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Personal loans are borrowed lump sums that you pay back, with interest, to the lender. Though the money can be used for almost anything, some common uses for personal loans include covering medical bills, paying for home repairs, and consolidating debt.

When you don’t have the savings to cover an important purchase or bill, a personal loan is usually a better alternative to credit cards. We’ll take a closer look at what personal loans can be used for, their drawbacks and benefits, and alternative ways to pay for unexpected expenses.

What Can I Use a Personal Loan For?

Personal loans may be used for just about anything “personal,” meaning it’s not a business-related expense. Here are some of the most popular reasons people take out different types of personal loans.

Debt Management and Consolidation

Refinancing or high-interest debt consolidation into better loan terms is one of the most common uses for a personal loan — and one of the most financially savvy. Credit card debt carries some of the highest interest rates out there. Credit cards also typically have variable rates, making it challenging to create a predictable budget to pay down outstanding debt.

Rates for personal loans, on the other hand, tend to be lower than credit card APRs. This can save borrowers a lot of money in interest over the long term. And the fixed payback schedule of a personal installment loan may help borrowers avoid falling into a vicious cycle of revolving debt that can continue indefinitely.

You don’t have to be drowning in credit card debt to benefit from consolidation. For borrowers with multiple loans, consolidating debt with one personal loan can be a useful financial tactic — if the borrower qualifies for good loan terms.

Bottom line: Personal loans can help streamline multiple high-interest debt payments into one payment. Plus, loans tend to have lower rates than credit cards. This could help borrowers save money in interest over time.

Recommended: Where to Get a Personal Loan

Wedding Expenses

According to Zola, an online wedding planning site, the average cost of a wedding in 2023 is around $29,000. Unfortunately, many young couples have not saved up enough to pay for their entire wedding themselves. (In many cases, the days when a bride’s parents footed the entire wedding bill are over.)

A personal loan, sometimes referred to as a wedding loan when used for this purpose, can cover some or all of a well-budgeted wedding. Personal loans tend to offer much lower interest rates than credit cards, which some newlyweds may use to fund their big day.

However, before you go this route, think long and hard about whether you really want to start out your married life in debt. Consider if you can actually afford to pay off the loan in a timely manner. If not, it might be better to cut back on your wedding budget, or take more time to save up for the big day.

Bottom line: A wedding loan can help pay for some or all of the wedding costs, which could help you avoid having to use a credit card or tap into your savings.

Unexpected Medical Expenses

When a medical emergency occurs, it’s important for your main focus to be on a healthy outcome. But the financial burden can’t be ignored. Being able to pay for out-of-pocket expenses with a low-rate personal loan may relieve some stress and give you time to heal.

It’s no secret that the cost of medical care in America can be sky-high, especially for the large portion of Americans who have high-deductible health plans. The situation is even more challenging for those who don’t have health insurance coverage at all. When paying out of pocket, even a seemingly simple procedure, like casting a broken leg, can cost a shocking $7,500, according to Healthcare.gov.

Bottom line: Medical emergencies happen. Using a personal loan to help pay for bills and expenses could provide peace of mind.

Recommended: How to Pay for Medical Bills You Can’t Afford

Moving Expenses

A low-interest personal loan (also known as a relocation loan) may help defray some out-of-pocket costs associated with moving. According to the American Moving & Storage Association, a local move can set you back $1,250 on average. Moving 1,000 miles or more typically costs $4,890.

And these figures only account for the move itself. As anyone who has relocated knows, hidden costs can and do often pop up, from boxes and storage space to cleaning fees and lost security deposits.

There are also expenses that come with a new home. Most new rentals require upfront cash for a deposit, sometimes totaling three times the monthly rent (first, last, and security). Opening new utility accounts may also require a deposit.

And don’t forget about replacing household items left behind. Even basics like soap, light bulbs, shower curtains, and ketchup can easily total a few hundred dollars.

Lastly, miscellaneous costs can arise during the move itself, such as replacing broken items. Even with insurance, there’s usually a deductible to pay.

Bottom line: Whether you’re relocating across town or across the country, expenses can pile up quickly. A relocation loan can help you pay to move and set up your new home.


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

Funeral Expenses

Many people have life insurance to cover their own funeral. But what if Mom, Dad, or Grandpa didn’t plan ahead? If the deceased did not plan appropriately to finance their death, and life insurance doesn’t cover the bill, a personal loan can be a quick, easy solution for the family.

Basic costs for a funeral include the service, burial or cremation, and a memorial gathering of friends and family. The median cost of a funeral service with a viewing and burial is $7,848, while the cost of a funeral with cremation is $6,971.

Bottom line: When a loved one passes away, paying for the funeral may be the last thing on your mind. If you need help financing the arrangements, a personal loan could provide a fast and simple solution.

Home Improvement Expenses

Many renters and homeowners feel that annual or biannual itch to spruce up their living space. That might mean a fresh coat of paint, upgraded appliances, or a kitchen remodel. Depending on the level of your project, the cost of home remodel can come in anywhere from a few hundred to tens of thousands of dollars.

If you’re making upgrades that will improve a home’s value, the cost may be made up when selling the house later. Using a personal home improvement loan can help you focus on the renovation instead of fretting about costs. Plus, if you get an unsecured loan, you won’t have to worry about putting your home equity on the line as collateral.

Bottom line: Taking out a home improvement loan is one way to help fund a home improvement project.

Family Planning

Whether your plans involve pregnancy, adoption, in vitro fertilization (IVF), or surrogacy, growing a family can be expensive.

The average cost of a complete IVF cycle, for example, starts around $15,000 and can go up from there, depending on the center and your medication needs. Meanwhile, giving birth costs an average of $18,865, and insured women typically pay $2,854 of that amount.

Once your baby arrives, you’ll need money to pay for diapers, clothing, formula, and other supplies. A personal loan can help you cover the expenses without having to dip into your savings or emergency fund.

Bottom line: When you’re looking to add a new member to the family, a personal loan can provide peace-of-mind financing.

Car Repairs

You get a flat tire. The transmission fails. The brakes go out. When your car breaks, chances are you can’t afford to wait to have it fixed while you pull together the necessary funds. A personal loan can help you cover the cost of the repair, which can be significant.

On average, consumers spend around $548 per year fixing their cars, according to Cox Automotive, which owns Kelley Blue Book. Of course, you could spend much more, depending on the work being done. If you’re replacing a failed transmission, for instance, you can expect to pay between $2,900 and $7,100 for a new one.

Bottom line: Car repairs are rarely planned. If you need money quickly to fix your car, you may want to consider a personal loan. Depending on the lender, you may be able to get same-day funding, but it could also take up to one week to get the money.

Vacation

Ready to take the plunge and book that bucket list trip? A personal loan is one way to help finance a dream vacation, and the interest rate could be lower than a credit card’s.

Bottom line: If you’re planning an expensive getaway and don’t have the cash you need at the ready, a personal loan can help you pay for the trip. Note that you may be paying off the loan long after the trip.

What Personal Loans Can’t Be Used For

While personal loans can be used for almost anything, there are some restrictions. In general, here are things you should not use a personal loan for:

•   A down payment on a home. Buying a home? In general, you’re not allowed to use personal loans for down payments on conventional home loans and FHA loans.

•   College tuition. Most lenders won’t allow you to use personal loans to pay college tuition and fees, and many prohibit you from using the money to pay down student loans.

•   Business expenses. Typically, you are not allowed to use personal loan funds to cover business expenses.

•   Investing. Some lenders prohibit using a personal loan to invest. But even if your lender allows it, there may be risks involved that you’ll want to be aware of.

Recommended: Personal Loan Glossary

Pros and Cons of Taking Out a Personal Loan

As you’re weighing your decision, it may help to take a look at the overall pros and cons of personal loans:

Pros	Cons
Fast access to cash	Increases debt
Can be used a variety of purposes	Potential fees and penalties
Lower interest rates compared to credit cards	Credit and income requirements to qualify
No collateral required for unsecured personal loans	Applying might ding your credit score

Deciding Whether to Take Out a Personal Loan

Wondering whether a personal loan makes sense for your situation? Here are a few things to keep in mind as you make your decision.

