SoFi

In a high-interest-rate climate, especially after historic lows, you may be more aware of purchase interest charges on your credit card statement. These charges are a wordy way of saying interest, which you owe when you don’t pay your credit card statement balance in full.

Read on for more about credit card interest, including how it works and how to find your card’s interest rate.

What Is Credit Card Interest?

Credit card interest is what you’re charged by a credit card issuer when you don’t pay off your statement balance in full each month. Card issuers may charge different annual percentage rates (APRs) for different types of balances such as purchases, balance transfers, cash advances, and others. You may also be charged a penalty APR if you’re more than 60 days late with your payment.

An interest charge on purchases is the interest you are paying on the purchases you make with the credit card but don’t pay in full by the end of the billing cycle in which those purchases were made. The purchase interest charge is based on your credit card’s APR and the total balance on that card, both of which can fluctuate.

Taking a closer look at your credit card balance and interest rate can help you figure out the best way to pay it off. Here’s some information about how purchase interest charges work and, in general, how interest works on a credit card.

How Does Credit Card Interest Work?

Credit cards charge different APRs on purchases, cash advances, and balance transfers. The cardmember agreement that was included when you first received your credit card outlines the different APRs and how they’re charged. This information is also included in brief on each monthly billing statement, or you can contact your credit card issuer’s customer service department for this information. Another place to find how interest works on various credit cards is through the Consumer Financial Protection Bureau (CFPB), which maintains a database of credit card agreements from hundreds of card issuers.

Some credit cards offer an introductory 0% interest rate. But once that promotional period ends, paying your balance in full each month is how you can avoid interest charges.

For example, you get a new credit card with a $5,000 available credit limit and 0% interest for three months. You use the credit card to buy a new computer that costs $3,000 and a designer dog house for your poodle that costs $1,000.

Let’s say that for each of the three interest-free months, you pay only the minimum balance due. But since the full balance hasn’t been paid, your fourth statement will include a purchase interest charge. That is the interest you now owe because you did not pay off your credit card statement balance in full.

Credit card interest is variable, based on the prime rate, and banks typically calculate interest daily. A typical interest calculation method used is the daily balance method:

•   The bank will calculate the daily periodic rate, which is the APR divided by 365.

•   To each day’s balance, the bank will add any interest charge from the previous day (compounded interest) and any new transactions and fees, then subtract any payments or credits. This is the new daily balance.

•   The daily periodic rate is multiplied by the daily balance each day.

•   At the end of the billing cycle, each day’s balance is added together, resulting in the amount of interest owed.

•   If the amount owed is less than the minimum interest charge shown on the credit card’s fee schedule, the bank will charge the minimum.

You can make a payment toward your balance due at any time — you don’t have to wait until the due date. Since interest is commonly calculated daily, making multiple smaller payments rather than one large payment on the due date is one way to decrease the amount of interest you might owe at the end of the billing cycle. This can be a good strategy to use if you don’t pay your credit card bill in full each month. You’ll still owe some interest, but it may be less.

Recommended: APR vs. Interest Rate

What Is a Purchase Interest Charge?

Sometimes also known as a finance charge, an interest charge on purchases is simply interest you pay on your credit card balance for purchases you made but didn’t pay in full. If you don’t pay off your balance each billing cycle, a purchase interest charge for the unpaid amount then becomes part of the total balance you owe.

For example, let’s say you owe $1,000 on a credit card, and because you did not pay that $1,000 in full, you were charged a purchase interest charge of $90. You now owe $1,090, and then the next month’s purchase interest charge will be calculated based on a balance of $1,090.

This is called compound interest and can lead to a cycle of credit card debt. The interest charges continue to accrue if you’re not paying your balance in full every month.

How Do You Get Rid of a Purchase Interest Charge?

For a temporary reprieve from paying an interest charge on purchases, you might look for a credit card that has an introductory 0% APR. Some credit card issuers offer introductory rates for anywhere from six to 21 months for qualified applicants. If you make a plan for paying off the balance before the promotional period ends and you’re diligent about sticking to it, you could forgo paying interest on purchases made during that period.

Some people might choose this strategy rather than taking out personal loans for a specific purchase. If you know that you can pay the balance in full while the APR remains at 0%, it could be a good strategy.

The only sure way not to pay a purchase interest charge is to pay your credit card balance in full each month. This can help you avoid credit card debt. If that’s not possible, paying more than the minimum and investigating methods such as the debt snowball payoff technique or considering a debt consolidation loan can be wise.

Recommended: 11 Types of Personal Loans and Their Differences

Personal Loan Tips

If you have high-interest credit card debt, a personal loan is one way to get control of it. However, you’ll want to make sure the loan’s interest rate is much lower than the credit cards’ rates and that you can make the monthly payments.

In addition, before agreeing to take out a personal loan from a lender, you should know if there are origination, prepayment, or other kinds of fees. With personal loans from SoFi, for example, there are no-fee options.

Finally, just as there are no free lunches, there are no guaranteed loans. So beware lenders who advertise them. If they are legitimate, they need to know your creditworthiness before offering you a loan.

Different Types of Credit Card Interest

Interest charges on purchases are just one type of interest charged on a credit card. Other transactions and fees may apply and must be disclosed to credit card applicants. The information can be found in a credit card’s rates and fees table, often referred to as the Schumer Box after legislation introduced by Sen. Chuck Schumer as part of the Truth in Lending Act. The APR for purchases is typically at the top of the list, with others below:

•   Balance transfer APR: If you transfer a balance from one credit card to another, this is the rate you’ll pay on the amount of the transfer. You’ll also be charged interest at this APR on any balance transfer fee your card issuer might charge you.

