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Q: Can you ask for forgiveness of credit card debt?

You’ll unlikely be able to secure debt forgiveness on the total outstanding credit card debt that you owe through your card issuer. Some credit card companies might be willing to settle the debt at a lower amount, which you’ll need to pay in a lump sum. The remainder of the debt is then “written off.”

Jan

2026

Credit Hardship Program: What It Is & How It Works

If you’re experiencing a temporary financial setback and have fallen behind on your credit card debt, you’re not alone. According to the Federal Reserve Bank of New York, credit card balances rose to $1.23 trillion in the third quarter of 2025, a $67 billion increase over the previous year.

Having to repay credit card bills when you’re struggling financially — whether due to an emergency expense or a job loss — can be a challenging burden. In this difficult situation, it’s worth contacting your credit card company to see if it has a credit card hardship program.

Key Points

• A credit card hardship program is a temporary, modified repayment plan offered by some issuers for consumers facing unexpected financial difficulty.

• Eligibility is case-by-case, but programs are generally for consumers impacted by severe events like job loss, illness, or a natural disaster.

• To apply, review your budget, call your credit card issuer, and negotiate terms that are realistic and affordable for your situation.

• Hardship plans may require freezing or closing your account, the latter of which can negatively affect your credit utilization ratio and credit score.

• Alternatives may include debt management plans, balance transfers, or debt consolidation loans which can offer lower (and fixed) interest rates and transparent terms.

What Is a Credit Card Hardship Program?

A credit card hardship program, sometimes referred to as a credit card assistance program, is a repayment plan that’s created based on your hardship circumstances. (This type of modified repayment option was commonly offered by credit card issuers for customers who were financially affected by COVID-19, for example.)

However, credit card issuers aren’t required by law to offer hardship assistance programs, and not all card companies provide this option. Those that do might offer a variety of ways to temporarily ease your repayment burden, if you’re eligible. For instance, it might adjust your credit card payment due date, waive late fees that have accrued, lower your interest rate, or reduce your minimum payment required over a period of time.

Again, these changes are temporary and only designed to get you caught up on your outstanding credit card balance. Once you’ve completed the program, your original terms will be enforced if your account is still active.

Why Is High Credit Card Debt a Concern?

Credit cards tend to have higher interest rates than other types of loans. According to Federal Reserve data, credit card interest rates averaged 22.30% near the end of 2025. In addition, credit card interest is compounded, typically daily, which essentially means you pay interest on the accumulated interest. As a result, your debt can grow quickly over time. High interest rates in the U.S. have recently prompted some to propose a temporary 10% cap on credit card interest rates.

Opinions on the prospect of credit card caps are divided, and it’s unclear they will ever come to be. However, there may be other options available to those struggling with credit card debt, such as a credit card hardship program, if applicable, or a non-revolving loan, which typically has lower (fixed) interest rates, and a predictable end date.

💡 Quick Tip: Credit card interest rates average 20%-25%, versus 12% for a personal loan. And with loan repayment terms of 2 to 7 years, you’ll pay down your debt faster. With a SoFi personal loan for credit card debt, who needs credit card rate caps?

Who Is a Credit Card Hardship Program For?

Credit card hardship programs are for consumers who are experiencing an unexpected hardship. Generally, the hardship directly or indirectly impacts the consumer’s ability to make on-time credit card minimum payments.

For example, hardship assistance plans might be offered to those who are unexpectedly facing:

• An income reduction

• Job loss

• Death of a primary earner

• Natural disaster

• Divorce

• Severe illness

• Other emergency

Eligibility for credit card hardship programs varies among credit card companies. Generally, at the very least you’ll need to provide proof of the hardship; however, credit issuers don’t publicly share much information about eligibility since it’s approved on a case-by-case basis.

How to Apply for a Credit Card Hardship Program

If your credit card company offers a hardship program, prepare for your conversation by taking a few steps.

1. Review Your Budget

For starters, evaluate where your finances stand today. Compare your non-negotiable bills, like rent or your mortgage payments, a child’s tuition, groceries, gas, etc., against your monthly income.

Determine how much you can comfortably put toward your credit card payments. Make sure the amount is realistic since you’ll want to make positive strides toward your hardship program, if it’s available to you.

Write out your budget and the amount you’ve determined that you can reasonably afford to make toward your credit card bill each month. Have this information ready for your phone call with your card issuer in the next step.

2. Call Your Issuer

Contact your credit card company by calling the phone number listed on the back of your card. Explain your hardship situation and note that it will impact your ability to repay your outstanding credit card balance. Ask them if they offer a temporary credit card assistance or hardship program.

3. Agree Only to Terms You Can Afford

If they offer this option, this next step is your opportunity to negotiate the terms of your hardship plan. Ultimately, the company would likely rather work alongside you to get repaid, rather than risk you delaying credit card payments and later defaulting on your debt.

Make sure that any terms they initially offer are what you can realistically manage financially. If it still feels too costly, tell them that those terms don’t work for you and ask for further relief. It’s important to make sure to only agree to what’s realistic, given the consequences of credit card late payment.

If you arrive at a credit card hardship plan that you can confidently complete, get all of the terms in writing and read the agreement carefully before signing.

Factors to Consider Before Agreeing to a Credit Card Hardship Plan

One significant impact that credit card assistance programs typically have is a freeze on your credit card activity — meaning using the credit card is no longer an option. Although a credit card freeze doesn’t negatively impact your credit score, that’s spending power that you’ll immediately lose. Though, given your financial hardship, it’s a practical requirement until you can regain your footing.

Some credit card companies might even require that you close your card account entirely while participating in the program. This is what can impact your credit score the most.

Further, closing your account reduces yourcredit utilization ratio, which is the percentage of credit you’ve used compared to your available credit line. According to the Consumer Financial Protection Bureau, it’s best to keep this ratio below 30%. However, if you suddenly have a reduced overall credit line due to a closed account, your credit utilization ratio will increase.

Additionally, a closed credit card can lower your score since you’re losing the benefits of a matured credit card account. ForFICO® credit scores, for example, the average age of all of your credit accounts makes up 15% of your score.

Finally, closing your account can also impact the mix of credit in your credit profile, especially if you’re losing your only revolving account, which is what a credit card is. Having a mix of installment (e.g. car loans, mortgages, etc.) and revolving credit (e.g. credit cards) comprises 10% of your FICO score.

Pros and Cons of Credit Card Hardship Program

There are a handful of benefits associated with a credit card hardship program. However, you should also consider the drawbacks before moving forward.

Advantages of a Credit Card Hardship Plan	Disadvantages of a Credit Card Hardship Plan
Might help build credit long-term by potentially avoiding default	May end up losing access to your credit line
Positive hardships payments are reported to credit bureaus	Might adversely affect your score in the short-term
Allows you to rework repayment features so they’re manageable	Requires proof of hardship and possibly additional paperwork to get a plan
Offers temporary financial relief

Alternatives to Credit Card Hardship Programs

If a credit card assistance program isn’t right for you, there are a few other options for getting through financial hardship.

Balance Transfer Credit Card

If your credit is still in good standing and your account isn’t delinquent yet, consider a balance transfer card. It lets you transfer one or more credit card balances onto a low- or temporarily 0% APR card. A balance transfer fee might apply.

Debt Consolidation Loan

This option lets you combine multiple debts — installment and revolving — into a new installment loan. Ideally, the debt consolidation loan offers a much lower APR with one simple payment to help you chip away at payments. A non-revolving line of credit like a personal loan, for example, tends to have lower interest interest rates, fixed payments, and a transparent schedule. Fees might apply.

