In some popular budgets, 30% of your take-home pay goes toward the wants in life. So if you are wondering how to enjoy life when you have student loans, some of those funds can go to dining out, travel, and more. While student loans can eat up a portion of your disposable income, with smart budgeting, you can have some fun money available as you make your payments.
Read on for advice on how much money to earmark for fun when you’re focused on paying off what you borrowed for your education. Student debt, after all, is a phase of your life that you are moving through, and you can indeed find ways to live life while paying off student loans..
The Impact of Student Loan Debt
Yes, student loans can require time and effort to pay off. Many Americans are working their way through their payments. In fact, in one recent survey, the College Board found that 54% of undergraduate students at four-year institutions graduated with student loan debt. In other words, you are not alone.
Having that debt hanging over you can have an emotional impact in addition to affecting your finances. Student loan debt can result in higher levels of mental health issues; it can possibly contribute to money stress or feelings of depression.
That in turn can put strain on other aspects of life. It might, for instance, lead a borrower to delay life decisions, such as getting married or starting a family.
But having student loans on your plate can have a silver lining. That debt can encourage you to build positive financial habits as you work through your payments. You can learn how to budget efficiently. You can learn resilience and how to work through paying off debt. Consider it good practice for when you might have a car loan or a mortgage in the future. 💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.
How Much Money to Allocate for Fun
As you look at your budget when paying off student loans, you might wonder, “What’s the right amount of money to allocate for fun?”
There’s no “right” or “correct” amount. Funds that you allocate toward fun (whether that means buying new clothes you don’t need, snapping up some concert tickets, or spending a long weekend at the beach) will need to work within your budget. Given that you are allocating a percentage of income toward student loans, here’s how to figure that out.
10% Rule
The 10% Rule refers to allocating 10% of your monthly income after taxes toward fun. For example, if you make $3,000 per month after taxes, you’d allocate $300 toward fun each month. You can use that amount guilt-free, whether you want to put it toward hobbies or dining out.
50/30/20 Rule
The 50/30/20 rule could also help you budget when you’re paying off student loans. Here’s how it works; you would allocate your take-home pay as follows:
• 50% essential expenses: Essential expenses refer to the cost of housing, food (groceries, not going out to brunch with friends), healthcare, and the like, as well as minimum debt payments, such as what you owe per month for your student loans, credit card, and car loan, if you have one.
• 30% discretionary expenses: Discretionary expenses include items that aren’t as essential, including dining out (like the above-mentioned brunch), personal care (spa days, training sessions), non-essential clothes, travel expenses, etc.
• 20% for savings and additional debt payments: You can think of these as putting money toward your short- and long-term goals. They can include savings, investments, or a child’s education. Or making additional payments toward you student debt to pay it off that much faster.
70/20/10 Rule
Another type of rule, the 70/20/10 rule, may seem just like the 50/30/20 rule, which it is — just with different allocation percentages. This rule means you divide your take-home pay as follows:
• 70% goes toward needs and wants.
• 20% goes toward debt repayment and short-term savings.
• 10% goes toward investing and donations.
You would figure out how much of that 70% you can allocate for fun to make this budget work for you.
Budgeting as a Couple
If you have a partner, you will have to decide how to budget your funds. Some couples keep their money separate, while others pool their resources. You may be in a situation where one person earns more than the other, or perhaps one is still in school. One or both of you may have student debt in a marriage. It can take some discussion and experimentation with different budget systems to decide how to divide your money up to cover:
• Essential expenses
• Discretionary expenses
• Goals
• Debt payoff
• Savings (whether for the down payment on a house, an emergency fund, or other goal).
💡 Quick Tip: It might be beneficial to look for a refinancing lender that offers extras. SoFi members, for instance, can qualify for rate discounts and have access to career services, financial advisors, networking events, and more — at no extra cost.
Choose Your Fun
Fun money should be intentional and focused. There’s no rule on how to live life while paying off student loans, so consider what would bring you joy. Would it be knowing you can go out to dinner once or twice a month? Being able to buy a new mountain bike? Becoming a member at your favorite local museum?
A quick reminder: Not that there’s anything wrong with saving for a crazy weekend in Vegas, but you don’t need to spend thousands to have fun. Don’t forget to also find low-cost fun with family and friends through free local concerts, movie nights at home, strolls through the local farmers’ market or sunset walks at a local park, potluck dinners, and similar activities. Making your own fun can be a free or cheap way to stretch your budget while paying off your student loans.
Monthly Budget Example
Here’s a quick example of a simple monthly budget. Say your take-home pay is $6,000 a month , and these are some basic expenses:
• Mortgage: $2,000
• Property taxes: $500
• Credit card debt: $500
• Food: $300
• Car loan: $300
• Student loans: $250
• Transportation (gas, etc.): $100
• Utilities: $260
• Healthcare: $300
• Retirement savings: $200
• Emergency fund savings: $200
• College savings for your child: $200
• After-school childcare: $500
Total expenses: $5,610
If you have allocated the amounts needed in the 50/30/20 budget rule, for example, then you would subtract $5,510 from $6,000, and you have $490 left. In that case, you may consider using the difference between your expenses and your income as your fun money, as long as you’ve covered all your bases with your expenses.
Set Goals for Life Beyond Debt
Imagine your future without student loans. Setting financial goals — such as paying off student loans or other debt or accruing enough cash for the down payment on a house — can help you build long-term financial stability and help you work toward financial freedom. The best way to do that is to plan to achieve these goals and stay committed to them.
Take a look at this example: Let’s say that instead of buying a new pair of shoes every month, you put $100 in an investment account every month. In five years, that amount could grow to $8,000, and over 30 years, it could grow to over $280,000.