•   Cash advance APR and fee: Cash advance APRs tend to be much higher than purchase APRs, and there’s typically no grace period — interest starts accruing immediately. Like a balance transfer fee, you’ll be charged interest on a cash advance fee, too.

•   Penalty APR: If your credit card payment is more than 60 days late, your credit card issuer may increase your APR. If you make the next six consecutive payments on time, the card issuer must reinstate your original APR on the outstanding balance. But they are allowed to keep the higher penalty APR on any new purchases.

In addition to interest charges, there may also be fees charged. All of these fees could potentially accrue interest at their respective rates if the credit card’s balance is not paid in full by the payment due date:

•   Annual fee: Some credit cards charge an annual fee to the card holder.

•   Balance transfer fee: Plan on a fee of 3% to 5%, typically, on the amount transferred.

•   Cash advance fee: It’s the greater of a flat dollar amount or a percentage of the cash advance.

•   Foreign transaction fee: You’ll be charged a percentage of each transaction amount, in U.S. dollars.

•   Returned payment fee: Having insufficient funds in the bank account used to pay your credit card bill could result in a returned payment fee.

•   Late payment fee: Payments made after the statement due date may incur a late fee of $30 or more.

Where Can I Find My Credit Card’s Interest Rates?

There are several places you can locate your credit card’s interest rates and fees.

Any time you receive a solicitation for a credit card, which is basically an advertisement, the credit card issuer is required by law to disclose the card’s possible interest rates and fees, as well as how interest is calculated. Since the recipient of this advertisement hasn’t been approved for the credit at this point, these numbers are estimations.

If you are going through a prequalification process for a credit card, the issuer should be able to provide you with more specific APRs so you can decide if that card is a good financial tool for you.

After you’ve been approved, the credit card issuer will mail you a packet containing your physical credit card and detailed information in a cardmember agreement. It’s a good idea to read this document thoroughly so you’re aware of all possible APRs and fees you could be charged.

If you access your credit card account online or via an app, you can also find this same detailed information on the card issuer’s website. You can call the card’s customer service telephone number for the information.

The Takeaway

If you’re one of the many people who carry a credit card balance, knowing how much interest you’re paying on different types of charges is important. Interest charges on purchases are likely the most common interest charges, and the amount of interest you may pay can add up quickly.

To keep from paying interest on purchases at all, it’s important to pay your credit card balance in full each month. If you don’t, you’ll accrue interest, which compounds and can create a debt cycle.

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

SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

FAQ

Why am I getting a purchase interest charge on my credit card?

You typically are assessed a purchase interest charge on your credit card if you haven’t paid your balance in full by the payment’s due date. The interest that you pay reflects your card’s APR and the debt owed.

How do I avoid purchase interest charges?

You can avoid purchase interest charges on your credit card by paying your bill in full every month. Remember to keep an eye on transferred balances at the end of an introductory period to avoid unexpected interest charges.

What does 24% interest rate on my credit card mean?

A 24% APR on a credit card means that if you owe, say, $1,000, you would divide 24% by 365 and get 0.066% as a daily rate, about 66 cents per day. To calculate how much you would owe in interest per month on a balance of $1,000, you would multiply the daily rate by the number of days in your billing cycle.

---

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

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

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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.

SOPL-Q326-004

Read more

If you need expensive dental work, you’re likely wondering how to pay for it. After getting a quote from your dentist and learning how little your insurance will cover, you may be thinking, “I must be missing a way to afford this.”

There’s good news and bad news when it comes to how to finance expensive dental work. Bad news first: Despite insurance, dental work can cost a lot out of pocket. The good news: Although there’s probably no easy solution to covering the whole bill, there are many tricks you can use to make your dollar stretch further (and possibly even get a tax break while you’re at it).

Here, learn smart strategies about how to pay for dental work. Together, these ideas can add up to quite a discount on your dentist’s quote.

10 Ways to Pay for Dental Work

Many people cover their dental work by combining several of the strategies below. It’s tough to avoid paying out of pocket entirely, but you can often get a hefty discount off the original quote. Read on to find out how to pay for dental work:

1. Dental Insurance

You should know that there’s a difference between a dental office that takes your insurance and a dental office that’s in network. A dentist may take your insurance even if they are out of network.

When a dentist says that they take your insurance, that likely means that they will file an insurance claim for you. But if your insurance doesn’t cover a procedure or service, the price will generally be set at your dentist’s discretion, and you’ll typically be responsible for paying the costs out of pocket.

Generally, using an out-of-network dentist means your insurance will cover less, so you’ll pay more. Being in network, on the other hand, usually means that your insurance company has prenegotiated the fees with the dentist, who generally can’t charge more than what was negotiated. So you’ll usually pay less with an in-network dentist.

Recommended: Does Cosigning Build Credit?

2. Medical Insurance

Dental work isn’t typically covered by medical insurance, but certain procedures may be if they’re deemed medically necessary. For instance, some kinds of oral surgery potentially can be billed as a medical procedure. Before you move forward with any dental work, it’s a smart idea to talk to your medical insurance company to find out what may be covered. This could help you afford a major dental bill.

