May
08
2026
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How Much Does Medical School Cost?

By | Debt Payoff, Fresh Out of School, Student Loans, student_loan | Comments Off on How Much Does Medical School Cost?

If you’re thinking about becoming a doctor and wondering, how much is medical school?, it’s a good idea to understand the total expense upfront. The average cost of medical school is $228,959 in total, according to the Education Data Initiative. The yearly cost is $59,720, and there’s an average increase of about $1,511 each year.

Seventy percent of medical students rely on student loans to help pay for the cost of medical school, and the average medical student graduates with just over $246,659 in total student loan debt (this includes debt from their undergraduate degree).

The average physician salary ranges from an average of $297,000 for primary care doctors to an average of $404,000 for specialists, with some specialties making close to $600,000 per year. While these numbers are well above the national average wage of $64,220 per year, paying for medical school and paying off medical school student loans is still no easy feat.

Key Points

•   The average total cost of medical school exceeds $228,950.

•   Student loans, scholarships, and grants, help students cover medical school expenses, with 70% of medical students borrowing loans.

•   Students who choose to pursue their degree by participating in a military physician program may get full funding for medical school with a service commitment.

•   Medical students can explore federal repayment plans and loan forgiveness options to help with their student loan debt.

•   Student loan consolidation and student loan refinancing are other methods medical students can consider to help manage their monthly student loan payments.

How to Pay for Medical School

With the average cost to become a doctor being well above six figures, affording their education is one of the biggest hurdles future medical students face. However, by being proactive about finding ways to pay for medical school, med students may be able to reduce their overall student debt.

Scholarships

Scholarships aren’t always easy to get at the graduate level, but it’s not impossible. Some schools offer merit-based scholarships to incoming medical students who show exceptional academic capabilities and have a unique life experience. Students can also look into more individualized scholarships geared toward their location, specific area of study, or previous work experience.

Scholarships are offered by colleges and universities, businesses, local organizations, churches, and more. While it may take some time to search for scholarships you qualify for, the end result could save you thousands in medical school tuition expenses.

Military Service

With the rising cost of medical school, some medical professionals choose to obtain their medical degree by participating in a military physician program. The qualifications and commitment for each program vary, and the separate branches of the military, including the Army National Guard and Navy Reserve, have different programs.

The two options for medical students in the military are the Health Professions Scholarship Program and Uniformed Services University of the Health Sciences. Both programs pay for the cost of medical school but require a service commitment once the student graduates.

Federal Financial Aid

The first step in getting federal student loans is to complete the Free Application for Federal Student Aid (FAFSA®). Students can check with the medical school they plan to attend to get filing date requirements and information on institutional financial aid (aid given by the school).

There are three types of federal student aid:

•   Grants: Grants, such as the Pell Grant, do not have to be paid back unless the student withdraws from school and owes a refund. Grants are needs-based and the maximum amount for the 2026-2027 academic school year is $7,395.

•   Work-Study: Federal work-study jobs are needs-based and help students earn money to pay for school through part-time employment. A bonus for medical students is that the work is often tied to community service or may be related to the student’s course of study, so this type of job may be more interesting and manageable than some others.

•   Federal Loans: A student who borrowed money as an undergraduate and demonstrated financial need may have been awarded a Federal Direct Subsidized Loan to help cover school costs. Those types of federal loans are not available to students in graduate and professional school programs.

However, medical students are eligible for other federal loans. They may receive a Direct Unsubsidized Loan, which is not based on financial need, or a Direct PLUS Loan, which will require a credit check.

Private Student Loans

Private student loans are usually used once federal student loans have been exhausted. Based on federal loan limits and the cost of medical schools, medical students may need additional funding to cover the gap. Certain private student loan lenders, including SoFi, allow borrowing up to 100% of the cost of attendance.

To get a private medical student loan with a competitive interest rate, a borrower generally needs to have a strong credit profile and a low debt-to-income (DTI) ratio. If a borrower doesn’t meet these qualifications, they may want to consider using a cosigner to get a better rate.

Have a Budget Plan in Place

Finding the right resources to pay for medical school is important, but learning to live within a budget can also help med students reduce their average medical school debt. Medical students who started with a spending plan as undergraduates can probably modify what they’ve already been doing. But, it’s never too late to start budgeting.

Once a student determines how much will be coming in from various sources (work, family, loans, scholarships, etc.), the next step is to list what will be going out for tuition and fees, housing, food, transportation, and other costs.

Next, it’s a good idea to see where you can cut back on spending. Is there inexpensive public transportation available? Will you have roommates to split rent and utility bills? Other ideas to reduce expenses include meal planning and cooking at home, canceling subscription services, and buying in bulk.

By living on a budget while in medical school, you may be able to take out less in loans, pay off your loans quicker, and set yourself up for financial success down the line.

How to Pay Off Medical School Loans

It’s no secret that physicians have the potential to earn a higher-than-average salary once they finish their residency and start practicing. Here are the average annual salaries of a variety of medical specialties:

•   Orthopedics: $564,000

•   Plastic Surgery: $544,000

•   Cardiology: $520,000

•   Radiology: $526,000

•   Anesthesiology: $501,000

•   General Surgery: $434,000

•   Emergency Medicine: $388,000

•   Ob/Gyn: $372,000

•   Family Medicine: $281,000

•   Pediatrics: $265,000

However, these amounts are not earned until both medical school and residency are completed. Luckily, there are medical school loan repayment strategies that can be used in the meantime.

It’s important to be aware that the total cost of medical school over time can be impacted by the loan repayment option a borrower chooses. Repayment plans with a longer loan term can result in the borrower paying more overall.

In addition, how interest accrues on certain repayment methods can also be a factor. For example, on federal income-driven repayment plans, unpaid interest may accrue. This can happen if your monthly payments are less than the interest that accrues between payments. In that case, because your payments don’t cover all of the interest, the unpaid interest will add up.

Loan Forgiveness and Repayment Through Service

There are several medical school loan forgiveness programs for doctors with student debt. Some are government-sponsored (federal and state), and some are private programs.

Benefits vary, but generally, participants provide service for two to four years (depending on the number of years they receive support) in exchange for repayment of student loans and possibly a stipend for living expenses.