•   Figure out how much you’ll need to borrow. Remember, you’ll be on the hook for repaying a significant amount of money including interest. There might be hidden fees, too.

•   Make a repayment plan. Going into debt should never be taken lightly, so it’s important to set a realistic strategy to repay the debt.

•   Check your credit score. Your credit history and score will have a significant impact on the loan terms, and interest rates and qualifying criteria will vary from lender to lender.

•   Explore your options. Before applying with a lender, shop around for the interest rate and terms that best fit your needs.

Keep in mind that there may be situations when taking out a personal loan might not make sense. Here are a few instances:

•   You can’t afford your current monthly payments. If making the monthly payments on your existing debt is a challenge, you may want to reconsider whether it’s a good idea to take on any more debt right now.

•   You have a high amount of debt. Shouldering a high amount of debt? Taking out a personal loan could put a strain on your finances and make it more difficult for you to make ends meet or put money away for savings. Plus, carrying a lot of debt could increase your debt-to-income ratio (DTI), which lenders look at in addition to your credit score and credit report when reviewing your loan application.

•   You have a “bad” credit score. A less-than-stellar credit score could reduce your chance of getting approved for a personal loan. If your credit score is considered “bad,” which FICO defines as 579 or below, then you may want to hold off on taking out a personal loan and instead work on your credit. You can help raise your score by paying your bills on time, paying attention to revolving debt, checking credit reports and scores and addressing any errors, and being mindful about opening and closing credit cards.

Recommended: Can a Personal Loans Hurt Your Credit?

Alternatives to Personal Loans

Considering alternative ways to pay for expenses or big-ticket items that don’t involve personal loans? Here are three to keep in mind:

Credit cards

Credit cards offer a line of credit that you can use for a variety of purposes. This includes making purchases, balance transfers, and cash advances. You can borrow up to your credit limit, and you’ll owe at least the minimum payment each month.

A credit card may make sense for smaller expenses that you can pay off fairly quickly, ideally in full each month.


💡 Quick Tip: If you’ve got high-interest credit card debt, a personal loan is one way to get control of it. But you’ll want to make sure the loan’s interest rate is much lower than the credit cards’ rates — and that you can make the monthly payments.

Home equity line of credit

If you have at least 20% equity — the home’s market value minus what is owed — you may be able to secure a home equity line of credit (HELOC). HELOCs commonly come with a 10-year draw period, generally offer lower interest rates than those offered by a personal loan, and you can borrow as much as you need, up to an approved credit limit. However, you may be required to use your home as collateral, and there’s a chance your rate might rise.

HELOCs might be an option to consider if you plan on borrowing a significant amount of money or if you expect to have ongoing expenses, like with a remodeling project.

401(k) loan

If you need money — and no other form of borrowing is available — then you may want to consider withdrawing funds from your retirement plan. A 401(k) loan doesn’t come with lender requirements and doesn’t require a credit check. However, you may face taxes and penalties for taking out the money. Each employer’s plan has different rules around withdrawals and loans, so make sure you understand what your plan allows.

Borrowing from your 401(k) could be a smart idea in certain situations, like if you need a substantial amount of cash in the short term or are using the money to pay off a high-interest debt.

The Takeaway

When it comes to weddings, funerals, cross-country moves, and other big-ticket items, a personal loan is typically a better alternative to high-interest credit cards. Other common uses for personal loans include debt consolidation, medical bills, home improvement, family planning, and vacation.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

What is interest?

Interest is the money you’re charged when you take out a loan from a bank or earn for leaving your money in a bank to grow. It’s expressed as a percentage of the total amount of the loan or account balance, usually as APR (Annual Percentage Rate) or APY (Annual Percentage Yield). These figures estimate how much of the loan or account balance you could expect to pay or receive over the course of one year.

How important is credit score in a loan application?

Credit score is one of the key metrics lenders look at when considering a loan applicant. Generally, the higher the credit score, the more likely lenders are to approve a loan and give the borrower a more favorable interest rate. Many lenders consider a score of 670 or above to indicate solid creditworthiness.

Can I pay off a personal loan early?

Most lenders would likely welcome an early loan payoff, so chances are you can pay off a personal loan early. However, if an early payoff results in a prepayment penalty, it may not make financial sense to pay off the loan ahead of schedule.

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

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

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

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.

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

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For the 2022-2023 school year, the average cost of tuition and fees for a four-year private college was $39,400, $28,240 for a public four-year college (out-of-state) and $10,950 for a public four-year college (in-state), according to the College Board.

Add in other living expenses and it’s no surprise that students and their families often rely on a combination of funding sources to pay for their education. Students may turn to savings, scholarships, grants, and student loans to find enough money to pay for college.

11 Ways to Pay for College and Other Expenses

Paying for college, plus living expenses, often requires a hodgepodge of funding sources. As mentioned, students rely on things like scholarships, grants, in addition to student loans.

Students attending trade school or community college may also be able to use these sources of funding to pay for their education. Continue reading for details on different ways to pay for college.

1. Fill Out FAFSA and See What Aid You Qualify For

The Free Application for Federal Student Aid, better known as FAFSA®, is the application students will fill out if they are interested in securing any form of federal financial aid. This includes federal scholarships, grants, work-study, and loans. Many schools will also use information provided on the FAFSA to determine school-specific scholarships or grants.

Completing the FAFSA is free — it requires a bit of time, but that’s worth it if you qualify for much-needed funding to pay for schools.

Be sure to compare financial aid packages from each college to understand the net cost at each. Some colleges may have more expensive sticker prices, but offer more aid.

2. Applying for Scholarships

Many colleges and private organizations offer merit-based scholarships. This means money is awarded based on academic or athletic ability, not financial need. There are plenty of databases and scholarship search tools that can help students find scholarships.

Scholarships often have specific requirements, so read the criteria carefully. For instance, you might need to live in a certain state or major in a particular subject to qualify. If you’re unsure whether you qualify, contact the scholarship sponsor.

Recommended: What Is a Scholarship & How to Get One?

It may also benefit you to start researching scholarships early. Gather required documents and information to apply so that you are ready to meet any early deadlines. Many scholarships require you to submit a high school transcript, your standardized test scores, a financial aid form, and information about your family’s finances, including your parent’s tax returns from the previous year.

Many scholarships also require you to write an essay and provide at least one letter of recommendation. Be sure to follow all the directions carefully and to keep copies of your application.

3. Applying for Grants

Unlike scholarships, most grants are based on financial need, not academic achievement. The largest source of need-based grants is the federal government’s Pell Grant program, but there are other federal student grants available.

To qualify for a Pell Grant, you must be a U.S. citizen attending either a two- or four-year undergraduate program. If you have already earned a baccalaureate or professional degree, you won’t be eligible for a federal grant, so this link has four simple steps if you’re looking for ways to pay for graduate school.

Pell Grant amounts are based on financial need, the cost to attend your college, and your enrollment status. The amount awarded will vary based on those factors, but the current maximum award is $7,395 for the 2023-2024 academic year.

Many states also distribute grants. Check out SoFi’s financial aid database with state-by-state guides.

4. Asking the College for More Money

While it may seem like a bold move, one strategy for obtaining additional student aid might be asking the college to provide a larger financial aid package. Appealing a financial aid decision is a possibility, but there are no guarantees. Financial aid awards are usually based on information provided on the FAFSA, and in some cases changes in financial circumstances can lead to an amended financial aid award. Some colleges and universities might also be willing to match a more competitive financial aid offer from a comparable school.

The appeals process might vary based on the school’s policies, so check in with the financial aid office or review the school’s website to determine the exact process.

Many schools will require a letter of explanation. Depending on the circumstances, documentation might be necessary to supplement the information detailed in the appeals letter.

5. Getting a Part-Time Job

Another way to pay for college is to look for a part-time job, either on or off campus. Campus career services offices may also have resources for students looking for part-time work and may even help with resume writing.