Recommended: Guarantor vs. Cosigner: What Are the Differences?

3. Payment Plans

Paying a bill on a weekly or monthly basis can be much more manageable than paying it in a lump sum. That’s why many dental offices offer payment plans for procedures not covered by insurance.

Payment plans can be offered directly through your dentist’s office or by third-party services such as CareCredit. Ask about the specific terms of any payment plan offered. For example:

•   What procedures qualify for a payment plan?

•   Will they charge interest? And if so, how much?

•   Are other fees involved?

•   Do they have to check your credit first? If so, will it be a hard or soft inquiry?

Asking these questions beforehand can help keep you from getting blindsided by unexpected costs.

4. Flexible Spending Account

A flexible spending account (FSA) is a special savings account offered through some employer benefit plans. FSAs allow employees to pay for certain out-of-pocket medical and dental costs with tax-free money.

The typical taxpayer can save about 30% in federal, state, Social Security, Medicare, and unemployment taxes on average. That translates to a 30% discount off all eligible medical and dental expenses, which could be a way to pay for expensive dental work.

FSA rules cap the amount of money that can be placed in the account each year ($3,400 for 2026 per the Internal Revenue Service, or IRS) and also dictate which types of expenses are FSA-eligible. Most routine dental work and orthodontia qualify: cleanings, X-rays, fillings, crowns, extractions, implants, and Invisalign.,

FSAs can’t be used for any procedure that is considered cosmetic, including teeth whitening and veneers. But in some instances, if a typically cosmetic procedure is deemed medically necessary — as with some veneers — you may be able to use your FSA. Talk to your dental insurance company for more information.

One drawback of FSAs is that any funds that are unused at the end of the plan year are forfeited, so make sure you don’t leave any money on the table. In the plus column, because FSAs are funded with pretax dollars, they reduce your taxable income, which is always nice.

5. Health Savings Account

A health savings account (HSA) is similar to an FSA in several ways:

•   Both are funded with pretax dollars.

•   Both are used to cover health care expenses.

•   Both can be established through your employer and funded with payroll deductions

But there are also key differences between an FSA and HSA:

•   HSAs must be used with a high deductible health plan (HDHP).

•   The 2025 HSA funding cap is $4,400 for individuals, $8,750 for families.

•   HSA funds roll over from year to year.

•   You can set up an HSA through some health insurance companies and banks, making them a good option for the self-employed.

If you don’t have access to an FSA and you are currently covered by a high-deductible health plan, you can open an HSA at any time.

6. Negotiate With Your Dentist

The cost of dental work can actually be negotiable, depending on your dentist and your situation. First, have your dentist walk you through the treatment plan. Ask lots of questions, including:

•   Are all the procedures they’re suggesting equally urgent? Can some be postponed?

•   Can you get a discount by paying cash or the entire cost upfront? Some dentists give a percentage off for this.

•   If you don’t have insurance, ask if you can score an uninsured rate.

Some dentists will be flexible, and the worst that may happen is that they say no. Another thing you can do is have an honest conversation with your dentist about your financial situation. If your budget has no breathing room, see if they are open to giving you a discount or willing to push out your bill for a few months.

If the planned dental work is important but not super urgent, you may be able to schedule your appointments so they straddle two plan years. For example, if your plan year is January-December, you might schedule half of your appointments for December and half for the following January. That way, you can take advantage of two annual benefit maximums for insurance and two years’ worth of FSA or HSA funds.

7. Get Work Done at a Dental School

Having work done at a reputable dental school may be an option to make expensive dental work more affordable. Search online to see if you live within easy distance of a dental school that offers discounted services. Some schools may provide lower-cost dental exams and procedures as a way of training their students and giving them real-world experience under the supervision of skilled, highly trained dentists. The cost can be up to 50% lower than what you might find elsewhere.

If you have access to this and want to go this route, it can be wise to carefully check online reviews to find out others’ experiences and feel confident about your decision.

Recommended: Applying for a Loan With a Cosigner

8. Credit Card

In some circumstances, a credit card can be a suitable payment option for dental bills. If you have a card that offers rewards or cash back, it can also provide some benefits in return.

You might also consider looking for a medical credit card. These cards are issued by banks, credit unions, and other lenders and can only be used for health care expenses and within a specific provider network.

Some medical credit cards defer interest for a period of time after your health care charges are incurred, much like 0%-interest cards. No interest is charged so long as those charges are paid off in full before the interest-free period expires. Late payments or balances that have not been fully paid before the deferment period ends can incur interest charges. Make sure you read the fine print and are comfortable with the fees involved before signing up for one of these cards.

Speaking of 0%-interest cards, they’re another option to finance expensive dental work. By law, these interest-free promotional financing offers must last at least six months. But the most competitive offers go well beyond this to offer 0% introductory APR financing for 18 months or longer.

Before you commit to a new card, it’s a good idea to shop around for the best terms and make sure that dental work meets the requirements for any rewards. Credit card debt can be a significant financial issue, so it’s wise to know the exact benefits and downsides of this kind of card.

You might want to consider getting a personal loan or borrowing from family instead.

9. Personal Loan

Because of their flexibility, many people use personal loans to pay for out-of-pocket medical expenses or to consolidate high-interest debts through a debt consolidation loan.

