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While revolving credit provides borrowers with flexibility, too much revolving debt can be crippling. With interest rates on the rise, the most vulnerable credit card holders can use some help.

Let’s look at ways of dealing with mounting revolving debt. But first, here’s a primer on revolving credit vs. installment credit.

A Closer Look at Revolving Debt

There are two main categories of debt: revolving and installment. Revolving credit lets you borrow money up to an approved limit, pay it back, and borrow again as needed. The two most common revolving accounts are credit cards and a home equity line of credit.

HELOCs are offered to qualified homeowners who have sufficient equity in their homes. Most have a draw period of 10 years, followed by a repayment period. A less common type of revolving credit is a personal line of credit, usually obtained by an existing customer of a lending institution.

Then there are credit cards, which became part of the American fabric in the 1950s, starting with the cardboard Diners Club card.

You can choose to make credit card minimum payments, pay off the entire balance each month, or pay some amount in between. If you don’t pay off the full balance when it’s due, your balance will accrue interest.

For example, let’s say you have a $10,000 balance on a credit card at 17% interest. If you pay $250 a month, it will take five years to pay off the balance — and you’ll ultimately pay $4,862 in interest. (Ouch.) You can use a credit card interest calculator to see how much interest you’ll pay on any balance.

If you continue to charge more to that credit card while making only minimum monthly payments, it’ll take even longer to pay off the balance.

That’s one of the quiet dangers of revolving debt: If you haven’t reached your limit, you can continue to borrow while you owe money, which adds to your debt and to the amount of interest accruing on it.

Recommended: Credit Card Rules to Live By

What Is Installment Debt?

Installment credit comes in the form of a loan that you pay back in installments every month until the loan is paid off. The loan amount is determined when you’re approved. Think mortgages, auto loans, personal loans, and student loans.

An installment loan may have a fixed or variable interest rate.

Secured and Unsecured Debt

Now is a good time to touch on secured vs. unsecured debt (and why credit card debt is especially pernicious). Mortgages, HELOCs, home equity loans, and auto loans are secured by collateral: the home or car. If you stop making payments, the lender can take the asset.

An unsecured loan does not require the borrower to pledge any collateral. Most personal loans are unsecured. The vast majority of credit cards are unsecured. Student loans are unsecured, and personal lines of credit are usually unsecured.

That means lenders have no asset to seize if the borrower stops paying on unsecured debt. Because of the higher risk to lenders, unsecured credit typically has a higher interest rate than secured credit.

Which leads us to the common credit card trap: The average annual percentage rate (APR) for credit cards accruing interest was 20.40% in late 2022 … and rising. The APR on a credit card includes interest and fees.

Perhaps you can see how “revolvers” — borrowers who carry a balance month to month — can easily get caught in a trap. The average household of credit card revolvers owes nearly $7,500, according to recent data. Some owe much more.

On the flip side, “transactors” use cards for convenience and to gain credit card rewards. They pay off their balances each month.

Recommended: Personal Loan vs Personal Line of Credit

How Revolving Debt Can Affect Your Credit

Both installment and revolving debt influence your score on the credit rating scale, which typically ranges from 300 to 850.

Your credit utilization ratio is a big factor. It’s the amount of revolving credit you’re using divided by the total amount of revolving credit you have available, expressed as a percentage.

Most lenders like to see a credit utilization rate of 30% or lower, which indicates that you live within your means and use credit cards responsibly.

The most important element of a FICO® Score is payment history. It accounts for 35% of your credit score, so even one late payment — a payment overdue by at least 30 days — will damage a credit score.

And unfortunately, late payments stay on a credit report for seven years.

Getting Out of Revolving Debt

Ideally, we’d all avoid interest on credit cards by paying off the balance each month. But if you do carry a balance, you have plenty of company. More than half of Americans carry a balance on active credit card accounts, recent data from the American Bankers Association shows.

If your revolving credit card debt has become unbridled, there are ways to try to corral it.

Debt Consolidation

Consolidating high-interest credit card balances into a lower-rate personal loan will typically save you money. Most personal loans come with a fixed rate, which results in predictable payments, and just one a month.

Installment loans do not affect credit utilization. So using a personal loan to pay off higher-interest revolving debt will lower your credit utilization ratio (a good thing) as long as you keep those credit card accounts open. Yes, closing a credit card can hurt your credit score.

Homeowners using a home equity loan or HELOC to consolidate high-interest credit card debt can substantially lower their monthly payments. However, their home will be on the line, and closing costs may come into play.

Another method, cash-out refinancing, is a good move only when a homeowner can get a better mortgage rate and plans to stay in the home beyond the break-even point on closing costs.

Balance Transfer

A balance transfer card is another way to deal with high-interest debt. Most balance transfer credit cards temporarily offer a lower interest rate or a 0% rate. But they may charge a balance transfer fee of 3% to 5%, and they require vigilance.