Without dipping into a no-fun lifestyle or dealing with more money stress, consider finding a way to economize today to make tomorrow brighter. For example, maybe you could forgo or cut your fun money for a few months out of the year to build your savings. Or put the money saved toward crushing your student debt that much sooner.
Recommended: Ways to Stay Motivated When Paying Down Debt
How to Manage Student Loans
What’s the best way to manage student loans without forgetting to allocate money toward fun? Take a look at a few steps you can take.
Make It Automatic
First, consider setting up an automatic payment plan through your loan servicer. An automatic payment plan will automatically pull money from your account each month, ensuring you do not miss any payments.
Missing payments can result in a delinquent account, which happens the first day after you miss a student loan payment. If you remain delinquent on your student loan payments after 90 days, your loan servicer will report you to the three major national credit bureaus. This could lower your credit score, which might make it more difficult to obtain credit, get a job, or secure housing.
If that carries on, you could default on your student loan. Consequences could include the entire unpaid balance of your loan coming due, loss of eligibility for federal student aid, further damage to your credit score, wage garnishment, and possibly legal action against you.
This is an extreme situation, but making it automatic will prevent these issues from occurring.
Income-Driven Repayment
If you’re a federal student loan borrower, you may qualify for an income-driven repayment plan, which means monthly student loan payments get capped at a certain level of your income and family size.
Several types of income-driven repayment plans include the Saving on a Valuable Education (SAVE) Plan, Pay As You Earn (PAYE) Repayment plan, Income-Based Repayment (IBR) plan, and the Income-Contingent Repayment (ICR) plan:
• SAVE Plan: Caps your payments at 10% of your discretionary income and, as of summer 2024, possibly 5%.
• PAYE Plan: Caps your payments at 10% of your discretionary income, and you’ll never pay more than the 10-year Standard Repayment Plan amount.
• IBR plan: Caps your payment at 10% of your discretionary income if you’re a new borrower on or after July 1, 2024. If you’re not a new borrower on or after July 1, 2014, your payment generally caps at 15% of your discretionary income.
• ICR plan: Offers the lesser of 20% of your discretionary income or what you would pay on a repayment plan with a fixed payment over 12 years based on your income.
You must apply to qualify for one of these plans (contact your loan servicer) and update your income and qualifications every year to continue with one of these plans.
Prioritize an Emergency Fund and Retirement
Many graduates ask this question: Should I fund my retirement and emergency savings or pay off my student loans?
In most situations, there’s no reason why you can’t do both. Furthermore, it’s important to realize the importance of funding an emergency fund and retirement savings.
• Your emergency fund is a financial safety net that will allow you to pay for a critical home repair (think air conditioning in the summer!) or help cover the negative financial consequences of becoming unemployed. Ideally, you want to save three to six months’ worth of basic living expenses in an account where you can quickly get the money out if necessary.
• Saving for retirement when you have student loans can be an important step for your financial security as you reach older age. If you retire at 65 and live till 95, you must ensure you’ve saved enough to last those 30 years. Consider contributing at least enough to your retirement plan to get your employer match — many employers match between 3% and 5% of employee pay.
Putting money in all these “buckets” means prioritizing and organizing your debts, putting together a budget, tracking your spending, and setting savings goals.
Celebrate Your Progress
Don’t forget to take time to celebrate your progress! In addition to spending your “fun money,” you should also allocate time toward celebrating your student loan payoff goals.
For example, if you choose to pay off a high-interest rate loan and succeed in paying it off, consider rewarding yourself with a night out or another type of splurge — maybe a larger splurge than you would ordinarily allocate for fun money.
Recommended: How to Handle Student Loans During Job Loss
The Takeaway
While student loans and other debt types may make you feel burdened, remember that this is just a phase you are moving through. Building fun money into your budget can help bridge the gap between frustration and feeling like you have flexibility.
Write down a few things you enjoy doing, and budget for them. Also investigate other ways to free up funds to make paying off your student loans more manageable.
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.
Photo credit: iStock/Dragon Claws
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.
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Surprisingly Calm Reaction to Surprisingly Similar Fed Rate Projections
By:
Matthew Graham
Wed, Mar 20 2024, 4:32 PM
Surprisingly Calm Reaction to Surprisingly Dovish Fed
With so much apparently at stake heading into today’s Fed events, the reality ended up being somewhat underwhelming. At least it was underwhelming in a good way for the bond market and rates. The key revelation was a Fed dot plot (individual projections for the Fed Funds Rate) that showed the exact same median rate at the end of 2024 as seen in the last dot plot (3 rate cuts still penciled in this year). Bonds cheered the news at first, but then got defensive ahead of Powell’s press conference. Powell navigated questions without prompting any more panic–essentially convincing investors that the Fed was approaching incoming data with with a certain level of optimism regarding inflation returning to the late 2023 trend (as opposed to the early 2024 trend of higher readings). Bonds ended up basically threading the needle with modest gains by the end of the day.
09:38 AM
Initially stronger overnight on EU inflation data, but steadily rising since then. 10yr unchanged at 4.293. MBS down 1 tick (.03)
01:25 PM
Slightly stronger ahead of Fed. MBS up an eighth. 10yr down 1.8bps at 4.275
02:32 PM
2 way reaction after Fed announcement. Now slightly weaker heading into the press conference. 10yr up 1.1bps at 4.304. MBS still up an eighth of a point.
03:25 PM
Bonds settling down in slightly stronger territory with MBS up 7 ticks (.23) and 10yr yields down 1.6bps at 4.277.
Download our mobile app to get alerts for MBS Commentary and streaming MBS and Treasury prices.
