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Can a Parent PLUS Loan Be Transferred to a Student?

If you took out a federal Parent PLUS loan to help your child through college, you may be wondering if it’s possible to transfer the loan into your child’s name now that they’ve graduated and have an income. While there are no federal loan programs that allow for this, there are other options that let your child take over the loan.

Read on to learn how to transfer a Parent PLUS loan to a student.

Key Points

•   Transferring a Parent PLUS loan to a student involves refinancing through a private lender.

•   The student must apply for a new loan to pay off the Parent PLUS loan.

•   Once refinanced, the student becomes responsible for the new loan’s repayments.

•   Refinancing can potentially lower the interest rate and monthly payments.

•   The process is irreversible, making the student solely responsible for the debt.

How to Transfer a Parent PLUS Loan to a Student

There are no specific programs in place to transfer a Parent PLUS loan to a student, but there is a way to do it. To make the transfer of the Parent PLUS loan to a student, the student can apply for student loan refinancing through a private lender. The student then uses the refinance loan to pay off the Parent PLUS loan, and they become responsible for making the monthly payments and paying off the new loan.

Here’s how to refinance Parent PLUS loans to a student.

Gather Your Loan Information

When filling out the refinancing application, the student will need to include information about the Parent Plus loan. Pull together documentation about the loan ahead of time, including statements with the loan payoff information, and the name of the loan servicer.

Compare Lenders

Look for lenders that refinance Parent PLUS loans (most but not all lenders do). Then shop around to find the best interest rate and terms. Many lenders allow applicants to prequalify, which doesn’t impact their credit score.

Fill Out an Application

Once the student has found the lender they’d like to work with, they will need to submit a formal application. They can list the Parent PLUS loan on the application and note that it is in their parent’s name, and include any supporting documentation the lender requires.

Eligibility Requirements for Refinancing a Parent PLUS Loan

To refinance a Parent PLUS loan to a student, the student should first make sure that they qualify for refinancing. Lenders look at a variety of factors when deciding whether to approve a refinance loan, including credit history and credit score, employment, and income. Specific eligibility requirements may vary by lender, but they typically include:

•   A credit score of at least 670 to qualify for refinancing and to get better interest rates

•   A stable job

•   A steady income

•   A history of repaying other debts

If approved for refinancing, the student can pay off the Parent PLUS loan with the refinance loan and begin making payments on the new loan.

Advantages of Refinancing a Parent PLUS Loan

The main advantage of refinancing a parent student loan like a Parent PLUS loan is to get the loan out of the parent’s name and into the student’s. However, there are other potential advantages to refinancing student loans, including:

•   Lowering the interest rate

•   Reducing the monthly payments

•   Paying off the loan faster

•   Helping the student to build a credit history

Disadvantages of Refinancing a Parent PLUS Loan

While it may be beneficial to refinance a Parent PLUS loan into a private loan, there are some disadvantages to Parent PLUS vs. private loans that should be considered. The drawbacks include:

•   Losing federal student loan benefits, including income-driven repayment, deferment options, and Public Service Loan Forgiveness

•   Possibly ending up with a higher interest rate, especially if the student has poor credit

•   The student is solely responsible for the monthly payment, which might become a hardship if their income is low

If you do choose to refinance your Parent PLUS loan, you should note that this process is not reversible. Once your child signs on the dotted line and pays off the Parent PLUS loan, the debt is theirs.

Parent PLUS Loan Overview

The Department of Education provides Parent PLUS loans that can be taken out by a parent to fund their child’s education. Before applying, the student and parent must fill out the Free Application for Federal Student Aid (FAFSA®).

Then the parent can apply directly for a Parent PLUS loan, also known as a Direct PLUS Loan.

The purpose of a Parent PLUS loan is to fund the education of the borrower’s child. The loan is made in the parent’s name, and the parent is ultimately responsible for repaying the loan. Parent PLUS loans come with higher interest rates than federal student loans made to students, plus a loan fee that is the percentage of the loan amount. These loans are not subsidized, which means interest accrues on the principal balance from day one of fund disbursement.

Parents are eligible to take out a maximum of the cost of attendance for their child’s school, minus any financial aid the student is receiving. Payments are due immediately from the time the loan is disbursed, unless you request a deferment to delay payment. You can also opt to make interest-only payments on the loan until your child has graduated.

Pros and Cons of Parent PLUS Loans

Parent PLUS loans allow you to help your child attend college without them accruing debt.

Pros of Parent PLUS loans include:

You can pay for college in its entirety. Parent PLUS loans can cover the full cost of attendance, including tuition, books, room and board, and other fees. Any money left over after expenses is paid to you, unless you request the funds be given directly to your child.

Multiple repayment plans available. As a parent borrower, you can choose from three types of repayment plans: standard, graduated, or extended. With all three, interest will start accruing immediately.

