PLGen Archives | Page 3 of 26

Sep

2024

The Cost of Being in Someone’s Wedding

By Maureen Shelly | Budgeting & Goals, Life & Career, personal_loan | No Comments

It’s an honor to be asked to be a member of a friend’s or family member’s wedding, but it also comes with a cost. Between buying/renting attire, attending pre-wedding events, and purchasing gifts, it can run around $1,650 to be a bridesmaid and $1,600 to be a groomsman.

Just one wedding can take a bite out of your budget, not to mention the familiar scenario of attending several weddings in one year. We’ll help you understand the expenses that go into being a part of the big day so you can prepare and budget well in advance.

How Much Does It Cost To Be a Bridesmaid?

While the average bridesmaid can spend $1,650 to be a part of the bridal party, costs vary significantly depending on location of the wedding, number of events, and dress code. Before you agree to participate as a bridesmaid (or maid of honor), it’s important to consider what costs you may be responsible for.

Recommended: What Are Personal Loans Used For?

The Dress

Etiquette dictates that bridesmaids cover the cost of their dress, shoes, and any accessories the bride has selected for them to wear. According to The Knot’s 2023 Real Weddings Study (which surveyed nearly 10,000 couples who wed in 2023), the average bridesmaid dress cost is $130 per person.

You’ll likely also be responsible for any alterations, which can run from $45 to $150, depending on what adjustments are needed. While there are ways you can save — such as renting a dress — that decision is often not up to the bridesmaid.

Hair and Makeup

Traditionally, if the bride requests everyone in the party have their hair and makeup done in a certain style, she will cover the cost. If, on the other hand, bridesmaids are given the option to opt in or do their own thing, the bridesmaids generally cover the cost of getting glammed up for the big day. The average cost of wedding hair for bridesmaids is $95, tack on another $90 for makeup.

Bachelorette Party

Bachelorette parties have gotten more elaborate in recent years. Typically, every attendant pays for their own expenses, while also splitting the cost to cover most, or all, of the bride’s expenses.

According to The Knot, the average cost of a bachelorette party in 2023 was $1,300 per person. Of course, the cost of attending a bachelorette party varies significantly depending on the type, location, and length of the event. Celebrations that last between one to two days cost, on average, $1,135 per attendee, while those that go on for three to four days can run $1,630. Also, the farther you need to travel to the event, the more you’ll need to spend. Guests who travel to the bachelorette party locale by plane spend an average of $2,000, while those who travel by personal car spend an average of $900 to attend the event.

Wedding Travel and Accommodations

For the wedding itself, the bridal party is typically expected to cover the costs of travel and accommodations, which can vary significantly depending on the location of the event and length of stay (with members of the bridal party possibly needing to arrive early or stay late).

On average, wedding guests who need to travel outside of their town or city to attend a wedding spend around $456 on travel and accommodations. You could end up spending significantly more if you’re covering travel costs for yourself and other family members, or if the wedding involves long-distance travel. When the wedding is local, travel costs are likely to be minimal.

Gifts

Bridesmaids traditionally give shower and wedding gifts, which add to the cost of being in someone’s wedding. According to The Knot, the average bridesmaid bridal shower gift cost between $50 and $75, while the average bridesmaid wedding gift lands at around $170. A group gift may allow you to spend less while giving something nicer than you could afford on your own.

What Does the Maid of Honor Pay For?

Being the maid of honor generally doesn’t cost more than being a bridesmaid, but it does come with additional duties and a greater commitment of time. Generally, the maid of honor is there to assist with any tasks she can take off the bride’s to-do list. They may be involved in planning pre-wedding events and generally take charge of communicating with other members of the wedding party.

In some cases, the maid of honor might plan the shower and help cover the costs. However, these days, the cost of a wedding shower is more commonly covered by family.

Recommended: How to Save for Your Dream Wedding

What Do Groomsmen Pay for?

Groomsmen typically pay for their wedding attire, the cost to attend a bachelor party (which may include sharing the cost for the groom’s attendance), the cost to attend the wedding (which might involve travel and accommodations), as well as a wedding gift. Here’s a look at what it all adds up to.

Formalwear or Tuxedo Rental

Just like bridesmaids generally pay for their dresses, groomsmen typically pay for their wedding day clothing. This might be a suit, tuxedo, shirt and slacks, or another type of attire selected by the groom or couple. Typically the groomsmen’s attire is purchased or rented, but in some cases, a groom will let their wedding party choose from their own wardrobe, which can be a more affordable option.

