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If you want to borrow a large amount of cash but need to prove additional household income, your spouse may be able to help. You cannot simply list a spouse’s income with, or instead of, your own if you apply in your name alone. However, you can list their income if your spouse agrees to become a “co-borrower” on the loan.

Here’s a closer look at when and how you can use your spouse’s income on a loan application.

What Is a Personal Loan?

A personal loan is a type of installment loan that is paid back with interest in equal monthly payments over a set term, which can range from one to seven years. Personal loan interest rates tend to be lower than for credit cards, making them a popular option for consumers who need to borrow a large amount. Common uses for personal loans include major home or car repairs, medical bills, and debt consolidation.

There are different types of personal loans. Unsecured personal loans are the most common. These are not backed by collateral, such as your car or home.

Recommended: What Is a Personal Loan?

Checking Your Credit

Before you decide whether to include your spouse’s income, gather this information to assess your own financial standing.

Credit Report

Lenders will look at your full credit history to evaluate your creditworthiness, so it’s smart to review your credit reports before applying for a loan. You can request a free credit report from each of the three major credit bureaus — Equifax, Experian, and TransUnion — through AnnualCreditReport.com.

When you receive your reports, review them closely and make a note of any incorrect information. If you see any mistakes or outdated information (more than seven years old), you can file a dispute with the credit bureau(s) reporting the error.

If you have a limited or no credit history, consider taking some time to build your credit before applying for a loan.

Credit Score

Next, take a look at your credit score. You can often get your credit score for free through your bank or credit card company. The minimum credit score requirement for a personal loan varies from lender to lender. Broadly speaking, many lenders consider a score of 670 or above to indicate solid creditworthiness.

While there are personal loan products on the market designed for applicants with bad credit, they typically come with higher interest rates.

Debt-to-Income Ratio (DTI)

Your debt-to-income ratio (DTI) is the amount of debt you have in relation to your income, expressed as a percentage. Although some personal loan lenders may be willing to work with borrowers with DTIs as high as 50%, your chances of being approved for a personal loan and getting a good rate are higher if your DTI is below 42%. If your DTI is too high, you have two options: pay down your debt, or increase your income.

Shop Around Online

Shop around and “prequalify” with different lenders to compare the interest rates and monthly payments you’re offered with your income alone. When you’re comparing lenders, keep an eye out for any hidden fees, such as origination fees, prepayment penalties, and late fees. A personal loan calculator shows exactly how much interest you can save by paying off your existing loan or credit card with a new personal loan.

Now that you have a firm grasp of your financial standing, you can assess whether you need to include your partner’s income as part of your application.

Using Your Spouse’s Income

First, the bad news. You cannot simply use your spouse’s income or your combined household income, even with their permission, when applying for a personal loan in your own name.

Now for the good news. If your partner has a strong credit history and income, they can become a secondary “co-borrower” on the loan. A co-borrower can help improve your chances of approval, along with the interest rates and terms you’re offered.

What Is a Co-Borrower?

A co-borrower applies for the loan alongside you. Both of your financial information is taken into consideration, and both of you are responsible for paying back the loan and its interest.

Let’s look at the pros and cons of this arrangement.

Pros of Using a Co-Borrower

Because co-borrowers have equal rights, the arrangement is well-suited for people who already have joint finances or own assets together. Using a co-borrower allows you to present a higher total income than you can alone. A higher income signals to lenders that it’s more likely you’ll be able to make the monthly loan payments.

Plus, if you manage your loan well, both your credit histories will get a boost over time.

Cons of Using a Co-Borrower

Each borrower is equally responsible for repayment over the entire life of the loan. If the primary borrower cannot make the payments, that could negatively impact the credit of both parties. It’s important to have confidence in a co-borrower’s ability to repay the loan.

The loan will appear on both of your credit reports as a debt, which can affect the ability of one or both of you to get approved for another loan down the line.

Co-borrowers also have equal ownership rights to the loan funds or what the loan funds purchased, so trust is a big factor in choosing a co-borrower.

Applying for a Personal Loan with a Co-Borrower

The basic process of applying for a personal loan is the same no matter the number of applicants. The lender will likely ask both of you to provide certain information up front:

•   Personal info: Photo IDs, Social Security numbers, dates of birth

•   Proof of employment, and your employment histories

•   Proof of income

The lender will then run a hard inquiry of your credit reports, which might temporarily ding your credit score by a few points. Depending on the complexity of your application, you can expect to get your personal loan approved in one to ten days.

