SoFi

Getting a personal loan? It’s not as simple as walking into a bank and asking for a check — there’s some paperwork involved.

Your personal loan agreement is the document that contains everything you need to know about the deal you’re making with your lender, including your rights and responsibilities as well as theirs. It’s a fairly long and complex form, but breaking it down can make it easier to understand.

Here, take a closer look at personal loan agreements.

What Is a Private Personal Loan Agreement?

A personal loan agreement, as mentioned above, is a document that details exactly what is being agreed to on both sides of a personal loan — lender and borrower. At the very least, it will state how much money is being loaned and the terms and conditions of the borrower’s repayment responsibilities.

But what about a personal loan that is not with a traditional lender? Private lenders can be individuals or organizations that make loans to individuals, sometimes without the qualification requirements of traditional lending institutions. A private personal loan agreement, specifically, is drafted as part of a private personal loan — one made between a private lender and a borrower.

Any personal loan agreement is a legally binding document, so it’s important to understand it in full before you apply your signature.


💡 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.

Why Is a Loan Agreement Needed?

A personal loan agreement is essentially a protective document. It protects both the lender and the borrower by laying out, in clear terms, exactly what is being agreed to. If either party fails to uphold the agreement, action can be taken — such as the lender seizing any assets offered as collateral or sending the account to collections — both of which, obviously, would be bad for the borrower.

But the document works both ways. Lenders, too, are subject to lender liability and can be taken to court if they fail to uphold their end of the loan agreement. Although these cases are far less common than borrower default, the loan agreement is a document that can be used for the borrower’s protection as well.

How to Write a Personal Loan Agreement

Here are the usual steps to writing a personal loan agreement.

Decide Whether to DIY It or Hire a Lawyer

Depending on the specifics of your loan and situation, you could write up a simple agreement by hand or draft it on your computer and then print it out for signing. Or you might download a template from a reputable site, which can be a popular option. These are often free or are sometimes available for a small fee.

However, if the loan is complicated or you don’t want to handle the agreement yourself, you could look into hiring a lawyer to draw up the paperwork. Either way, a personal loan agreement will be a legally binding arrangement. Hiring a lawyer will likely be a costlier proposition.

Gather the Necessary Personal Details

You will need the legal names and addresses of both parties. This ensures the lender can’t ask you for anything beyond the borrowed principal (plus interest, which will also be listed).

Agree to and Spell Out the Loan Terms

The loan agreement should list the payments that will be expected each month and the expected date of the conclusion of the loan term.

The interest rate for the personal loan should also be on the personal loan agreement, likely expressed as an APR, which shows what percentage of the loan principal you’ll end up paying back in the course of one year including interest and any additional fees that may be packaged into the loan.

The interest rate will vary based on your credit score and other financial factors. If you have decent credit, you’ll likely be able to qualify for a personal loan. But generally speaking, the higher your score, the lower your rate.

Recommended: APR vs. Interest Rate

List Payment and Legal Details

A personal loan agreement should also include the following:

•   The loan agreement may list which types of payment are acceptable, such as check, bank transfer, or credit card.

•   The personal loan contract should also list specific repayment conditions, including when payment is due and whether or not additional principal can be applied without penalty.

•   A complete personal loan agreement should include details on how any disputes will be handled between the parties involved.

•   Some personal loan documents may include the option to change your loan’s term (the period over which the loan is repaid).

•   Personal loan contracts in the United States should stipulate which state’s laws will be used to govern and interpret the agreement if the borrower lives in a different state than the lender is headquartered.

•   Severability is a clause that states that even if one part of a contract is found to be unenforceable or otherwise rendered null and void, the remainder of the agreement will still hold.

•   Penalties associated with the personal loan, such as any late fees that may be assessed, at what point the loan will go into arrears or default, or other scenarios, should be listed in the contract as well.

Sign the Document

Finally, the contract for loaning money must be signed by the borrower and the lender in order to be made legally binding.


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

Does a Personal Loan Agreement Need to Be Notarized?

Personal loans are a type of contract, and contracts do not need to be notarized to be legally binding. All it needs is your signature. Be sure to read all the fine print in detail before you uncap that pen.