If you’re struggling with other payments as well, you could consider another type of loan — a hardship loan. While this could help you continue to make your rent or mortgage payments or stay on top of other necessary daily living expenses, be mindful before assuming additional debt.

Recommended: When Are Credit Card Payments Due?

Debt Management Plan

Debt management plans are typically offered through credit counseling organizations. A credit counselor facilitates an agreement with your creditors on a payment plan.

Generally, a debt management plan requires you to make monthly payments to the counseling service, which will then make payments to your creditors on your behalf. It’s best to work with a nonprofit organization, such as the National Foundation for Credit Counseling.

The Takeaway

If you anticipate falling behind on your credit card payment, a credit card hardship program may help you avoid spiraling debt and future default. Remember, you still owe the debt, but it’s worth talking to your credit card issuer to see how it can help you through this difficult period.
After successfully completing a credit card hardship program — and regaining financial stability — your card issuer might offer to unfreeze your credit card account, based on your hardship agreement.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

Enjoy unlimited cash back rewards with fewer restrictions.

FAQ

Do credit card hardship programs affect your credit?

Credit card hardship programs, in and of themselves, don’t directly affect your credit. However, the requirements to participate in a hardship program, like closing the impacted account during the hardship plan, or other credit reporting might have an adverse effect on your credit score.

Does credit card debt count as a hardship?

No, credit card debt doesn’t typically qualify as a hardship. Uncontrollable factors like a major illness or injury, disability, sudden unemployment, loss of your household’s primary earner due to divorce or death, or other significant unexpected expenses typically fall under hardship.

What are my options if I can’t pay my credit card?

If you can’t pay the minimum amount due on your credit card bill, contact your card issuer to learn more about your repayment options. Based on your unique situation, it might offer a manageable path forward to repay your debt, whether that’s simply changing your monthly due date or putting you on a credit card hardship program.

Can you ask for forgiveness of credit card debt?

You might be able to secure debt forgiveness on the total outstanding credit card debt that you owe through your card issuer. Some credit card companies might be willing to settle the debt at a lower amount, which you’ll need to pay in a lump sum. The remainder of the debt is then “written off.”

Photo credit: iStock/PeopleImages

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.

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

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

SoFi Credit Cards are issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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Jan

2026

Guide to Paying Bills With a Credit Card: Can You Even Do It?

By Jacqueline DeMarco | Credit, Family Finances, money | Comments Off

It is possible to pay bills with a credit card. Using a credit card in this way can help you earn rewards like cash back and travel points.

But it’s not always the right financial move. Keep reading to learn what bills you can pay with a credit card and how using a credit card to pay bills works.

Key Points

• Certain bills can be paid with a credit card, but it’s recommended to only do so if you can pay the balance in full right away to avoid high interest and fees.

• Paying bills with a credit card responsibly may help you build your credit history and earn rewards, but you’ll need to ensure any processing fees don’t cancel out your rewards.

• Common bills like streaming, cable, phone, and internet can often be paid by credit card without extra fees, while others, like utilities, may involve fees.

• Lenders for mortgages and car loans generally don’t accept credit cards directly, and may involve higher fees when they do.

• If financially strapped, charging debt payments to high interest credit cards will likely make your debt grow faster. Another option is to trade in credit card debt for a fixed, lower-interest personal loan.

Can You Pay Bills With a Credit Card?

Yes, it is possible to pay certain bills with a credit card. However, using a credit card responsibly is key.

When using a credit card to pay bills, it’s important to make sure doing so won’t cause you to rack up a high balance. Paying bills with a credit card makes the most sense when you can easily pay off your credit card balance in full right away.

If done responsibly, a card holder can earn credit card rewards — like cash back, travel points, and gift cards — for spending on purchases they have to make every month without paying interest. Plus, making regular, on-time payments can help build your credit score.

When Should You Not Use a Credit Card to Pay Bills?

As great as the potential to earn rewards is, if someone can’t afford to pay their credit card balance, charging their bills can lead to high interest charges and late fees (which are two ways credit card companies make money). High-interest credit cards have an average APR of about 20%–25%, and credit card interest typically compounds daily using a daily interest rate, all of which means debt can build up quickly when balances are carried.

It also might not make sense to pay bills with a credit card if it leads to paying an extra fee from the merchant.

💡 Quick Tip: Credit card interest caps have become a hot topic, as the total U.S. credit card balance continues to rise. Balances on high-interest credit cards can be carried for years with no principal reduction. A SoFi personal loan for credit card debt may significantly reduce your timeline, however, and could save you money in interest payments.

What Bills Can You Pay With a Credit Card?

There are limitations on which bills you can pay with a credit card. And, as briefly noted earlier, you may owe a fee for using a credit card to pay bills, which could outweigh the benefits earned.

Here are 10 examples of bills you can pay with a credit card, as well as explanations on how paying these bills with a credit card works.

1. Streaming Services

The vast majority of streaming services accept credit card payments to cover the monthly cost of the subscription. To pay this bill with a credit card, all you’ll need to do is enter their credit card number on the streaming service’s website. The card will then automatically get charged each month unless you cancel or suspend your membership.

It’s unlikely any streaming service will charge an extra fee for using a credit card to pay for their subscription.

2. Utilities

Some utilities providers allow credit card payments, so it’s worth investigating this option to determine if it’s accepted. If your utility provider will take a credit card payment, then setting it up is usually as simple as providing your credit card number when you pay your bill online, over the phone, or through the mail. You can often set up autopay as well.

However, watch out for the additional convenience and processing fees that some providers may charge. Higher bills are more likely to offset this fee given the greater earning potential for credit card points or other rewards.

3. Cable

Cable is another bill you can pay with a credit card. To determine how to do so, you’ll want to consult your cable provider. You may be able to enter your credit card number on the online payment portal or provide this information over the phone. Setting up autopay is also usually an option with a credit card.

There is typically no additional processing fee to pay cable bills.

4. Phone

Another bill you might pay with your credit card is your phone bill. You can likely set this up online on your phone provider’s website or by giving them a call. If you’re unsure of how to pay bills with a credit card, simply consult your phone provider.

You’ll typically face no additional processing fees.

5. Internet

Your internet service is another bill that you can cover using your credit card. As with other utilities and services, consult your internet provider if you need assistance getting this set up. In general, however, you can do so through your online payment portal. If you don’t want to go through the legwork each month, you can usually set up autopay with your credit card.

Most internet providers won’t charge an additional processing fee to pay your bill with a credit card, meaning those costs won’t cut into any rewards you earn with a cash back credit card or other type of rewards credit card.

6. Rent

Most landlords don’t allow credit card payments, but there are third-party solutions that can allow someone to pay their rent with a credit card. This includes services such as Plastiq and PlacePay, which act as intermediaries.

However, you’ll generally pay a convenience charge or other fees. You’ll want to assess whether the benefits of using your credit card to pay rent outweigh the costs.

7. Mortgage

Mortgage servicers generally don’t allow credit card payments. However, there are third-party payment processing services through which you could pay your mortgage. Still, some credit card issuers may prohibit you from paying your mortgage through these services.

In addition to restrictions, you’ll want to look out for processing fees. These could cancel out any rewards you could earn from covering your mortgage with a credit card.

8. Car Loan

Just like mortgage services, most auto lenders also don’t accept credit cards for loan payments. If you do find an auto lender who’s willing to accept a credit card for payment, you’ll likely face a hefty processing fee.

