underwriting Process

Self-employed borrowers will likely face a higher level of scrutiny during the underwriting process which precedes final loan approval. For instance, if you lack steady, predictable income, you may be asked for additional tax returns or banking documents. Or P&L sheets or letters from your accountant about your business income could be requested. This is because lenders typically view those who are self-employed as less creditworthy and more of a risk to default on a loan.

Personal Loan Alternatives When Self-Employed

Personal loans aren’t the only option for self-employed individuals looking to borrow money to pay for expenses. Personal loan alternatives to consider include a credit card, cash advance, or a home equity loan.

Credit Cards With 0% APR Promotions

Credit cards can have high-interest rates, but ones with a 0% APR promotion (aka a balance transfer card) could be a great tool to pay for an upcoming expense. Just be sure to pay off the credit card before the promotional period ends and interest starts accruing.

Recommended: Average Credit Card Interest Rates

Cash Advances

A cash advance is a short-term loan generally offered by your credit card which allows you to borrow cash against your existing line of credit. Cash advances can provide an avenue for you to get quick access to cash, but there may be additional fees and a higher interest rate than usual. Be sure to read all the terms and conditions outlined by your credit card company before borrowing a cash advance.

Home Equity Loans or HELOCs

If you are a homeowner, you may be able to tap into the equity you’ve built in your home using a home equity loan or home equity line of credit (HELOC). A home equity loan is an installment loan where the borrower receives a lump sum payment and repays it in regular payments with interest.

A HELOC, on the other hand, is a revolving line of credit that the borrower can draw from and, once it is repaid, continue drawing from during a specified period of time.

Business Loans

Small business loans can be used to pay for business expenses. Self-employed individuals may be able to qualify for loans backed by the U.S. Small Business Administration (SBA), as well as private small business loans offered by banks, credit unions, and online lenders.

It is important to keep your personal and business expenses separate as a self-employed person. If you are using the money for a personal expense, you’ll want to avoid borrowing a business loan. Also keep in mind that many lenders don’t allow you to use personal loans for business expenses.

Peer-to-Peer Lending

Peer-to-peer lending bypasses the usual financial institutions and allows companies and individuals to invest in others via loans. You may have heard of some of the popular platforms, such as Kiva, Upstart, and Lending Club. These may be more accommodating for self-employed borrowers who are finding it challenging to secure a loan.

Secured Personal Loan

While most personal loans are unsecured, meaning they are approved based on the applicant’s creditworthiness, some of them are secured, meaning they are backed by an asset, known as collateral. Since these secured loans involve collateral, they are considered less risky. If the borrower defaults, the lender knows they can seize an asset that can help them recoup what is owed. Typical examples of collateral for personal loans include real estate, vehicles, cash in a bank or investment account, and other items of value.

The Takeaway

The challenge for self-employed individuals applying for a personal loan will generally be providing proof of income. Alternatives to traditional proof of income documents include tax or bank statements. Fortunately, many lenders understand that a full-time job isn’t the only qualifier of financial stability and will also consider factors like your credit score, financial history, and whether you have a cosigner.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

Can you get any loans if you’re self-employed with no proof of income?

It is possible to get a loan if you are self-employed. However, with zero proof of income, it may be challenging to gain approval for a loan. To improve your odds of approval, you may consider adding collateral to the loan or applying with a cosigner.

Are there any loans for self-employed people with bad credit?

While a strong credit history can help strengthen a loan application, it’s not impossible to qualify for a loan with bad credit. If you can show a consistent and stable income history, that could help improve your application. You’ll likely pay a higher interest rate and enjoy less favorable terms than if your score were higher, however. Another option to qualify could be to add a cosigner.

Can self-employed freelance workers get personal loans?

Yes, self-employed freelance workers can qualify for a personal loan. Instead of providing W-2 documents to verify their income, they will need to provide alternatives such as tax documents or bank statements. Applicants who have been working in a specific industry as a freelancer for two years or more may be viewed more favorably by lenders.

What documents do self-employed borrowers need to apply for a loan?

To apply for a personal loan, a self-employed person should probably gather tax returns, bank statements, profit and loss statements, and any documentation of other income sources (such as alimony). If you are working with a cosigner, they will also need to gather their documentation.

How can self-employed people improve their chances of getting approved for a loan?

Ways that a self-employed person can improve their chances of personal loan approval include building your credit score, working with lenders who specialize in loans for the self-employed, and considering whether to add a cosigner.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOPL-Q425-064

For most Americans, having a car is a necessity to get to work, school, the supermarket, the doctor, and everywhere else. However, both new and used cars are expensive — and auto loan rates can be considerable, too.

So when buying a car, does it ever make sense to use a personal loan instead of traditional financing? Here, you’ll learn the difference between personal loans and car loans and when you might want to use each to buy a new set of wheels.

Personal Loan vs Auto Loan: An Overview

You can use a personal loan for almost any legal purpose, including buying a car. (Typically, though, you cannot use personal loans for business purposes or for tuition.) But why would you use a personal loan to purchase a vehicle when there are very specific loans — auto loans — to finance this purchase?