Recommended: Comparing Personal Loans vs Business Loans

Other Personal Loan Documents

Along with the signed personal loan agreement, other typical personal loan requirements include the following:

Proof of Identity

Your driver’s license or some equivalent form of photo ID will likely be necessary in order to verify your identity.

Income Verification

Lenders will consider your income when qualifying you for a loan — after all, they have good reason to be interested in whether or not you’ll be able to repay the debt. Along with asking you to list your annual income, verifying documents such as tax returns may also be required.

Proof of Address

In order to prove your residence, and therefore eligibility for any type of personal loan, you may need to provide utility statements, bank statements, or other official documents.

Getting a Personal Loan

Taking out a personal loan is a big financial responsibility, but it can also be a smart money move if you need to handle large, unexpected expenses at the last minute, or to consolidate existing debt. For someone who has bad credit, a small personal loan responsibly managed can be one way to bolster their credit score.

Just remember that all loans come at a price — interest charged — and considering the total amount you’ll pay back to the lender over time is important in order to have a full understanding of the cost of the loan.

For example, if you take out a $10,000 personal loan at a 7% interest rate to be repaid over a term of five years, you’ll pay back a total of $11,880.72, or an additional $1,880.72 in interest. That’s not including any origination fees, late fees, or prepayment penalties a lender might charge.

The Takeaway

If you’re considering a personal loan, reading the loan agreement in depth is a good way to understand for sure what you’re agreeing to. That loan agreement will contain many details about funds borrowed and how they will be repaid.

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.

FAQ

Does a personal loan agreement need to be notarized?

No, a personal loan agreement does not need to be notarized to be legally binding — it simply needs to be signed by each party to the agreement.

What is a private personal loan agreement?

A private personal loan agreement is the binding legal contract between a borrower and a private lender for a personal loan.

Why do you need a loan agreement?

The personal loan agreement serves to outline the specific terms of the loan and protect both parties in case either fails to uphold the agreement.

Photo credit: iStock/Chaay_Tee

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

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

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

This article is not intended to be legal advice. Please consult an attorney for advice.

SOPL-Q224-1840979-V1

Historically speaking, mortgage rates have remained relatively low since the Great Recession, with some fluctuation at times due to market conditions. As a result, a generation of homebuyers has become accustomed to a low 30-year fixed-rate mortgage.

But with mortgage rates on the rise, it can put a sour taste in the mouths of people trying to join the ranks of homeowners in the country. They may be thinking that they missed an opportunity to buy a home. However, it’s important to look at the history of mortgages and mortgage rates to put the current conditions into context.

The History of Mortgage Rates

The modern history of mortgage lending in the U.S. began in the 1930s with the creation of the Federal Housing Administration. From the 1930s through the 1960s, a combination of government policy and demographic changes made owning a home a normal part of American life. During this time, the 30-year fixed-rate mortgage became the standard for home mortgage loans.

When discussing the fluctuation of mortgage rate trends, analysts usually refer to the average 30-year fixed-rate mortgage. Here’s a look at the trend of these mortgage rates since the 1970s.

The 1970s

Throughout the 1970s, mortgage rates rose steadily, moving from the 7% range into the 13% range. This uptick in rates was due, in part, to the Arab oil embargo, which significantly reduced the oil supply and sent the U.S. into a recession with high inflation — known as stagflation.

As a result, Federal Reserve Chairman Paul Volcker made a bold change in monetary policy by the end of the decade, raising the federal funds rate to combat inflation. Though the Federal Reserve doesn’t directly set mortgage rates, its monetary policy decisions can still impact many financial products, including mortgages.

The 1980s

The average 30-year fixed-rate mortgage hit an all-time high in October 1981 when the rates reached 18.63%. The Federal Reserve’s tight monetary policy affected this high borrowing cost and put the economy into a recession. However, inflation was under control by the end of the 1980s, and the economy recovered; mortgage rates moved down to around 10%.

The 1990s and 2000s

Mortgage rates continued a downward trend throughout the 1990s, ending the decade at around 8%. At the same time, the homeownership rate in the U.S. increased, rising from 63.9% in 1994 to 67.1% in early 2000.

Several factors led to a housing crash in the latter part of the 2000s, including a rise in subprime mortgages and risky mortgage-backed securities.