Additionally, credit card interest rates tend to be higher than those of auto loans, so if you’re not confident you could immediately pay off your credit card balance in full, you could simply end up paying a lot more in interest.

9. Taxes

It is possible to pay some taxes with a credit card. The IRS allows you to pay on its website using a credit card. However, you’ll face a processing fee ranging from 1.82% to 1.98%, depending on which payment processor you select. If you opt to pay using an integrated IRS e-file and e-pay service provider, such as TurboTax, your fee could range even higher.

10. Medical Bills

While you can pay medical bills with a credit card, it might not be the most cost-effective option. This is because credit cards can charge high interest and fees, and there’s the potential to damage your credit score. Many medical providers may offer interest-free or low-interest payment plans, or a personal loan could offer a lower rate than a credit card.

If you do think the rewards and convenience of using a credit card is worth the risk, the process of paying bills with a credit card will vary by medical institution. Before charging your medical bills to a credit card, you may want to at least try to negotiate medical bills down.

Benefits of Paying Bills With a Credit Card

There are a few key benefits associated with paying bills with a credit card.

1. Ease of Payment

It may be possible to pay a bill with a credit card online, in an app, or over the phone.

2. Easy to Prove Payment

If a payment dispute arises, paying by credit card is an easy way to keep a record of payments.

3. Identity Theft Protection

If either a credit card or someone’s personal information gets stolen, a credit card issuer will pay back some or all of the charges.

4. Autopay

It’s easy to use a credit card to set up autopay for bills so you never accidentally forget to pay them.

5. Can Build Credit History

Given how credit cards work, using a credit card to make payments and then paying that balance off on time and in full can help build your credit score.

6. Earn Rewards

Purchases made with a credit card helps earn cash back and credit card points.

Downsides of Paying Bills With a Credit Card

There are also some downsides to paying bills with a credit card that are worth keeping in mind.

1. May Cost More

Because many bill services charge fees to pay with a credit card, it’s possible to spend more than necessary on processing fees.

2. Can Lead to High-Interest Debt

If someone can’t afford to pay off their credit card balance after using it to pay for bills, they can end up with high-interest debt on their hands. As mentioned above, debt can accrue quickly on credit cards with high, compounding interest rates, and it’s unfortunately not an uncommon situation to be in. In the United States, the total credit card balance recently rose to $1.23 trillion.

In fact, credit card interest caps have become a hot topic, including a proposal for a temporary 10% cap on credit card interest rates. While opinions are divided on interest rate caps, one increasingly popular option is applying for a personal loan. Personal loans interest rates average 10-12%, compared to 20%-25% for credit cards, and they have predictable, fixed terms.

3. Processing Fees Can Cancel Out Rewards

It’s important to do the math to make sure that the cost of processing fees isn’t canceling out the cash back you’re earning with the purchase.

4. Leads to Another Bill to Pay

Similar to when you pay a credit card with another credit card, paying a bill with a credit card simply leads to another bill to pay. This can cause more hassle than it’s worth.

5. Can Hurt Credit Utilization Ratio

Carrying a higher balance on a credit card can lead to a higher credit utilization ratio, which is damaging to credit scores. One of the common credit card rules is to keep your utilization below 30%, meaning you’re not using more than this percentage of your total available credit at any given time.

Recommended: What Is a Charge Card

Guide to Using a Credit Card to Pay Bills

At this point, it’s clear that it is possible to pay some bills with a credit card. But should you? In short, it depends.

If the bill provider won’t charge a processing fee and the consumer can afford to pay off their credit card balance in full, then paying their bills with a credit card is a great way to earn rewards and build a credit score.

However, in many cases, the processing fee some merchants charge can outweigh the value of cash back or other rewards earned. Not to mention, carrying a credit card balance can lead to incurring expensive interest and fees.

The Takeaway

It is possible to pay some bills with a credit card, but doing so can lead to paying costly processing fees or even accruing interest charges. It’s important to crunch the numbers to see if paying a bill with a credit will result in earning enough rewards to justify any processing fees.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

Enjoy unlimited cash back rewards with fewer restrictions.

FAQ

Should I put non-debt bills on a credit card?

If someone can afford to pay off their credit card balance in full and the processing fee they’ll owe isn’t, it can make sense to put a non-debt bill on their credit card. They just have to remember to then pay their credit card bill to avoid owing any fees or interest, which could undercut the potential benefits.

Is it wise to pay monthly bills with a credit card?

Paying monthly bills with a credit card can lead to processing fees in some scenarios. If someone won’t owe a fee, they can benefit from earning cash back by paying their bills with a credit card. This can be a savvy move to make if they can afford to pay off their credit card bill in full each month, thus avoiding interest charges.

Is it better to pay bills with a credit or debit card?

Paying a bill with a credit card can lead to earning rewards, which a debit card can’t offer. There’s also often purchase protection. However, if you’re worried about handling credit card debt responsibly, you may opt for using a debit card, as this will draw on money you already have in your bank account. With either a debit or credit card, however, you’ll want to look out for fees.

Should I pay off my credit card in full or leave a small balance?

It’s always best to pay off a credit card balance in full if possible before a credit card’s grace period ends. The grace period is the time between when the billing cycle ends and your payment becomes due. You won’t owe interest as long as you pay off your balance in full before the statement due date. Otherwise, you could owe interest charges and fees.

What happens if you pay the full amount on your credit card?

Paying the full amount on a credit card makes it possible to avoid paying interest. After a credit card is paid off in full, the consumer can simply enjoy the rewards they earned by making purchases with their credit card.

Does paying a bill with a credit card count as a purchase?

Yes, paying a bill with a credit card does count as a purchase. This makes it possible to earn cardholder rewards like cash back when paying bills.

About the author

Jacqueline DeMarco

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

Photo credit: iStock/Damir Khabirov

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

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

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 .

SoFi Credit Cards are issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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Jan

2026

A dense group of miniature wooden houses, painted white and teal blue, are spread across a surface, illustrating topics like foreclosure rates.

Foreclosure Rates for All 50 States

By Sarah Brooks | Home Ownership, mortgage | Comments Off

In the ever-evolving landscape of real estate, the U.S. foreclosure market often unveils key trends that will shape the future of homeownership. According to property data provider ATTOM, 28,269 properties started the foreclosure process in December 2025. Rob Barber, CEO of ATTOM, notes that “Foreclosure activity increased in 2025, reflecting a continued normalization of the housing market following several years of historically low levels.”

Nationwide, one in every 3,163 housing units had a foreclosure filing in December 2025. Foreclosure starts increased nationwide by 46% from last year. States with the worst foreclosure rates in December 2025 included New Jersey, South Carolina, and Maryland. Borrowers should stay up to date on their mortgage payments and work closely with their lenders to explore options for assistance if needed.

Read on for the foreclosure rates in December 2025 – plus the top three counties with the worst foreclosure rates in each state.

50 State Foreclosure Rates

Read on for the December 2025 foreclosure rates for all 50 states — beginning with the state that had the lowest rate of foreclosure filings per housing unit.

50. South Dakota

The Mount Rushmore State nabbed the 50th spot once more for its foreclosure rate in December. Having 398,903 total housing units, the fifth-least populous state had a foreclosure rate of one in every 28,493 households with 14 foreclosures. The counties with the most foreclosures per housing unit were (from highest to lowest): Yankton, Brown, and Minnehaha.

49. Vermont

In 49th place for population, the Green Mountain State also ranked 49th for its foreclosure rate in December. Of the state’s 337,072 housing units, 13 homes went into foreclosure at a rate of one in every 25,929 households. The three counties in the state with the most foreclosures were: Rutland, Orange, and Washington.