The Takeaway

You cannot simply list your partner’s income along with, or instead of, your own when applying for a personal loan in your own name. However, if your spouse agrees to become a co-borrower on the loan, both your incomes and credit histories will be considered. This can increase your chances of getting approved, qualify you for a larger loan, and/or give you access to better loan rates and terms. The catch is that both parties have equal responsibility for paying back the loan, and any late or missed payments can negatively affect both your credit scores.

If you’ve explored your options and decided that a personal loan is right for you, it’s wise to shop around to find the right loan. Consider personal loans from SoFi, which offers loans of up to $100,000, low rates, and a quick and easy application process. Checking your rate takes just a minute.

FAQ

Can my wife use my income for a personal loan?

Your wife can use your income for a personal loan only if you agree to become a co-borrower on the loan application. That gives you equal ownership of the funds, but also equal responsibility for paying back the loan. How your wife manages her loan payments can affect both your credit scores — for better or worse.

Can you use someone else’s income for a loan?

You can use someone else’s income for a loan only if they agree to become a co-borrower on the loan. That gives them equal ownership of the funds, and also equal responsibility for paying back the loan. This is a common arrangement between spouses, and between a parent and child.

Can a stay-at-home parent get a personal loan?

A stay-at-home parent may be able to get a personal loan if they have a strong credit history and can provide proof of income to show they can make the payments. Without that, they may need to find a co-borrower. A co-borrower’s credit and income can be used to help the primary borrower qualify for a loan, or access better interest rates and loan terms. However, a co-borrower will have equal ownership of the funds, and equal responsibility for repaying the loan. Using a spouse or parent as a co-borrower is a common arrangement when a stay-at-home parent cannot qualify on their own.

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.

SOPL-Q324-031

Thrift Savings Plans (TSPs) are retirement plans for federal employees and members of the uniformed services. They offer the same kinds of benefits and tax advantages that private employers can offer their employees through a 401(k).

Like 401(k)s, TSPs allow savers to take out loans from their own savings. Borrowing against your retirement can be risky business, so it’s important to understand the ins and outs of TSP loans before you make a decision.

What Are Thrift Savings Plan Loans?

A TSP loan allows federal workers and uniformed service members to borrow from their retirement savings. They must pay interest on the loan; however, that interest is paid back into their own retirement account. In 2024, interest rates are 4.50%, typically lower than the rate private employees pay on 401(k) loans.

Before you can borrow from your account the following must be true:

•  You have at least $1,000 of your own contributions invested in the account.

•  You must be currently employed as a federal civilian worker or member of the uniformed services.

•  You are actively being paid, as loan repayments are deducted from your paycheck.

•  You have not repaid a TSP loan in full within the last 30 days.

How Do Thrift Savings Plan Loans Work?

There are two types of TSP loans. General purpose loans may be used for any purpose, require no documentation, and have repayment terms of 12 to 60 months.

Primary residence loans can only be used to buy or build a primary residence. They must be repaid in 61 to 180 months, and they require documentation to qualify. You cannot use primary residence loans to refinance or prepay an existing mortgage, add on to or renovate your existing home, buy another person’s share in your home, or buy land only.

Recommended: Recommended: Common Uses for Personal Loans

Pros and Cons of a Thrift Savings Plan Loan

As you weigh whether or not it’s a good idea to borrow from your retirement savings, consider these pros and cons.

Pros of a TSP Loan

Chief among the advantages of borrowing from a TSP are the relatively low interest rates compared to most other loans.

What’s more, you can get access to funds pretty quickly and repayment is simple, coming from payroll deductions. Also you don’t need to submit to a credit check to qualify for the loan.

Cons of a TSP Loan

Despite the benefits, borrowing from a TSP is often considered a last resort due to certain disadvantages.

First and foremost, when you borrow from your retirement you are removing money from your account that would otherwise benefit from tax-advantaged compounding growth.

If you leave your job with an unpaid loan, you will have 90 days to repay it. Fail to meet this deadline and the entire loan may be reported as income, and you’ll have to pay income taxes on it.