The Federal Reserve’s Federal Open Markets Committee (FOMC) held its short-term policy interest rate steady at a range of 5.25% to 5.5% for a fifth straight meeting on Wednesday.
“The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%,” the FOMC said in a statement. “In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans.”
Earlier in March, Fed Chair Jerome Powell emphasized during his semiannual monetary policy testimony that the central bank needed “just a bit more evidence” that inflation was on the right path before implementing the first rate cut since March 2020. On multiple occasions Wednesday, Powell reiterated the central bank’s commitment to a target of 2% inflation.
Fed officials also unveiled their latest interest rate and economic projections for the first time since December. At that time, most officials agreed that inflation would fall from just above 3% at the end of 2023 to just below 2.5% at the end of 2024. Most penciled out three quarter-point rate cuts this year.
But in the interval between the December and March meetings, inflation in both January and February came in higher than expected. Meanwhile, the unemployment rate continued to stay below 4%, companies still exhibited expanding payrolls, and workers boasted growth in real wages.
While the projections for the policy rate at the end of 2024 did not change, policymakers expect fewer rate cuts in 2025 and 2026 than they anticipated in December. In other words, interest rates are poised to stay higher for longer.
Fed officials also expect inflation, excluding volatile food and energy prices, to end the year at 2.6% instead of 2.4%, a modestly higher level than they anticipated in December. As of Wednesday afternoon, investors were placing the probability of a cut by June at 74.4%, according to the CME Group. The Fed meets one more time before that, on April 30 and May 1.
What does a cautious approach mean for housing?
Mortgage rates have trended upward since the beginning of the year. As of March 18, mortgage rates were 30 to 40 basis points higher than on Jan. 1, 2024, according to Mike Simonsen, founder and president of Altos Research.
Experts still expect mortgage rates to come down in 2024 but not as fast as anticipated, hampering homebuyers’ prospects of improved affordability. New construction will continue to be a necessary source of housing options for buyers as the supply of existing homes remains limited.
According to Realtor.com chief economist Danielle Hale, assumable mortgages — which allow a buyer to take over a seller’s existing mortgage terms — could become a more viable alternative.
“A small share of the total outstanding mortgage pool is eligible for assumption, and the share of sellers who are aware of this feature and advertising it on their listings is even smaller, but in some of the markets where sellers are most likely to advertise this feature, Realtor.com research suggests that buyers can find mortgage assumption advertised on 1-3% of active homes for sale,” Hale said in a statement.
Average mortgage rates edged higher yesterday. Unfortunately, it was the sixth consecutive business day on which they’ve risen.
Earlier this morning, markets were signaling that mortgage rates today might barely move. However, these early mini-trends frequently alter speed or direction as the hours pass.
Current mortgage and refinance rates
Find your lowest rate. Start here
Program
Mortgage Rate
APR*
Change
Conventional 30-year fixed
7.15%
7.17%
Unchanged
Conventional 15-year fixed
6.57%
6.61%
-0.04
Conventional 20-year fixed
7.16%
7.19%
+0.02
Conventional 10-year fixed
6.63%
6.66%
-0.05
30-year fixed FHA
6.51%
7.19%
Unchanged
30-year fixed VA
6.61%
6.72%
-0.03
5/1 ARM Conventional
6.3%
7.39%
Unchanged
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions See our rate assumptions here.
Should you lock your mortgage rate today?
Tomorrow’s Federal Reserve events (see below) could make a big difference to mortgage rates in the near and medium terms. But, right now, I’m pessimistic about our seeing a sustained downward trend until the summer. And some wonder if the fall might be a more realistic timeframe.
So, for now, my personal rate lock recommendations remain:
LOCK if closing in 7 days
LOCK if closing in 15 days
LOCK if closing in 30 days
LOCK if closing in 45 days
LOCKif closing in 60days
However, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So, let your gut and your own tolerance for risk help guide you.
>Related: 7 Tips to get the best refinance rate
Market data affecting today’s mortgage rates
Here’s a snapshot of the state of play this morning at about 9:50 a.m. (ET). The data are mostly compared with roughly the same time the business day before, so much of the movement will often have happened in the previous session. The numbers are:
The yield on 10-year Treasury notes held steady again at 4.32%. (Neutral for mortgage rates. However, yields were rising this morning.) More than any other market, mortgage rates typically tend to follow these particular Treasury bond yields
Major stock indexes were mixed this morning. (Neutral for mortgage rates.) When investors buy shares, they’re often selling bonds, which pushes those prices down and increases yields and mortgage rates. The opposite may happen when indexes are lower. But this is an imperfect relationship
Oil prices increased to $83.18 from $81.35 a barrel. (Bad for mortgage rates*.) Energy prices play a prominent role in creating inflation and also point to future economic activity
Goldprices inched down to $2,156 from $2,159 an ounce. (Neutral for mortgage rates*.) It is generally better for rates when gold prices rise and worse when they fall. Because gold tends to rise when investors worry about the economy.
CNN Business Fear & Greed index — dropped to 69 from 75 out of 100. (Good for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So, lower readings are often better than higher ones
*A movement of less than $20 on gold prices or 40 cents on oil ones is a change of 1% or less. So we only count meaningful differences as good or bad for mortgage rates.
Caveats about markets and rates
Before the pandemic, post-pandemic upheavals, and war in Ukraine, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. We still make daily calls. And are usually right. But our record for accuracy won’t achieve its former high levels until things settle down.
So, use markets only as a rough guide. Because they have to be exceptionally strong or weak to rely on them. But, with that caveat, mortgage rates today look likely to hold close to steady. However, be aware that “intraday swings” (when rates change speed or direction during the day) are a common feature right now.
