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You might be wondering how easy it is to get approved for a $5,000 personal loan. In most cases, the process is straightforward and no collateral is required — though you might pay more in interest if your credit is poor. Overall, a $5,000 personal loan is a good way to access cash for unexpected bills and necessary expenses.

Learn more about the typical terms and requirements for a $5,000 personal loan.

Pros of a $5,000 Personal Loan

A personal loan is money that you borrow from a bank, credit union, or online lender that you pay back in regular installments with interest, usually over about two to seven years. Personal loans have several advantages over high-interest credit cards, making them a good option for a variety of borrowers.

Popular uses for personal loans include consolidating debt, covering medical bills, and home repairs or renovations.

Recommended: 11 Types of Personal Loans

Flexible Terms

With $5,000 personal loans, you can choose the repayment terms to fit your budget. For example, you can opt for a longer repayment term with a higher interest rate but a lower monthly payment. Or you can choose a shorter repayment term with a lower interest rate and a higher monthly payment.

No Collateral

Most personal loans are unsecured, meaning you aren’t required to provide collateral to be approved. That said, using collateral on a personal loan can increase your approval odds, especially if your credit is poor. Doing so could result in a larger loan amount, lower interest rate, and better terms.

Fixed Payments

The interest rate on a $5,000 personal loan is usually fixed, meaning your payments will stay the same for the life of the loan. Fixed payments are typically easier to budget for.

Cons of a $5,000 Personal Loan

Small personal loans of $5,000 or so have disadvantages that should be considered before you apply.

Debt

You’ll be going into debt when you take out a $5,000 loan, which is the biggest downside. If you struggle to repay the loan, you can end up in a worse financial position than before you took it on.

Origination Fees

Personal loans can have many fees, including origination fees. This fee is separate from the interest the loan charges and has no direct benefit to you as the borrower.

Some origination fees can be high, up to 15% of the loan principal. Even just a 5% fee on a $5,000 loan is $250 — just to receive the money. Fortunately, there are ways to avoid loan origination fees.

Interest Rates

While personal loan interest rates are usually lower than credit cards’, they can cost you hundreds (or even thousands) over the life of the loan. A personal loan calculator can help you figure out the total interest you’ll pay.

Personal Loan Pros	Cons
Flexible terms: Choose the repayment terms that suit you.	Debt: Personal loans increase your debt and the risks that come with it.
No collateral: Most personal loans are unsecured.	Origination fees: Personal loans often have fees for borrowing money.”
Fixed payments: Payments stay the same for the life of the loan	Interest: You’ll be charged interest, which can cost hundreds or thousands of dollars.

Requirements for a $5,000 Personal Loan

Requirements for a $5,000 loan vary by lender. But in general, you should have at least Fair credit, which is a score of 580 or above. Lenders may also look at other factors, such as your income and your debt-to-income ratio (DTI), during the application process.

Recommended: The Credit Score Required To Get a Personal Loan

$5,000 Personal Loan Terms

Repayment terms for a $5,000 personal loan are usually in the range of two to seven years. The length of the repayment term will play a role in determining the monthly payment amount and the interest rate.

Your credit score will also affect the interest rate. For example, the average interest rate for personal loans is 6.59% for those with Excellent credit. However, if you have Fair credit, the average jumps to 15.91%.

Payment on a $5,000 Personal Loan

The payment on a $5,000 personal loan depends in large part on the length of the loan term. For example, SoFi’s personal loan calculator estimates that the monthly payment for a two-year $5,000 personal loan ranges from $224 to $252. A $224 monthly payment over two years results in your paying $5,376 total: the $5,000 principal plus $376 in interest.

Increase the loan term to seven years, and you have a much lower monthly payment of $89 to $106. However, $89 paid over 84 months comes to $7,476. That’s a whopping $2,476 in interest for the same $5,000 principal.

The higher interest paid is due to both the longer repayment term and the higher rate that longer repayment terms usually come with.

Top $5,000 Personal Loan Lenders

There are many online lenders that offer $5,000 personal loans. Personal loan amounts can range from $1,000 up to $100,000. However, the requirements will be different for larger loan amounts. For instance, the credit score required for a $10,000 personal loan is 640, compared to 580 for a $5,000 loan. For a $50,000 personal loan, the credit score requirement jumps to 660.

Here are seven of the top lenders we find by searching online, along with their terms for a $5,000 loan:

1. LightStream

Lightstream is a division of Truist bank and offers some of the best APRs for $5,000 personal loans. APRs can be as low as 3.99% — the lowest on this list. While the exact APR will vary with your credit, Lightstream has some of the lowest fees overall, charging no fees to use its services. There is also a 0.50% discount for enrolling in autopay.

