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Choosing to adopt a child is an exciting milestone in life, but it’s also one that takes a lot of planning and effort. Future adoptive parents can opt for either a domestic adoption or international adoption, but there are a lot of differentiating factors that may influence the decision.

If you’re considering adoption, you’ll want to understand the distinctions between domestic and international adoptions, from the process and timeline to the costs involved, so you can decide what’s best for you.

The Domestic Adoption Process

One of the major advantages of choosing a domestic adoption is that you have the potential to adopt a newborn. However, the timeline is not set in stone and may depend on whether you opt for an open, semi-open, or closed adoption. Most domestic adoptions are considered at least “semi-open.”

Depending on the agency you work with, you may need to be chosen by a birth mother based on your profile. Once you’re selected, the timing depends on the expected (and actual) due date. The process usually takes a few months. Typically, you get access to the child’s medical records as well as the birth mother’s family history.

An open adoption also allows some contact and conversations with the birth mother before the baby is born. In a semi-open adoption, personally revealing information is withheld between the adoptive parents and the birth mother.

Once the baby is born and you officially adopt the child, the adoption agency may facilitate sending updates to the birth mother, as well as pictures so she can see the baby is well taken care of.

Domestic Adoption Eligibility Requirements

American adoption requirements vary by state and by the adoption agency you choose to work with. Generally, you must be at least 18 years old, and there’s often a minimum age difference required between you and the child.

Most states allow domestic adoptions regardless of marital status; parents can be married, single, divorced, or widowed and still qualify.

Explore your state and city adoption websites for more details on additional requirements unique to your area.

The International Adoption Process

International adoption, thanks to rules and clearances, typically will not involve a newborn, so you’ll need to be open to welcoming an older baby or toddler to your home.

With international adoption, there are issues that could affect your ability to adopt, even in the middle of the process. New international laws and relations between the United States and other countries have the potential to derail families who are in the middle of an adoption. The process varies by country but typically takes between 1.5 and 2.5 years.

While you can find out about the child’s medical history, you likely won’t know anything about the family history. Once you adopt a child from abroad, you won’t have any contact with the birth family.

International Adoption Eligibility Requirements

Each country has its own eligibility requirements for adoptive parents, which are typically much stricter than domestic requirements. Often you’ll need to meet income requirements, which may include a higher amount if you already have children. Some countries also have net worth requirements.

In addition, you may discover that some countries restrict the type of families that are allowed to adopt from there. For example, some only offer adoption to married couples or single women.

These rules vary by country, and there are some countries, such as Colombia, that allow single men and same-sex partners to adopt.

International vs Domestic Adoption Costs

The costs vary greatly with both international and domestic adoptions, but the common thread is that it can be expensive if you’re not adopting a foster child.

For international adoptions, expect to pay anywhere from $20,000 to $50,000, depending on the country.

In South Korea, for example, adoptions may cost between $32,000 – $38,000. In China, the range is $35,000 to $40,000. Adoptions from India may span $21,000 to $25,000.

Choosing an international adoption also requires you to travel to the country (often more than once) in advance of actually adopting your child.

Domestic adoptions through a private agency may cost between $30,000 and $60,000.

It is much less expensive, and potentially even free, to adopt through foster care. However, as a foster parent, your goal is to help reunite the child with the existing family. Adoption may become an option, but it is not the primary objective.

Recommended: Common Financial Mistakes First-Time Parents Make

Funding Options for Adoptions

Adoption costs are often out of reach for many U.S. families. But even if you can’t tap into your savings (or don’t want to), you can explore other options for funding your adoption.

Recommended: 5 Tips for Saving for a Baby

Employer Benefits

Some companies offer adoption assistance funds as part of their employee benefits packages. In addition, about 34% of employers offer paid adoption leave and 25% provide paid foster child leave. This provides flexibility to transition when a new family member arrives.

You may want to check with your HR department to make sure you don’t miss out any adoption benefits offered by your company.

Adoption Federal Tax Credit

The federal government provides some tax benefits for adoptions. First, if you use employer benefit funds to pay for the adoption, that money is excluded from your income so you don’t have to pay federal taxes on it.

The tax code also offers an adoption tax credit that can help offset some of the costs involved in adoption, whether you adopt for a domestic or international adoption. Qualified adoption expenses include things like adoption fees, legal costs, and travel expenses.

