TAXUPD Archives

Apr

2024

Student Loan Refinancing: What Happens If There’s Overpayment?

By Rebecca Safier | Fresh Out of School, Going to College, Student Loans, student_loan | Comments Off

If there’s an overpayment on your student loan refinance, the money might be returned to you or go towards your next payment on your new loan. Another possibility is that you may have to request a student loan overpayment refund.

These kinds of situations do occur, and they are typically resolved without too much effort. Here’s a closer look at student loan overpayment when you are refinancing your debt and what you can do to get your money back.

Student Loan Overpayment Explained

Student loan overpayment occurs when you pay off more than the amount you owe to your loan servicer. If you owe $1,000 on your loan and make a $1,500 payment, you’ve overpaid by $500.

This might happen for a couple of reasons.

• For one, you might send an extra payment before your loan servicer has processed your previous one. It might take some time for your payments to reflect in your account. If you send an extra payment before the servicer has applied your last one, you could end up overpaying your balance.

• Overpaying loans can also happen when you refinance student loans. When you refinance, your new loan provider will pay back your old balances. Specifically, it will send the amount that’s agreed upon when you sign the Truth in Lending (TIL) Disclosure, which is one of the documents you must sign to finalize your loan refinance.

If you make a payment on your old loans after you’ve signed the TIL Disclosure but before your new refinancing provider has disbursed the payment, the amount sent to your old servicer will exceed your balance. Your new lender will have paid off your old loan and then some, resulting in a student loan overpayment.

That’s not to say that you shouldn’t keep paying back your student loans while you’re waiting for refinancing to go through. In fact, it’s important to keep up with repayment so you don’t miss any due dates and end up with a negative mark on your credit report. Wait until your new refinanced student loan is up and running before you stop paying your old student loans.

💡 Quick Tip: Enjoy no hidden fees and special member benefits when you refinance student loans with SoFi.

Take control of your student loans.
Ditch student loan debt for good.

What Happens When a Student Loan Is Overpaid?

There are a few things that can happen when there’s an overpaid student loan. For one, a loan servicer might send the extra payment back to you via check or direct deposit.

If a refinancing provider overpaid your account, your old servicer might send the payment back to them. Then, that refinancing lender could send you back the payment or apply it toward your new, refinanced student loan.

Let’s say, for instance, that you decide to refinance your federal student loans with Alpha (a made-up company for the sake of this example). You understand that refinancing with a private student loan means you forfeit federal benefits and protections, and you know that if you refinance for an extended term, you may pay more interest over the life of the loan. If Alpha sends an overpayment to your existing loan servicers, those servicers will generally return the extra amount to Alpha. Then, Alpha will apply that overpayment retroactively to the principal balance on your new Alpha loan, a process that may take about six to eight weeks.

In some cases, your old servicer will send the payment back to you. For example, a lender might send a refund to the borrower directly if the overpaid amount is less than $500. In this case, the amount might be sent back to you via check using the address it has on file.

You can also receive a direct deposit, but you may need to request it specifically. Reach out to your loan servicer to find out how it deals with excess payments and any steps you need to take to receive your student loan refund.

💡 Quick Tip: If you have student loans with variable rates, you may want to consider refinancing to lock in a fixed rate before rates rise. But if you’re willing to take a risk to potentially save on interest — and will be able to pay off your student loans quickly — you might consider a variable rate.

What Should I Do With My Refund?

Finding out you overpaid your student loans can result in a windfall of cash. You may be wondering what to do with your student loan refund. Here are a few options worth considering.

Put Towards Next Payment

If you already used that payment toward your old loans, you might put it toward your new refinanced loan to pay down your balance faster (if your new servicer hasn’t already sent it there). After all, you’d already designated that cash for a student loan payment, so you may not miss having it in your bank account.

Making extra payments on your student loans can help you pay your student loan off early and save on interest charges. Let’s say, for example, that you owe $5,000 at a 7% interest rate with a five-year repayment term. If you make an extra payment of $500, you’ll get out of debt eight months sooner and save $292 in interest.

Use this tool for calculating student loan payments and finding out how much you can save by making extra payments. If you choose this route, instruct your loan servicer to apply the extra payment to your principal balance, rather than saving it for a future payment.

Use For Personal Expenses

Another option is putting that student loan refund toward personal expenses or your own savings. If you’re struggling to pay your rent or have other high-interest debt, for instance, covering those costs might be a priority over prepaying your student loans.

It’s also useful to have an emergency fund on hand that you can draw on if you lose your job or encounter unexpected expenses. Funneling that student loan refund into an emergency fund could save the day if you run into financial hardship.

However, using that refund on vacation or non-essential expenses might not be the best idea if you’re dealing with debt or don’t have an emergency fund in place. Consider your financial goals and priorities to determine the best use for that student loan refund.

The Takeaway

Overpaying student loans may be an inconvenience, but don’t worry about losing that money forever — you’ll get it back in the form of a refund or a payment toward your new, refinanced student loan. The exact process may vary by lender, so reach out to yours to find out what will happen next and whether there are any steps you must take to get your refund. Ensure that your loan servicers have your current address on hand, too, in case they need to mail you a check.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

What happens if you overpay a student loan?

If you overpay a student loan, your servicer will issue a refund. That refund may go to you or, in the case of refinancing, to the third-party servicer that issued the payment. The exact process may vary by lender, so get in touch with yours to find out where it will send your refund.

What happens to excess student loan money?

When you borrow a student loan, the lender usually sends the amount directly to your financial aid office, which applies it to required expenses like tuition and fees. It then sends any excess funds to you so you can use the money on books, supplies, living expenses, and other education-related costs. If you find you borrowed more than you need, you could consider returning the amount to your lender. If you return part of a federal student loan within 120 days of disbursement, you won’t have to pay any fees or interest on the amount.

Does refinancing affect student loan forgiveness?