Using a personal loan to finance dental work might be a better option than a credit card. The lower the interest rate, the lower your monthly payment. And personal loans tend to have lower interest rates than credit cards. As of June 2026, credit cards have an average interest rate of 19.22%, but online lenders may offer significantly lower personal loan interest rates (even less than half that percentage) to qualified borrowers.

By using a personal loan calculator, you can compare this option to, say, using a credit card or dipping into your savings.

How much you can borrow is also flexible, and getting approved for a personal loan can be done entirely online. In short, a dental loan might be a good option to cover additional dental needs, from basic fillings to more complex, high-cost procedures.

10. Emergency Fund

Tapping your emergency fund won’t offer a discount on your dental bill, but it can be a way to pay it. One of the cornerstones of good financial management is to build an emergency fund, typically holding three to six months’ worth of living expenses. The usual scenarios for withdrawing funds from your emergency savings account include paying bills if you lose your income or taking care of an unexpected large medical, dental, or car repair bill. So if you have a major dental expense and need cash, your emergency fund could be a solution.

Remember, emergency funds aren’t built in a day. Setting up automatic payments into this account from your checking account can be a smart move, even if it’s only a small sum like $25 per paycheck to start. And don’t forget to keep the money in a high-yield savings account so it can grow until you need to use it.

The Takeaway

When it comes to how to pay for expensive dental work, there isn’t one perfect solution. But there are a number of resources and tricks you can call upon to stretch your dollar. Discuss your options with your dentist to see what discounts and payment plans they may offer. Avail yourself of an FSA or HSA to pay with pretax dollars, if possible, or pay your bill with a 0% interest credit card, rewards card, or medical credit card, among other tactics.

Another option is to finance your dental work with a personal loan.

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

SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

FAQ

What can I use as financial assistance for dental work?

To finance expensive dental work, you may have to employ a few different tricks. First, if you have a flexible spending account (FSA) or a health savings account (HSA), paying your bills with pretax funds will net you an effective 30% discount. You can also schedule dental work to straddle two plan years so that your dental insurance and FSA/HSA cover twice the annual amount. If you’re uninsured, explain your financial situation to your dentist to see if they’ll offer a discount, and consider taking out an unsecured personal loan.

Can I use a personal loan as financial assistance for dental work?

Yes, a personal loan can be a great option for covering expensive dental work, compared to high-interest revolving credit. Shop around for the best rate and terms, and read the fine print to make sure you fully understand the fees involved for any option you are considering.

Is it hard to get financial assistance for dental work?

It will take some work on your part, but financial assistance is available for low-income patients through dental schools, clinical trials, United Way, Medicare, and Medicaid. Find out what kind of assistance you may be eligible for on the U.S. Department of Health and Human Services website at HHS.gov..

---

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 .

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

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

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.

SOPL-Q226-079

Read more

Has this happened to you? You’re thinking about getting a personal loan but haven’t yet applied. Then you get a letter in the mail: “You’re preapproved or prequalified for a personal loan!” What does that mean?

Some lenders use “prequalified” interchangeably with “preapproved,” but they are different. Here, we’ll discuss preapproval vs. prequalification and how to know if you’re a good candidate for a personal loan.

What Does Being Prequalified for a Loan Mean?

Prequalification is sometimes considered the first step in the loan approval process. You can think of it as a less comprehensive version of a preapproval. Prequalification simply means that you fit the general description of a customer typically qualified for a loan.

Based on your general profile, the lender can give you an idea of the size of loan you can qualify for. While prequalification can be done fairly quickly, it does not involve a full analysis of your credit report or verification of the financial information you provide. Because of that, there’s no guarantee that your loan will be approved.

Recommended: What Is a Personal Loan?

What Does Loan Preapproval Mean?

Preapproval is a more in-depth stage of the personal loan approval process. A lender will have accessed your financial history to assess you as a potential customer. Being preapproved means that, based on the information accessed, you’ll most likely be approved for a loan.

Preapproval allows the lender to show you the size of the loan you might qualify for, as well as the interest rate and loan terms they’re willing to offer. It’s a step closer to final approval of your loan application. However, this doesn’t automatically translate to being fully approved. For example, a hard credit inquiry can pull in information previously unseen by the lender that was not considered at the preapproval stage.

Does Prequalification or Preapproval Affect Your Credit Score?

Lenders typically prequalify you based on financial information that you provide and perhaps a soft inquiry into your credit history. Soft inquiries don’t affect your credit score, so it’s unlikely that prequalification will either.

Because the prequalification process varies by lender, however, it’s impossible to say for sure that prequalification won’t impact your credit. If it does, the impact will be small and temporary.

Preapprovals are more rigorous than prequalifications and closer to what you’ll experience when you actually apply for a loan. Preapprovals often involve a hard credit inquiry, which does impact your credit. But again, any effect will be minor.

Recommended: Should You Borrow Money During a Recession?

How Do I Know If I’m a Good Candidate for a Personal Loan?

A personal loan application considers your existing debt and your ability to repay the loan. Your current employment will factor into how well suited you are to repay the loan, as will your credit score. In most cases, this means you need a good credit score to qualify for an unsecured personal loan at a low interest rate.

Lenders will also consider your debt-to-income (DTI) ratio — the ratio of your income to existing debt — and what kind of monthly payments you can afford.

If you can’t otherwise qualify because of a poor credit score, consider asking a close friend or family member to cosign your personal loan. Adding a cosigner with a good credit score to your application can help you get a lower interest rate on your loan.

Will You Prequalify for a SoFi Personal Loan?