In addition, TSP loans are not reported to the credit reporting bureaus, so they don’t help you build credit.

Does a Thrift Savings Plan Loan Affect Your Credit?

TSP loans are not reported to the three major credit reporting bureaus — TransUnion, Equifax, and Experian — so they do not affect your credit score.

Recommended: How Do I Check My Credit Score Without Paying? 

How Long Does a Thrift Savings Plan Loan Take to Get?

Applying for a TSP is a relatively simple process. You can fill out an application online on the TSP website . There is a $50 processing fee for general purpose loans and a $100 fee for primary residence loans. Borrowers who are married will need spousal approval before taking out a loan.

Once the application is approved, borrowers typically receive the loan amount via direct deposit or check within three business days.

How Much Can You Borrow From a Thrift Savings Plan?

The minimum you have to borrow with a TSP loan is $1,000. Rules for determining your maximum are rather complicated. You’ll be limited to the smallest among the following:

•  Your own contributions and their earnings in your TSP.

•  $50,000 minus your largest loan during the last 12 months, if any.

•  50% of your own contributions and their earnings, or $10,000, whichever is greater, minus your outstanding loan balances.

According to these rules, $50,000 is the most you can borrow, and you may be limited to as little as $1,000.

Should You Take Out a Thrift Savings Plan Loan?

Because a TSP loan can have a lasting effect on your retirement savings, you’ll want to be sure to exhaust all other loan options before deciding to apply for one. If you are experiencing financial hardship or poor credit has made it hard for you to qualify for another type of loan, a TSP may be worth exploring.

Thrift Savings Plan Loan Alternatives

Before choosing a TSP loan, take the time to research other alternatives.

Credit Card

Credit cards typically carry very high interest rates. The average interest rate as of August 2024 is 27.62%. That said, if you use a credit card to make a purchase and pay off your debt on time and in full at the end of the billing cycle, you will not have to pay interest on your debt.

Credit cards only get expensive when you carry a balance from month to month, in which case you’ll owe interest. What’s more, the amount of interest you owe will compound. In order to carry a balance, you must make minimum payments or risk late penalties or defaulting on your debt.

Recommended: Differences and Similarities Between Personal Lines of Credit and Credit Cards

Passbook Loan

Passbook loans allow you to borrow money at low interest rates, using the money you have saved in deposit accounts as collateral. That money must remain in your account over the life of the loan. And if you default on the loan, the bank can use your savings to recoup their losses.

Signature Loan

Unlike passbook loans, signature loans do not require that you put up any items of value as collateral. Also known as “good faith loans,” signature loans require only that you provide your lender with your income, credit history, and your signature. Signature loans are considered to be a type of unsecured personal loan.

Personal Loan

A personal loan can be acquired from a bank, credit union, or online lender. They are typically unsecured loans that don’t require collateral, though some banks offer secured personal loans that may come with lower interest rates.

Loan amounts can range from a few hundred dollars to $100,000. These amounts are repaid with interest in regular installments.

Personal loans place few restrictions on how loan funds can be spent. Common uses for personal loans range from consolidating debt to remodeling a kitchen.

The Takeaway

For borrowers in a financial pinch, TSP loans can provide a low-interest option to secure funding. However, they can also have a permanent negative impact on retirement savings, so it makes sense for borrowers to explore other options as well.

SoFi offers low fixed interest rates on personal loans of $5,000 to $100,000 and no-fee options.

FAQ

What does TSP loan stand for?

TSP stands for Thrift Savings Plan, a retirement account the federal government offers to its civilian employees and members of the uniformed services.

What is a TSP loan?

A TSP loan allows Thrift Savings Plan holders to borrow from their retirement account. Loans are repaid automatically through payroll deductions, and interest payments are made back to the account.

How long does it take to get a TSP loan?

Once processed, the proceeds of your TSP loan will generally be disbursed within three business days.

Photo credit: iStock/SDI Productions

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.

SOPL-Q324-029

Good car value estimates will factor in as many as a dozen data points, including geographic and economic influences. Less precise tools base estimates only on make, model, year, and mileage. If you’re looking to sell your car, or you’re in the market for a used vehicle, it’s important to familiarize yourself with how automobile valuations work.

Here’s what you need to know to help you increase your chances of getting the best deal.

