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Almost 26 million Americans moved in 2024, which amounts to 7.5% of the country’s population. As you may know, a move can be expensive. Current estimates reveal that a local move for the contents of a three-bedroom home costs approximately $1,250 to $2,200, while a long-distance move is easily twice that, averaging $4,890 according to Moving.com. What’s more, amid the chaos of purging and packing, it’s easy to forget some of the additional moving-related costs you might face.

To help you get organized and budget appropriately, read on for the full story.

Average Moving Costs in the U.S.

The average cost of moving can vary tremendously depending on such factors as how much property you have, what kind of things you are moving (do you have delicate artwork, a piano?), how far you are moving, when you move, and the cost of living in the areas you are moving to and from.

Cost of Moving Locally

That said, the average cost of a local move for the contents of a 3-bedroom home is currently between $1,200 and $2,200. A local move is typically defined as being less than 100 miles and able to be completed in a single day.

Cost of a Long-Distance Move

A long-distance move, on the other hand, requires multiple days and covers more than 100 miles. A cross-country move certainly falls into this category, as does a move from, say, Seattle to Chicago. Due to the distance and time involved, this kind of move can be considerably more expensive, with some averages in 2025 coming in at just under $5,000.

Understanding Moving Expenses

While it may not be as fun as, say, budgeting for a wedding, figuring out costs for moving can be similarly complex. There can be numerous aspects to wrangle, from purchasing the proper packing supplies to deciding whether to DIY your move or hire professionals to understanding insurance needs. Consider the following.

Types of Moving Expenses

Here are some of the costs you are likely to incur when moving:

•   Transportation, or actually moving your possessions from point A to point B

•   Moving services, meaning having professionals load, transport, and unload your belongings

•   Packing, which usually involves cartons and bubble wrap (or you might pay to have movers pack delicate or valuable items or, if time is tight or young children are part of the household, to take care of it all for you)

•   Insurance to cover the value of your belongings as they are transported

•   Rent and security deposits. The location you’re moving to may require a security deposit and first month’s rent in advance.

•   Cleaning fees. You may have to pay to have your former and new residences cleaned.

•   Lodging. As you travel from your former home to your new place, you may have to stay a number of nights in a hotel or motel. Some people need to bridge the gap between homes with a short-term rental as well.

•   Storage. You might have to put some items in storage, depending on the timing and specifics of your move.

•   New furniture and appliances. Often, when people move, they discover they need to buy new pieces, whether that means window shades, a fridge, rugs, or a dining table.

Factors That Affect Moving Costs

There are numerous variables when you move, but here are a few key ones to consider:

•   How far you are moving. A move across town will involve less time, effort, and expense than a move across the country (or overseas).

•   How much you are moving. If you are a recent college graduate with just a few pieces of furniture, your move is likely to cost less than, say, a family of four packing up their whole home (basement and attic including) and relocating.

•   Time of year. Summer tends to be the busy season, with students leaving school and finding new places to settle and families wanting to get to their new house before the school year starts. This increased demand can increase prices.

•   Services needed. If you are going to pack the contents of your studio apartment and have a friend with a van to help you move, you’ll likely spend considerably less than you will if you are a family of four who wants movers to pack and transport all your furniture and other items 2,000 miles.

•   Storage. If you have to store all your possessions for a couple of weeks before you can have access to your new place, those costs can add up.

•   Access to locations. Someone whose move involves a single-level home with an ample driveway will likely have a shorter move than someone who lives in a 20th-floor apartment on a crowded city block. And shorter moves are less expensive than longer ones.

Cost of Hiring Professional Movers

Next, take a closer look at one of the biggest expenses of moving: the cost of hiring a professional team to get you to your new home.

As you might guess, the cost of hiring movers can range widely depending on location, distance of the move, and how much you’re moving. Here are some general figures to be aware of, as noted above:

•  For a local move (meaning 100 miles or less), costs typically range from $1,200 to $2,200.

•  For a long-distance move (more than 100 miles), costs are usually considerably higher, ranging from $2,200 to several thousand, with an average of $4,890.

There can be additional fees to consider: extra insurance for valuable items, the cost of packing and moving supplies, the fee for professional packing of items, and special services for moving items like, say, a piano or a pool table. You may also want to calculate how much tipping your movers might cost; omitting that expense could be a budgeting mistake. Recommendations typically say between 10% and 20% of the cost of your move is appropriate.

DIY Moving: Budgeting and Expenses

Thinking of doing your own move? Consider these aspects:

Comparing Truck Rentals and Portable Containers

The cost of renting a truck or van will require funding. As you might guess, the bigger the truck and the longer you use it, the more costly it will be. According to Angi.com, renting a truck costs about $1,000 on average in the U.S.

Keep in mind that you need to resolve what happens to a truck that you might drive a long distance to complete your move. Can you drop it off at a location near your new home, or will you have to pay a fee for its return to its home base?

Packing Materials and Equipment Rental

You’ll also need to budget for packing materials. Online packing calculators can help you determine your needs and the cost, but estimates say that for a small-to-medium home (a two-bedroom apartment or house), you’ll likely need to spend at least a couple hundred dollars on cartons, not including such supplies as bubble wrap ($29 for 300 feet) and tape ($7 per 55-yard roll). Don’t forget some sturdy markers to help you label what’s inside each box.

You might rent reusable boxes (typically plastic ones) to use for your move. Another item that can be wise to rent is wardrobe boxes, which allow you to move clothing that’s hanging in your closet into these boxes for easy transportation.