Websites popular with college students looking for work during the academic year include QuadJobs , WayUp , and Upwork .

Students looking for part-time jobs may want to consider the following types:

Student Research Positions

Bolster your resume while working as a lab assistant or teaching assistant. Some colleges and universities may have research positions available for undergraduate students.

Jobs with Tuition Reimbursement

Some companies may offer tuition reimbursement or support to part-time employees. This means you could earn money to boost your income and also gain some extra funding to pay for your tuition. For example, at Starbucks, part-time employees may qualify for the company’s education assistance program.

Applying for Internships

Internships can be a good way to help you gain work experience and round out your resume. While some internships are unpaid, if you can secure a paid internship it could allow you to earn some extra money and build skills directly applicable to your future career.

6. Applying for a Tax Credit

Qualifying students — or their parents, if the student is a dependent — may claim the American Opportunity Tax Credit (AOTC) for up to $2,500 for each eligible child attending college. To be eligible, the student must:

•   be enrolled in a degree program at least half time for one academic period.

•   have not finished the first four years of higher education at the beginning of the tax year.

•   have not claimed the AOTC (or the former Hope credit) for more than four tax years.

•   have not had a felony drug conviction at the end of the tax year.

Another tax credit, the Lifetime Learning Credit (LLC) , is also available for qualifying students, but cannot be claimed for the same student on an individual tax return. The maximum benefit of the LLC is $2,000 per tax return, and there is no limit on the number of tax years the credit can be claimed.

Requirements for either of these tax credits may change from year to year, so it’s recommended to check the most recent information before claiming the credit.

7. Federal Student Loans

The U.S. The Department of Education oversees the Federal Direct Loan Program which offers a few different types of student loans. Undergraduate students may qualify for subsidized or unsubsidized loans.

Subsidized loans are awarded based on financial need. The interest accrued on a subsidized loan is covered by the Department of Education while the borrower is enrolled at least half-time, during the grace period, and during periods of deferment.

Unsubsidized loans don’t have a financial need requirement, and borrowers are responsible for paying the interest on an unsubsidized loan once it’s disbursed.

Parents of undergraduate students or graduate students may also qualify for Direct PLUS Loans. Unlike other types of federal loans, a credit check is required for a Direct PLUS Loan.

8. Work-Study

Some students may have been awarded Federal Work-Study as part of their federal student financial aid package. This program is administered by individual colleges or universities, so check with the financial aid office to see if the school participates in the program.

If you are awarded work-study, you’ll still need to find a job that qualifies for the program. Many schools will run an on-campus job database for this sort of thing. Based on your financial aid award, you’ll be allowed to work a certain number of hours each week.

9. Private Student Loans

If you aren’t awarded a scholarship or grant and have exhausted your federal loan options, there are a variety of private student loans you can apply for to help pay for college.

Private loans are offered by banks, credit unions, and other financial institutions. They are not need-based or subsidized, and the lender will often review your credit score among other financial factors. In some cases, you may need to add a cosigner to your application to be approved.

Interest rates and terms vary from lender to lender, so compare loan options before committing.

10. Use Your Savings

If you’re lucky enough to have money saved away for college, put it to work! Some students may have a 529 savings plan set up in their name. A 529 savings plan is a dedicated college fund that offers certain tax advantages. Money contributed to the plan is invested and can be withdrawn tax-free if it is used for qualified education expenses.

Recommended: Guide to Paying for College for Parents

Using money saved up could help you take on less student loans or make it so you can work fewer hours at a part-time gig.

11. Income-Share Agreements

Income share agreements are made between a student and the school they attend. The college or university lends the student money required to pay for their educational costs, and in exchange the student agrees to pay a share of their future earnings for a fixed amount of time after graduation.

Unlike a student loan where the amount you repay is determined by the interest rate on the loan, the amount you repay for an income share agreement can fluctuate based on how much you earn after you graduate.

Income share agreements can be helpful for students who have exhausted their federal loan options. A potential negative is that students who are high-earners after graduation may end up repaying more than they would if they had borrowed a more traditional loan.

The Takeaway

One place to start figuring out how to pay for college is by speaking with a guidance counselor and doing some research about financing college costs. Understanding the options available can help you and your family figure out what types of funding work best for your situation. Students can use a combination of funding — from student loans to grants and scholarships — to pay for their education.

No-fee private student loans from SoFi may be an option to help students pay for school after all federal student aid options have been exhausted. The application process can be completed easily online and you can see rates and terms in just a few minutes. Flexible repayment plans allow borrowers to select the option that best suits their budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

FAQ

Does anyone actually pay full price for college?

Some students pay the full sticker price for college. According to data from the National Center for Education Statistics, from 2009 to 2020, nearly 87% of first-time degree seeking students at four year universities received some form of financial aid.

Can you borrow from a 401(k) to pay for your child’s college?

It is possible to borrow a loan against your 401(k) to pay for your child’s college education. However, when you borrow against your 401(k), it can potentially limit growth in your retirement fund. There are also Parent PLUS Loans available from the federal government or private student loans for parents that could be considered to help pay for your child’s college education without requiring you to withdraw from or borrow against your 401(k). Consider speaking with a qualified financial professional for personalized advice.

Do student loans go away after 7 years or a set amount of time?

Repayment terms for federal student loans range from 10 to 25 years. Private student loan repayment terms may vary by lender.

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

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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.

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.

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.

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

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If you’re cash poor and home equity rich, a cash-out refinance could be the ticket to funding home improvements, consolidating debt, or helping with any other need. With this type of refinancing, you take out a new mortgage for a larger amount than what you have left on your current mortgage and receive the excess amount as cash.

However, getting a mortgage with a cash-out isn’t always the best route to take when you need extra money. Read on for a closer look at this form of home refinancing, including how it works, how much cash you can get, its pros and cons, and alternatives to consider.

What Is a Cash-Out Refinance?

A cash-out refinance involves taking out a new mortgage loan that will allow you to pay off your old mortgage plus receive a lump sum of cash.

Like other types of refinancing, you end up with a new mortgage which may have different rates and a longer or shorter term, as well as a new payment amortization schedule (which shows your monthly payments for the life of the loan).

The cash amount you can get is based on your home equity, or how much your home is worth compared to how much you owe. You can use the cash you receive for virtually any purpose, such as home remodeling, consolidating high-interest debt, or other financial needs.

💡 Quick tip: Thinking of using a mortgage broker? That person will try to help you save money by finding the best loan offers you are eligible for. But if you deal directly with a mortgage lender, you won’t have to pay a mortgage broker’s commission, which is usually based on the mortgage amount.

How Does a Cash-Out Refinance Work?

Just like a traditional refinance, a cash-out refinance involves replacing your existing loan with a new one, ideally with a lower interest rate, shorter term, or both.

The difference is that with a cash-out refinance, you also withdraw a portion of your home’s equity in a lump sum. The lender adds that amount to the outstanding balance on your current mortgage to determine your new loan balance.

Refinancing with a cash-out typically requires a home appraisal, which will determine your home’s current market value. Often lenders will allow you to borrow up to 80% of your home’s value, including both the existing loan balance and the amount you want to take out in the form of cash.

However, there are exceptions. Cash-out refinance loans backed by the Federal Housing Administration (FHA) may allow you to borrow as much as 85% of the value of your home, while those guaranteed by the U.S. Department of Veterans Affairs (VA) may let you borrow up to 100% of your home’s value.

Cash-out refinances typically come with closing costs, which can be 2% to 6% of the loan amount. If you don’t finance these costs with the new loan, you’ll need to subtract these costs from the cash you end up with.

💡 Quick tip: Using the money you get from a cash-out refi for a home renovation can help rebuild the equity you’re taking out. Plus, you may be able to deduct the additional interest payments on your taxes.

Example of Cash-Out Refinancing

Let’s say your mortgage balance is $100,000 and your home is currently worth $300,000. This means you have $200,000 in home equity.

If you decide to get a cash-out refinance, the lender may give you 80% of the value of your home, which would be a total mortgage amount of $240,000 ($300,000 x 0.80).