48. Montana

Listed as 44th in population, the Treasure State rated 48th for its foreclosure rate in December. With 34 foreclosures out of 522,939 housing units, Montana’s foreclosure rate was one in every 15,381 homes. The counties with the most foreclosures per housing unit were: Sweet Grass, Daniels, and Lincoln.

47. North Dakota

The Peace Garden State’s foreclosure rate was one in every 12,496 homes. This puts the fourth-least populous state — with 374,866 housing units and 30 foreclosures — into 47th place. The counties with the most foreclosures per housing unit were (from highest to lowest): Griggs, McHenry, and Pembina.

46. Wisconsin

With 259 foreclosures out of 2,750,750 total housing units, America’s Dairyland and the 20th most populous state secured the 46th spot with a foreclosure rate of one in every 10,621 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Langlade, Juneau, and Marinette.

45. Kansas

The Sunflower State ranked 45th for highest foreclosure rate in December. With 1,285,221 homes and a total of 133 housing units going into foreclosure, the 35th most populous state’s foreclosure rate was one in every 9,663 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Pawnee, Morton, and Geary.

44. West Virginia

Ranked 39th in population, the Mountain State claimed the 44th spot for the month of December. It has a total of 859,653 housing units, of which 95 went into foreclosure. This means that the foreclosure rate was one in every 9,049 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Marion, Wetzel, and Raleigh.

43. New Hampshire

The Granite State, and the 41st most populous state in the U.S., ranked 43rd for highest foreclosure rate. New Hampshire saw 82 of its 644,253 homes go into foreclosure, making for a foreclosure rate of one in every 7,857 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Sullivan, Merrimack, and Hillsborough.

42. Rhode Island

The eighth-least populous state placed 42nd for highest foreclosure rate in December. A total of 65 homes went into foreclosure out of 484,615 total housing units, making the foreclosure rate for the Ocean State one in every 7,456 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Bristol, Kent, and Newport.

41. Alaska

The Last Frontier saw 46 foreclosures in December, making the foreclosure rate one in every 6,933 homes. This caused the third-least populous state, with a total of 318,927 housing units, to claim the 41st spot. The boroughs with the most foreclosures per housing unit were (from highest to lowest): Sitka, North Slope, and Ketchikan Getaway.

40. Hawaii

The Paradise of the Pacific, and the 40th most populous state, came in 40th for highest foreclosure rate. Of its 564,905 homes, 84 went into foreclosure, making for a foreclosure rate of one in every 6,725 households. The three counties with the most foreclosures were (from highest to lowest): Honolulu, Hawaii, and Kauai.

Recommended: Tips on Buying a Foreclosed Home

39. Kentucky

With a total of 2,010,655 housing units, the Bluegrass State saw 299 homes go into foreclosure, thus landing in 39th place in December. This puts the foreclosure rate for the 29th most populous state at one in every 6,725 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Owen, Bell, and Union.

38. Nebraska

Ranking 37th in population, the Cornhusker State placed 38th in December with a foreclosure rate of one in every 6,685 homes. With a total of 855,631 housing units, the state had 128 foreclosure filings. The counties with the most foreclosures per housing unit were (from highest to lowest): Clay, Morrill, and York.

37. Mississippi

Ranked 34th in population, the Magnolia State experienced 206 foreclosures out of 1,332,811 total housing units. This puts the foreclosure rate at one in every 6,470 homes and into the 37th spot in December. The counties with the most foreclosures per housing unit were (from highest to lowest): Franklin, Clay, and Webster.

36. Oregon

The 27th most populous state ranked 36th for highest foreclosure rate in December. Of the Pacific Wonderland’s 1,838,631 homes, 296 went into foreclosure, making for a foreclosure rate of one in every 6,212 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Gilliam, Columbia, and Lake.

35. Washington

Sorted as 13th in population, the Evergreen State ranked 35th for its foreclosure rate in December. Of its 3,262,667 housing units, 588 went into foreclosure, making the state’s foreclosure rate one in every 5,549 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Pacific, Okanogan, and Lewis.

34. Missouri

Coming in at 19th in population, the Show-Me State took the 34th spot for highest foreclosure rate in December. Of its 2,809,501 homes, 567 went into foreclosure, making for a foreclosure rate of one in every 4,955 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Scotland, Butler, and Mississippi.

Recommended: What Is a Short Sale?

33. Minnesota

Ranked 22nd for most populous state, the Land of 10,000 Lakes obtained the 33rd spot for highest foreclosure rate in December. It has 2,519,538 housing units, of which 540 went into foreclosure, making the state’s foreclosure rate one in every 4,666 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Martin, Dodge, and Benton.

32. Tennessee

Ranked 16th in population, the Volunteer State endured 677 foreclosures out of its 3,095,472 housing units. This puts the foreclosure rate at one in every 4,572 households and in 32nd place for the month of December. The counties with the most foreclosures per housing unit were (from highest to lowest): Hardeman, Moore, and Hancock.

31. Massachusetts

The 15th most populous state ranked 31st for highest foreclosure rate in December. Of the Bay State’s 3,014,657 housing units, 687 went into foreclosure, making for a foreclosure rate of one in every 4,388 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Hampden, Bristol, and Plymouth.

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30. North Carolina

The ninth-most populous state claimed 30th place for highest foreclosure rate. Out of 4,815,195 homes, 1,099 went into foreclosure. This puts the Tar Heel State’s foreclosure rate at one in every 4,381 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Anson, Lee, and Gates.

29. New Mexico

The 36th most populous state claimed the 29th spot for highest foreclosure rate in December. Of the Land of Enchantment’s 949,524 homes, 219 went into foreclosure, making for a foreclosure rate of one in every 4,336 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Union, Eddy, and Torrance.

28. Virginia

With 867 homes going into foreclosure, the 12th most populous state ranked 28th for highest foreclosure rate in December. Having 3,654,784 total housing units, the Old Dominion saw a foreclosure rate of one in every 4,215 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Emporia City, Petersburg City, and Franklin City.

27. Idaho

Ranked 38th in population, the Gem State received the 27th spot due to its 188 housing units that went into foreclosure in December. With 776,683 total housing units, the state’s foreclosure rate was one in every 4,131 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Franklin, Elmore, and Payette.

26. Connecticut

With 373 of its 1,536,049 homes going into foreclosure, the Constitution State had the 29th-highest foreclosure rate at one in every 4,118 households. In this 29th most populous state, the counties that had the most foreclosures per housing unit were (from highest to lowest): Northeastern Connecticut, Greater Bridgeport, and South Central Connecticut.

25. Arizona

Sorted as 14th in population, the Grand Canyon State withstood 776 foreclosures out of its total 3,142,443 housing units. This puts the foreclosure rate at one in every 4,050 homes and into the 25th spot in December. The counties with the most foreclosures per housing unit were (from highest to lowest): Pinal, Santa Cruz, and Cochise.

24. Wyoming

The country’s least populous state claimed the 24th spot for highest foreclosure rate in December. With 275,131 housing units, of which 71 went into foreclosure, the Equality State’s foreclosure rate was one in every 3,875 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Niobrara, Goshen, and Converse.

23. Arkansas

Listed as the 33rd most populous state, the Land of Opportunity ranked 23rd for highest foreclosure rate in December. The state contains 1,382,664 housing units, of which 357 went into foreclosure, making its latest foreclosure rate one in every 3,873 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Grant, Prairie, and Randolph.