What to Know About Instant Dealer Trade-In Quotes

A number of dealerships and websites — such as Carvana, Truecar and Kelley Blue Book — offer instant cash or instant dealer trade-in quotes for your car. Often, all you have to do is share a few details, such as the vehicle identification number (VIN) or license plate number, and the company will come back to you with a cash offer for your vehicle.

Though a lot of companies make it sound like the process is as simple as that, know that there is likely an in-person review of your vehicle before anyone will cut you a check.

What Do Dealers Base Their Car Estimates On?

Instant quotes and valuations usually look at a few quick measures, such as year, make and model, and mileage. This information is enough to provide a rough estimate of value. However, other factors will also come into play. Here’s a closer look.

(Keep in mind, these terms apply only to cars you own outright; different calculations go into valuing a leased car.)

Make and Model

You can think of the make and model of a car as the brand and the specific product on offer. For example, Toyota is a make of vehicle, while the Corolla is a model. Some makes and models are more popular, which helps them hold their value longer. For example, a certain make and model might be known for fuel efficiency or to be safer or more reliable.

There may be numbers or letters next to a car’s make and model that further delineate different features or trim level. Generally speaking, the higher a vehicle’s trim level — the more features it has — the more valuable the car will be.

Style

A vehicle’s body style is its shape. It might be a minivan, hatchback, or pickup truck. Information about a vehicle style is contained in its make and model. And certain styles are more valuable than others. For example, trucks tend to retain their value better than other car styles. In other words, they depreciate more slowly.

Condition

Your vehicle’s condition means both cosmetic issues like scratches, dents, and wear to upholstery, and also the wear and tear on the engine and other components. The better condition a car is in and the fewer impending repairs needed, the more valuable it will be.

Mileage

Mileage is an important factor to consider because it serves as shorthand for potential wear and tear. The more a car has been driven, the more likely it needs repair or will soon. As a result, cars with smaller odometer readings are worth more.

Accident History

Accidents big and small will hurt the value of a vehicle. Even if a car was in a minor accident and shows no outward signs of damage, value can decrease. Buyers can look up vehicle history reports on sites such as Carfax and AutoCheck, using a car’s VIN.

Car Add-ons

When you buy a car new, you may be offered a series of add-ons, such as splash guards, alarm systems, and tinted windows. While these are often pricey to add to a new vehicle, that doesn’t always translate into increased value for used cars. In fact, according to some experts, once a car is two or three years old, add-ons have little effect on its value. Condition, mileage, and accident history often matter much more to the average used car buyer.

Number of Previous Owners

Used cars that have been owned by only one person may be seen as preferable because the vehicle will have had a consistent driving history and maintenance schedule. Multiple owners will not necessarily hurt the value of a car, but it may raise a red flag if there have been many owners in a short period of time.

Warranties

If a car is still under warranty and that warranty is transferable to a new buyer, it can add value.

Location

Geography can have an effect on car value. For example, the harsh winters and salted roads of the Northeast can take a toll, causing more wear and tear than a warm, dry climate.

Additionally, some types of vehicles may be in higher demand in certain areas, driving up price. For example, you might have an easier time selling a pickup truck in a suburban or rural area than in a big city.

Timeline

The less time an individual has to sell their vehicle, the more likely it is that they may have to accept an offer that’s less than the fair market value, especially in areas where there is not much demand.

The Economy

The value of used vehicles can fluctuate with changes in the economy. For example, a softer-than-expected labor market and a slowdown in economic growth in 2024 drove down the price of new and used vehicles. As of August 2024, the average price of used cars was $25,251 — down from $28,000 in 2022, according to CarEdge.

Rising interest rates can also make borrowing to buy a vehicle more expensive, putting downward pressure on demand, as can a struggling stock market or a recession.

Recommended: What Credit Score Is Needed to Buy a Car?

What Buyers Are Looking For

Ultimately, supply and demand drive the value of used vehicles. If buyers are looking for hybrid vehicles over gasoline-only cars, value for hybrids increases. If a certain color falls out of favor, a car may end up being worth less than an otherwise identical model in a different hue.