One of the most common programs is the federal Public Service Loan Forgiveness (PSLF) program, which was designed to encourage students to enter full-time public service jobs.

While PSLF isn’t specifically aimed at medical students, it could help those who choose to work for a government or not-for-profit organization.

Eligible borrowers may receive forgiveness of the remaining balance of their federal direct loans after making 120 qualifying payments while employed by certain public service employers.

Another program is the National Health Service Corps (NHSC) Students to Service Loan Repayment Program, which provides loan repayment assistance in return for at least three years of service at an NHSC-approved site in a designated Health Professional Shortage Area. Students who are in their last year of medical or dental school may be eligible.

Federal Repayment Programs

There are currently several student loan repayment plans for federal student loan borrowers. Some are based on graduated payments that start low and increase over time, and they are designed to ensure the loans will be repaid after a designated period. Others, such as income-based repayment, are based on a percentage of discretionary income and family size, and the repayment term is generally 20 to 25 years on these plans.

However, for federal loans taken out on or after July 1, 2026, there will only be two repayment plans available: a revised 10-year Standard Repayment Plan and a new income-driven option called the Repayment Assistance Plan (RAP). The graduated and extended repayment plans will remain open to current borrowers but be phased out.

Federal Loan Consolidation

A Direct Consolidation Loan allows borrowers to combine multiple federal student loans into one loan with a single monthly payment.

Consolidation also can give borrowers access to available federal loan repayment plans and forgiveness programs. But the interest rate on the new loan will be a weighted average of prior loan rates (rounded up to the nearest one-eighth of a percentage), not necessarily a new lower rate.

If the monthly payment is lower, that may be because the loan term is longer, which means the borrower is paying more interest over time. Also, federal loan consolidation is only for federal loans and does not include private student loans.

Private Student Loan Refinancing

Another option borrowers may want to consider is to refinance medical loans. With student loan refinancing, one or more student loans are combined into one new private loan from a private lender with one new payment — ideally, with a lower interest rate.

Advantages of a student loan refinance include possible lower monthly payments and more favorable loan terms. You may even be able to refinance student loans during medical school, depending on your situation. However, borrowers should be aware that they will lose access to federal benefits if they refinance federal loans, including income-driven repayment plans and loan forgiveness.

You may also opt to extend the term of the loan when you refinance. An extended loan term means you may pay more interest over the life of the loan. You can use a student loan refinancing calculator to plug in the numbers and see how much your payments might be.

Medical School Cost vs Law School and Other Graduate Programs

You may be wondering how the cost of a medical degree compares to the cost of other advanced degrees like the average cost of a law degree. For example, what’s the average cost of medical and law school? Here’s how they stack up: While the average cost of medical school is $228,959 in total, the average cost of law school is $217,480, according to the Education Data Initiative.

Other graduate degree programs are less expensive than both med school and law school. For example, the cost to earn an MBA at Harvard (a two-year program) is $161,304. And the average cost to earn a Master of Public Health degree (MPH) is $79,530.

One thing to keep in mind is that medical school degrees require more years of schooling than other graduate degrees, which can account for some of the cost. A medical degree typically requires four years of medical school (followed by years of residency), while a law degree typically requires three years of law school, and an MBA usually takes two years of full-time attendance to earn.

The Takeaway

Medical school is expensive, with the average cost being well over $200,000. Many students rely on student loans, grants, and scholarships to pay for their medical education.

When it comes time to pay off your loans, there are many options new graduates can consider. These include federal repayment plans, student loan forgiveness, federal loan consolidation, and student loan refinancing.

If you do choose to refinance your student loans, consider SoFi. It takes just minutes to check your rate and your credit will not be impacted when you prequalify.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

How much does medical school cost on average?

The average total cost of medical school is $228,959, according to the Education Data Initiative. The average yearly cost of medical school is $59,720.

Is medical school more expensive than other graduate programs?

Medical school, which has a total average cost of $228,959, is more expensive than many other graduate programs, including law school, which has a total average cost of $217,480. It’s also more than the total average cost of an MBA from Harvard, which is approximately $161,304.

What are the main factors that affect the cost of medical school?

Factors that affect the cost of medical school include the length of time a student must attend. Medical school is typically four years — and that’s after the four years students spend earning their bachelor’s degree. In addition, there are supplies and equipment med students need, such as stethoscopes and lab coats, numerous text books, and study materials.

As students advance in their medical education, they will often do rotations, which may involve travel and accommodation costs. There are also licensing exams students must take, which are generally hundreds of dollars each.

Can scholarships cover the full cost of medical school?

There are some scholarships that cover the full cost of medical school, but the eligibility requirements to qualify can be rigorous. However, smaller scholarships can add up to help cover a chunk of medical school costs, so students should consider searching for and applying for the applicable scholarships they can find. One resource: The Association of American Medical Colleges, which has a scholarship database organized by state.

How do most students pay for medical school?

Most students pay for medical school by taking out student loans. Seventy percent of medical students rely on student loans to help pay for the cost of medical school, according to the Education Data Initiative.

What is the total cost of medical school including living expenses?

According to the most recent research by the Association of American Medical Colleges, the median cost of medical school, including living expenses, for first-year med students at an in-state public school was $67,693. The cost was $91,929 for those attending private medical school.

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Not all repayment options may be available for all loans. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is current as of 3/2/2026 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).

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.

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.
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May
06
2026
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Pawnshop Loans: What They Are and How They Work?

By | Debt Payoff, Financial Independence, personal_loan | Comments Off on Pawnshop Loans: What They Are and How They Work?

If you’re strapped for cash and have a hard time qualifying for traditional loans, or you live in an underbanked area, you may be considering a pawnshop loan. They appear to be a convenient option for fast cash, but they can also come with significant disadvantages, including high costs.

Before putting your valuables down in pawn, learn more about what pawnshop loans are so you can understand how pawning works.

Key Points

•   A pawnshop loan is a secured loan requiring valuable items as collateral, typically offering 25% to 60% of the item’s resale value.

•   Borrowers can access cash immediately, often without credit checks or income verification, but must pay significant financing fees.

•   While pawnshop loans do not impact credit scores, failing to repay results in permanently losing the pawned item without further penalties.

•   The average pawnshop loan is around $150 with a repayment term of 30 to 60 days, but high costs can make them costly.