Make one late payment on the new card and you’ll usually forfeit the promotional APR and have to pay a sky-high penalty APR. You’ll need to keep track of the day when the promotional rate expires so any balance is not subject to the high rate.

Balance transfer credit cards are simply another form of revolving debt and can restart that cycle. If you find that you’re creating new debt, you might want to learn to spend wisely while still budgeting.

Debt Settlement

A debt settlement company may be able to reduce a pile of unsecured debt. There are many drawbacks to this route, though.

You will usually stop paying creditors, so mounting interest and late fees will cause your balances to balloon. Instead, you’ll make payments to an escrow account held by the debt settlement company. Funding it could take three or four years.

Your credit scores will be damaged, there is no guarantee of a successful outcome, it can be very expensive, and if a portion of your debt is forgiven, it probably will be considered taxable income.

This and bankruptcy options are considered last resorts. If you do go with a debt settlement company, know that those affiliated with the American Fair Credit Council agree to abide by a code of conduct.

Credit Counseling

A credit counseling service might be able to help. The Federal Trade Commission advises looking for a nonprofit program, but it adds that “nonprofit” does not guarantee that services are free, affordable, or even legitimate.

Look into credit counseling organizations affiliated with the National Foundation for Credit Counseling, National Association of Certified Credit Counselors, or Financial Counseling Association of America.

The Department of Justice keeps a list of approved credit counseling agencies. Also check with state and local consumer agencies.

A credit card hardship program addresses temporary setbacks. Not all card companies have one.

Budget Strategies

The fastest ways to pay off debt call for creating a budget to plan how much you will spend and save each month.

With the avalanche method, for example, you pay off your accounts in the order of highest interest rate to lowest. The 50/30/20 budget works for some people: Those are the percentages of net pay allotted toward needs, wants, and savings.

A free app that tracks your spending and offers financial insights could be of great help.

The Takeaway

Revolving credit offers flexibility but can devolve into runaway revolving debt. Credit card debt is especially pernicious, thanks to high interest rates charged to revolving balances. Debt consolidation, one approach to tame mounting revolving debt and the stress that comes with it, aims to lower your monthly payments.

Do you have high-interest credit card balances? You may be able to transfer that debt to a SoFi credit card consolidation loan.

A lower-interest loan will result in a lower monthly payment — and just one payment to keep track of each month. The personal loan is funded fast, has a fixed rate, and comes with no fees required.

Get a rate quote in just 60 seconds.

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

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.

This article is not intended to be legal advice. Please consult an attorney for advice.

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The cost to become a nurse or nurse specialist ranges from a few thousand dollars to hundreds of thousands. The cost rises with education level — from a two-year associate degree to a doctorate — but so do average earnings.

You already know that you’ll be in demand. More than 203,000 new openings for registered nurses alone are expected each year over the next decade.

Typical Nursing School Costs and Salaries

There are a number of routes to becoming a nurse or nurse assistant. Here are the main types, median pay (based on 2021 figures from the U.S. Bureau of Labor Statistics), and average educational costs.

Keep in mind that many students benefit from student loans and scholarships. Working nurses reaching for the next rung up may be eligible for tuition reimbursement from their current employer.

Certified Nursing Assistant (CNA)

Becoming a CNA may require a high school degree. You typically need to complete four to 12 weeks’ worth of courses and onsite training and pass an exam.

The cost of a CNA program varies, sometimes substantially, based on length and whether the program is state approved.

Average education cost: $600 to $2,000

Median pay: $30,310

Licensed Practical Nurse (LPN)

Also known as a licensed vocational nurse, an LPN must complete a state-approved educational program, which typically takes 12-18 months, and pass a licensing exam.

Tuition cost: as low as $1,000 to $5,000

Median pay: $48,070 per year

Recommended: Guide to Nursing Student Loans

Registered Nurse (RN)

Registered nurses need at least a two-year associate degree in nursing from an accredited college or technical school to practice.

Average in-state tuition cost: $3,500 per year at public institutions; $15,470 per year at private schools

RNs with an associate degree in nursing can seek a bachelor of science in nursing (BSN) in an RN-to-BSN program, which usually takes one to two years to complete.

Average cost of online RN-to-BSN: $25,000 to $80,000

The American Association of Colleges of Nursing considers the four-year Bachelor of Science in nursing the degree that provides the educational and experiential base for entry-level professional practice.

Average total in-state cost of a BSN: $40,000 to $80,000 at a public school; $60,000 to $120,000 at a private school

Median pay for all RNs: $77,600 per year

Advanced Practice Registered Nurse (APRN)

An advanced practice registered nurse holds at least a master’s degree in nursing. The four specialties are nurse practitioner, certified registered nurse anesthetist, certified nurse midwife, and clinical nurse specialist.
A Master of Science in nursing will take one to two years. The tuition cost is often higher than that to obtain a BSN.

Tuition cost of a Master of Science in nursing: $22,000 to $100,000 per year

Master’s-level programs still allow grads to join the APRN ranks, but a doctorate is quickly becoming the standard, according to the American Association of Colleges of Nursing.