Moving blankets are another expense. These can cost $20 and up a pop if you purchase them. You may be able to rent them from a moving company to use for your DIY move.

Recommended: Personal Loan Calculator

Extra Moving Costs to Think About

As you get ready to move, don’t overlook these costs (some of which were mentioned above):

Storage Fees

Storage costs for any items that need to be held securely before they can be moved into your new home. You might easily pay between $100 and $300 a month (or much more in a city) for this service. You also might need to pay insurance fees to protect your items.

Moving Insurance

Moving insurance protects your possessions if they are lost or damaged. The cost can vary from a few hundred to a few thousand dollars; it’s typically 1% of the total estimated cost of your move. Some of the features impacting the cost of moving insurance include the value of your items, how much coverage you want, how large (or small) a deductible you opt for, and how far your move is.

Packing and Moving Supplies

In addition to the packing and moving supplies mentioned above, such as cartons, tape, and blankets, don’t forget about dollies and hand trucks to get boxes from one location to another. You might also need special crates for artwork and equipment to wrap and move musical instruments.

Travel Expenses

It can be easy to overlook your own travel expenses as your household furnishings get loaded onto a moving van to travel to a new destination. You may be in a situation in which you fly cross-country but need to ship your car (the average cost of shipping a car is $1,150). Or maybe you’ll drive vs. ship your car, triggering gas, lodging, and road food costs.

And, while not technically a travel expense, you might need temporary housing at your destination or to pay a security deposit if you rent a home. These costs can add up, meaning you may have to dip into savings or perhaps take out a personal loan (sometimes called a relocation loan) to cover your costs.

Tips for Reducing Moving Expenses

Here are some ways you can bring down your moving costs (some were already referenced above):

Downsize and Declutter

Downsize as much as you can before moving. The less you have, the faster and cheaper your move can be. Also, when you declutter, you might be able to get cash for your gently used unwanted items. There are many places where you can sell your stuff, in person or online.

Reuse Boxes and Packing Materials

Here’s a packing and moving tip that can help you save a bundle: Find affordable or free moving materials. Options can include getting free cartons and other supplies from friends and family, sourcing boxes from local retailers, or renting things like plastic containers, wardrobes, and moving blankets vs. purchasing them.

Consider Timing

Did you know when you move can impact the cost? If possible, schedule your move to avoid the busy, pricey summer high season. Moving in fall or winter, when demand is lower, can help you save money.

Recommended: Get Your Personal Loan Approved

The Takeaway

Moving is a major financial commitment, but it doesn’t have to break the bank. When planning a move, first decide whether you’re going to DIY or hire pros. Then make a list of other expenses: packing supplies, transportation and travel expenses, and other potential costs. You may need to tap your savings or take out a personal loan to afford these charges.

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

What financing options are available to cover moving costs?

When moving, you can fund your expenses with savings, take out a personal loan (also called a moving or relocation loan), or see if your employer offers any assistance. It can be wise to avoid high-interest credit cards.

What’s the difference between a DIY move and a full-service move?

When undertaking a DIY move, you are typically responsible for renting or borrowing a van, getting packing materials and packing items, and loading and unloading your possessions. With a full-service move, professional movers can help pack, if you like, as well as load, transport, and unload items. A DIY move may be cheaper, but it’s typically much more time-consuming and you could put yourself and your items at more risk.

How are moving costs calculated?

Moving costs are based on several factors, such as how much and what sort of property you’re moving, how far you are moving, whether you need help packing, what time of year you are moving, and what the prevailing cost of living is like in the areas involved.

Are moving costs tax-deductible?

For most Americans, moving costs are typically not tax-deductible. For those in the military, some unreimbursed expenses may be deductible.

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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If you want to borrow a large amount of cash but need to prove additional household income, your spouse may be able to help. You cannot simply list a spouse’s income with, or instead of, your own if you apply in your name alone. However, you can list their income if your spouse agrees to become a “co-borrower” on the loan.

Here’s a closer look at when and how you can use your spouse’s income on a loan application.

What Is a Personal Loan?

A personal loan is a type of installment loan that is paid back with interest in equal monthly payments over a set term, which can range from one to seven years. Personal loan interest rates tend to be lower than for credit cards, making them a popular option for consumers who need to borrow a large amount. Common uses for personal loans include major home or car repairs, medical bills, and debt consolidation.

There are different types of personal loans. Unsecured personal loans are the most common. These are not backed by collateral, such as your car or home.

Recommended: What Is a Personal Loan?

Checking Your Credit

Before you decide whether to include your spouse’s income, gather this information to assess your own financial standing.

Credit Report

Lenders will look at your full credit history to evaluate your creditworthiness, so it’s smart to review your credit reports before applying for a loan. You can request a free credit report once per week from each of the three major credit bureaus — Equifax®, Experian®, and TransUnion® — through AnnualCreditReport.com.

When you receive your reports, review them closely and make a note of any incorrect information. If you see any mistakes or outdated information (more than seven years old), you can file a dispute with the credit bureau(s) reporting the error.

If you have a limited or no credit history, consider taking some time to build your credit before applying for a loan.

Credit Score

Next, take a look at your credit score. You can often get your credit score for free through your bank or credit card company. The minimum credit score requirement for a personal loan varies from lender to lender. Broadly speaking, many lenders consider a score of 670 or above to indicate solid creditworthiness.

While there are personal loan products on the market designed for applicants with bad credit, they typically come with higher interest rates.