Some nontraditional lenders, such as SoFi, look at other parts of a financial package when evaluating a candidate’s personal loan application.

SoFi considers additional factors such as your earning potential and cash flow after expenses. This means that even if you have a shorter credit history (because you just graduated college, for example), you may still qualify for a personal loan based on your education and career.

To find out whether you qualify for a SoFi personal loan, first go through the online prequalification process. This requires you to create an account and input your basic personal information, education, and employment history. It takes only a few minutes, after which SoFi will immediately show you which loan options you prequalify for.

After selecting a preliminary personal loan option, you’ll have to finalize your application by uploading documentation to verify your personal information. This may include pay stubs and bank statements. Once you’re approved, the loan is typically disbursed within a week.

The Takeaway

Wondering what it means to be prequalified vs. preapproved? You’re not alone. The terms may sound similar, but there are differences to be aware of.

Prequalification is often the first step of the loan application process, and it typically takes less time and requires fewer details from the borrower. Preapproval is the second step of the process. Here, you can see the size of the loan you could qualify for and the potential terms and interest rate. However, neither step guarantees that you’ll be approved for the loan.

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

SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

FAQ

Can you be denied a loan after being preapproved?

Yes. Preapproval does not guarantee final loan approval. Lenders may still deny a loan application if new information appears during the underwriting process, such as changes to your income, employment, debt levels, or credit history.

Is prequalification the same as applying for a loan?

Prequalification is an initial review based on basic financial information and usually involves a soft credit inquiry. A formal loan application is more detailed and may require documentation verification and a hard credit inquiry.

Does getting prequalified or preapproved affect your credit score?

Prequalification usually involves a soft credit inquiry and generally doesn’t affect your credit score. However, preapproval may require a hard credit inquiry, which can cause a small, temporary decrease in your score.

---

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.

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

SOPL-Q226-062

Read more

Many of us would love to own a vacation home, but the added expense isn’t always doable. Because we can’t all own multiple properties, vacation timeshares continue to be a popular choice for solo travelers, couples, and families who want more space, amenities, and “a place to call home” at their locale of choice.

Here, you’ll get an honest rundown of how timeshares work, their pros and cons, and a few financing options.

What Is a Timeshare?

A timeshare is a way for multiple unrelated purchasers to acquire a fractional share of a vacation property, which they take turns using. They share costs, which can make timeshares far cheaper than buying a vacation home of their own.

Timeshares are a popular way to vacation. In fact, nearly 10 million U.S. households own one or more timeshare products, according to the American Resort Development Association (ARDA). The average price of a timeshare transaction is $23,160. This figure can vary widely depending on the location, size, and quality of the property, the length of stay,

How Do Timeshares Work?

If you’ve ever been lured to a sales presentation by the promise of a free hotel stay, spa treatment, or gift card, it was probably for a vacation timeshare. As long as you sit through the sales pitch, you get your freebie. Some invitees go on to make a purchase. You can also buy a timeshare on the secondary market, taking over from a previous owner.

What you’re getting is access to a property for a set amount of time per year (usually one to two weeks) in a desirable resort location. Timeshares may be located near the beach, ski resorts, or amusement parks. You can trade weeks with other owners and sometimes even try out other properties around the country — or around the world — in a trade.

In addition to the upfront cost of the timeshare, owners pay annual maintenance fees based on the size of the property — about $1,480 on average — whether or not they use their timeshare that year. These fees, which cover the cost of upkeep and cleaning, often increase over time with the cost of living. Timeshare owners may also have to pay service charges, such as fees due at booking.

Recommended: Loans With No Credit Check

Types of Timeshares

There are two broad categories of timeshare ownership: deeded and nondeeded. In addition, you’ll find four types of timeshare use periods: fixed week, floating week, fractional ownership, and a points-based system.

It’s important to understand all of these terms before you commit.

Deeded Timeshare

With a deeded structure, each party owns a piece of the property, which is tied to the amount of time they can spend there. The partial owner receives a deed for the property that tells them when they’re allowed to use it. For example, a property that sells timeshares in one-week increments will have 52 deeds: one for each week of the year.

Nondeeded Timeshare

Nondeeded timeshares work on a leasing system, where the developer remains the owner of the property. You can lease a property for a set period during the year or a floating period that allows you greater flexibility. Your lease expires after a predetermined period.

Fixed-Week Timeshare

Timeshares offer a limited number of options for when they can be used. Fixed-week means you can use the property during the same set week each year.

Floating-Week Timeshare

Floating-week agreements allow you to choose when you use the property depending on availability.

Fractional Ownership

Most timeshare owners have access to the property for one or two weeks a year. Fractional timeshares are available for five weeks per year or more. In this ownership structure, there are fewer buyers involved, usually 2-12. Each party holds an equal share of the title, and the cost of maintenance and taxes is split.

Points System

Finally, you may be able to purchase “points” that you can use in different timeshare locations at various times of the year.

Is a Timeshare a Good Investment?

Getting out of a timeshare can be difficult. Selling sometimes involves a financial loss, which means they’re not necessarily a good investment. However, if you purchase a timeshare in a place that your family will want to return to for a long time — and can easily get to — you may end up spending less than you would if you were to purchase a vacation home.

Benefits of Timeshare Loans

The timeshare developer will likely offer you financing as part of their sales pitch. The main benefit of a timeshare loan is convenience. And if you’re happy to return to the same vacation spot year after year, you may save money compared to staying in hotels. Plus, for many people, it may be the only way they can afford getting a vacation home.