Most research-focused doctoral nursing programs grant a Ph.D. The Doctor of Nursing Practice degree is more practice focused.

Cost of Doctor of Nursing Practice program after earning a master’s degree: $20,000 to $40,000

Median pay for nurse anesthetists, nurse midwives, and nurse practitioners: $123,780 per year

If you need to borrow in order to get through school, know that you’re in good company. Most nurses take out loans (federal and private student loans are available) to earn their professional titles.

Other Fees While Studying to Be a Nurse

The anatomy of a nursing degree consists of much more than tuition, which might be the figure on a website that catches your eye. Still, the cost of college tuition alone can be helpful in calculating the total tab: Multiplying the current tuition price by four will yield a rough estimate.

Myriad fees can add up to hundreds of dollars. Books and software can average $2,000 to $3,000 per academic year.

Other expenses to keep in mind include travel costs, living costs (especially if you’re unable to work while studying), lab fees, and the cost of a laptop.

Some nursing schools may also require students to take out liability insurance and get immunizations.

Before stepping into a new job or practice, aspiring RNs have to pass the National Council Licensure Examination test, better known as the NCLEX exam, which costs $200 per attempt. Taking the NCLEX exam a second (or even third or fourth time) time costs more in studying, coursework, and time.

How to Pay for Nursing School Without Going Broke

If just thinking about the cost of nursing school raises your blood pressure, know that student loans, grants, and scholarships are available.

Plus, some hospitals will help pay for nursing school. Duke University Health System employees, for example, may be eligible for tuition assistance.

Here are the main ways to pay for nursing school.

Federal Student Loans

Students can apply for federal aid — including student loans, scholarships, grants, and work-study — by completing the FAFSA, the Free Application for Federal Student Aid, each year.

It’s a good idea to submit the FAFSA even if you’re not expecting federal aid because other student aid programs piggyback off the application.

Many nurses plan to work for a qualifying nonprofit or government organization. They aim for the federal Public Service Loan Forgiveness program and one of the income-based repayment plans.

Scholarships and Grants

An aspiring nurse may want to use a scholarship search tool and seek out grants. Pell Grants go to undergraduate students only.

The American Association of Colleges of Nursing also maintains a grants and scholarship database for nursing schools.

The Nurse Corps Scholarship Program will pay your tuition, fees, and other educational costs if you agree to work at a critical shortage facility after graduation.

Recommended: Search for Scholarships and Grants by State

Private Student Loans

If federal aid does not cover the total cost of nursing school, private student loans are another option.

Private student loans are available from private lenders and generally allow students to borrow up to the school’s estimated annual cost of attendance. That includes tuition and fees, room and board (or living expenses), books, supplies, a personal computer, transportation, and child care.

Two- and four-year colleges are required to publish the cost of attendance on their websites.

It’s important to keep in mind that federal protections and programs like income-based repayment apply only to federal student loans.

Still, private student loans can fill gaps in need. Learn more in our guide to private student loans.

The Takeaway

How much is nursing school? Getting an associate degree can cost a few thousand dollars. The full path leading to a master’s or doctorate can cost hundreds of thousands. A lot will depend on whether the school is public or private, whether you’re an in-state student, and whether you receive scholarships or grants.

In any case, here’s to your health, and to heeding the call to become a nurse.

In addition to private student loans for all qualifying students, SoFi offers private graduate school loans for health care professionals that come with a variety of repayment options and no fees.

It’s quick and easy to get a rate quote on a SoFi private student loan.

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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.

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.

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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The average price of a new non-luxury vehicle topped $44,000 in July 2022, according to Kelley Blue Book. That number is dwarfed by the average for a luxury full-size SUV, at over $100,000.

With these prices, buying a new or used car usually involves getting an auto loan. And it’s no surprise that a big car payment can have a major impact on your monthly budget. If money is tight and your credit is excellent, you might be considering refinancing your auto loan.

We’ll discuss the pros and cons of refinancing an auto loan, as well as some alternative financing options you might not be aware of.

What Is a Car Refinance?

Refinancing a car loan essentially means applying for a new loan to pay off the balance on your existing auto loan. The goal is usually a lower interest rate or lower monthly payments. Some people who are unable to lower their rate can attempt to extend their repayment term in order to secure lower monthly payments.

Refinancing a car doesn’t automatically mean a lower interest rate or lower monthly payments. The rate you’re offered depends on your credit score and the lender. But if your credit history and debt-to-income ratio have improved since you took out your car loan, refinancing can potentially save you money. (If you need a refresher on auto loan lingo, this guide to auto loan basics can help.)

Pros of Refinancing a Car Loan

There are a number of situations when it might make sense to refinance a car loan.

1.   Your credit score has improved since you took out your current loan, making it possible to qualify for a lower interest rate on a new loan. If your financial history hasn’t improved since you first got your car loan, or if your credit score has gone down, refinancing might not be for you.