Debt-to-Income Ratio (DTI)

Your debt-to-income ratio (DTI) is the amount of debt you have in relation to your income, expressed as a percentage. Although some personal loan lenders may be willing to work with borrowers with DTIs as high as 50%, your chances of being approved for a personal loan and getting a good rate are higher if your DTI is below 30%. If your DTI is too high, you have two options: pay down your debt, or increase your income.

Shop Around Online

Shop around and “prequalify” with different lenders to compare the interest rates and monthly payments you’re offered with your income alone. When you’re comparing lenders, keep an eye out for any hidden fees, such as origination fees, prepayment penalties, and late fees. A personal loan calculator shows exactly how much interest you can save by paying off your existing loan or credit card with a new personal loan.

Now that you have a firm grasp of your financial standing, you can assess whether you need to include your partner’s income as part of your application.

Using Your Spouse’s Income

You may be wondering, “Can I use household income for a personal loan?” First, the bad news. You cannot simply use your spouse’s income or your combined household income, even with their permission, when applying for a personal loan in your own name.

Now for the good news. If your partner has a strong credit history and income, they can become a secondary “co-borrower” on the loan. A co-borrower can help improve your chances of approval, along with the interest rates and terms you’re offered.

What Is a Co-Borrower?

A co-borrower applies for the loan alongside you. Both of your financial information is taken into consideration, and both of you are responsible for paying back the loan and its interest.

Let’s look at the pros and cons of this arrangement.

Pros of Using a Co-Borrower

Because co-borrowers have equal rights, the arrangement is well-suited for people who already have joint finances or own assets together. Using a co-borrower allows you to present a higher total income than you can alone. A higher income signals to lenders that it’s more likely you’ll be able to make the monthly loan payments.

Plus, if you manage your loan well, both your credit histories will get a boost over time.

Cons of Using a Co-Borrower

Each borrower is equally responsible for repayment over the entire life of the loan. If the primary borrower cannot make the payments, that could negatively impact the credit of both parties. It’s important to have confidence in a co-borrower’s ability to repay the loan.

The loan will appear on both of your credit reports as a debt, which can affect the ability of one or both of you to get approved for another loan down the line.

Co-borrowers also have equal ownership rights to the loan funds or what the loan funds purchased, so trust is a big factor in choosing a co-borrower.

Applying for a Personal Loan with a Co-Borrower

The basic process of applying for a personal loan is the same no matter the number of applicants. The lender will likely ask both of you to provide certain information up front:

•   Personal info: Photo IDs, Social Security numbers, dates of birth

•   Proof of employment, and your employment histories

•   Proof of income

The lender will then run a hard inquiry of your credit reports, which might temporarily ding your credit score by a few points. Depending on the complexity of your application, you can expect to get your personal loan approved in one to ten days.

Recommended: What’s the Difference Between a Hard and Soft Credit Check?

Alternatives If You Don’t Qualify

If your loan application is rejected, take heart: You still have options. Let’s take a closer look at three avenues you may want to explore.

Consider a Joint Credit Card or Line of Credit

With a joint credit card or joint line of credit, you and your fellow account-holder equally share the spending and repayment responsibility. And because the account is in both of your names, it impacts both of your credit scores. Regular, on-time payments and low credit utilization can help build up your scores, while late payments and accumulated debt may bring it down.

Improve Your Credit and Reapply

This strategy will take some time and patience, but building your credit can help you and your spouse secure better loan terms down the road. There are several steps you can take, including paying your bills on time, paying down debt, and reviewing your credit reports regularly and disputing inaccuracies.

“One way to build credit is to display a history of responsible borrowing,” says Brian Walsh, CFP® and Head of Advice & Planning at SoFi. “For that reason, you may want to place monthly bills and other expenses on your credit card. Just be sure to pay the bill in full each month by the due date.”

Explore Secured Personal Loans

With a secured personal loan, you put up collateral that the lender can take possession of if you fail to repay the loan. While that prospect can be a drawback, this type of loan does have its share of benefits. For starters, it can be a good way to build credit, provided you make regular, on-time payments. And secured personal loans also tend to have a lower interest rate than unsecured loans. (Note: SoFi does not offer secured personal loans. However, we do offer home equity loans, which are secured by your home, and offer lower interest rates than unsecured personal loans.)

The Takeaway

You cannot simply list your partner’s income along with, or instead of, your own when applying for a personal loan in your own name. However, if your spouse agrees to become a co-borrower on the loan, both your incomes and credit histories will be considered. This can increase your chances of getting approved, qualify you for a larger loan, and/or give you access to better loan rates and terms. The catch is that both parties have equal responsibility for paying back the loan, and any late or missed payments can negatively affect both your credit scores.

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 I use my husband’s income for a personal loan?

You can use your spouse’s income for a personal loan only if they agree to become a co-borrower on the loan application. That gives you equal ownership of the funds, but also equal responsibility for paying back the loan. How you manage your loan payments can affect both your credit scores — for better or worse.

Can you use someone else’s income for a loan?

You can use someone else’s income for a loan only if they agree to become a co-borrower on the loan. That gives them equal ownership of the funds, and also equal responsibility for paying back the loan. This is a common arrangement between spouses, and between a parent and child.

Can a stay-at-home parent get a personal loan?

Loans for stay-at-home moms or dads are possible if the borrower has a strong credit history and can provide proof of income to show they can make the payments. Without that, they may need to find a co-borrower. A co-borrower’s credit and income can be used to help the primary borrower qualify for a loan, or access better interest rates and loan terms. However, a co-borrower will have equal ownership of the funds, and equal responsibility for repaying the loan. Using a spouse or parent as a co-borrower is a common arrangement when a stay-at-home parent cannot qualify on their own.