•   Alternatives like personal loans offer unsecured options with longer repayment terms and the potential to build credit, making them a better choice for some.

What Is a Pawnshop Loan?

A pawnshop loan is a secured (vs. unsecured) loan, also known as a collateralized loan. To comprehend how this type of loan works, you’ll need to understand how does pawning work: To borrow the money, you must produce an item of value as collateral that provides backing for the loan. You and the pawn shop and loan operator, known as a pawnbroker, agree to a loan amount and a term. If you don’t pay back the loan (plus fees) within the agreed amount of time, the pawnshop can sell the item to recoup its losses.

Pawnshops will typically offer you 25% to 60% of the resale value of an item. The average size of a pawnshop loan is $150 with a term of around 30 days.

What Items Can You Pawn?

Items that can be pawned include jewelry, musical instruments, electronics, or antiques. It’s even possible to pawn the title to a vehicle. The pawnbroker will determine whether or not an item can be pawned, and borrowers can bring practically any possession for the broker’s scrutiny.

Recommended: No Credit Check Loans Guide

How Does Pawning Work?

Take a look at this example to see how pawning works: Say you bring in a $600 guitar to a pawnshop. The pawnbroker might offer you 25% of the resale value, or $150. On top of that, it would not be unusual for the pawnshop to charge a financing fee of 25% of the loan. That means you’ll owe $37.50 in financing fees, or $187.50 in total.

If you agree to the loan, the pawnbroker will typically give you cash immediately. The broker will also provide you with a pawn ticket, which acts as a receipt for the item you’ve pawned. Keep that ticket in a safe place. If you lose it, you may not be able to retrieve your item.

You’ll usually have 30 to 60 days to repay your loan and claim your item. According to the National Pawnbrokers Association, 85% of people manage to do this successfully. Nevertheless a pawnshop loan is considered a kind of high-risk personal loan, in that the borrower has a higher than average chance of defaulting. When a borrower pays off a pawnshop loan, they can retrieve the item they pawned. If a loan isn’t repaid, the pawnshop will keep the item and put it up for sale. There is no other penalty for failing to pay off your loan, but you do lose your item permanently.

Pawnshop Loan Fees and Interest Rates

Pawnshops don’t typically charge interest on the loans they offer. However, the borrower is responsible for paying financing fees or storage fees that can make the cost of borrowing higher than other loan options. Aside from the need for collateral, there are few other requirements to qualify for a pawnshop loan. You typically don’t need to prove your income or submit to a credit check.

Regulations around what pawnshops can charge vary by state, but you could end up paying the equivalent of many times the interest charged by conventional loans.

Recommended: How to Avoid Predatory Loans

Pros and Cons of Pawnshop Loans

In general, it’s best to seek traditional forms of lending, such as a personal loan from a bank, credit union, or online lender, if you can. These loans tend to be cheaper and can help you build credit. However, if you need cash the same day and you don’t qualify for other loans — and have a possession you are willing to risk losing — you might consider a pawnshop loan. Carefully weigh the pros and cons to help you make your decision.

Pros of a Pawnshop Loan

•   Access to cash quickly. When you agree to a pawnshop loan, the pawn shop and loan broker will typically hand over cash immediately.

•   No qualifications. The ability to provide an object of value is often the only qualification for a pawnshop loan.

•   Failure to pay doesn’t hurt credit. While you will certainly lose the item that you put in pawn if you don’t pay back your loan, there are no other ramifications. Your credit score will not take a hit.

•   Loans aren’t sent to collections. If you don’t pay back your loan, no collections agency will hound you until you pay.

Recommended: How Do Collection Agencies Work?

Cons of a Pawnshop Loan

•   High fees. The financing fees associated with pawn lending can be much more expensive than traditional methods of obtaining credit, including credit cards and personal loans. Consider that the average annual percentage rate (APR) on a personal loan is currently 11.40%, whereas pawnshop financing fees, when converted into an APR, can be 200% or more.

•   Loans are relatively small. The average size of a pawnshop loan is just $150. If you need money to cover a more costly expense, you may end up scrambling for cash elsewhere.

•   You won’t build credit. Pawn lending isn’t reported to the credit reporting bureaus, so paying them off on time doesn’t benefit your credit.

•   You may lose your item. If you can’t come up with the money by the due date, you’ll lose the item you put in pawn. (Same if you lose your pawn ticket.)

Pros and Cons at a Glance

Pros Cons
Quick access to cash. Monthly interest rates can be as high as 20% to 25% and contribute significantly to the cost of the loan. Personal loan rates are significantly lower.
No qualification requirements, such as credit check or proof of income. Pawnshop loans aren’t reported to the credit reporting bureaus, so they won’t help you build credit.
Failure to pay doesn’t hurt your credit. If you fail to pay back your loan on time, or you lose your pawn ticket, you can’t reclaim your item.
Loans can’t be sent to collections. Loans are relatively small, just $150 on average.

What Is a Pawnshop Title Loan?

As noted above, it’s possible to pawn a vehicle if you wish to do so. A pawnshop title loan is a loan in which you use the title of your car as collateral for your loan. You can typically continue driving your vehicle over the course of the loan agreement. However, as with other pawnshop loans, if you fail to repay your loan on time, the pawnbroker can seize your car.

Typical Requirements to Get a Loan Through a Pawnshop

There are typically few requirements to get a pawnshop loan, since the loan is collateralized by the item you put in pawn and the pawnbroker holds on to that item over the course of the loan. Business is done in cash so you don’t need a bank account to get a loan. However, pawnbrokers do want to avoid dealing in stolen goods, so they may require that you show some proof of ownership, such as a receipt.

Alternative Loan Options

There are a number of benefits of personal loans that make them a good alternative to pawnshop loans. Personal loans are usually unsecured, meaning there is usually no collateral required for a personal loan. Lenders will typically run a credit check, and borrowers with good credit scores usually qualify for the best terms and interest rates. That said, some lenders offer personal loans for people with bad credit.

If you qualify for a personal loan, the loan amount will be given to you in a lump sum, which you then typically repay (plus interest) in monthly installments over the term of the loan, often two to seven years. The money can be used for virtually any purpose.