Refinancing student loans can affect your eligibility for loan forgiveness. Most loan forgiveness programs are federal, and when you refinance federal loans with a private lender, you lose access to federal programs, such as Public Service Loan Forgiveness and Teacher Loan Forgiveness.

Photo credit: iStock/stefanamer

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SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

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.

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

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Apr

2024

Roth 401(k) vs Traditional 401(k): Which Is Best for You?

By AJ Smith | Growing Wealth, invest, Investing, Preparing for Retirement | Comments Off

A traditional 401(k) and a Roth 401(k) are tax-advantaged retirement plans that can help you save for retirement. While both types of accounts follow similar rules — they have the same contribution limits, for example — the impact of a Roth 401(k) vs. traditional 401(k) on your tax situation, now and in the future, may be quite different.

In brief: The contributions you make to a traditional 401(k) are deducted from your gross income, and thus may help lower your tax bill. But you’ll owe taxes on the money you withdraw later for retirement.

Conversely, you contribute after-tax funds to a Roth 401(k) and can typically withdraw the money tax free in retirement — but you don’t get a tax break now.

To help choose between a Roth 401(k) vs. a traditional 401(k) — or whether it might make sense to invest in both, if your employer offers that option — it helps to know what these accounts are all about.

5 Key Differences Between Roth 401(k) vs Traditional 401(k)

Before deciding on a Roth 401(k) or traditional 401(k), it’s important to understand the differences between each account, and to consider the tax benefits of each in light of your own financial plan. The timing of the tax advantages of each type of account is also important to weigh.

1. How Each Account is Funded

• A traditional 401(k) allows individuals to make pre-tax contributions. These contributions are typically made through elective salary deferrals that come directly from an employee’s paycheck and are deducted from their gross income.

• Employees contribute to a Roth 401(k) also generally via elective salary deferrals, but they are using after-tax dollars. So the money the employee contributes to a Roth 401(k) cannot be deducted from their current income.

💡 Quick Tip: Did you know that you must choose the investments in your IRA? Once you open a new IRA account and start saving, you get to decide which mutual funds, ETFs, or other investments you want — it’s totally up to you.

2. Tax Treatment of Contributions

• The contributions to a traditional 401(k) are tax-deductible, which means they can reduce your taxable income now, and they grow tax-deferred (but you’ll owe taxes later).

• By contrast, since you’ve already paid taxes on the money you contribute to a Roth 401(k), the money you contribute isn’t deductible from your gross income, and withdrawals are generally tax free (some exceptions below).

3. Withdrawal Rules

• You can begin taking qualified withdrawals from a traditional 401(k) starting at age 59 ½, and the money you withdraw is taxed at ordinary income rates.

• To withdraw contributions + earnings tax free from a Roth 401(k) you must be 59 ½ and have held the account for at least five years (often called the 5-year rule). If you open a Roth 401(k) when you’re 57, you cannot take tax-free withdrawals at 59 ½, as you would with a traditional 401(k). You’d have to wait until five years had passed, and start tax-free withdrawals at age 62.

4. Early Withdrawal Rules

• Early withdrawals from a 401(k) before age 59 ½ are subject to tax and a 10% penalty in most cases, but there are some exceptions where early withdrawals are not penalized, including certain medical expenses; a down payment on a first home; qualified education expenses.

You may also be able to take a hardship withdrawal penalty-free, but you need to meet the criteria, and you would still owe taxes on the money you withdrew.

• Early withdrawals from a Roth 401(k) are more complicated. You can withdraw your contributions at any time, but you’ll owe tax proportional to your earnings, which are taxable when you withdraw before age 59 ½.

For example: If you have $100,000 in a Roth 401(k), including $90,000 in contributions and $10,000 in taxable gains, the gains represent a 10% of the account. Therefore, if you took a $20,000 early withdrawal, you’d owe taxes on 10% to account for the gains, or $2,000.

5. Required Minimum Distribution (RMD) Rules

With a traditional 401(k), individuals must take required minimum distributions starting at age 73, or face potential penalties. While Roth 401(k)s used to have RMDs, as of January 2024, they no longer do. That means you are not required to withdraw RMDs from a Roth 401(k) account.

For a quick side-by-side comparison, here are the key differences of a Roth 401(k) vs. traditional 401(k):

Traditional 401(k)	Roth 401(k)
Funded with pre-tax dollars.	Funded with after-tax dollars.
Contributions are deducted from gross income and may lower your tax bill.	Contributions are not deductible.
All withdrawals taxed as income.	Withdrawals of contributions + earnings are tax free after 59 ½, if you’ve had the account for at least 5 years. (However, matching contributions from an employer made with pre-tax dollars are subject to tax.)
Early withdrawals before age 59 ½ are taxed as income and are typically subject to a 10% penalty, with some exceptions.	Early withdrawals of contributions are not taxed, but earnings may be taxed and subject to a 10% penalty.
Account subject to RMD rules starting at age 73.	No longer subject to RMD rules as of January 2024.

Bear in mind that a traditional 401(k) and Roth 401(k) also share many features in common:

• The annual contribution limits are the same for a 401(k) and a Roth 401(k). For 2024, the total amount you can contribute to these employer-sponsored accounts is $23,000; if you’re 50 and older you can save an additional $7,500 for a total of $30,500. This is an increase over the 2023 limit, which was capped at $22,500 ($30,000 if you’re 50 and older).

• For both accounts, employers may contribute matching funds up to a certain percentage of an employee’s salary.

• In 2024, total contributions from employer and employee cannot exceed $69,000 ($76,500 for those 50 and up). In 2023, total contributions from employer and employee cannot exceed $66,000 ($73,500 for those 50 and up).

• Employees may take out a loan from either type of account, subject to IRS restrictions and plan rules.

Because there are certain overlaps between the two accounts, as well as many points of contrast, it’s wise to consult with a professional when making a tax-related plan.