How does applying with a co-borrower affect your loan terms?

If you apply with a co-borrower, you may be able to secure better loan terms because the lender considers both applicants’ financial profiles. But remember, you and your co-borrower are also on the hook for paying back the loan.

What are the risks of being a co-borrower on a personal loan?

When you’re a co-borrower on a personal loan, you’re essentially assuming the same financial obligation and risk as if you had taken out the loan yourself. This means if the primary borrower defaults on the loan, the debt is as much your responsibility as it is theirs. And any late or missing payments will negatively impact your credit.

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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If you’re making a big purchase, it can pay (literally) to know when prices are lowest, such as Black Friday, Cyber Monday, and other sale dates.

After all, if you are plunking down hundreds or thousands on a purchase, you likely want to get the best bargain possible. Here, you’ll learn about the best times to buy some of the most common big investment items. Happy shopping!

Televisions

If you’re interested in upgrading your home viewing experience, waiting for a sale could mean you score serious savings on the model you’ve had your eye on. There are a few times of year that TVs commonly go on sale. One way to score a deal on a new TV is to follow the release cycle.

Most television manufacturers release new models sometime between February and April every year, and while you could pick up the latest model, you could also find dramatic price cuts on last year’s models since retailers are looking to make room for newer inventory.

You can also find discounts on televisions in advance of events like the big football game in February, during Black Friday, and Cyber Monday.

Laptops

Buying a laptop can be a very personal choice. The demands you place on your computer may require more processing power than others, so it’s important to determine what you need out of a laptop before you begin browsing different brands and models. Deals may vary depending on the model that you need.

MacBooks and other Apple products usually get an upgrade once a year, though they don’t always follow a consistent release schedule or release all new products at the same time. If you see ads announcing new models, it may well mean that last year’s models are seeing price cuts.

Major PC manufacturers generally release new laptops three times a year — back-to-school season from June to September, holiday season from September to December, and spring from February to April. However, the best deals on laptops tend to appear at the heart of the back-to-school shopping season from July to August and from November to December, the peak of the holiday shopping season.

Outdoor Furniture

A great time to shop for outdoor furniture is generally when you won’t actually be able to use it. Typically, patio furniture goes on sale from Fourth of July to Labor Day, as retailers are trying to clear their inventory to make room for fall inventory. Usually the further you are from summer, the bigger the savings.

Recommended: $5,000 Personal Loan: How to Get One

Mattresses

Finding the perfect mattress can mean comfort, relaxation, and most importantly a restful sleep. So finding a supremely comfortable mattress and at a low price would be a huge win.

When buying a mattress there are a few times of year you can target to find reliably low prices. May is one of the best months to buy a new mattress. That’s because most sellers launch new models in June, and are eager to make space for the newer inventory.

It’s also worth looking for deals over popular shopping holidays, including but not limited to Memorial Day, Labor Day, and President’s Day. And don’t overlook Black Friday and Cyber Monday, where you can often find reasonable prices and good deals on mattresses. Amazon Prime Day can be another good time to swoop in and get a good deal.

Furniture

If you’re ready to spruce up your interior design with some new furniture there are two times you can look to find some major sales. The best time to buy furniture is typically either in winter or summer (usually January or July, to be specific). Usually, new styles are released twice a year, in February and August.

In January and July, retailers are eager to clear space for those new arrivals, so prices will generally be discounted. Floor models may be included as well, so you could ask about discounts on sample pieces to help you afford your purchase, whether you are thinking of using your credit card or a personal loan to pay for your new furniture.

And for an even better deal? Don’t be afraid to haggle! Furniture stores may be willing to negotiate, so consider asking them to sweeten the deal with a discount or freebie.

You may also find furniture deals around shopping holidays like President’s Day and Memorial Day.

Recommended: Can I Increase My Personal Loan Amount?

Engagement Rings

The thrill of falling in love and finally finding your match is invigorating. The cost of an engagement ring to make it official? Not as exciting. In 2025, Americans spent an average of $5,200 to buy an engagement ring, according to the wedding site The Knot. If the thought of dropping a few thousand dollars on a ring is less than thrilling, it could be worth planning your purchase so you can wait for the optimal time to buy.

If you’re wondering how to finance an engagement ring, know that there are a couple of times when you may be able to find a discount. Jewelry sales can be slow in the summer, so there may be sales to entice customers. There may also be seasonal sales after Christmas or after Valentine’s Day. Some jewelers may even be willing to negotiate on price to make the sale.

Household Appliances

Major household appliances like dishwashers, washing machines, stoves, and refrigerators can be expensive, so it makes sense to look out for discounts before you commit to a new model. Some great discounts on appliances can be found from September to October when manufacturers are releasing their latest product. This can make financing an appliance purchase easier.

Retailers will be trying to make room for newer models so you can often find considerable discounts during these months on new, but last year’s models. When it comes to refrigerators, the best time to purchase is usually in that spring, as that is when manufacturers release new models.

Black Friday and the Fourth of July are other great times to look for sales on household appliances. And if you plan on buying a new appliance from a brick and mortar store, it could be worth going toward the end of the month when salesmen are trying to meet their monthly quotas.

Tip: When you’re looking to upgrade or replace an appliance, always check for floor models and returned (but still fully functional) models when bargain hunting.

Fitness Equipment

Have your eye on a new treadmill or elliptical? January could be the right time to buy new exercise equipment as stores are eager to take advantage of New Year’s resolutions to get fit or lose weight.

Also look for Black Friday, Cyber Monday, and Amazon Prime Day discounts.