2.   You’re looking to lower your monthly payments, either with an interest-rate reduction or a longer loan term. How much can you save? If your current loan has a term of four years, or 48 months, and a monthly payment of $500, refinancing with a six-year term (60 months) can lower your payments to about $375 — enough to make refinancing worth it for many people.

3.   You want to work with a new lender. Some lenders don’t have the best customer service. That can become a big issue if you have to make a claim. And if you financed your car through the dealership, or if your original lender sold your loan to a third party, you may be better off choosing your own lender and refinancing.

4.   You want to become debt-free faster. If your income has increased or you’ve freed up more money in your budget, you might consider putting more toward your car loan. In that case, you can refinance with a shorter loan term. Your monthly payment will be higher, but you’ll get out of debt faster and own your car outright.

Recommended: Common Uses for Personal Loans

Cons of Refinancing a Car Loan

If you’re deciding whether refinancing is right for you, here are some important caveats:

1.   Extending your loan term on its own doesn’t save you money. Extending the length of a car loan at the same rate will result in lower monthly payments but more interest paid over the life of the loan. For example, a $15,000 auto loan with an APR of 7.5% and five years (60 months) remaining will cost $18,034 in total. Extending that loan to a seven-year period (84 months) will cost $19,326 — a difference of $1,292.

2.   You don’t qualify for a lower interest rate. Refinancing a car loan doesn’t always mean a lower interest rate. If your credit score went down since you took out the loan, you may only be eligible for a higher rate than your current car loan.

3.   You have a balance under $5,000. Most lenders won’t refinance a car loan that has less than $5,000 remaining. For some lenders, the cutoff for refinancing is $7,500.

4.   You have less than two years on your loan. Given the fees and hassle involved in refinancing, it will be very difficult to save money if you have less than 24 months left on your loan.

5.   Your loan has prepayment penalties. Check your existing loan agreement for a “prepayment penalty” clause. If you find one, your current lender can charge you a fee for paying off your loan early — which might cancel out much of your savings.

Recommended: Types of Personal Loans

Alternatives to Car Refinancing

Balance-Transfer Credit Card

Many balance transfer credit cards don’t require interest payments for several months. This move is only worthwhile if the auto loan balance can be paid off during the interest-free time, which can range from six to 21 months.

Be aware that some major credit card issuers don’t allow balance transfers on a loan. And some balance transfers come with a fee of 3% to 5%, which can wipe out much or all of your interest savings.

Personal Loan

A personal loan can be used for almost anything: unexpected medical expenses, home repairs, and yes, paying off an auto loan. Many personal loans are unsecured, meaning they’re not backed by collateral. That makes personal loan interest rates generally lower than credit cards but higher than auto loans.

Personal loan requirements vary by lender. Lenders look at your credit score to help determine your interest rate. The lower your score, the higher your rate. Borrowers also need to show proof of income and employment.

Lenders also look at your debt-to-income ratio (DTI). That’s the ratio of your gross monthly income compared to your monthly debt payments. Lenders prefer a DTI of 36% or lower.

If your car loan balance is over $5,000 and you’re able to get a lower interest rate or change the payback term, a personal loan can be worthwhile. A personal loan calculator can help you decide.

The Takeaway

Although a car loan refinance isn’t for everyone, it may be a good choice for drivers looking to lower their interest rate or change the length of the loan. Some drivers extend their loan term to secure lower monthly payments, but this means they’ll pay more in interest over the life of the loan. Other drivers who want to get out of debt fast may want to shorten their loan term. This will save them money in interest but raise their monthly payments. In some circumstances, it might be worthwhile to pay off your auto loan with a balance-transfer credit card or a personal loan.

If a personal loan of $5,000 to $100,000 sounds like it could be a good fit, check out SoFi fixed-rate personal loans. They come with no fees required and with terms of up to seven years.

Check your rate in just 1 minute.

FAQ

What are the advantages of refinancing your car?

There are a few advantages to refinancing a car loan, though they won’t all apply to every person’s situation. First, if your credit score has improved since you took out the loan, you may qualify for a lower interest rate — and that can save you significant money. Second, even if you don’t get a lower interest rate, refinancing can extend the payback period, lowering your monthly payments. (Just know that you’ll pay more in interest over the life of the loan.) Third, if your income has increased, you might actually want to refinance with a shorter payback term, which may save you money on interest and make you debt-free sooner.

When should you refinance a car loan?

We’re sorry to put it this way, but it depends. Technically, you can refinance a car loan at any time. But typically, you’ll want to wait until your credit score improves to take full advantage of the benefits of refinancing. That can take between six and 12 months. (Also, some lenders won’t consider your application until they’ve seen six to 12 months of your payment history.) On the flip side, you won’t save much money if you have less than two years left on the loan. That’s because lenders charge most of their interest up front.

How soon can you refinance your car loan after purchase?