The tax credit amount changes every year, so it’s a good idea to talk to an accountant for more specifics.

There are income limits for qualifying for both the tax exclusion and credit.

Friends and Family

Many adoptive parents ask friends and family members for financial support when starting the adoption process. You could even start a crowdfunding campaign as a way for your broader community to donate to your adoption fund.

Hopeful parents may want to include a compelling personal story about the path to adoption to help draw in potential donors from their community.

Just remember that if you use a crowdfunding platform, you generally have to pay fees taken out of the money you’ve raised. This usually ranges from 3% to 8% when including both fundraising fees and processing fees.

Recommended: New Parent’s Guide to Setting Up a Will

Personal Loan

Another option for financing your domestic or international adoption is with an unsecured personal loan.

This type of loan typically comes with a fixed interest rate and repayment period, which allows you to make a set monthly payment over a set number of years.

You’ll need good credit to qualify for the best interest rates. Lenders may also take your debt-to-income ratio into consideration. You may qualify for a larger loan amount if your existing debt is low compared to your monthly income.

Sometimes referred to as an adoption loan, the proceeds from this type of loan can be used for just about anything. That means not just the agency and legal fees but also soft costs like travel and meals, which can get expensive if you’re adopting from abroad.

The Takeaway

Choosing to adopt a child can be life-changing, but an international or domestic adoption usually carries a high price tag. Fortunately, with tax benefits and funding options available, you can worry less about how to pay for all of the costs associated with the process and focus more on the joy of growing your family.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

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

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

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

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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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The term “accessory dwelling unit” might sound foreign, but chances are you’ve encountered one. Sometimes called an in-law suite, granny flat, or, more romantically, carriage house, an ADU is a secondary dwelling unit on the same lot as a primary single-family home.

Although ADUs have risen in popularity in recent years, they’ve been around for decades, according to a study by the Federal Home Loan Mortgage Corp., known as Freddie Mac.

When the suburbs boomed in the 1950s, municipalities across the country created zoning laws prohibiting higher-density residential structures, the Freddie Mac report noted, but in cities like Los Angeles, San Francisco, and others that lacked affordable housing, the practice continued in secret.

As zoning laws across the country have changed to allow ADUs, the trend has boomed in tandem with population growth in the South and the West. “Half of our total 1.4 million ADUs are located in the Sun Belt states of California, Florida, Texas, and Georgia,” Freddie Mac reported.

What’s the attraction? Some property owners add an ADU to generate rental income; others want a place to accommodate guests, and still others need living space for aging parents.

Read on to learn why ADUs are all the rage in pricey cities and what it takes to build one.

ADU Meaning Explained

An ADU goes by many names, but its features make it unique among types of dwellings.

•   ADUs are smaller than the primary residence they accompany. In California, which passed statewide laws making many city restrictions on ADUs obsolete and streamlining the approval process, the size generally ranges from 500 to 1,000 square feet.

•   ADUs are self-contained. They usually include a bathroom, kitchenette, living area, and separate entrance.

•   ADUs require a special permit, which varies by location, according to the American Planning Association. Building codes may limit the size of the ADU and the number of occupants. Some cities, however, are offering an ADU amnesty program to help legalize under-the-radar units.

•   Unlike a duplex, ADUs usually share utility connections with the primary residence.

Recommended: A Guide to Buying a Duplex

What Are the Different Types of ADUs?

All ADUs have to follow ordinances and laws, but they don’t all look the same. Depending on homeowner preference, it might look like one of the following:

•   Detached This is likely new construction, formal or informal.

•   Converted garage This might mean retrofitting the garage or adding a second floor to create an ADU. Fans of Happy Days might recall Fonzie living in the Cunninghams’ converted garage, which was actually an ADU.

•   Attached Typically this is an addition to the existing residence.

•   Interior conversion An existing portion of the house, perhaps the basement, is transformed into an ADU. Fans of Full/Fuller House might recall the Tanners’ attic conversion and the basement/garage living space.

Benefits of an ADU

For the right homeowner, an ADU has upsides.

•   Rental income Choosing to rent out the space could bring in income, whether with a long-term rental or short-term Airbnb.

•   A true mother-in-law suite or adult-child dwelling For multi-generational families, adding an ADU could be a good way to create privacy and be close … but not too close. An ADU can also house an adult child who returns to the nest.