Cars

Dealerships generally offer great deals during year-end sales events. Some dealers anticipate cars as gifts for the holidays. Car dealerships are also looking toward the new year, which means they’ll need to make space for newer models on the lot. For some dealers, December is one of their biggest sales months.

You may also secure a good deal on a new car during holiday weekends when dealerships run promotions. Dealerships are also more likely to offer a deal on older models, anticipating a new release. Typically, new models are released in September and October, so you might also look for deals in late August. This intel can help you get your financing for a car purchase ready in time to go shopping.

The Takeaway

The best time to make a large purchase will depend on the item. There are a few shopping holidays, like Memorial Day, Labor Day, and Black Friday, when retailers are known to offer deep discounts on some items. When shopping for a big-ticket item it can be helpful to do your research, shop around, and in some cases, negotiate to secure the best deal.

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.

The Takeaway

How long to wait before making a big purchase?

Experts recommend waiting anywhere from a couple of days to a couple of weeks or even a month before making a major purchase. This gives you time to be sure that it’s not an impulse purchase, to shop around for the best deal, and to determine the right financing.

How to decide if a big purchase is worth it?

Take time to consider whether you truly want and need the purchase and if it will add value to your life. Make sure you’re not buying it for such reasons as boredom and “keeping up with the Joneses,” that you’re getting a good deal, and you can afford the cost.

Should you put big purchases on a credit card?

Many people use credit cards for big purchases (which could yield major rewards), but cards do have high interest rates. Consider if you could pay off the purchase before interest kicks in. If not, you might look into using your savings or taking out a personal loan, which can have a lower interest rate.

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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If you’re looking to start or grow a side hustle or small business, you might think a business loan is the right next step. A personal loan, however, is another popular financial product that you also might be able to use. For instance, by using it to free up some cash elsewhere in your budget, you could put more of your income toward funding your business.

Because there are potential benefits and disadvantages to both types of financing, it’s important to understand the differences. You’ll find that information here and be better equipped to decide whether a business loan vs. personal loan might work best for you.

What Is a Personal Loan?

A personal loan is a source of financing that a borrower typically can use for just about any legal personal purpose. That said, you typically cannot use the money from a personal loan directly for your business. You might instead use the lump sum to consolidate credit card debt, which could free up funds in your overall budget to put back into your business.

Typically, you’ll find unsecured personal loans, with the borrower agreeing to pay back the full amount, plus interest, in fixed monthly payments within a predetermined time frame.

Some lenders also offer secured personal loans, however,which means some form of collateral is involved. Also, some offer personal loans with variable interest rates.

How Personal Loans Work

When you apply for a personal loan, you can expect the lender to review your personal financial information — including your credit score, credit reports, and income — to determine your eligibility. In general, the better your credit, the better your chances of receiving a lower interest rate.

Personal loan amounts vary, but some lenders offer personal loans for as much as $100,000.

Although most personal loans have shorter repayment terms, the length of a loan can vary from a few months to several years. Typically, they last from 12 to 84 months.

What is a Business Loan?

A business loan is a type of financing used specifically to pay for business expenses. It could be used to purchase equipment or inventory, for example, or to fund a new project.

There are many kinds of small business loans available — with different rates and repayment terms — including Small Business Administration (SBA) loans, equipment loans, micro loans, and more. Rates, terms, and loan requirements also can vary significantly depending on the lender.

How Business Loans Work

Applying for a business loan tends to be more complicated than getting a personal loan. For one thing, you’ll likely have to submit more paperwork to back up your application, including your business’s financial statements and an up-to-date business plan. The lender also usually will want to review your personal and business credit scores. And you may have to be more specific about what the loan will be used for than you would with a personal loan.

If your business is brand new, lenders may be reluctant to give you a business loan. Some lenders might ask you to put up some type of collateral to qualify.

Differences Between Business and Personal Loans

There are several factors you’ll want to understand when considering the difference between a personal loan vs. a business loan, including the loan costs, how you plan to use the money, and how much you hope to borrow. Here’s a look at a few basic differences.

Cost Differences Between Business and Personal Loans

Whether you’re considering applying for a business loan or a personal loan, it’s important to be clear about how much it could cost you upfront and over the life of the loan.

Interest Rates

Interest rates for business loans can be lower than for the interest rates for personal loans, but the rates for both can vary depending on the type of loan, the lender you choose, and your qualifications as a borrower.

Fees

Fees also can affect the upfront and overall cost of both personal and business loans, so it’s a good idea to be clear on what you’re paying. Some of the more common fees for business loans and personal loans that you might see include origination, application, packaging, and underwriting fees, and late payment and prepayment penalties.

Some fees may be subtracted from the loan amount before the borrower receives the money. But fees also may be folded into a loan’s annual percentage rate (APR) instead, which can increase the monthly payment.

Down Payment

Business loans may be available for larger amounts than a personal loan. For a larger business loan — a substantial SBA loan or commercial real estate loan, for example — you could be required to come up with a down payment. This amount can add to your upfront cost. However, just as with a mortgage or car loan, a larger down payment can help you save money over the long term, because you’ll pay less in interest.

Whether you’ll need a down payment, and the amount required, may depend on your individual and business creditworthiness.

Different Uses for Business and Personal Loans

One of the biggest differences between business vs. personal loans is the way borrowers can use them.

•   A business loan can be used to finance direct business costs, such as paying for supplies, marketing, a new piece of equipment, business debt consolidation, or a business property. But it typically can’t be used for indirect business costs, which means a borrower can’t pay off personal debts with the money or buy personal property with it.