If you need to rent a tux for the event, costs vary depending on what style, design, brand, and accessories you’ll need to wear. On average, you can expect to pay between $100 and $250 to rent a tux for the standard period.

Bachelor Party

Groomsmen normally take part in planning the bachelor party and may cover their own costs and the groom’s. According to a recent survey by The Knot (which included roughly 500 respondents who attended, or plan to attend, a bach party in 2023), the average cost of a bachelor party is $1,400 per person. The survey also found that the average bachelor celebration lasts for two days, and roughly one-fifth of attendees are flying to the party destination. Indeed, 29% of those surveyed are actually spending $2,000 (or more) to celebrate in a major metro city.

For guests who drove or were planning to drive to the event’s location, spending was less — averaging $1,000 per attendee.

Wedding Gift

Groomsmen are generally expected to give the couple a wedding gift, though they are not expected to spend more on a gift than other guests do. According to The Knot’s 2023 Real Wedding Guest Study, wedding party members spend an average of $160 on their gifts. If you want to save money, consider chipping in for a group gift with other wedding party members.

The Takeaway

It’s not unusual for a bridesmaid to spend $1,650, including the dress, bachelorette party, and gifts. Groomsmen may spend just a little bit less ($1600) for a rental tux, bachelor party, and wedding gift. Keep in mind, however, that the cost to be in someone’s wedding can run much higher or lower, depending on the location and style of wedding.

If you haven’t saved up enough money to be in a friend’s or family member’s wedding in advance, there are better options than throwing it all on a credit card. Personal loans are designed to help cover life’s big events. SoFi Personal Loans offer low fixed rates, no-fee options, and a quick and easy online application process. Checking your rate takes just a minute.

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

SOPL-Q324-038

Sep

2024

10 Steps for the Perfect Bathroom Remodel

By Kristin Luna | Home Ownership, personal_loan | No Comments

A bathroom remodel is a major project. Whether you’re looking to do a cosmetic refresh or a total gut job with all new high-end fixtures, the process takes planning, time, effort, and money. But the end product can be well worth it: A beautifully updated bathroom can significantly improve your home, bump up its resale value, and make your everyday life more enjoyable.

How much will it cost? Depending on the scope of work, a bathroom remodel typically ranges from $9,000 to $48,000, but many homeowners in the U.S. will pay around $28,500 on average. If you live in a major metro area (where the cost of living is generally higher), however, you may pay as much as $75,000 for a bathroom remodel.

Your bathroom budget will greatly depend on the purpose of your remodel. Whatever you have in mind, these 10 steps can help you plan appropriately, anticipate problems, and ensure you end up with a room you love.

Why Homeowners Remodel Bathrooms

Here’s a look at the most common reasons why homeowners decide to remodel a bathroom. For many, it can be a combination of reasons.

Updating the Look

Happy with the layout of your current bathroom but feel it just needs a refresh? Focus your attention on material selection, and perhaps add new cabinetry or plumbing fixtures. You can find plenty of inspiration online, including ideas for how to make a small bathroom look bigger.

Even if you’re not making a major structural change, you’ll still want to pay attention to the age of your home and the remodels done by previous homeowners. After all, laying new tile over a foundation rife with mold or making do with an outdated electrical system may mean inviting big problems down the road.

Resale Value

If you’re updating your bathroom in preparation for selling your home, think about what potential buyers might look for. While it’s impossible to anticipate what any one individual might want in a new home, you can research your local real estate market to learn what appeals to the majority of homeowners.

You also can find out the resale value of bathroom remodels by using an online home project value estimator.

Better Functionality and More Storage

Perhaps you’ve always hated how the door hits the vanity as it swings open, or you’re tired of stacking toilet paper on the tank and seeing makeup on the counter. Or maybe you never use the bathtub and long for a large shower stall, or would prefer two sinks instead of one to expedite the family’s morning rush. Is your bathroom a dark, moist cave? It may be crying out for more natural light and better ventilation.

This level of bathroom remodel may require gutting the entire space, possibly rearranging the fixtures and rerouting plumbing. Not only will your bathroom be brand new in that case, it could be higher end, too.