Drawbacks of Timeshare Loans

Timeshare loans from developers often come with steep interest rates, especially for buyers with lower credit scores, who may be offered rates that exceed 20.00%. And if you eventually decide to sell, you’ll probably lose money. That’s because timeshares tend not to gain value over time. Finally, if you’re not careful about running the numbers before you commit, you can end up paying more in annual fees than you expect.

Recommended: What Is Revolving Credit?

Financing a Timeshare

Developer financing is often proposed as the only timeshare financing option, especially if you buy while you’re on vacation. However, with a little advance planning, there are alternative options for financing timeshares. If developer financing is taken as an initial timeshare financing option, some timeshare owners may want to consider timeshare refinance in the future.

Home Equity Loan

If you have equity built up in your primary home, it may be possible for you to obtain a type of home equity loan from a private lender to purchase a timeshare. Home equity loans are typically used for expenses or investments that will improve the resale value of your primary residence, but they can be used for timeshare financing as well.

Home equity loans are “secured” loans, meaning they use your house as collateral. As a result, lenders will give you a lower interest rate compared to the rate on an unsecured timeshare loan offered at a developer pitch. You can learn more about the differences in SoFi’s guide to secured vs. unsecured loans.

Additionally, the interest you pay on a home equity loan for a timeshare purchase may be tax-deductible as long as the timeshare meets Internal Revenue Service (IRS) requirements, in addition to other factors. Before using a home equity loan as timeshare financing, or even to refinance timeshares, be aware of the risk you’re taking on. If you fail to pay back your loan, your lender may seize your house to recoup their losses.

Personal Loan

Another option to consider for timeshare financing is obtaining a personal loan from a bank or an online lender. While interest rates for personal loans can be higher than rates for home equity loans, you’ll likely find a loan with a lower rate than those offered by the timeshare sales agent.

Additionally, with an unsecured personal loan as an option for timeshare financing, your primary residence isn’t at risk in the event of default.

Getting approved for a personal loan is generally a simpler process than qualifying for a home equity loan. Online lenders, in particular, offer competitive rates for personal loans and are streamlining the process as much as possible.

The Takeaway

Timeshares offer one way to secure a place to stay in your favorite vacation destination each year without having to buy a second home. And timeshares may save you money over time compared to the cost of a high-end hotel. However, beware of timeshare financing offered by developers. Interest rates can be as high as 20.00%. There are other ways to finance a timeshare that can be more affordable, including home equity loans and personal loans.

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

SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

FAQ

Can I rent my timeshare to someone else?

Whether or not you can rent your timeshare out to others will depend on your timeshare agreement. But in many cases, your timeshare resort will allow you to rent out your allotted time at the property.

Can I sell my timeshare?

Your timeshare agreement will give you details about when and how you can sell your timeshare. In most cases, you should be able to sell, but it may be hard to do so, and you may take a financial loss.

Can I transfer ownership of my timeshare or leave it to my heirs?

You can leave ownership of a timeshare to your heirs when you die and even transfer ownership as a gift while you’re living. Once again, refer to your timeshare agreement for rules about what is possible and how to carry out a transfer.

---

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.

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.

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

SOPL-Q226-061

Read more

Saving money allows you to handle unexpected expenses, protects you from relying on high-interest debt, and helps fund future goals like buying a home or retiring. But many people wonder if they are saving enough and how their balances compare with common benchmarks.

Exactly how much you should have in savings depends on factors like your age, income, expenses, and priorities. There is no one-size-fits-all number, but several widely used rules of thumb can help you set realistic savings goals. Understanding how much to save and where to keep those funds can help you make steady progress over time.

Why Is It Important to Build Your Savings?

Savings provide a financial safety net that can help you navigate emergencies and work toward future goals. Having sufficient funds set aside can help reduce financial stress and prevent you from relying on high-interest credit cards or loans when unexpected expenses arise. It can also provide the freedom to make choices on your own terms.

For example, having savings can help you:

•   Cover emergencies like car repairs or medical bills

•   Prepare for large purchases such as a home or car

•   Fund vacations or other planned expenses

•   Build wealth for retirement

•   Increase your financial flexibility and independence

Even modest savings can make a difference. According to the Federal Reserve’s 2025 Report on the Economic Well-Being of U.S. Households, approximately 37% of American adults — nearly four in ten — report that they would struggle to cover an unexpected $400 expense with cash or savings. Building savings gradually can improve your overall financial stability.

How Much Money Should You Have in Savings? General Rules of Thumb

There is no universal amount everyone should have saved. Instead, financial experts often rely on a few guidelines that can help you determine how much to set aside.

The 50/30/20 Budgeting Rule

One popular approach is the 50/30/20 budgeting rule. Under this framework, you divide your take-home income into three categories:

•   50% for needs: These are essential bills and obligations, such as rent or mortgage, utilities, basic groceries, health insurance, minimum debt payments, and transportation.

•   30% for wants: These are the nonessential (discretionary) expenses, such as dining out, vacations, streaming subscriptions, concert tickets, hobbies, and new clothes.

•   20% for goals (savings and debt repayment): This bucket is designed to help secure your financial future and includes emergency savings, retirement contributions, investments, and extra payments on debts.

