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Finding out you need dental work can be scary — and scary expensive. Still, the pain and the price could get even worse if you put off getting care. And sometimes delaying just isn’t an option.

If you don’t have enough money stashed away in your emergency fund, and your insurance won’t cover all your costs, you may want to chew on the pros and cons of taking out a dental loan.

What Are Dental Loans?

Medical financing loans are personal loans that are used to pay for a variety of medical expenses, including dental work and related expenses.

Whether you’re feeling overwhelmed by the upfront cost of a root canal or crown, or you expect to pay a substantial amount over time for braces, aligners, or implants, a dental loan can be a quick and convenient way to get the financing you need.

With a dental loan, you can borrow money to pay for your care, then make monthly payments until the loan balance is paid off.

How Do Dental Loans Work?

Dental loans are usually unsecured personal loans, which means you don’t have to put up collateral to secure the loan. Approval for a loan for dental work will be based on your creditworthiness.

If you qualify, you’ll receive a lump sum of money that’s to be repaid in monthly installments consisting of principal and interest. Since dental loans typically have fixed interest rates, your payments should be the same amount each month throughout the repayment period.


💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. One question can save you many dollars.

What Can Dental Loans Be Used For?

You typically can use a personal loan to pay for just about anything as long as it’s legal and within the terms of your loan agreement.

Costs related to your dental care are included in common uses for personal loans. These might include treatment — even for expensive elective or cosmetic procedures that may not be covered completely or at all by dental insurance — as well as over-the-counter or prescription medications you might require and transportation. You can even use the funds for the milkshake and soup you might need after your procedure.

Here are approximate costs for some common procedures that could be paid for with a dental loan:

Porcelain Crown

The cost of a crown can vary based on the materials used to make it, as well as the size, shape, and location of the tooth that’s being replaced. Costs for an all-porcelain crown can range from $800 to $2,000. Dental insurance may cover some of that expense, unless the crown is strictly for cosmetic purposes.

Whitening

A basic teeth cleaning may be covered by dental insurance as part of your annual exam. But an in-office teeth bleaching (which can cost around $300) or a laser whitening (which averages $1,000), likely won’t be covered by insurance.

Root Canal

The cost of a root canal could range from about $500 to $1,500 depending on how severe the infection is and which tooth is affected. Molars can run anywhere from $800–$1,500, while incisors can cost $500–$1,000.

Aligners

Clear teeth aligners can be pretty pricey. For example, the cost for Invisalign can range from $1,800 to $9,500 per treatment course, depending on how complex the orthodontic problem is. The average cost for Invisalign for a teenager is $3,000. Your insurance provider may pay for some of those costs, but you should check your coverage before ordering.

Veneers

Veneers can range from $800 to $2,000 per tooth, depending on the type and how much prep work is involved. Because the purpose of veneers is cosmetic, the cost generally is not covered by dental insurance.

Typical Dental Loan Application Process

Your dentist may offer an in-house financing plan to help with costs — especially if they specialize in cosmetic procedures. Or, the practice may partner with a lender who provides these types of loans. You aren’t obligated to use your dentist’s financing plan, but you may want to check out what the practice is offering. You also can go online to compare dental loan offers from traditional and online lenders.

Compare Offers: Choosing the Right Loan

When you start shopping for loans for dental work, you can go to individual lenders’ websites to see what they have to offer or use a comparison site to conveniently check out multiple lenders.

Getting prequalified with a few different lenders can help you get the clearest idea of what’s available and what’s best for your needs. Lenders typically use a soft credit pull during the prequalification process, so it won’t affect your credit score.

Here are a few things to watch for as you shop for financing:

Annual Percentage Rate

A loan’s annual percentage rate (APR) tells you the amount you can expect to pay on top of the principal amount over the course of one year, including interest and any fees or charges you might incur. Because it gives you a complete picture of the cost of the loan (as opposed to just looking at the interest rate), the APR can be a useful tool for comparing various loan offers.

Recommended: APR vs. Interest Rate

Fees

Fees can add up quickly, and they can add to the cost of your loan. Some common fees to look out for could include an application fee, origination fee, late payment fee, returned payment fee, and a prepayment penalty. Low-fee or fee-free loans may save you money over the life of the loan.

Loan Amounts

Some lenders may have loan minimums that require you to borrow more than you need. Before you go loan shopping, you may want to get dental procedure cost estimates to get an idea of how much you’ll have to borrow. Then you can look for lenders who are willing to lend that amount.


💡 Quick Tip: Generally, the larger the personal loan, the bigger the risk for the lender — and the higher the interest rate. So one way to lower your interest rate is to try downsizing your loan amount.

Loan Terms

Another important factor to consider is the loan term, or how long you’ll be given to repay the money you’ve borrowed. Of course, you’ll want to find a loan term that feels comfortable (a longer-term can equal lower payments). But a longer-term also could increase the amount you pay in interest over the life of the loan. You may want to think about how the loan length could affect your future financial goals.

