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The average salary in the U.S. is $66,622, according to the latest data from the Social Security Administration. How your salary compares will depend on your industry and skilI set, as you’d expect. What you might not realize is that your salary is also greatly influenced by where you live, since salaries go hand in hand with the cost of living.

Here’s a closer look at the average salary in the U.S. and how income varies from state to state.

What Is the Average US Salary (2025)

The national average salary is $63,795. That is the sum of all incomes divided by the number of workers. Where someone lives, their industry, education level, and current demand for that job all contribute to how much a worker earns per year.


💡 Quick Tip: Online tools make tracking your spending a breeze: You can easily set up budgets, then get instant updates on your progress, spot upcoming bills, analyze your spending habits, and more.

Average Salary vs Median Salary: What’s the Difference?

The Bureau of Labor Statistics (BLS) provides data on median pay. As of Q4 2024, the median weekly earnings of full-time workers was $1,192, or $61,984 per year. The median is the midpoint in the data set, with 50% of incomes falling above that figure, and 50% below.

Why are the average and median income figures different? With averages, unusually high or low numbers can skew the results. For instance, multi-millionaires or billionaires might drive the average higher than what the typical worker actually makes. The median is less affected by outliers.

US Average and Median Salary by State in 2025

The following chart shows both the average and median income (in single income households) in each state, according to data from Forbes and the U.S. Census Bureau.

Recommended: Salary to Hourly Calculator

Why Do States Have Different Average Salaries?

The chart shows that the average salary in some states is quite different from the average salary nationwide. That’s partly because the cost of living, which affects how much a company pays its employees, varies significantly by state.

Also, inflation impacts states to varying degrees.

In addition, industries with a concentrated presence in certain states — such as banking or automobile manufacturing — can affect the overall quality of job opportunities in that area.

Which Regions Pay the Most?

Salaries tend to be higher in some areas of the country. Cities on the West Coast and in the Northeast have some of the highest average salaries:

•   Massachusetts

•   New York

•   Washington

•   California

•   New Jersey

•   Connecticut

•   Maryland

Remember, while these states have higher incomes, they may also have a much higher cost of living and higher housing prices.

Recommended: 25 Highest-Paying Jobs in the US

Which Regions Pay the Least?

The South is home to states that tend to pay the least:

•   South Carolina

•   Kentucky

•   Louisiana

•   Alabama

•   Arkansas

•   West Virginia

•   Mississippi

To determine what your personal cost of living is, try tracking your expenses with a free budget app for a few months.

Recommended: Biweekly Money-Saving Challenge

Should You Move to Make More Money?

It’s important to remember that just because a state has a higher average salary, that doesn’t mean it’s more profitable for workers to live there. Higher salaries tend to correlate with a higher cost of living.

Before making a major move, first try living below your means. One reason that people who make more money still have trouble paying their bills is the phenomenon of lifestyle creep. This is when your so-called needs expand to consume your current salary.

One of the most effective ways to counteract lifestyle creep is to downsize your home. Reducing your housing expenses to less than 30% of your gross income can help you pay down debt, increase savings, and become more conscious of how lifestyle choices affect spending.


💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.

The Takeaway

The average annual average salary in the U.S. is $66,622. The median annual salary, which is often less skewed by outlying numbers, is $61,984. It’s worth noting that average and median salaries vary quite a bit by state. States in the Northeast and on the West Coast tend to pay higher salaries, while those in the South often pay less. What’s stopping people from moving to a higher paying state? Often, it’s housing prices, which rise along with the cost of living in “richer” states.

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

FAQ

How much do the top 10% of Americans make per year?

The top 10% of Americans earn $167,639 per year. Some top earners live in higher cost of living areas, so it can be more revealing to see how much the top 10% earn in your state.

What percentage of Americans make over $75K?

Only 12.1% of Americans make in the $75,000 to $99,999 range. An additional 17% make between $100,000 and $149,000, and 15.7% earn in the $50,000 to $74,999 range.

Which U.S. state has the highest salary?

Massachusetts is the state with the highest annual income of $76,600. This salary is significantly more than the national average salary of $63,795.

About the author

Jacqueline DeMarco

Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.

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.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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 content is provided for informational and educational purposes only and should not be construed as financial advice.

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SORL-Q125-011

While there’s no universally required credit score needed to rent an apartment, having a solid credit score can certainly help your chances of a landlord handing you a set of keys. In general, a landlord will look for a credit score that is at least “good,” which is generally in the range of 670 to 739. However, that can vary by landlord or property manager, as well as the location in which you’re renting.