2. Discover

Discover offers personal loans with competitive rates and flexible terms. APRs on Discover personal loans range from 5.99% to 24.99%. Terms range from 36 to 84 months with no origination fees.

3. Marcus by Goldman Sachs

Marcus by Goldman Sachs offers personal loans of up to $40,000. APRs start at 6.99%, with repayment terms ranging from 36 months to 72 months. There are no origination fees, and there is a 0.25% discount for enrolling in autopay.

4. Best Egg

Best Egg offers personal loans of up to $50,000 and competitive interest rates. Loan terms are from 36 months to 60 months. However, Best Egg does charge an origination fee of at least 0.99% of the loan amount.

5. PersonalLoans.com

PersonalLoans.com does not lend money itself but instead connects you with lenders in its network or another third-party lender network. Personal loans from its lenders have competitive APRs, ranging from 5.99% to 35.99%. It has flexible repayment terms as brief as three months and up to 72 months. Most of the lenders in its network charge origination fees.

6. CashUSA

CashUSA offers personal loans of up to $10,000 with a competitive APR that starts at 5.99%. It has flexible payment terms which start at three months and can be as long as 72 months. Applying for a personal loan on CashUSA.com is simple, and you can have money as soon as the next day.

7. Happy Money

Happy Money offers the Payoff Loan, branded specifically as a personal loan meant for paying off credit card balances. Given that credit cards can have high APRs, Happy Money’s starting APR could be a good choice. Its term is from 24 to 60 months, and origination fees are included in the APR.

Lender	APR	Term	Origination Fee
LightStream	3.99% – 19.99%	24 – 84 months	$0
Discover	5.99% – 24.99%	36 – 84 months	$0
Marcus by Goldman Sachs	6.99% – 19.99%	36 – 72 months	$0
Best Egg	5.99% – 35.99%	36 months or 60 months	0.99% – 5.99% of loan amount
PersonalLoans.com	5.99% – 35.99%	3 – 72 months	1% – 5% of loan amount
CashUSA	5.99% – 29.99%	3 – 72 months	Varies
Happy Money	5.99% – 24.99%	24 – 60 months	Included in APR

The Takeaway

Many lenders offer $5,000 personal loans with competitive APRs and flexible terms. However, you are still charged interest and often additional fees, so you’ll want to shop around for the best deal you qualify for.

If you find yourself in need of quick cash, consider SoFi Personal Loans. SoFi has a competitive APR that starts at 6.99% for loans up to $100,000. There are no origination fees or hidden fees of any kind.

You can check your rate in 60 seconds without affecting your credit score, and get your loan funded as soon as the same day you’re approved.

FAQ

What credit score do I need for a $5,000 personal loan?

In most cases, the credit score needed for a personal loan is at least 580, considered a Fair credit score. If your score is lower than that, your borrowing opportunities will be limited. Lenders may also look at other factors, such as your income and your debt-to-income ratio (DTI), during the application process.

How much is the monthly payment for a $5,000 personal loan?

The amount you pay per month depends on the loan amount, the APR, and the length of the loan. You can opt for a longer repayment term with a higher interest rate but a lower monthly payment. Or you can choose a shorter repayment term with a lower interest rate and a higher monthly payment.

How can you get a $5,000 personal loan?

Online lenders tend to offer your best chance of approval, especially those that work with lender networks. This is because you can apply to more than one lender at a time.

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

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

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

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A personal loan is a strong option when you need to borrow money to cover a medical bill or home repair, or to consolidate debt. But before you decide that a personal loan will meet your needs, it’s important to understand the advantages and disadvantages that come along with them.

We’ll do a deep dive into interest rates, borrowing limits, fees and penalties, and lender requirements to get the best terms.

What Are Personal Loans?

A personal loan is money that you borrow from a bank, credit union, or online lender. It’s an installment loan, so you agree to repay the loan principal and interest at regular intervals — usually monthly.

When you apply for a personal loan, your lender will run a credit check, which will help determine your interest rate. Generally speaking, borrowers with higher credit scores have a better chance of being offered lower interest rates. The higher your interest rate, the more money it will cost you to borrow.

Recommended: 11 Types of Personal Loans

The Benefits of Personal Loans

Personal loans are a flexible option for borrowers looking to accomplish a variety of goals, from consolidating other debts to remodeling their home. Here’s a look at some of the advantages.

Comparatively Low Interest Rates

Personal loans offer relatively low interest rates when compared to other methods of short-term borrowing. The average personal loan interest rate is 9.41% according to the St. Louis Federal Reserve. Credit cards by comparison have average interest rates of 14.56% and up, and a personal line of credit can have interest rates that vary between 9.30% and 17.55%.