Personal loans payments are reported to the credit reporting bureaus, unlike pawnshop transactions, and on-time payments can help you build a positive credit profile.

Other alternatives, such as payday loans may have very high interest rates that make them a less attractive way to borrow.

The Takeaway

If you only need a small amount of money, you don’t qualify for other credit, or if you’re looking for a loan without a bank account, you may consider a pawnshop loan. Just beware that they are potentially costly alternatives to other forms of credit, and if you don’t repay the loan you will lose the item you have pawned.

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.


SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

FAQ

How is a loan obtained through a pawnshop?

To borrow money from a pawnshop you must present an item of value that can act as collateral for the loan. The pawnbroker may then provide a loan based on the value of that item.

What happens if you don’t pay back your pawnshop loan?

If you fail to pay back your pawnshop loan on time, you won’t be able to reclaim the item you put up as collateral for the loan. The pawnshop will sell it to recoup their losses.

What’s the most a pawnshop loan will pay?

On average, a pawnshop will loan you about 25% to 60% of an item’s resale value. The average pawnshop loan is $150 and is repaid in about 30 days.

Does a pawn loan affect your credit score?

Pawnshops do not report to the credit bureaus, so taking out a pawnshop loan, repaying a pawnshop loan, or failing to repay the loan and claim your pawned item will not have an impact on your credit score.

How long do you have to repay a pawn loan?

The average term of a pawnshop loan is about 30 days, though pawnshop regulations differ from state to state and policies may differ from pawnshop to pawnshop.

Photo credit: iStock/miriam-doerr

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.


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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May
05
2026
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Exploring Whether or Not Personal Loans Are Bad

By | Debt Payoff, Financial Independence, personal_loan | Comments Off on Exploring Whether or Not Personal Loans Are Bad

Personal loans are a type of lending instrument offered through banks, credit unions, and online lenders. They’re paid back, with interest, in installments, and there are few limitations on how the loan funds can be used. They’re also typically unsecured, meaning you don’t have to put up any property as collateral for the loan.

A personal loan is an important financial tool if you can find one from a reputable lender at a reasonable interest rate, and you can commit to making loan payments on time. However, if you only qualify for a loan with a high interest rate or you feel you may have trouble paying it back, you may want to think twice before applying.

Key Points

•   Personal loans can be beneficial for consolidating high-interest debt or funding home improvements if you qualify for favorable rates.

•   Downsides include fees, higher interest rates compared to secured loans, and the risk of increasing overall debt.

•   No-credit-check loans are often predatory and can trap borrowers in cycles of debt due to extremely high interest rates.

•   Taking out a personal loan for discretionary spending or investing is generally not a good idea due to financial risk.

•   Before applying, compare alternatives such as home equity lines of credit (HELOCs) or 0% APR credit cards to determine an option that fits your needs.

Are Personal Loans Bad?

Not necessarily. There are both advantages and disadvantages to personal loans. Here’s a look at some of the benefits of taking out a personal loan:

•   Personal loans generally offer a wide range of borrowing limits, typically between $1,000 and $100,000.

•   There is flexibility in how the funds can be spent, unlike with a mortgage, which you must use to buy a house, or an auto loan, which must be used to purchase a car.

•   Proceeds from personal loans can be used for a variety of purposes, from paying down credit card debt to making home improvements and more.

•   Unsecured personal loans are offered by many lenders. There is no need to put any of your assets up as collateral for the loan, nor do you risk losing them should you default.

It’s important to weigh these benefits against potential disadvantages and determine whether it’s bad to get a personal loan for your financial needs. Here’s a look at some of the downsides of taking out a personal loan:

•   Personal loans may not offer the lowest-cost borrowing option. For example, you might be able to get a better rate on a home equity loan or a HELOC if you have enough equity in your home. That said, both of those lending instruments use your house as collateral, so if you default, you could risk losing your home.

•   Personal loans sometimes have fees or penalties that can increase the cost of borrowing. For example, origination fees on personal loans tend to be between 1% and 10%. Some lenders may charge prepayment penalties to ensure they don’t lose future interest payments if you repay your loan early.

•   When you take out a personal loan, you’re increasing your overall debt. If you have other debts, comfortably affording all your monthly payments can become a challenge. And missing payments or making late payments can have a negative impact on your credit score.

Recommended: What Is Considered a Bad Credit Score?

Pros and Cons of Personal Loans

Here’s a look at the pros and cons of personal loans at a glance.

Pros of Personal Loans Cons of Personal Loans
Wide range of loan amounts, usually between $1,000 and $100,000. Interest rates may be higher than those of other types of loans, such as home equity loans or HELOCs.
Use of funds is flexible. Borrowers can use money from personal loans toward almost any purpose. Fees and penalties can make borrowing more costly.
They are generally unsecured loans, which is beneficial to those who don’t want to put up collateral. They increase your debt, potentially putting a strain on your budget.

When Can It Be a Good Idea to Get a Personal Loan?

So when is a personal loan a good idea?

Debt Consolidation

One reason to take out a personal loan is to use it as a credit debt consolidation loan to pay down high-interest credit card debt. The average credit card interest rate as of April 2026 is 19.16%. The current average personal loan interest rate as of May 2026, on the other hand, is 12.27%. If you have excellent credit, you may pay less, and if you have poor credit, you could pay more.

Consolidating high-interest credit card debt with a lower-interest-rate personal loan may make your monthly payments more manageable and potentially save you money in interest payments over the life of the loan.

If you use a personal loan to pay off credit card debt, it’s a good idea not to use those credit cards to incur even more debt.

Home Improvement

Using a personal loan to make improvements to your home may also be beneficial, as home improvements can increase the value of your home, possibly offsetting the cost of borrowing.

When Can It Be a Bad Idea to Get a Personal Loan?

There are a number of cases where you may wonder if getting a loan is bad. Here’s a look at some situations where getting a personal loan may not be a good idea.

No Credit Check Loans

Most loans — including most personal loans — require a credit check. This helps your lender understand your creditworthiness, or how likely you are to repay your debts. Generally speaking, the healthier your credit, the more favorable your loan interest rates and terms. Those with poor or limited credit may find it difficult to qualify for a loan.

No-credit-check personal loans, on the other hand, look at your bank account balance or require you to pledge some asset as collateral to secure the loan.