Although some lenders won’t consider a refinance application until at least six months have passed, you can probably find someone to approve a refinancing as soon as your car rolls off the lot. On the other hand, it’s in the driver’s best interest to wait six to 12 months before refinancing. That way, your credit score has time to improve, qualifying you for a better interest rate — or at least not a lower rate.

Photo credit: Stocksy/Peter Meciar

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SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

¹SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc’s service. Vehicle Identification Number is confirmed by LexisNexis and car values are provided by J.D. Power. Auto Tracker is provided on an “as-is, as-available” basis with all faults and defects, with no warranty, express or implied. The values shown on this page are a rough estimate based on your car’s year, make, and model, but don’t take into account things such as your mileage, accident history, or car condition.

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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Once you begin looking for financing options, you may find your search leads you to multiple forms, including personal loans. One choice available to prospective borrowers is a short-term loan.

A short-term loan is a personal loan that can help with personal financial needs. But this type of loan may not fit every situation since it typically only provides limited funds. Read on to find out whether a short-term loan may help you meet your financial goals.

What Is a Short-Term Loan?

When you take out a short-term loan, you borrow funds to address immediate financial needs for a limited period. These loans serve a variety of functions, depending on your situation. For example, individuals may take out a short-term loan to keep them afloat until their next paycheck.

Or, someone running their own business who needs to cover small expenses may take out a short-term business loan.

Recommended: What Is a Personal Loan?

How Do Short-Term Loans Work?

Essentially, short-term loans operate on a short time scale. The approval process and repayment schedule occur quickly, usually within a year.

Average personal loan interest rates range from 5.99% to 36% APR, depending on the applicant’s creditworthiness. Short-term loans tend to be near the higher end of this scale, in addition to fees and penalties that may be charged by a lender.

However, lenders such as banks or credit unions offer varying personal loan terms and rates. So, it’s important to research and shop around before you apply for one.

What Can You Use a Short-Term Loan for?

Short-term loans can be used for many purposes when you need quick access to money and your cash flow is low. You can use the funds from a short-term loan to cover unexpected costs such as medical bills or for everyday expenses until you reach your next paycheck.

Businesses might use short-term loans in the form of merchant cash advances so they can replenish inventory or purchase new equipment even when short on cash. In this scenario, the business receives a lump sum of cash from a lender and repays it with a percentage of credit or debit card sales until the advance is paid in full.

Recommended: What Are Personal Loans Used For? And How to Apply

Example of a Short-Term Loan

A bank overdraft can be considered a short-term loan the bank provides when your account balance isn’t sufficient to pay for a purchase you’ve made. In this scenario, your account lacks funds to make a payment, but the bank lends you that money. In return, you pay a fee.

How Long Is a Short-Term Loan?

Every loan varies based on the lender and applicant. Often, short-term loans mature within a year or less. However, it is possible to find one that extends up to two years. Any loan term longer than that qualifies as either a medium-term or long-term personal loan.

Characteristics of Short-Term Loans

Short-term loans have unique features, such as:

•   Smaller borrowing amounts compared to other loans.

•   Typically offered as unsecured loans.

•   High annual percentage rates (APRs).

•   Short repayment periods.

•   Sometimes weekly payments are required.

Benefits of a Short-Term Loan

Short-term loans come with certain disadvantages, mostly due to their high interest rates. But they can be helpful if you find yourself in a tight spot. Some benefits include:

High Approval Rates

Since short-term loans only provide limited funds, the lending requirements may be easier to meet. Because of that, more applicants have a chance of approval. Even though you may not need a stellar credit score, you may still have some trouble if you have a low credit score. Your lender may ask for proof of a steady income, among other criteria.

Online Application

Short-term loans are also easy to access. Lenders often offer online applications, so there’s no need to visit a brick-and-mortar office. Applications are typically easy to fill out, taking only minutes to complete.

Quick Access to Funds

The short-term loan processing time is typically fast. As a result, you will probably receive approval and loan proceeds faster than you would for a long-term loan. So they might be a good option if you have an unexpected expense you need to pay as soon as possible.

Lower Accrued Interest

While short-term loans can come with high interest, they generally have a short time frame. Because of that, there are fewer total interest payments. As long as you pay on time, you could save money on built-up interest with a short-term loan.

Credit Score

As mentioned above, you don’t typically have to have an excellent credit score to get approved for a short-term loan. Applicants with average credit scores may also be able to usually qualify for a short-term personal loan.

Unsecured Personal Loan

When it comes to the difference between a secured vs. unsecured loan, a secured loan means more risk on the borrower’s part. That’s because a secured loan requires collateral, such as your car or your home. But most lenders don’t require collateral for a short-term personal loan because it doesn’t carry enough risk.

Recommended: Using Collateral on a Personal Loan

Disadvantages of a Short-Term Personal Loan

While short-term loans are easier to qualify for, they may not be the right choice for everyone. Here are some drawbacks to be aware of:

Lower Limit

For borrowers who need a significant amount of money, a short-term personal loan may not be the right choice. The borrowing limits for these types of loans tend to be small, sometimes just a few hundred dollars, to make it easier to pay off in a short amount of time.