Interest rates are fixed. Interest rates on Parent PLUS loans are fixed for the life of the loan. This allows you to plan your budget and monthly expenses around this additional debt.

They are relatively easy to get. To qualify for a Parent PLUS loan, you must be the biological or adoptive parent of the child, meet the general requirements for receiving financial aid, and not have an adverse credit history. If you do have an adverse credit history, you may still be able to qualify by applying with an endorser or proving that you have extenuating circumstances, as well as undergoing credit counseling. Your debt-to-income ratio and credit score are not factored into approval.

Cons of Parent PLUS loans include:

Large borrowing amounts. Because there isn’t a limit on the amount that can be borrowed as long as it doesn’t exceed college attendance costs, it can be easy to take on significant amounts of debt.

Interest accrues immediately. You may be able to defer payments until after your child has graduated, but interest starts accruing from the moment you take out the loan. By comparison, federal subsidized loans, which are available to students with financial need, do not accrue interest until the first loan payment is due.

Loan fees. There is a loan fee on Parent PLUS loans. The fee is a percentage of the loan amount and it is currently (since October 2020) 4.228%.

Can a Child Make the Parent PLUS Loan Payments?

Yes, your child can make the monthly payments on your Parent PLUS loan. If you want to avoid having your child apply for student loan refinance, you can simply have them make the Parent PLUS loan payment each month instead.

However, it’s important to be aware that if you do this, the loan will still be in your name. If your child misses a payment, it will affect your credit score, not theirs. Your child also will not be building their own credit history since the debt is not in their name.

Parent PLUS Loan Refinancing

As a parent, you may also be interested in refinancing your Parent PLUS loan yourself. Refinancing results in the Parent PLUS loan being transferred to another lender — in this case, a private lender. With refinancing, you may be able to qualify for a lower interest rate. Securing a lower interest rate allows you to pay less interest over the life of the loan.

When you refinance federal Parent PLUS loans, you do lose borrower protections provided by the federal government. These include income-driven repayment plans, forbearance, deferment, and federal loan forgiveness programs. If you are currently taking advantage of one of these opportunities, it may not be in your best interest to refinance.

Parent Plus Loan Consolidation

Another option for parents with Parent PLUS loans is consolidation. By consolidating these loans into a Direct Consolidation Loan you become eligible for the income-contingent repayment (ICR) plan, which is an income-driven repayment (IDR) plan. (Parent PLUS loans are not eligible for IDR plans otherwise.)

On an ICR plan, your monthly payments are either what you would pay on a repayment plan with a fixed monthly payment over 12 years, adjusted based on your income; or 20% of your discretionary income divided by 12 — whichever is less.

One thing to consider if you consolidate a Parent PLUS loan is that you may pay more interest. In the consolidation process, the outstanding interest on the loans you consolidate becomes part of the principal balance on the consolidation loan. That means interest may accrue on a higher principal balance than you would have had without consolidation.

Alternatives to Transferring a Parent PLUS Loan

Instead of learning how to transfer Parent PLUS loans to a student, you could opt to keep the loan in your name and have your child make the monthly loan payments instead. But as noted previously, if you go this route and your child neglects to make any payments, it affects your credit not theirs. Also, when the loan remains in your name, the child is not building a credit history of their own.

You could also choose to consolidate Parent PLUS loans, as outlined above. Just weigh the pros and cons of doing so.

And finally, you could refinance the loan in your name to get a lower interest rate or more favorable terms, if you qualify.

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


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

FAQ

What if I can’t pay my Parent PLUS loans?

If you are struggling to pay your Parent PLUS loan, get in touch with your lender right away. One option they may offer is a deferment or forbearance to temporarily suspend your payments. Keep in mind that with forbearance, interest will continue to accrue on your loan even if payments are postponed.

You could also consider switching the repayment plan you are enrolled in to an extended repayment plan, or refinancing your loan in order to get a lower interest rate.

Can you refinance a Parent PLUS loan?

Yes, you can refinance a Parent PLUS loan through a private lender. Doing so will make the loan ineligible for any federal borrower protections, but it might allow you to secure a more competitive interest rate or more favorable terms. You could also opt to have the refinanced loan taken out in your child’s name instead of your own.

Is there loan forgiveness for Parent PLUS loans?

It is possible to pursue Public Service Loan Forgiveness (PSLF) with a Parent PLUS loan. To do so, the loan will first need to be consolidated into a Direct Consolidation loan and then enrolled in the income-contingent repayment (ICR) plan.

Then, you’ll have to meet the requirements for PSLF, including 120 qualifying payments while working for an eligible employer (such as a qualifying not-for-profit or government organization). Note that eligibility for PSLF depends on your job as the parent borrower, not your child’s job.

What happens if a Parent PLUS loan is not repaid?