The housing crash led to the Great Recession. To boost the economy, the Federal Reserve cut interest rates to make borrowing money cheaper. Mortgage rates dropped from just below 7% in 2007 to below 5% in 2009.

Recommended: ​​US Recession History: Reviewing Past Market Contractions

The 2010s

Mortgage rates steadily decreased throughout most of the 2010s, staying below 5% for the most part. The Federal Reserve enacted a zero-interest-rate policy and a quantitative easing program to prop up the economy during this time following the Great Recession. This helped keep mortgage rates historically low.

The 2020s

The Federal Reserve reduced the federal funds rate to near-zero levels in March 2020, causing a drop in rates of various financial products. The effects of the fallout from the Covid-19 pandemic pushed mortgage rates below previous historic lows. The average 30-year fixed-rate mortgage hit 2.77% in August 2021.

However, with inflation reaching levels not experienced since the early 1980s, the Federal Reserve reversed course. The central bank started to tighten monetary policy in late 2021 and early 2022, which led to a rapid increase in mortgage rates. In May 2022, the average mortgage rate was above 5%. While this was below historical trends, it was the highest rate since 2018. From there, the 30-year fixed rate mortgage crept upward, reaching a high of 7.79% in October 2023 before declining to 7.1% in April 2024.

Recommended: How Inflation Affects Mortgage Interest Rates

Why Do Mortgage Rates Change?

As we can see from looking at interest rate fluctuations, major economic events can significantly impact mortgage rates both in the short and long term. As noted above, this has to do primarily with the Federal Reserve.

Federal Reserve actions influence nearly all interest rates, including mortgages through the prime rate, long-term treasury yields, and mortgage-backed securities. The Federal Reserve sets the federal funds benchmark rate, the overnight rate at which banks lend money to each other.

This rate impacts the prime rate, which is the rate banks use to lend money to borrowers with good credit. Most adjustable short-term rate loans and mortgages use the prime rate to set the base interest rates they can offer to borrowers. So, after the Federal Reserve raises or lowers rates, adjustable short-term mortgage loan rates are likely to follow suit.

Longer-term mortgage rates have also risen and fallen alongside economic and political events with movement in long-term treasury bond yields. In the short term, a Federal Reserve interest rate change can affect mortgage markets as money moves between stocks and bonds, affecting mortgage rates. Longer-term mortgage rates are influenced by Fed rate changes but don’t have as direct an effect as short-term rates.

Recommended: Federal Reserve Interest Rates, Explained

Can Changing Rates Affect Your Existing Mortgage?

If you have a mortgage with a variable interest rate, known as an adjustable-rate mortgage, changing rates can affect your loan payments. With this type of home loan, you may have started with an interest rate lower than many fixed-rate mortgages. That introductory rate is often locked in for an initial period of several months or years.

After that, your interest rate is subject to change — how high and how often depends on the terms of your loan and interest rate fluctuations. These changes are generally tied to the movement of interest rates, but more specifically, which index your adjustable-rate mortgage is linked to, which can be affected by the Fed’s actions.

However, most adjustable-rate mortgages have annual and lifetime rate caps limiting how high your interest rate and payments can change.

If you took out a fixed-rate mortgage, your initial interest rate is locked in for the entire time you have the home loan, even if it takes you 30 years to pay it off.

Recommended: What Is a Good Mortgage Rate?

The Takeaway

If you are in the market to buy a home, it might be tempting to rush and buy when mortgage rates drop a bit, or to put off buying until rates hopefully decrease in the future. However, choosing the perfect time to buy a home based on the ideal rate can be difficult. You’re probably better off letting your need for a home and your personal financial situation drive your decision making. (Do you have a down payment saved up? Is your debt under control?) When it’s time to buy, do your research and choose the best mortgage available for your personal situation.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

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.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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.

SOHL-Q224-1842813-V1

It’s no secret that the price tags of single-family homes — the ideal dwelling in terms of space, independence, and resale value — have spiked, and many current homeowners have been reluctant to let go, but a buyer whose heart is set on a single-family home may be able to follow a playbook to find their prize.

Buying a single-family home isn’t dramatically different from purchasing another type of property, but the process has a few variations. Here are some guidelines.

What Is a Single-Family Home?