From that $240,000 loan, you’ll have to pay off what you still owe on your home ($100,000), that leaves you with $140,000 (minus closing costs) you could potentially get as an get as cash. The actual amount you qualify for can vary depending on the lender, your creditworthiness, and other factors.

Common Uses of Cash-Out Refinancing

People use a cash-out refinance for a variety of purposes. These include:

•   A home improvement project (such as a kitchen remodel, a replacement HVAC system, or a new patio deck

•   Adding an accessory dwelling unit (ADU) to your property

•   Consolidating and paying off high-interest credit card debt

•   Buying a vacation home

•   Emergency expenses, such as an unexpected hospital stay or unplanned car repairs

•   Education expenses, such as college tuition

Qualifying for a Cash-Out Refinance

Here’s a look at some of the typical criteria to qualify for a cash-out refinance.

•  Credit score Lenders typically require a minimum score of 620 for a cash-out refinance.

•  DTI ratio Lenders will likely also consider your debt-to-income (DTI) ratio — which compares your monthly debt payments to monthly gross monthly income — to gauge whether you can take on additional debt. For a cash-out refinance, many lenders require a DTI no higher than 43%.

•  Sufficient equity You typically need to be able to maintain at least 20% percent equity after the cash-out refinance. This cushion also benefits you as a borrower — if the market changes and your home loses value, you don’t want to end up underwater on your mortgage.

•  Length of ownership You typically need to have owned your home for at least six months to get a cash-out refinance.

Tax Considerations

The money you get from your cash-out refinance is not considered taxable income. Also, If you use the funds you receive to buy, build, or substantially improve your home, you may be able to deduct the interest you pay on the cash portion from your income when you file your tax return every year (if you itemize deductions). If you use the funds from a cash-out refinance for other purposes, such as paying off high-interest credit card debt or covering the cost of college tuition, however, the interest paid on the cash-out portion of your new loan isn’t deductible. However, the existing mortgage balance is (up to certain limits). You’ll want to check with a tax professional for details on how a cash-out refi may impact your taxes.

Cash-Out Refi vs Home Equity Loan or HELOC

If you’re looking to access a lump sum of cash to consolidate debt or to cover a large expense, a cash-out refinance isn’t your only option. Here are some others you may want to consider.

Home Equity Line of Credit

A home equity line of credit (HELOC) is a revolving line of credit that works in a similar way to a credit card — you borrow what you need when you need it and only pay interest on what you borrow. Because a HELOC is secured by the equity you have in your home, however, it usually offers a higher credit limit and lower interest rate than a credit card.

HELOCs generally have a variable interest rate and an initial draw period, which can last as long as 10 years. During that time, you make interest-only payments. After the draw period ends, the credit line closes and payments with principal and interest begin. Keep in mind that HELOC payments are in addition to your current mortgage (if you have one), since the HELOC doesn’t replace your mortgage.

Home Equity Loan

A home equity loan allows you to borrow a lump sum of money at a fixed interest rate you then repay by making fixed payments over a set term, often five to 30 years. Interest rates tend to be higher than for a cash-out refinance.

As with a HELOC, taking out a home equity loan means you will be making two monthly home loan payments: one for your original mortgage and one for your new equity loan. A cash-out refinance, on the other hand, replaces your existing mortgage with a new one, resetting your mortgage term in the process.

Personal Loan

A personal loan provides you with a lump sum of money, which you can use for virtually any purpose. The loans typically come with a fixed interest rate and involve making fixed payments over a set term, typically one to five years. Unlike home equity loans, HELOCs, and cash-out refinances, these loans are typically unsecured, meaning you don’t use your home or any other asset as collateral for the loan. Personal loans usually come with higher interest rates than loans that are secured by collateral.

Pros of Cash-Out Refinancing

•  A lower mortgage interest rate With a cash-out refinance, you might be able to swap out a higher original interest rate for a lower one.

•  Lower borrowing costs A cash-out refinance can be less expensive than other types of financing, such as personal loans or credit cards.

•  May build credit If you use a cash-out refinance to pay off high-interest credit card debt, it could reduce your credit utilization (how much of your available credit you are using), a significant factor in your credit score.

•  Potential tax deduction If you use the funds for qualified home improvements, you may be able to deduct the interest on the loan when you file your taxes.

Cons of Cash-Out Refinancing

•  Higher cost than a standard refinance Because a cash-out refinance leads to less equity in your home (which poses added risk to a lender), the interest rate, fees, and closing costs are often higher than they are with a regular refinance.

•  Mortgage insurance If you take out more than 80% of your home’s equity, you will likely need to purchase private mortgage insurance (PMI).

•  Longer debt repayment If you use a cash-out refinance to pay off high-interest debts, you may end up paying off those debts for a longer period of time, potentially decades. While this can lower your monthly payment, it can mean paying more in total interest than you would have originally.

•  Foreclosure risk If you borrow more than you can afford to pay back with a cash-out refinance, you risk losing your home to foreclosure.

Is a Cash-Out Refi Right for You?

If you need access to a lump sum of cash to make home improvements or for another expense, and have been thinking about refinancing your mortgage, a cash-out refinance might be a smart move. Due to the collateral involved in a cash-out refinance (your home), rates can be lower than other types of financing. And, unlike a home equity loan or HELOC, you’ll have one, rather than two payments to make.

Just keep in mind that, as with any type of refinance, a cash-out refi means getting a new loan with different rates and terms than your current mortgage, as well as a new payment schedule.

Turn your home equity into cash with a cash-out refi. Pay down high-interest debt, or increase your home’s value with a remodel. Get your rate in a matter of minutes, without affecting your credit score.*

Our Mortgage Loan Officers are ready to guide you through the cash-out refinance process step by step.

FAQ

Are there limitations on what the cash in a cash-out refinance can be used for?

No, you can use the cash from a cash-out refinance for anything you like. Ideally, you’ll want to use it for a project that will ultimately improve your financial situation, such as improvements to your home.

How much can you cash out with a cash-out refinance?

Often lenders will allow you to borrow up to 80% of your home’s value, including both the existing loan balance and the amount you want to take out in the form of cash. However, exactly how much you can cash out will depend on your income and credit history. Also, you typically need to be able to maintain at least 20% percent equity in your home after the cash-out refinance.

Does a borrower’s credit score affect how much they can cash out?

Yes. Lenders will typically look at your credit score, as well as other factors, to determine how large a loan they will offer you for cash-out refinance, and at what interest rate. Generally, you need a minimum score of 620 for a cash-out refinance.

Does a cash-out refi hurt your credit?

A cash-out refinance can affect your credit score in several ways, though most of them are minor.

For one, applying for the loan will trigger a hard pull, which can result in a slight, temporary, drop in your credit score. Replacing your old mortgage with a new mortgage will also lower the average age of your credit accounts, which could potentially have a small, negative impact on your score.

However, if you use a cash-out refinance to pay off debt, you might see a boost to your credit score if your credit utilization ratio drops. Credit utilization, or how much you’re borrowing compared to what’s available to you, is a critical factor in your score.

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

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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

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

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.

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

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More Americans are choosing to leave the hubbub of big cities in order to move to smaller towns, according to multiple studies. Reasons include a desire for a less stressful environment, more affordable housing and lower cost of living, and a shorter commute.

Thousands of smaller U.S. cities offer all of the above and more. But which one to choose? Below you’ll find 12 prime candidates, drawn from public data and our own personal favorites.

What Is Considered a Small City?

According to the U.S. Census Bureau, “urban” areas have at least 5,000 people. A midsize city has a population of 100,000 to 250,000, and a large city counts more than 250,000 inhabitants.

Our list includes small cities with a population of 5,000 to 100,000 residents.

Why People Choose to Live in a Small City

People find life in a small city appealing for a variety of reasons. If you’re coming from a bigger city, a less populated one often means reduced traffic, noise, crowds, and pollution. You may see lower housing costs, or find you get more space and amenities for your buck. The overall cost of living also tends to be more affordable, given lower prices for groceries, gas, utilities, and dining out. Lower sales and property taxes can also be a factor.