Some forms of predatory short-term lending, such as payday loans , can charge the equivalent of many times these rates to borrow.

	Average Interest Rates
Personal Loans	9.41%
Credit Card	14.56%
Personal Line of Credit	9.30% – 17.55%

Comparatively High Borrowing Limits

Small personal loans are usually for amounts of $3,000 or less. (Smaller loans often come with lower interest rates.) However, some lenders will offer loans of up to $100,000 to cover major expenses and life events, which may be quite a bit more than other credit options.

The average credit limit for credit cards, by comparison, is $30,365, according to credit reporting bureau Experian. Personal lines of credit have a range of limits from $1,000 to $100,000, similar to the range offered by personal loans.

	Borrowing Limits
Personal Loans	Up to $100,000
Credit Card	Average limit of $30,365
Personal Line of Credit	Up to $100,000

Personal Loans Can Be Used for Many Things

Some types of loans must be used for designated purposes. Auto loans must be used to buy a car, and a mortgage must be used to finance a house. Personal loans, on the other hand, have few restrictions on how you must use the money, and you can generally use it for any purpose.

Recommended: Common Uses for a Personal Loan

No Collateral Necessary

Unsecured personal loans are the most common type of personal loans. They are not backed by collateral, such as your car or home.

Some personal loans are secured, and require you to borrow against the equity in your personal assets, like a home or your savings. With a secured vs. unsecured personal loan, the lender can seize your property if you default, selling it to recoup their loss. As a result, secured loans present less risk for the lender and often come with lower interest rates than unsecured loans.

Simple to Manage

You can use personal loans to consolidate other, higher-interest debt, for example, by paying off the balance on several high-interest credit cards. A single personal loan can offer cheaper interest, lowering the cost of your debt over time. And it may be easier to manage, since you only have one bill to pay each month.

Can Help Building Credit

Your lender will likely report your personal loan and payment history to the three credit reporting bureaus — Experian, TransUnion, and Equifax. In fact, 35% of your FICO® score — the most commonly used credit score — is determined by your payment history. You can build up a strong credit history over time merely by avoiding late or missed payments.

The Disadvantages of Personal Loans

Without properly weighing the potential disadvantages, personal loans can be a bad idea for some borrowers.

Higher Interest Rates Than Some Alternatives

Personal loans may carry higher interest rates than some alternatives. For example, if you’re looking to remodel your home, you might consider taking out a home equity loan or a home equity line of credit (HELOC).

A home equity loan uses your home as collateral. As of June 2022, the average interest rate on a 10-year fixed home equity loan was 6.02%. A home equity line of credit, is a revolving credit line that uses your home as collateral. Borrowers with good credit can qualify for interest rates ranging from 3% to 5%. Those with below-average credit are likely to receive interest rates that range from 9% to 10%.

Fees and Penalties

Some lenders may charge fees and penalties in association with personal loans. For instance, an origination fee helps pay for the processing of your loan application and is usually equal to a percentage of the loan amount. Fortunately, it’s possible to avoid origination fees.

Lenders may also charge prepayment penalties if you pay off your loan ahead of schedule, to make up for profit they are losing on interest payments.

Can Increase Debt

Take out a personal loan only if you are sure you can pay it off and it makes financial sense. For example, a home remodel could increase the value of your home, and consolidating credit card debt could save you money in interest payments.

Avoid taking out a loan that is for more money than you need to avoid the risk of taking on more debt than necessary.

Alternatives to Personal Loans

In addition to personal loans, you may wish to explore other forms of credit that can help you finance big and small expenses.

•  Credit cards allow users to make purchases using credit, which they pay back at the end of each billing cycle. Borrowers must make minimum payments and owe interest on any balance they carry from month to month.

•  A personal line of credit (PLOC) is similar to a credit card. It allows you to tap your credit line as needed. Credit is replenished when you pay back your loan.

•  A home equity loan uses a borrower’s home as collateral. The value of the property determines the loan amount.

•  A home equity line of credit is a revolving source of credit, like credit cards and PLOCs. As with home equity loans, HELOCs use the borrower’s home as collateral.

Exploring Personal Loans Further

A personal loan is a type of installment loan, usually unsecured, that allows you to use the money for a variety of unexpected expenses. Borrowers with higher credit scores have a better chance of being offered lower interest rates. This is important because the higher your interest rate, the more money it will cost you to borrow. Also, some lenders charge extra fees and penalties.