If you can’t make the payments on a Parent PLUS loan, contact your loan servicer immediately to prevent the loan from going into default. The loan servicer can go over the options you have to keep your loan in good standing. For instance, you could change your repayment plan to lower your monthly payment. Or you could opt for a deferment or forbearance to temporarily stop the payments on your loan.

Can a Parent PLUS loan be consolidated with federal loans in the student’s name?

No, Parent PLUS loans cannot be consolidated with federal student loans in the student’s name. You can only consolidate Parent PLUS loans in your name.


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

SoFi 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 .


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.

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.


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 Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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How the UltraFICO Credit Score Works

UltraFICO® is a scoring model that includes banking activity not normally factored into your credit score. By incorporating information from your savings and checking accounts, you may be able to build your FICO credit score and, in turn, your chances of getting approved for credit, as well as qualifying for better rates.

The most widely used credit scoring model is the FICO® score which tells lenders how much risk you represent as a borrower. Your score is important because it can determine what financial products and services, as well as interest rates, you can qualify for. If you have a low (or no) score, however, you may be able to positively impact it using the UltraFICO® Score.

Here’s what you need to know about UltraFICO.

Key Points

•   UltraFICO is a credit score that includes banking activity to potentially positively impact a person’s score.

•   UltraFICO can help individuals with poor or minimal credit history, provided they manage their banking well.

•   UltraFICO could help those with borderline scores build their score and qualify for credit or more favorable interest rates.

•   Experian is the only provider of UltraFICO.

•   Positive bank balances and behavior can help build an UltraFICO score.

How Does UltraFICO Work?

UltraFICO is a tool that allows you to voluntarily include banking activity not normally considered by the credit bureaus in your credit score calculation.

To understand how UltaFICO works, it helps to understand how your FICO credit score is calculated. While FICO keeps their exact methodology under wraps, your score, which can range from 300 to 850, is primarily based on the following criteria:

•   Debt payment history (35% of your score) This looks at whether you make your debt payments on time. Late payments can negatively impact your score. So can accounts in collections or a bankruptcy.

•   Credit utilization (30%) Also known as amounts owed, this is how much of your available revolving credit you’re currently using. Utilizing less of your available credit at any one given time is generally better than using more. Ideally, you want to aim to use 30% or less of your available credit.

•   Length of credit history (15%) Having a longer history with creditors is better than being new to credit.

•   New credit (10%) Applying for new credit cards or loans (and initiating a hard credit pull) can temporarily lower your score. For this reason, it’s a good idea to research credit card offerings and eligibility requirements before applying for one.

•   Credit mix (10%) Having a mix of different types of credit (such as a credit card and an installment loan like a mortgage) can positively influence your score.

The UltraFICO scoring model expands the information included in your credit score by considering such factors as:

•   Length of time you’ve had your bank accounts open (checking, savings and money market)

•   Your activity in those bank accounts

•   Proof that you have cash in those accounts (ideally, at least $400)

•   Whether your overdraft often

•   If you have direct deposit of your paycheck

How Do You Get an UltraFICO Score?

If you apply for new debt, such as a credit card or personal loan, and are denied because your score is low or you don’t have enough credit history to generate a FICO Score, you can ask the lender to pull your UltraFICO score. You might also ask a lender to pull your UltraFICO score if you are offered a credit card or loan with a high interest rate in the hopes of getting a better offer.

In some cases, a lender might invite you to participate in the UltraFICO scoring process after you submit an application for a credit card or loan. This is most likely to happen if your score is on the edge of acceptance or there simply isn’t enough information in your credit report to generate a FICO score.

If a lender offers UltraFICO, you will be directed to a secure site to answer questions about your banking relationships. By doing this, you’re allowing the credit bureau to look at your checking, savings, and money market accounts in order to try to get the boost you need to qualify for credit.

Recommended: How to Apply for a Personal Loan

Who Will UltraFICO Benefit?

The UltraFICO score was designed to broaden access to credit for those who are just starting to build their credit profile, as well as those who are those who are trying to reestablish their credit after financial challenges. They also say that the new scoring model will be able to help borrowers who are near score cut-offs, giving them access to credit they wouldn’t otherwise qualify for.

While UltraFICO isn’t likely to dramatically change the outcome of your credit card or loan application, it might be enough to build your score into the next higher range which may make a difference if you were on the borderline of acceptance.

You’ll want to keep in mind, however, that UltraFICO is only available through some lenders. In addition, only Experian® offers UltraFICO. Your credit reports with the other two consumer credit bureaus — Equifax® and TransUnion® — won’t be affected by this service.

You can, of course, look into other ways to build your credit score, such as reducing your credit utilization ratio and always making debt payments on time.