Smaller cities can be much easier to navigate. For families, the public school system may rank higher and be less competitive (no more stressing out trying to get your kid into pre-K). Smaller populations may also result in tight communities, where residents feel safe and welcome.

Living in a smaller city can be more manageable for older adults especially, providing a peaceful and reassuring place to retire. Some retirees for whom taxes are a prime concern gravitate to small towns in states with lower taxes on retirement savings.

Recommended: Price-to-Rent Ratio in 52 Cities

Pros and Cons of Living in a Small City vs a Big City

If you’re not sure whether a small city is better for you, here are some pros and cons of each. Note that some factors — such as large populations of young singles or a slower pace — may be pros or cons, depending on your demographic.

Pros of a Small City	Cons of a Small City
Lower cost of living	Fewer employment opportunities
Slower pace	Limited entertainment and culture
Less crowded	Too sparsely populated
More indoor and outdoor space	Less access to medical care and major airports
Reduced crime	Less diversity
Larger populations of families and retirees	More college students, recent grads, and young singles
Quieter and cleaner, with less pollution	Little to no public transportation

Traditionally, many people migrate to big cities to establish themselves professionally, since small cities tend to provide fewer employment opportunities. That may be changing due to the rise of remote work.

Pros of a Big City	Cons of a Big City
Personal autos may be optional	Public transportation can be unreliable or unpleasant
Access to arts, culture, entertainment, and sporting events	Higher local taxes and cost of living
Larger job market	More competitive employment standards
More diverse population	Potentially overcrowded
More social opportunities for singles, younger people, and couples without children	Higher crime rate
Access to medical care and major airports	Streets can be dirty, with greater noise and pollution

5 Tips for Living in a Small City

Whether you’re moving from a rural area, the suburbs, or a large U.S. city, a small city can take some getting used to. Here are five suggestions on how to find your way as the new kid in town:

•   Get to know the locals. They know the best places to go, from basic services to restaurants and cultural venues. Plus, they can tell you how to get there, including shortcuts, streets to stroll, and areas to avoid. And of course, meeting people helps you feel a part of the community.

•   Allow time for adjustment. A small city may not have all the amenities you had in your previous hometown. But given time, you’ll find that for every perk you give up, you’ll discover at least one new advantage.

•   Seek out like-minded people. Even in cities where the bulk of the populace doesn’t share your political or social perspectives, you can still find people who do. It might just take a little effort. Volunteering, taking a class, or hanging out in a particular neighborhood can foster new friendships.

•   Rejigger your budget. If you’re paying less than you used to for housing and essentials, don’t fritter away that extra cash. Download a good spending app and channel that disposable income toward emergency savings, retirement, or other financial goals.

•   Seek out hidden treasures. Smaller cities tend to have more mom-and-pops and independent businesses, which can be a nice change from national chains. And small cities are often rich in green spaces, hiking and biking trails, and local festivals. Make time to wander and discover all that your new home has to offer.

12 Best Small Cities to Live in the USA

To compile our list, we reviewed numerous roundups of the best small cities to live in the U.S., along with government statistics and personal anecdotes. Read on for our recommendations.

1. Tupelo, Mississippi

•   Population: 37,748

•   Median household income: $58,887

•   Median home value: $158,800

•   Median monthly rent: $825

•   Mean travel time to work: 19 minutes

•   Cost of living: 19% lower than the national average

•   Crime statistics: 1 in 649 chance of being a victim of a violent crime, 1 in 96 chance of being a victim of a property crime

Located in the northeastern part of Mississippi, 90 miles from Memphis, Tupelo offers big-city perks in a small town setting. This racially diverse area is often cited as one of the best places for young professionals, families, and retirees to live. That’s due in part to a highly rated public school system, lower crime rate, low cost of living, and pleasant year-round weather.

Each year, Tupelo attracts thousands of visitors to its museums and festivals, including the Gumtree Museum of Art and the Elvis Presley Birthplace & Museum. Tupelo celebrates its native son with an annual Elvis festival in June, and there’s a Chili fest in October.

Tupelo offers a varied culinary scene (lots of authentic BBQ and southern comfort food), plus a vibrant downtown that’s been designated a “Great American Main Street” by MainStreet.org.

2. Greenville, South Carolina

•   Population: 72,310

•   Median household income: $60,388

•   Median home value: $349,300

•   Median monthly rent: $1,078

•   Mean travel time to work: 20 minutes

•   Cost of living: 5.4% lower than the national average

•   Crime rate: 1 in 141 chance of becoming a victim of a violent crime, 1 in 27 chance of becoming a victim of a property crime

If you’re looking for a picturesque setting worthy of a postcard, Greenville may be the place for you. Situated in the northwest part of the state about halfway between Charlotte, North Carolina, and Atlanta, Greenville is a stone’s throw from the Blue Ridge Mountains, lakes, rivers, and more than 50 waterfalls.

Greenville’s population is diverse, and the city is well-suited to families, retirees, and singles. Parents will find it appealing because of a highly rated public school system and myriad family friendly activities including Falls Park on the Reedy River, Greenville Zoo, and the Children’s Museum of the Upstate.

For older adults, Greenville is often recommended as an ideal place to settle. The pace of living is slower, the weather is mild, and South Carolina is one of the best states to retire in when it comes to taxes.

Like many smaller towns and cities, Greenville has a dedicated Main Street and lively downtown area catering to pedestrians, with wide sidewalks, outdoor plazas, and al fresco dining. “Mice on Main” is a series of nine life-size bronze sculptures scattered up and down the main drag, providing a fun scavenger hunt for all ages.

Foodies can enjoy an array of international and regional specialties, including a bustling weekend farmer’s market and several food trucks. More than 20 local breweries also serve as music venues and community centers.

The city has a rich African-American heritage, with 13 cultural sites across the greater Greenville area. Residents and tourists can catch the city’s minor league baseball team, the Greenville Drive, the Swamp Rabbits hockey team, plus professional men’s and women’s soccer teams.

Expect mild, comfortable temperatures during the fall, winter, and spring months in Greenville, but the summers can be hot and muggy.

3. Ames, Iowa

•   Population: 66,950

•   Median household income: $54,339

•   Median home value: $222,900

•   Median monthly rent: $972

•   Mean travel time to work: 17 minutes

•   Cost of living: 5% lower than the national average

•   Crime rate: 1 in 488 chance of becoming a victim of a violent crime, 1 in 65 chance of becoming a victim of a property crime

Home to Iowa University, Ames is a bustling college town in the center state, north of Des Moines. This energetic city is frequently listed as one of the best places to live in the country and one of the best college towns in the U.S.

Schools here win national recognition, and the cost of living is reasonable. If you’re looking for racial and ethnic diversity, Ames comes up short, with 80% of the population white. The city also skews young, with many college kids. While the city might not suit all retirees, families will find many parks, with opportunities for biking, golf, and an indoor ice arena.

Ames has an old town historic district and a downtown full of shopping, dining, art galleries, and live music. The Iowa summers can be warm, humid, and often rainy, while the winter brings cold temperatures and often snow. But if you enjoy the heartland, Ames is a charming place to consider.

4. Fredericksburg, Texas

•   Population: 11,257

•   Median household income: $54,771

•   Median home value: $317,600

•   Median monthly rent: $1,064

•   Mean travel time to work: 17 minutes

•   Cost of living: close to the national average

•   Crime rate: 1 in 738 chance of being a victim of a violent crime; 1 in 92 chance of being a victim of a property crime

Fredericksburg is located in the middle of the state, in Texas Hill Country. It’s often voted one of the best places to retire, with retirees making up about 31% of the population. Older adults are drawn to the warm weather, low property taxes, and affordable housing, and low crime.

Fredericksburg was founded by German immigrants back in 1846, and the city retains a strong German connection. About 21% of the population is Hispanic or Latino, 6% Native American, and 5.4% encompassing Black, Asian, and mixed race.