Find your lowest rate. Start here
What’s driving mortgage rates today?
Tomorrow
I covered yesterday the three Federal Reserve events due early tomorrow afternoon:
2 p.m. Eastern — Rate announcement and report publications
2 p.m. Eastern — Summary of Economic Projects publication. This occurs only quarterly and includes a dot plot
I’ll brief you more fully on those tomorrow morning. That way you’ll know what to look out for before it’s too late to act.
Personally, I’m not very hopeful about the impact of the Fed’s events on mortgage rates. Of course, I can’t be sure what they’ll bring. But recent economic data has likely reinforced the central bank’s natural caution. And I suspect that it may signal later and fewer cuts in general interest rates this year than markets have been expecting.
If I’m right, that could be seriously bad for mortgage rates. So, let’s hope I’m wrong.
Today and later in the week
I’ll be surprised if today’s economic reports move mortgage rates much. They cover February’s housing starts and building permits. It’s not that those data are unimportant. However, they rarely attract the attention of the investors who largely determine mortgage rates.
We have to wait until Thursday for a couple of reports that sometimes affect mortgage rates. They’re two March purchasing managers’ indexes (PMIs) from S&P. One is for the services sector and the other covers manufacturing. I’ll brief you on those tomorrow morning.
Don’t forget you can always learn more about what’s driving mortgage rates in the most recent weekend edition of this daily report. These provide a more detailed analysis of what’s happening. They are published each Saturday morning soon after 10 a.m. (ET) and include a preview of the following week.
Recent trends
According to Freddie Mac’s archives, the weekly all-time lowest rate for 30-year, fixed-rate mortgages was set on Jan. 7, 2021, when it stood at 2.65%. The weekly all-time high was 18.63% on Sep. 10, 1981.
Freddie’s Mar. 14 report put that same weekly average at 6.74% down from the previous week’s 6.88%. But note that Freddie’s data are almost always out of date by the time it announces its weekly figures.
Expert forecasts for mortgage rates
Looking further ahead, Fannie Mae and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.
And here are their rate forecasts for the four quarters of 2024 (Q1/24, Q2/24 Q3/24 and Q4/24).
The numbers in the table below are for 30-year, fixed-rate mortgages. Fannie’s were updated on Feb. 12 and the MBA’s on Feb. 20.
Forecaster
Q1/24
Q2/24
Q3/24
Q4/24
Fannie Mae
6.5%
6.3%
6.1%
5.9%
MBA
6.9%
6.6%
6.3%
6.1%
Of course, given so many unknowables, both these forecasts might be even more speculative than usual. And their past record for accuracy hasn’t been wildly impressive.
Important notes on today’s mortgage rates
Here are some things you need to know:
Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions. Read ‘How mortgage rates are determined and why you should care’
Only “top-tier” borrowers (with stellar credit scores, big down payments, and very healthy finances) get the ultralow mortgage rates you’ll see advertised
Lenders vary. Yours may or may not follow the crowd when it comes to daily rate movements — though they all usually follow the broader trend over time
When daily rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
Refinance rates are typically close to those for purchases.
A lot is going on at the moment. And nobody can claim to know with certainty what will happen to mortgage rates in the coming hours, days, weeks or months.
Find your lowest mortgage rate today
You should comparison shop widely, no matter what sort of mortgage you want. Federal regulator the Consumer Financial Protection Bureau found in May 2023:
“Mortgage borrowers are paying around $100 a month more depending on which lender they choose, for the same type of loan and the same consumer characteristics (such as credit score and down payment).”
In other words, over the lifetime of a 30-year loan, homebuyers who don’t bother to get quotes from multiple lenders risk losing an average of $36,000. What could you do with that sort of money?
Verify your new rate
Mortgage rate methodology
The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.
How your mortgage interest rate is determined
Mortgage and refinance rates vary a lot depending on each borrower’s unique situation.
Factors that determine your mortgage interest rate include:
Overall strength of the economy — A strong economy usually means higher rates, while a weaker one can push current mortgage rates down to promote borrowing
Lender capacity — When a lender is very busy, it will increase rates to deter new business and give its loan officers some breathing room
Property type (condo, single-family, town house, etc.) — A primary residence, meaning a home you plan to live in full time, will have a lower interest rate. Investment properties, second homes, and vacation homes have higher mortgage rates
Loan-to-value ratio (determined by your down payment) — Your loan-to-value ratio (LTV) compares your loan amount to the value of the home. A lower LTV, meaning a bigger down payment, gets you a lower mortgage rate
Debt-To-Income ratio — This number compares your total monthly debts to your pretax income. The more debt you currently have, the less room you’ll have in your budget for a mortgage payment
Loan term — Loans with a shorter term (like a 15-year mortgage) typically have lower rates than a 30-year loan term
Borrower’s credit score — Typically the higher your credit score is, the lower your mortgage rate, and vice versa
Mortgage discount points — Borrowers have the option to buy discount points or ‘mortgage points’ at closing. These let you pay money upfront to lower your interest rate
Remember, every mortgage lender weighs these factors a little differently.
To find the best rate for your situation, you’ll want to get personalized estimates from a few different lenders.
Verify your new rate. Start here
Are refinance rates the same as mortgage rates?
Rates for a home purchase and mortgage refinance are often similar.
However, some lenders will charge more for a refinance under certain circumstances.
Typically when rates fall, homeowners rush to refinance. They see an opportunity to lock in a lower rate and payment for the rest of their loan.
This creates a tidal wave of new work for mortgage lenders.
Unfortunately, some lenders don’t have the capacity or crew to process a large number of refinance loan applications.