22. Maine

Ranked 42nd in population, the Pine Tree State placed 22nd for highest foreclosure rate in December. With a total of 746,552 housing units, Maine saw 196 foreclosures for a foreclosure rate of one in every 3,809 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Washington, Somerset, and Penobscot.

21. California

The country’s most populous state ranked 21st for highest foreclosure rate in December. Of its impressive 14,532,683 housing units, 4,153 went into foreclosure, making the Golden State’s foreclosure rate one in every 3,499 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Shasta, El Dorado, and Kern.

20. New York

With 2,495 out of a total 8,539,536 housing units going into foreclosure, the Empire State claimed the 20th spot in December. The fourth-most populous state’s foreclosure rate was one in every 3,423 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Rockland, Washington, and Richmond.

19. Pennsylvania

The Keystone State had the 19th highest foreclosure rate. The fifth-most populous state saw 1,733 homes out of 5,779,663 total housing units go into foreclosure, making the state’s foreclosure rate one in every 3,335 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Delaware, Philadelphia, and Berks.

18. Michigan

Ranked 10th in population, the Wolverine State secured the 18th spot with a foreclosure rate of one in every 3,251 homes. With a total of 4,599,683 housing units, the state had 1,415 foreclosure filings. The counties with the most foreclosures per housing unit were (from highest to lowest): Sanilac, Tuscola, and Jackson.

17. Oklahoma

The Sooners State landed the 17th spot in December. With housing units totaling 1,763,036, the 28th most populous state saw 549 homes go into foreclosure at a rate of one in every 3,211 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Noble, Caddo, and Woodward.

16. Iowa

The Hawkeye State had the 16th highest foreclosure rate in December. With 459 out of 1,427,175 homes going into foreclosure, the 31st most populous state’s foreclosure rate was one in every 3,109 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Jones, Tama, and Muscatine.

15. Colorado

The 21st most populous state ranked 15th for highest foreclosure rate in December. Of the Centennial State’s 2,545,124 housing units, 825 went into foreclosure, making for a foreclosure rate of one in every 3,085 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Pueblo, Alamosa, and Cheyenne.

14. Louisiana

Sorted as 25th in population, the Pelican State placed 14th for highest foreclosure rate in December. Louisiana had a foreclosure rate of one in every 2,966 households, with 706 out of 2,094,002 homes going into foreclosure. The parishes with the most foreclosures per housing unit were (from highest to lowest): Tangipahoa, Livingston, and Ascension.

13. Georgia

Ranked eighth in population, the Peach State took the 13th spot for highest foreclosure rate in December. Of its 4,483,873 homes, 1,582 were foreclosed on. This puts the state’s foreclosure rate at one in every 2,834 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Butts, Peach, and McDuffie.

12. Alabama

Listed as 24th in population, the Yellowhammer State came in 12th for highest foreclosure rate in December. Of its 2,316,192 homes, 820 went into foreclosure, making for a foreclosure rate of one in every 2,825 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Hale, Lowndes, and Bibb.

11. Ohio

The Buckeye State placed 11th in December with a foreclosure rate of one in every 2,736 homes. With a sum of 5,271,573 housing units, the seventh-most populous state had a total of 1,927 filings. The counties with the most foreclosures per housing unit were (from highest to lowest): Cuyahoga, Stark, and Crawford.

10. Indiana

The 17th largest state by population, the Crossroads of America landed the 10th spot in December with a foreclosure rate of one in every 2,544 homes. Of its 2,953,344 housing units, 1,161 went into foreclosure. The counties with the most foreclosures per housing unit were (from highest to lowest): Sulivan, Daviess, and Noble.

9. Texas

The Lone Star State withstood 4,852 foreclosures in December. With a foreclosure rate of one in every 2,451 households, this puts the second-most populous state in the U.S., with a whopping 11,890,808 housing units, into ninth place. The counties with the most foreclosures per housing unit were (from highest to lowest): Liberty, Borden, and Kaufman.

8. Nevada

Ranked 32nd in population, the Silver State took the eighth spot for highest foreclosure rate in December. With one in every 2,386 homes going into foreclosure, and a total of 1,307,338 housing units, the state had 548 foreclosure filings. The counties with the most foreclosures per housing unit were (from highest to lowest): Clark, Lyon, and Nye.

7. Utah

The Beehive State placed seventh for highest foreclosure rate in December. Of its 1,193,082 housing units, 501 homes went into foreclosure, making the 17th most populous state’s foreclosure rate one in every 2,381 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Iron, Tooele, and Wayne.

6. Illinois

The Land of Lincoln had the sixth-highest foreclosure rate in all 50 states in December. Of its 5,443,501 homes, 2,425 went into foreclosure, making the sixth-most populous state’s foreclosure rate one in every 2,245 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Dewitt, Edgar, and Saint Clair.

5. Florida

The third-most populous state in the country has a total of 10,082,356 housing units, of which 4,757 went into foreclosure. This puts the Sunshine State’s foreclosure rate at one in every 2,119 homes and into fifth place in December. The counties with the most foreclosures per housing unit were (from highest to lowest): Hendry, Charlotte, and Osceola.

4. Delaware

The sixth-least populous state in the country, the Small Wonder nabbed fourth place in December. With one in every 2,044 homes going into foreclosure and a total of 457,958 housing units, the state saw 224 foreclosures filed. Having only three counties in the state, the most foreclosures per housing unit were (from highest to lowest): Kent, New Castle, and Sussex.

3. Maryland

Ranked 18th for most populous state, America in Miniature took 3rd place for highest foreclosure rate in December. With a total of 2,545,532 housing units, of which 1,298 went into foreclosure, the state’s foreclosure rate was one in every 1,961 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Baltimore City, Dorchester, and Charles.

2. South Carolina

The 23rd most populous state had the second-highest foreclosure rate in December with one in every 1,917 homes going into foreclosure. Of the Palmetto State’s 2,401,638 housing units, 1,253 were foreclosed on in December. The counties with the most foreclosures per housing unit were (from highest to lowest): Dorchester, Kershaw, and Florence.

1. New Jersey

With a foreclosure rate of one in every 1,734 homes, the Garden State ranked first for highest foreclosure rate in December. The 11th most populous state contains 3,775,842 housing units, of which 2,178 went into foreclosure. The counties with the most foreclosures per housing unit were (from highest to lowest): Salem, Camden, and Cumberland.

The Takeaway

Of all 50 states, Texas had the most foreclosure filings (4,852), and Vermont had the least (13). As for the states with the highest foreclosure rates, Maryland, South Carolina, and New Jersey took the top three spots.

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SOHL-Q126-017

Jan

2026

A woman sits at a kitchen table in front of an open laptop. She is writing in a notebook.

Can Personal Loans Be Used for Businesses?

By Austin Kilham | Building Your Career, Life & Career, personal_loan, SMB | Comments Off

Table of Contents

What Is a Personal Business Loan?
Personal Business Loans vs Small Business Loans
Benefits of a Personal Loan for Business
Disadvantages of a Personal Loan for Business
How to Get a Personal Loan for Business
What to Consider Before Applying for a Personal Loan for Business
Alternatives to Personal Business Loans
FAQ

Starting a new business requires a good idea, customers who want your product or service, and money to get you off the ground. A personal loan to start a business can be one option for funding your business, especially if you don’t yet qualify for a small business loan.

Let’s walk through the difference between personal loans and business loans, the advantages and disadvantages of using a personal loan for business, and some alternative options to explore.