The definition would seem easy enough, but it does vary according to real estate experts and government sources. The U.S. Census Bureau says single-family homes include fully detached and semi-detached homes, row houses, duplexes, quadruplexes, and townhouses. Each unit has a separate heating system and meter for public utilities, and has no units above or below.

According to other definitions of a single-family home, the building has no shared walls; it stands alone on its own parcel of land. In some places, the number of kitchens the home has informs the definition.

Unlike a multi-family property, a single-family home is meant for one person or household. Among the types of houses out there, including condos, co-ops, townhouses, and manufactured homes, the single-family home remains the holy grail for many Americans.

💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.

Benefits of Purchasing a Single-Family Home

While condos and townhouses may come with shared amenities and lower maintenance, traditional detached single-family homes come with different perks. When people buy a single-family home, they’re looking for benefits specific to this property type.

Spacious, Quiet, and Intimate

A single-family home is typically larger than a condo or townhome. Moreover, since the property is often on its own lot without shared walls, a single-family home offers more space and more privacy inside and outside the home.

Possibly No HOA

A co-op association or a condo or townhouse homeowners association sets and enforces rules and collects fees to pay for shared amenities. Anyone who buys into an HOA community must live by the CC&Rs: the covenants, conditions, and restrictions. They can be lengthy, and the ongoing fees can constantly rise.

You may be able to buy a detached single-family home with no HOA and paint your mailbox, or house, pink or purple — unless you live in a city like Palm Coast, Florida, that allows only earth tones and light or pastel hues but no colors that are deemed “loud, clashing, or garish.”

Then again, HOAs are becoming more common for detached single-family homes in planned communities. In fact, about 65% of single-family homes built in 2020 were in an HOA, Census Bureau data shows.

Single-Family Home Appreciation

Generally, single-family homes are in higher demand than multi-family or other properties. Because of both the building and demand, when a person buys a single-family home, the value may increase faster.

Possibilities for Renovation and Expansion

When people buy single-family homes, they’re buying into the potential to expand or renovate extensively. If the lot is big enough, single-family homeowners could put an addition on the property.

Single-family homes can be an attractive buy simply because of the option to expand in the future, unlike properties with shared lots or walls.


💡 Quick Tip: Not to be confused with prequalification, preapproval involves a longer application, documentation, and hard credit pulls. Ideally, you want to keep your applications for preapproval to within the same 14- to 45-day period, since many hard credit pulls outside the given time period can adversely affect your credit score, which in turn affects the mortgage terms you’ll be offered.

How to Buy a Single-Family Home

Ready to buy a single-family home? Anyone from a first-time buyer to a seasoned investor may find appeal in a single-family home.

Recommended: First-Time Homebuyers Guide

1. Draw Up Your Financial Priorities

First, it’s important to look at finances. Your credit scores can have a significant impact on getting approved for a mortgage. To get a clear read on credit, but not scores, buyers can request free credit reports from the three major credit bureaus.

Additionally, it can be helpful for a qualified first-time homebuyer — who can be anyone who has not owned a principal residence in three years, some single parents, and others — to look into specialty mortgages to see if they qualify for them.

A loan from the Federal Housing Administration (FHA) may allow a down payment as low as 3.5%. A USDA loan (from the United States Department of Agriculture) requires nothing down, and a VA loan (from the Department of Veterans Affairs) also usually requires nothing down. Some conventional lenders allow qualifying first-time buyers to put just 3% down.

It’s important to know, though, that all FHA loans require an upfront and annual mortgage insurance premium, regardless of the down payment size. VA loans require a one-time “funding fee.” And borrowers with conventional conforming loans who put down less than 20% will pay private mortgage insurance until their loan-to-value ratio drops to 80% and they request removal, or to 78%, when it falls off.

2. Decide on Your Preferred Type of Housing

No two houses are alike, just as no two homebuyers are. Everyone has different tastes and priorities about where they want to call home.

Before hitting every open house in town, consider deciding on must-haves for a single-family detached home, including privacy, proximity to businesses, size, and style. This could help determine if a single-family home is the right fit.

3. Arrive at Your Price Point

Armed with an understanding of the type of house, it’s time to think about the price point. In addition to thinking about the down payment, buyers will want to calculate a monthly mortgage payment and total loan costs.

Figuring out a price point before looking at homes can take the emotion out of the process. That way, buyers have a budget in mind and a “do not exceed” amount before they fall for a home.