Eligibility Requirements

Before you settle on a particular personal loan for dental work, you may want to check out the lender’s eligibility requirements. In the process of checking your personal loan rate, most sites will review your credit scores, credit history, income, and other personal financial information to determine whether you qualify for a particular interest rate or other loan terms.

Many lenders will accept a fair credit score (a FICO® Score of 580 to 669 is considered fair), but a good FICO Score (670 to 739) could qualify you for a more favorable interest rate and other terms. If you have a poor score (lower than 580), lenders may consider you to be a high lending risk, which could affect your eligibility. You may be able to find a loan, but the interest rate will likely be more expensive.

Approval and Funding Timeline

If you can’t get your treatment until you can pay for it — and you need it soon — a quick approval time and rapid funding also could be an important consideration. One of the major pluses of using an online lender can be the convenience and fast application time. If you have all your information ready, it can be easy to apply using an online form. And if you qualify, the money generally can be available within a few days.

Customer Service

Does the lender have a reputation for good customer service? You may want to check into how various lenders deal with consumer questions and problems. At the same time, you can see if there are any perks to building a relationship with a lender that might benefit you in the future.

Applying for a Dental Loan

If you find a lender and loan terms you like, and you’re ready to apply, your next step will be to complete a formal application. You can expect to be asked to verify your identity, income, and current address, and it can make things easier if you gather up the necessary documents ahead of time. You’ll probably need your driver’s license, Social Security number, recent pay stubs and/or bank statements, and a utility bill or some other proof of address.

Once you apply, most lenders will do a hard credit check, which may cause your credit score to drop by a few points temporarily. The lender will evaluate your ability to repay the loan and, if you qualify, your loan will be funded.

Pros and Cons of Dental Loans

Whether you need money for a one-time emergency procedure or for a series of treatments that could add up to a big expense, a dental loan may be an option worth considering. Here are some pros and cons that could help you decide if a personal loan makes sense for your situation:

Pros

Convenient Online Comparison

Applying for a personal loan online can be convenient and quick. Many online lenders offer personal loans that can be used for dental treatment, so you can shop for the loan amount and terms that best suit your needs.You may be able to get your approval within a few hours (maybe even a few minutes) and you could receive your money within a few days.

Competitive Terms

If you have a solid credit history, a stable income, and fair or better credit scores, you may qualify for a competitive interest rate and a repayment period you feel comfortable with. (The interest rate on a dental loan is typically lower than the interest rate on a credit card.)

Fixed Payments

With a dental loan, borrowers typically receive a lump sum of money that is repaid in fixed monthly payments. This can make it easier to budget and manage your payments.

Cons

Fees and Penalties

Some dental treatment loans come with fees and penalties that can drive up the overall cost of borrowing. You may be able to keep your costs down, though, by finding a low- or no-fee loan.

Alternatives May Cost Less

If you can qualify for a credit card with a low or 0% promotional rate for purchases, it may be a less expensive way to borrow money — at least for a while. Zero-interest credit cards charge no interest during an introductory period, which typically lasts from six to 18 months. Paying the balance in full within the promotional period is essential to making the most of an offer like this.

Fixed Payments

Having a fixed monthly payment can make budgeting easier, but it doesn’t provide flexibility if you can’t make that payment for some reason. A different financing option, such as a credit card, might offer more adaptable minimum monthly payments.

Pros and Cons of Dental Loans

Pros	Cons
Easy to compare lenders online	May come with fees and penalties that can increase the overall cost
Terms are competitive and interest rates are generally lower than on credit cards	Alternatives like credit cards with a 0% interest introductory rate may be less expensive
Fixed monthly payments can make it easy to budget for the expense	Fixed payments don’t allow for budget shortfalls

Alternatives to Personal Loans

If you can’t afford the dental work you need, there are options besides dental loans that you might want to check out. A few to consider include:

Credit Cards

If you already have a low-interest credit card, you may want to compare the interest you’d pay if you used that card vs. the cost of a dental loan. Or you might want to consider the pros and cons of applying for a low or 0% introductory-rate credit card — if you think you can pay off the balance during the designated promotional period. If you end up using a high percentage of your available credit, however, your credit score could be negatively affected.

Dental Office Financing

Your dentist may offer some type of in-house financing to patients who can’t afford to pay upfront for the treatments they want or need. The practice might partner with a lender that offers loans for dental procedures, for example, or the dental office might suggest a medical credit card with a low or 0% introductory rate. These offers may be worth reviewing and comparing to similar options, as long as you’re clear on all the repayment terms.

Grants

There are grant programs aimed at helping seniors, adults and children living in low-income households, and those who have special needs. The Dental Lifeline Network is a nonprofit organization that provides access to dental care for people who can’t afford it. Some dentists also may offer partial grants to attract new patients who need extensive and expensive treatment.

Explore Personal and Dental Loans with SoFi

A dental loan can be a quick and convenient solution if you need cash to pay for an unexpected dental procedure or an elective treatment you’ve been thinking about for a while (like braces, aligners, or implants). Whether you’re considering an expensive cosmetic procedure or you need a crown or root canal ASAP, SoFi may offer a personal loan that works for your unique financial situation.

SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

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

FAQ

What credit score do you need for dental implant loans?

Many lenders will offer a dental loan to a borrower with a fair credit score. (A FICO Score of 580 to 669 is considered fair). But a good or better score could improve your interest rate and other terms. If you have a poor score (lower than 580), lenders may consider you to be a higher risk, which could affect your eligibility.

Can you get your teeth fixed with no money?

You may be able to find a research clinic or university dental program that provides free services to volunteer patients who need care. And some dental practices may occasionally offer free care to low-income patients. There are also grants that could help cover costs.

Can you put dental work on a credit card?

Yes, you can use a regular credit card or a medical credit card to pay for dental work. But if you come close to using up all the available credit on your card, it could affect your credit utilization ratio, which can have a negative impact on your credit scores. Putting dental work on a credit card can also considerably add to the cost of your treatment if you are not able to pay it off quickly.

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Photo credit: iStock/Sanga Park

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

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.

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

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When it comes to picking a new credit card, there’s one detail you should not overlook: the card’s annual percentage rate, or APR. This represents the rate lenders charge to borrow, including fees and interest. But credit cards don’t have one single rate, and it may be hard to evaluate what’s a good deal and what isn’t.

In general, a good APR is one that’s below the current average interest rate, which is 21.47%, according to the latest data from the Federal Reserve at the start of 2024. However, what’s a good APR will also depend on the type of credit card, the various rates that could be assessed, and your own creditworthiness. This guide will take you through the details.

What Is an Annual Percentage Rate (APR)?

The APR on a credit card represents the total cost of the loan expressed in annual terms. A credit card’s APR includes the interest rate as well as any fees, including for late payments, foreign transactions, or returned payments.

Taking these fees into account when applying for a credit card helps to provide a fuller picture of what the loan may actually cost over its lifetime.

Keep in mind that APR is distinct from interest rate, which is simply the additional cost of borrowing money. Like APR, interest rate is typically expressed as a percentage of the principal. However, when looking at the average credit card interest rate vs. the average APR, you’re not comparing apples to apples.

For example, if a consumer takes out a $1,000 loan with a 10% simple interest rate and a one-year term, they will pay $1,100 over the lifetime of the loan — the principal $1,000 plus interest of $100.

While this example is extremely simplified, it’s helpful in demonstrating the difference between a simple interest rate and a not-so-simple APR calculation. If the consumer calculates the cost of the same $1,000 loan, considering the various fees that go into the APR, the number will likely be higher than the stated interest rate.

How Is APR Determined?

Knowing how APR is determined is an important part of understanding how credit cards work. A credit card’s APR is largely determined based on an individual’s financial specifics when they open the account.

•  The lender will look at the person’s credit score and credit history, as well as factors like their payment history and debt-to-income (DTI) ratio, which represents how much of an individual’s gross income is already going toward debt payments. In general, someone with a good payment history and credit score and a lower DTI ratio will qualify for a better APR.

•  However, APR isn’t only based on a borrower’s creditworthiness. Lenders will also take into account the current US prime rate, which is used to set rates on consumer loan products. Typically, a lender will take this rate and then bump it up a bit to minimize risk and increase profits.

•  Lastly, APR will vary based on the type of credit card. If you know what a credit card is, you’ll know all credit cards aren’t created equal. For instance, a credit card that offers lucrative rewards (like travel points or cash back) will generally have a higher APR than a more basic card.

When It Matters to Look at APR

If a consumer is comparing two similar loan or credit card offers, they may want to also look at the offer’s APR.

Let’s say a person has two loan offers. Each is a $1,000 loan with an interest rate of 10%. With just that information to compare the two, they seem equal to each other. A little more digging, though, will uncover that Offer A has a $100 origination fee while Offer B only has a $50 origination fee — both of which could be calculated and accounted for in the offer’s APR.

With credit cards, it could be that two cards have the same interest rate, but Card A has no late payment fees, while Card B carries a 20% late payment fee, making its APR potentially higher.

When it comes to APR, the devil really is in the details. And reading the fine print can reveal that the APR could make a difference to your credit card balance and debt management.

Types of Credit Card APR

To further complicate the answer to the question of what’s a good APR for a credit card, it’s important to understand that credit cards have different types of APR. The main one you’re probably going to want to consider when considering your total cost of borrowing is the purchase APR. However, if you’re planning to take out a cash advance or do a balance transfer, you’ll want to look at those APRs as well.

Introductory APR or Promotional APR

Sometimes, cards will offer a lower (or even 0%) APR to new customers for a limited time after they open the account. This APR can apply to purchases or to balance transfers. Introductory or promotional APRs must last at least six months, but they can be longer, too. Once this period is up, the regular APR kicks in.

Purchase APR

The purchase APR is the rate that applies when you use your credit card to make a purchase and then carry a balance into the next billing cycle, perhaps only making the credit card minimum payment. This is the most commonly discussed type of APR, and the main one you’ll want to look out for when comparing credit cards.