How to Choose Between a Roth and a Traditional 401(k)

In some cases it might make sense to contribute to both types of accounts (more on that below), but in other cases you may want to choose either a traditional 401(k) or a Roth 401(k) to maximize the specific advantages of one account over another. Here are some considerations.

When to Pay Taxes

Traditional 401(k) withdrawals are taxed at an individual’s ordinary income tax rate, typically in retirement. As a result these plans can be most tax efficient for those who will have a lower marginal rate after they retire than they did while they were working.

In other words, a traditional 401(k) may help you save on taxes now, if you’re in a higher tax bracket — and then pay lower taxes in retirement, when you’re ideally in a lower tax bracket.

On the other hand, an investor might look into the Roth 401(k) option if they feel that they pay lower taxes now than they will in retirement. In that case, you’d potentially pay lower taxes on your contributions now, and none on your withdrawals in retirement.

Your Age

Often, younger taxpayers may be in a lower tax bracket. If that’s the case, contributing to a Roth 401(k) may make more sense for the same reason above: because you’ll pay a lower rate on your contributions now, but then they’re completely tax free in retirement.

If you’re older, perhaps mid-career, and in a higher tax bracket, a traditional 401(k) might help lower your tax burden now (and if your tax rate is lower when you retire, even better, as you’d pay taxes on withdrawals but at a lower rate).

Where You Live

The tax rates where you live, or where you plan to live when you retire, are also a big factor to consider. Of course your location some years from now, or decades from now, can be difficult to predict (to say the least). But if you expect that you might be living in an area with lower taxes than you are now, e.g. a state with no state taxes, it might make sense to contribute to a traditional 401(k) and take the tax break now, since your withdrawals may be taxed at a lower rate.

💡 Quick Tip: Before opening any investment account, consider what level of risk you are comfortable with. If you’re not sure, start with more conservative investments, and then adjust your portfolio as you learn more.

The Benefits of Investing in Both a Roth 401(k) and Traditional 401(k)

If an employer offers both a traditional and Roth 401(k) options, employees might have the option of contributing to both, thus taking advantage of the pros of each type of account. In many respects, this could be a wise choice.

Divvying up contributions between both types of accounts allows for greater flexibility in tax planning down the road. Upon retirement, an individual can choose whether to withdraw money from their tax-free 401(k) account or the traditional, taxable 401(k) account each year, to help manage their taxable income.

It is important to note that the $23,000 contribution limit ($30,500 for those 50 and older) for 2024 is a total limit on both accounts.

So, for instance, you might choose to save $13,500 in a traditional 401(k) and $9,500 in a Roth 401(k) for the year. You are not permitted to save $23,000 in each account.

What’s the Best Split Between Roth and Traditional 401(k)?

The best split between a Roth 401(k) and a traditional 401(k) depends on your individual financial situation and what might work best for you from a tax perspective. You may want to do an even split of the $23,000 limit you can contribute in 2024. Or, if you’re in a higher tax bracket now than you expect to be in retirement, you might decide that it makes more sense for you to put more into your traditional 401(k) to help lower your taxable income now. But if you expect to be in a higher income tax bracket in retirement, you may want to put more into your Roth 401(k).

Consider all the possibilities and implications before you decide. You may also want to consult a tax professional.

The Takeaway

Employer-sponsored Roth and traditional 401(k) plans offer investors many options when it comes to their financial goals. Because a traditional 401(k) can help lower your tax bill now, and a Roth 401(k) generally offers a tax-free income stream later — it’s important for investors to consider the tax advantages of both, the timing of those tax benefits, and whether these accounts have to be mutually exclusive or if it might benefit you to have both.

When it comes to retirement plans, investors don’t necessarily have to decide between a Roth or traditional 401(k). Some might choose one of these investment accounts, while others might find a combination of plans suits their goals. After all, it can be difficult to predict your financial circumstances with complete accuracy — especially when it comes to tax planning — so you may decide to hedge your bets and contribute to both types of accounts, if your employer offers that option.

Another step to consider is a 401(k) rollover, where you move funds from an old 401(k) into an IRA. When you do a 401(k) rollover it can help you manage your retirement funds.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Easily manage your retirement savings with a SoFi IRA.

FAQ

Is it better to contribute to 401(k) or Roth 401(k)?

Whether it’s better to contribute to a traditional 401(k) or Roth 401(k) depends on your particular financial situation. In general, if you expect to be in a lower tax bracket in retirement, a traditional 401(k) may make more sense for you since you’ll be able to deduct your contributions when you make them, which can lower your taxable income, and then pay taxes on the money in retirement, when you’re in a lower income tax bracket.

But if you’re in a lower tax bracket now than you think you will be later, a Roth 401(k) might be the preferred option for you because you’ll generally withdraw the money tax-free in retirement.

Can I max out both 401(k) and Roth 401(k)?

No, you cannot max out both accounts. Per IRS rules, the annual 401(k) limits apply across all your 401(k) accounts combined. So for 2024, you can contribute a combined amount up to $23,000 (or $30,500 if you’re 50 or older) to your Roth 401(k) and your traditional 401(k) accounts.

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.

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.

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Apr

2024

Family Loans: A Complete Guide to Borrowing and Lending Money to Family

By Jamie Cattanach | Budgeting & Goals, personal_loan | Comments Off

Borrowing money from family members — or lending it to them — can be a risky business. And although all debt is risky, family loans carry different kinds of dangers.

Although family lenders don’t have to worry about pulling (or affecting) anyone’s credit score, private loans may put a strain on otherwise strong relationships. Depending on the size of the loan, there may also be tax implications to consider.

That said, there are ways to thoughtfully issue and receive family loans. Here are our best tips for stacking the odds in your favor.

What Are Family Loans?

Family loans are those that are given and received within a family group, instead of a typical lending situation like a bank or credit union, or even a payday lender.