Recommended: Typical Personal Loan Requirements

The Takeaway

Your credit score can make or break your ability to get a credit card, mortgage, or any type of personal loan. It can also determine the interest rate you’re offered, which can make a big difference in the total cost of a loan. The scoring model UltraFICO could help build your FICO score if you have consistently maintained positive bank account balances. However, it’s not offered by all lenders and creditors, so it isn’t always an option. Fortunately, there are other ways to positively impact your credit profile, such as keeping your credit utilization low, and always paying debt (such as your credit card bill or personal loan installment) on time.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.


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

FAQ

What is an UltraFICO score?

An UltraFICO score is a type of credit score that incorporates data from your bank accounts (checking, savings, and money market) to possibly positively impact your standard FICO score. It may benefit individuals who don’t have much of a credit history or have scores in the lower ranges.

Is UltraFICO from Experian or TransUnion?

UltraFICO is only available through Experian, not through TransUnion or Equifax.

How rare is it to have an 800 credit score?

Perhaps surprisingly, an 800 credit score is not extremely rare, but it’s still considered exceptional. Almost one out of four Americans have credit scores in the 800-850 range, which is considered excellent.


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.


*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

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


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


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 Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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Typical Personal Loan Requirements Needed for Approval

Personal loans can be used for almost any purpose. In fact, they are one of the most flexible ways to borrow money, without the high interest rates that credit cards charge. So, what’s stopping people from borrowing money for a yacht and cruising away to the Mediterranean, never to return? Simple: They need to meet the lender’s personal loan requirements.

Personal loan qualifications vary by lender — there is no universal list. However, there are certain red and green flags that lenders commonly look for in a borrower’s credit history. They are compiled here to help you prepare before you apply.

Key Points

•   Personal loans can be used for various purposes and offer flexibility without high interest rates.

•   Lenders may consider credit score, collateral, proof of income and employment, debt-to-income ratio, and origination fees when approving personal loans.

•   A higher credit score can increase the likelihood of loan approval and favorable interest rates.

•   Collateral may be required for secured loans, while unsecured loans don’t need collateral but can have higher interest rates.

•   Proof of income and employment is necessary to ensure the borrower’s ability to repay the loan.

1. Credit Score

One of the key metrics lenders look at when evaluating an applicant for any loan is credit score. There’s no universal minimum credit score for personal loans. However, in general, the higher the credit score, the more likely lenders are to approve a loan and give the borrower a more favorable interest rate. The lower your interest rate, the less money you’ll pay over time. Many lenders consider a score of 670 or above to indicate solid creditworthiness.

If your credit score is lower, you might still qualify for a personal loans for bad credit, but the terms may not be as favorable. Some lenders specialize in working with borrowers with lower credit scores, although you might face higher interest rates or stricter repayment terms.

If you apply for prequalification, many lenders will run a soft credit check (which doesn’t affect your credit score) in order to see if you’re a good candidate for a personal loan. As the process moves forward, and an applicant actually applies for a personal loan, lenders will usually do a hard credit check (that is, a deep dive into your credit history). A hard credit check may knock several points off your credit score and can continue to impact your score for a few months.

Most lenders review your credit history as well as your credit score, plus other financial factors like your income, to create a holistic view of your financial situation.

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

2. Collateral

There are two types of personal loans: collateralized and uncollateralized. Collateral is something of value that is used as security for repayment of a loan. In the event of default, the bank or lender may be able to seize the property from the borrower.

When a loan requires collateral, it’s referred to as a “secured loan.” When it does not, it is called an “unsecured loan.” From a lender’s perspective, unsecured personal loans are riskier. Therefore, the requirements for secured and unsecured loans are typically different.

Typically, when people talk about personal loans, they’re referring to unsecured personal loans. Because these loans aren’t backed by collateral, they may have higher interest rates or be harder to qualify for than secured personal loans. Some lenders and banks require collateral for personal loans. Anything from cars to property can be used as collateral, and can be seized in the event that you fail to make your loan payments.

It’s a tradeoff that’s worth weighing before you apply for a personal loan. If you put your property on the line, you could lose it. But taking that risk may qualify you for a lower interest rate.

On the flip side, using collateral on a personal loan can come with hidden costs. For example, some lenders may require you to have additional insurance in the event the collateralized property is damaged.

Awarded Best Personal Loan by NerdWallet.
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3. Proof of Income and Employment

Most lenders will want to be sure that you are gainfully employed and have sufficient income to repay the loan. Proof of income and employment can be required by many lenders to verify how you will repay the loan. This is one way they can determine the likelihood that you’ll pay it back. Plus it can affect things like the interest rate or payback term you’re offered.

Like most personal loan requirements, “proof of income” can mean different things for different lenders. Some lenders require a signed letter from your employer, while others need pay stubs or W2s.

If you are self-employed and want a personal loan, you might need to submit a copy of your tax returns or provide bank deposit information. If you’re considering applying for a personal loan while unemployed, you’ll want to carefully weigh the pros and cons before moving forward.