How to Prepare Your Car and Your Expectations

Prepare your car for the highest valuation by tackling as many repairs as you can, from fixing a broken brake light to replacing worn out brake pads. A budget planner app can help you figure out how much you have to spend on the fixes. Before an in-person valuation, you’ll also want to have your car washed and detailed to make sure it looks like it’s in the best condition possible.

Manage your expectations for values by doing a bit of research. If you’re looking to sell your car, check out valuation estimates from multiple sources, including Edmunds, Kelley Blue Book, and online dealers. You may even want to bring your car to a local dealership to see what price you might get there.

Similarly, if you’re looking to buy a new or used car, you can look up the value of various makes and models to help you understand whether the price you’re quoted is close to fair market value.

Recommended: Does Net Worth Include Home Equity?

The Takeaway

Good car value estimates will factor in as many as a dozen data points, including geographic and economic influences. Tracking your car’s value is especially important as you plan your budget and save up to buy a used or new car. The reason: Your current car’s value can have a big impact on what you can afford.

SoFi’s money tracker app now has an Auto Tracker feature that can give you a better understanding of your net worth and help you identify good times to sell.

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.

FAQ

What is the best way to determine the value of a car?

Find out the value of a car through trusted online resources such as Kelley Blue Book or Edmunds. Enter the VIN, license plate number, or the year, make, model, and mileage of your car or truck to get an idea of what it may be worth.

Which car value estimator is most accurate?

Kelley Blue Book and Edmunds are two of the most trusted car value estimators.

How do you know if a car deal is too good to be true?

Red flags that may suggest a car deal is too good to be true include a seller who is rushing you, a seller who won’t give you an accident report, signs of rust or disrepair, and a price that is much too low compared to fair market price.

Photo credit: iStock/Talaj

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.

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.

SORL-Q324-017

Paying off a car loan can help your credit profile by reducing your debt-to-income ratio. But closing out a loan can also have several negative effects on your credit history. And paying off a loan early isn’t the best decision when there are better ways you can use that money — or save it for an emergency.

We’ll discuss how much paying off a car loan helps your credit and when paying it off early really does pay off.

How Credit Scores Are Calculated

The fact that you got a car loan means you know a little something about your credit score. But it’s always helpful to learn more about how those scores are calculated. According to FICO®, your credit rating is made up of five parts:

•   Payment history (timely payments): 35%

•   Amounts owed (credit utilization): 30%

•   Length of credit history: 15%

•   New credit requests: 10%

•   Credit mix (installment versus revolving): 10%

Whether you’re applying for a personal loan or a car loan, the same factors are used to determine your creditworthiness.

Recommended: What Credit Score Is Needed to Buy a Car?

Does Paying Off a Credit Card Help Your Credit?

For the sake of comparison, let’s say you buy a car with a credit card. (In real life, this is usually a bad idea because credit card interest rates are considerably higher than for auto loans.) How would paying off the credit card balance affect your credit score?

No matter what you’ve heard, maintaining a credit card balance doesn’t help your score. That’s because the amount you owe, also called credit utilization, accounts for 30% of your score. To calculate your credit utilization, add up the credit limits on your cards. Then divide that figure by your outstanding balance(s).

Let’s say your credit limit is $20,000. If you buy a used car for $10,000, you’re utilizing 50% of your available credit. So paying down your balance — or paying off the whole $20K — will improve your credit utilization factor.

But there’s a key difference between paying off a credit card and paying off a car loan. After you pay off the credit card balance, the account remains open (unless you take action to close it). This is called revolving credit: You can repeatedly use the funds up to your credit limit, as long as you continue to make payments.

How Paying Off Your Car Loan Early May Affect Your Credit Score

A car loan is considered an installment loan, one with a starting balance that’s paid down each time you make a monthly payment. According to credit reporting agency Experian, paying off an installment loan can briefly cause your score to dip.

That’s because the loan is no longer “active,” so your timely payment history is no longer contributing to your overall credit score. Paying off an installment loan can also affect a person’s credit mix and the average age of their open accounts.

How To Decide Whether to Pay Off Your Car Loan Early

There’s no one answer that fits every borrower. See which pros and cons below apply to your situation.

When It’s a Good Idea to Pay Off Your Car Loan Early

If any of these statements resonate with you, paying off your car loan early is likely the right decision.

•   You have trouble juggling your monthly bills and would be glad to have one fewer to deal with.