Someone who may not be able to qualify for a traditional loan might be inclined to ask a family member for a loan.
Sometimes a family loan might work in the interest of both parties. For instance, the borrower might receive a more favorable interest rate than they might have from a bank, and the lender might receive a higher interest rate than they would find in a savings account.

Reasons someone might ask a family member for a loan are similar to reasons they might consider a personal loan: They might need cash for emergency medical expenses, unexpected home repairs, or expenses for adoption or fertility treatments.

💡 Quick Tip: Some lenders can release funds as quickly as the same day your loan is approved. SoFi personal loans offer same-day funding for qualified borrowers.

How Do Family Loans Work?

At their most basic, family loans work similarly to traditional loans: One person asks for a loan, and another person approves the request. While that is an oversimplification, the concept is the same. There is generally less paperwork involved in a family loan, with no application or credit check necessary, although a formal contract detailing each party’s rights and responsibilities is recommended.

Terms for the Lender to Include in a Family Loan

• Amount loaned

• Interest rate, if interest is charged

• Payment amount (often, monthly)

• Penalties for non-payment

Terms for the Borrower to Include in a Family Loan

• Amortization schedule, with principal and interest amounts clearly stated

• Ability to pay the loan off early without penalty

• Periods of payment suspension in cases of hardship

Risks and Benefits of Family Loans

No matter which end of the dynamic you might find yourself on, there are both risks and benefits to family loans. But while both the borrower and lender risk putting a strain on the family relationship involved, the lender is likely to carry the greater financial risk — after all, it can be pretty hard to recoup your losses when you have no official financial authority.

Risks of Family Loans

One of the biggest risks of loans between family members is the potential for conflict within the relationship. People tend to have strong emotions tied to money. Some risks lie with the borrower or lender alone, though.

Risks for the Borrower:

• There is risk to the relationship if the loan repayment plan falls through.

• Although avoiding a credit check — and possible negative credit consequences — is a plus, family loans also fail to help borrowers build their credit history since they’re not reported to credit bureaus.

Risks for the Lender:

• There is risk to the relationship if the loan repayment plan falls through — which puts the lender into a particularly tricky situation if they really need the cash back for their own financial situation.

• It’s easy for family lenders to lose their money outright if the borrower constantly defers to an IOU.

• Since family lenders don’t have any financial authority or backing, it can be difficult to recoup losses or enforce any substantial consequences for borrowers who go into default.

• If the loan is interest-free and for an amount in excess of the IRS gift tax exclusion , it may trigger the need to file a gift tax return (and potentially pay taxes on the gift).

Benefits of Family Loans

Despite their risks, family loans do have some attractive qualities.

Benefits for the Borrower:

• Family loans present a potentially low-cost alternative to traditional credit options. Family lenders usually don’t assess fees and may not charge interest.

• Family loans can carry much easier approval standards than their official counterparts. At a financial institution, borrowers are subject to a credit check, employment history, income verification, and more. A family member is not likely to run those checks.

• Family loans often carry more flexible repayment standards than traditional loans do, and family lenders may be more lenient if the borrower faces extenuating circumstances that make it difficult to make payments.

• Failure to pay private family loans in a timely manner — or at all — won’t impact the borrower’s credit score the way such behavior would with a traditional loan.

Benefits for the Lender:

• It can feel rewarding to help out a family member in need, particularly if they’re putting the money toward a major life goal like homeownership.

• If the lender chooses to charge interest on the loan, they can earn interest as the loan is repaid.

Tax Implications of Family Loans

It can be surprising to learn that loaning money to a family member could be a big enough deal to land on the IRS’s radar.

Fortunately, most family loans fall outside of the purview of the IRS. It’s only when they’re above IRS-defined amounts and interest-free that lenders have to report them on their tax return.

If a family lender offers an interest-free loan to a family borrower, the IRS still sees the transaction as a loan — and assumes that the interest that should have been charged counts as a gift to the recipient. (The government publishes minimum interest rates on a monthly basis.)

That’s no big deal if the loan is for, say, $300. But if the unpaid interest — or unpaid loan balance — tops the annual gift-giving exclusion, which is $17,000 ($34,000 for married couples) for 2023 and $18,000 ($36,000 for married couples) for 2024, the lender might be responsible for filing a gift tax return and potentially paying taxes on the gift.

The IRS might also count the should-be interest toward the lender’s gross income, even if no interest is charged or received. Again, this isn’t a big deal on loans of just a few hundred dollars, but with a large enough loan, it could impact the lender’s finances.

Making a Family Loan Legitimate for Tax Purposes

The main thing that makes a family loan legitimate to the IRS is a family loan agreement that specifies repayment terms. If an agreement is not in place, the agency may consider it a gift instead of a loan.

The federal government sets minimum interest rates (as noted above) that lenders can charge on a private loan, which a family loan is. If less than the minimum interest rate is charged, the IRS may assess taxes on any unpaid interest that is deemed payable.

Keeping records of payments made will also show the IRS that the lender was keeping track of the debt and that there is an expectation of repayment.

Recommended: How to Gift a Stock

Tips to Successfully Borrow From or Lend Money to Family

If you’re considering lending money to, or borrowing money from, a family member, adding some structure to your loan can help minimize the risks while still allowing everyone involved to reap the benefits.

Planning Your Family Loan Out

All too often, a family loan takes place in a single, impromptu transaction: The borrower asks for some money, and the lender gives it.

A better bet is to make a concrete plan together that specifies all the loan’s terms, such as repayment installments and timing. Lenders might want to consider charging interest, especially on large loans, due to the tax implications outlined above. Even a low family loan interest rate can motivate a borrower to get serious about repayment.

Making a Family Loan Official

Clear communication and boundary-setting skills make pulling off a family loan a positive experience for all involved — and oftentimes, the best way to achieve those goals is to write things down.

Plus, drafting a formal money-lending contract makes your loan official in the eyes of the IRS, which can help keep loans from being classified as gifts for tax purposes.

Terms to include in your family loan agreement include:

• The amount loaned.