•   A space to age in place Conversely, aging homeowners or empty-nesters might choose to build an ADU for themselves. The homeowners could move into the smaller, more manageable space and rent out the larger property for passive income.

•   Flexibility An ADU could become a home office or art studio. For some homeowners, it might just be a good place to host guests.

•   Enhanced property value Compare the cost of buying a second small home or condo in your area with the cost of adding an ADU. How much value will a permitted habitable accessory dwelling add? A property appraisal will tell the tale.

Drawbacks of an ADU

ADUs may also come with their fair share of potential downsides.

•   Can be expensive A detached ADU may cost as much as a small house to build (though the homeowner already owns the land). An attached ADU or conversion of an existing structure will probably cost less, but still may cause sticker shock. Size, features, and the cost of professional services, permits, and any financing come into play.

•   Occupancy requirements Some local ordinances require that a home that has an ADU be owner-occupied in some capacity. That means a property with an ADU may not be the right fit for someone who wants to rent out the entire property.

•   Higher taxes On one hand, adding value to your property is a good thing. On the other, an ADU can make a property tax bill spike.

•   A smaller yard Unless a homeowner is retrofitting an ADU into their existing dwelling, building an ADU will cut down on outdoor space.

•   Financing Can be tricky. Read on.

Recommended: 8 Steps to Buying a Vacation Home

Ways to Pay for an ADU

While ADUs have different shapes and designs, they have a commonality: a price tag. If homeowners don’t have cash on hand to finance the build, they’ve got a few options to move forward.

A home improvement loan is a personal loan used to pay for a home renovation or update. When a homeowner takes out a home improvement loan, it’s not secured by the property — meaning the home isn’t collateral in the transaction.

A home equity loan or home equity line of credit (HELOC) leverages homeowners’ equity in a property and allows them to borrow money against the value of the home. Unlike a home improvement loan, a home equity loan or credit line is tied to the house, meaning the property is used as collateral. A home equity loan provides you with a lump sum of funds at one time and typically has a fixed interest rate. With a HELOC, homeowners can draw different amounts at different times, typically with a variable interest rate.

With sufficient equity in your home, homeowners could also consider a cash-out refinance.

The Takeaway

Determining if an accessory dwelling unit is the right move for a homeowner comes down to needs, preferences, and finances. ADUs have pros and cons, but many areas have eased the way for this cottage industry.

Homeowners who don’t have much equity in their property or don’t want to use their home as collateral may want to consider a SoFi unsecured personal loan to cover the cost of an ADU. SoFi’s home improvement loans range from $5K to $100K, and offer competitive, fixed rates, as well as a variety of terms. Plus, there are no fees required.

Imagine the possibilities. Then check your rate. It’s easy.

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

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

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.

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

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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Ready to buy your own home? There’s a lot to consider, especially if this is your first time applying for a mortgage and you’re carrying debt. While having debt is not necessarily a deal-breaker when you’re applying for a mortgage, it can be a factor when it comes to how much you’ll be able to borrow, the interest rate you might pay, and other terms of the loan.

Understanding how the home loan process works can help you decide whether it’s better to pay off debt or save up for a downpayment on a home. Here’s what you need to know.

How to Manage Debt before Buying a Home

Understand Your Debt-to-Income Ratio

When lenders want to be sure borrowers can responsibly manage a mortgage payment along with the debt they’re carrying, they typically use a formula called the debt-to-income ratio (DTI).

The DTI ratio is calculated by dividing a borrower’s recurring monthly debt payments (future mortgage, credit cards, student loans, car loans, etc.) by gross monthly income.

The lower the DTI, the less risky borrowers may appear to lenders, who traditionally have hoped to see that all debts combined do not exceed 43% of gross earnings.

Here’s an example:

Let’s say a couple pays $600 combined each month for their auto loans, $240 for a student loan, and $200 toward credit card debt, and they want to have a $2,000 mortgage payment. If their combined gross monthly income is $8,000, their DTI ratio would be 38% ($3,040 is 38% of $8,000).

The couple in our example is on track to get their loan. But if they wanted to qualify for a higher loan amount, they might decide to reduce their credit card balances before applying.

That 43% threshold isn’t set in stone, by the way. Some mortgage lenders will have their own preferred number, and some may make exceptions based on individual circumstances. Still, it can be helpful to know where you stand before you start the homebuying process.