Read on to learn more about how your credit score can affect renting an apartment — and how you can approach renting if you have a lower credit score.

What Credit Score Do I Need to Rent an Apartment?

Truth is, the answer to what credit score you need to rent an apartment is a bit squishy. In general, you’ll have a better chance of approval if your credit score is at least deemed “good.”

What’s considered good? Credit scores are generally classified as follows per FICO® (keep in mind that different scoring models may vary):

•   Exceptional: 800-850

•   Very good: 740-799

•   Good: 670-739

•   Fair: 580-669

•   Very poor: 300-579

There also are variables that can affect whether your credit score qualifies you to rent an apartment. For example, if you live in a city where there is huge demand for apartments, landlords may give preference to those with higher credit scores.

Can You Get an Apartment if One Person Has Bad Credit?

If one person has bad credit, know that it will likely make it tougher for you to get an apartment. Landlords have a lot of leeway and can follow criteria of their choosing.

Still, it’s not impossible even if it is trickier. One smart strategy in this situation is to put the lease in the name of the person whose credit and income is best. You could also offer to show your income or provide a reference.

What Landlords Look at on Your Credit Report

When your landlord reads your credit report, they will be looking for clues about your financial health and habits.

Of much importance is your debt-to-income ratio. In a nutshell, this is the amount of your monthly pre-tax income that gets spent on debt payments. It’s certainly not news to you that filing for bankruptcy can have a negative impact on one’s credit. A landlord also may be spooked if you have hefty credit card balances.

Your credit history disclosed on your credit report also may include your rental history, since some landlords and rental property managers share your data with the credit bureaus. This can be a plus if you’ve been doing the right thing; if not, this can work against you.

Too many hard inquiries also can raise red flags for a landlord. This is because frequently applying for different types of credit could suggest financial instability, which increases risk in the eyes of lenders — as well as landlords.

How to Rent an Apartment with a Lower Credit Score

Just because your credit score isn’t stellar doesn’t mean you’re resigned to sleeping on a friend’s couch or living with your parents. There are ways to rent an apartment even with a lower credit score.

Pay a Higher Security Deposit

One way to show that your credit history is just history is by offering to make a higher security deposit. Say you are required to pay first and last month’s rent upfront. To sweeten the deal, maybe you tack on a couple additional months of rent.

If you want to instill confidence in your potential new landlord, this might do it. Just make sure you actually have the room in your budget to offer up the cash.

Recommended: What Is The Difference Between Transunion and Equifax?

Get a Cosigner

While getting a cosigner may put a damper on feeling like you’re finally a grownup, it may be worth sucking it up and getting a creditworthy parent or other trusted individual to cosign for your apartment. This can give your landlord peace of mind if someone is willing to pay the rent on your behalf if you’re unable to.

Just keep in mind that your cosigner will be on the hook if you miss a payment, and that cosigners generally must meet even steeper credit score and income requirements.

Play Up Your Income

Maybe your credit score is nothing to brag about, but you’ve worked hard and now have your finances in order, with solid savings and a good income. If you could show that you earn three or four times your rent on a monthly basis, that might divert attention from your lousy credit score. Additionally, if you have a solid stash in your savings account, that can also give your landlord assurance that you have the funds to cover your monthly rent.

Consider Getting a Roommate

Adding a roommate to your lease or rental agreement can increase your creditworthiness and your qualifying income. This is especially the case if you can find a roommate with good credit — and get your landlord to pull their credit first.

Benefits of Good Credit When Renting an Apartment

A landlord needs more than their gut instinct to help them determine who to rent to, which is why a credit score carries a lot of weight when it comes to getting your rental application approved. A good or — better still — an excellent score can give landlords the confidence to consider you for the apartment, especially if all other signals they get when checking on your background indicate they should give you the green light.

Having a solid credit score can help you to snag the apartment you want, and avoid the hassles associated with trying to secure an apartment when your credit isn’t as great, such as getting a roommate or a cosigner. Especially if you live in a city with a competitive rental market, a good credit score can be a serious edge.

How to Monitor Your Credit Score

Ideally, you want to monitor your credit and get a copy of your credit report before you start apartment hunting. It’s important to know where you stand, and if there are any errors, you want to fix them right away.

You can get free weekly credit reports from the three national credit reporting agencies: Equifax, Experian and TransUnion via AnnualCreditReport.com.