In this case, a lender might raise its rates to deter new business and give loan officers time to process loans currently in the pipeline.
Also, cashing out equity can result in a higher rate when refinancing.
Cash-out refinances pose a greater risk for mortgage lenders, so they’re often priced higher than new home purchases and rate-term refinances.
Check your refinance rates today. Start here
How to get the lowest mortgage or refinance rate
Since rates can vary, always shop around when buying a house or refinancing a mortgage.
Comparison shopping can potentially save thousands, even tens of thousands of dollars over the life of your loan.
Here are a few tips to keep in mind:
1. Get multiple quotes
Many borrowers make the mistake of accepting the first mortgage or refinance offer they receive.
Some simply go with the bank they use for checking and savings since that can seem easiest.
However, your bank might not offer the best mortgage deal for you. And if you’re refinancing, your financial situation may have changed enough that your current lender is no longer your best bet.
So get multiple quotes from at least three different lenders to find the right one for you.
2. Compare Loan Estimates
When shopping for a mortgage or refinance, lenders will provide a Loan Estimate that breaks down important costs associated with the loan.
You’ll want to read these Loan Estimates carefully and compare costs and fees line-by-line, including:
Interest rate
Annual percentage rate (APR)
Monthly mortgage payment
Loan origination fees
Rate lock fees
Closing costs
Remember, the lowest interest rate isn’t always the best deal.
Annual percentage rate (APR) can help you compare the ‘real’ cost of two loans. It estimates your total yearly cost including interest and fees.
Also, pay close attention to your closing costs.
Some lenders may bring their rates down by charging more upfront via discount points. These can add thousands to your out-of-pocket costs.
3. Negotiate your mortgage rate
You can also negotiate your mortgage rate to get a better deal.
Let’s say you get loan estimates from two lenders. Lender A offers the better rate, but you prefer your loan terms from Lender B. Talk to Lender B and see if they can beat the former’s pricing.
You might be surprised to find that a lender is willing to give you a lower interest rate in order to keep your business.
And if they’re not, keep shopping — there’s a good chance someone will.
Fixed-rate mortgage vs. adjustable-rate mortgage: Which is right for you?
Mortgage borrowers can choose between a fixed-rate mortgage and an adjustable-rate mortgage (ARM).
Fixed-rate mortgages (FRMs) have interest rates that never change unless you decide to refinance. This results in predictable monthly payments and stability over the life of your loan.
Adjustable-rate loans have a low interest rate that’s fixed for a set number of years (typically five or seven). After the initial fixed-rate period, the interest rate adjusts every year based on market conditions.
With each rate adjustment, a borrower’s mortgage rate can either increase, decrease, or stay the same. These loans are unpredictable since monthly payments can change each year.
Adjustable-rate mortgages are fitting for borrowers who expect to move before their first rate adjustment, or who can afford a higher future payment.
In most other cases, a fixed-rate mortgage is typically the safer and better choice.
Remember, if rates drop sharply, you are free to refinance and lock in a lower rate and payment later on.
How your credit score affects your mortgage rate
You don’t need a high credit score to qualify for a home purchase or refinance, but your credit score will affect your rate.
This is because credit history determines risk level.
Historically speaking, borrowers with higher credit scores are less likely to default on their mortgages, so they qualify for lower rates.
So, for the best rate, aim for a credit score of 720 or higher.
Mortgage programs that don’t require a high score include:
Conventional home loans — minimum 620 credit score
FHA loans — minimum 500 credit score (with a 10% down payment) or 580 (with a 3.5% down payment)
VA loans — no minimum credit score, but 620 is common
USDA loans — minimum 640 credit score
Ideally, you want to check your credit report and score at least 6 months before applying for a mortgage. This gives you time to sort out any errors and make sure your score is as high as possible.
If you’re ready to apply now, it’s still worth checking so you have a good idea of what loan programs you might qualify for and how your score will affect your rate.
You can get your credit report from AnnualCreditReport.com and your score from MyFico.com.
How big of a down payment do I need?
Nowadays, mortgage programs don’t require the conventional 20 percent down.
Indeed, first-time home buyers put only 6 percent down on average.
Down payment minimums vary depending on the loan program. For example:
Conventional home loans require a down payment between 3% and 5%
FHA loans require 3.5% down
VA and USDA loans allow zero down payment
Jumbo loans typically require at least 5% to 10% down
Keep in mind, a higher down payment reduces your risk as a borrower and helps you negotiate a better mortgage rate.
If you are able to make a 20 percent down payment, you can avoid paying for mortgage insurance.
This is an added cost paid by the borrower, which protects their lender in case of default or foreclosure.
But a big down payment is not required.
For many people, it makes sense to make a smaller down payment in order to buy a house sooner and start building home equity.
Verify your new rate. Start here
Choosing the right type of home loan
No two mortgage loans are alike, so it’s important to know your options and choose the right type of mortgage.
The five main types of mortgages include:
Fixed-rate mortgage (FRM)
Your interest rate remains the same over the life of the loan. This is a good option for borrowers who expect to live in their homes long-term.
The most popular loan option is the 30-year mortgage, but 15- and 20-year terms are also commonly available.
Adjustable-rate mortgage (ARM)
Adjustable-rate loans have a fixed interest rate for the first few years. Then, your mortgage rate resets every year.
Your rate and payment can rise or fall annually depending on how the broader interest rate trends.
ARMs are ideal for borrowers who expect to move prior to their first rate adjustment (usually in 5 or 7 years).
For those who plan to stay in their home long-term, a fixed-rate mortgage is typically recommended.
Jumbo mortgage
A jumbo loan is a mortgage that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac.