Cash Advance APR

A cash advance APR applies if you withdraw money from an ATM or bank using a credit card. Unlike your purchase APR, this APR doesn’t have a grace period, meaning interest starts accruing immediately. Additionally, cash advance APRs tend to be on the higher side.

Penalty APR

If you fail to make your payments on time, the penalty APR will kick in, driving up your card’s previous APR to one that’s often much higher. This is why it’s always important to make your credit card payments on-time — even if you’re in the midst of disputing a credit card charge, for instance.

Balance Transfer APR

A balance transfer APR will apply when you transfer any balances from other cards onto your credit card account. Often, this APR is comparable to the purchase APR, though this can vary depending on the credit card company.

How to Evaluate and Compare APRs

To get a sense of a credit card’s APR, follow these steps:

•  First take a look at a card’s purchase APR range, and compare that to other credit cards. For a fair comparison, make sure to look at the same type of credit card. (For example, only compare travel rewards cards to other travel rewards cards, or a credit-building card to another credit-building card.)

•  Then, get into the nitty-gritty and look at the APR for different types of transactions. Even one credit card can have varying APRs on different transactions. For example, a card may have a different APR on late payment penalties than it does for balance transfers or cash advances.

•  Evaluate each APR and compare those to any other offer you may have in front of you to ensure you pick the most competitive option. It’s a good idea to attempt to seek out the lowest rate possible for your financial situation. That way, you can feel confident using your credit card for what you need to use it for — which might include paying taxes with a credit card.

Low vs High APR Credit Cards

As you’re evaluating credit card APRs, it’s important to keep in mind that some credit cards tend to have higher APRs than others. For example, rewards credit cards generally have higher APRs, but provide value through perks, discounts, points, or other benefits.

On the other hand, many low-interest cards come with fewer perks. But again, these cards can save someone money in the long run if they need to carry a balance from, say, covering a large purchase at an establishment that accepts credit card payments.

Low-interest cards also tend to be reserved for those with higher than average credit scores, so they may be harder to qualify for with lower credit.

What Is a Good APR for a Credit Card?

According to the Federal Reserve, the U. national average credit card APR was 21.47% in December 2023. It’s reasonable to assume that an APR at or below the national average is considered “good.”

That said, qualifying for a “good” APR may hinge on a consumer’s credit score. For instance, someone with a below-average credit score may have a different definition of a good APR for a credit card compared to someone whose score is excellent.

APR and interest rates also change alongside federal interest rates changes. Because of this, it’s important for consumers to find the most recent data available on average credit card APR to ensure they aren’t relying on out-of-date information to inform their decision.

How to Avoid Paying APR

The APR a person qualifies for typically depends on their individual credit score. This means that those with credit scores on the higher end of the scale might qualify for lower APRs. If a consumer has a lower credit score, that doesn’t mean they’re totally out of luck, but they might be offered the same card at a higher APR.

However, there are a few ways a person can improve their chances of qualifying for a lower APR, and that starts by doing the work to build one’s credit score.

Tips for Qualifying for a Better APR

The APR a person qualifies for typically depends on their individual credit score. This means that those with credit scores on the higher end of the scale might qualify for lower APRs. If a consumer has a lower credit score, that doesn’t mean they’re totally out of luck, but they might be offered the same card at a higher APR.

However, there are a few ways a person can improve their chances of qualifying for a lower APR, and that starts by doing the work to improve their credit score.

•  One step is to check your credit report regularly for accuracy. US federal law allows consumers to get one free credit report annually from each of the three credit reporting agencies. Look out for any incorrect or suspicious charges. Even if you’d thought you’d resolved an issue related to a credit card skimmer, for instance, you’ll want to make sure those charges aren’t affecting your credit report in any way.

•  You can build your personal credit scores by making debt payments on time and trying to use only 30% of your available credit limit at any given time. Payment history accounts for 35% of the total credit score, and credit utilization — how much of a person’s total credit is being used at a given time — accounts for 30% of the total credit score.

Rebuilding a poor credit score can take some time, but it’s worth the work.

The Takeaway

Currently, the average credit card APR is 21.47%, and anything below that could be considered a good rate. However, when it comes to what is a good APR for a credit card, the answer is that it depends on a variety of factors. It will also depend on your credit scores and history as well as what type of credit cards and rewards you’re looking for. When you do get a credit card, it’s important to use it wisely so that you don’t wind up getting charged higher penalty rates.

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.

FAQ

What is a bad APR rate?

A bad APR for a credit card is generally one that’s well above the current national average credit card rate. APR for a credit card can vary widely, with some offering APRs as high as a whopping 36%.

What APR will I get with a 700 credit score?

A credit score of 700 is considered in the good range. It’s likely you could qualify for an APR around the average, though of course this will also depend on other factors, including the type of card and the current prime rate.

Does the interest rate on my credit card change?

Your credit card company can increase your interest rate. However, they are not permitted to do so within the first year of opening the account. Additionally, they must give you notice at least 45 days in advance.

What other financial products have an APR?