As you’ll see, personal loans can offer some benefits over car loans, including less buyer risk, no down payment needed, better negotiating power, and potential savings on car insurance. But car loans still have their place and may be cheaper in the long run.

Personal Loans

A personal loan allows you to borrow money from a bank, credit union, or lender to fund nearly any kind of purchase. People commonly use personal loans for debt consolidation, home renovations, weddings, vacations, and even new and used car purchases.

Personal loans can be unsecured (no collateral required) or secured (collateral required). For the sake of our personal loan vs. auto loan comparison, we’ll be looking at unsecured personal loans, as they’re more common.

How Interest Rates Work on Personal Loans

Because unsecured personal loans aren’t backed by any collateral, interest rates tend to be higher than what you’d get for a car loan. Average personal loan interest rates vary depending on your credit score and the loan terms. As of November 2025, the average rate was 12.25%, and these loans tend to max out at a rate of about 36%.

Most personal loans come with fixed rates, meaning your interest rate will stay the same over the life of the loan. It is possible, however, to get a variable-rate personal loan. Check out options for a fixed- vs. variable-rate loan to figure out which is right for you.

Terms for Personal Loans

Terms for personal loans vary by lender, but you can typically take out a loan with a repayment term of one to seven years. The faster you pay it off, the less you’ll pay in interest — but your monthly payments will be larger.

When Personal Loans Make Sense

A personal loan can be useful in many scenarios, including:

•   For debt consolidation. If you have several debts (say, balances on a couple of high-interest credit cards), you could pay them off with a single personal loan, simplifying your financial life since you only need to make one monthly payment. What’s more, the personal loan may charge a lower interest rate.

•   Unexpected major bills. If you get hit by a big medical, dental, or car repair bill and can’t cover it with emergency fund savings, a personal loan could be used for financing.

•   Home renovations. If you need to replace your hot water heater or want to renovate a dated bathroom, a personal loan can be an option that doesn’t require tapping your home equity or using your property as collateral.

•   Major purchases. When it’s time to get a new laptop or a used car, a personal loan could be the right option.

•   Pricey life events. Maybe you’re getting married or planning a big vacation for your whole family. A personal loan can help you afford this kind of big-ticket, memorable experience.

Recommended: Types of Personal Loans

Car Loans

When buying a new or used car through a dealership, the dealer’s finance department can help you find a loan through a bank or credit union. Alternatively — or when buying from a private seller — you can shop around for a car loan from various banks and credit unions on your own.

Auto loans are usually secured loans, meaning the car you’re buying serves as collateral. This means that if you fall behind on payments, the lender can repossess your car. (It’s possible, but less common and more expensive, to get a car loan without putting the car up as collateral.)

An important note: For tax years 2025 to 2028, interest paid on a car loan can now be deducted on your federal tax return, up to $10,000 annually, even if you take the standard deduction. The loan must be for new cars assembled in the U.S. and used for personal purposes only. The deduction phases out for taxpayers with a MAGI (modified adjusted gross income) over $100,000 per year.

How Interest Rates Work on Car Loans

The collateral on the car loan reduces the risk to the lender, which usually results in a lower interest rate. As of mid-2025, the average car loan interest rate for a new car was 6.73% and 11.87% for a used car. That said, auto loan interest rates depend on your credit score. You can use an online auto loan calculator to get a better idea of how different rates and terms compare.

Car loan rates for both new and used cars have increased in recent years, but they’re still typically lower than the average personal loan rate. Notably, car loan refinancing rates are lower than regular financing rates.

Terms for Car Loans

Like personal loans, car loans might stretch 84 months (that’s seven years), but some are as short as 24 months (two years). Also like personal loans, it’s common to repay your car loan over three to five years.

When Car Loans Make Sense

There are several scenarios when getting an automobile loan can make good sense:

•   You lack the cash to buy a car. For many people, cars are necessities to get to work, school, and run errands that are necessary for daily life. A car loan can enable the purchase of a car when you don’t have the funds to pay upfront.

•   You want to protect your savings. Perhaps you do have enough money in the bank to buy a car, but you’d rather save it for a goal like buying a house. Getting a loan can be a good option in this case.

•   You have a good, very good, or exceptional credit score. Typically, the higher your credit score, the lower your interest rate on a loan. If you have a solid score, a personal loan may offer a relatively affordable avenue to financing.

•   You want to build your credit history. Securing a loan and making on-time payments every month can positively impact your credit score.

Can You Use a Personal Loan to Buy a Car?

Yes, you can use a personal loan to buy a car. In fact, you can use a personal loan for (almost) any legal purpose (though typically not for business expenses or tuition, as mentioned above). However, it often makes more sense to get traditional vehicle financing when buying a car.

Recommended: Personal Loan Calculator

Is It Better to Get a Personal Loan to Buy a Car?