•   Some business loans have a very specific purpose, and the borrowed money must be used for that purpose. For example, if you get an equipment loan, you must buy equipment with it. Or, if you get a business car loan, you must buy a business car with the money.

•   With a personal loan, you have tremendous flexibility in how you use the loan, although that usually does not include business purposes. Rather, you can use a loan to pay off credit card debt, fund a home improvement, or pay an unexpected medical or car repair bill. Personal loans are typically smaller than business loans, and they generally come with a shorter repayment term. It can be helpful to have a clear intent for how the money will be spent and to keep separate records for business and personal expenses.

Differences When Applying for Business and Personal Loans

The criteria lenders look at can be very different when approving a small business loan vs. a personal loan. Here’s what you can expect during the application process.

Applying for a Personal Loan

When you apply for a personal loan, your personal creditworthiness usually plays a large role in the application and approval process.

•   Lenders typically will review a borrower’s credit scores, credit reports, and income when determining the interest rate, loan amount, and repayment term of a personal loan.

•   Generally, you can expect to be asked for a government-issued photo ID, your Social Security number, and/or some other proof of identity.

•   You also may be asked for proof of your current address. And the lender will want to verify your income.

Applying for a Business Loan

When you apply for a business loan, your personal finances still will be a factor, though other aspects of your application will be reviewed carefully.

•   The loan underwriters also will evaluate your business’s cash flow, how long you’ve been in business, your profitability, the exact purpose of the loan, trends in your industry, your business credit score, and more.

•   The lender may ask for a current profit-and-loss statement, a cash-flow statement, recent bank statements and tax returns for the business, your business license and a business plan, and any other current loan documents or lease agreements you might have.

•   You also will have to provide information about your collateral if you are applying for a secured loan.

Recommended: Understanding Credit Score Ranges

Structural Differences in Business and Personal Loans

Knowing the differences in how personal loans vs. business loans are structured could help you decide which is right for you and your business. A few factors that might affect your choice include:

Loan Amount

A business loan may be more difficult to apply for and get than a personal loan, especially if your business is a startup or only a few years old. But if you can qualify, you may be able to borrow more money with a business loan. While personal loan amounts typically top out at $50,000 to $100,000, some SBA loans can go as high as $5.5 million.

Loan Length

You’ll likely find personal and business loans with both short and long repayment terms. But generally, personal loans have shorter terms (typically one to seven years), while some business loan repayment periods can be up to 25 years.

Tax Advantages

If you have a business loan, deducting the interest you pay on the loan may be possible when filing income taxes if you meet specific criteria.

With a personal loan, it might get a little more complicated. If you use the borrowed money only for business costs, you may be able to deduct the interest you paid. But if you use the loan for both business and personal expenses, you would only be able to deduct the percentage of the interest that was used for qualifying business costs.

And you should be prepared to itemize deductions, documenting exactly how you spent the money. Your financial advisor or tax preparer can help you determine what’s appropriate.

Support

Along with the traditional banking services you might expect to get with any type of loan, a business loan also may come with operational support and online tools that can be useful for owners and entrepreneurs.

Risk

When you’re deciding between a personal vs. business loan, it’s also a good idea to think about what could happen if, at some point, the loan can’t be repaid.

•   If your business defaults and it’s a business loan, the impact to your personal credit would depend on how the loan is set up.

◦   If you’re listed as a sole proprietor or signed a personal guarantee, it’s possible you could be sued, your personal and/or business credit scores could take a hit, and your personal and business assets could be at risk.

◦   If your business is set up as a distinct legal entity, on the other hand, your personal credit score might not be affected — but your business credit score could suffer. And it could be more difficult for you to take out a business loan in the future.

Pros and Cons of Business Loans

There are advantages and disadvantages to keep in mind when deciding whether to apply for a business loan vs. personal loan.

•   A business loan can be more difficult to get than a personal loan, especially if the business is new or still struggling to become profitable.

•   If you qualify for a business loan, you may be able to borrow a larger amount of money and get a longer repayment term.

•   A business loan also can make it easier to separate your business and personal finances. {Personal loans typically can only be used for personal expenses, as the name indicates.)

•   There could be fewer personal consequences if the business defaults on the loan.

Recommended: Can You Refinance a Personal Loan?

Pros and Cons of Personal Loans

A personal loan vs. business loan can have advantages and disadvantages to consider.

•   Personal loans can offer borrowers more flexibility than business loans in terms of usage, though those uses must typically be for personal expenses, such as paying for a home renovation or a vacation.

•   They’re generally easier to qualify for and may have lower interest rates.

•   One major hurdle may be that you cannot use them for any business expense in most situations. You could use them to free up cash in your budget which you might then apply to a business purpose.

Is a Business or Personal Loan Right for You?

Considering the differences between a personal loan and a business loan can help you decide which is right for your needs. You may want to do some online research, compare rates and terms, and/or ask a financial professional or business mentor for advice before moving forward with this important decision. Here are some things to think about as you look for a loan that’s a good fit for your personal and professional goals.

A business loan may make sense if:

•   You’re seeking a lower interest rate and/or repayment term.

•   You want to keep personal and business expenditures separate.

•   You’ve been successfully running your business for a while.

•   You need more money than you can get with a personal loan.

•   You hope to build your business credit.

•   You want to limit your liability.

A personal loan may make sense if:

•   Your goal is to use the money for personal purposes, which might free up funds in your budget for business expenses.

•   You plan to use the money for both business and personal expenses.