4. Search for a Good Real Estate Agent

Buying a single-family home can be fun, stressful, and fast-paced. Working with a trusted real estate agent can make the process a little easier.

To find a real estate agent, you might consider:

•   Reaching out to friends for referrals

•   Checking out local real estate association websites

•   Using an agent selling homes in the area you want to buy in

You might want to interview more than one agent, asking about their experience, availability, and philosophy. The choice of agent will likely come down to a combination of personality match and experience.

5. Find Your Neighborhood

Armed with an agent and budget, it’s time to dive deeper into neighborhoods. Once again, the choice of where to search will come down to the buyer; there’s no one “right” place to buy a single-family home.

As buyers explore neighborhoods, they might prioritize the following:

•   School district

•   Walkability

•   Proximity to workplace

•   Community resources

•   Budget

An experienced agent can help buyers distill their priorities and even point them in the right direction. Typically, buyers will have to balance the above elements, as it might not be possible to check all the boxes in a single neighborhood.

6. Tour Homes With Your Agent

Once buyers decide what neighborhoods they want to buy a single-family home in, it’s time to start touring properties.

When touring a single-family home with an agent, try to allot between half an hour to an hour. In the case of open houses, prospective buyers can walk in at any time, but private home tours require a buyer’s agent to gain access to the property.

When buying a single-family home, everyone will have their own checklist of what they want, which might include:

•   Listing price

•   Number of bedrooms and bathrooms

•   Storage space

•   Floorplan

•   Plot of land

•   Deck and porch

•   Garage and driveway

It could help to take photos or notes while touring a home to refer to them long after you’ve left the property.

7. Choose a House and Bid

Found a place and ready to make an offer? Time to get a home loan in order. Luckily, buyers will have a good idea of what they can offer on a property based on their finances with the upfront legwork.

Your agent can help with negotiating a house price.

How to make an offer? It pays to understand comps and the temperature of the market, and then:

•   Figure out the offer price

•   Determine fees

•   Budget for an earnest money deposit

•   Craft contingencies

With an offer drawn up, it’s time to submit it to the seller and wait for the next steps.

8. Review the Process and Get Ready to Move

Buying a single-family home isn’t a done deal once an offer is submitted. Typically there will be a back and forth, perhaps over offer price or contingencies.

Once everything is agreed on, and the inspection is resolved, it’s time to tally moving expenses and pack up.

9. Head to Closing and Move Into Your New Property

The final part of buying a single-family home is closing day. During closing, the buyer and seller meet with their agents to go over paperwork, and settle any outstanding costs, and formally turn over property ownership.

Next, it’s just moving everything in and settling in. Even after closing, homeownership may feel overwhelming, but there are plenty of resources to make it easier.

Ready to Buy a Home Quiz

The Takeaway

Ready to buy a single-family home? The process before you may seem daunting, especially if it’s your first home purchase. But if you break it down to small steps and keep your budget and dream-house priorities top of mind, home sweet home may be closer than you think.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

How much does it cost to buy a single-family home?

Zillow put the typical value of a single-family home at $354,000 in April 2024. New construction costs more. The median sales price of new houses sold in February 2024 was $400,500, according to the U.S. Census Bureau.

Can you buy a single-family home with no money down?

If a buyer qualifies for a mortgage backed by the Department of Veterans Affairs or Department of Agriculture, or one issued directly by those agencies, they may be able to purchase a home with no down payment.

What are the most important things to consider when buying a house?

Location (including property tax rate, quality of schools, walkability, crime rate, access to green space, and the general vibe), your ability to cover all the costs, duration of your stay, and square footage may be important.

How much should you have in savings to buy a single-family house?

You’ll need to have enough to cover a down payment, closing costs, and moving fees while ideally preserving an emergency fund.

Photo credit: iStock/jhorrocks

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.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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.

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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
^†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

SOHL-Q224-1842723-V1

Car sales professionals make an average of $103,042 a year, according to Salary.com. While that’s more than what the average American worker earns annually, the job often requires long hours and your income may depend on how many cars you sell.

Let’s dive into what car salesmen do and how much they can make.

What Are Car Salesmen?

Car salespeople help customers shop for cars. Typical duties include answering questions about the cars on the lot, arranging test drives, and explaining financing options, warranties, and specifications.