Key Points

• Personal business loans offer flexibility in spending, but it’s crucial to confirm with lenders whether they will allow you to use the loan for business purposes.

• Your personal loan interest rate is influenced by your financial history, income, and credit score, with higher credit scores leading to better rates.

• Benefits of personal loans for business include ease of qualification, faster funding than business loans, and lower interest rates than credit cards.

• Personal loans can be versatile with few spending restrictions, but they may have lower borrowing limits and shorter repayment terms and can affect your personal credit score.

• Alternatives to personal business loans include small business loans, business lines of credit, business credit cards, and merchant cash advances.

What Is a Personal Business Loan?

Personal loans for business are offered by some banks, credit unions, and online lenders. While many loans will specify what you can spend the money on — a mortgage must be used to buy a house, for example — the sum you receive from a personal loan can be used in several ways. That said, it’s important to confirm with your lender whether its personal loans can be used for business expenses, as some lenders do not allow this.

Your personal loan interest rate is based on various financial factors, including your financial history, income, and credit score. Generally, the higher a person’s credit score, the more likely they are to receive a personal loan with favorable terms and interest rates. Applicants with lower credit scores may have more difficulty qualifying for low interest rates. Lenders tend to see them as at greater risk of defaulting on their payments. To offset that risk, they might charge a higher interest rate.

Personal Business Loans vs Small Business Loans

Borrowing money to pay for business expenses is a decision that takes some consideration. There are different reasons you might want or need a business loan, many lenders to choose from, and different lending options to compare. Some things to think about if choosing between a personal loan for business or a small business loan include:

Factor to Consider	Personal Loan for Business	Small Business Loan
Use of funds	Some lenders may not allow personal loan funds to be used for business purposes.	Specifically for business purposes — cannot be used for personal use.
Qualification	Personal creditworthiness determines approval, interest rate, and loan terms.	Lenders will require business financials, proof of time in business, and other details, in addition to possibly taking personal credit into account.
Interest rate	Depending on your creditworthiness, interest rate may be lower than on other forms of credit, such as credit cards.	Depending on the type of loan, interest rates on SBA loans may be lower than some personal loans.
Loan amount	Up to $100,000 depending on the lender.	SBA maximum loan amount is $5 million. Some lenders may approve working capital loans for up to several million dollars.
Funding time	Depending on the lender, loan funds may be disbursed as soon as the day of approval or in up to seven days.	The SBA loan timeline is between 60 and 90 days from application to disbursement.A working capital loan from a traditional lender may be approved quickly and funded shortly after approval.
Tax deductibility	Interest is not generally tax deductible.	Interest may be tax deductible in some cases.

Benefits of a Personal Loan for Business

Taking out personal loans for business purposes can offer several advantages over other financing options.

Ease of Qualification

If your business is brand new, it can be tricky to get a startup business loan and may be easier to qualify for a personal loan. Banks offer personal business loans based on your personal income and credit score.

By contrast, you’ll be asked for a lot of information during the business loan application process, including your personal and business credit score, annual business revenue and monthly profits, and your length of time in business. The longer your business has existed, the more likely you are to have a record of revenue and profit — and the more likely you are to qualify.

Faster Funding

The length of time it takes to get approved for a personal loan and receive funding will vary by lender. Online lenders are typically faster than traditional banks and credit unions. You are likely to receive funding within seven business days.

By contrast, the process for a business loan can be much slower. For example, it can take 30 to 90 days to receive funding from a Small Business Administration (SBA) loan.

Potential for Low Interest Rates

If you have strong credit, personal loans can have lower annual percentage rates (APRs) than other financing products — such as credit cards. While it can be useful to have a business credit card, you’ll pay a relatively high rate if you carry a balance from month to month.

Small business credit cards may also have penalties and fees that personal loans may not have. These often include penalty APRs that go into effect if you make a late payment, over-limit fees if you spend more than your credit limit, annual fees, and more.

Flexibility and Versatility

Personal loans have few restrictions on how you’re allowed to use the money you borrow. You can use them for anything from debt consolidation to home repairs to a veterinary bill.

Disadvantages of a Personal Loan for Business

Despite the potential advantages of using a personal loan to help you start your business, there are drawbacks.

Some Lenders Don’t Allow Personal Loans for Business

Some lenders place restrictions on how personal loans can be used. It’s wise to be transparent about your intention to use the personal loan for business expenses and confirm if the lender permits it.

In some cases, it may not be. However, it’s far better to be honest about how you plan to use a loan than risk breaching the loan agreement. If you end up using a loan in a prohibited way, your lender could force you to immediately repay the full amount of the loan with interest.

Lower Loan Amount Limits

Personal loans generally offer borrowing limits as low as $1,000. They can go as high as $100,000 for larger personal loans. For small businesses, this might be plenty. But if you own a larger business that needs more money, you might benefit more from a loan specifically designed to meet business financial needs. Small business loans generally have lower interest than personal loans.

Shorter Repayment Terms

Lending periods for personal loans vary. Typically, you can find loans with term lengths of 12 months to five years. Compared to some small business loans, this is a relatively short period. Consider that for SBA loans, maximum terms can be as much as 25 years for real estate, 10 years for equipment, and 10 years for working capital or inventory.

Potential to Affect Personal Credit Score and Assets

If you take out a personal loan and can’t make monthly payments, you are putting your personal credit at risk. Missed payments may harm your credit score, which can make it more difficult for you to access funding in the future.

Recommended: What Is Considered a Bad Credit Score?

Fewer Tax Deduction Opportunities

Generally, the interest you pay on a personal loan is not tax deductible, unlike the interest paid on business loans. However, there’s an exception if you use the proceeds of a personal loan for business purposes.

However, this can get a bit tricky, as you may only deduct interest on the portion of the loan used for business expenses. So if you use any of that money to remodel the primary bathroom in your home, for example, interest on that portion can’t be deducted.

How to Get a Personal Loan for Business

Securing a personal loan for business purposes involves several key steps. The process looks like this:

1. Assess your finances: Begin by looking at your personal credit score, income, and overall financial health. This will give you insight into the likelihood of qualifying for a personal loan and the interest rates you might get.

2. Choose a lender: Look for banks, credit unions, and online lenders that offer personal loans suitable for business purposes. Make sure they allow you to use personal loan funds for business expenses. Compare interest rates, loan terms, and fees to find the best lender for your needs.

3. Prepare your documents: Gather documents like proof of income, tax returns, identification, and any business-related information required for your application.

4. Submit your application: Complete the loan application process with your chosen lender. Be honest about your intention to use the loan for business expenses. This transparency helps avoid potential issues in the future.

5. Review loan terms: Once your application is approved, carefully review the loan terms, including the interest rate, repayment schedule, and any associated fees. If everything looks good to you, accept the loan terms to move forward with the funding process.

What to Consider Before Applying for a Personal Loan for Business

When analyzing the benefits and risks of this approach, consider these factors.

• Your personal creditworthiness: Using a personal loan for business mixes your individual finances with the company’s risk. Think about the effects this move might have on your personal credit score and future loans.

• Your business revenues: You’ll want to be sure your business will bring in enough money to cover your monthly personal loan payments. Run the numbers to be sure that paying the costs for this loan won’t force you to skimp on other needed business expenditures.

• The loan’s true cost: Beyond the loan’s interest rate, lenders may charge fees for loan origination, late payments, loan processing, or account maintenance.

• Timing: Funding for a personal loan may be processed faster than for a business loan. That’s an advantage over SBA loans, which can take up to three months to come through, possibly costing you a current opportunity.