How to Plan a Bathroom Remodel

Embarking on a bathroom remodel can be daunting, and there are many parts of the process where things can go disastrously wrong. What follows are 10 steps that can help streamline the process and ensure your remodel is a success.

1. Determine What Your Bathroom Remodel Should Achieve

When starting any home improvement project that requires a good chunk of time and cash, you want to determine what the overall goal is. Is it to expand the existing space? To add a shower or a tub? To improve your home’s value? To update a vintage bathroom to one that is more modern in design and functionality? Your answers will factor into your design and budget.

Other considerations to make when planning a bathroom remodel include:

• How many people will use the room?

• How much time do you spend in the bathroom in the morning, afternoon, and evening?

• What’s your routine? How does your current space hinder it? How could a new space improve it?

• Do you just want something that’s easy to clean? Or do you want to improve the look for resale?

2. Research and Budget

Before you get too far with planning, it’s good to know how much bathroom you can afford. Depending on the type of bathroom reno you’re looking to do, costs average between $600 and $800 per square foot, according to Remodeling magazine’s 2024 Cost vs Value Report.

Before proceeding with your dream plans, think about whether you’re after a basic update, a mid- to upper-range remodel, or a deluxe spa getaway. It’s also a good idea to factor in a cushion of 20% for unforeseen costs. An online home improvement cost calculator can help you get a ballpark estimate of what your plan will cost.

One way to cut expenses is to avoid moving the existing plumbing and wiring. Some homeowners focus on just a shower remodel, which can run anywhere from $500 to $20,000.

3. Hire the Right Professionals

Given the complexity of rerouting plumbing, laying tile and flooring, and installing vanities and toilets, you may need to hire a few different professionals to get the job done:

• Interior designer, to reimagine the space and source materials

• Architect, to handle structural changes

• Plumber

• Electrician

• Tile installer

• General contractor, to manage them all

What exactly will all these folks be doing, besides spending your money? We’ll walk you through it.

First, a professional interior designer will think of things a homeowner will not. For instance: which way the cabinet doors open, if there’s room for a washer/dryer, how a skylight could brighten the space, or ways to rearrange the room in a creative way that maximizes both functionality and efficiency.

On the other hand, if you know what you want and where to find the products you need — and have an eye for good design — then you might take on the design process yourself.

A general contractor will hire and supervise the various subcontractors, and keep the project on schedule and on budget. If you have DIY experience and are comfortable tackling (or supervising) the demolition, construction, and installation, you may not need a general contractor. Just remember that once you start exposing layers of old work, a straightforward update can devolve into something more complex.

For major structural changes, you’ll want to hire an architect, and consider bringing in an experienced plumber and electrician, too. In some places, it’s required by law.

While you’re keeping an eye on the budget, don’t forget about your valuable time. Even with DIY experience, a bathroom remodel can take homeowners several times as long as a professional to complete — and your results may not be up to your high standards. To keep your budget on track, you might take on simpler tasks like demo and painting and hire out the rest.

Recommended: How to Pay for Emergency Home Repairs

4. Refine Your Bathroom Remodel Plan

If your dream bathroom couldn’t ever fit in the space you have, think about what’s on the other side of the bathroom walls. Can you steal square footage from an adjacent closet, adjoining bedroom, or underused hallway? Is it possible to punch out an exterior wall to add square footage?

Other options to consider: whether you want the toilet out in the open or housed in its own private water closet, and what kind of special storage you may need — for hair tools, makeup, and other everyday essentials.

Choosing the style of bathroom you want can also be tricky. You may love the look of the industrial-style bathroom in your favorite restaurant, but will it look right in your Craftsman bungalow? Designers recommend that you look to the rest of your house for inspiration. You may also want to consult resources like Pinterest for ideas.

5. Approve Your Bathroom Remodel Design

Next you’ll consult with your interior designer and/or architect to review preliminary floor plans and sketches. These will show how the room’s components — shower, vanity, any cabinetry — fit in the space.

At this point, you’ll focus on the big picture: where the major elements go and the functionality of the space. Don’t worry about the finishing touches like colors and materials. These drawings and scope of work will be used to interview contractors and solicit estimates.

6. Get Estimates From Contractors

It’s a common process to get three separate estimates from licensed contractors for each home remodel project in which you bring in professional help. If you’re already working with a designer, they may know skilled contractors or can help you interview professionals to make sure they’re right for the job.