Tourism makes up a good part of the local economy, along with the medical and agricultural industries. A staggering 400 festivals take place each a year, including a three-day Oktoberfest. Visitors will find a raucous live music scene, numerous breweries and distilleries, and more than 50 wineries. In fact, Fredericksburg is the most popular wine-tasting destination in the state of Texas.

The Fredericksburg public school system is highly rated, and the many kid-friendly activities make it a great place to raise a family. Things to do include hiking trails and parks, and a Main Street featuring art galleries, restaurants, ice cream parlors, and toy stores. Younger adults and couples can take advantage of the many dance venues and bars.

5. Bloomington, Indiana

•   Population: 79,107

•   Median household income: $41,995

•   Median Home value: $231,500

•   Median monthly rent: $988

•   Mean travel time to work: 17 minutes

•   Cost of living: close to the national average

•   Crime rate: 1 in 167 chance of becoming a victim of a violent crime, 1 in 43 chance of becoming a victim of a property crime

Bloomington is the home of Indiana University and their legendary Hoosiers basketball and football teams. Often called B-Town, Bloomington (pop. 80,000) is frequently cited as one of the best places to live in Indiana and in the U.S for its lively, bohemian vibe.

B-Town offers a walkable downtown area where you’ll find restaurants, bars, shops, museums, art galleries, and venues for live music and comedy. Bloomington also features many parks, forests, lakes, and other spots to commune with nature.

Much of life in Bloomington revolves around the university and its large student body, so retirees may not find it ideal. The city is often voted a great place to raise a family and gets high marks for its public schools. The cost of living is low, and the city is considered relatively safe.

Indiana winters can be very cold and snowy, and summers are warm, wet, and humid. It’s cloudy a good part of the year too. Bloomington is flush with youthful energy and rife with perks, making it a great Midwestern city to hang your hat.

6. Cedar City, Utah

•   Population: 38,692

•   Median household income: $55,022

•   Median Home value: $245,700

•   Median monthly rent: $861

•   Mean travel time to work: 14 minutes

•   Cost of living: 1.5% higher than the national average

•   Crime rate: 1 in 716 chance of becoming a victim of a violent crime, 1 in 86 chance of becoming a victim of a property crime

Cedar City is located in the southwestern part of Utah, situated 5,800 feet above sea level. To the east you’ll find 10,000 foot mountains, and to the west, a large desert. If you’re an outdoors enthusiast, look no further than Cedar City for fishing, rock climbing, skiing, kayaking, and star gazing. Often called the gateway to Utah’s parks, Cedar City offers easy access to the spectacular Zion and Bryce Canyon National Parks.

Besides the amazing natural landscapes of red hills and alpine mountains, Cedar City plays host to a number of arts festivals, earning it the nickname of Festival City USA. Some of these events include the popular annual Utah Shakespeare Festival, the Neil Simon Festival, the Groovefest American Music Festival, and the International Red Rock Film Festival.

Cedar City provides a dense suburban atmosphere that primarily attracts young professionals and families, due to its lower cost of living and above average public schools. The city is home to the small Southern Utah University, and the city’s economy benefits from the school, along with tourism, agriculture, some mining, and industrial complexes.

7. Ithaca, New York

•   Population: 32,870

•   Median household income: $40,973

•   Median Home value: $282,000

•   Median monthly rent: $1,248

•   Mean travel time to work: 18 minutes

•   Cost of living: 2.7 % higher than national average

•   Crime rate: Chances of becoming a victim of a violent crime is 1 in 327; 1 in 25 of being the victim of a property crime

Ithaca is often identified with its two colleges, Ithaca College and Cornell University. The busy college city is situated on Cayuga Lake, the second largest of the Finger Lakes. The region is also known for its gorges and numerous picturesque waterfalls.

Cornell is Ithaca’s largest employer, attracting educators and students from all over. While diverse, more than half the population is in the 18-24 age group. Retirees may prefer the summer months in Ithaca, when the universities are on break and the weather is mild. Winters in Ithaca can be extremely cold and snowy.

There’s no shortage of things to do in Ithaca for children, teens, and adults. Kid-friendly attractions include many area state parks, the “Sciencenter,” Ithaca Children’s Garden, and the Museum of the Earth. Everyone can enjoy strolling on Ithaca Commons, a pedestrian walkway offering a vast array of restaurants, shops, and events. Autumn brings the Downtown Ithaca Apple Harvest Festival, followed by the Downtown Ithaca Chili Cook-Off in winter.

Downtown Ithaca offers an immersive street-art experience, with murals, sculptures, and a distinctly hippie vibe similar to Woodstock. Entertainment covers the gamut, with theater, film, and music. The State Theatre of Ithaca is a 1,600 seat venue featuring year-round concerts, comedy shows, readings, dance performances, and more.

Ithaca is considered safe, offering a lower cost of living, highly rated public schools, an inclusive sensibility, and lots of outdoor recreational options against beautiful scenery.

8. Bozeman, Montana

•   Population: 56,123

•   Median household income: $67,354

•   Median home value: $466,400

•   Median monthly rent: $1,229

•   Mean travel time to work: 15 minutes

•   Cost of living: 2% higher than the national average

•   Crime rate: 1 in 303 chance of becoming a victim of a violent crime; 1 in 76 chance of becoming a victim of a property crime

Surrounded by the Rocky Mountains, the southwestern Montana city of Bozeman has become an increasingly desirable place to live. In fact, The Wall Street Journal dubbed Bozeman as “Boz Angeles” and reports real estate is booming with out-of-town professionals flocking to the city. Montana State University and Gallatin College are both located here.

One big draw for families is Bozeman’s excellent education system, especially when it comes to pre-K choices, which have grown significantly over the last decade. Kid-friendly activities include the Museum of the Rockies, the JumpTime trampoline park, and Gallatin Regional Park, or “Dinosaur Park,”where kids can swim, climb boulders and sled in the winter.

Bozeman is an outdoor lover’s paradise. You can enjoy skiing, fly fishing, rafting, biking, hiking, and indulging in Bozeman’s natural, rejuvenating, hot springs. You can make a day trip to Yellowstone National Park, 80 miles south of Bozeman.

Like many other small cities, Bozeman has a downtown and a Main Street, where you’ll find casual and fine dining spots, art galleries, and retail shops. Bozeman offers a range of arts and entertainment, such as a multiplex movie theater, the Montana Ballet Company, Bozeman Symphony, and the Ellen Theater, a performing arts venue.

The cost of living in Bozeman is a bit higher than the national average, especially housing. Summers are warm and the winters cold, with substantial snowfall, which may not make it ideal for retirees. Bozeman also doesn’t offer much in the way of racial and ethnic diversity, with whites making up 91% of the population.

Overall, for people looking for a safe family-friendly city with lots of vitality and a beautiful natural setting, Bozeman delivers.

9. Santa Fe, NM

•   Population: 89,008

•   Median household income: $33,297

•   Median home value: $312,300

•   Median monthly rent: $1,199

•   Mean travel time to work: 20 minutes

•   Cost of living: 3.6% higher than national average

•   Crime rate: 1 in 286 chance of being a victim of a violent crime, 1 in 29 chance of being a victim of property crime

The capital city of New Mexico, Santa Fe is a popular place to visit, attracting about 2 million tourists a year. It’s also frequently touted as one of the best cities to live, especially for those approaching retirement. In fact, 24% of the city’s population is 65 and older.

Sante Fe promotes a laid-back lifestyle. Because of its slower pace, the city skews suburban and doesn’t feature a lot of nightlife. It does provide a diverse, culturally rich scene with a strong artistic and intellectual community. Visitors include authors, scholars, and global thought leaders giving lectures on a variety of topics. Entertainment offerings include productions by the Santa Fe Opera, Sante Fe Symphony, the local Santa Fe Playhouse theater company, and live music at multiple venues.

People looking to move to Sante Fe to bring up children can count on an above average public school system. Some people find Santa Fe a relatively expensive place to live, especially when it comes to housing. But the city has a relatively low crime rate and dry climate. Summers are warm to hot, with temps typically staying under 90 degrees, while winters are cold and snowy.