Being able to build relationships with customers and close deals can help you succeed as a car salesman. Since car salespeople work directly with customers, the job may not be the best fit for introverts.


💡 Quick Tip: Online tools make tracking your spending a breeze: You can easily set up budgets, then get instant updates on your progress, spot upcoming bills, analyze your spending habits, and more.

How Much Do Starting Car Salesmen Make a Year?

The average salary for entry-level car sales positions in the United States is $38,680 per year, according to ZipRecruiter data. The pay for entry-level jobs in car sales will likely differ based on the dealership’s size, location, and car brand.

While some employers pay a base wage, others offer commission-based pay. Base wages tend to provide a more consistent monthly income, usually between $2,000 and $4,000. With commission-based compensation, you may earn a portion of each sale, typically between 20% and 30%.

What Is the Average Salary for a Car Salesman?

If you’re looking to enter the field, you may wonder, how much does a car salesman make a year?

As mentioned above, the average annual salary for a car salesman is a competitive $103,042, per Salary.com, though pay can range between $88,987 and $119,501. High-achieving salespeople may make more than six figures, particularly if they are employed by luxury car dealerships or in regions with wealthy buyer demographics.

Commission-based arrangements are also a major factor in determining overall income.

Recommended: What Trade Makes the Most Money?

What Is the Average Car Salesman Salary by State for 2024?

A car salesman may not be the highest-paying job in most states, but it can provide a good living. This is especially true if you happen to work in a state like California, New Jersey, or Alaska, where the position tends to pay more. Let’s see how salaries in 2024 vary by state.

Source: Salary.com

Car Salesman Job Considerations for Pay and Benefits

Flexible schedules and possible commissions and bonuses are some attractive parts of being a car salesman. Plus, dealerships might provide extra incentives, such bonuses for hitting or exceeding sales goals, corporate cars, and expense reimbursements. Retirement plans, health insurance, and employee car discounts may also be included in the benefits package.

Recommended: Work-From-Home Jobs for Retirees

Pros and Cons of a Car Salesman Salary

As with any profession, there are advantages and disadvantages of working as a car salesman.

Pros:

•   Performance-driven earnings. Commission-based pay can boost your income, especially during strong sales periods.

•   Flexibility. Compared to standard 9–5 jobs, the position may offer flexibility in terms of work hours.

•   Career advancement. A successful car sales career can lead to managerial roles and a path for professional advancement within the dealership.

•   Diverse work environment. Helping customers find a car that fits their needs and budget can be professionally satisfying.

•   Incentives and perks. Dealerships often provide extra bonuses and perks, such car discounts for staff members or opportunities for career advancement.

Cons:

•   Income volatility. If you earn a commission, your earnings could decrease during slow times.

•   Pressure to perform. Reaching sales goals is essential, and the stress of closing deals might lower your level of job satisfaction.

•   Long hours. In order to accommodate consumers, you’ll likely need to work weekends and evenings.

•   Customer relations. Resolving complaints and interacting with a variety of client personalities can be difficult.


💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.

The Takeaway

How much does a car salesman make? These professionals have the potential to earn $100,000 or more a year, especially if they can earn a commission based on their sales. They also have the chance to advance their careers and gain a variety of work experiences. That said, the job often requires long hours, income may not be steady, and there’s often a pressure to hit sales goals.

Whatever type of job you pursue, you’ll want to make sure your earnings can cover your everyday living expenses. Establishing a budget — and using online tools to help monitor spending — can help you make progress toward your financial goals.

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.

With SoFi, you can keep tabs on how your money comes and goes.

FAQ

Can you make $100k a year as a car salesman?

Yes, it is possible to make $100,000 or more as a car salesman. Your salary may depend on your location, base pay, the car brand being sold and how many cars you sell each month.

Do people like being a car salesman?

Some people love being a car salesman, but the job is not a good fit for everyone. Those who enjoy making sales and building customer relationships may enjoy a career as a car salesman.

Is it hard to get hired as a car salesman?

The difficulty of getting hired as a car salesman depends on factors such as the dealership, car brand, location, and your experience. If you’re a people person, willing to put in time, and eager to make sales, you can likely find a position at a dealership.

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.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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

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

SORL0124047