You’ll want to carefully evaluate each contractor’s bid. Don’t let the highest bid scare you, or immediately jump on the lowest bid.

Recommended: How Do Home Improvement Loans Work?

7. Choose Your Bathroom Materials, Finishes, and Colors

Now it’s time to research materials, so you’ll have a basic knowledge of what you need and final costs. Marble may look great, but it’s not stain-resistant and is a pain to maintain.

Maybe you want to look at easy-to-clean options. Or perhaps you didn’t know that wood can indeed work for countertops in bathrooms if properly treated, or you weren’t aware of the vast stone possibilities that could work with your design.

8. Work on Design Development and Construction Documents

At this stage, you should be actively reviewing the floor plan, elevations, tile layout, and any other relevant drawings associated with your project. More planning on the front end of the project can mean fewer mistakes will arise later in the process.

You’ll also want to be kept up to speed on everything that goes into your project: what materials will be used, and how they will be laid out. If something in construction drawings isn’t specified — such as general tile layout or how you want trim pieces in your shower niche to look — chances are your tile installer will make a decision on the spot, especially if you’re not around on the install day.

This stage will also involve pulling permits. If you’re working with a knowledgeable contractor, they will likely take this on. Many are skilled at navigating the process with contacts they’ve made at the local planning office. If you’re doing much of the work yourself, you’ll need to brush up on what permits you’ll need, and where and how to submit drawings for approval.

9. Plan for Installation and Prepare for Bathroom Demo

In an ideal world, you will have every last detail planned and every material picked out and ordered before construction starts. The last thing you want is to get halfway through your remodel and have to tell your construction crew to take a two-week break while you wait for that back-ordered marble to arrive from Italy.

You’ll also want to nail down the nuts and bolts of how construction will flow and where supplies will be stored. You’ll need a dry space inside for most materials, so you’ll need to decide where you’re going to keep displaced furniture and household items while construction is underway. Can you make space in your garage or on the side of your house?

10. Make a Post-Completion Punch List

Despite meticulous planning, it’s likely that something with your bathroom remodel will go wrong. Maybe you overlooked something, materials arrived broken or scratched or not at all, there’s a dent in the wall, or the caulk was too messy.

Now is the time to make a list of these things, either in an informal email or more formal document with your contractor. Get it into the hands of the person responsible for correcting the mistakes and include a date by which the fixes and finish work should be completed.

It’s normal for a contractor to return several times to address any post-project concerns, so try not to worry. Everyone makes little mistakes in a big, complicated project like a bathroom remodel. Just hold off making your final payment until the problems are fixed.

The Takeaway

A bathroom remodel can be a complex and costly project. Before you jump in, consider the purpose of your remodel, the scope of work it will involve, and your budget. Costs vary widely, anywhere from $9,000 on the low end up to $48,000 on the higher end, with the average falling at $28,500. To keep costs down, take the time to plan meticulously and get multiple bids from contractors.

Need a way to finance your new bathroom remodel? SoFi can help. SoFi’s home improvement loans range from $5K-$100K and they’re unsecured, which means that your house is not used as collateral to secure the loan. Checking your interest rate takes just a minute.

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

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.

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.

SOPL-Q324-036

Aug

2024

Exploring Whether or Not Personal Loans Are Bad

By Austin Kilham | Debt Payoff, Financial Independence, personal_loan | Comments Off

Personal loans are a type of lending instrument offered through banks, credit unions, and online lenders. They’re paid back, with interest, in installments, and there are few limitations to how the loan funds can be used. They’re also typically unsecured, meaning you don’t have to put up any property as collateral for the loan.

A personal loan is an important financial tool if you can find one from a reputable lender at a reasonable interest rate, and you can commit to making loan payments on time. However, if you only qualify for a loan with a high-interest rate or you feel you may have trouble paying it back, you may want to think twice before applying.

Are Personal Loans Bad?

Not necessarily. There are both advantages and disadvantages to personal loans. Here’s a look at some of the benefits of taking out a personal loan:

• Personal loans generally offer a wide range of borrowing limits, typically between $1,000 and $100,000.

• There is flexibility in how the funds can be spent, unlike a mortgage, which you must use to buy a house, or an auto loan, which must be used to purchase a car.

• Proceeds of personal loans can be used for a variety of purposes, from paying down credit card debt to making home improvements and more.

• Unsecured personal loans are offered by many lenders. There is no need to put any of your assets up as collateral for the loan, nor do you risk losing them should you default.