Many different types of lending products have APR. Beyond credit cards, this can include mortgages, car loans, and personal loans.

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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.

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

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

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Because a credit score is an important indicator for determining a consumer’s creditworthiness when buying a car, those with excellent credit histories tend to have an easier time borrowing money on favorable terms compared to those with lower credit scores. However, industry data shows that high-risk borrowers remain viable candidates for auto loans. In other words, there is no universally defined credit score needed to buy a car.

Read on to learn how your credit score can affect buying a car, plus some tips for purchasing a car with a lower credit score.

What FICO Score Do Car Dealers Use?

There are a few different scoring models that car dealers may use for determining a customer’s credit score. They may use the FICO® Auto Score, an industry-specific model featuring a score range from 250 to 900. The auto industry also may use VantageScore 3.0 or 4.0, which has a score range from 300 to 850.

No matter which scoring model is used, a bad credit score falls on the lower end of the range and a good credit score sits on the higher end of the range.


💡 Quick Tip: Your credit score updates every 30-45 days. Free credit monitoring can help you learn about your score’s normal ups and downs — and when a dip is cause for concern.

What Is the Minimum Credit Score to Buy A Car?

There may not necessarily be a minimum credit score required to buy a car. Consumers with deep subprime credit scores (300–500) have obtained financing for new and used vehicles in 2023, according to the credit bureau Experian. Although the percentage of borrowers in this category is very low, this indicates that even those with the lowest credit scores still may have access to auto financing.

Average APR by Credit Score Ranges

Consumers from all credit score categories have obtained auto loans in 2023, but car buyers with excellent credit histories tended to secure the lowest annual percentage rate (APR) financing, according to Experian. When assessing what is a good credit score to buy a car, Experian’s data confirms that consumers in the super prime and prime categories obtain the lowest interest rates on average for financing.

Quarterly financing data on new vehicle purchases in the fourth quarter of 2023 shows the following average APRs by credit score ranges:

•   Deep subprime (300-500): 14.78%

•   Subprime (501-600): 12.28%

•   Near prime (601-660): 9.60%

•   Prime (661-780): 7.01%

•   Super prime (781-850): 5.64%

How to Buy a Car With a Lower Credit Score

Obtaining a loan to purchase a new or used vehicle when you don’t have great credit can be cumbersome, but it’s not impossible. Here are some ways a consumer with poor credit may be able to obtain auto financing:

Make a Large Down Payment

Offering a large down payment on a vehicle purchase may allow car buyers to obtain more reasonable rates and better terms for financing, resulting in more affordable monthly loan payments. By putting more money down at the time of purchase, lenders also may view the loan as less risky, thus increasing your odds of approval.

Get Cosigner Assistance

Buying a car with the assistance of a cosigner is another way to potentially bolster your chance of securing favorable financing. A cosigner agrees to share the responsibility of repaying the loan, effectively promising the lender that if you don’t make the payments they will. If the cosigner is creditworthy, it puts the buyer in a much better position to obtain financing than going it solo.

Consider a Less Expensive Car

Especially if you are buying a car with bad credit, it is important to know how much you can realistically afford to spend — and then stick to that budget, even if the dealer tries to upsell you. Additionally, finding a less costly car will reduce the amount you need to borrow, and it may be easier to get approved for a smaller loan amount than a larger one.

Benefits of Good Credit When Buying a Car

The benefit of a good credit score when buying a vehicle is that you may secure lower interest rates compared to consumers with poor credit. Unless a consumer buys a vehicle outright with cash or receives 0% APR financing, the consumer will eventually face monthly principal and interest payments until they’ve paid off the loan balance in full. Auto financing terms may vary in length, with some maturing at 60 months, 72 months or 84 months.

Car loans with a high APR may cause consumers to pay a long-term premium above and beyond the actual sales price of the vehicle.

How to Monitor Your Credit Score

There are a number of ways you can check your credit score, including through your credit company or another financial institution where you have an account, as well as through a credit service or credit scoring website. Contrary to what you may expect, your credit report does not include your credit score, though it does provide valuable information about your credit history and debts, which is why it can still be helpful to read over your credit report before making a major purchase like a car.

Credit scores can fluctuate over time depending upon financial circumstances, and credit score updates occur at least every 45 days. That’s why it’s important to take a look at where your score stands right before you begin the process of car shopping.

Also keep in mind that it’s common for credit inquiries to occur when you’re shopping around to see what auto loan terms you qualify for. While soft inquiries don’t affect your credit score, hard inquiries, such as those that happen when you’re comparing rates for an auto loan, can ding your score. However, most major credit scores will count multiple car loan inquiries made within a certain period of time — typically 14 days — as one inquiry.

What to Expect in 2024

Based on the trends outlined in Experian’s Q4 report for 2023, prime borrowers with good credit in 2024 may continue shifting away from used vehicles in favor of new electric vehicles. Experian’s research also shows that subprime financing remains low, with 14.5% of car loans in 2023 going to consumers in the subprime risk category. These trends could continue through 2024.