If you’ve explored your options and decide that a personal loan is right for you, it’s wise to shop around to find the right loan. Consider personal loans from SoFi, which offers loans of up to $100,000 with no fees required. Check SoFi personal loan rates and your own personal loan rate. borrowers may receive funding as quickly as the same day it is approved.

Compared with high-interest credit cards, a SoFi Personal Loan is simply better debt.

FAQ

What is a personal loan?

A personal loan is a loan you receive from a bank, credit union, or online lender. Borrowers pay back the principal and interest in regular installments.

What can you use a personal loan for?

Personal loans have few usage restrictions. You can use them for everything from covering an unexpected medical bill to remodeling your kitchen.

How much money can you get from a personal loan?

Personal loan amounts may range from a few hundred dollars up to $100,000 from some lenders.

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

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

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

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.

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If you’re strapped for cash and have a hard time qualifying for traditional loans, or you live in an underbanked area, you may be considering a pawnshop loan. They appear to be a convenient option — consider that there are 10,000 pawn shops currently operating in the country — but they can also come with significant disadvantages, including high fees.

Before putting your valuables down in pawn, learn more about what pawnshop loans are and how they work.

What Is a Pawnshop Loan?

A pawnshop loan is a secured, or collateralized, loan. To borrow the money you must produce an item of value as collateral – such as a piece of jewelry, a musical instrument, electronics, or an antique – that provides backing for the loan. You and the seller agree to a loan amount and a term. If you don’t pay back the loan within the agreed amount of time, the pawnshop can sell the item to recoup the amount of the loan.

Pawnshops will typically offer you 25% to 60% of the resale value of an item. The average size of a pawnshop loan is $150 over the course of 30 days.

Aside from the need for collateral, there are few other requirements to qualify for a pawnshop loan. You typically don’t need to prove your income or submit to a credit check.

Recommended: Loans Based on Income

How Do Pawnshop Loans Work?

Pawnshops don’t charge interest on the loans they offer. However, the borrower is responsible for paying financing fees that can make the cost of borrowing higher than other loan options.

Regulations around what pawnshops can charge vary by state, but you could end up paying the equivalent of many times the interest charged by conventional loans.

Say you bring in a $600 guitar to a pawnshop, and they offer you 25% of the resale value, or $150. On top of that, let’s say the pawnshop charges a financing fee of 25%. That means you’ll owe $37.50 in financing fees, or $187.50 in total.

If you agree to the loan, the pawnbroker will typically give you cash immediately. They’ll also give you a pawn tick, which acts as a receipt for the item you’ve pawned. Keep that ticket in a safe place. If you lose it, you may not be able to retrieve your item.

You’ll usually have 30 to 60 days to repay your loan and claim your item. According to the National Pawnbrokers Association, 85% of people manage to do this successfully. When a borrower pays off a pawnshop loan, they can retrieve the item they put in pawn. For those who don’t, the pawnshop will keep the item and put it up for sale. There is no other penalty for failing to pay off your loan, but you do lose your item permanently.

Recommended: Can You Get a Loan Without a Bank Account?

The Pros and Cons of Pawnshop Loans

In general, it’s best to seek traditional forms of lending, such as personal loans, if you can: They tend to be cheaper and help you build credit. However, if you need cash the same day and you don’t qualify for other loans, you might consider a pawnshop loan. Carefully weigh the pros and cons to help you make your decision.

Pros of a Pawnshop Loan

•  Access to cash quickly. When you agree to a pawnshop loan, you can typically walk out with cash in hand immediately.

•  No qualifications. The ability to provide an object of value is often the only qualification for a pawnshop loan.

•  Failure to pay doesn’t hurt credit. While you will certainly lose the item that you put in pawn if you don’t pay back your loan, there are no other ramifications. Your credit score will not take a hit.

•  Loans aren’t sent to collections. If you don’t pay back your loan, no collections agency will hound you until you pay.

Recommended: How Do Collection Agencies Work?

Cons of a Pawnshop Loan

•  High fees. The financing fees associated with pawnshop loans can be much more expensive than traditional methods of obtaining credit, including credit cards and personal loans. Consider that the average interest rate on a personal loan is 9.41% as of February 2022, according to the St. Louis Federal Reserve, whereas pawnshop financing fees could range from 12% to 240% or more.

•  Loans are relatively small. The average size of a pawnshop loan is just $150. If you need money to cover a more costly expense, you may end up scrambling for cash elsewhere.

•  You won’t build credit. Pawnshop loans are not reported to the credit reporting bureaus, so paying them off on time doesn’t give you credit score a boost.

•  You may lose your item. If you can’t come up with the money by the due date, you’ll lose the item you put in pawn. (Same if you lose your pawn ticket.)