While your credit report provides information on your various credit accounts and their balances and your payment history, it does not include your credit score. You can check your credit score by looking at a loan or credit card statement or through an online credit score checker. You can also buy a score directly through credit reporting companies. Even if you might have checked your credit score not that long ago, don’t skip doing so again — your credit score updates every 30 to 45 days.

If your score is low, consider taking steps to improve it before jumping into your apartment search. Actions like paying down credit card balances and making sure you don’t have any more late or missed payments for a stretch can show progress.

Recommended: What Credit Score Is Needed to Buy a Car?

What to Expect in 2025

According to Zillow, a surge in apartment construction in 2024 is finally catching up with demand. As a result, rental affordability is at its best level in four years, and landlords are offering record-high concessions.

But that doesn’t mean housing prices are cheap. Apartment rents have risen 36.1% since the start of the pandemic. As of September 2025, the typical asking rent is $1,979.

The Takeaway

You’ll want to shoot for having a good credit score — generally in the range of 570-739 — to get an apartment. While you may be able to still get an apartment if you don’t have solid credit, it will make it more challenging with the competition you’re likely to face.

If you have the luxury of time, do what’s necessary to improve your score so that when you begin your search, you’ll be an ideal candidate. An online credit monitoring tool can make it easier.

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

Photo credit: iStock/MixMedia

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.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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.

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

SORL-Q425-029

If you’re juggling a car loan and student loans, you might be wondering which debt to prioritize. While it’s important to keep up with minimum payments on all your loans, making extra payments on one of these types may help you save money on interest.

The decision of whether to pay off a car loan or student loans first ultimately depends on your personal financial situation. Here, we’ll look at the benefits of paying off each, what factors to consider, and how you can best decide which option is right for you.

Understanding Your Debt Types

First, it’s important to understand the difference between student loans and car loans. Student loans may be federal or private, and they might come with fixed or variable interest rates. They’re unsecured loans, meaning they’re not backed by collateral. Auto loans, on the other hand, are a secured form of debt.

Secured Debt

Secured debt is a type of loan backed by collateral, meaning the lender can seize the pledged asset if the borrower fails to repay.

Car loans are secured by your vehicle. If you fall behind on car loan payments, a lender can repossess your car. Car loans commonly have fixed interest rates and repayment terms of 36 to 84 months.

Unlike student loans, auto loans don’t usually offer much flexibility if you’re having trouble making payments. And car loan payments can be costly — the average car payment in 2025 is $745 a month for new cars. By comparison, the average student loan payment is estimated to be about $536 per month in 2025, according to the Education Data Initiative.

Unsecured Debt

Unsecured debt is a loan that isn’t backed by collateral. Both federal student loans and private student loans are unsecured forms of debt.

Federal student loans qualify for various benefits and plans that can help lower student loan payments, such as income-driven repayment, as well as programs to temporarily pause payments if needed, like deferment and forbearance. Federal student loans are also eligible for forgiveness programs such as Public Service Loan Forgiveness.

Private student loans don’t have as many benefits as federal loans, but some private lenders will let you modify or postpone payments if you run into financial hardship. You might also explore refinancing student loans to see if you can qualify for a lower interest rate or more favorable terms that might help make your payments more manageable.

Factors to Consider When Prioritizing Debt

There are several things to think about when deciding whether to pay car or student loans first. Some of the main considerations include your loan’s interest rate, tax implications, repayment terms, and the impact on your credit score.

Interest Rates and Total Costs

It typically makes sense to pay off the loan with the highest cost of borrowing first. This usually means the loan with the highest interest rate. If your student loan has a rate of 5.00%, and your car loan has a rate of 10.00%, paying off the car loan would save you more money in the long run.

Along with the interest rate, consider whether the loan carries any other fees, such as a prepayment penalty. Student loans don’t charge penalties for prepayment, but a car loan might. Compare each loan’s annual percentage rate (APR), as this figure takes both interest and fees into account.

Tax Implications and Deductions

Another factor has to do with tax deductions. The student loan interest deduction allows you to deduct up to $2,500 a year in student loan interest from your taxable income, depending on your modified adjusted gross income (MAGI). At certain income limits, student loan tax deduction phase-outs begin. In 2025, if your MAGI is less than $85,000 a year if you’re a single filer, and $170,000 if you’re married and filing jointly, you can qualify for the full deduction. If you earn between $85,000 and $100,000 ($170,000 and $200,000 if married filing jointly), you can make a partial deduction.