In 2023, the conforming loan limit is $726,200 in most areas.
Jumbo loans are perfect for borrowers who need a larger loan to purchase a high-priced property, especially in big cities with high real estate values.
FHA mortgage
A government loan backed by the Federal Housing Administration for low- to moderate-income borrowers. FHA loans feature low credit score and down payment requirements.
VA mortgage
A government loan backed by the Department of Veterans Affairs. To be eligible, you must be active-duty military, a veteran, a Reservist or National Guard service member, or an eligible spouse.
VA loans allow no down payment and have exceptionally low mortgage rates.
USDA mortgage
USDA loans are a government program backed by the U.S. Department of Agriculture. They offer a no-down-payment solution for borrowers who purchase real estate in an eligible rural area. To qualify, your income must be at or below the local median.
Bank statement loan
Borrowers can qualify for a mortgage without tax returns, using their personal or business bank account as evidence of their financial circumstances. This is an option for self-employed or seasonally-employed borrowers.
Portfolio/Non-QM loan
These are mortgages that lenders don’t sell on the secondary mortgage market. And this gives lenders the flexibility to set their own guidelines.
Non-QM loans may have lower credit score requirements or offer low-down-payment options without mortgage insurance.
Choosing the right mortgage lender
The lender or loan program that’s right for one person might not be right for another.
Explore your options and then pick a loan based on your credit score, down payment, and financial goals, as well as local home prices.
Whether you’re getting a mortgage for a home purchase or a refinance, always shop around and compare rates and terms.
Typically, it only takes a few hours to get quotes from multiple lenders. And it could save you thousands in the long run.
Time to make a move? Let us find the right mortgage for you
Current mortgage rates methodology
We receive current mortgage rates each day from a network of mortgage lenders that offer home purchase and refinance loans. Those mortgage rates shown here are based on sample borrower profiles that vary by loan type. See our full loan assumptions here.
Well, so much for mortgage rates falling just in time for the spring home buying season.
While many expected interest rates to be lower by now, they’ve proven to be pretty sticky at current levels.
At last glance, the 30-year fixed is still hovering close to 7%, albeit better than October 2023 when it was around 8%.
But there was hope we’d see rates in the 6% range by now and maybe even lower if the Fed had cut rates earlier.
Interestingly, rates are actually pretty well aligned with the 2024 mortgage rate predictions made at the end of last year.
The likes of Fannie Mae and the Mortgage Bankers Association pegged the popular loan program at 7% for the first quarter of 2024. And that’s pretty much where we stand today.
The bad news is they’ve now indicated that it could take longer for rates to fall to more agreeable levels.
Fannie Mae Has Adjusted Its Mortgage Rate Forecast Higher for 2024 and 2025
In Fannie Mae’s March forecast, they noted that their “interest rate forecast has been upgraded.”
And not upgraded in a good way. Upgraded as in expect higher mortgage rates for the foreseeable future.
Just how bad is it? Well, after making adjustments a month earlier, they’ve since made upgrades of four-tenths and five-tenths, for the years 2024 and 2025, respectively.
This puts the 30-year fixed at an average of 6.6% in 2024 and 6.2% in 2025. In other words, no sub-6% mortgage rate for the next two years! Ouch!
In January, their forecast called for a 5.8% 30-year fixed in the fourth quarter of 2024, and a relatively low 5.5% by the end of 2025.
Freddie Mac Also Expects Mortgage Rates to Stay Above 6.5% in the First Half of 2024
Meanwhile, Freddie Mac released a new outlook that calls for mortgage rates to remain high through at least the first half of 2024.
They noted that 30-year mortgage rates will stay above 6.5% through the second quarter of 2024.
It’s unclear what happens after that, but there’s not a lot of optimism at the moment.
This should translate to lower mortgage volume, with rate and term refinance activity hard to come by.
And purchase activity also constrained by things like a continued lack of for-sale supply and mortgage rate lock-in.
However, they do expect home prices to increase by about 2.5% in 2024 and another 2.1% 2025.
Whether this keeps up with inflation is another story…
Why Aren’t Mortgage Rates Coming Down?
Simply put, the economy continues to run too hot. As a rule of thumb, good economic news leads to higher interest rates. And vice versa.
The reason is a strong economy typically results to inflation, which is bad for bond prices and mortgage-backed securities.
That price pressure requires higher yields, which translates to higher mortgage rates. So if you want lower rates, you kind of need to root for economic strife.
Due to this robust economy, the Federal Reserve has maintained its restrictive monetary policy.
While there were expectations of a series of rate cuts in 2024, including one as early as this March, the Fed balked today.
And there’s a chance rate cuts will remain elusive for the time being.
Ultimately, inflation continues to run high and unemployment remains low. Until that changes, the Fed won’t “pivot” and cut rates. They’ll simply stay the course.
While the Fed doesn’t directly control mortgage rates, their long-term policy decisions can dictate the direction of 10-year treasury yields and also 30-year mortgage rates.
Until economic conditions worsen, don’t expect the Fed to pivot and begin cutting its own federal funds rate.
Perhaps It’s Better to Say Mortgage Rates Will Be Elevated for Longer
There’s a popular phrase “higher for longer,” in reference to the Fed’s monetary policy needing to remain restrictive for a longer period of time to reach its goals.
When it comes to mortgage rates, perhaps it’s more accurate to say “elevated for longer.” That is to say they won’t necessarily go higher from their current levels.
But they may remain at these higher levels for longer than originally anticipated. So it’s not like we’ll necessarily see mortgage rates move up from here.
Or that they’ll go back to those scary 8% rates seen in October 2023. But they could linger in this unpleasant range throughout 2024. And maybe even into 2025.