Recommended: How to Prepare for Buying a New Home

Consider How Debt Affects Your Credit Score

A mediocre credit score doesn’t necessarily mean you won’t be able to get a mortgage loan. Lenders also look at employment history, income, and other factors when making their decisions. But your credit score and the information on your credit reports will likely play a major role in determining whether you’ll qualify for the mortgage you want and the interest rate you want to pay.

Typically, a FICO® Score of 620 will be enough to get a conventional mortgage, but someone with a lower score still may be able to qualify. Or they might be eligible for an FHA or VA backed loan. The bottom line: The higher your score, the more options you can expect to have when applying for a loan.

A few factors go into determining a credit score, but payment history and credit usage are the categories that typically hold the most weight. Payment history takes into account your record of making on-time or late payments, or if you’ve filed for bankruptcy.

Credit usage looks at how much you owe in loans and on your credit cards. An important consideration in this category is your credit utilization rate, which is the amount of revolving credit you’re currently using divided by the total amount of revolving credit you have available. Put more simply, it’s how much you currently owe divided by your credit limit. It is generally expressed as a percent. The lower your rate, the better. Many lenders prefer a utilization rate under 30%.

Does that mean you should pay off all credit card debt before buying a house?

Not necessarily. Debt isn’t the devil when it comes to your credit score. Borrowers who show that they can responsibly manage some debt and make timely payments can expect to maintain a good score. Meanwhile, not having any credit history at all could be a problem when applying for a loan.

The key is in consistency — so borrowers may want to avoid making big payments, big purchases, or balance transfers as they go through the loan process. Mortgage underwriters may question any noticeable changes in your credit score during this time.

Recommended: What Credit Score is Required to Buy a House?

Don’t Forget, You May Need Ready Cash

Making big debt payments also could cause problems if it leaves you short of cash for other things you might need as you move through the homebuying process, including the following.

Down Payment

Whether your goal is to put down 20% or a smaller amount, you’ll want to have that money ready when you find the home you hope to buy.

Closing Costs

The cost of home appraisals, inspections, title searches, etc., can add up quickly. Average closing costs are 3% to 6% of the full loan amount.

Moving Expenses

Even a local move can cost hundreds or even thousands of dollars, so you’ll want to factor relocation expenses into your budget. If you’re moving for work, your employer could offer to cover some or all of those costs, but you may have to pay upfront and wait to be reimbursed.

Remodeling and Redecorating Costs

You may want to leave yourself a little cash to cover any new furniture, paint, renovation projects, or other things you require to move into your home.

Be Aware of Housing Market Trends

Trends in the housing market may help you with prioritizing saving or paying down debt. So it’s a good idea to pay attention to what’s going on with the overall economy, your local real estate market, and real estate trends in general.

Here are some things to watch for.

Interest Rates

When interest rates are low, homeownership is more affordable. A lower interest rate keeps the monthly payment down and reduces the long-term cost of owning a home.

Rising interest rates aren’t necessarily a bad thing, though, especially if you’ve been struggling to find a home in a seller’s market. If higher rates thin the herd of potential buyers, a seller may be more open to negotiating and lowering a home’s listing price.

Either way, it’s good to be aware of where rates are and where they might be going.

Inventory

When you start your home search, you may want to check on the average amount of time homes in your desired location sit on the market. This can be a good indicator of how many houses are for sale in your area and how many buyers are out there looking. (A local real estate agent can help you get this information.)

If inventory is low and buyers are snapping up houses, you may have trouble finding a house at the price you want to pay. If inventory is high, it’s considered a buyer’s market and you may be able to get a lower price on your dream home.

Price

If you pay too much and then decide to sell, you could have a hard time recouping your money.

The goal, of course, is to find the right home at the right price, with the right mortgage and interest rate, when you have your financial ducks in a row.

If the trends are telling you to wait, you may decide to prioritize paying off your debts and working on your credit score.

Remember, You Can Modify Your Mortgage Terms

If you already have a mortgage, you may be able to make some adjustments to the original loan by refinancing to different terms.

Refinancing can help borrowers who are looking for a lower interest rate, a shorter loan term, or the opportunity to stop paying for private mortgage insurance or a mortgage insurance premium.

Consider a Debt Payoff Plan

If you decide to make paying down your debt your goal, it can be useful to come up with a plan that gets you where you want to be.