May Lead To Cycle of Debt

Because of the high-interest rate and steep fees attached to short-term loans, they really aren’t long-term solutions. They might be an option in an emergency but can lead to a cycle of debt if relied on too often.

Types of Short-Term Loans

There are a few variations on the short-term loan available to you. The type of personal loan you apply for will generally depend on the amount of cash you want and how quickly you need it. Here are some worth considering:

Payday Loans

A payday loan is a short-term loan that some people use to tide themselves over financially until their next paycheck. The funds are meant to be repaid at the time of the borrower’s next payday — thus, the name. However, payday loan issues arise if the borrower can’t repay the loan in the short time frame required.

Installment Loans

Installment loans give borrowers a way to access a lump sum of money that’s repaid in monthly installments over a set time frame. A fixed-rate loan with steady monthly payments makes budgeting during the repayment period more convenient.

Lines of Credit

A line of credit is similar to a credit card. You receive a credit limit and can tap into the line of credit as needed. Funds can be taken out in installments of the amount needed at the time they’re needed. But you can’t surpass your limit, which the lender bases on your creditworthiness.

Recommended: Personal Loan vs Personal Line of Credit

Merchant Cash Advance

Merchant cash advances are used by businesses that make mainly debit or credit card sales. As a means to secure cash, the business will borrow a lump sum, which is advanced against the business’s daily sales. The lender is then repaid through a certain percentage of the business’s daily sales.

Invoice Financing

Similar to merchant cash advances, invoice financing is a type of short-term loan that can help business owners meet financial needs. The business submits unpaid invoices, i.e., accounts receivable, to a lender as collateral. The lender charges a fee for the financing and can collect on the invoices if the borrower defaults.

Short-Term Loan vs Long-Term Loan

It’s always important to explore your options. Short-term loans probably aren’t the right option if you need a large amount of funds in a lump sum or will need to periodically draw small amounts from a set amount of credit. In these situations, a long-term loan might be a better solution.

Long-term personal loans can sometimes have high-interest rates depending on the applicant’s credit score and other factors used by the lender. They may not require collateral, which makes them seem risky to lenders.

Here’s a breakdown of how these two loans stack up against each other:

	Short-Term Loans	Long-Term Loans
Loan Amount	Typically, a few hundred to a few thousand dollars, but can be up to $100,000	Depending on the lender, amounts can be a few thousand dollars to $200,000 or more
Loan Term	A couple of weeks to 18 months	Up to 25 years
Interest	High interest rates	Competitive interest rates
Eligibility	May qualify with bad credit	Stringent qualifications such as good credit

Typical Requirements to Get a Short-Term Loan

Requirements to be approved for a short-term loan vary by lender, but all lenders will evaluate your creditworthiness in some way. Generally, a higher credit score will likely secure you better terms and interest rates. You also need to be able to show your lender a range of personal and financial information such as proof of identity, verification of employer and income, and proof of current address.

Can I Get a Short-Term Loan With Bad Credit?

While short-term loans don’t typically require excellent credit, the higher an applicant’s credit score, the better their chances of approval. A lender may also offer more favorable interest rates and terms to a borrower with a higher score. Since short-term loans are often for relatively small amounts of money, requirements tend to be laxer.

Personal Loan Options From SoFi

SoFi offers personal loan options to fit a variety of financial situations and needs. With competitive interest rates and a range of terms, there may be a SoFi Personal Loan that works for you. SoFi does not charge fees on personal loans, so you only repay the loan principal and interest.

The Takeaway

Short-term personal loans vary based on your financial situation and the lender you use. Some lending institutions use high-interest rates and hidden fees that can add to the overall cost of a short-term personal loan. That doesn’t make a personal loan bad, but it’s important to be aware of what you’re agreeing to when you borrow money.

SoFi may have a personal loan that will work for your unique financial situation and needs. Checking your rate takes 60 seconds and won’t affect your credit score.^*

Research your personal loan options today

Photo credit: iStock/kitzcorner

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

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

SOPL1121035

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In 2020, the average health insurance deductible was $4,364 for individuals, and a staggering $8,439 for families. (Thanks a lot, high-deductible health plans.) That’s a lot to pay upfront before insurance kicks in. What many people don’t know is that the medical bills you receive aren’t always set in stone. You may be able to work with the hospital, doctor, or ambulance service to negotiate a lower price.

We’ll explain how to research your medical bills, dispute overcharges, and negotiate a more fair and affordable price.