4. Debt-to-Income Ratio

Another important personal loan qualification is debt-to-income ratio (DTI). DTI compares your gross monthly income to the monthly payments you make on your debt. Generally, the lower your DTI, the more desirable you are as a borrower for any lender. Financial experts typically advise keeping your DTI under 30%; 10% or lower is considered ideal.

For example, someone earning $120,000 per year might seem like they’re doing great. That’s $10,000 in gross income per month. But let’s say they’re actually having a tough time making ends meet because they’re paying $6,000 per month toward their credit card and student loan debt. Their DTI is 60%, which is considered high — and might make them less desirable to lenders.

Conversely, someone with a lower income, say $60,000 per year, might get better terms on their personal loan offer if they are only paying $500 a month toward student loans. In this scenario, they are earning $5,000 per month and paying $500 per month toward debt, which makes their DTI 10%.

Recommended: Can You Use Your Spouse’s Income for a Personal Loan?

5. Origination Fee

This one is a personal loan requirement rather than a qualification. Some lenders charge a one-time “origination fee,” which is intended to cover the cost of processing the loan. Origination fees vary by lender and the borrower’s financial situation. Some lenders charge a flat fee for personal loans, while others charge a percentage of the total loan amount. These fees usually range from 1% to 10%, but they can go as high as 10%.

This can be a considerable sum of money, depending on the loan size. Note that you can typically roll this cost into your loan’s total or pay it out of your loan’s principal.

How to Qualify for a Personal Loan

Savvy consumers know that they may have work to do before applying for a personal loan. Some tasks are relatively quick, like pulling together financial documents. Other things take more time, like practicing good financial habits over the long term so that your credit score is at its best. Once you have your financial ducks in a row, you can feel more confident that you’ll get your personal loan approved.

Below are a few things to keep in mind if you’re considering applying for a personal loan.

Maintain a Stable Income

Lenders typically prefer a borrower with a stable income. If you plan to apply for a personal loan, it may not be the time to change careers.

If there are other ways to boost your income in the meantime, it may help your chances of qualifying and getting favorable loan terms. Whether that means asking for a raise or picking up part-time work, increasing your cash inflow can make you a more desirable borrower in the eyes of a lender — although not all income is considered eligible.

Get a Cosigner or Co-Borrower

A cosigner is someone who agrees to pay the loan if you default. A personal loan co-borrower is someone who may reside with you and takes the loan out with you — their name is on the loan, and you both have an obligation to repay it. Either may improve your chances of qualifying for a personal loan, as lenders view both as an extra layer of repayment security.

Before deciding to bring someone else into the equation, check with your lender if a cosigner or co-borrower is allowed. Then carefully consider the potential drawbacks for both parties involved. For instance, a cosigner might see a decrease in their credit score if you fail to make a payment. And a co-borrower would have to pay the loan themselves if you default.

Monitor Your Credit Score

If your credit history is less than ideal, you may want to monitor your credit score to learn what actions (or inaction) might hurt it. You can request your credit report for free from each of the three major credit reporting agencies — Equifax®, Experian®, and TransUnion® — at AnnualCreditReport.com.

Check your credit history for errors, such as fraud, misreporting, or a card accidentally opened in your name. If necessary, file a dispute online asking the credit bureaus to remove the errors. But keep in mind that fixing issues on your credit report could take time.

Do your best to pay every bill on time, and try to reduce how much debt you’re carrying relative to your credit limits. For instance, pay down outstanding debt as much as you can. It may also help to pay your credit card bill in full each month.

Applying for a Personal Loan

Often it’s better to save for a big expense, even if it takes a few months or years. However, if that’s not possible, a personal loan can be a better option than charging the expense to a credit card.

When applying for a personal loan, start by figuring out how much you’d like to borrow. (A personal loan calculator can help you decide.) You’ll also want to check your credit, and get prequalified with multiple lenders. Once you choose a lender, you’ll submit your application. This is when you’ll need your financial documents, such as pay stubs, tax returns, and bank statements.

And then hopefully the next and final step is getting approved for a personal loan.

Recommended: Pros and Cons of Personal Loans

how to apply for a personal loan

How to Get a Personal Loan

Wondering where you can get a personal loan? They’re available from banks, credit unions, and online lenders. If you’d like to do business with a particular bank, you might start your inquiries there. Existing customers may get better interest rates or receive their funds sooner.

You can also shop around online to check going rates and terms. With online lenders, it’s easy to compare offers. Plus the entire application process is digital.

Recommended: What Is a Personal Loan?

The Takeaway

Qualifications for a personal loan typically include a credit score of 670 or more, proof of income, and a debt-to-income ratio below 30%. Some lenders require collateral to secure your loan; if you default, the lender can seize your property. Lenders may also charge an origination fee of 1% to 10%. Before you apply for a personal loan, maintain a stable income, monitor your credit score, and get a cosigner with excellent credit if necessary. The application process is usually straightforward if you have your financial documentation ready.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.