Pros and Cons at a Glance

Pros	Cons
Quick access to cash.	Financing fees can range from 12% to 240% and contribute significantly to the cost of the loan.
No qualifications, such as credit check or proof of income.	Pawnshop loans aren’t reported to the credit reporting bureaus, so they won’t help you build credit.
Failure to pay doesn’t hurt credit.	If you fail to pay back your loan on time, or you lose your pawn ticket, you can’t reclaim your item.
Loans can’t be sent to collections.	Loans are relatively small, just $150 on average.

What Is a Pawnshop Title Loan?

A pawnshop title loan is a loan in which you use the title of your car as collateral for your loan. You can typically continue driving your vehicle over the course of the loan agreement. However, as with other pawnshop loans, if you fail to repay your loan on time, the pawnbroker can seize your car.

Typical Requirements to Get a Loan Through a Pawnshop

There are typically few requirements to get a pawnshop loan, since the loan is collateralized by the item you put in pawn and the pawnbroker holds on to that item over the course of the loan. However, pawnbrokers do want to avoid dealing in stolen goods, so they may require that you show some proof of ownership, such as a receipt.

Alternative Loan Options

There are a number of benefits of personal loans that make them a good alternative to pawnshop loans. Personal loans are usually unsecured, meaning there is usually no collateral for a personal loan. Lenders will typically run a credit check, and borrowers with good credit scores usually qualify for the best terms and interest rates. That said, some lenders offer personal loans for people with bad credit.

If you qualify for a personal loan, the loan amount will be given to you in a lump sum, which you then repay over a course of monthly installments. The money can be used for any purpose.

Personal loans payments are reported to the credit reporting bureaus, and on-time payments can help boost your credit score.

The Takeaway

If you only need a small amount of money, you don’t qualify for other credit, or if you’re looking for a loan without a bank account, you may consider a pawnshop loan. Just beware that they are potentially costly alternatives to other forms of credit.

Consider a personal loan option from SoFi, which offers a low fixed rate for those who qualify.

Compared with high-interest credit cards, a SoFi Personal Loan is simply better debt.

FAQ

How is a loan obtained through a pawnshop?

To borrow money from a pawnshop you must present an item of value that can act as collateral for the loan. The pawnbroker may then provide a loan based on the value of that item.

What happens if you don’t pay back your pawnshop loan?

If you fail to pay back your pawnshop loan on time, you won’t be able to reclaim your item, and the pawnshop will sell it to recoup their losses.

What’s the most a pawnshop loan will pay?

On average, a pawnshop will loan you about 25% to 60% of an item’s resale value, and the average pawnshop loan is $150 over 30 days.

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Photo credit: iStock/miriam-doerr
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 .

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.

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

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You may have heard that the better your credit score, the better your potential loan rates and offers may be. Why is that? That’s because your credit score determines your creditworthiness. A good credit score may qualify you for what’s known as a prime loan.

Here, what a prime loan is and how it works.

Understanding a Prime Loan

To understand a prime loan, it’s important to understand the prime rate. The prime rate is established by banks as the interest rate given to prime customers. This number is based on the federal funds rate set by the Federal Reserve.

When interest rates are low, the prime rate across banks will be low. But if the Fed raises interest rates, rates across banks — even for prime borrowers — will also increase.

This matters when you’re considering a fixed-rate loan, like a mortgage or a personal loan. Lower interest rates now mean that you will lock in a lower rate for the life of your loan. But prime rates also extend to variable-rate debt, like credit card debt or a home equity line of credit (HELOC).

Prime Loan Borrowers

When the bank sets its rates, they set a prime rate as the basis of their loan rates, which may be higher or lower based on the creditworthiness of each applicant. The prime rate is set considering the Federal Reserve rates, as well as other factors including the bank’s own desired return on the loan. But in general, prime rates are very similar, if not identical, between major banks.

According to the Consumer Finance Protection Bureau (CFPB), borrowers with a credit score of 660 to 719 generally receive prime rates. Borrowers with scores above 720 are considered “super-prime” borrowers, and will receive even more favorable interest rates. The interest rates for super-prime borrowers will be lower than the prime rate.

Here are the rate categories for borrowers:

Category	Credit Score
Deep subprime	Below 580
Near prime	620 to 659
Prime	660 to 719
Super prime	Above 720

Knowing your credit score can help you assess the category you will fit in.

Prime Loan Rates

As mentioned above, prime loan rates are set by the bank and change based on the federal fund rate. When the federal fund rate moves, so will the prime rate. As of this writing, the prime rate is 4.75%, according to the Wall Street Journal.