💡 Quick Tip: One way to raise your credit score? Pay your bills on time. Setting up autopay can help you keep your account in good standing.

The Takeaway

While it is possible to buy a vehicle with bad credit in 2024, consumers in the subprime or deep subprime risk categories may want to explore ways of improving their credit scores to help secure financing with more favorable terms. As far as what credit score you need to buy a car, any score is potentially sufficient for obtaining financing.

If you want to check your credit or work to improve your score before buying a car, a money tracker app allows you to easily monitor and keep track of your credit score.

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

See exactly how your money comes and goes at a glance.

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SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

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

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

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

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One type of loan that isn’t often discussed is cross-collateralized, also known as cross-collateral loans, which is a type of secured loan. If someone is looking to take out multiple loans through the same financial institution, it’s important that they understand what cross-collateralization is and when it can happen.

So, what is a cross-collateralized loan? Keep reading to find out.

What Is Cross-Collateralization?

Cross-collateralization is when a lender uses the collateral you put up for one loan, such as a car, to secure another loan you take out with that same lender. Collateral is an asset that acts as a loan guarantee. If the borrower fails to make their loan payments, the lender has the option to seize the collateral or to force the sale of the collateral to recoup its losses.

How Does Cross-Collateralization Work?

The way that cross-collateralization works is that the same form of collateral is used to back more than one loan. The collateral used needs to guarantee the loan value. For example, if someone takes out an auto loan, the car (which equates to the value of the loan) is used as collateral. Once that loan is partially paid off, the lender may be willing to use the car as collateral for a second loan. Generally, for cross-collateralization to work, that car also needs to be worth the same or more than the value of the both loans.

A common example of cross-collateralization is a second mortgage. If someone takes out a second mortgage on their home, the home is going to be used as collateral for both the primary mortgage used to purchase the home and the new second mortgage.

While cross-collateralization can involve using the same asset for similar loan types, it doesn’t have to happen this way. For example, a lender can use a borrower’s car as collateral for a new loan that isn’t an auto loan (such as a personal loan), even though the car is already being used as collateral for the auto loan.


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When Is Cross-Collateralization Used?

It’s more common to come across cross-collateralization in practice at credit unions and auto lenders. Unlike banks, credit unions are owned by the members of the credit union. To help protect this group against various losses, credit unions often use cross-collateralization to gain some extra security. Credit unions tend to have more favorable loan terms than larger financial institutions and banks, and members may secure those better terms by agreeing to cross-collateralization.

An example of this would be if a credit union member wants to finance their car through their credit union. Fast forward six months, and they want to take out an unsecured loan with a low-interest rate. The reason the credit union can offer an unsecured loan to the member at such a great rate is because they are actually securing the loan with the existing collateral from the member’s car loan.

The lender is legally obligated to disclose cross-collateralization, and the borrower must consent. It’s important to ask about cross-collateralization practices when taking out a new loan, however. Rather than verbally explaining the cross-collateralization to you, a lender could simply include a clause in the loan agreement allowing it to cross-collateralize any collateral you used on any loan with that lender. The wording in such a clause can vary by lender.

Once a form of collateral is being used to secure multiple loans, the borrower can’t sell that collateral. If the borrower isn’t aware that the collateral they put up for their original loan is also being used to secure the second loan, this could come as an unpleasant surprise. For example, a borrower might try to sell their car after paying off their car loan, believing they own it free and clear, only to discover that they can’t sell it until they pay off a second “unsecured” loan they have with that lender.

How Can You Get Out of Cross-Collateral Loans?

Getting out of a cross-collateralized loan without paying it off in full can be difficult. Plus, it can be challenging and expensive to move a cross-collateral loan to another lender, which can leave a borrower stuck with whatever rates and terms were offered to them when they took out the loan. That’s why it’s a good idea to read the fine print of any loan agreements before signing and confirming whether a bank or credit union plans to start a cross-collateral loan.

Pros and Cons of Cross-Collateral Loan

Pros	Cons
Typically easy to qualify for	Larger risk of losing collateral
Potentially low cost	Tied to just one lender
Allows borrowers to leverage existing assets	May get stuck with unfavorable terms

There are some major advantages and disadvantages associated with cross-collateral loans that are worth taking into consideration before signing any loan documents.

Benefits

Here’s a look at some of the benefits of a cross-collateral loan.

•   Ease of qualification: Because cross-collateral loans are secured, they can be easier to qualify for than unsecured loans, for which the lender takes on more risk. Applicants with low credit scores may find it easier to qualify for this type of loan than some others.

•   Lower cost: Cross-collateral loans tend to be less expensive than unsecured loans. This type of loan tends to come with lower interest rates, which could lead to savings over the life of the loan. (However, they may come with longer repayment terms, which could increase total interest cost.)

•   Allows borrowers to leverage existing assets. Cross-collateral loans use an asset that is already trapped in an existing loan, and allows the borrower to get more value out of it by using it to ensure more loans.

Drawbacks

There are also some serious downsides associated with cross-collateral loans that are worth thinking carefully about.