One thing to keep in mind, Santa Fe sits at 7,000 feet above sea level, so it can take a couple of days to adjust. For a small city, Sante Fe is rich with culture, history, the arts, and great Southwestern cuisine. If you crave peace and quiet set against mountain scenery, Sante Fe might be the perfect place for you.

10. Bellingham, Washington

•   Population: 93,896

•   Median household income: $59,163

•   Median home value: $440,300

•   Median monthly rent: $1,222

•   Mean travel time to work: 18 minutes

•   Cost of living: 11% higher than national average

•   Crime: 1 in 234 chance of being a victim of a violent crime; 1 in 19 chance of being a victim of a property crime

Looking for a home in the Pacific Northwest that’s not Seattle or Portland? Consider Bellingham. This coastal city in northwestern Washington serves up an expansive view of the Puget Sound. The area is known for its clean air, eco-friendly attitudes, and chill ambiance. Bellingham is positioned halfway between Vancouver, Canada, and Seattle, with easy access to the San Juan Islands and the Mount Baker and North Cascade mountain ranges.

Outdoor enthusiasts enjoy hiking, biking trails, fishing, boating, kayaking, and whale watching. Numerous beaches offer visitors a variety of landscapes, from hidden white sands to rocky shorelines and wetlands.

Families with children can rest assured the Bellingham public school system is highly rated. There are lots of kid-centric things to do, including Boulevard Park, where kids can frolic in a pirate-themed playground, and the Family Interactive Gallery at the Whatcom Museum.

Bellingham’s active Downtown area offers shopping, dining, art, and entertainment. You’ll find public art exhibitions, a classic bowling alley, theaters, performing arts venues, museums, and the Pickford Film Center, where you can catch independent and classic movies.

Bellingham has a strong and growing retiree population, along with college students from Western Washington University, and many young professionals. At nearly 82% white, Bellingham isn’t particularly diverse.

The area enjoys comfortable summers with temperatures rarely exceeding 82 degrees. However, winters bring overcast skies, cold, and rain. It’s a relatively safe city though it can be more expensive than others of its size. But if you want a small, seaside city with plenty of amenities, Bellingham lives up to its hype.

11. Portland, Maine

•   Population: 68,424

•   Median household income: $66,109

•   Median Home value: $341,700

•   Median monthly rent: $1,278

•   Mean travel time to work: 20 minutes

•   Cost of living: 19.8% higher than the national average

•   Crime: 1 in 449 chance of becoming a victim of a violent crime; 1 in 57 chance of becoming a victim of a property crime

It’s understandable why Portland is frequently recommended as one of the best small cities in the U.S. Located on the Casco Bay shoreline, this small New England city is known for its connection to the sea, with its many lighthouses, rocky beaches, and sublime seafood.

People of all ages enjoy visiting and living in Maine’s largest city. Portland is home to the University of Southern Maine, and many former students make the city their home. Portland is considered one of the healthiest places for older adults, due to access to the outdoors and many recreational activities. Portland’s public school system is highly rated. The area is also more racially diverse than many other small cities, and crime is low.

There’s an abundance of room to stretch out in Portland, with more than 7,000 acres of public parks and open space. Fishing, sailing, and kayaking are popular ways to enjoy the area’s natural resources.

The quaint historic district of Old Port and the downtown area offer shopping, art galleries, restaurants, entertainment, and excellent people-watching. You can find plenty of cultural sites downtown too, including theater, movies, and live music. Many Portland locales cater to children, such as the beachfront amusement park Palace Playland and the Children’s Museum and Theater of Maine.

You’ll enjoy comfortable summers in Portland, but expect very cold, windy, and snowy winters. Portland can be the ideal spot if you love the Northeast, spending time outdoors, and living in a coastal town.

12. Burlington, Vermont

•   Population: 44,595

•   Median household income: $59,331

•   Median Home value: $338,100

•   Median monthly rent: $1,381

•   Mean travel time to work: 19 minutes

•   Cost of living: 28% higher than the national average

•   Crime: 1 in 291 chance of becoming a victim of a violent crime, 1 in 27 chance of becoming a victim of a property crime,

Burlington is known for its warm and welcoming inhabitants, growing racial diversity (one in four people moving here is a person of color), and excellence in public school education. It’s also home to two institutes of higher education, the University of Vermont and Champlain College.

Ski resorts are a major draw, especially Stowe Mountain Resort and Cochran’s Ski Area. Burlington gets six feet of snow each year, making it a true winter wonderland. The summers are warm, and the change of seasons is visually dramatic.

Burlington has a flourishing arts and culture scene, with the city playing host to the annual Vermont International Film Festival, theatrical and musical productions at the Flynn Theater, and comedy shows at the Vermont Comedy Club.

Kids here are encouraged to stay active, with many opportunities for biking, hiking, sailing, and winter sports. Younger kids flock to Vermont Teddy Bear Factory, where they can shop for a handcrafted lovee.

The cost of living in Burlington can be challenging, and affordable housing hard to come by. But Vermont is one of the safest states to live in the U.S., making it a good option for well-off retirees who aren’t afraid of the snow.

The Takeaway

With thousands of small cities in the USA to choose from, naming even the top 100 would be quite a challenge. Our list of the 12 best small cities in the U.S. is based on safety, quality of education, arts and culture offerings, overall cost of living, and climate, among other factors. Whether you’re looking for a great place to raise kids or retire, we hope that one of our suggested small cities will pique your interest.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

What is the best small city to live in the United States?

No two small cities are alike, and the best small city for you depends on what you’re looking for. Generally, you want to find a safe, affordable city offering a vibrant cultural scene and opportunities for indoor and outdoor activities. We like Tupelo, MS; Cedar City, UT; and Greenville, SC, among others. But the best small city boils down to personal choice.

Where are some of the best small towns to live in?

Some of the best small towns — with populations under 5,000 — include Sedona, AZ; Carmel-by-the-Sea, CA; Mystic, CT; Gatlinburg, TN; and Telluride, CO.

What is the friendliest little town?

According to TravelAwait’s 2023 survey, Concordia, Kansas, is the friendliest small town in the U.S.

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Photo credit: iStock/kate_sept2004

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If you’re looking for a cheaper alternative to a traditional house, you might consider buying a mobile home. The price of a mobile home (also known as a manufactured home) is typically much lower than a standard single-family home. Plus, these homes aren’t necessarily temporary. These days, factory-made homes can be just as permanent as houses that are built on-site. They can also be customized in many of the same ways as a traditional home.

While mobile homes don’t always qualify for a traditional mortgage, there are several types of financing that can help make buying a factory-built home more affordable. Read on for a closer look at the process of buying — and financing — a mobile, manufactured, or modular home.

What is the Average Cost of a Mobile Home?

According to the Census Bureau’s February 2022 Manufactured Housing Survey, the average price of a new manufactured home is $128,100.

More specifically, the average price for a single-wide mobile home is $89,200 and average for a double-wide mobile home is $160,400.

However, mobile home prices can vary significantly by region. The highest prices tend to be in the Northeast, where the average cost of a new mobile home is $107,000 for a single-wide and $167,800 for a double-wide.

The lowest prices are typically in the South, where the average price for a single-wide is $88,200 and average cost of a double-wide is $157,900.

In the West, a single-wide mobile home averages $92,800 and a double-wide averages $170,000, while in the Midwest, a single-wide mobile home averages $85,300 and a double-wide averages $158,800.

Recommended: How to Budget for Buying A House

Differences Between a Mobile Home, Modular Home, and Manufactured Home

The terms mobile home, manufactured home, and modular home are often used interchangeably. While all three refer to homes built in a factory rather than on-site, there are some differences between them. Below, we break it down.

Mobile Home

A mobile home is a prefabricated home built on a permanent trailer chassis that was constructed prior to June 15, 1976. That is when the U.S. The Department of Housing and Urban Development (HUD) enacted the National Manufactured Housing Construction and Safety Standards Act. After that date, new safety standards went into effect, which led to a new designation for these homes.