So does this mean that any loan you apply for will have a 4.75% interest rate? No. APR rates will vary based on the type of loan you apply for. Banks may have their own formula but there are some rules of thumb.

For example, credit card interest rates are generally set at “prime + 13.99%.” As the prime rate changes, so will your interest rate. But in general, the higher your credit score, the lower your interest rates will be.

Prime Loan Example

How Does the Prime Loan Rate Affect You?

The prime loan rate affects everyone. From buying a car to buying a house to opening a credit card, the prime loan rate will determine how much interest you’ll pay. You may be more vulnerable to prime loan rate fluctuations if you have a lot of variable interest loans, like credit card debt. As the prime rate climbs, so too might the APR of your cards. When you see a prime rate hike, it can mean that your APR will quickly rise as well.

Conversely, when the prime rate falls, some people use that time to refinance a mortgage or lock in a rate for a loan, like a personal loan or an auto loan.

Because the prime rate affects credit cards, some people who carry a high credit card balance who have good credit may consider using a personal loan to consolidate their credit card debt. This is one way to use a personal loan to pay less overall interest, depending on the rates offered.

What Is the Difference Between a Prime Loan and Subprime Loan?

There are a few differences between a prime loan and subprime loan. Not only do prime loans have the most favorable interest rates, but they also may affect how large a loan you can take, among other things. Here, some differences between a prime loan vs. a subprime loan.

Interest Rates

Interest rates are one of the most obvious differences between a prime and subprime loan. But even within categories, like a prime borrower, there may be subcategories that receive different interest rate offers. For example, a prime borrower with a credit score near super-prime territory may receive more favorable rates than a borrower whose credit is close to subprime.

Repayment Periods

A subprime borrower may also have fewer options when it comes to repayment periods. They may have a shorter repayment period at a higher interest rate than a prime borrower.

Down Payments

A prime borrower may have a low, or no, down payment required for a loan. But subprime borrowers may have to make a larger down payment to qualify for a loan. This is especially true for loans like car loans or mortgages.

Loan Amounts

Prime borrowers may have access to greater loan amounts than subprime borrowers.

Fees

Non-prime borrowers may also have to pay more loan fees than a prime borrower. This may be due to the types of loans they can access. If they can’t get a loan from a traditional bank, a subprime borrower may seek payday loans or other loans that require fees. Different types of personal loans besides loans offered by traditional banks may include payday loans, hard money loans, and other loans that may require collateral, or have high fees and interest rates.

What Do You Need To Qualify for a Prime Loan?

Your credit score will determine what type of loan is offered to you. But a lender will take other details into consideration, including your credit history and employment status. But a good rule of thumb is to make sure your credit score is as high as possible before you apply for a loan to receive the most favorable terms.

The Takeaway

The prime rate is out of your control. But so much of your interest rate is under your control, including your credit score. Building your credit score can help you have the most competitive loan options, whether you’re researching personal loans, credit card offers, mortgages, or refinancing your student loans.

If you’re applying for a personal loan, personal loan approval tips include assessing your credit score. If it’s not where you’d like it to be, you might want to consider building your credit before applying for a personal loan. Subprime personal loans may exist, but they may be for lower amounts at higher interest rates than ones offered for prime borrowers.

Rates may be different across banks so it’s worth comparing personal loan interest rates. You can check your rate for personal loans without it affecting your credit score. Doing so can help you determine the types of loan rates, as well as amounts, you may be eligible for.

Check your personal loan rate from SoFi here.

FAQ

What does prime mean in loans?

Prime in loans means the borrower is considered a low lending risk. The bank will set a prime rate that will then be the basis for interest rates across lending products, including mortgages, car loans, personal loans, and credit card offers.

Is there a difference between prime loans and subprime loans?

Yes. Prime loans are given to people whose credit scores generally fall into a 660 to 719 range. (Borrowers with credit scores above that are considered superprime borrowers and may be given even more favorable rates.) But there are also categories within the prime range — people with higher credit scores may get a lower rate than people with lower scores, even if their scores fall into the “prime” category.

In addition to interest rates, prime borrowers may also have longer repayment period options, more access to credit, lower fees, and a smaller down payment obligation than subprime borrowers.

What is the current loan prime rate?

The current loan prime rate is 4.75%.

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

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

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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Turning a new space into a home can be daunting. By far the hardest part of furnishing a house from scratch is figuring out where to start. One good first step is deciding on a budget — ideally, before you move out of your old place.

However you proceed, recognize that it’ll take some trial and error: At some point, you’re going to realize that something you had your heart set on is not what you want to spend your money and time on after all.

Whether you’re a minimalist or maximalist, we’ll show you tips for furnishing a home on a realistic timeline and budget.