• Usage restrictions: Some personal loan agreements forbid using funds for business, so double check that your prospective lender permits it.

• Repayment details: If you do get the green light, you may want to have on hand a solid business plan (showing revenue model and expenses, for example) to show how the loan will be repaid.

There are funding alternatives that could cost you less or give you added flexibility. Those are detailed in the next section.

Alternatives to Personal Business Loans

Personal loans might not be ideal for everyone and aren’t the only funding option for your small business. It may be worth considering small business loans or other types of business loans as alternatives.

Small Business Loans

Small business loans are offered through online lenders, banks, and credit unions. There are various options available, each designed for specific purposes. For example, a working capital loan is designed to help you finance the day-to-day operations of your business. Equipment financing can help you replace aging technology and buy new tools and machinery.

SBA loans are guaranteed by the Small Business Administration, whose aim is to help small businesses start and grow. If you aren’t able to make your payments, the SBA will step in and cover up to 85% of the default loss. By reducing risk in this way, the organization helps businesses get easier access to capital.

Shopping around for the best small business loan rates is a good way to compare lenders and find the one that works best for your unique financial needs.

Business Lines of Credit

A business line of credit is revolving credit, similar to a credit card. You have a set credit limit and only pay interest on the amount you’re currently borrowing, making it a more economical option than a term loan for some business owners. As you repay the funds, they are available to borrow again.

Another advantage to a line of credit over a term loan is the ability to use a check to pay vendors who do not accept credit cards.

Business Credit Cards

Business credit cards can be useful for separating personal and business expenses. They also usually have higher credit limits than personal credit cards, which gives you more flexibility to make larger business purchases. Plus, they may offer rewards, perks, and bonuses. It’s important to keep in mind, however, that credit cards tend to have higher interest rates than other types of business financing.

Merchant Cash Advance

A merchant cash advance (MCA) is an alternative form of financing for businesses that get revenue through credit card sales. With an MCA, a business can borrow a lump sum of money and repay the lender with a percentage of future credit card transactions. The repayment amount is larger than the advance, since the lender charges a fee. In some cases, MCA fees can significantly exceed interest rates on other types of business loans.

The Takeaway

Can you use a personal loan to start a business? Perhaps. Taking out a personal loan may be one way to fund your small business needs. However, some lenders do not allow a personal loan to be used for business purposes. It’s a good idea to explore alternatives, such as a small business loan or line of credit.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

With one simple search, see if you qualify and explore quotes for your business.

FAQ

Can a personal loan be used for business?

Yes, you can use personal loans for business if the lender allows it. It’s important to check with the lender to ensure there are no restrictions on using the loan for business expenses.

Can I write off a personal loan if used for my business?

You can typically write off the interest on a personal loan used for business purposes, but only the portion directly related to business expenses. Personal loan principal repayments are not tax-deductible.

Does the SBA offer personal loans?

No, the Small Business Administration (SBA) does not offer personal loans. The SBA provides various loan programs designed specifically to support small businesses, such as SBA 7(a) loans and SBA 504 loans.

What are the risks of using a personal loan for business purposes?

Funding your business with a personal loan can present a number of risks. The overall risk is that such a loan puts your individual creditworthiness on the line, as personal loans always require a personal guarantee. This means:

• Any missed payments could hurt your individual credit history.

• Even if you pay on time, you’d miss the opportunity to build your business credit score.

• Defaulting on a personal loan could cause lenders to take legal action, meaning you’d probably have to pay for a lawyer to represent you.

• Negative consequences from a lawsuit could include a lien on your home or garnishment of your wages.

Can startups qualify for a personal loan for business?

Generally, the answer is no. Many lenders disallow the business use of a personal loan, for one thing. For another, lenders ordinarily approve or deny loans based on the borrower’s ability to manage repayments — and given the high rate of startup failure (roughly 20% in the first year), both personal and business loans to new entrepreneurs are often seen as too risky.

Photo credit: iStock/fizkes

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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.

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

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

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.
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SOSMB-Q425-023

Jan

2026

What is Debt Consolidation and How Does it Work_780x440

How Does Debt Consolidation Work?

By Janet Schaaf | Budgeting & Goals, Debt Payoff, personal_loan, student_loan | No Comments

If you’re repaying a variety of different debts to different lenders, keeping track of them and making payments on time each month can be time consuming. It isn’t just tough to keep track of these various debts, it’s also difficult to know which debts to prioritize in order to fast track your debt repayment. After all, each of your cards or loans likely have different interest rates, minimum payments, payment due dates, and loan terms.

Consolidating — or combining — your debts into a new, single loan may give your brain and your budget some breathing room. We’ll take a look at what it means to consolidate debt and how it works.

Table of Contents

What Is Debt Consolidation?
Common Ways to Consolidate Debt
Is Debt Consolidation Right For You?
Credit Card Debt Relief: How to Get It
Debt Relief: Is it a Good Idea?

Key Points

• Debt consolidation involves combining multiple debts into a single loan with a potentially lower interest rate, simplifying monthly payments.

• Common methods include balance transfers to low or zero-interest credit cards and home equity loans.

• Personal loans are an increasingly popular alternative to high-interest credit card debt. These unsecured loans are cheaper, safer, and more transparent than credit cards.

• Consolidation can be beneficial if it reduces the number of payments and potentially lowers the interest rate.

• It may not be suitable for everyone, especially if it leads to longer payment terms or higher overall costs due to fees.

What Is Debt Consolidation?

Debt consolidation involves taking out one loan or line of credit (ideally with a lower interest rate) and using it to pay off other debts — whether that’s car loans, credit card debt, or another type of debt. After consolidating those existing loans into one loan, you have just one monthly payment and one interest rate.

💡 Quick Tip: Credit card interest rates average 20%-25%, versus 12% for a personal loan. And with loan repayment terms of 2 to 7 years, you’ll pay down your debt faster. With a SoFi personal loan for credit card debt, who needs credit card rate caps?

Common Ways to Consolidate Debt

Your options to consolidate debt depend on your overall financial situation and what type of debt you wish to consolidate. Here are some common approaches.

Balance Transfer

If you are able to qualify for a credit card that has a lower annual percentage rate (APR) than your current cards, a balance transfer credit card may be one option to consider and can be a smart financial strategy to consolidate debt if you use it responsibly.

Some credit cards have zero- or low-interest promotional rates specifically for balance transfers. Promotional rates are typically for a limited time, so if you pay the transferred balance in full before it ends, you’ll reap the benefit of paying less — or possibly zero — interest.

However, there are some caveats to keep in mind. Credit card issuers generally charge a balance transfer fee, sometimes 3% to 5% of the amount transferred. If you use the credit card for new purchases, the card’s purchase APR, not the promotional rate, will apply to those purchases.

At the end of the promotional period, the card’s APR will revert to its regular rate. If a balance remains at that time, it will be subject to the new, regular rate.

Making late payments or missing payments entirely will typically trigger a penalty rate, which will apply to both the balance transfer amount and regular purchases made with the credit card.

Home Equity Loan

If you own a home and have equity in it, you might consider a home equity loan for consolidating debt. Home equity is the home’s value minus the amount remaining on your mortgage. If your home is worth $300,000 and you owe $125,000 on the mortgage, you have $175,000 worth of equity in your home.

Another key term lenders use in home equity loan determinations is loan-to-value (LTV) ratio. Typically expressed as a percentage, the LTV is similar to equity, but on the other side of the scale: Instead of how much you own, it’s how much you owe. The percentage is calculated by dividing the home’s appraised value by the remaining mortgage balance.

