Jun
24
2023

5 Easy Ways Doctors Can Save on Taxes

By | Debt Payoff, Student Loans, student_loan | No Comments

Doctors tend to make a good amount of money. For instance, primary care physicians report earning about $265,000 a year while specialists make approximately $382,000 annually, according to a 2023 survey from Medscape.

But compared to other high-earners, doctors also have high amounts of student debt. Med school graduates owe about $200,000 to $215,000 in student debt, reports EducationData.org. In addition, physicians spend extra years in school, rather than building equity in their future, such as having a 401(k) or an IRA.

That’s why it makes sense to know how to save money on taxes as a doctor and learn about physician tax deductions.

Here are five easy ways doctors can save on taxes, plus tax deductions for doctors.

1. Contribute to multiple tax-advantaged retirement accounts.

One way to save? Instead of only paying into one company-sponsored 401(k) or 403(b), spread your retirement savings across as many tax-advantaged accounts as you can. By having multiple accounts like this, you can substantially increase your savings each year.

2. Consider a 529 plan account to save for children’s college funds.

A 529 account grows tax-free when used for qualifying educational expenses. You might even get a tax deduction on your state taxes the year you fund it. Check your local tax laws to find out more.

3. If you own a practice or you moonlight, consider deducting all business-related expenses.

For physicians, owning a practice comes with a perk: tax deductions for doctors. Think advertising, license fees, exam fees, website fees, professional publications, dues, memberships, medical associations, and conferences. The general strategy is to deduct as much on Schedule C or your personal tax return as possible.

4. For investments, consider the tax benefits of long versus short term gains.

Owning an investment for more than one year means any profit will qualify as a long-term gain. That makes sense. What’s important to consider is that long-term capital gains are typically taxed lower than short-term capital gains (which are taxed at your ordinary income rate). For those with portfolios to manage, this is one factor worth keeping in mind.

5. For charitable donations, don’t forget you can donate investments.

Most people know that donating cash or used items qualifies as a tax deduction. But for physician tax deductions, it’s good to remember you can donate appreciated stocks and funds. In this case, you can gain a double tax benefit by getting a tax deduction for the gift—and avoiding the capital gain on the sale.

Another way to possibly save money is with student loan refinancing. When you refinance, you replace your existing student loans with a new loan, ideally with a lower interest rate and better terms.

Should you refinance your student loans? One very important thing to keep in mind is that refinancing federal student loans makes them ineligible for federal protections and programs, like income-driven repayment plans. If you think you may need these federal benefits, refinancing may not be right for you.

This student loan refinancing guide may be helpful as you weigh your options.

If you decide to explore refinancing, this student loan refinance calculator can help you figure out what you might save. For instance, a lower interest rate or a longer loan term may help lower your monthly payment. However, a longer loan term means you may end up paying more interest over the life of the loan.

SoFi offers loans with competitive fixed and variable rates, flexible terms, and no fees. And you can find out if you prequalify in two minutes.

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

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


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.

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.

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

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23
2023
What Should I Do After My Master’s Degree_780x440: Finishing a master’s degree is a big deal.

What Should I Do After My Master’s Degree?

By | Debt Payoff, Life & Career, Student Loans, student_loan | Comments Off on What Should I Do After My Master’s Degree?

Finishing a master’s degree is a big deal and deserves a huge congratulations. Countless hours spent tackling reading lists, group projects, and thesis research have finally come to an end. And after all that, you’re probably wondering what comes next after getting your master’s degree.

On one hand, an end to tuition payments and assignments is a relief. On the other hand, figuring out what to do after grad school can be daunting. Compared to navigating life after college, master’s students may be faced with more debt and responsibilities than when they finished their undergraduate degree.

Whether starting a new and exciting role, embarking on the job hunt, or making plans for an alternative path, the transition may take time adjusting to.

To help you make the next step, check out these tips for what to do after grad school.

Utilize University Career Resources and Networking

Many graduate programs promote their job placement rates to attract future students and stay competitive in college rankings.

To help ensure master’s students have a plan for life after grad school, many universities offer career resources and services. Possible programs include career planning, interview and resume workshops, job fairs, and networking events with employers and alumni.