Manufactured Home

Like a mobile home, a manufactured home is built almost exclusively in a factory rather than on-site. However, these homes were built after June 15, 1976, when HUD put new safety standards into effect for mobile homes and changed the name of these structures from “mobile” homes to “manufactured” homes.

Another difference between mobile and manufactured homes is that manufactured homes typically are not moved after assembly. That said, it is possible to move a manufactured home if it has a pier and beam foundation. Manufactured homes need to not only meet HUD standards but also local building standards for the communities where they will be located.

Recommended: How Much Does It Cost to Build a Manufactured Home?

Modular Homes

Like mobile and manufactured homes, modular homes are built in a factory and shipped to the land where they will be set up. However, modular homes are often delivered in two or more modules (hence the name) that are then put together on-site by a contractor.

Modular homes are not designed to be relocated and are placed on a permanent foundation. Once put together, these homes have a lot in common with on-site built homes. They may have a basement and/or crawlspace, come in a variety of layouts, and can be one or two stories.

Like manufactured homes, modular homes must adhere to local building codes.

💡 Quick Tip: Buying a home shouldn’t be aggravating. Online mortgage loan forms can make applying quick and simple.

Things To Consider When Buying a Mobile Home

To find the best mobile home for your needs, here are some things to keep in mind.

Location

As with any home purchase, location is key. You can install your mobile home on land you already own, or purchase land for your mobile home. In either case, you’ll want to make sure that local zoning regulations allow for the installation of mobile homes and that the local utilities are able to connect a mobile home.

Another location option is to rent a plot of land in a mobile home community. If you find a community you like, it’s a good idea to find out what their restrictions are for home size and features before you buy a mobile home.

Size

Mobile homes are usually classified by their width. A single-wide is slightly under 15 feet wide and around 70 feet long. A double-wide mobile home is usually the same length but double the width — around 30 feet wide.

Due to their long, narrow shape, single-wide homes have fewer floorplan options and can work best for individuals or couples. Double-wide homes offer more space, as well as design options, and can be ideal for larger families.

Keep in mind that larger homes will, of course, be more expensive and also require a larger lot.

New vs Used

These days, you find new manufactured homes with all kinds of bells and whistles, including vaulted ceilings, walk-in closets, and luxurious bathrooms. If you’re looking to save money, however, you might consider going with a used mobile home. Just keep in mind that a used home may show signs of wear and tear (depending on how well it was maintained) and that some mobile home sites don’t allow homes made before a certain date.

Financing a Mobile Home

Once you’ve decided on the type and size of mobile home you want to buy, it’s time to figure out how you are going to pay for it. While it can be harder to find a loan for a mobile home than a traditional home, there are still a number of options. Here are some to consider.

Fannie Mae

While not all lenders finance manufactured homes, some may offer Fannie Mae’s MH Advantage program. These loans come with terms of 30 years, competitive rates, and down payments as low as 3%.

However, they also come with strict qualification criteria: The manufactured home must be at least 12 feet wide, have a minimum of 600 square feet, and can’t be on leased land. The home also needs to have a driveway and a sidewalk that connects the driveway, carport, or detached garage.

Freddie Mac

Another option for manufactured home financing is the Freddie Mac Home Possible mortgage program. This program offers 15-, 20- and 30-year fixed-rate loans, as well as adjustable-rate mortgages. Like Fannie Mae, these loans typically come with low rates and down payments as low as 3%. Freddie Mac loans also have strict criteria for qualification: The home must be considered real property, have at least 400 square feet of living space, and be built on a permanent chassis.

FHA

The Federal Housing Administration (FHA), which offers loans for traditional homes with flexible credit and down payment requirements, also offers manufactured home loans called Title I and Title II loans.

You can use a Title I loan to buy a manufactured home (but not the land it sits on), provided that the property is your primary residence, is connected to utilities, and meets FHA guidelines. These loans typically come with terms up to 20 years and relatively low loan amounts.

Title II loans, by contrast, can be used to purchase both a manufactured home and the land it sits on together. However, the home must count as real property and have been built after 1976.

US Department of Veterans Affairs (VA)

If you’re a member of the military community, you may be able to qualify for a loan insured by the Department of Veterans Affairs (VA) to purchase a mobile or manufactured home. To qualify for a VA loan for a manufactured home, your home must be on a permanent foundation, meet HUD guidelines, and must be purchased with the land underneath it. These loans often offer 100% financing with no money down; terms can range from 20 to 25 years.

💡 Quick Tip: You never know when you might need funds for an unexpected repair or other big bill. So apply for a HELOC (a home equity line of credit) brokered bySoFi today: You’ll help ensure the money will be there when you need it, and at lower interest rates than with most credit cards.

Chattel Loans

A chattel loan is a loan designed to purchase different types of expensive personal property, such as cars, boats, and mobile homes. You don’t have to own the land your home will sit on to get a chattel loan, so this can be a good option if you plan to rent a space in a mobile home community. Some lenders also offer chattel loans that are insured by the FHA, VA, and the Rural Housing Service (RHS) through the U.S. Department of Agriculture.

Chattel loans typically have higher rates and shorter terms than traditional mortgages. Like a traditional mortgage, however, these loans hold the property being financed as collateral for the loan. That means that if you run into trouble making payments, the lender can seize and re-sell the mobile home.

Personal Loans

Since mobile homes generally cost far less than traditional homes, you may be able to finance your purchase through a personal loan.

Personal loans are typically unsecured loans with a fixed interest rate that can be used for virtually any purpose (including the purchase of a mobile home). These loans don’t have restrictions on how your mobile home is built, so you can likely qualify even if it’s fully movable and not attached to a permanent foundation. Also, personal loans don’t put your home at risk, and the application process and time to funding tends to be shorter than other types of mobile home loans. However, interest rates may be higher.

While some lenders offer maximum personal loans of $40,000 to $50,000, others will let you borrow $100,000 or more. If you can find a larger personal loan, it may be enough to finance a mobile, manufactured, or modular home.

Recommended: How Much Is a Down Payment on a House?

Getting Approved for a Personal Loan

If you’re thinking about applying for a mobile home loan, here are some steps that can help streamline the process.

1. Check Your Credit Reports

Whenever you apply for any type of financing, a lender will likely look at your credit history to help them determine how much they will lend to you and at what rate (or if they will lend to you at all). It’s wise to look at your three credit reports, see where you stand, and make sure there aren’t any mistakes or inaccuracies that could negatively affect your credit. You can get free copies of your credit reports from the three consumer bureaus — Equifax®, Experian®, and TransUnion® — at AnnualCreditReport.com.

2. Determine Whether You’re Buying Land and a Mobile Home

This will determine how much money you need to borrow, as well as what your financing options are. Some lenders will only offer mobile home financing if the home will be permanently set up on land that you own.

3. Save For a Down Payment

While it’s not always required, you may also want to think about saving for a down payment on your manufactured or mobile home.

4. Find the Right Lender

Interest rates can vary from one lender to the next, so it can definitely pay to shop around and compare offerings from banks, credit unions, and online lenders. Some lenders will allow you to “prequalify” for a loan with a soft credit check (which doesn’t impact your credit score). This will allow you to get an idea of the loan amount and rate you may be able to qualify for before you officially apply.

The Takeaway

While mobile and manufactured homes are typically more affordable than a traditional home, you may still need financing to cover the cost of the purchase. You may be able to get a loan from the same sources as traditional mortgages (such as FHA and VA loans). Other options include specialized manufactured home loans through Fannie Mae and Freddie Mac, chattel loans, and personal loans.

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.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Can you get a personal loan for a mobile home?

Yes, a personal loan can be used to buy a mobile, manufactured, or modular home. Applicants will need to meet qualification requirements of the lender they’re working with.

What is the maximum personal loan amount for a mobile home?

The maximum loan amount is dependent on the lender. Many have maximum loan amounts of $40,000 and $50,000 but some will offer up to $100,000. The amount you can borrow will also depend on your income, credit score, and other factors.

Where can I get a personal loan to buy a mobile home?

Traditional banks, credit unions, and online lenders may offer personal loans to buy a mobile or manufactured home.

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*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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

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