Preparing for Medical Bill Negotiation

Save Your Explanation of Benefits

Soon after you’ve received medical care, you should receive an explanation of benefits (EOB) from your insurance company. It may look like a bill, but it isn’t — it’s a breakdown of the following:

•   Medical services you were provided

•   What the doctor or hospital charged

•   What your insurance covered (and didn’t cover)

•   How much your insurance agreed to pay

•   The amount you’re expected to pay

The EOB can help you be sure you’re receiving the full benefits to which you are entitled under your insurance plan. And it can be useful to compare the information your insurance company has to the actual bill(s) you receive. Your EOB may even offer a better description of the services you received than what’s on your medical bills.

If your EOB seems incomplete, it may be because it doesn’t reflect the most recent charges or payments. If you’re confused or suspect an error, call the number listed on the EOB to get help.

Be sure to save your EOB when it comes in the mail, or download it when you receive an email that it’s ready. You may need it when you speak to your insurance company or doctor.

Recommended: Types of Personal Loans

Be Clear About Who’s Billing You

One visit to the emergency room can result in multiple medical tabs. You might be billed by the ambulance, the hospital, and the specialist who saw you.

Adding to the complexity, the invoice you receive may come from a doctor or hospital’s internal billing department, or it might come from a company that’s been hired to handle all invoicing and payments for a hospital, doctor, or group practice.

To avoid mix-ups, carefully track who sent each bill as it arrives, note if the billing was outsourced or done in-house, and mark down who you talked to about errors or making payments. Don’t forget to keep a copy of your EOB with those statements (either paper or digital) so you’re always prepared with the right information.

Don’t Delay Getting Help

As soon as you realize there’s a problem with a bill — either because it’s incorrect or it’s just too high for you to manage — get in touch with the provider who sent it.

As long as your debt remains with the original service provider, medical bills won’t show up on your credit report. But if the bill goes to collections, it can affect your credit score. You may also have fewer options for negotiating once the debt goes to collections.

Ways To Negotiate a Medical Bill

Can you really negotiate medical bills? Absolutely, and there are a few different strategies you can adopt when talking down healthcare costs. If one tactic fails, don’t give up — simply move on to another. The most effective method for negotiating a hospital bill may depend on your situation and the doctor. Here are a few to consider:

Dispute Any Errors

Errors on medical bills are surprisingly common. Look for things like duplicate charges, charges for procedures that didn’t happen, errors in your insurance information, mistakes regarding whether a provider was in-network or out-of-network, and misstated quantities of medications and supplies.

Billing codes for diagnoses and treatments can also be entered wrong, which can confuse the insurance company and slow down or stop payment on a bill. If you suspect your bill was miscoded (and you’re feeling motivated), you can look them up online. There are two different databases:

•   Diagnosis codes, called ICD codes (for International Classification of Diseases) can be found on the Centers for Disease Control website.

•   Treatment and service codes, called CPT codes (for Current Procedural Terminology), are available on the Centers for Medicare and Medicaid website. Just accept the usage waiver, and a spreadsheet of codes will download automatically.

A billing representative can answer almost any questions you have regarding your bill, so don’t hesitate to ask what certain line items are. If you catch any errors that inflate your bill, you may want to file a dispute to get the charges reduced or eliminated.

Offer To Pay a Lump Sum

Many hospitals prefer to get a slightly lower payment at the time of billing than wait for a bill to drag through collections. You can offer to pay the bill immediately — ideally in cash rather than by credit card — if the provider will accept less than the total amount due.

A good rule of thumb is to start high when suggesting a discount, leaving room for the provider to negotiate downward. It’s perfectly reasonable to start by requesting a 50% discount. Even if you don’t pay the entire bill at once, ask whether the provider offers a self-pay discount for those paying out-of-pocket.

Show Evidence of Overcharges

This is where doing your homework comes in handy. If you can show evidence that you were charged more than the average price points in your area, you may have leverage for requesting a discount on your bill. Besides checking online resources and calling competitors, you can also cite the amount Medicare allows for the service. Frame your request as a desire to pay what is “usual, customary, and reasonable”

Negotiate a Payment Plan

Some facilities will agree to a payment plan that replaces the original bill’s due date with a schedule that’s feasible for you. See if you can sign on to a plan with zero interest. If that’s not an option, you can try asking for a lower interest rate. And just because you negotiate a payment plan doesn’t mean you shouldn’t try asking for a discount on the total as well.

Research Hospital and Government Resources

When you’re sick or recovering, online research and phone calls can exhaust your limited energy reserves. But you don’t have to go it alone. There are several resources you may be able to tap for assistance.

Hospital Help

Hospitals often offer discounts or financial relief programs, such as forgiveness, for patients whose income falls below a certain threshold and for uninsured patients. The hospital may refer to this help as “charity care,” “bridge assistance,” or simply “financial assistance.”

Even if you don’t meet income guidelines for government programs, it’s worth checking on what’s available at the hospital level.