Car loans may also qualify for a tax deduction. Beginning in the 2025 tax year, the new One, Big, Beautiful Bill Act permits taxpayers to deduct up to $10,000 in interest paid on qualifying auto loans — even if they use the standard deduction. This deduction applies only to new, U.S.-assembled vehicles purchased after December 31, 2024, and only for personal (not business) use. The benefit phases out for individuals with modified adjusted gross income (MAGI) over $100,000 (or $200,000 for joint filers).

Loan Terms and Repayment Periods

Student loans tend to have more flexible repayment terms than car loans. Federal student loan borrowers are eligible for various repayment plans, including the Standard Repayment Plan and income-driven repayment plans. Keep in mind that for new loans taken out on or after July 1, 2026, borrowers will be limited to the standard plan or the new Repayment Assistance Program (RAP).

Car loans don’t qualify for many options. You’ll often choose a repayment term of three to seven years and be expected to pay monthly on your agreed-upon rates and terms. If you can’t make payments, the lender can repossess your vehicle.

Impact on Credit Score and Financial Flexibility

Neither type of payoff is universally better for your credit score, as it depends on your situation. Paying off a car loan can boost your score by reducing installment debt and freeing up cash flow, but it may slightly lower your credit mix. Paying down student loans, which are typically long-term, can improve your payment history and lower your overall debt burden. Paying off either one should have a positive impact on your credit score.

It’s also important to consider your financial situation. If your student loan payment is higher, for example, you may want to pay that off first to free up more cash.

Recommended: Student Loan Consolidation vs Refinance

Benefits of Paying Off Car Loans First

Paying off a car loan before your student loan can have several advantages, especially since car loans don’t have as much repayment flexibility or offer any tax benefits for vehicles that are strictly for personal use. Here are some reasons to consider prioritizing your car loan over your student loans.

Eliminating Secured Debt

Defaulting on a car loan could lead to losing your car. The sooner you can pay off your secured car loan, the sooner you’ll own your car outright and you won’t have to worry about the possibility of car repossession.

Potential Savings on Interest

Car loans may come with higher interest rates than student loans, so paying off the auto loan first could lead to more savings. Keep in mind, though, that if you purchased a new car in 2025, you could qualify for the new car loan interest deduction. Savings on interest mostly applies to vehicles purchased in or before 2024, used vehicles, or foreign brand vehicles.

Let’s say, for example, that you owe $15,000 on a car loan at a 10.00% rate and a $15,000 student loan at a 5.00% rate, and that both loans have five years left on their repayment.

If you put an extra $100 per month toward your car loan, you’d save $1,232 on interest and get out of debt nearly a year and a half sooner. If you put that extra $100 toward your student loans, you’d also get out of debt about a year and a half sooner but you would save just $574 in interest charges. Our student loan payoff calculator can help you crunch the numbers on your student debt.

You could also consider refinancing your car loan for a better rate to help save on interest. This option might be worth exploring if interest rates are lower now than when you originally took out the loan.

Building Equity in Your Vehicle

The faster you pay down your car loan, the more equity you’ll hold in your vehicle. That means you’ll own more of your car outright, which could come in handy if you ever want to sell it. Plus, you’ll be less likely to end up underwater on your car loan, which can happen when the debt you owe on your vehicle exceeds what the vehicle is worth.

Lower Monthly Obligations and Insurance Costs

Paying off your car loan can significantly reduce your monthly financial obligations, freeing up room in your budget for savings, investments, or other expenses. Once the loan is gone, you’re no longer responsible for a sizable installment payment each month, which can improve overall cash flow. In addition, some lenders require comprehensive and collision insurance coverage for financed vehicles, meaning you may be able to lower your insurance costs once the car is fully paid off.

Advantages of Prioritizing Student Loans

Although it often makes sense to prepay a car loan before a student loan, there are certain advantages to paying off student loans first. Here are some scenarios where you could benefit from prepaying your education debt:

•   Your student loans have a variable rate: Some private student loans have a variable rate that can increase and make your borrowing costs unpredictable. If you’ve been dealing with a rising variable rate, you may want to pay off those loans as quickly as you can. You might also explore refinancing those loans, which could allow you to switch to a fixed (and potentially lower) interest rate.

•   You’re considering filing for bankruptcy: If you’re in dire financial straits, you might be looking into potentially erasing or restructuring your debts through bankruptcy. Although it’s possible to discharge student loans in bankruptcy, the process is notoriously difficult. It may be easier to discharge a car loan through bankruptcy than a student loan.

Access to Federal Loan Protections and Forgiveness

Federal student loans come with a variety of borrower protections, but you may not require any of them for managing your student loan debt. If you aren’t pursuing loan forgiveness, for instance, you might focus on paying off your federal loan debt.