Recommended: Things to Budget for After Buying a Home

6 Tips for Furnishing a Home

The key to finding the right home furnishings is to follow your instincts. There isn’t one universal definition of good taste. This is your taste, and your home. Here are a few guidelines.

1. Consolidate Your Stuff

Before you set a budget for new home furnishings, walk through your old place and identify what you want to keep (if anything) and what you’ll need to purchase. A new home is the perfect opportunity to say goodbye to pieces that don’t suit your lifestyle anymore. (“What would Marie Kondo do?” is still a good mantra.)

Start with the key pieces of furniture you’ll need for your home to be functional — beds, couches, dining table, area rugs. Did you recently purchase your dream bed, or have you had the frame since college? Decide what to move and what to chuck.

You can sell or donate furniture, depending on value.

2. Prep Before the Schlep

A rule of thumb for interior decoration: Pulling up carpeting and painting the walls are much easier to do before any furniture is brought into the house. Before move-in day, create a list of any changes you would like to make to the existing interior. Ask yourself if you want to include minor home repairs in this budget or create a separate one.

Here are some basics to consider before furnishing a house:

•   Walls and ceilings: Choose a paint color, patch holes, remove popcorn ceilings

•   Floors: Remove or add carpet, put in hardwood floors, refinish floors

•   Appliances: Select kitchen appliances, bring in a washer and dryer, install ceiling fans and lighting fixtures

•   Kitchen and bath upgrades: Redo the kitchen counters, choose a backsplash, retile the bathroom

•   Laundry room: A laundry room remodel can create a more efficient space or a room with a dual function.

Once you’ve made the list of potential changes, determine what needs to be tackled now and what can wait. You may be able to live with the blue tile in the kitchen, for instance, but the pink walls in the bedroom aren’t going to cut it. Next, determine what you can do yourself and what will require professional attention. You may want to research reliable contractors in your new neighborhood before you need one.

3. When Buying Furniture, Start with Key Rooms

The living room and main bedroom are two places you likely spend the most time in, so these are good rooms to prioritize. You don’t need to have a fully organized pantry before you have an acceptable place to sleep.

A bed and a couch may be worth spending extra money on in order to get something that will last for years and tie the room together.

•   Bedroom: A good bed frame and mattress are wise investment pieces. And it can be a good idea to choose a whole bedroom vibe before buying new pieces so that you have a cohesive theme.

•   Living room: A couch is the centerpiece here, so that’s the investment piece (and a good decor starting point). Consider size, comfort, and color. A big TV or entertainment center may also be part of the equation.

•   Home office: You may be able to offset some of the cost with a home-office tax deduction.

4. Keep Things Organized While You Unpack

The two elements that really shape the feng shui of a home are organization and decor. An organized pantry or closet makes life easier, while a curated bookshelf can subtly affect the feel of an entire room.

See what you already have that can be functional — baskets, bins, and such. As you unpack your belongings, use these tools to stay organized. Depending on your lifestyle, organizational outlays for your new home could range from slimline hangers to a closet remodel.

5. Little Things Add to the Big Picture

Lay out all decor pieces you own, including art, books, family heirlooms, photographs, trays, candles, and vases. Ideally, you’ve gone through most of this stuff in the consolidation phase and kept only things that are meaningful to you or fit your home’s aesthetic.

Once you see everything in one place, begin picking out things that go together. There are no wrong answers here — you might choose travel books for your office and a series of family heirlooms and photographs for your bedroom. This is the most forgiving aspect of interior decoration because smaller decor pieces can be easily shifted.

Once all of your belongings are in place and the art is hung, you can browse online to find some great pieces that resonate with you and your space. Now may be the time to frame that print you’ve been hanging on to, or to splurge on the perfect pillows for your couch. These may seem like small additions, but they can make a huge difference.

6. Space Out the Purchase of Big-Ticket Items

It’s OK if your home looks like a work in progress for a while. Once you’ve consolidated, organized, and decorated, you may want to buy your investment pieces. Pick three or four non-negotiables — perhaps a bed, sofa, television, and live edge dining table — and get those into the house. Then focus on buying art, rugs, and lights you’ve been eyeing.

How Much Does It Cost to Furnish a House?

One way to estimate interior costs is to set a budget that’s a percentage of your home’s price — typically 10% to 50%. For a $400,000 home, for instance, you’re looking at a baseline of $40,000.

Remember, that includes any painting, flooring work, and minor updates in addition to new home furnishings. That figure also accounts for all interior-related costs in your first few years of home ownership: the inexpensive starter pieces you tolerated until the perfect item materialized, the well-intentioned mistakes, and so forth.