This may make that date the rate, marry the house thing hard to achieve
If you recall when mortgage rates were super low, many forecasts called for higher rates year in and year out.
Yet each year, the forecasts proved to be incorrect as rates reached new all-time lows and stayed at/near those levels for much longer than expected.
Sadly, the same thing is possible now, just the other way around. So instead of rates doing what the forecasters expect, they’ll continue to remain sticky high.
The funny part is the economists will be wrong in both instances. Wrong about them rising for many years. And possibly wrong again about them falling back down to earth.
The PROGRESS in Lending Association released the names for its 2024 Innovations Award winners last week, including two vendors that are active in the reverse mortgage industry, according to an announcement.
The organization recognized LoanPASS for its loan pricing software, which can map out forward and reverse mortgage options side by side.
“In this current market, many lenders are looking for new lending products to offer to help expand their offerings and keep the company afloat,” the organization said in its announcement of the award winners.
It went on to state that independent mortgage banks, community banks and credit unions have shown interest in product pricing engines (PPEs) that allow them to price and make decision on nonqualified (non-QM) mortgages, reverse mortgages, fix-and-flip loans, construction loans or portfolio lending products.
This past January, San Diego-based reverse mortgage wholesale lender Smartfi Home Loans forged a partnership with LoanPASS to use the technology company’s software-as-a-service (SaaS) product pricing engine in its reverse lending operations.
“Partnering with LoanPASS to implement their product and pricing engine was an easy decision as it seamlessly aligned with our vision,” Smartfi CEO Gregg Smith said in a statement in January. “Their innovative solution supports our commitment to streamlining the lending process for our partners.”
Also recognized by the PROGRESS in Lending Association was Mortgage Cadence, which was lauded for its technology innovation.
“With reverse mortgages on the rise, Mortgage Cadence knew it was important to include both forward and reverse lending in its platform,” the organization said of its award for Mortgage Cadence. “Lenders are enabled to work more efficiently, leveraging automation and workflow tools that enable an excellent borrower, sales and operational user experience. It was important to the team that this experience was available for reverse lending and not just forward.”
Last month, Mortgage Cadence announced the hiring of reverse mortgage industry veteran George Morales to serve on its sales team. The company is aiming to bring more reverse mortgage technology solutions to potential partners already in the industry, as well as those that have yet to enter.
“I’m standing in a place where I’ve got all this reverse experience, but I’ve also got a lot of forward experience, [having] been in the mortgage industry since 1999,” Morales told RMD in February.
“The reverse experience is particularly interesting right now, because we’re seeing traditional forward mortgage companies really starting to come around on the reverse product a little more than we’ve seen in a while. And so for me, I feel like it’s an opportunity to kind of open the door via technology, to how and what is happening in the reverse space.”
Known for its university, athletics, and natural beauty, Eugene offers a variety of neighborhoods that are perfect for renters who prefer to navigate on foot. From the lively streets of Downtown to the serene paths of Fairmont, each neighborhood has its own charm. Rentals are fairly expensive, though, with the average one-bedroom apartment costing $1,520.
In this ApartmentGuide article, we will take you on a virtual tour of the most walkable neighborhoods in Eugene, providing insights to help you find your perfect fit. So, get ready to explore the pedestrian-friendly side of Eugene.
All data sourced March 2024.
1. West University
Walk Score: 93
West University is the most walkable neighborhood in Eugene, with a Walk Score of 93. Known for its close proximity to the University of Oregon, residents and visitors alike can explore the area and take advantage of its walkable layout. Notable attractions include the Jordan Schnitzer Museum of Art and University Park.
Search for West University apartments for rent.
2. Downtown
Walk Score: 91
Downtown has a Walk Score of 91, making it the second most walkable neighborhood in Eugene. There’s a lot to love about the area, from its historic buildings to its bustling nightlife. While you’re walking around the neighborhood, check out the Hult Center for the Performing Arts.
See Downtown apartments for rent.
3. Jefferson Westside
Walk Score: 86
Jefferson Westside is the third most walkable neighborhood in the city. There are numerous walkable areas and attractions throughout Jefferson Westside, like Monroe Park and the Fifth Street Public Market. And if you’re in the mood for an adventure, you’re not far from the Willamette River.
Find Jefferson Westside apartments for rent.
4. Whiteaker
Walk Score: 80
Whiteaker has plenty of amenities a resident might need within walking distance. From the Ninkasi Brewing Company to the Owen Rose Garden, you’re sure to find something to love. A notable amenity is the Whiteaker Community Market, which is a great spot for locals and visitors alike.
Browse Whiteaker apartments for rent.
5. University
Walk Score: 80
As the fifth most walkable neighborhood in the city, University is known for its academic atmosphere. Consider exploring the Museum of Natural and Cultural History or grabbing a bite to eat at the Falling Sky Pizzeria and Public House with friends. There are plenty of other amenities in this scholarly community as well, like the Knight Library and the Matthew Knight Arena.
Discover University apartments for rent.
6. South University
Walk Score: 78
South University has a Walk Score of 78, making it the sixth most walkable neighborhood in Eugene. Known for its residential charm, residents and visitors can choose from walkable amenities such as the Washburne Park and Hayward Field. While you’re out, check out the Prince Puckler’s Ice Cream.
Look for South University apartments for rent.
7. Far West
Walk Score: 67
Far West is the seventh most walkable neighborhood in Eugene. This suburban community has quite a few hotspots for residents to visit on foot, including Westmoreland Park and the Cascade Manor. While you’re walking, take a moment to smell the flowers at the Madison Meadow.
Search for Far West apartments for rent.