• The loan’s repayment terms, such as frequency and amount, as well as a due date for when the loan must be repaid in full.

• The loan’s interest rate and fees, if any (for instance, the lender may decide to charge late fees if the loan repayment terms are not honored).

• Clauses concerning what happens if the loan is repaid early (is there a prepayment penalty?) and what happens if the borrower goes into default for any reason.

Family Loans vs Gifts

If a family lender has the financial ability and willingness to make a monetary gift instead of a loan, they can do so without tax implications for amounts up to $17,000 for 2023 and $18,000 for 2024.

There are various reasons why someone might choose to give a gift instead of making a loan, or vice versa.

Family Loan	Gift
Interest rates can be advantageous to both parties.	There is no expectation of repayment for a gift.
Written agreement legitimizes the loan for tax purposes.	No paperwork necessary.
Family loans have potential to cause conflict.	Giving a gift is generally construed as a positive thing.
The IRS determines minimum acceptable interest rates and loan amounts subject to those rates.	Gifts under a certain value are excluded from the IRS gift tax in most cases.

Alternatives to Family Loans

If all of these caveats and warnings are making family loans sound like a less-than prudent idea, there are alternatives to consider before asking family members for a loan. (And yes, if a family member asks you to borrow money, you’re allowed to say no and steer them in a different direction.)

Obviously, the most ideal financial strategy for making a big purchase is to save your money so you don’t have to go into debt at all. Although this isn’t always possible or realistic, it might be worth taking a second look at your budget, working on a promotion, or starting up a side hustle to generate cash.

Unsecured personal loans are available from certain banks and financial institutions and make it possible to fund a wide variety of expenses upfront. Of course, these may come with higher interest rates and more stringent qualification requirements than family loans do.

You might also consider asking a family member to cosign on a loan with you instead of loaning you the money. They would be responsible for making the loan payments if you, the primary borrower, don’t, but they wouldn’t be immediately taking money out of their own bank account to help you.

If you need to borrow money for business purposes, a small business loan may be an option to think about. The Small Business Administration is an excellent resource for business loans. The agency works with lenders to help small business owners find funding for a wide range of amounts and terms, with competitive interest rates.

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

The Takeaway

While borrowing money from, or lending money to, a family member can be tempting, it can have long-lasting impacts on interpersonal relationships as well as the lender’s finances. Drafting a structured family loan agreement can help, but you may also want to explore a traditional personal loan from a bank, credit union, or online lender.

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 is a loan from a family member called?

A loan from a family member is often referred to as a family loan, an intra-family loan, or a friends and family loan.

Can family loans help your credit?

Since a family member is not likely to formally check your credit report or provide payment information to the credit bureaus, a family loan probably won’t help (or hurt) your credit.

Are family loans considered debt?

Yes, a loan from a family member is considered debt, but will likely not be reflected on your credit report. For tax purposes, a family loan is considered debt if it meets certain guidelines.

Photo credit: iStock/Ridofranz

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

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

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

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

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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.

SOPL0124018

Mar

2024

Are There Loans for 18-Year-Olds With No Credit History?

By Melissa Brock | Budgeting & Goals, Growing Wealth, Money & Life, personal_loan | Comments Off

If you’re an 18-year-old with no credit history, you can get a loan, but your choices may be more limited. You may have to tap into alternative options and sources, such as loans with a cosigner.

That’s because lenders like to lend to people with a history of borrowing and on-time payments. Oftentimes, young people just starting out have no credit history. This means they have no credit accounts in their name or haven’t used credit for a long period of time and the information has been removed from their credit history. Without credit, it can be difficult to access loans or credit cards, rent an apartment or buy a house, and obtain certain subscriptions.

Let’s take a closer look at loans for 18-year-olds.

Benefits of Loans for 18-Year-Olds

Two important benefits of getting a loan as an 18-year-old include gaining access to funds and building up credit history.

Access to Funds

The obvious benefit of getting loans as a young person is that you will have access to the money you need. Depending on the type of loan you get, you may be able to use the funds for a variety of purposes, including:

• Education

• Purchasing big-ticket items, such as a car

• Personal expenses, such as medical or wedding expenses

Build Up Your Credit History

Loans allow you to start building up your credit history, which can help you meet goals such as:

• Getting a cellphone

• Accessing utilities in your name

• Qualifying for a credit card

• Getting good rates on insurance, a mortgage, or auto loan

Plus, establishing a strong record of borrowing and repayment can position you well for future borrowing.

💡 Quick Tip: Need help covering the cost of a wedding, honeymoon, or new baby? A SoFi personal loan can help you fund major life events — without the high interest rates of credit cards.

Cons of Loans for 18-Year-Olds

While there are benefits to getting a loan when you’re 18, there are downsides to consider as well. Let’s take a closer look at a few.

Limited Loan Amounts

You may not be able to borrow a large loan amount when you’re young and just starting out. For example, if you want to purchase a $500,000 home as an 18-year-old and have no credit history, you’ll likely have difficulty qualifying for this type of loan.

Potentially High Rates

It’s possible to get a loan with no credit as a young person, but lenders may charge a higher interest rate than if you had an established credit history.

Why is that the case? Lenders try to assess your risk level when you apply for anything from a personal loan to a credit card. If they can’t see evidence that you have successfully made loan payments, they may not grant you a loan or they may compensate for that risk by charging you a higher interest rate.

Some lenders consider other aspects of your profile beyond credit history, including whether you can comfortably afford your payments.

Risk of Getting Into Debt

According to a consumer debt study conducted by Experian, Generation Z (those aged 18-26) had a non-mortgage debt average of $15,105 in 2023. This includes credit cards, auto debt, personal loans, or student loans.

While carrying any level of debt can be stressful, there are also financial implications to consider. For starters, if you don’t pay off your balance in a timely way, interest can start to build. Credit cards tend to carry higher interest rates than home or auto loans. This means wiping out credit card debt could take a long time if you only pay the minimum amount.