If you find your university’s career services to be limited or you’ve already graduated, you can reach out to your former professors for advice on entering the job market or pursuing a PhD.

Some universities may have official alumni groups or organizations to tap into. Connecting with alumni, professors, and classmates on LinkedIn is another way to broaden your network and find jobs in your desired field.

Entering the Workforce

A master’s degree can be an asset in the job market and for long-term career growth. In 2021, employed individuals with a master’s degree earned median weekly earnings of $1,574, compared to median weekly earnings of $1,334 for those with bachelor’s degrees.

Still, landing a job that reflects your credentials immediately after graduate school can be difficult. Sometimes, factors like geographic location or an economic recession could pose challenges to gainful employment.

If you have limited work experience or changed careers after graduate school, it may be helpful to cast a wider net with job applications in your desired sector.

Not everyone’s career is a straightforward path. Finding a position that balances passion and professional development can be a good place to start.

Recommended: How to Financially Manage a Job Transition

Continuing Education

Depending on your career goals, a doctorate degree (PhD) could be a way to develop specialized knowledge and stand out from the pack. As of 2021, the number of Americans whose highest degree was a master’s degree reached 24.1 million, compared to just 4.7 million for a PhD.

Besides working as a college professor, a PhD can be applicable for a variety of careers, such as researcher, scientist, psychologist, and high-level positions in government agencies.

Whereas completing a master’s degree generally takes one to three years, a PhD program can take between five and six years, possibly longer.

Given this considerable time commitment, it is worth considering the return on education for different doctoral programs. If you receive a tuition waiver and stipend for a PhD, this calculation should instead measure the ratio of foregone earnings from studying to the income a doctorate will help you receive upon graduation.

Recommended: The Highest Paying Jobs in Every State

Teach College Courses

After earning a master’s degree, there may be opportunities to stay involved in academia without pursuing a doctoral degree. Some graduates utilize their master’s credentials to teach college courses as a full-time or adjunct lecturer.

Many community colleges only require their instructors to have a master’s degree. Usually, these positions are geared towards instruction more than research and writing. Thus, preference may be given to candidates with previous college teaching experience and to those with master’s degrees.

Pay for lecturer positions varies between community colleges, four-year institutions, and graduate schools. The average salary of an adjunct professor, though, is currently $83,715 per year.

You may choose to teach college courses full-time at your local community college or university or teach classes part-time as your schedule allows. Either way, teaching college courses can be a fantastic way to utilize your master’s degree.

National Service

Are you interested in applying knowledge and skills from your master’s degree to make a difference? National service programs, such as the Peace Corps and Americorps, let you do just that.

Every year, Americorps enrolls more than 200,000 members to work with schools, nonprofits, community organizations, and government entities to address critical needs ranging from poverty reduction to natural disaster relief and youth empowerment.

Peace Corps operates in over 60 countries, with volunteers working on programs related to agriculture, environment, health, community and economic development, education, and youth development.

The bulk of Peace Corps assignments are for two-year durations, preceded by two or three months of language and cultural training. However, candidates with more experience and advanced degrees can apply to Peace Corps Response to serve in more specialized roles for 3-12 months.

Although both organizations refer to participants as volunteers, they do provide financial compensation and other benefits. Americorps provides a stipend and lump-sum education award structured according to the duration of service, which spans incrementally between 300 and 1,700 hours.

In the case of the Peace Corps, stipends are structured according to the host country’s cost of living. Other benefits include a $10,000 readjustment allowance, healthcare, federal student loan deferment, and non-competitive eligibility for federal jobs.

Taking Time to Travel

For many recent or soon-to-be master’s graduates, long-term recreational travel may not seem financially feasible for life after grad school. However, the transition from graduation to the workforce can be a good time to travel frugally before professional obligations and life’s responsibilities begin adding up.

To make the most of your travel budget, you can take advantage of free accommodation via couch surfing or work remotely part-time while you’re traveling to bring in some extra funds.