In some ways, it can be better to buy a car with a personal loan. You don’t have to stress about saving up for a down payment, there’s no risk of your car being repossessed, and you might even have more negotiating power at the dealership.

However, many buyers prefer the structure of an auto loan. These loans tend to be cheaper in the long run because of the lower interest rates. And they’re easier to get — both because of lower credit score requirements for car loans and because dealerships can help you find the best car loan for you.

Key Differences Between Personal Loans and Car Loans

Here’s a summary of the key ways that personal loans and auto loans differ when you’re shopping for a new car.

Secured vs Unsecured Debt

As noted above, a car loan is secured by the vehicle. When you use an auto as collateral in this way, the loan is less risky for the lender and therefore the interest rate is typically lower. However, you do run the risk of losing your car (that is, having it repossessed) if you default on the loan.

A personal loan, on the other hand, is unsecured, meaning it’s not backed by an asset. For this reason, the rate is typically somewhat higher but you don’t face the possibility of losing your property if you don’t pay the loan.

Vehicle Ownership and Title

With an auto loan, the lender typically holds onto the title until the loan is fully paid off. However, with a personal loan, you usually buy the car with the funds provided and take ownership and title right away. This quicker path to holding the title may appeal to some borrowers.

Loan Approval and Credit Score Considerations

Because a car loan is a secured loan, it carries less risk to the lender. That means the lender may approve a loan for a borrower with a lower credit score vs. what’s required for a personal loan.

Pros & Cons: Personal Loan vs Car Loan

Buying a car with a personal loan instead of an auto loan has its share of advantages, but there are also drawbacks to consider. Once you know these, you can decide whether a personal loan is right for you or if you should use an auto loan as an alternative to a personal loan.

Pros

First, the upsides of using a personal loan:

•   Less risk: When you take out a car loan, the car itself serves as collateral for the loan. If you miss enough payments, the lender could repossess your vehicle. With an unsecured personal loan, you don’t face that risk, though there are still consequences if you default on a personal loan.

•   More negotiating power: When you don’t have to go through the hassle of securing financing, the car buying process is much easier and faster for you and the dealer. That means you might be able to negotiate a better deal, like a discount for paying in full.

•   Lower insurance costs: When financing a car, the lender may require you to carry comprehensive, collision, and gap insurance. But when you pay for the vehicle outright with the funds from your personal loan, no one can require you to carry those car insurance coverages, just what is dictated by your state law.

•   No need to save for a down payment: Personal loans don’t require a down payment. Though some have origination fees, you might even be able to roll those into the cost of the loan. That means you could use a personal loan to get a car with no money down.

Cons

Next, review the potential downsides of using a personal loan to buy a car:

•   Higher cost: Interest rates are typically higher for personal loans, which means you’ll end up spending more money on your car in the long run than you would if you got traditional auto financing. Origination fees for personal loans may also be higher than they are for car loans.

•   Higher credit score requirements: Because auto loans are secured by the vehicle being financed, lenders are a little more willing to work with lower credit scores. The credit score you need for a personal loan is typically higher (usually in the good range), though this varies by lender.

•   More insurance risk: There may not be an auto lender requiring you to carry comprehensive, collision, or gap insurance. However, declining those coverages just because your personal loan lender doesn’t mandate them could open you up to considerable risk. If your car is totaled and you don’t have the proper coverage to get reimbursed, you’ll still be on the hook for making your personal loan payments — so think carefully before minimizing your car insurance coverage.

The Takeaway

Both auto loans and personal loans can help you get behind the wheel of a new (or used) car. Determining which type of loan is right for you comes down to your needs, preferences, and financial profile.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

Is it easier to get a personal loan or car loan?

Getting a car loan is usually easier than getting a personal loan. That’s because car loans are secured by the vehicle you’re buying. That means less risk to the lender, who will be willing to accept lower credit scores.

Should I take out a personal loan to buy a car?

It depends. While you can get an auto loan through a bank, credit union, or the dealership, you can also pay for a car with a personal loan. Personal loans reduce your risk — there’s no chance of your car being repossessed — and they may give you more negotiating power. However, personal loans typically cost more in the long run.

Am I allowed to use a personal loan to buy a car?

Yes, you can use a personal loan to buy a new or used car. In fact, you can use personal loans for just about any legal purpose (though usually not for business expenses or tuition). Just read the fine print of any loan agreement to make sure.

Which loan type typically offers better interest rates?

When comparing auto loans and personal loans, an auto loan usually has somewhat lower interest rates since it’s a secured loan vs. an unsecured loan. However, that also means that with a vehicle loan, you risk possible repossession of the auto (the collateral) if you default. With an unsecured personal loan, there’s no asset that the lender could lay claim to if you don’t make payments.

What are the risks of using a personal loan to buy a car?

The risks of using a personal loan to buy a car can include higher costs (interest rates and origination fees may be higher than for auto loans), which means your monthly payment may be steeper. Also, there can be higher credit requirements for approval, and if you fail to make timely payments, your credit score will likely be negatively impacted.

Photo credit: iStock/skynesher

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.

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