•   Larger risk: If the borrower isn’t able to repay their debts, the lender can seize the asset acting as collateral.

•   Tied to just one lender: With a cross-collateral loan, more than one loan is being secured by the same asset all through one lender. This can make it hard and expensive to ever switch to a lender offering more favorable terms.

•   Unfavorable terms: Cross-collateral loans can have stricter terms to meet in order to protect the lenders on subsequent loans.

💡 Quick Tip: With lower fixed interest rates on loans of $5K to $100K, a SoFi personal loan for credit card debt can substantially decrease your monthly bills.

Cross-Collateralization and Bankruptcy

Cross-collateralization can become particularly complex during bankruptcy. For example, a borrower of a cross-collateral loan (using their car as collateral) who files for Chapter 7 bankruptcy will be required to either reaffirm the debt or surrender their car.

If they choose to reaffirm the debt and that loan is with a financial institution that has secured other sources of debt to the car, then they will need to pay off all of those debts in order to keep their car. Don’t forget, that borrower may not even be aware that some of their loans were cross-collateralized.

How cross-collateralization affects bankruptcy depends on the type of bankruptcy filed. Anyone dealing with cross-collateralization complications during bankruptcy may find that consulting a bankruptcy attorney will help them determine what their next steps should be.

Recommended: Getting Approved for a Personal Loan After Bankruptcy

Applying for SoFi’s Personal Loans

If you’re looking for an alternative to a cross-collateralized loan with your existing bank or credit union, you may want to investigate taking out an unsecured personal loan through a different financial institution. Personal loans can be used to finance a variety of expenses, including large purchases, home repairs/renovations, medical expenses, car repairs, weddings, vacations, and more.

SoFi personal loans offer competitive fixed rates and same-day funding. Checking your rate takes just a minute

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

FAQ

Is cross-collateralization legal?

Yes, cross-collateralization is legal. Many banks and credit unions practice cross-collateralization.

Who can and can’t cross-collateralize?

Borrowers who already have a secured loan at a financial institution may qualify for cross-collateralization. Lenders don’t always inform borrowers verbally that they are participating in cross-collateralization, so it’s worth confirming whether or not this is happening before taking on a second loan through the same lender.

Can you get out of cross-collateralization?

A major downside of cross-collateralized loans is that once a borrower has multiple sources of debt through the same lender that are cross-collateral loans, it can be difficult to move them to another lender. Paying off the loan is usually the best option for getting out of this type of loan.

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Photo credit: iStock/mapodile

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

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

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.

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If you’ve ever returned from a trip and wondered if it’s possible to deposit foreign currency into your U.S. bank account, the answer is yes — but not directly. Typically, you need to convert the money back to U.S. dollars first, then make the deposit. And there may be a few steps — and costs — involved in that process.

Let’s take a look at the five steps involved in depositing foreign currency to a bank account, as well as your alternatives.

How to Deposit Foreign Currency into a Bank Account

If your pockets are jingling with foreign currency and you want to deposit it into your bank, you’ll have to exchange it into U.S. dollars first. If you live in a major city or have an account at a larger bank, you may not have too much trouble accomplishing this. If not, you might have to shop around a bit for another bank or business that can help. Let’s take a closer look at how this works.

💡 Quick Tip: Don’t think too hard about your money. Automate your budgeting, saving, and spending with SoFi’s seamless and secure mobile banking app.

1. Check With Your Bank First

It may save time if you contact your own bank or credit union (or look on its website) to see if it offers foreign currency exchange services. Many financial institutions require that you have a checking or savings account with them in order to do an exchange. This could wind up being a win-win for you.

If they do offer to exchange foreign currency, you may want to schedule an appointment to make the exchange instead of just going in and heading to the nearest teller. That way, you can be sure the bank staff is ready for the transaction, that it can take the currency you’re carrying, and that a knowledgeable person will be on hand to assist you and answer your questions. You can call your branch, or you may be able to make the appointment online or on the bank’s mobile app.

2. Find a Bank to Convert Foreign Currency to U.S. Dollars

If your bank can’t do the exchange, another financial institution may be willing to work with you. It’s a good idea to reach out in advance and be clear about the type of currency you have, how much you have, and whether you have to have an account with that financial institution. This will save you time and energy versus just strolling into local brick-and-mortar banks.

Recommended: How to Deposit Cash at Local and Online Banks

3. Sell Foreign Currency to Buyer of Choice

Whether it’s your local branch bank, your bank’s larger main office, or a different bank than you usually use, you’ll likely have to do the transaction in person. It’s a good idea to come prepared with a current photo ID and some understanding of what will happen when you get there. Here are a few things to be aware of:

•   The bank may have a required minimum value — $20 in U.S. dollars, for example — for the currency you hope to exchange. If you don’t have that much leftover currency to exchange, you might decide to just keep what you have as a souvenir, save it for another trip, or give it to a friend or family member who plans to travel abroad.