•   You can find a personal loan with a lower interest rate than a comparable business loan, and the lender approves the loan for business expenses.

•   You want to get the money as quickly as possible.

•   You are seeking a shorter repayment term.

•   You don’t want to secure the loan with collateral.

•   You feel confident about your personal ability to repay the loan.

Recommended: Can I Pay Off a Personal Loan Early?

The Takeaway

If you’re seeking funding to start or grow your business, you may decide to apply for a business loan. Another approach: You might apply for a personal loan, which could be used for personal purposes, freeing up money in your budget that could go toward your business. Personal loans are typically easier to apply for and offer quicker access to funds, but often at a somewhat higher interest rate and shorter term vs. business loans. Also, business loans usually offer significantly higher loan amounts and the interest can be tax-deductible. It’s worthwhile to consider the tax and credit implications of each type of loan too, among other factors.

FAQ

Are business loans more expensive than personal loans?

Business loans typically have lower interest rates than personal loans. However, these two loans aren’t interchangeable: one is for business uses, the other for personal expenses.

Can I use a personal loan for business?

Most (but not necessarily all) personal loans can be used for just about any personal use. Check the fine print, and follow the lender’s guidelines.

Are startup loans personal loans?

There are a few different options for funding a startup, including SBA loans, family loans, or crowdfunding platforms. But if you have good credit and are confident you can make the monthly payments, taking out a personal loan could be an effective strategy for funding a startup, if the loan permits that usage.

Photo credit: iStock/MicroStockHub

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.

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

SOPL-Q425-040

Getting a mortgage can be one of life’s biggest financial undertakings. What’s more, it also unlocks the path to what is typically the biggest asset and wealth builder out there: a home of your own.

Whether you’re dreaming of a center hall Colonial or a cool, loft-style condo, you will likely need a mortgage to make homeownership happen. And if you want to qualify for the best possible interest rate, it helps to have a little more knowledge and preparation when you seek a home loan.

This guide will teach you how to get a home mortgage and arrive expeditiously at the closing. Read on to learn how to get a mortgage right now, what matters most to lenders when you’re getting a mortgage, and the seven steps necessary to get a mortgage on your new home.

Step 1: Prepare Your Finances and Determine Your Budget

Now is the time to develop a budget for buying a house. Use a mortgage calculator to see what your monthly payment might be depending on the home price, down payment amount, and mortgage type. But don’t overlook these other costs:

•   Closing costs and related expenses (typically 2% to 5% of the loan amount)

•   Funds to make any repairs/renovations required

•   Moving expenses

•   Home insurance premium

•   Property taxes

•   Utilities (especially important if you are moving from a rental where your landlord paid some of these costs)

•   Maintenance (landscaping, HVAC service, etc.)

Another good first step to getting a mortgage is to understand how you will be evaluated by lenders so you can put your best foot (or financial profile) forward. Here are the key mortgage loan requirements:

Your Credit Score

Your credit score is an important number: It tells lenders how well you have managed debt in the past. Typically, you will need a credit score of 620 or higher to qualify for a conventional home loan. However, those with scores of 740 or higher may snag lower interest rates. So as you’re learning how to get a house loan, make sure you are also taking good care of your credit score.

If your score is at least 580, you may qualify for a government-backed loan (more on those below). And even those with a credit score of 500 to 579 may be eligible in some cases. If you’d like to build your credit score, make every payment on time and pay any unpaid bill. Avoid opening new credit accounts or closing old ones in the months leading up to your mortgage application.

Your Debt-to-Income Ratio

Another number that lenders will be interested in is your debt-to-income (DTI) ratio — in other words, how much debt you are carrying relative to your income. To compute your DTI ratio, total your monthly minimum debt payments, such as student loans, car loans, credit-card bills, current rent or mortgage and property taxes, and the like. Divide the total by your gross monthly income. The resulting number is your DTI.

The DTI figure that lenders look for may vary. Some lenders want to see 36%; others will be comfortable with up to 45%. Government-backed loans are likely to accept higher DTI’s than other lenders. You can use a home affordability calculator to compute what price home you might be able to afford based on your income and debts.

Other factors lenders will consider are your income history and assets. Lenders like to see signs of a positive, stable income. Ideally, you have been employed for at least two years. If you have been out of work or have job-hopped recently, it might be wise to wait a bit before applying for a mortgage.

Lenders will also want to see that you have some assets available, such as cash in the bank or other fairly accessible funds. This is where a healthy emergency fund and money saved for a down payment can be a real boost.

Speaking of your down payment: A down payment for a conventional loan has traditionally been 20% of a home’s cost, but there is some flexibility. A recent survey by the National Association of Realtors® found that first-time homebuyers typically put down 10% on a home purchase. And some loans are available with as little as 3% down or even (for certain government-backed ones) zero money down.

Keep in mind that if you put down less than 20%, you will likely have to pay for private mortgage insurance (PMI), or in the case of a Federal Housing Administration (FHA) loan, a mortgage insurance premium.

💡 Quick Tip: Don’t overpay for your mortgage. Get your dream home or investment property and a competitive rate with SoFi Mortgage Loans.

Step 2: Research Mortgage Loan Types and Find a Lender

It’s worth reviewing some of the different types of mortgage loans that you may qualify for.

•   Conventional vs. government-backed loans. Conventional loans typically have stricter income, credit score, and other qualifying factors, while government-backed loans may be easier to obtain. Government-backed loans may have lower (or even no) down payment requirements. Examples of these government loans are FHA, VA, and USDA loans.