Income-Driven Repayment Options

Federal student loans also come with income-driven repayment plans, where your monthly payments are based on your income and family size. If you aren’t using that benefit, it might make sense to prioritize paying off your student loans before your car loan.

Recommended: Student Loan Refinancing Calculator

Develop a Debt Repayment Strategy

Once you’ve decided which loans to pay off first, it’s important to develop a strategy for repayment. Here are some steps to take.

Create a Budget and Debt Snowball

Start with making a budget so you have a clear sense of your income and expenses. Track your spending, and look for areas where you could cut back. By reducing your spending, you might find room in your budget to direct extra payments toward your debt.

There are debt pay-off strategies that can help. For example, with the debt snowball method, you pay off the loan with the smallest balance first. Then you work on paying off the next smallest loan and so on. The debt avalanche, in contrast, targets the loan with the highest interest rate first, and then the loan with the next highest interest rate, and it can save you the most money in the long run.

The debt snowball may not save you as much money as the debt avalanche, but it can be psychologically rewarding to pay off a debt in full before moving onto the next one.

Seek Additional Income Sources

After budgeting and cutting down on spending, you might explore ways to increase your income. This could mean going for a promotion and raise at work or finding a new job. You could also consider taking on a side hustle, such as driving for a ride-sharing service or doing freelance tutoring.

By setting up additional income streams, you’ll have more cash to put toward your loans and get out of debt faster.

Negotiate with Lenders

If you’re looking to modify payments or adjust your interest rate, try negotiating directly with your lender. Notify the lender that you’re having difficulty repaying the loan and see if they might be willing to work with you. Depending on the type of loan, the lender might offer a repayment plan or reduce the loan interest rate. Although there’s no guarantee of success, it’s worth a try.

Consider a Hybrid Approach to Paying Off Both Loans

A hybrid approach — paying more than the minimum on both your car loan and student loans — can be a smart strategy if you’re unsure which to prioritize. By splitting extra payments, you reduce both balances simultaneously, chip away at interest, and avoid neglecting one debt while focusing on the other. This method also preserves financial flexibility, allowing you to adjust your payoff strategy if your income, expenses, or interest rates change over time.

The Takeaway

While there’s no one-size-fits-all answer to whether you should pay off a car loan or a student loan first, paying off the loan with the highest interest rate can generally save you the most money. For many borrowers, that may be their car loan. If your student loans have high interest rates, you might consider refinancing your student loans.

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.

FAQ

Is it better to pay off higher interest debt first?

Paying off high-interest debt first usually makes the most financial sense, since it will save you more money in the long run. However, it’s important to keep up with the minimum payments on all your debts so you don’t end up in delinquency or default.

Can I deduct student loan interest on my taxes?

It depends on your income. The student loan interest deduction lets you deduct the interest you pay on student loans, up to $2,500 a year if your modified adjusted gross income (MAGI) is less than $85,000 for single filers and $170,000 if you’re married and filing jointly. If you earn between $85,000 and $100,000 ($170,000 and $200,000 if married filing jointly), you can make a partial deduction. Anything more than that and you cannot take the student loan interest deduction.

Can I claim car loan interest on my taxes?

Yes, you may be able to claim a deduction for car loan interest starting 2025, but only under certain conditions. The loan must be for a new, U.S.-assembled vehicle purchased for personal use, and the deduction is capped at $10,000 per year. This temporary benefit applies through tax year 2028, and you’re eligible whether you itemize or take the standard deduction.

What happens if I default on my car loan or student loans?

A car loan is secured by your vehicle, and if you default on the loan, the lender can repossess your car. Student loans are unsecured, so a lender can’t take your personal property. However, the government can garnish your wages, tax refunds, and Social Security benefits if you default on a federal student loan. Defaulting on private and federal student loans can also damage your credit, and a private lender could potentially take you to court to try to collect the money.

Can paying off a car loan early hurt your credit score?

Paying off a car loan early may cause a small, temporary dip in your credit score because it closes an active installment account and slightly reduces your credit mix. However, the impact is usually minor, and becoming debt-free often outweighs the short-term change in your score.

Should I refinance my car loan or student loans before paying them off?

Refinancing your car loan or student loans before paying them off can be beneficial if you qualify for a lower interest rate or better terms. Lower monthly payments or reduced interest costs can free up cash and make repayment more manageable. However, compare fees, credit requirements, and federal loan benefits before refinancing.

Photo credit: iStock/damircudic

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

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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.