Not everyone can follow this formula exactly. If you live in an area with a high cost of living, for example, you may not be able to keep “needs” to 50% of your monthly income. However, this framework can provide a helpful starting point for balancing spending and saving.

The 15% to 20% Monthly Savings Target

Another benchmark recommended by financial experts is to save at least 15% to 20% of your gross income (total earnings before taxes and other deductions are taken out). This includes retirement contributions (including employer matches), emergency fund allocations, and saving for goals like a vacation or down payment on a home. For example, someone earning $5,000 per month might aim to save between $750 and $1,000 monthly. If that amount feels out of reach, starting with a smaller percentage and increasing contributions over time can still help build momentum. Consistency often matters more than hitting a perfect number.

Emergency Funds vs. Sinking Funds vs. Retirement Savings

When setting up savings targets, it helps to know what you’re saving for. Common goals include:

•   Emergency funds: Financial experts often recommend having at least three to six months’ worth of essential expenses set aside to cover unexpected expenses and disruptions to income. If your income fluctuates or your work seasonally, you might choose to set aside more.

•   Sinking funds: A sinking fund is a savings strategy where you gradually set aside money over time for a specific, known expense — such as vacations, holiday shopping, home repairs, or replacing appliances. By dividing a large future cost into smaller, manageable contributions, you ensure the cash is available when the bill arrives.

•   Retirement savings: This savings bucket is intended for long-term financial needs. Contributions to workplace retirement plans and individual retirement accounts can help support your lifestyle after you stop working. The earlier you start, generally the easier it will be to reach your goal. This is thanks to the power of compound returns (when returns you earn also returns of their own).

Maintaining separate savings buckets may make it easier to track progress and avoid using emergency savings for planned expenses.

Recommended: Savings Calculator

How Much Money Should You Have Saved by Age?

How much money you should have in savings by a certain age depends on your personal goals, income, and circumstances. However, these savings benchmarks can help provide a framework for evaluating your progress.

In Your 20s: Starter Emergency Fund and 1x Your Salary

Your 20s are often focused on building financial habits. A good initial goal is establishing a starter emergency fund of at least $1,000, then gradually expanding it to cover several months of expenses. Ideally, you’ll also want to start saving for retirement. By age 30, many financial experts suggest aiming to have approximately one times your annual salary set aside for retirement. For example, someone earning $75,000 annually might target $75,000 in retirement savings by age 30.

In Your 30s: 3 to 6 Months of Expenses and 2x to 3x Your Salary

Your 30s may bring larger financial responsibilities, such as buying a home or raising children. Maintaining an emergency fund equal to three to six months of expenses becomes increasingly important.

Retirement benchmarks often suggest accumulating two times your annual salary by age 35. At this stage, increasing retirement contributions and maintaining consistent saving habits can help support long-term goals.

In Your 40s: 6+ Months of Expenses and 3x to 6x Your Salary

By your 40s, many people prioritize strengthening both short- and long-term savings. A larger emergency fund — potentially six months or more of expenses — can provide additional security.

Retirement savings benchmarks often recommend having four times your annual income set aside for retirement by age 45. Because retirement is closer than it was in earlier decades, increasing contributions and reviewing your investment strategy periodically may become more important.

In Your 50s: 6 to 9 Months of Expenses and 6x to 8x Your Salary

Your 50s are often considered peak earning years. Many people focus on maximizing retirement contributions and reducing debt.

An emergency fund covering six to nine months of expenses can provide added protection, particularly if changing jobs may be more difficult later in your career.

Retirement savings goals might be seven times your income by age 55 and eight times your income by age 60. Taking advantage of catch-up contributions available in certain retirement accounts may also help boost savings.

In Your 60s and Beyond: Nearing 8x to 10x Your Salary

As retirement approaches, preserving and growing savings becomes increasingly important. Many experts suggest accumulating ten times your annual salary by age 67. The exact amount you’ll need depends on factors including:

•   Desired retirement lifestyle

•   Expected Social Security benefits

•   Healthcare expenses

•   Life expectancy

•   Other income sources

Having multiple sources of retirement income and sufficient emergency reserves may help provide greater flexibility during retirement.

Where Are the Best Places to Keep Your Saved Money?

The best place for your money depends on how soon you’ll need it and what goals you’re saving for.

High-Yield Savings Accounts

High-yield savings accounts, commonly offered by online banks and credit unions, offer significantly higher interest rates than traditional savings accounts while providing easy access to your money. These accounts can be well-suited for emergency funds, sinking funds, and other short-term goals.

Because deposits are protected (up to certain limits) by FDIC insurance at banks or NCUA insurance at credit unions, high-yield savings accounts can provide both accessibility and security.

Retirement Accounts

Tax-advantaged retirement accounts can help you save for the future while potentially reducing taxes. Common options include:

•   401(k) plans

•   Traditional IRAs

•   Roth IRAs

•   SEP IRAs for self-employed individuals

Employer matching contributions, if available, can provide an additional benefit and help accelerate retirement savings.

Investments

Money intended for medium- to long-term goals may benefit from investment accounts that offer greater growth potential. Examples include:

•   Brokerage accounts

•   Mutual funds

•   Exchange-traded funds (ETFs)

•   Stocks

•   Bonds

Investments carry risk and can fluctuate in value, but they can potentially help combat inflation and build wealth over time. Money needed within the next few years is generally better suited for savings accounts rather than investments.

How Much Does the Average American Actually Have Saved?