Government Financial Assistance

If you weren’t on Medicaid but would have qualified for it when the original medical charges were generated, you may be able to get retroactive help. Depending on the state you live in, Medicaid (a federally authorized, state-administered insurance program for low-income individuals) may cover bills received up to three months before the month you apply for the program. You can check your eligibility on Medicaid.gov

Ask for an Advocate

When you need additional help negotiating with your insurance company or medical provider, consider a patient advocacy organization, such as the Patient Advocate Foundation at PatientAdvocate.org, or state or local consumer protection agency at USA.gov/State-Consumer

Come Prepared To Negotiate

If you’re new to negotiating, here are some basics that can help:

Try to Stay Calm and Polite

Do your best to keep your emotions under control while communicating with billing department representatives. Expressing your requests in a clear and collected way will make it easier for them to understand your situation and can improve the chances that the representatives you deal with will want to help. If you’re angry or despairing, cool off before picking up the phone.

Do Your Homework

You may have a better chance of succeeding if you’ve researched the average costs of the treatments you received — especially if you use data that’s specific to your area. You can find this information with a little online searching or by consulting resources like HealthcareBluebook.com

Don’t Underestimate the Power of Empathy

Explain economic or other hardships you’re facing and why you’re struggling with repayment. Perhaps you’ve recently lost your job, or you just got out of college and you’re on your own for the first time. Calling on the other person’s sense of compassion and humanity may help your cause.

Write Down Everything

Keep clear notes with the dates, names, and affiliations for every phone call you have, as well as reference numbers if applicable. It’s easy to forget what you spoke about and with whom. Keep everything in one place. And ask to receive the final details of any agreement you make in writing.

Don’t Hesitate to Escalate

Start with the contact phone number on your bill. But if the person you’re speaking with seems unwilling or unable to help, don’t be afraid to ask for a supervisor. Be prepared to explain the situation, over and over again, to each person you speak with.

If all else fails, apply a bit of pressure. While remaining courteous, state that you probably won’t use this provider or facility again if they can’t meet you halfway. Mention that you’ll share your negative experience with your network, including on social media.

What Happens If You Don’t Pay Medical Bills?

The worst thing you can do with overwhelming medical bills is ignoring them. If you don’t make a payment by the due date on your bill, what happens next depends on the laws in your state.

After a few months, if you still haven’t paid, the hospital may pass your bill on to a debt collections agency, and that agency may report the past due balance to the credit bureaus that put together your credit reports. From there, individuals with medical debt have about six months to fix insurance or billing problems.

Once that grace period is over, however, an unpaid bill can impact your credit score for years. And if a court issues a judgment in the hospital’s favor, your wages could be garnished. This means money could be taken directly from your paycheck and sent to the creditor, even without your consent.

Borrowing Money To Pay Medical Bills

Even if you use all the strategies described above, negotiation doesn’t always work. If you can’t get your bill reduced or eliminated by negotiating, there are other options, such as taking on debt by using a credit card or taking out an unsecured personal loan.

Recommended: Secured vs. Unsecured Personal Loans

Credit Card

Using a credit card to pay medical bills is not generally recommended because of their typically high-interest rates. However, if you have exhausted all negotiating tactics and are still having trouble paying your outstanding balance after the six months grace period given by credit reporting agencies, it might be better to pay the balance with a credit card than to have your account sent to collections and see your credit score drop.

Recommended: Average Credit Card Interest Rates

Personal Loan

Another option you might consider is taking out an unsecured personal loan to pay your medical bills. Personal loans interest rates can be significantly lower than those of credit cards, particularly if you have a healthy credit score. And since a fixed-rate personal loan is installment debt — in contrast to the revolving debt of credit cards — the balance is paid on a fixed payment schedule.

If you qualify for a personal loan with a manageable interest rate and monthly payment, you can use it to pay off your medical bills immediately and avoid accruing late fees or having the bill move into collections. SoFi’s personal loan calculator can help you run the numbers.

Recommended: How To Get Approved for a Personal Loan

The Takeaway

Medical bills can be stressful, especially when added to the stress of having medical treatment. But it’s best not to ignore them. Armed with the right tactics, you may be able to negotiate the amount due or get assistance to make the expense manageable.

If that doesn’t work, a SoFi personal loan can prevent medical bills from dragging you into a vicious cycle of debt. An unsecured personal loan from SoFi offers competitive, fixed rates; no fees required; and loan terms that can work with a variety of budgets.

Pay for medical costs — without sinking into high-interest debt.

FAQ

Do medical bills affect your credit?

As long as your medical bill remains with the original doctor or facility, it won’t show up on your credit report. But if the bill goes to collections, it can affect your credit score.

Should I pay a medical bill that’s gone to collections?

Yes, paying off medical collections will remove the negative information from your credit report and help you build up your credit again. Under new guidelines, paid medical collections will no longer remain on your report.

How long do I have to pay a medical bill?

Medical bills are typically due 30 days from the date of the bill. Doctors and facilities usually send several rounds of bills before turning the debt over to a collections agency. If you’re struggling to pay your medical bills, call the doctor or facility to negotiate either a lower price or a payment plan that you can afford.

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

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

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.

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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