It’s important to weigh these benefits against potential disadvantages, and determine if it’s bad to get a personal loan for your financial needs. Here’s a look at some of the downsides of taking out a personal loan.

• Personal loans may not offer the lowest possible borrowing option. For example, you might be able to get a better rate on a home equity loan or a home equity line of credit (HELOC) if you have enough equity in your home. That said, both of those lending instruments use your house as collateral, so if you default, you could risk losing your home.

• Personal loans sometimes have fees or penalties that can increase the cost of borrowing. For example, origination fees on personal loans tend to be between 1% and 5%. Some lenders may charge prepayment penalties to ensure they don’t lose future interest payments if you pay off your loan early.

• When you take out a personal loan, you’re increasing your overall debt. If you have other debts, comfortably affording all your monthly payments can become a challenge. And missing payments or making late payments can have a negative impact on your credit score.

Recommended: What Is Considered a Bad Credit Score?

Pros and Cons of Personal Loans

Here’s a look at the pros and cons of personal loans at a glance:

Pros of Personal Loans	Cons of Personal Loans
Wide range of loan amounts, usually between $1,000 and $100,000.	Interest rates may be higher than other types of loans, such as home equity loans or HELOCs.
Use of funds is flexible. Borrowers can use money from personal loans toward almost any purpose.	Fees and penalties can make borrowing more costly.
They are generally unsecured loans, which is beneficial to those who don’t want to put up collateral.	They increase your debt, potentially putting a strain on your budget.

When Can It Be a Good Idea to Get a Personal Loan?

So when is a personal loan a good idea?

Debt Consolidation

One reason to take out a personal loan is as a credit debt consolidation loan to pay down high interest credit card debt. The average credit card interest rate as of August 2024 is 27.62%. The current average personal loan interest rate, on the other hand, is 12.38% (if you have excellent credit you may pay less; if you have poor credit, you could pay more).

Consolidating high interest credit card debt with a lower-interest-rate personal loan may make your monthly payments more manageable and potentially save you money in interest payments over the life of the loan.

If you use a personal loan to pay down credit card debt, it’s a good idea not to use those credit cards to incur even more debt.

Home Improvement

Using a personal loan to make improvements to your home may also be beneficial as home improvements can increase the value of your home, possibly offsetting the cost of borrowing.

When Can It Be a Bad Idea to Get a Personal Loan?

There are a number of cases when you may wonder if getting a loan is bad. Here’s a look at some situations when getting a personal loan may not be a good idea.

No Credit Check Loans

Most loans — including most personal loans — require a credit check. This helps your lender understand your creditworthiness, or how likely you are to repay your debts. Generally speaking, the healthier your credit, the more favorable your loan interest rates and terms. Those with poor or limited credit may find it difficult to qualify for a loan.

No credit check personal loans, on the other hand, look at your bank account balance or require you to pledge some asset as collateral to secure the loan.

The problem is that these loans also tend to be extremely expensive — interest rates can well exceed 100%, which is considered to be predatory. There’s a pretty good chance that borrowers who rely on no credit check loans won’t be able to pay their bills on time, which could trap them in a cycle of debt.

Cheaper Alternatives May Be Available

Before taking out a personal loan, consider whether there are cheaper alternatives. We’ve already mentioned home equity loans and HELOCs. You might also consider a no-interest credit card, which charges 0% interest for an introductory period typically lasting between 12 and 20 months. If you can pay off your debt in this time period, this may be a good option. But whatever balance you don’t pay off in time may revert to the card’s regular rate, which is likely high.

You Are Not Good at Managing Debt

If you’re not good at managing debt, think twice before taking on more. And if you use your personal loan to consolidate credit card debt, you’ll want to be careful about racking up new credit card bills.

Discretionary Spending

Borrowing money for discretionary spending, such as vacations or an engagement ring generally isn’t a good idea. While these things are nice, they are not necessarily worth jeopardizing your financial wellbeing. Instead of borrowing to pay for big-ticket items like these, you may be better off saving for them in advance as a part of your regular budget.

Borrowing Money for Investments

It’s generally not a good idea to borrow money to make investments. By nature, investments are risky, and you are not guaranteed a return. Should the investment lose money instead of gain, you’ll be responsible for paying off your debt regardless of the investment loss.