Recommended: How to Save for a Vacation: Creating a Travel Fund

Budgeting for Life After Grad School

Graduate students are no strangers to living on a shoestring budget. During the transition from student discounts and bargain hunting to full-time jobs and steady income, it can be easy to lose track of these money-conscious habits.
Maybe it’s not a bad idea to upgrade your diet from ramen noodles, but creating a budget can help keep you on track to save for things like retirement, a mortgage, and paying off student loans.

One way to possibly save money each month is to refinance your student loans into one loan with one monthly payment. If you have a strong credit profile and are bringing in a decent income each month, you may qualify for the lowest rates. A lower rate will lower your monthly payment if you keep the term the same. If you want to pay off your loan quicker, though, you can shorten your loan term and reduce the amount you pay in interest overall. Note: You may pay more interest over the life of the loan if you refinance with an extended term.

There are many advantages to refinancing student loans, but like anything, there are disadvantages, as well. If you plan on using federal benefits, such as student loan forgiveness or income-driven repayment plans, you will lose access to these if you refinance. Make sure you do not plan on taking advantage of federal benefits now or at any point in the future before deciding to refinance federal student loans.

The Takeaway

Your post-master’s degree path will vary depending on your career goals, industry, and personal interests. Options may include entering the workforce, continuing your education, teaching college courses, or taking time to travel. Whatever option you decide to pursue, you’ll need to do so with a budget in mind in order to make the most of your financial future.

If you are paying off student loans from your undergraduate and graduate degrees, you have options. Refinancing your student loans could give you more favorable loan terms with lower interest rates and flexible repayment plans.

As stated above, graduates refinancing federal student loans with a private lender will lose out on benefits like income-driven repayment and loan forgiveness.

If you’re interested in refinancing, consider SoFi. SoFi makes it easy to get pre-qualified online for student loan refinancing in just a few minutes. There’s no fee to apply, and SoFi members can take advantage of free career coaching and financial guidance.

See if you prequalify with SoFi in just two minutes.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


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.

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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23
2023
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What to Do After You Graduate From Law School

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

Life after law school can be an exciting time as you look forward to your new career. There are plenty of opportunities available to those with a JD. Some avenues to consider include practicing law at a firm, specializing as an attorney in a field like patents, contracts, immigration (and many more), working as general counsel in-house at a corporation, or even pursuing a career in government.

The path you choose depends on the type of law you studied, your interests, and your past experiences. According to the Bureau of Labor Statistics (BLS), the median salary for lawyers in 2021 was $127,990 annually.

Once you find your first post-law school gig, you may also have to start thinking about repaying any law school student loans.

Finding Jobs After Law School

After getting a law degree, what to do really depends on why you decided to go to law school in the first place. Did you have dreams of working at a major law firm, becoming a public defender, or going solo with your own practice?

Maybe you’ve decided you no longer want to practice law and would rather apply your new skills to a relevant career or continue to further your education. If you are considering what to do after law school, you can start by examining what workplace environment you find the most exciting and attainable.

Landing at a Law Firm

A law firm is an obvious choice for where to work after getting your JD. But the size, location, and culture of the law firm can greatly impact your experience and job satisfaction. Attorneys working at smaller firms may offer stronger partnership prospects than larger law firms. However, depending on location, the pay could be comparatively lower, and your training may come in the form of on-the-job experience.

While the path to promotion may be longer at a larger firm, they may have more resources and a higher salary. Depending on your preferences and career interests, a major law firm with a big name might be a better fit to help you find your specialty.

Considering a Clerkship

A clerkship is an important career milestone for many attorneys. Usually taking place under the guidance of a certain judge, a clerkship allows law school graduates to see the inner workings of the legal system. Many are considered prestigious resume boosters and offer valuable first-hand experience working under a judge and a leg up on networking from the start.

There are federal and state court clerkships, but federal opportunities like with Supreme Court or circuit court judges can be more difficult to secure because of their prestige. However, state clerkships can also be beneficial, especially if you plan on practicing in the local area.

Getting an Advanced Degree

If you have a desire to specialize in a specific field of law, staying in school to get a post-JD degree is another avenue to consider after getting a law degree.

You might want to pursue this type of degree after having some relevant work experience, which can help you first figure out what particular field of law you want to study. These specialty degrees include Air and Space Law, Sports Law, Global Food Law, Cannabis Law, and more.