Because here’s the thing: All debt is not created equal. Credit card debt interest rates are typically higher than other types of borrowed money, so those balances can be more expensive to carry over time. Also, loans for education are often considered “good debt,” while credit card debt is often viewed as “bad debt.” As a result, lenders may be more understanding about your student loan debt when you apply for a mortgage.

As long as you’re making the required payments on all your obligations, it may make sense to focus on dumping some credit card debt.

Recommended: Beginners Guide to Good and Bad Debt

The Takeaway

Should you pay off debt before buying a house? Not necessarily, but you can expect lenders to take into consideration how much debt you have and what kind it is. Considering a solution that might reduce your payments or lower your interest rate could improve your chances of getting the home loan you want.

When you consolidate your credit card debt, you typically take out a personal loan, ideally with a lower rate than you’re paying your credit cards, and use it to pay off all of your credit cards. You then end up with one balance and one payment to make each month. This simplified the debt repayment process and can also help you save money on interest.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

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

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

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

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When housing costs are high, it’s hard to imagine that your home could ever go down in value. But the truth is it can, particularly if you aren’t actively maintaining your home. If you neglect small repairs, over time these issues can become large — i.e., expensive — problems that can drag down the resale value of your home.

Whether you plan to sell in the near or far-off future, here are some simple (and relatively low-cost) ways to maintain — or even increase — the value of your home over time.

Update, Update, Update

If a home that’s for sale has an updated anything, the real estate listing will scream it out in ALL CAPS. This can apply to appliances, cabinetry, countertops, flooring, bathroom remodels, kitchen remodels, and more.

If your kitchen is due for an update, try to keep in mind that this doesn’t necessarily mean stripping it to the studs and starting from scratch. Are the cabinets in good shape? Consider a fresh coat of paint or stain to reflect the latest color trends.

In addition, something as simple as upgrading to matching appliances or installing a garbage disposal or water filtration system could help maintain value — even if they’re not top-of-the-line.

Also keep in mind that “update” means bringing the home’s aesthetics into line with current styles — replacing brass fixtures for brushed bronze, for example, or swapping out carpet for wood. However, it doesn’t necessarily mean having to buy the most expensive version of that aesthetic.

Something as simple as adding some USB outlets to a room could turn it into a potential home office space.
Other, more expensive updates might adjust the actual layout of the home. If your current house only has one bathroom, is it possible to find a space for another half bath? Are there unused rooms or wasted space that could be updated to become more functional?

Recommended: 10 Small-Bathroom Remodel Ideas

Keeping Your Roof in Good Repair

Replacing a roof is costly, so it’s a good idea to do what you can to extend the life of your current roof as long as possible. A roof that shows signs of wear and tear can also be a big red flag to potential home buyers.

To maintain the value of your roof (and avoid other costly problems like leaks), you’ll want to replace any missing shingles or damaged areas as soon as possible. It’s also a good idea to have your roof cleaned regularly to remove any algae, moss, and mold that can damage the roof over time. Finally, be sure to get your gutters cleaned regularly so water can drain rather than collect on your roof.

Recommended: The Ultimate House Maintenance Checklist

Keeping Your Exterior Paint in Good Shape

Maintaining your home’s exterior paint not only helps your house look attractive and well-cared-for but also protects it from moisture. When paint starts peeling, water can find a way in, which can cause your siding to rot over time. Replacing sections of your siding can end up being a much costlier project than periodically freshening up your paint.

It’s a good idea to give your exterior paint job a look-over once a year to see if you any areas may need attention. This can help your paint job last longer and save money in the long run.

Pruning Your Trees and Shrubs

Maintaining your yard is a lot of work if you do it yourself, and costly if you hire a landscaper. But neglect can cause dead branches or an entire tree to fall in a heavy rain or wind storm, and can cause significant damage to your home. Overgrown shrubs can also bring unwanted bugs close to, and eventually inside, your home (more on that below).

It can be worth hiring a tree expert to evaluate and, if necessary, prune your trees once a year. You can regularly trim back hedges and bushes yourself or hire a landscaper to do the job.

Upgrading Energy Efficiency

Making your home more energy efficient is one of those goals that’s great not only if you’re selling, but also if you want to reduce spending on utility bills. And it doesn’t just mean big investments like switching to solar or wind-powered energy. Making your home more energy efficient can also be as simple as replacing bad weather seals, ensuring that the attic has sufficient insulation, paying attention to the air and heating systems, and using energy-efficient light bulbs and appliances.