The problem is that these loans also tend to be extremely expensive — interest rates can well exceed 100%, which is generally considered to be predatory. There’s a pretty good chance that borrowers who rely on no-credit-check loans won’t be able to pay their bills on time, which could trap them in a cycle of debt.

Recommended: How to Avoid Falling Victim to Predatory Loans

Cheaper Alternatives May Be Available

Before taking out a personal loan, consider whether there are cheaper alternatives. We’ve already mentioned home equity loans and HELOCs. You might also consider a no-interest credit card, which charges 0% interest for an introductory period typically lasting between 12 and 21 months. If you can pay down your debt in this period, this may be a good option. But whatever balance you don’t repay in time may revert to the card’s regular rate, which is likely high.

You Are Not Good at Managing Debt

If you’re not good at managing debt, think twice before taking on more. And if you use your personal loan to consolidate credit card debt, you’ll want to be careful about racking up new credit card bills.

Discretionary Spending

Borrowing money for discretionary spending, such as vacations or an engagement ring, generally isn’t a good idea. While these things are nice, they aren’t necessarily worth jeopardizing your financial well-being. Instead of borrowing to pay for big-ticket items such as these, you may be better off saving for them in advance as a part of your regular budget.

Borrowing Money for Investments

It’s generally not a good idea to borrow money to make investments. By nature, investments are risky, and you’re not guaranteed a return. Should the investment lose money instead of gaining, you’ll be responsible for repaying your debt, regardless of the investment loss.

The Takeaway

So are personal loans bad? The answer depends on how you plan to use the loan. Personal loans can be useful tools for purposes such as consolidating credit card debt, making home improvements, and more.

Any time you’re considering a loan, it’s important to understand whether it will meet your needs, what it will cost you, and whether there are any better alternatives out there.

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.


SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

FAQ

Do personal loans hurt your credit?

They can, at least at first — a new loan adds to your overall debt and means a hard credit check. If you miss payments, your score will drop, but making on-time payments helps you stay on track.

When is getting a personal loan a good idea?

It can be a good idea when you’re consolidating high-interest credit card debt, since personal loan rates are usually lower. It’s also common to finance home improvements that could boost your home’s value.

When is getting a personal loan a bad idea?

It’s usually a bad idea if you already have a lot of debt or can’t comfortably afford the monthly payment. You should also avoid no-credit-check loans with very high rates and skip borrowing for vacations or investments.

What are the risks of taking out a personal loan?

You’ll often pay an origination fee of 1% to 10%, and some lenders charge a fee if you pay early. Because the loan is unsecured, the rate may be higher than a secured option, and you’re adding to your total debt.

Photo credit: iStock/Morsa Images

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.

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 .

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.

SOPL-Q226-003

Read more
May
05
2026
Colorful rectangular blocks of different sizes are arranged vertically on a pink background.

Why Are Student Loan Interest Rates So High? What Borrowers Should Know

By | Debt Payoff, Fresh Out of School, Student Loans, student_loan | No Comments

Student loan interest rates have been on the rise over the past five years. In July 2024, federal student loan interest rates rose to their highest level in 16 years and rates for graduate loans reached record highs. Rates dipped only slightly in July 2025.

Why are student loan interest rates so high? Some of it comes down to perception: Interest rates are up after a decade of historical lows. But other factors also come into play.

Read on to learn how federal and private student loan interest rates are set, why interest rates have gone up, and the different options available for managing high-interest student loans.

Key Points

•   Federal student loan interest rates have risen over the last five years; in 2024, some rates for graduate loans reached record highs.

•   Interest rates on federal student loans are set annually by Congress, influenced by the 10-year Treasury note rate plus a fixed increase. Rates are capped at specific limits.

•   Private lenders determine interest rates on private student loans, using benchmarks such as the prime rate. Borrowers’ credit scores and credit history also impact private loan rates.

•   Students who don’t have a strong credit history may need a cosigner on a private student loan to qualify for more favorable rates.

•   Methods to help pay off student loans include paying any accruing interest while in school, using an income-driven repayment plan after graduation, and refinancing student loans.

Understanding Student Loans

There are two main types of student loans — federal and private student loans. Federal loans are offered by the Education Department (ED) and they include Direct Subsidized and Unsubsidized student loans for undergraduate students, and Direct Unsubsidized loans and Direct PLUS loans for graduate or professional students.

•   Direct Subsidized loans are for undergraduates who have financial need. You fill out the Free Application for Student Aid (FAFSA®), and your school determines how much you can borrow. The interest on the loan is paid by the ED while you’re in school and during a six-month grace period after graduation.

•   Direct Unsubsidized loans are available for undergrads and graduate students. A borrower does not have to prove financial need for these loans. Again, your school determines the amount you can borrow. However, unlike Direct Subsidized loans, the interest on Direct Unsubsidized loans is not paid by the ED and it begins to accrue as soon as the loan is disbursed.

•   Direct PLUS loans are for eligible parents (typically called a parent PLUS loan) and grad students. To be approved for one of these loans, a borrower must undergo a credit check and cannot have an adverse credit history. Interest accrues on Direct PLUS loans while the student is in school.

Here’s a look at how the interest rates on these federal loans have increased over the last five years:

School Year 2021 – 2022

 School Year 2022 – 2023

 School Year 2023 – 2024

 School Year 2024 – 2025

 School Year 2025 – 2026
Direct Subsidized and Unsubsidized Loans for Undergrads 3.73% 4.99% 5.50% 6.53% 6.39%
Direct Unsubsidized Loans for Graduate or Professional Students 5.28% 6.54% 7.05% 8.08% 7.94%
Direct PLUS Loans for Graduate or Professional Students or Parents of Undergrads 6.28% 7.54% 8.05% 9.08% 8.94%

There are currently several different repayment plans for federal student loans, including the standard 10-year plan; graduated repayment in which your monthly payments gradually increase over 10 years; extended payment, which gives you up to 25 years to repay your loans; and income-driven repayment plans that base your monthly payments on your income and family size.

However, starting July 1, 2026, there will be only two repayment plans available to new borrowers: a revised 10-year standard plan and a new income-driven option, the Repayment Assistance Plan (RAP).