Alternative Careers Outside Law

Pivoting after law school to a different careeris another option to consider when looking at jobs. If you, like many, have graduated with six-figures worth of student loan debt, you’ll obviously want to find a steady job so you can make regular student loan payments.

Other jobs that may fit with the skill set you curated in law school may include political advisor, journalist, lobbyist, and teacher.

Tackling Law School Debt

Depending on your earning potential and chosen career path, it might make sense for you to aggressively pay off your law school debt in 10 years or less, or try to maximize your law school loan forgiveness opportunities.

In order to make your degree count towards your personal and professional goals, figuring out how to approach your debt is a key part of what to do after law school.

Ready to tackle your law school debt?
Refinancing your student loans
could help you pay it off faster.

Making Payments While Still in School

While the government does not require you to make payments on most federal student loans while still in school, you could consider paying the amount of interest that builds up each month to help keep your student loan debt from growing.

Whether you need to pick up a side hustle or prioritize how much you save, making at least interest payments on your student loans while still in school can help reduce the amount of interest that will capitalize on your student loans. This can ultimately reduce the amount of interest that accrues and help set you up for success after law school.

Sticking to Budget Basics

After your law degree, it can be wise to take stock of your budget and work to balance your goals for savings, emergency funds, credit card payments, and student loans. The average student loan debt from law school currently sits at $180,000, so you’ll want to prioritize making a plan to get these paid off as quickly and efficiently as possible.

Ultimately, you’ll likely want to pick a student loan repayment plan that works for your personal budget, no matter what jobs after law school you are considering. You may decide to pay down debt while also building up a basic emergency fund as part of your financial foundation.

Recommended: How Much Money Should Be in Your Emergency Fund?

Refinancing Law School Loans

Refinancing your law school loans means that a private lender will issue one new loan that effectively pays off your existing federal and/or private student loans. This new loan comes with new terms, ideally with a lower interest rate or shorter repayment period. Instead of paying multiple student loans, such as from undergraduate and graduate school, there is only one new loan to pay off.

While there are many advantages to refinancing student loans, refinancing federal student loans means that you will not be able to take advantage of benefits like income-driven repayment plans and Public Service Loan Forgiveness. So it may not make sense if you are taking advantage of one of these benefits or plan to in the future.

The Takeaway

Life after law school can mean something different for everyone. Whether you pursue a private practice, family law at a small firm, or corporate law at a large one, there are many career opportunities to pursue.

Law school may also mean taking on a significant amount of student loan debt. Refinancing could be an option that helps you spend less in interest over the life of the loan if you’re able to qualify for a more competitive interest rate or secure a shorter term. If you’re interested in student loan refinancing, consider SoFi. Refinancing with SoFi can be completed online and there are no application fees, origination fees, or prepayment penalties.

See if you prequalify for law school student loan refinancing with SoFi.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


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.

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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23
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6 Ways to Save Money for Grad School

By | Debt Payoff, Student Loans, student_loan | No Comments

Figuring out how to save money for grad school can feel overwhelming, but it doesn’t have to be. In fact, it’s possible to save for grad school without picking up a side hustle or taking on more debt — if you plan ahead and adjust your current budget.

Here’s how to save money for grad school and help make it more affordable.

Strategies to Save Up for Grad School

1. Splitting Up Your Paycheck

If you are currently working and get regular paychecks, one of the simplest ways to start saving for grad school is to automate as much of the process as possible. If your workplace has direct deposit, you could contact HR and see if you are able to add another bank account, and designate a certain amount from every paycheck to go into your savings account.

It can be as much or as little as you’d like, but putting the money directly into savings makes it harder to spend right away. By automating your savings account, you eliminate the hassle of manually parting with it.

If your company doesn’t offer the option to split your paycheck to multiple accounts, you can contact your bank directly or check online to see if they offer a recurring transfer. Banks are typically able to set up transfers for you automatically on your payday.

To decide how much to save for grad school, review your monthly budget before starting. If you don’t have one, put one together.

2. Opening a Separate Savings Account

While you shouldn’t necessarily open a new account for every savings goal in your life, as that could get messy fast, setting up a new, separate savings account with your bank for grad school is another way to potentially maximize your money.