The Takeaway

So are personal loans bad? The answer depends on how you plan to use the loan. Personal loans can be useful tools for purposes like consolidating credit card debt, making home improvements, and more.

Any time you’re considering a loan, it’s important to understand if it will meet your needs, what it will cost you, and whether there are any better alternatives out there.

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

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

Photo credit: iStock/Morsa Images

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.

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

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

SOPL-Q324-033

Aug

2024

$5,000 Personal Loan: How Can You Get One?

By Bob Haegele | Debt Payoff, Financial Independence, personal_loan | Comments Off

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

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

Key Points

• A $5,000 personal loan provides a straightforward way to access cash for unexpected expenses without requiring collateral, though interest rates may vary based on credit scores.

• Flexible repayment terms allow borrowers to choose between lower monthly payments with longer terms or higher payments with shorter terms, catering to different financial situations.

• Borrowers should be cautious regarding origination fees, which can significantly increase the overall cost of the loan and may be as high as 15% of the loan amount.

• The average interest rates for personal loans differ based on credit quality, with higher rates for those with fair credit, potentially leading to substantial costs over the loan’s life.

• Shopping around for lenders is essential to find competitive interest rates and favorable terms, ensuring borrowers secure the best deal possible for their financial needs.

Pros of a $5,000 Personal Loan

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

Popular uses for personal loans include consolidating debt, covering medical bills, and home repairs or renovations. Here’s a look at some of the pros of taking out a $5,000 personal loan.

Flexible Terms

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

No Collateral

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

Fixed Payments

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

Cons of a $5,000 Personal Loan

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

Debt

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

Origination Fees

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

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

Interest Rates

While personal loan interest rates are usually lower than credit cards’, they can cost you hundreds (or even thousands) over the life of the loan.

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

Requirements for a $5,000 Personal Loan

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

$5,000 Personal Loan Terms

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

Your credit score will also affect the interest rate. For example, the average interest rate for personal loans is 10.73%-12.50% for those with Very Good or Excellent credit. However, if you have Fair credit, the average jumps to 117.80%-19.90%.

Payment on a $5,000 Personal Loan

The payment on a $5,000 personal loan depends on the interest rate and the loan term. For example, a two-year $5,000 personal loan with a 7.80% interest rate results in your paying $226 per month. This means you’ll pay $416.34 in total interest over the life of the loan.

If, on the other hand, you take out a three-year $5,000 loan at an interest rate of 15%, you’ll pay $173 per month. In this case, you’ll pay a total of $1,239.76 in interest over the life of the loan.

Recommended: Personal Loan vs Credit Card

The Takeaway

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

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

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

FAQ

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

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

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

The amount you will pay per month on a $5,000 personal loan will depend on the loan’s interest rate and term (length of the loan). As an example, the monthly payment on a $5,000 personal loan with a 13% interest rate and a three-year term will be $168.

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

Getting a personal loan generally involves checking your credit, comparing lenders (including banks, credit unions, and online lenders), getting prequalified, and then submitting your application.

Photo credit: iStock/SDI Productions

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Aug

2024

Prime Loan vs Subprime Loan: What Are the Differences?

By Austin Kilham | Financial Independence, personal_loan, Terminology | Comments Off

Labels like prime and subprime help denote loans that are designed for people with different credit scores. Prime loans are built for borrowers with good credit, while subprime loans are designed for those with less-than-perfect credit. While subprime loans can help this group finance big purchases like a home or a car, they also come with potentially significant downsides.

Here are key things to know about prime and subprime loans to help you make better borrowing decisions.

Prime Loan vs Subprime Loan

When you’re shopping for a loan, lenders will consider your credit history to help them determine how much default risk they’d be taking on were they to loan you money.

Your credit score is a three-digit representation of your credit history that lenders use to understand your creditworthiness. While there are different credit scoring models, the FICO® score is one of the most commonly used. Lenders and other institutions may have different rules for which credit scores determine prime vs subprime loans.

For example, Experian, one of the three major credit reporting bureaus, defines a prime loan as requiring a FICO score of 670 to 739. With a score of 740 or above, you’re in super prime territory. Borrowers with a FICO score of 580 to 669 will likely only qualify for subprime loans.

Here are some key differences between the two that borrowers should be aware of.

Interest Rates

Borrowers with lower credit scores are seen as a greater lending risk. To offset some of that risk, lenders may charge higher interest rates on subprime loans than on prime loans.