•   You hate the idea of continuing to pay interest on the loan.

•   The money you free up can be used to pay down another debt, add to your savings, or spend on pursuits you’re passionate about.

•   You’re considering taking out another loan, and paying off this one could help you qualify.

But wait! Check out the drawbacks to paying off a loan below before you decide.

When It’s Better to Keep the Loan

Even if you’re eager to pay down some debt, sometimes you’re better off financially keeping a loan. See if any of these disadvantages affect your cost-benefit analysis.

•   Instead of paying off the loan, investing the lump sum might net you more profits than you’ll save in loan interest.

•   If you’re using savings to pay off the loan, you may find yourself short in an emergency.

•   Some loans come with prepayment penalties. Make sure you won’t be charged for paying off your loan ahead of schedule.

•   As noted above, paying off an installment loan can have a negative impact on your credit mix, payment history, and length of credit history.

Recommended: Does Net Worth Include Home Equity?

About to Make Your Last Scheduled Loan Payment?

Now is the perfect time to test how much paying off the loan will impact your credit score. You may be able to find your credit score for free through various channels, such as banks, credit card companies, and credit counselors. Check your score before you make your final payment and again a few months later.

Or you can sign up for a service that monitors your credit score for you. What qualifies as credit score monitoring varies from service to service. Look for one that will alert you whenever your score changes.

You’ll also want to decide how you’re going to use those funds going forward. You may decide to pay off other debts (especially credit cards), build your savings, or invest the funds. A money tracker app can give you a helpful overview of your finances.

Paying off a car loan can sometimes lower your auto insurance premium. Check with your insurance carrier, and shop around to make sure you’re getting the best deal.

The Takeaway

The reality is that paying off a car loan may cause your credit score to dip. But it can still be the right decision if you have plenty of savings to cover the balance due. After all, you’ll save money on interest, lower your debt-to-income ratio, and have one fewer monthly bill to juggle. Whether you should pay off a car loan early depends on your financial circumstances and if you have other, higher-interest debt that should be paid off first.

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.

FAQ

How much will my credit score go up if I pay off my car?

Your credit score may actually dip after paying off a car, but it depends on your specific financial situation. That’s because paying off an installment loan can have a negative impact on your credit mix, payment history, and length of credit history.

Will paying off a car loan early improve credit?

Each situation is unique. Paying off a loan will improve your debt-to-income ratio, which lenders look at to determine your creditworthiness. However, it can also have a negative impact on your credit mix, payment history, and length of credit history.

Why did my credit score drop when I paid off my car early?

Credit score algorithms are complex, and every borrower’s situation is different. If your car loan was your only installment loan, closing it reduces your credit mix, which accounts for 10% of your score. Paying off a loan can also reduce the overall length of your open credit accounts, another factor used to calculate your score.

Photo credit: iStock/Pofuduk Images

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.

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


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

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.

SORL-Q324-037

Thanks to high demand and inflation, the cost of home repairs has been on the rise in recent years. In 2023, the average household spent $2,458 on maintenance and $1,667 on emergency repairs, according to Angi’s State of Home Spending Report. The report also found that total spending across home improvement, maintenance, and emergency repairs increased 6% compared to 2022.

The most common home repairs include the usual suspects: electrical, plumbing, HVAC, water damage, and termite damage. Keep reading to learn more about these issues and the cost of repair or replacement, so you can be prepared when reality bites.

Estimated Cost of the Most Common Home Repairs

Low-cost preventive measures — like cleaning your gutters or getting your heating and cooling systems serviced annually — can help keep common home repair costs down. But even with the best preparation, surprises (like a busted pipe or roof leak) happen, and when they do, you can be on the hook for thousands of dollars. Whether you’re a new or longtime homeowner, it’s a good idea to plan for — and budget for — home repairs.

Below is a roundup of the most common home repairs and average costs.

Recommended: How to Pay for Emergency Home Repairs

Foundation Repair

A number of different issues can occur with foundations, some of which are more serious (aka, costly) than others. Among the most common problems are foundation cracks, which can be caused by house settling or changes in soil pressure around the home. Cracks can lead to water damage or cause the walls in your foundation or home to bow. Foundations can also begin to sink, due to changing weather patterns, nearby tree roots, or erosion.