If you don’t have a separate fund earmarked for new home furnishings, it can be hard to come up with a chunk of cash right after closing. One option is taking out a personal loan. In fact, funding home updates and furnishings is one of the most common uses for personal loans.

There are different types of personal loans. Typically, you can borrow between $5,000 and $100,000, and pay it back in equal installments over a term of up to seven years. Fixed interest rates for personal loans tend to be lower than for credit cards.

Here are some cost ranges for key pieces to help you create a budget.

Recommended: Personal Loan Calculator

Painting: $500 to Thousands

The cost of paint supplies will depend on the number of rooms, amount of trim for doors and windows, and the quality of the paint. Paint is about $15-$40 per gallon, but a designer brand can cost much more than that. A gallon of paint covers about 400 square feet, and two coats may be recommended. Factor in all the myriad paint supplies to buy if you DIY.

Expect to pay a painter $2 to $6 per square foot for labor and materials, according to Home Advisor. For a 2,300 square foot home, you can pay from $4,000 to $11,000.

Bed: $200 to $2,000 and Up

Simple bed frames are available from IKEA or Wayfair in the $100-$200 range. Inexpensive bed frames and headboards are also easy to find at thrift stores and yard sales. While you may not want to furnish your entire house with thrifted pieces, one or two second-hand items can free up a lot of cash to put toward a couch or higher-end mattress.

You can also find mid-priced selections from $200 to $1,000 at those retailers as well as more design-driven vendors such as West Elm, Raymour & Flanigan, and Crate and Barrel.

Mattress: $300 to $2,000 and Up

Mattress-in-a-box brands such as Zinus, Allswell, and Nectar offer mattresses starting at a few hundred dollars. Higher-end brands like West Elm, Raymour & Flanigan, and Tempur-Pedic can run upwards of $3,000.

Sofa: $200 to $3,000

The IKEAs, Wayfairs, and Targets of the world offer many starter pieces for a few hundred dollars. Midrange selections run from $300 to $1,000 from these and other retailers, such as Ashley Furniture, West Elm, Raymour & Flanigan, Crate and Barrel, and CB2.

At the higher end of the spectrum, more sophisticated designs are available at Roche Bobois, Ligne Roset, Design Within Reach, and other luxury brands. And don’t forget second-hand designer marketplaces — such as Apt Deco, Kaiyo, 1st Dibs — and antique stores.

Dressers and Wardrobes: $500 to $5,000 and Up

Bedroom furniture can be found at the same kinds of retailers and run from modest to extravagant. While coordinating bedroom sets used to be de rigueur, in recent years they’ve been replaced by a less matchy-matchy aesthetic.

Rugs: $30 to $1,000 and Up

Rugs are a cost that’s easy to forget about, and they can be a lot more expensive than you expect. A high-quality Persian rug can run thousands of dollars, but some of the midrange retailers discussed have area rugs starting at $100. Look out for Labor Day and Black Friday sales, too.

Organizational Pieces: $20 to $300 and Up

Baskets, bins, storage ottomans, and closet systems can bring order to chaos. The Container Store offers inspiration.

What Home Decor Style Fits Your Personality Quiz

The Takeaway

When furnishing a home, start with a budget. One rule of thumb suggests putting aside 10% to 50% of your home’s price for interior decorating. Before you move, cull your belongings and prepare the new space for move-in (pulling up carpet, redoing countertops, remodeling a closet). Then identify initial key purchases. Many homeowners today choose a mix of high and low-end furnishings, plus second-hand items from thrift stores and online designer dealers.

When you’re making your new house a home, a personal loan can help ensure that you don’t have to cut corners. SoFi offers no-fee option personal loans that come with a fixed rate.

Check your rate in 60 seconds without affecting your credit score†, and get your loan funded as soon as the same day you’re approved.^*

FAQ

What is a good budget for furnishing a new home?

Some experts recommend setting your home furnishings budget as a percentage of your home’s price: say, 10% to 50%. That includes any cosmetic work done on the interior before you move in, as well as new home furnishings and decor pieces.

Can you furnish your home with a personal loan?

If you have an emergency fund tucked away and feel comfortable making another monthly payment on top of your mortgage, a personal loan can be a good option. In fact, home furnishings and updates are one of the most common uses for a personal loan. Just be prepared to prove to lenders that your debt-to-income ratio will remain below 36%.

Can you furnish a new home with a $10,000 personal loan?

A personal loan is a good option for covering new home furnishings. Just make sure $10,000 will cover your costs — you can’t add to a personal loan amount after the fact. One rule of thumb suggests budgeting 10% to 50% of your home’s price for furnishings and interior updates.

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

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

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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