•   Type of rate: For some borrowers, a fixed-rate loan, with its never-varying monthly payment, may be best. For others, an adjustable-rate one that fluctuates may be more appealing. The payments tend to start out low, which can be attractive for those who may sell their home within a few years’ time. You may also look into mortgage points, which involve paying more upfront to shave down your rate over the life of the loan.

•   Mortgage loan term: Many loans last 30 years, but there are other options, such as 5, 10, 15, or 20 years. The shorter the term, the higher your payment is likely to be.

Next, it’s wise to review different mortgage lenders and see what kind of rates and terms are quoted. For example, your own bank may offer mortgages and could give you a good rate in an effort to keep your business. Or you might look into online lenders, where the process can be more streamlined and the rates possibly better than traditional options.

Step 3: Get Preapproved for a Mortgage

It can be wise to get preapproved by more than one lender. This can help you evaluate different offers and broaden your options when it’s time to apply for a loan. When you apply for preapproval, you can expect the lender to do a credit check, verify your income and assets, and consider your DTI ratio.

It’s often possible to get preapproved for a mortgage online. If all goes well, the lender will provide you with a preapproval letter, and you can shop for a home in the designated price range.

While not a guarantee of a mortgage, it shows you are serious about buying and are on the path to securing your funding, and it reflects that the lender found you qualified for a mortgage. Having this letter can be especially helpful when you are competing for a home in a seller’s market.

You might also decide to work with a mortgage broker to get help learning about your alternatives.

💡 Quick Tip: Backed by the Federal Housing Administration (FHA), FHA loans provide those with a fair credit score the opportunity to buy a home. They’re a great option for first-time homebuyers.

Step 4: Find a Home and Make an Offer

With your preapproval letter in hand, you are ready to go home shopping. As you tour properties, you’ll likely refer back to your budget and down payment plans again and again as you get to an accepted offer. Don’t be surprised if you find yourself having agonized discussions about whether a home is truly affordable. Try to avoid pushing yourself beyond what you can comfortably afford.

Once you find a suitable property and your offer is accepted (a big moment!), you will hopefully be on the path to home ownership. If contract negotiations and the inspection goes well, you will move along to the final steps.

Step 5: Submit Your Mortgage Loan Application

Once you have an accepted offer and know how much you need to borrow, you’ll submit a full-fledged mortgage application. Expect to submit the following, and possibly more:

•   Two years’ worth of W-2 forms or other income verification

•   A month’s worth of pay stubs

•   Two years’ worth of federal tax returns

•   Proof of other income sources

•   Recent bank statements and documentation of possibly recent sources of deposits

•   Documentation of funds/gifts of money to be used as your down payment

•   ID and Social Security number

•   Details on debt, such as student loans and car payments

These forms allow a lender to consider your level of financial security and whether you are a good risk to offer a mortgage loan.

Step 6: Go Through the Underwriting Process

As you wait for your mortgage approval and a closing date, the underwriting process is happening. You’ll need a home appraisal and title search, and an underwriter will verify your income, evaluate your credit history, and assess your financial readiness to take on the loan. It’s not unusual for the lender to reach out with questions or to ask for more documentation during underwriting. Respond promptly to keep things on track.

If things progress smoothly, your loan will be approved and you will be ready to close on your home. You’ll do a final walk-through of the home to make sure everything is in order and any repairs that the seller agreed to make have been addressed.

Three days before your closing date, your lender will provide you with a closing disclosure that outlines the final closing costs and terms of your home loan. You can compare this five-page form with the loan estimate you received initially. If everything looks to be in order, get ready to close.

Step 7: Close on Your New Home

You may wish to bring your real estate agent and/or attorney with you to your closing meeting, which might be in-person or virtual. They can help explain everything — especially valuable if you are a first-time homebuyer. At the closing you will sign all your forms and submit your down payment and closing costs (or provide proof of wire transfer). The closing attorney, escrow officer, or title company representative will record the deed, and you will be given the house keys. Congratulations — you’re a homeowner!

The Takeaway

The path to homeownership can be a long and winding road, but worth it as you gain what could be your biggest financial asset. By learning how to get a mortgage, preparing to present a creditworthy file, and following the steps needed to apply for a home mortgage, you can be on your way to owning your new home.

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.

FAQ

How do you improve your chances of getting approved for a mortgage loan?

You can improve your chances of getting approved for a mortgage by checking on your credit score (and improving it, if necessary), showing a debt-to-income ratio of ideally 36% or lower, and having two years’ of a steady job history.

What is the lowest income to qualify for a mortgage?

There is no one set income required to qualify for a mortgage. Much will depend on how much you want to borrow versus your income, how much debt you are carrying, and your credit score. For those who have a lower income, there are government-backed loans that may be suitable; it can be worthwhile to look into FHA, USDA, and VA loans to see what you might qualify for.

What credit score is needed to get a mortgage?

Typically, a credit score of at least 620 is required for a conventional loan, and the higher your score (say, in the 700s or higher still), the more loan options and lower rates you may find. For those with a credit score of at least 500, there may be government-backed loan products available.

How long does the mortgage approval process take?

The full approval process for a mortgage can take 30 to 60 days. If you have a closing date or range of dates specified in your agreement with the seller, it’s important to let your prospective lender know.

What documents are needed for a mortgage application?

Documents needed for a mortgage application include proof of identity and at least two years’ worth of W-2 forms and tax filings. You can also expect to need your most recent pay stubs, bank statements, and proof of other income sources. If you are self-employed, be prepared to be asked for more details about your income, including, potentially, a profit-and-loss statement for your business.

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.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SOHL-Q425-197