Since the foundation is the footprint of your home, repairs can be complicated and expensive. According to Angi, foundation repair costs can range anywhere from $2,196 to $7,921.

Average cost of foundation repair: $5,056

Electrical Issues

While there are many home repairs you can safely DIY, electrical issues and wiring are generally best left to professional electricians. Working with live wires can be dangerous and faulty electrical work can be a significant fire hazard. Some signs you may need to call an electrician include:

•   Burning smell coming from an outlet

•   Buzzing or sizzling noises coming from an outlet

•   Flickering lights

•   Outlets feel hot to the touch

•   You have 2- rather than 3-prong outlets

•   Circuit breaker continually trips

•   Appliances spark when plugged in

Depending on the length and complexity of the job, the cost of hiring an electrician ranges between $163 and $535. Installing a new outlet can run $200 to $300, for example, while replacing a breaker panel can cost anywhere from $520 to $2,120.

Average cost of electrical repairs: $348

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Roof Repair

Your roof protects your home from the elements, so it’s important to keep it in top condition. If you notice any damage or signs of wear and tear, you’ll want to address them sooner rather than later. This can help prevent small problems from becoming serious and expensive. Signs that your roof may be compromised include broken, cracked, curling, or missing shingles, and any interior signs of water damage (such as dark spots or discoloration on walls or ceiling and/or mold or rotting wood in the attic).

The cost of a roof repair will depend on your home’s location, roofing material, size of your home, and the type of roof. On average, costs run between $391 and $1,901. By contrast, a full roof replacement can run between $5,900 to $12,900. Due to the significant price difference, you would generally only invest in a new roof if the damage to your existing roof is extensive or the roof is near the end of its life.

Average cost of roof repairs: $1,133

Repair or Replace a Water Heater

Due to mineral buildup and the routine breakdown of components, water heaters do not last forever. Depending on how extensive the repairs your water heater requires, you can be on the hook for a new unit entirely. And if you’ve ever taken a cold shower in the middle of winter, you know this is one repair that is essential to your quality of life.

On average, homeowners spend anywhere from $221 to $980 on water heater repairs. Your actual bill will depend on the cost of the part needed for the fix, how much your local water heater professional charges for labor, and the length of the job. Where you live and where the water heater is located in your home can also impact costs.

Average cost of water heater repairs: $600

Water Damage

Water damage is fairly common. It can result from a crack in an old pipe, a leaky roof, an unusually strong storm, or sewage backup. To prevent mold growth and further damage, it’s best to fix the issue and clear out moisture as soon as you spot it.

Water damage restoration can involve replacing wallboard, flooring, and/or ceilings, as well as ensuring that no mold spores are left behind to spread once the repairs are complete. Two important factors influencing price are the square footage affected and the type of water (i.e., whether it’s clean or has been contaminated with potentially harmful substances). The cost of water damage restoration generally ranges between $1,300 and $5,600.

Average cost to fix water damage: $3,300

Replacing Pipes

Replacing older pipes is a common home repair often needed after a home inspection. Common problems include dated construction materials with a known problem in their manufacturing, signs of corrosion, clogs, and leaks. And because pipes run behind walls and underground, repair costs often include patching up interior holes and dug-up yards.

The good news is that not all leaks, burst pipes, and signs of corrosion require replacing large amounts of plumbing. Often, a plumber can replace a small section of the pipe affected by the damage. The cost to install pipes for a repair ranges from $370 to $2,108, though it can run higher if the damaged pipes are difficult to access.

Average cost to install pipes: $1,237

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Septic System Repair

A septic tank contains and filters household wastewater. If it is damaged or not functioning properly, it’s important to deal with the problem quickly — otherwise, you could be dealing with a smelly and costly mess. Sewage backups can occur when the septic tank becomes clogged or full, there’s a problem with devices within the tank, or there’s a blockage in the home’s main drain line leading to the tank.

Depending on the type of repair, tank size, permits, and other factors, the cost of a septic tank repair runs, on average, between $630 and $3,035. A small fix like repairing a septic tank lid could cost less ($150 to $500); but if you need to replace the tank, you could be looking at a bill as high as $9,500.