Private student loans are issued by private lenders, such as banks, credit unions, and online lenders. Their interest rates and loan terms differ from lender to lender. The interest rates on private student loans may be fixed or variable, and the rate you get depends on your credit history.

You can consider student loan refinancing later on for potentially better interest rates and terms on your private loans, if you’re eligible. (Federal loans can be refinanced as well, but they then become private loans and lose access to the federal benefits mentioned above.)

By using a student loan refinance calculator, you can check the interest rate and repayment terms you may qualify for — and find out if refinancing makes sense for your situation.

Take control of your student loans.
Ditch student loan debt for good.

How Are Student Loan Interest Rates Determined?

The federal government adjusts federal student loan rates every year based on 10-year Treasury notes, plus a fixed increase. Rates are also capped, so they can’t rise above a certain limit. Here are the formulas:

•   Direct Unsubsidized Loans for Undergraduates: 10-year Treasury + 2.05%, capped at 8.25%

•   Direct Unsubsidized Loans for Graduates: 10-year Treasury + 3.60%, capped at 9.50%

•   PLUS Loans to Graduate Students and Parents: 10-year Treasury + 4.60% Capped 10.50%

Private student loan interest rates are based on the credit rating of the borrower (or their student loan cosigner, if they have one), and they are also influenced by market conditions.

Factors Contributing to High Interest Rates

As mentioned, federal student loan rates are based each year on 10-year Treasury notes plus a fixed increase. The rates for Treasury notes are set based partly on global market conditions and the state of the economy. When market conditions are in flux, the rates for Treasury notes tend to rise.

Federal student loan interest rates are fixed over the life of the loan. That means if you get a federal student loan for your freshman year, the rate it was issued with won’t change — despite Congress setting a new rate every year. If you need to take out another federal student loan for your sophomore year, however, you’ll then get the new rate, not the previous one.

Private student loan rates vary by lender and fluctuate with market trends. A borrower’s credit history also determines the rate they get for a private student loan.

Another factor contributing to student loan interest rates is that student loans are unsecured. Unsecured loans are not tied to an asset that can serve as collateral. Secured loans, by comparison, are backed by something of value, such as a car or house, which can be seized if you default. But lenders can’t seize a degree. So student loan interest rates may be higher than secured loan rates because the lender’s risk is higher.

Federal vs. Private Student Loan Interest Rates

When looking at why student loan interest rates are so high, it’s important to understand that private student loan rates will fluctuate with market trends and from lender to lender. They also depend on a borrower’s credit score. As of April 2026, some private student loan rates start at about 3% and go up to around 15.99%.

Private student loan rates for 10-year loans may be higher than the federal interest rate when borrowers are comparing rates concurrently on offer. The rates may be lower for a loan that has a shorter term length than the standard 10 years of federal loans.

What’s more, private student loan rates and student loan refinancing rates that are currently on offer may be lower than the federal interest rate a borrower received at the time of getting their loan, depending on what year they took out the loan. Borrowers interested in private or refinance loans can shop around with private lenders for the best interest rates.

Pros and Cons of Federal and Private Student Loans

Both federal and private student loans have advantages and drawbacks.

Pros of federal student loans include:

•   Interest rates for federal loans are fixed over the life of the loan

•   The rates for federal loans may be lower than the rates borrowers might get for private student loans

•   Depending on the type of federal loan you have, the government may pay your interest while you are in school and during the six-month grace period after graduation

•   Federal loans have federal programs and protections such as income-driven repayment plans and federal deferment options

Cons of federal student loans include:

•   You can’t shop around for interest rates

•   If you take out a new loan in subsequent years, you may get a higher rate than you got with your initial loans

•   Borrowing limits may be lower compared to private student loans

Pros of private student loans include:

•   Borrowers can shop around with different private lenders for lower rates

•   Borrowers (or cosigners) with very good or excellent credit can typically get lower interest rates

•   May offer higher borrowing limits than federal loans, depending on what a borrower is eligible for

Cons of private student loans include:

•   Borrowers with poor credit will get higher interest rates or may not be able to qualify for a loan

•   If the loan has a variable interest rate, it may rise over time

•   Private loan student holders don’t have access to the same federal programs and protections that federal student loan borrowers do

•   Deferment and forbearance options (if any) depend on the lender

Recommended: Average Interest Rate for Student Loans

Interest Rates for Graduate and Professional Degrees

For graduate students and those pursuing advanced professional degrees, interest rates on federal Direct PLUS loans and Direct Unsubsidized Loans for graduate and professional students are substantially higher than the interest rate for Direct Subsidized and Unsubsidized loans for undergrads.

For the 2025-2026 school year, the interest rates are:

Direct PLUS loan: 8.94%
Direct Unsubsidized loans for graduate and professional students: 7.94%
Direct Subsidized and Unsubsidized loans for undergraduate students: 6.39%

The higher rates on loans for graduate and professional students add significantly to the cost of borrowing. Not only that, the interest on these loans begins accruing immediately and while the borrower is in school, which also adds to the overall amount they’ll need to repay.

It’s worth noting that loans for graduate students currently have much higher borrowing limits than federal loans for undergrads. Graduate students can usually borrow up to $20,500 each year, with a lifetime cap of $138,500. Undergrad borrowers can typically borrow $5,500 for the first year, $6,500 for the second year, and $7,500 for the next two years, up to a total of $31,000. However, starting on July 1, 2026, lifetime borrowing limits for graduate students will be reduced to a lifetime cap of $100,000.

How Credit Scores Impact Private Student Loan Rates

Private lenders will look at a borrower’s creditworthiness when determining their interest rate. This involves considering such factors as:

•   Credit score: Lenders have different requirements when it comes to credit scores for private student loans, but many look for a score of at least 650. As a student, you may not have that high a score, and in that case, you may need a cosigner on the loan in order to be approved.

•   Credit history: When entering college, most students have little to no credit history. That means the lender could be unsure of their ability to repay the loan since students don’t typically have a history of paying any loans. This can lead to a higher interest rate.

•   A cosigner’s finances: Since many private student loan applicants are relatively new to debt and have no credit history, they might be required to provide a cosigner, as previously mentioned. A student loan cosigner shares the burden of debt with you, meaning they’re also on the hook to pay it back if you can’t. A cosigner with a strong credit history can potentially help secure a lower interest rate on private student loans.