•   The bank may only be able to exchange commonly requested foreign currencies. If you have Canadian dollars, Euros, or Mexican pesos, for example, things should go smoothly. But if you come in with paper money you picked up a bit off the tourist-beaten path, you may be out of luck. Checking in advance about services offered can be a very good idea before you head to a location.

4. Learn the Official Exchange Rate

Before you went on your trip, you probably had to figure out how much of the country’s currency you needed and how much getting that money would cost you in U.S. dollars. (Or perhaps your banker or travel agent did the math for you.)

That amount was calculated using the current exchange rate (the basic cost to exchange one country’s currency for another), plus whatever the bank charged you to convert your dollars prior to your trip.

The process is the same when you return and want to convert back to U.S. dollars. The amount of money you’ll get when you hand over your leftover currency (Euros, yen, rupees, pesos, etc.) will be based on the current rate of exchange for that currency, plus the bank’s markup.

It’s important to note that exchange rates fluctuate frequently, based on what’s happening in foreign currency markets. It’s probable that the exchange rate when you get home from your trip may not be the same as when you were preparing to travel.

You can check the exchange rate online at sites like Google Finance, Xe, and Oanda. Just keep in mind that wherever you end up exchanging your currency, a fee will likely be added.

The bank also may charge a transaction fee that’s based on how much currency you’re converting. This could be on top of the fee that’s already figured into the exchange rate.

5. Deposit the Money in Your Bank Account

Can you deposit foreign currency directly into your account? No. But once you’ve exchanged your foreign currency to U.S. dollars, go right ahead! You can deposit the money into your bank account — or do anything with it you like.

What Banks Will Not Accept

While you may want to exchange and deposit all of your foreign currency after you travel, be prepared to hear a couple of “sorry, but no” responses. Specifically, banks generally won’t accept any foreign coins. They also won’t exchange old foreign currency that isn’t in use anymore (so if you were hoarding some French francs or Italian lira, you are out of luck unfortunately). And if the bills you have are in bad condition, you may have trouble exchanging them.

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Other Places to Exchange Foreign Currency

If you can’t find a bank that can exchange your leftover foreign currency, you may have a few other options, depending on where you live. It can take a bit of research and/or legwork, but if you have more than a few dollars left from your travels, it can be well worth it.

Some possibilities include:

•   You can try a large hotel. If you live near a hotel that’s popular with international visitors, you may be able to sell your currency there. There could be an exchange desk or the front desk could prove helpful.

•   Your travel agency may be able to help. If you worked with a travel agent, see if they might be willing to exchange your foreign currency back to U.S. dollars. Or your agency may have suggestions for where you can go to have the currency converted.

•   You can exchange money at an airport kiosk. If you’re flying into an international airport, you can convert your remaining foreign currency at a booth that sells this service. But customers typically pay a higher markup for this easy access, so you might want to weigh the cost vs. the convenience.

•   You can look for a nearby currency exchange storefront. One way to find local businesses that might exchange your foreign currency is to simply do an online search of the term “currency exchanges near me.” Once you get a list and/or map of local exchanges, you can check out their websites or contact them to see if they will convert your money, what they’re charging, and if they’re licensed. Remember, the markup will be higher at some locations than others, so you may be able to save money by doing a little research.

In the future, if you want to avoid the inconvenience and cost of coming home with foreign currency, you could go old-school with traveler’s checks. But they can be more difficult to get and use than in the past — and they also may come with a cost.

Recommended: What Is a Foreign Currency Bank Account?

The Takeaway

If you come home from a trip (welcome back, btw) with leftover foreign currency, don’t expect to deposit that money directly into your bank account. You’ll likely have to exchange those foreign funds to U.S. dollars first, then make the deposit.

A local bank or credit union may be willing to convert your foreign currency if you have an account there. But if not, you’ll likely have to do some research to find the most convenient and affordable alternative for making the exchange.

All this talk about fees leads us to an option: Consider opening a SoFi Checking and Savings account, and start banking better. Open an account with direct deposit, and you will have access to any of the fee-free 55,000+ ATMs in the worldwide Allpoint Network when you travel. But the benefits don’t end there: SoFi Checking and Savings currently offers a competitive APY, and you won’t pay account fees.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with 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, NerdWallet’s 2024 winner for Best Checking Account Overall. Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

Can you deposit foreign currency into an ATM?

Probably not. ATMs generally accept only one type of currency. Instead of using an ATM, you likely will have to go in person to your local branch bank to exchange foreign currency, then deposit it into your checking, savings, or money market account. Or, you may need to seek out another location to complete your currency exchange.

Can I receive money from abroad into my bank account?

Yes, you can use an international money transfer service to send money from abroad directly into your bank account. The process may differ depending on the service provider you choose to send the funds, but you should be prepared with some key bits of information.

You typically need to provide your full bank account number, your full name (as it appears on your account), the bank’s address for incoming wire transfers, and a Swift Code that identifies your bank. The fees involved will vary. And the current exchange rate will apply, as your foreign currency will be converted into U.S. dollars before the funds are credited to your account.

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Photo credit: iStock/Agustin Vai

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is 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.

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.

Our account fee policy is subject to change at any time.

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