Opening a new account with a specific goal of how much to save for grad school could help you keep track of the goal and make your progress tangible. Having a separate account specifically for school can also help you manage and keep track of spending on books and other school-related costs.

These first two ideas can work together to get you progressing on your savings goal. It can be intimidating to commit to allocating some of your budget for savings, but if you make the process regular and automatic, you may be surprised to find how little you miss that extra cash.

3. Don’t Forget Financial Aid

The Free Application for Federal Student Aid is not just for student loans—you could also receive work-study and grants by filling out the FAFSA®. Just like undergraduate applications for federal financial aid, students must demonstrate need, be a U.S. citizen or eligible noncitizen, and be enrolled or accepted as a regular student pursuing a degree beyond a bachelor’s.

However, when graduate students fill out the FAFSA, they may be considered independent, meaning their parents’ income is no longer taken into consideration.

Recommended: Independent vs Dependent Student: Which One Are You?

For some people, this might actually mean they are eligible for more financial aid as an independent individual. The amount a student is awarded will be based on factors including their income and financial assets. Students cannot be in default on a prior student loan to be eligible for additional aid.

Regardless of dependency status, graduate students may be eligible to receive PLUS Loans. These unsubsidized loans can be taken out in amounts up to the cost of attendance, but be aware you can’t have an adverse credit history to qualify.

There’s also the option of financial aid that isn’t typically repaid, in the form of scholarships or other grants, or scholarships from your state based on field of study, interest, or school type.

File your FAFSA as soon as possible after October 1, the year before each enrollment period. Since there are limited funds, the sooner you file, the better chance you may have of getting the most aid possible.

When we say no fees we mean it.
No origination fees, late fees, & insufficient fund
fees when you take out a student loan with SoFi.

4. Checking With Your Current Employer

Even if you are not in a career where your employer is expected to pay for a graduate degree, a lot of companies may offer some contribution to ongoing education if it’s possible to show that it will be relevant to your job.

Tuition reimbursement varies depending on your company and industry, but some may offer tuition assistance to their employees. While it might not cover your entire graduate school cost, a tuition reimbursement benefit from your company could significantly lower the amount you need for school, which in turn could lower your dependence on loans.

If you have existing student loan debt from your undergraduate education, check to see if your company offers employees a match (up to a certain amount yearly) on payments made toward student loan debt every year. In this way, employers can make a regular contribution to help with your student loan balance, while you make your regular payments, too.

5. Considering Schools Abroad

Schools in Europe, South America, and Africa may be significantly less expensive than universities in the United States, which can help with saving for grad school. But, before enrolling in graduate school abroad, make sure you understand how your industry will accept and transfer over any foreign degrees. You’ll want to make sure that your grad school degree is a decent ROI.

While the cost of living might be higher in some other countries, international graduate programs can also save you time; some PhD programs in Europe are only three to four years, as compared to six or seven in the U.S.

6. Refinancing Current Student Loans

If you are currently paying off undergraduate student loans, the idea of juggling paying for grad school and paying off undergrad loans may seem daunting. It’s helpful to get your current debt situation under control before saving for grad school. One option you might want to consider that could potentially result in monthly savings is student loan refinancing.

Refinancing your student loans could possibly result in a lower interest rate, which could mean lower monthly payments (depending on the loan term), potentially freeing up room in your monthly budget. A lower interest rate might also mean spending less money over the life of the loan. Note: You may pay more interest over the life of the loan if you refinance with an extended term.

However, it’s important to know that loan refinancing means you’re no longer eligible for federal student loan forgiveness, deferment, and income-driven repayment.

A lower overall interest rate could help you with your goal of saving money to pay for graduate school, helping to make your savings goals more manageable as you embark on this exciting next step in your career. A student loan refinance calculator can help you figure out if refinancing makes sense for your situation.

The Takeaway

Graduate school doesn’t necessarily mean taking on more debt. Those looking to focus their savings plan for graduate school can review their monthly budget and automate as much of their savings as possible.