Upgrading the energy efficiency of your home is something that might even be rolled in with another project, such as maintenance or updating.

Installing Smart Tech

Even if your home is more than 100 years old, adding smart tech can make it 21st-century ready. Smart home assistants like Google or Alexa, for example, can control everything from the lights to the TV to locking the front door.

They can also allow you to remotely control your heating and air temperatures, make sure the oven is actually turned off, and even give you a sense of security with security systems or video door bells. In order for the home assistants to accomplish all of these features, additional smart appliances may be required.

While some types of home tech are hard-wired into the house and others are more portable, even being able to say “wired for surround sound” can be a bonus on a home listing.

Smart home tech is not only quickly becoming a must-have for many homebuyers, adding it to your home can be a perk even if you have no immediate plans to move.

Recommended: What Are Common Uses for Personal Loans?

Keeping the Bugs at Bay

One important job that comes with homeownership is keeping unwanted critters outside where they belong. Public enemy No. 1 in this category? Termites. They can wreak havoc on a home’s wood structures leading to costly repairs.

The problem is so widespread that some home loan companies require buyers to get a “termite letter,” which is basically a guarantee that the home is free from termite damage.

DIY recommendations for keeping the pests at bay can also check off items on the home maintenance list, including keeping gutters and downspouts flowing, filling in any places where water pools around the home or in the yard, filling in cracks in the foundation, pruning shrubbery close to the home, and keeping air vents free and clear.

Beyond termites and the havoc they wreak, there are a variety of other living creatures that can cause damage to a home or surrounding property, including attic squatters like mice or raccoons, carpenter bees, moles, mosquitoes, and even grasshoppers that brunch on beautiful landscaping.

Recommended: What Are the Most Common Home Repair Costs?

Making Improvements Affordable

While some home maintenance projects are relatively low cost, others require a more significant investment. Before sinking a lot of money into a home maintenance or improvement project, it can be a good idea to use a Home Project Value Estimator that can help determine whether it’s a smart investment.

If you decide to move forward on the project, you’ll want to get estimates from at least three different contractors. Once you know the cost of the project, your next question may be, how are you going to pay for it?

For a small to midsize home maintenance project, you might consider using a home improvement loan. Unlike a home equity loan, these are unsecured personal loans — meaning your home isn’t used as collateral to secure the loan. Lenders decide how much to lend to you and at what rate based on your financial credentials, such as your credit score, income, and how much other debt you have.

With a home improvement personal loan, you receive a lump sum of cash up front you can then use to cover the costs of your home project. You repay the loan (plus interest) in regular installments over the term of the loan, which is often five or seven years.

If you think a personal loan might work well for your home maintenance project, SoFi could help. SoFi’s home improvement loans range from $5K-$100K and offer competitive, fixed rates and a variety of terms. Checking your rate won’t affect your credit score, and it takes just one minute.

See if a home improvement loan from SoFi is right for you.

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

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

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.

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When the interest rate and annual percentage rate (APR) are calculated for a loan — especially a large one — the two can produce very different numbers, so it’s important to know the difference when evaluating what a loan will cost you.

Basically, the interest rate is the cost for borrowing money, and the APR is the total cost, including lender fees and any other charges.

Let’s look at interest rates vs. APRs for loans, and student loans in particular.

What Is an Interest Rate?

An interest rate is the rate you pay to borrow money, expressed as a percentage of the principal. Generally, an interest rate is determined by market factors, your credit score and financial profile, and the loan’s repayment terms, among other things.

Nearly all federal student loans have a fixed interest rate that is not determined by credit score or financial standing. (However, a credit check is made for federal Direct PLUS Loans, which reject applicants with adverse credit, except in specific circumstances.)

Rates on federal student loans are rising: For loans made from July 1, 2023, to June 30, 2024, rates are increasing by roughly half a percentage point:

•   Direct Loans for undergraduate students. 5.50%, up from 4.99% for 2022-23.

•   Direct Loans for graduate students. 7.05%, up from 6.54% in 2022-23.

If a loan were to have no other fees, hidden or otherwise, the interest rate and APR could be the same number. But because most loans have fees, the numbers are usually different.

What Is APR?