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

FAQ

What can be used as collateral for a personal loan?

Just about any assets you own can be used for collateral on a personal loan. That includes your home, car, savings account, investments, and jewelry or collectibles.

How do I know if I will qualify for a loan?

To “preview” the loan terms you qualify for, you can get prequalified online for a personal loan. You’ll see the loan amount you’re approved for, plus your interest rate, any fees, and repayment term. Prequalification requires a soft credit check only, which won’t hurt your credit score.

Can you get a personal loan without income proof?

Yes, it is possible to get a personal loan without income proof. However, it will be more difficult to qualify, since your credit score and history will have to be exemplary enough to compensate for the lack of income proof. Also, keep in mind that a stable income is more important to lenders than a high salary. If you have a modest income and excellent credit, you may still qualify for favorable loan terms.

What disqualifies you from getting a personal loan?

There are a number of factors that could disqualify you from taking out a personal loan. Examples include a bad credit score or no income, among other considerations.

Do all personal loans require proof of income?

Generally speaking, most lenders require proof of income, though some may offer unsecured loans without verifying your income. Secured loan lenders might issue a loan without looking at your income or credit history.

What type of personal loan is easiest to get approved for?

One of the easiest types of personal loan to get approved for is a “no credit check” loan. As the name suggests, these loans offer quick cash to borrowers without requiring a credit check. However, they can have major drawbacks, such as short repayment periods and sky-high interest rates.


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.


*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

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


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

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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What We Like About the Snowball Method of Paying Down Debt

Dealing with debt can be a very stressful experience and make you feel as if you’ll never be able to pay off what you owe. If you find yourself struggling to manage multiple debts, the snowball method can provide a practical and effective strategy to regain control of your financial situation. This method, popularized by personal finance expert Dave Ramsey, focuses on paying off debts in a specific order to build momentum and motivation.

Read on to learn how the snowball debt payoff method works, including its benefits, plus alternative payoff strategies you may want to consider.

Key Points

•   The snowball method lists debts from smallest to largest, focusing on the smallest first.

•   Quick wins and a sense of accomplishment are key psychological benefits.

•   The avalanche method targets high-interest debts to save on interest.

•   The snowball strategy builds momentum, though the avalanche technique can be more cost-effective.

•   The best approach for debt payoff depends on individual circumstances and goals, with personal loans being another popular option.

Building the Snowball

With the snowball method you list your debts from smallest to largest based on balance and regardless of interest rates. The goal is to pay off the smallest debt first while making minimum payments on other debts. Once the smallest debt is paid off, you roll the amount you were paying towards it into the next smallest debt, creating a “snowball effect” as you tackle larger debts.

Getting rid of the smallest debt first can give you a psychological boost. If, by contrast, you were to try to pay down the largest debt first, it might feel like throwing a pebble into an ocean, and you might simply give up before you got very far.

A Word About Paying Off High-interest Debt First

From a purely financial perspective, it might make more sense to first tackle the debt that comes with the highest interest rate first, since it means paying less interest over the life of the loans (more on this avalanche approach below).

However, the snowball method focuses on the psychological aspect of debt repayment. By starting with the smallest debt, you experience quick wins and a sense of accomplishment right away. This early success can then motivate you to continue the debt repayment journey. In addition, paying off smaller debts frees up cash flow, allowing you to put more money towards larger debts later.

Recommended: How to Get Out of $10,000 in Credit Card Debt

Making Minimum Payments Doesn’t Equal Minimum Payoff Time

While you may feel like you’re making progress by paying the minimum balance on your debts, this approach can lead to a prolonged payoff timeline. The snowball method encourages you to pay more than the minimum on your smallest debt, accelerating the repayment process. Over time, as you pay off each debt, the amount you can allocate towards the next debt grows, increasing your progress.

The Snowball Plan, Step By Step

Here’s a step-by-step guide to implementing the snowball method.

1. List all debts from smallest to largest. You want to list them by the total amount owed, not the interest rates. If two debts have similar totals, place the debt with the higher interest rate first.

2. Make minimum payments. Continue making at least minimum payments on all debts except the smallest one.

3. Attack the smallest debt. Put any extra money you can towards paying off the smallest debt while still making your payments on others.

4. Roll the snowball. Once the smallest debt is paid off, take the amount you were paying towards it and add it to the minimum payment of the next smallest debt.

5. Repeat and accelerate. Repeat this process, attacking one debt at a time, until all debts are paid off.

A Word About Principal Reduction

It’s a good idea to reach out to your creditors and lenders and find out how they apply extra payments to a debt (they don’t all do it the same way). You’ll want to make sure that any additional payments you make beyond the minimum are applied to the principal balance of the debt. This will help reduce the overall interest you pay and expedite the debt payoff process.