Additional options to pay for college include federal student aid including federal student loans, scholarships, grants, and work-study. Some students may even consider pursuing their graduate degree abroad to attend a more affordable university. And refinancing is an option that could help some students with undergraduate loans reduce their interest rate.

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.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


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.

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.

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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22
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All You Need to Know About Loans for Legal Fees

By | Debt Payoff, Family Finances, personal_loan | Comments Off on All You Need to Know About Loans for Legal Fees

Legal fees can get expensive. Whether you need to hire an attorney for a divorce case, to represent you against criminal charges, or to guide you through the adoption process, the cost can be prohibitive — but that doesn’t mean you should move forward without legal counsel.

Instead, there are a few different ways to pay for a lawyer, including personal loans. We’ll review how to get a loan for legal fees, as well as other options available to you.

What Are Loans for Legal Fees?

While you cannot find a loan designed specifically for legal fees, you can take out a personal loan to cover your legal costs. If your lawyer mentions taking out a loan for payment, they’re likely referring to a personal loan.

How Do Loans for Legal Fees Work?

Personal loans for legal fees work much like how a personal loan works typically. Personal loan rates and terms vary by financial institution. In general, the longer the loan term, the higher your annual percentage rate (APR) will be, but because the repayment is spread out over more years, the monthly payments will be lower. Generally, personal loan terms range between one and seven years.

When you get a personal loan for legal fees, you’ll get the lump sum from the lending institution to pay your lawyer. Some banks offer same-day funding. Then, rather than owing the lawyer, you’ll owe the lender until the loan is paid off in full.

Keep in mind that, in addition to interest, some personal loans include origination fees and prepayment penalties.

Typical Legal Loan Requirements

When you go to apply, the lender may have a few personal loan requirements that you’ll have to meet. These may vary by financial institution.

Credit Score

A key factor in getting approved for a legal loan is your credit score. In general, the higher your credit score, the better your chances of approval (and at a lower interest rate, which means lower personal loan rates).

The credit score you need for a personal loan will vary by institution. Some lenders may even grant personal loans to borrowers with bad credit. In those cases, fees and APRs are typically very high.

Speaking of your credit score, most lenders offer soft pulls for personal loans to see if you’re qualified. But once you apply, expect a hard inquiry on your credit report, which will temporarily lower your score.

Debt-to-Income Ratio

Lenders also factor in your debt-to-income (DTI) ratio when considering your loan application. Your DTI ratio is the total amount of your monthly debts (think car payment, student loan payments, credit card bills, mortgage, etc.) divided by your monthly income.

The lower your DTI ratio, the better your chances of getting approved for a personal loan for legal fees with favorable rates and terms.

Proof of Income and Employment

To get a legal fee loan, you’ll need to demonstrate your ability to repay it to the lender. That means that lenders often want to see proof of income and employment, such as a signed letter from your employer, pay stubs, and/or W-2 forms.

Self-employed and need a personal loan? You’re not out of luck. Lenders may just want to see your tax returns and/or bank deposit info.

Origination Fees

Some lenders charge a loan origination fee when you take out a personal loan. This is a one-time fee at the start of the loan that covers the administrative costs of processing the loan. (If you’ve ever bought a house, you likely paid a mortgage origination fee as part of your closing costs.)

Personal loan origination fees might be flat fees or a percentage of the loan amount. Not every lender charges these fees.

Collateral

Loans for legal fees are usually unsecured personal loans, meaning they’re not backed by any collateral. Other examples of unsecured loans are traditional credit cards and student loans, where you can borrow money without putting up assets as collateral. Because there’s no collateral, fees and interest rates tend to be higher.

That being said, personal loans can be secured in some instances, meaning you’d have to put up some kind of collateral, like a car or house. Secured personal loans may have lower fees and interest rates, but costs vary by lender.

If you get a secured personal loan for your legal fees, you’ll need to offer some kind of collateral to the lender.