Lenders typically like to see applicants whose LTV is no more than 80%. In the above example, the LTV would be 42%.

$125,000 / $300,000 = 0.42
(To express this as a percentage, multiply 0.42 x 100 to get 42%.)

If you qualify for a home equity loan, you’ll typically be able to tap into 75% to 80% of your equity.

After the home equity loan closes, you’ll receive the loan proceeds in one lump sum, which you can use to pay your other debts.

A home equity loan is essentially a second mortgage, a secured loan using your home as collateral. Since there is a risk of losing your home if you default on the loan, this option should be considered carefully.

Personal Loan

If you don’t have home equity to tap into or you prefer not to put your home up as collateral, a personal loan may be another option to consider.

There are many types of personal loans, but they are typically unsecured loans, which means no collateral is required to secure the loan. They can have fixed or variable interest rates, but it’s fairly easy to find a lender that offers fixed-rate personal loans.

Generally, personal loans offer lower interest rates than credit cards. So consolidating credit card debt with a fixed-rate personal loan may result in savings over the life of the loan. Also, since personal loans are installment loans, there is a payment end date, unlike the revolving nature of credit cards.

There are many online personal loan lenders and the application process tends to be fairly simple. You may be able to use a loan comparison site to see what types of interest rates and loan terms you may be able to qualify for.

When you apply for a personal loan, the lender will do a hard credit inquiry into your credit report, which may temporarily lower your credit score. The lower credit score may drop off your credit report in a few months.

If you’re approved, the lender will send you the loan proceeds in one lump sum, which you can use to pay off your other debts. You’ll then be responsible for paying the monthly personal loan payment.

A drawback to using a personal loan for debt consolidation is that some lenders may charge origination fees, which can add to the total balance you’ll have to repay. Other fees may also be charged, such as late fees or prepayment penalties. It’s important to make sure you’re aware of any fees or penalties before signing the loan agreement.

💡 Quick Tip: Swap high-interest debt for a lower-interest loan, and save money on your monthly payments. Find out why SoFi credit card consolidation loans are so popular.

Awarded Best Personal Loan by NerdWallet.
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Is Debt Consolidation Right For You?

Your financial situation is unique to you, but there are several things you’ll want to keep in mind when trying to decide if debt consolidation is right for you.

Debt Consolidation Might Be a Good Idea If …

• You want to have only one monthly debt payment. It can be a challenge to manage multiple lenders, interest rates, and due dates.

• You want to have a payment end date. Using a home equity loan or a personal loan for debt consolidation will be useful for this reason because they are forms of installment debt.

• You can qualify for a zero interest or low-interest rate balance transfer credit card. This may allow you to consolidate multiple debts on one new credit card and save interest by paying off the balance before the promotional rate ends.

Debt Consolidation Might Not Be For You If …

• You think you’ll be tempted to continue using the credit cards you paid off in the debt consolidation process. This can leave you further in debt.

• You’ll incur fees (e.g., balance transfer fee or origination fee). If the fees are high, it might not make sense financially to consolidate the debts.

• Consolidating your debts may actually cost you more in the long run. If your goal is to have smaller monthly payments, that generally means you’ll be making payments for a longer period of time and incurring more interest over the life of the loan.

Recommended: Getting Out of Debt with No Money Saved

Credit Card Debt Relief: How to Get It

Some people seek assistance with getting relief from debt burdens. Reputable credit counselors do exist, but there are also many programs that scam people who may already be overwhelmed and are vulnerable.

Disreputable debt settlement companies may charge fees before ever settling your debt and often make bogus claims, such as guaranteeing that they will be able to make your debt go away or that there is a government program to bail out those in credit card debt.

Even if a debt settlement company can eventually settle your debt, there may be negative consequences to your credit along the way. What’s more, a debt settlement program may require that you stop making payments to your creditors. But your debts may continue to accrue interest and fees, putting you further in debt. The lack of payments may also take a negative toll on your payment history, which is an important factor in the calculation of your credit score.

Debt Relief: Is it a Good Idea?

What’s a good idea for some people may be a bad idea for others. Whether debt relief is a good idea for you and your financial situation will depend on factors that are unique to you. Working with a reputable credit counselor may be a good way to get some assistance that will help you get out of debt for good and create a solid financial plan for the future.

The Takeaway

Debt consolidation allows borrowers to combine a variety of debts, like credit cards, into a new loan. Ideally, this new loan has a lower interest rate or more favorable terms to help streamline the repayment process.

Whether or not you agree that credit card interest rates should be capped, one thing is undeniable: Credit cards are keeping people in debt because the math is stacked against you. If you’re carrying a balance of $5,000 or more on a high-interest credit card, consider a SoFi Personal Loan instead. SoFi offers lower fixed rates and same-day funding for qualified applicants. See your rate in minutes.

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

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

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

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

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

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Credit Hardship Program: What It Is & How It Works

What Is a Credit Card Hardship Program?

Why Is High Credit Card Debt a Concern?

Who Is a Credit Card Hardship Program For?

How to Apply for a Credit Card Hardship Program

1. Review Your Budget

2. Call Your Issuer

3. Agree Only to Terms You Can Afford

Factors to Consider Before Agreeing to a Credit Card Hardship Plan

Pros and Cons of Credit Card Hardship Program

Alternatives to Credit Card Hardship Programs

Balance Transfer Credit Card

Debt Consolidation Loan

Debt Management Plan

The Takeaway

FAQ

Do credit card hardship programs affect your credit?

Does credit card debt count as a hardship?

What are my options if I can’t pay my credit card?

Can you ask for forgiveness of credit card debt?

Guide to Paying Bills With a Credit Card: Can You Even Do It?

Can You Pay Bills With a Credit Card?

When Should You Not Use a Credit Card to Pay Bills?

What Bills Can You Pay With a Credit Card?

1. Streaming Services

2. Utilities

3. Cable

4. Phone

5. Internet

6. Rent

7. Mortgage

8. Car Loan

9. Taxes

10. Medical Bills

Benefits of Paying Bills With a Credit Card

1. Ease of Payment

2. Easy to Prove Payment

3. Identity Theft Protection

4. Autopay

5. Can Build Credit History

6. Earn Rewards

Downsides of Paying Bills With a Credit Card

1. May Cost More

2. Can Lead to High-Interest Debt

3. Processing Fees Can Cancel Out Rewards

4. Leads to Another Bill to Pay

5. Can Hurt Credit Utilization Ratio

Guide to Using a Credit Card to Pay Bills

The Takeaway

FAQ

Should I put non-debt bills on a credit card?

Is it wise to pay monthly bills with a credit card?

Is it better to pay bills with a credit or debit card?

Should I pay off my credit card in full or leave a small balance?

What happens if you pay the full amount on your credit card?

Does paying a bill with a credit card count as a purchase?

Foreclosure Rates for All 50 States

50 State Foreclosure Rates

50. South Dakota

49. Vermont

48. Montana

47. North Dakota

46. Wisconsin

45. Kansas

44. West Virginia

43. New Hampshire

42. Rhode Island

41. Alaska

40. Hawaii

39. Kentucky

38. Nebraska

37. Mississippi

36. Oregon

35. Washington

34. Missouri

33. Minnesota

32. Tennessee

31. Massachusetts

First-time homebuyers can prequalify for a SoFi mortgage loan, with as little as 3% down.

30. North Carolina

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Awarded Best Personal Loan by NerdWallet.
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