Recommended: Personal Loan Calculator

Perks of the Snowball Method

The snowball method offers several advantages:

•   Motivation and momentum The quick wins and sense of progress provide motivation to continue the debt repayment journey.

•   Simplification Focusing on one debt at a time simplifies the process, making it easier to track and manage.

•   Increased cash flow As each debt is paid off, the money previously allocated to it becomes available to put towards the next debt, accelerating the payoff timeline.

Alternatives to the Snowball Method

While the snowball method has proven effective for many, it’s not the only debt repayment strategy available. Here are three alternative methods you may want to consider.

The Avalanche Method

The avalanche method involves making a list of all your debts in order of interest rate. The first debt on your list should be the one with the highest interest rate. You then pay extra on that first debt, while continuing to pay at least the minimum on all the others. When you fully pay off that first debt, you apply your extra payment to the debt with the next highest interest rate, and so on.

This method can potentially save more on interest payments in the long run. However, it requires discipline and may take longer to see significant progress compared to the snowball method.

The Debt Snowflake Method

The debt snowflake method is a debt repayment method you can use on its own or in conjunction with other approaches (like the snowball or avalanche method). The snowflake approach involves finding extra income through a part-time job or side gig, selling items, and/or cutting expenses and then putting that extra money directly toward debt repayment. While each “snowflake” may not have a significant impact on your debt, they can accumulate over time and help you become free of high-interest debt.

Debt Consolidation

If the snowball, avalanche, or snowflake methods seem overwhelming, you might want to consider combining your debts into one simple monthly payment that doesn’t require any strategizing. Known as debt consolidation, you may be able to do this by taking out a personal loan and using it to pay off your debts. You then only have one balance and one payment and, ideally, a lower interest rate, which can help you save money.

Often called debt consolidation loans, these loans provide a lump sum of cash, usually at a fixed interest rate and are repayable in one to seven years.

Recommended: How Refinancing Credit Card Debt Works

The Takeaway

The snowball method offers a practical and motivational approach to paying down debt. By starting with small debts and building momentum, you can gain control of your finances and work towards becoming debt-free. It can be a good way to take action and commit to a debt repayment strategy. If it doesn’t suit you, you might consider the avalanche or snowflake method or a personal loan to consolidate debt.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.


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

FAQ

What is the snowball method of paying down debt?

With the snowball method of paying down debt, you prioritize paying off the smallest balance first, no matter what its interest rate is. Once that debt is paid off, you prioritize the next smallest debt.

What is the disadvantage of using the debt snowball method?

The disadvantage of the debt snowball method is that, by prioritizing the lowest amount of debt, you may not be paying off the debt with the highest interest rate first. This means your most expensive debt could continue to grow as you pay off smaller debts.

What is the advantage of the debt snowball method?

By tackling the smallest debt first, regardless of interest rate, you can get a psychological boost from successfully paying that off and then build momentum for getting rid of your other debt.



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.


*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

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


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

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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Cheapest Car Insurance Companies 2025: Find the Cheapest Car Insurance for You

Auto insurance is often one of the biggest costs of car ownership. On average, coverage costs $2,012 annually — up considerably from $1,459 a year ago. With monthly rates soaring, securing lower premiums is an important way you can manage expenses.

Here’s a look at some of the cheapest car insurance companies you may shop with in 2025, as well as some strategies to keep your premiums low.

Key Points

•   The average annual car insurance cost in the U.S. is $2,012.

•   USAA, Root, Travelers, and Geico offer some of the cheapest car insurance rates.

•   Young drivers generally face higher insurance premiums.

•   A good driving record can significantly lower car insurance costs.

•   Discounts are available for safety features, bundling policies, and insuring multiple vehicles.

Top Cheap Car Insurance Companies

As we mentioned, the average annual cost of car insurance is about $2,012, according to a 2025 U.S. News & World Report analysis of cheap car insurance companies. The chart below demonstrates which carrier has the cheapest car insurance rates.

It’s worth noting that many companies in the study offer annual rates well below this average. You can always switch car insurance at any time, so consider shopping around for the best rates.

Company

Average monthly rate

Average annual rate

American National $80.83 $970
USAA $106.58 $1,279
Root $116.16 $1,394
Travelers $129.08 $1,549
Geico $139.08 $1,669

Source: U.S. News & World Report, June 2025

Cheapest Car Insurance Companies for Young and Teen Drivers

The cost of car insurance varies widely depending on age and gender, among other things. For instance, teens are at significantly higher risk of getting into an accident, so premiums for young drivers can be sky high — especially for male teens. The national average for male teen drivers is $7,321 per year, while the average for female teens is $6,475, according to the 2025 U.S. News & World Report analysis.

A policy with the cheapest insurance providers may save you thousands.