Then there are potential penalties to be mindful of, such as late fees. You may also face collection costs if you don’t pay your bills, which will remain on your credit report and potentially impact your credit score for years.

Is a Co-Signer Required When Applying for Loans as an 18-Year-Old?

Not all lenders require a cosigner, so be sure to ask if you’ll need one. In most cases, a loan without a cosigner will likely have a lower loan amount and a higher interest rate.

What exactly is a cosigner? Simply put, it’s a person who agrees to take responsibility for a loan alongside the primary borrower. If one person fails to make payments, it will affect the other person’s credit score.

Applying for a loan with a co-borrower or cosigner can be a quick way to get accepted for a loan.

Understanding Your Loan Status

Like many financial processes, applying for a loan involves multiple steps. Here’s a general idea of what’s involved:

• Pre-approval: Pre-approval means that your lender takes a look at your qualifications (including a soft credit check). A soft credit check is an inquiry of your credit report.

• Application: In this part of the process, you submit a formal application, and your lender will verify your information.

• Conditional approval: You may also get conditional approval for your loan, which means the lender may likely approve you to get a loan as long as you meet all the requirements.

• Approval or denial: Finally, you’ll either get approved or denied for the loan.

Your lender should be clear with you at every step of the application process.

Recommended: How to Get Approved for a Personal Loan

Private Lender Loan Requirements for 18-Year-Olds

There are no hard-and-fast requirements that encompass private lender requirements. However, lenders generally look at an applicant’s credit score, debt, and income.

Credit Score

There’s no universally set minimum credit score requirement for a loan because rules can vary by lender. It’s worth noting that low-to-no-credit borrowers may be able to access a loan.

Debt and Income

Lenders will check to see how much debt you have and calculate your debt-to-income (DTI) ratio, which ideally should be less than 36%. To figure out your DTI, lenders add up your debts and divide that amount by your gross income.

Lenders will also look at your income to ensure you can make monthly payments on your loan. This can include income from your job, a spouse’s income, self-employment, public assistance, investments, alimony, financial aid for school, insurance payments, and an allowance from family members.

Tips for Getting Loans as an 18-Year-Old

If you’re ready to get a loan as a young person, you can take steps to help boost your odds of getting approved.

Show Your Savings

Show the lender what you’ve saved in your accounts, which may include:

• High-yield savings accounts

• Certificates of deposit (CDs)

• Money market account

• Checking or savings accounts

• Treasuries

• Bonds, stocks, real estate, and other investments

Demonstrating savings can help you show that you can repay your loan.

Show Proof of Income

Lenders will likely require you to provide proof of income so they can see how you’ll pay for your loan. But remember, this doesn’t mean just the money you earn from a job. Consider other types of income you receive. For instance, you may not initially think of alimony as a source of income, but a lender might.

Apply for a Lower Amount

Lenders may deny your loan if you choose to borrow more money than you can realistically repay. So if you’re young and have no credit history, you may be able to increase your chances of getting a loan if you apply for a lower amount. You may also want to consider this strategy if you’re denied for a loan and want to reapply.

💡 Quick Tip: Just as there are no free lunches, there are no guaranteed loans. So beware lenders who advertise them. If they are legitimate, they need to know your creditworthiness before offering you a loan.

The Takeaway

While most 18-year-olds don’t have a large income or lengthy credit history, that doesn’t mean you can’t qualify for a personal loan. Just remember that funding choices may be more restricted, and you might not qualify for a large amount. If you’re having trouble getting approved, you may want to consider asking someone to cosign the loan, showing proof of income and savings, or applying for less money.

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

Are there loans for 18-year-olds without a job?

You can get a loan without a job. However, you’ll need to show a lender that you have some form of consistent income, such as through investments, alimony, financial aid, or another source of cash flow.

Are there loans for 18-year-olds without credit?

Yes, loans do exist for 18-year-olds with no credit history. But note that even if you qualify for a loan without credit, it may be a lower amount than you could qualify for if you had a lengthy credit history. You may also not be able to get a low interest rate.

Can I get a loan as an 18-year-old?

Yes, 18-year-olds can get a loan. Your age matters less than your credit history and credit score — or the availability of a cosigner. Keep in mind that you may have trouble getting a loan if you don’t meet a lender’s qualifications. Contact a lender to learn more about your options.

How can I build credit as an 18-year-old?

If you want to start building credit, it may be worth exploring a secured credit card. Similar to a debit card, this type of credit card requires you to put down a cash deposit to insure any purchases you make. For example, putting down a $1,000 deposit, and that becomes your starting credit line on your card.

Photo credit: iStock/SeventyFour

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 .

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.

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.

SOPL1023021

Mar

2024

What Is a Signature Loan? Comparing It to Personal Loans and Revolving Credit

By Janet Schaaf | Budgeting & Goals, Financial Independence, personal_loan | Comments Off

A signature loan is a type of loan that lenders can make without requiring any collateral. They’ll typically approve the loan based upon a person’s financials and credit scores — plus their signature on loan papers. This is also called an unsecured personal loan, a signature personal loan, good faith loan, or character loan.

Read on to learn more about signature loans, how they compare to other types of personal loans, and their pros and cons.

What Are Signature Loans?

Signature loans are unsecured personal loans. Unlike secured personal loans, a signature loan doesn’t require you to pledge collateral — an asset of value like a house or a bank account — that the lender can seize should you fail to repay the loan. Signature loans are approved based solely on the creditworthiness of the applicant.

Because the loan is unsecured, signature loans often come with higher interest rates than secured loans like car loans and mortgages. However, the interest rates are typically lower than credit cards.

You can use a signature loan for virtually any purpose, such as consolidating high-interest debts, a major purchase, or a medical emergency.

💡 Quick Tip: Some lenders can release funds as quickly as the same day your loan is approved. SoFi personal loans offer same-day funding for qualified borrowers.