Managing student loans responsibly is one potential way for students to establish credit. Additionally, they might consider getting a credit card with a lower line of credit and using it to cover a few small expenses such as groceries and transportation. Actions like paying their bill on time each month and in full may help them build credit over time.

Strategies to Pay Off Student Loans Faster

Whether you’re still in school or you’ve just graduated, there are steps that may save you money. But it’s important to be proactive. Here are some potential actions you could take.

If You’re Still in College or Grad School

Borrowers with Direct Unsubsidized loans are responsible for the interest that accrues while they’re in school and immediately after. They don’t have to make payments while enrolled, but not making payments means that, in certain situations, interest may “capitalize” — that is, the interest will be added to the principal and a borrower will pay interest on the new higher amount. In other words, they would be paying interest on the interest.

To save yourself money on interest, consider making interest-only payments during school until your full repayment period begins after graduation. It will take a small bite out of your budget now, but it can save you money in the long run.

If you have Direct Subsidized loans, no interest will accrue until your grace period ends.

If You Graduated

Borrowers are automatically placed on the standard repayment plan, unless they select another option. The standard repayment plan currently spreads repayment over 10 years. Starting on July 1, 2026, there will be a revised standard plan that features longer repayment terms of 10, 15, 20, or 25 years based on a borrower’s total loan balance.

With an income-driven repayment (IDR) plan, your monthly student loan payments are currently based on your discretionary income and family size. Your monthly payments are typically a percentage of your discretionary income, which usually means you’ll have lower payments. At the end of the repayment period, which is 20 or 25 years on one of the current IDR plans, your remaining loan balance is forgiven.

On the RAP plan launching on July 1, 2026, payment is based on 1% to 10% of a borrower’s adjusted gross income (AGI) and the forgiveness timeline is 30 years.

Federal Student Loan Forgiveness

You could also explore student loan forgiveness through a state or federal program.

For example, borrowers with federal student loans who work in public service may be eligible for the Public Service Loan Forgiveness (PSLF) program. If you work for a qualifying employer such as a not-for-profit organization or the government, PSLF may forgive the remaining balance on your eligible Direct loans after 120 qualifying payments are made under a qualifying IDR plan or the standard 10 year repayment plan.

In addition, check with your state to find out what loan forgiveness programs they may offer.

Refinancing Student Loans

For borrowers dealing with high-interest student loan debt that doesn’t qualify for federal protections, exploring refinancing is an option they may want to consider. With refinancing, a borrower can potentially lower their interest rate or their monthly payments.

A borrower considering refinancing to save money, could be a strong candidate if they’ve strengthened their credit since they first took out their loans. Unlike when they first headed to college, they may now have a credit history for lenders to take into account. If they’ve never missed a payment and have continually built their credit, they might qualify for a lower interest rate.

Having a stable income can also help. Being able to show a consistent salary to a private lender may help make a borrower less of a risk, which in turn could also help them secure a more competitive interest rate.

Just remember that refinancing federal student loans makes them ineligible for federal programs and protections.

The Takeaway

Student loan interest rates have been on the rise in recent years, but there are ways to help manage the cost of student loan debt. Using an income-driven repayment plan, making interest-only payments on loans while in school, and refinancing high-interest private student loans, are options that may help some borrowers lower their payments and potentially pay off their student loans faster.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Why are student loan interest rates so high right now?

Interest rates set by the Federal Reserve have been higher in recent years to help fight inflation, and that in turn can cause student loan interest rates to go up. The reason: The rate set by the Fed is the benchmark rate used to set the interest rate for loans, including student loans. When the benchmark rate is higher, student loan interest rates can be higher as well.

How are federal student loan interest rates set?

Federal student loan interest rates are set by the federal government each year. The interest rates are based on 10-year Treasury notes, plus a set increase added by law. The rates on federal loans are capped, so they can’t rise above a certain limit. The interest rate remains fixed for the life of the loan.

Do private student loan interest rates change over time?

Private student loans with variable interest rates can change over time, depending on market conditions. The interest rate on variable loans may change monthly or quarterly, for instance, based on market trends.

With fixed-rate private student loans, the interest rate remains the same. However, you may be able to get a lower rate through refinancing if your credit is strong enough for you to qualify for a lower rate.

Can you lower your student loan interest rate?

It may be possible to lower your student loan interest rate through student loan refinancing. With refinancing, you exchange your current loan for a new loan from a private lender. Ideally, the new loan will have a lower interest rate if you qualify. You’ll typically need a strong credit history to get a lower rate. Just be aware that refinancing federal student loans makes them ineligible for federal benefits like forgiveness and income-driven repayment.

Is refinancing a good way to reduce student loan interest rates?

Refinancing may be a good way to reduce student loan interest rates if the interest rates on your current student loans are high, your loans are private student loans and don’t qualify for federal benefits, and your credit is strong. Refinance lenders tend to give lower rates to borrowers with a strong credit history.

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Not all repayment options may be available for all loans. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is current as of 3/2/2026 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).

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.

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 .

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

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

SOSLR-Q226-009

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May
01
2026
What Is a Mortgage Payoff Statement or Letter?

What Is a Mortgage Payoff Statement or Letter? All You Need to Know

By | Debt Payoff, Home Ownership, mortgage | Comments Off on What Is a Mortgage Payoff Statement or Letter? All You Need to Know

If you’re thinking about refinancing your home loan or paying off your mortgage early, you might request a mortgage payoff statement. The amount due on this document is likely to be different from your current balance because it includes interest owed until the payoff date and any fees due.

Read on to learn more about what a mortgage payoff statement or letter is and when you might need one.

Key Points

•   A mortgage payoff statement details the total amount needed to fully pay off a loan as of a specific date.

•   This statement includes the principal balance, accrued interest, and any applicable fees.

•   Homeowners often request this document when considering refinancing or paying off their mortgage early.

•   The statement is provided by the mortgage servicer and can be requested by homeowners at any time.

•   Accurate payoff information is crucial for managing financial decisions related to property ownership.

What Is a Mortgage Payoff Statement?

Starting with mortgage basics, a mortgage is a loan used to purchase different types of real estate, including a primary home. A bank or other lender agrees to lend money, which the borrower commits to pay back monthly for a set period and with interest.