Pros and Cons of Using a Loan to Cover the Cost of Legal Fees

Thinking about using a personal loan to cover legal fees? Here are the pros and cons to consider:

Pros of Legal Fee Loans Cons of Legal Fee Loans
You get access to the legal help you need, even if you can’t afford it right now. You’ll pay more over time because of interest and fees.
Personal loans for legal fees may be cheaper in the long run than paying with a credit card. Interest rates are typically high if you have bad credit.
You can often get same-day funding. Your budget will be strained with another monthly payment to manage for several years.
Unlike credit card APRs, personal loan interest rates are usually fixed; you can count on the same monthly payment until it’s paid off. Missing a payment can have financial consequences.
Unsecured loans don’t require collateral, so you don’t have to put your house or car at risk. You may be overlooking cheaper alternatives, like a payment plan through the law office or crowdfunding online.

How Legal Fees Are Billed

Legal fees can run the gamut. Your attorney may charge you several types of fees during the course of their representation. Here’s a quick look at some of the fees you might incur when hiring a lawyer:

•   Hourly fees: A lawyer will likely charge you by the hour for their services — and that’s not just the hours you spend consulting with them. Lawyers do a lot of work on your case behind the scenes, and they’ll bill you for every one. Hourly rates can range from as little as $50 to $100 an hour to as much as several thousand dollars an hour, depending on the lawyer’s experience, the complexity of the case, and geographic location. The average hourly rate for a lawyer in 2022 was $313, according to the Clio 2022 Legal Trends Report.

•   Flat rates: Sometimes, a lawyer might charge you a simple fixed fee for a specific service. This is typically for less involved work (i.e., no court representation). For instance, they may charge a set rate to prepare your will or help you with a real estate transaction, bankruptcy filing, or uncontested divorce.

•   Contingency fees: As the name implies, these fees are contingent. You’ll only pay them if you win your case and are awarded a monetary sum. Often, a lawyer’s contingency fees are a percentage of that sum.

•   Litigation fees: Your lawyer may include this as a line item on your invoice, but really, it’s a catch-all for several fees. These include court filing fees, attorney’s fees, expert witness fees, fees for re-creating an accident or accessing records, copy fees, and others.

Recommended: The Cost of a Divorce

Alternatives to Legal Loans

A legal loan is not your only option for covering legal fees. If you don’t want to take out a personal loan or don’t qualify, consider these other options. Just make sure to steer clear of predatory lending.

Credit Cards

Many lawyers accept credit cards as a payment method for their services. If that’s your preferred payment method, ask a lawyer if they accept credit card payments. If they say no, keep looking for a different option.

Just keep in mind that credit cards may have higher interest rates than a personal loan. Check your credit card’s APR to calculate how much you might owe in interest if you don’t pay off your credit card balance quickly.

Legal Payment Plans

Some law offices may offer payment plans to their clients. In this case, you would pay your lawyer in monthly installments rather than in one lump sum.

While not every lawyer offers this option, it never hurts to ask. This is another question you can ask upfront before hiring a lawyer.

Crowdfunding

Asking friends and family for financial help is never easy, but loved ones may chip in if you’re in a bind.

Alternatively, you can seek a wider net of potential benefactors by crowdfunding on social media or using official crowdfund platforms. Just keep in mind that such platforms often keep a percentage of the funds as payment.

Taking Out a Personal Loan With SoFi

Paying for costly legal fees with a personal loan can ease the process and make legal counsel more accessible, whether you’re adopting a child, getting a divorce, fighting criminal charges, or suing a person or business as a victim. SoFi offers personal loans at competitive rates.

Tackle your legal fees with a personal loan from SoFi.

FAQ

Is it legal to take out a loan for legal fees?

Yes, it is legal to take out a loan for legal fees. Legal funding loans are simply personal loans that you take out with a lender to cover the cost of hiring a lawyer.

Can legal fees be tax deductible?

If you’re a business owner who incurs legal fees for your business, you can deduct the cost on your taxes. This applies to property owners who incur legal fees when renting out their property to tenants. In addition, legal fees related to adopting a child are tax-deductible through the federal adoption tax credit.

Can legal fees be paid in installments?

Many law firms offer payment plans to their clients that allow them to make payments in installments. If your lawyer doesn’t offer this and you can’t pay out of pocket, you can also look for a legal finance loan (a personal loan) to cover the cost. While you’ll pay the lawyer in a lump sum, you’ll pay off the loan in installments.

Photo credit: iStock/Andrii Yalanskyi

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.

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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