How Do Signature Loans Work?

A signature loan works in the same way as an unsecured personal loan. These loans are offered by many banks, credit unions, and online lenders. When you apply for a signature loan, the lender will consider a number of factors, such as your credit history, income, and credit score, to determine whether you qualify for the loan and what the rate and terms will be.

If you’re approved for a signature loan, the lender will issue you a lump sum of cash, which you will then repay (plus interest) in monthly installments over a set term, often 24 to 60 months.

A Quick Look at Secured Loans

A secured loan requires you to pledge collateral to secure the debt. For a car loan, it’s typically the vehicle that is being purchased with the loan proceeds. For a mortgage loan, it’s typically the house being financed or refinanced. If the borrower defaults on a secured loan, the lender seizes the collateral to recoup their losses.

Some personal loans are secured, while others are unsecured. Secured personal loans could have a savings account put up as collateral, as just one example. This strategy could be risky for the borrower, though, because it may tie up money meant to be used for living expenses or set aside for emergency circumstances.

A Quick Look at Unsecured Loans

A lender does not require any collateral on a signature personal loan, which is an unsecured personal loan. So should you default on the loan, you won’t lose an asset of value (though your credit will likely take a hit). However, an unsecured loan may be harder to qualify for and have a higher interest rate than a secured loan, due to the increased risk to the lender.

Common Reasons to Get a Personal Loan

Personal loans are versatile, with the borrower typically able to use the funds for any personal, family, or household purposes. Some common personal loan uses are:

• Credit card debt consolidation Interest rates on credit cards can be high — the average annual percentage rate (APR) is now 24.66%. So you might use a lower-interest personal loan to combine credit card balances into one loan.

• Home improvement projects Depending upon the size of the remodeling project, costs can range from hundreds of dollars to thousands — even tens of thousands. A personal loan can give the borrower the opportunity to conveniently pay for home repairs and upgrades.

• Medical bills Unexpected medical expenses can quickly add up, putting a real dent in someone’s budget. Paying for them with a personal loan can often make more sense than using a high-interest credit card for that purpose.

• Weddings From engagement rings to ceremonies and receptions, weddings can get expensive — and that doesn’t even include the honeymoon. Couples may decide to look into signature personal loans as a way to cover their expenses.

• Moving expenses From moving supplies to renting a truck or hiring movers, the dollars can rack up, with a personal loan being one way to pay for the expenses.

Pros and Cons of Signature Loans

If you need loan funds fast, you don’t have collateral to pledge, or don’t want to tie up assets as collateral, a signature loan might be the right choice for you. Here are some of the pros and cons of signature loans:

Pros of Signature Loans

• Funds disbursement is typically quick

• There is no collateral requirement

• Generally a wide range of loan amounts available

Cons of Signature Loans

• Lenders may see unsecured signature loans as riskier than collateralized personal loans, so interest rates may be higher than secured loans.

• Some lenders’ minimum loan amounts may be higher than some people need.

• Short-term signature loans can be payday loans, which typically have extremely high interest rates and fees.

Pros of Signature Loans	Cons of Signature Loans
Typically, funds are disbursed quickly, sometimes within a few days.	Payday loans may be disguised as typical signature loans.
A wide range of loan amounts is typically available.	Some lenders may not be the best fit for applicants seeking small loan amounts.
There is no collateral requirement.	Lenders may charge higher interest rates on unsecured signature loans than secured loans if they perceive them as risker.

Signature Loans vs Personal Loans

A signature loan is a type of personal loan, specifically an unsecured personal loan. Each is approved based on the applicant’s creditworthiness, without collateral being a consideration. A secured personal loan, however, is not the same thing as a signature loan, since collateral is required to back up this type of loan.

As with other types of personal loans, online signature loan lenders are widely available, making it easy to compare lenders. Once approved for a signature loan, funds may be disbursed quickly, sometimes in just a few days. There are few restrictions on the use of the signature loan funds.

Signature Loans vs Revolving Credit

Signature loans are typically installment loans, with a lump sum loan amount repaid in equal installments over a set amount of time. Revolving credit, like a credit card or line of credit, works differently.

With revolving credit, you have access to a credit limit. You can then borrow money when you want to (up to your limit), pay it back over time, and borrow again as needed. You only pay interest on the amount you actually borrow, not the full credit limit.

Signature Loans	Revolving Credit
Funds disbursed as a lump sum	Credit limit that can be accessed as needed
Payments are equal over a set amount of time	Payments may vary each billing period
If more funds are needed, a new loan must be applied for	Funds can be used over and over again
Has a payment end date	Loan is revolving

What Are Signature Loans Commonly Used For?

There are few restrictions on the use of signature loan funds. One common use of a signature loan is to consolidate other, high-interest debt with the goal of either getting a lower interest rate or having a fixed payment end date.

Signature loan funds are also commonly used to pay for wedding expenses, medical expenses, or home renovation or repairs.

Advantages and Disadvantages of Signature Loans Online

Signature personal loans are widely available online and can be good choices for people who don’t mind not having a physical bank branch to drive to for transactions.

Advantages of signature loans online include:

• Competitive rates Online lenders can often offer competitive rates because they don’t have the expenses involved in maintaining physical branches.

• Convenience It can often be quick and easy to apply online (no driving, no appointments needed), and online lenders often offer streamlined processes which may result in quicker approval times.

• Different criteria Some online lenders might focus more significantly on a borrower’s cash flow and employment history, perhaps allowing for a bit more wiggle room on credit scores than a traditional bank would be willing to give.

• Additional benefits Online lenders may also offer more perks to their customers than a traditional bank offers.

There are, however, disadvantages to working with an online lender vs. a bank you have an established relationship with. Some to consider:

• No history As an established customer of a traditional bank, you may qualify for a reduced interest rate, depending on your creditworthiness.