Company

Average annual rate for female teens (as of June 2025)

Average annual rate for male teens (as of June 2025)

American National $2,608 $2,892
Root $3,138 $3,176
Country Financial $3,361 $3,615
USAA $4,304 $4,628
Geico $4,474 $4,939

Source: U.S. News & World Report, June 2025

Cheapest Car Insurance Companies for Good Drivers

A driving record free from accidents, traffic violations, and other infractions can help you qualify for lower premiums. The national average for good drivers is $2,012 a year, or $167.66 a month. But the cheapest insurance companies offer policies that may be less. As you’ll see, the rates for good drivers are the same as the overall cheapest rates in the study.

Company

Average monthly rate

Average annual rate

American National $80.83 $970
USAA $106.58 $1,279
Root $116.16 $1,394
Travelers $129.08 $1,549
Geico $139.08 $1,669

Source: U.S. News & World Report, June 2025

Cheapest Car Insurance Companies for Seniors

Seniors typically enjoy the lowest average car insurance. The average married 60-year-old woman pays $1,724 per year for coverage, while her male counterpart pays an average of $1,765.

Company

Average annual rate for female seniors

Average annual rate for male seniors

American National $824 $812
USAA $1,102 $1,104
Root $1,320 $1,412
Country Financial $1,470 $1,488
Geico $1,543 $1,605

Source: U.S. News & World Report, June 2025

Cheapest Car Insurance Companies for High-Risk Drivers

If you get a speeding ticket or are involved in an accident, you may see your insurance premiums go up, as insurers see you as a higher risk. After one speeding ticket, for instance, the national annual premium is $2,571 on average. After an accident, it’s $2,891. That said, you may be able to secure a better deal with one of the companies below.

Company

Average annual rate after a speeding ticket

Average annual rate after an accident

American National $1,234 $1,217
USAA $1,560 $1,841
Root $1,583 $1,793
Travelers $2,067 $2,172
Geico $2,239 $2,618

Source: U.S. News & World Report, June 2025

How to Find the Cheapest Car Insurance for You

Here’s a look at some of the strategies you may consider for how to save on car insurance.

Gather Your Information

Before you apply for auto insurance, gather pertinent information, such as your Social Security number and driver’s license number. You’ll also want a record of your driving history, including any accidents you’ve had, tickets, and driver’s license suspensions.

Pull together information about your car as well, including make, model, year of the vehicle, the mileage, and whether you own, lease, or finance it.

Get Quotes from Multiple Sources

Different insurance companies may offer different prices for the same coverage. And some insurance companies might specialize in different areas, such as roadside assistance. Get car insurance quotes from at least three or four insurance companies, so you can compare prices and coverage options and find the best deal for your needs.

Ensure Apples-to-Apples Coverage Comparison

Variables such as coverage type, limit, and deductible can all have an impact on the price of an insurance policy. So, when comparing online auto insurance policies, make sure these variables are the same across the board so you are getting a true side-by-side comparison.

How to Save on Car Insurance

In addition to comparison shopping, there are several other important ways to save on car insurance.

First and foremost, maintain a good driving record. Insurance companies typically charge lower rates for drivers who have no speeding tickets and haven’t been involved in at-fault accidents.

Ask about possible discounts for having two or more vehicles on a policy, having safety equipment like airbags, paperless billing, or bundling auto insurance with other policies.

Consider raising your deductible, which can lower your monthly premium. However, be aware that doing so may mean you pay more out of pocket if you need to use your insurance.

Finally, regularly review your policy and update as needed. You may need to update your policy if you add or remove a driver, increase or decrease the mileage you drive each year, or add or remove a vehicle from your policy.

Recommended: Compare Coverage Types

The Takeaway

Finding the cheapest insurance for your car doesn’t have to be overwhelming. Compare quotes, understand your coverage needs, and take advantage of discounts to lower your premiums without sacrificing protection. As you review your options, remember that the best deal isn’t necessarily the lowest cost. Rather, it provides a balance between cost and the coverage that’s right for you.

When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.

SoFi brings you real rates, with no bait and switch.

FAQ

Do cheaper companies offer lower-quality service?

While cheaper companies may offer lower premiums, this does not always mean that they will offer lower-quality services.

Are smaller or regional companies cheaper?

It’s possible that small or regional companies may be cheaper than national companies, but there’s no guarantee. The best thing to do is get quotes from insurers of different sizes to find a policy that meets your needs.

How much do quotes vary between companies for the same driver?

Quotes for the same driver can vary substantially between different insurance companies. That’s why it’s important to seek quotes from multiple companies.

Does bundling home and auto always result in the cheapest overall insurance cost?

Bundling home and auto doesn’t guarantee the cheapest overall insurance cost. However, many insurance companies will offer discounts if you choose to bundle policies.

How easy is it to switch car insurance companies?

Switching car insurance companies is usually relatively easy. It generally involves finding a new company and insurance policy and calling your old company to cancel. If you are financing your car, let your lender know that you have switched insurance companies.


Photo credit: iStock/FG Trade Latin

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.


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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