What’s more, many subprime loans have adjustable interest rates, which may be locked in for a short period of time after which they may readjust on a regular basis, such as every month, quarter, or year. If interest rates are on the rise, this can mean your subprime loan becomes increasingly more expensive.

Down Payments

Again, because subprime borrowers may be at a higher risk of default, lenders may protect themselves by requiring a higher down payment. That way, the borrower has more skin in the game, and their bank doesn’t need to lend as much money.

Loan Amounts

Subprime borrowers may not be able to borrow as much as their prime counterparts.

Higher Fees

Fees, such as late-payment penalties or origination fees, may be higher for subprime borrowers.

💡 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.

Repayment Periods

Subprime loans typically carry longer terms than prime loans. That means they take longer to pay back. While a longer term can mean a smaller monthly payment, it also means that you may end up paying more in interest over the life of the loan.

Prime Loan vs Subprime Loan: What Type of Loans Are They?

Prime and subprime options are available for a variety of loan types. For example, different types of personal loans come as prime personal loans or subprime personal loans. When you’re comparing personal loan interest rates, you’ll see that prime loans offer lower rates than subprime. Common uses for personal loans include consolidating debt, paying off medical bills, and home repairs.

You can also apply for prime and subprime mortgages and auto loans. What is considered a prime or subprime score varies depending on the type of loan and the lender.

Recommend: How to Get Approved for a Personal Loan

Prime Loan vs Subprime Loan: How to Get One

By checking your credit score, you can get a pretty good idea of whether you’ll qualify for a prime or subprime loan. That said, as mentioned above, the categories will vary by lender.

The process for applying for a prime or subprime loan is similar.

Get Prepared

Lenders may ask for all sorts of documentation when you apply for a loan, such as recent paystubs, employer contact information, and bank statements. Gather this information ahead of time, so you can move swiftly when researching and applying for loans.

Research Lenders

Banks, credit unions, and online lenders all offer prime and subprime loans. You may want to start with the bank you already have a relationship with, but it’s important to explore other options too. You may even want to approach lenders who specialize in subprime loans.

To shop around for the best possible rate, you may be able to prequalify with several different lenders. This only requires a soft credit inquiry, which won’t impact your credit. That way you can see which lender can offer you the best terms and interest rates. Applying for credit will trigger a hard inquiry on your credit report, which will temporarily lower your credit score.

Consider a Cosigner

If you’re having trouble getting a subprime loan, you may consider a cosigner with better credit, such as a close family member. They will be on the hook for paying off your loan if you miss any payments, so be sure you are both aware of the risk.

Subprime Loan Alternatives

There are alternatives to subprime loans that also carry a fair amount of risk. Some, like credit cards, are legitimate options when used responsibly. Others, like payday loans, should be avoided whenever possible.

Credit Cards

Credit cards allow you to borrow relatively small amounts of money on a revolving basis. If you pay off your credit card bill each month, you will owe no interest. However, if you carry a balance from month to month, you will owe interest, which can compound and send you deeper into debt.

💡 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.

Predatory Loans

Payday loans are a type of predatory loan that usually must be paid off when you receive your next paycheck. These lenders often charge high fees and extremely high interest rates — as high as 400%, or more. If you cannot pay off the loan within the designated period, you may be allowed to roll it over. However, you will be charged a fee again, potentially trapping you in a cycle of debt.

The Takeaway

Subprime loans can be a relatively expensive way to take on debt, especially compared to their prime counterparts. If you can, you may want to wait to improve your credit profile before taking on a subprime loan. You can do this by always paying your bills on time and by paying down debt. That said, in some cases, taking on a subprime loan is unavoidable — you may need a new car now to get you to work, for example — so shop around for the best rates you can get.

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

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

FAQ

Why are subprime loans bad?

Subprime loans are not necessarily bad. However, these loans typically charge higher interest rates and fees than their prime counterparts. Borrowers may also be asked to put down a higher down payment, and they may be able to borrow less.

What is the difference between subprime and nonprime?

Nonprime borrowers have credit scores that are higher than subprime but lower than prime.

What type of loan is a subprime loan?

A variety of loan types may include a subprime category, including mortgages, auto loans, and personal loans. All loans in the subprime category likely have higher interest rates and fees.

Photo credit: iStock/Nikola Stojadinovic

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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.

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

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

Third-Party 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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