Savings balances vary widely among Americans based on age, income, and household circumstances.

According to the Federal Reserve’s Survey of Consumer Finances for 2022 (the most recently released study), the median bank account balance, including checking and savings accounts, in the U.S. is $8,000. The median shows the middle point in the data, or the point at which half the accounts surveyed are larger and half are smaller. The median can give a clearer picture of how much most households have saved than the average, which can be skewed by a small number of outliers with very high account balances.

Looking at savings by age, the Federal Reserve’s survey shows:

Keep in mind that Federal Reserve survey, as well as others, consistently shows that a significant share of adults would struggle to cover an unexpected expense without borrowing or using credit. These findings highlight an important point: Comparing yourself to national averages may be less useful than focusing on your own financial goals and steadily improving your savings habits.

What Are the Best Strategies to Build Your Savings Quickly?

Building savings doesn’t necessarily require dramatic lifestyle changes. Small adjustments can add up to a significant sum over time. Here are some strategies that help grow your savings account.

Selling Your Stuff

Unused items around your home can provide a quick source of extra cash. You might consider selling:

•   Clothing

•   Furniture

•   Electronics

•   Sporting equipment

•   Collectibles

Online marketplaces, consignment shops, and local community groups can make it easy to turn unwanted items into money that can be directed toward savings goals. While this approach usually provides only a temporary boost, it can help jump-start an emergency fund.

Automate Your Savings and Cut Unnecessary Costs

Automation removes some of the effort involved in saving. Setting up automatic transfers from checking to savings on the same day each month (ideally right after you get paid) can help ensure savings remain a priority.

You may also find opportunities to save money by reviewing your bank and credit card statements and looking for places where you may be able to cut back. Some examples include:

•   Canceling unused (or rarely used) subscriptions

•   Negotiating bills (like cable and cell phone)

•   Reducing dining out

•   Refinancing high-interest debt

•   Shopping around for better rates on insurance coverage

Even saving an additional $25 to $50 per week can add up substantially over the course of a year. Pay raises, bonuses, tax refunds, and side income can also provide opportunities to accelerate your savings without significantly affecting your current lifestyle.

How Can Creating a Budget Help You Reach Your Savings Goals?

A budget gives your money a purpose and helps ensure savings become intentional rather than an afterthought.

While the process may sound complicated, making a budget is simply a matter of looking at your income and expenses for the past several months, identifying spending patterns, and determining how much you can realistically save each month. This process can also help you prioritize competing goals, such as building an emergency fund, paying down debt, and saving for retirement. Whether you use a spreadsheet, budgeting app, or just pen and paper, having a plan can help ensure your spending aligns with your priorities and can make it easier to stay consistent. Most importantly, a budget helps turn long-term goals into manageable monthly actions. Even small contributions made consistently can lead to significant progress over time.

The Takeaway

There is no perfect amount of money everyone should have saved. Your ideal savings balance depends on your income, expenses, goals, and stage of life.

General rules of thumb — such as saving 15% to 20% of your gross income, maintaining an emergency fund, and building retirement savings over time — can provide helpful benchmarks. Whether you’re just getting started or trying to increase your savings, consistency matters more than reaching a specific number overnight.

Regardless of your income, building savings gradually and creating a realistic budget can help you strengthen your financial foundation and prepare for both expected and unexpected expenses.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, named the #1 Bank in the U.S. for the fourth year in a row by Forbes (2026).* Enjoy up to 3.10% APY on SoFi Checking and Savings.

FAQ

How much money should I have saved by 30?

There is no universal target, but many financial experts suggest having about one year’s salary saved for retirement by age 30. It’s also a good idea to maintain an emergency fund with three to six months of essential expenses. Your actual savings goal may vary depending on your income, debt, and financial priorities. Building consistent saving habits is often more important than reaching a specific number.

Is $20,000 a good amount of money to have in savings?

Yes, $20,000 can provide a strong financial cushion for many households. Whether it’s enough depends on your monthly expenses, income stability, and financial goals. For some people, $20,000 may cover six months of expenses, while others may need more. Having savings available for emergencies and short-term goals is generally more important than comparing your balance to someone else’s.

How much of my paycheck should I save each month?

A common recommendation is to save 15% to 20% of your gross income (including retirement contributions). Another is the 50/30/20 budgeting rule that suggests directing 20% of your take-home pay toward savings and debt repayment. If 15% to 20% isn’t realistic, you might start with whatever you can afford and gradually increase your contributions over time. Consistent saving can help build long-term financial security.

What is the difference between an emergency fund and general savings?

An emergency fund is money reserved for unexpected expenses or loss of income, such as medical bills or car repairs. General savings are typically used for planned goals and purchases, including vacations, home improvements, or holiday spending. Keeping these funds separate can help ensure you don’t dip into emergency reserves for nonemergency expenses.

How much cash should I keep in a checking vs. a savings account?

A common guideline is to keep one to two month’s worth of monthly bills and routine spending in a checking account, while storing excess cash in a savings account. Savings accounts are better suited for emergency funds and longer-term goals because they generally earn more interest. The ideal balance depends on your expenses, income schedule, and financial goals.

---

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2026 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 5/28/26. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
^Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

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

We do not charge any account, service, or maintenance fees for SoFi Checking and Savings. We do charge transaction fees for outgoing wire transfers, Instant Transfers, and global remittance transfers. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
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.

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

SOBNK-Q226-146

Read more