An APR is the total cost of the loan, including fees and other charges, expressed as an annual percentage.

Compared with a basic interest rate, an APR provides borrowers with a more comprehensive picture of the total costs of paying back a loan.

The federal Truth in Lending Act requires lenders to disclose a loan’s APR when they advertise its interest rate.

In most circumstances, the APR will be higher than the interest rate. If it’s not, it’s generally because of some sort of rebate offered by the lender. If you notice this type of discrepancy, ask the lender to explain.

APR vs Interest Rate Calculation

The bottom line: The interest rate percentage and the APR will be different if there are fees (like origination fees) associated with your loan.

Let’s say you’re comparing loans with similar interest rates. By looking at the APR, you should be able to see which loan may be more cost-effective, because typically the loan with the lowest APR will be the loan with the lowest added costs.

So when comparing apples to apples, with the same loan type and term, APR may be helpful. But lenders don’t always make it easy to tell which loan is an apple and which is a pear. To find the best deal, you need to seek out all the costs attached to the loan.

You may find that a low APR comes with higher upfront fees, or that you don’t qualify for a super low advertised APR, reserved for those with stellar credit.

How APR Works on Student Loans

Not all students (and graduates, for that matter) understand the true cost of their student loans. Borrowers may think that only private student loans come with origination fees, but that is not the case.

Most federal student loans have loan fees that are taken directly out of the balance of the loan before the loan is dispersed. It’s on the borrower to pay back the entire amount of the loan, not just the amount received at disbursement.

Federal student loan fees from Oct. 1, 2020, to Oct. 1, 2024, are as follows:

•   Direct Subsidized and Direct Unsubsidized Loans: 1.057% of the total loan amount

•   Direct PLUS Loans: 4.228% of the total loan amount

While interest on many other loans is actually calculated monthly or annually, interest on federal Direct Loans is calculated daily. As a result, it is slightly more difficult to do an interest rate-to-APR calculation on a federal student loan.

Comparing Private and Federal Student Loans

Federal and private student loans have their pros and cons. In general, Direct Subsidized Loans offer competitive rates that are not dependent on the borrower’s credit.

When a federal student loan is subsidized, the borrower is not responsible for paying the interest that accrues while the student is in school and during most deferment periods.

Additionally, federal student loans offer flexible repayment plans, including income-driven repayment options. Federal student loans have fixed rates, and private loans may have fixed or variable rates.

Private student loans typically take borrowers’ credit into consideration. They can be useful in bridging gaps in need if you reach a cap on federal student loan borrowing.

Understanding Interest Costs

Being able to compare an APR to another APR may help level the playing field when shopping for loans, but it’s not the only thing to consider.

You might want to take into consideration the repayment period of the loan in question, because it will also affect the total amount you’ll owe in interest over the life of the loan.

Two loans could have the exact same APR, but if one loan has a term of 10 years and the other has a term of 20 years, you’ll pay more in interest on the 20-year loan even though your monthly payments may be lower.

To illustrate this, imagine two $10,000 loans, each at a 7% interest rate, but with 10- and 20-year repayment terms.

10-year repayment:

$116.11 monthly payment
Total interest paid: $3,933

20-year repayment:

$77.53 monthly payment
Total interest paid: $8,607

As you can see, the monthly payment on the 20-year loan is lower, but you pay significantly more in interest over time.

The reverse is also true: Shortening the payback period should lower the amount that you pay in interest over time, all else being equal.

Can Refinancing Help?

When you refinance student loans, you pay off your existing federal and/or private student loans with a new loan from a private lender, aiming for a lower interest rate or a repayment timeline that works better for your finances. A brand-new loan means dealing with only one monthly payment.

Refinancing may be a good idea for working graduates who have high-interest Unsubsidized Direct Loans, Graduate PLUS Loans, and/or private loans. Just realize that when borrowers refinance federal student loans, they give up benefits like income-​driven repayment plans and loan forgiveness.

To understand how interest rates, loan repayment terms, and total interest charges interplay with one another, check out this student loan refinancing calculator.

The Takeaway

APR vs. interest rate is what you may want to look at when deciding on a loan, because the APR reflects the fees involved. Even when it comes to federal student loans, fees are part of the story.

SoFi offers student loan refinancing with flexible terms and low fixed or variable rates, with absolutely no application or origination fees.

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.

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

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

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

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