• Potential scams Not all online “lenders” are legit so you’ll want to be wary of unsolicited offers, and only enter financial information on official, secure websites. It’s also a good idea to research the lender’s reputation before giving them your personal information.

• No face-to-face interaction Unlike working with a brick-and-mortar financial institution, you likely won’t have the chance to meet with an online lender in person. If this is something you value and desire in a lender, the online loan option may not be for you.

• Potential spam If you contact a number of online lenders directly to compare rates, you can end up on their email contact list, even if you don’t choose to work with them.

Application and Approval Processes

Similar to an unsecured personal loan, a signature loan’s application and approval process is generally simple and straightforward.

Things to Look Out for When Getting a Signature Loan

It’s a good idea to review your credit report before shopping around for a loan. A free annual credit report can be requested from each of the three major credit reporting agencies. If there are errors or inaccuracies on your credit report, you can try to correct them before any lenders start the loan qualification process.

Credit reports don’t include a person’s credit score . However, you may be able to access that information through your bank, credit card issuer, or a reliable website at no charge.

When you’re satisfied that your credit report is accurate, you may want to compare lenders and consider getting prequalified. Many lenders will do a soft credit check at that point, which will not affect your credit score. You’ll be able to compare interest rates and terms from multiple lenders to find the one that works best for your unique financial situation.

Getting prequalified can give you a good sense of how much might be available to borrow, what the interest rate would likely be, and how that translates into a monthly payment.

Before applying, it’s important to know how much you need to borrow. You generally want to choose an amount that would cover the expenses at hand while trying to avoid borrowing more than necessary. Interest will be charged on the amount borrowed, not only the amount used.

When comparing prequalification quotes from different lenders, it’s a good idea to find out if there are any hidden fees, such as origination fees, late fees, or prepayment fees.

Typical Signature Loan Requirements

Each lender has unique application and approval requirements but may commonly ask for the applicant’s name, proof of address, photo ID, and proof of employment and income. After the application has been submitted, a lender will conduct a hard credit check to review the applicant’s credit report.

Besides checking credit scores, lenders like to see steady employment and enough income to meet expenses, including this new loan. Sometimes, having a cosigner or co-borrower might improve the chances of loan approval or help to secure a more favorable interest rate.

Getting a Personal Loan With SoFi

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

Are signature loans easy to get?

You typically need a good credit score to get a signature loan, since lenders want to be confident that you will repay the money.

Signature loans are unsecured, meaning you don’t have to pledge an asset of value (like a home or bank account) that the lender can seize should you fail to repay the loan. This raises risk for the lender. As a result, signature loans can sometimes be harder to get than secured loans like car loans.

Do you need a down payment for a signature loan?

No down payment is necessary for a signature loan.

What is the maximum that can be borrowed with a signature loan?

Lending limits will vary by lender, but you can often get as much as $100,000 in funding with a signature loan.

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

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

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

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.

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.

SOPL0124014

Student Loan Refinancing: What Happens If There’s Overpayment?

Student Loan Overpayment Explained

Take control of your student loans. Ditch student loan debt for good.

What Happens When a Student Loan Is Overpaid?

What Should I Do With My Refund?

Put Towards Next Payment

Use For Personal Expenses

The Takeaway

FAQ

What happens if you overpay a student loan?

What happens to excess student loan money?

Does refinancing affect student loan forgiveness?

Roth 401(k) vs Traditional 401(k): Which Is Best for You?

5 Key Differences Between Roth 401(k) vs Traditional 401(k)

1. How Each Account is Funded

2. Tax Treatment of Contributions

3. Withdrawal Rules

4. Early Withdrawal Rules

5. Required Minimum Distribution (RMD) Rules

How to Choose Between a Roth and a Traditional 401(k)

When to Pay Taxes

Your Age

Where You Live

The Benefits of Investing in Both a Roth 401(k) and Traditional 401(k)

What’s the Best Split Between Roth and Traditional 401(k)?

The Takeaway

FAQ

Is it better to contribute to 401(k) or Roth 401(k)?

Can I max out both 401(k) and Roth 401(k)?

Family Loans: A Complete Guide to Borrowing and Lending Money to Family

What Are Family Loans?

How Do Family Loans Work?

Terms for the Lender to Include in a Family Loan

Terms for the Borrower to Include in a Family Loan

Risks and Benefits of Family Loans

Risks of Family Loans

Risks for the Borrower:

Risks for the Lender:

Benefits of Family Loans

Benefits for the Borrower:

Benefits for the Lender:

Tax Implications of Family Loans

Making a Family Loan Legitimate for Tax Purposes

Tips to Successfully Borrow From or Lend Money to Family

Planning Your Family Loan Out

Making a Family Loan Official

Family Loans vs Gifts

Alternatives to Family Loans

The Takeaway

FAQ

What is a loan from a family member called?

Can family loans help your credit?

Are family loans considered debt?

Are There Loans for 18-Year-Olds With No Credit History?

Benefits of Loans for 18-Year-Olds

Access to Funds

Build Up Your Credit History

Cons of Loans for 18-Year-Olds

Limited Loan Amounts

Potentially High Rates

Risk of Getting Into Debt

Is a Co-Signer Required When Applying for Loans as an 18-Year-Old?

Understanding Your Loan Status

Private Lender Loan Requirements for 18-Year-Olds

Credit Score

Debt and Income

Tips for Getting Loans as an 18-Year-Old

Show Your Savings

Show Proof of Income

Apply for a Lower Amount

The Takeaway

FAQ

Are there loans for 18-year-olds without a job?

Are there loans for 18-year-olds without credit?

Can I get a loan as an 18-year-old?

How can I build credit as an 18-year-old?

What Is a Signature Loan? Comparing It to Personal Loans and Revolving Credit

What Are Signature Loans?

How Do Signature Loans Work?

A Quick Look at Secured Loans

Take control of your student loans.
Ditch student loan debt for good.

Student Loan
Refinancing

Personal
Loans

Online
Investments