The different types of mortgage loans include conventional and government-insured mortgages and reverse mortgages.

There are jumbo loans, which exceed the dollar limits set by the Federal Housing Finance Agency, and home equity loans.

Say you have a mortgage and want to know exactly how much you’d need to pay to satisfy the loan. A mortgage payoff letter will tell you that magic number. Unlike your current balance, the payoff amount includes interest owed up to the day you intend to pay off the loan. It may also include fees that you’re on the hook for and haven’t paid yet.

Your monthly mortgage statement, on the other hand, only shows your loan balance and the amount due for your next monthly payment.

💡 Quick Tip: You’ve found an amazing home. Enjoy an amazing mortgage experience, too. SoFi has knowledgeable Mortgage Loan Officers to guide you through the process.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.

How Does a Mortgage Payoff Statement Work?

You can request a payoff statement from your loan servicer at any time. Note: Your mortgage servicer may be different from your lender. The company that manages your loan handles billing, accepts loan payments, keeps track of your principal and interest, and fields questions from borrowers.

You may request a payoff statement for any type of loan, including mortgages, student loans, personal loans, and auto loans. However, if you need your mortgage payoff statement, go to your mortgage servicer directly. Your monthly statements include the name and contact information of your mortgage servicer.

When you make the request from the company that handles your mortgage servicing, you’ll need to provide the following details:

•   Your name

•   Address

•   Phone number

•   Your loan number

•   The date you want your payoff to be effective if you’re seeking to pay off your mortgage early.

Asking for a payoff statement does not necessarily mean that you intend to pay off your loan immediately. You may simply be determining whether paying off your mortgage early is feasible, for example. The request itself does not initiate the prepayment process.

Traditional lenders, such as brick-and-mortar banks, may mail you a paper mortgage payoff statement. Online lenders may send a payoff statement online.

Recommended: 5 Tips for Finding a Mortgage Lender

What Information Do Mortgage Payoff Letters Contain?

All mortgage payoff letters tend to contain similar information, including:

•   Payoff amount: The amount of money that would satisfy the loan.

•   Expiration date: The date through which the payoff amount is valid. The letter may also include an adjusted amount should you pay before or after the expiration date.

•   Payment information: The letter will also usually tell you who to make the final check out to and where to mail it.

•   Additional charges: You will be alerted to any additional fees and charges that you’ll need to include.

💡 Quick Tip: Your parents or grandparents probably got mortgages for 30 years. But these days, you can get them for 20, 15, or 10 years — and pay less interest over the life of the loan.

Do You Need a Mortgage Payoff Statement?

There are a few common situations in which you might need a payoff statement.

•   Refinancing a mortgage: When you refinance your mortgage, your chosen lender pays off your old home loan with a new one, preferably with a lower interest rate and possibly a new term. When you seek to refinance, your new lender may ask you to provide a payoff statement on your current loan.

•   Prepaying a mortgage: It’s possible to pay off a mortgage early. A payoff statement will show you exactly how much you’d need to pay to do so. Most prepayment penalties for residential home loans that originated more than three years ago are prohibited. Still, check before you decide to prepay.

•   Working with a debt relief company: If you’re having trouble managing your debts, you’ve fallen behind on payments, or you otherwise need mortgage relief, you may choose to work with a debt relief company that can help negotiate with your lenders. The company will need to see payoff statements to get an idea of the scope of your debt.

•   Collections and liens: A lender might send you a payoff statement if you’ve fallen behind on your payments and they are sending your debt to a collection agency. In this case, the payoff statement may tell you how much you need to pay to stop the collection action.

If your lender decides to seize your home to recoup unpaid mortgage payments, they may place a lien on the property. They may send a payoff statement that alerts you that they’ve seized your property if the specified amount isn’t paid in full.

There are other ways to figure out how much you owe on your mortgage loan. You can talk to your lender and ask for a verbal payoff quote. This will provide an estimate, but understand that it is not a legal agreement and isn’t binding.

The Takeaway

If you have a home loan, you may want to request a mortgage payoff statement, especially if you’re thinking about refinancing or paying off your mortgage early. Requesting the mortgage payoff letter does not initiate any formal processes, so it’s fine to think of it as an information-gathering exercise.

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

How do I get my mortgage payoff statement?

Contact your loan servicer to request your mortgage payoff statement. Keep in mind that your loan servicer may be different from your lender.

When should I get my mortgage payoff statement?

Request your mortgage payoff statement when planning to prepay your mortgage, refinance, or consolidate debt. However, requesting your statement does not necessarily mean that you are planning to pay off these costs immediately.

How long does it take to get a mortgage payoff statement?

It depends on your servicer. Generally speaking, you should receive your mortgage payoff statement within seven business days of your request.

Photo credit: iStock/Vadym Pastukh


*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.

SoFi Invest®

INVESTMENTS AND DIGITAL ASSETS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE


SoFi Checking and Savings accounts are offered by SoFi Bank, N.A., Member FDIC.
SoFi Credit Cards are issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated.
Sofi Crypto products and services are offered by SoFi Bank, N.A.
Loans originated by SoFi Bank, N.A., NMLS #696891 (www.nmlsconsumeraccess.org). Equal Housing Lender.
Brokerage products offered through SoFi Securities LLC, member FINRA/SIPC. Advisory services are offered through SoFi Wealth LLC, an SEC-registered investment adviser. Information as of 11/5/25 and is subject to change. Screen images simulated.

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


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.

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Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or other eligible status, be residing in the U.S., and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates reserved for the most creditworthy borrowers. If approved, your actual rate will be within the range of rates at the time of application and will depend on a variety of factors, including term of loan, evaluation of your creditworthiness, income, and other factors. If SoFi is unable to offer you a loan but matches you for a loan with a participating bank, then your rate may be outside the range of rates listed above. Rates and Terms are subject to change at any time without notice. SoFi Personal Loans can be used for any lawful personal, family, or household purposes and may not be used for post-secondary education expenses. Minimum loan amount is $5,000. The average of SoFi Personal Loans funded in 2023 was around $33K. Information current as of 2/26/24. SoFi Personal Loans originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org). See SoFi.com/legal for state-specific license details. See SoFi.com/eligibility for details and state restrictions.

✝ 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.

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