Average cost to repair a septic system: $1,831

Heating or Air Conditioning Repair

Your home’s HVAC (which stands for heating, ventilation, and air conditioning) system plays a key role in keeping your home comfortable to live in. Though there are many different types of HVAC systems, they generally all work by using energy to heat or cool the air to a desired temperature. The system may also add/remove moisture and filter your home’s indoor air.

An HVAC system typically has two main components: a heater (which could be a furnace, boiler, or heat pump) and an air conditioning (AC) unit. The type of system you have and the component that’s broken will significantly influence the cost of repairs. For example, an AC system repair can run anywhere from $450 to $2,000, while a furnace repair tends to run between $130 and $1,200. On average, homeowners spend between $130 and $2,000 on HVAC repairs.

Average cost to fix a heating or air conditioning system: $350

Mold Removal

Mold develops inside homes as a result of moisture and can lead to health problems. Signs that you may have a mold problem include:

•   Musty odor in a specific area

•   Discoloration on the walls

•   Peeling, cracking, or warping of floors or walls

•   Leaks or water damage

•   Darkening around tile grout

•   Worsening of allergy symptoms

While you may be able to remove small amounts of mold yourself (provided you’re certain the mold isn’t toxic), often the best option is to hire a mold remediation professional.

The cost for mold removal will vary widely depending on where it is located in your home. Mold growth in hard-to-reach areas, like drywall or your HVAC system, generally costs more to remediate since it can require more time, materials, and labor. The size of the infestation and the type of mold that is growing also influence costs. On average, mold removal runs between $373 and $7,000.

Average cost of mold removal: $2,362

Termite Damage

The problem with termites is that they literally eat away at your house. They can also eat through your budget: The cost to repair termite damage can range anywhere from $1,000 to $10,000 or even more.

Generally, the longer termites chew on the wooden structure of your home, the more costly the repair will be, so it’s key to recognize — and deal with — any signs of a termite infestation early. If you catch a termite problem early, for example, you may only need to replace a few damaged boards or joists, which can run from $250 to $1,000. If the problem goes on for a while, however, you may need to replace damaged walls, framing, or floors — at a cost of $1,000 to $3,000. Worst-case scenario: Termites do enough damage to your home’s infrastructure (like beams or load-bearing walls) that it becomes structurally unsound. A major termite repair job can run from $3,000 to $10,000-plus.

Average cost to repair termite damage: $3,000

Average Cost of Home Repairs

Trying to predict — and budget for — home repairs can be challenging. However, there are several rules of thumb that can help homeowners:

•   The 1% Rule. One common guideline is to set aside approximately 1% of your home’s value annually for home maintenance. So if your home is worth $500,000, you’d want to have $5,000 tucked away in savings to cover general upkeep and repairs for the year.

•   The Square Foot Rule. Since a larger home typically costs more to maintain than a smaller one, another formula is to use the square footage of your home to estimate maintenance and repair costs. With this approach, you set aside $1 for every square foot of livable space. So if your home is 2,300 square feet, you would want to have $2,300 in savings earmarked for home repair costs.

•   The 10% Rule. With this rule of thumb, you put aside 10% of all your main monthly expenses (such as mortgage, taxes, and insurance) for your monthly home maintenance budget. For example, if your mortgage is $1500/month, taxes are $300/month, and insurance is $150/month (a total of $1950), your budget for home maintenance would be roughly $195 per month or $2,340 a year.

If you don’t have enough savings to cover the cost of a necessary home repair, there are financing options, including home equity lines of credit (HELOC) and credit cards (though this can be an expensive choice).

You can also use a personal loan to cover the cost of home repairs or improvements. Available through banks, credit unions, and online lenders, this type of loan (sometimes called a home improvement loan) typically doesn’t require any type of collateral or home equity. However, you usually need good to excellent credit to qualify.

💡 Quick Tip: Check out SoFi’s home improvement loan rates to find competitive options for financing your next repair or renovation project.

The Takeaway

It’s tough to predict the cost of home repairs. Different budgeting standards suggest putting aside 1% of your home’s value or $1 per square foot annually. In 2023, the average household spent $2,458 on maintenance costs and $1,667 on emergency repairs. Among the priciest home repairs are major foundation work (up to $7,921), roof replacement (as much as $12,900), and septic tank replacement (which can run $9,500). Even expenses like fixing termite damage or replacing a broken water heater can all but consume your savings.

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

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