8. Amazon
Walk Score: 64
Amazon has a Walk Score of 64, making it the eighth most walkable neighborhood in the city. There’s a lot to love about the area, from grabbing a bite to eat at nearby Cafe Yumm!, to taking a walk at Amazon Park. If you’re up for a longer outing, nearby Hendricks Park is popular among locals.
Find Amazon apartments for rent.
9. Friendly
Walk Score: 62
The ninth most walkable neighborhood in Eugene is Friendly. Pedestrians can enjoy the variety of restaurants, cafes, and shops, like the Friendly Street Market, Cornbread Cafe, and the Provisions Market Hall. It’s also easy to walk over to the Wayne Morse Family Farm for a great day out.
Peruse Friendly apartments for rent.
10. Fairmont
Walk Score: 53
Fairmont is the tenth most walkable neighborhood in the city. Local attractions here include the Laurelwood Golf Course and Washburne Park, providing residents a spot to get together and enjoy their community. However, with a walk score of 53, it may be a challenge to complete errands on foot.
Discover Fairmont apartments for rent.
Check out more walkable cities in Oregon.
Methodology: Walk Score, a Redfin company, helps people find walkable, bikeable, and transit-friendly places to live, rating areas on a scale from 0-100. To calculate a Walk Score for a given point, Walk Score analyzes thousands of walking routes to nearby amenities, population density, and metrics such as block length and intersection density. Points are awarded based on the distance to amenities in each category.
Kohl’s thinks Americans want more
ideas for feathering their nests. The retailer is looking to regain sales momentum and shake off persistently glum financial results with an expanded assortment of home furnishings or décor,
offering 40% more items in stores and online.
Unstable borrowing conditions and a lack of affordable properties kept homeownership out of reach for many Americans in 2023. However, as the spring buying season approaches and signs that the market is recovering emerge, buyer sentiment is shifting. According to the National Association of Realtors®, national existing home sales in January 2024 were up year-over-year by 1.3%. Housing supply is also improving, with national inventory up by 3.1% year-over-year and 2% month-over-month.
These positive changes are setting the stage for an active spring market in the US. But as competition increases, so do home prices. The national median price for a single-family home in the US increased by 5.1% year-over-year in January to $379,100. This begs the question: where can prospective homebuyers find the best deals this spring?
To better understand where homebuyers can find pockets of affordability, Zoocasa analyzed home prices in 50 metropolitan statistical areas across the country to determine which are below the national median and where the most growth is happening. Median single-family home prices were sourced from the National Association of REALTORS® and are from Q4 2023, except the national median home price which is from January 2024.
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It’s usually said that the further outside of an urban center you go, the more affordable the home price. But of the 33 metropolitan statistical areas with a median home price below the national median, 15 have populations above 2 million, and five have populations above 5 million. The largest urban center with a median home price below the national median is Chicago, IL with a median home price of $343,300 in Q4 of 2023. Despite the city experiencing year-over-year price growth of 6.2%, Chicago’s median home price is still $35,800 below the national median.
Of the 50 markets we analyzed, Cleveland, OH came out on top for affordability. Cleveland’s median home price of $190,700 is an impressive $188,400 below the national median and is one of the few areas on our list where the median home price dropped from last year. Other markets where the median home price fell from last year include Myrtle Beach, SC, Houston, TX, San Antonio, TX, and Memphis, TN. Alabama’s capital, Montgomery, was the only other market on our list besides Cleveland with a median home price below $200,000. Homebuyers here can snag a home for approximately $185,700 below the national median.
It’s worth noting that five out of the six markets that experienced year-over-year price growth of more than 9% have home prices below the national median. These markets include Rochester, NY, Hartford, CT, New Haven, CT, Oklahoma City, OK, and Cincinnati, OH. This means that homebuyers of all price ranges, including those purchasing lower-priced homes, can still expect to build a significant amount of equity.
Markets that have experienced significant year-over-year price growth also present good investment opportunities. For instance, single-family homes in Philadelphia, PA have experienced year-over-year price growth of 7.2% and are still $20,100 below the national median price, making this sought-after city a good option for first-time investors. Kansas City, MO is an emerging market that would make a great first-time investment location. The city garnered a lot of media attention last year thanks to the city’s football team and frequent Taylor Swift visits, resulting in the median home price rising by 5.9% year-over-year. Despite its growing popularity, the median home price in Kansas City remains one of the lowest on our list at $315,800.
Homebuyers with their hearts set on a particular destination, especially one of the largest and most sought-after cities in the US, would benefit from considering smaller markets relatively close to their dream location. While the Big Apple might be out of reach for the average buyer, with a median home price of $659,200, New York’s second and third-largest cities still maintain affordable prices. Buffalo and Rochester have median home prices of $243,500 and $230,500 respectively. This is nearly $150,000 less than the national median, compared to New York City, where the median home price is more than $280,000 above the national median.
Though San Francisco, CA, and Los Angeles, CA have notoriously high home prices, at $1,251,000 and $884,400 respectively, California homebuyers still have affordable options. At just $26,600 above the national median, Fresno’s median home price is one of the more affordable options in California. But for savvy buyers looking for a deal in California, Bakersfield presents the best option with a median home price of $11,800 below the national median.
In Florida, motivated buyers on the hunt for affordable prices will have to look outside of the vibrant Miami market, which has a median home price more than $200,000 above the national median. Tampa’s median home price exceeds the national median by just $30,900, while Daytona Beach and Tallahassee offer more affordable housing, with median prices $16,700 and $57,100 below the national median, respectively.
Planning to enter one of these markets this spring? It’s important to speak with a local realtor who is familiar with your local real estate market. Give us a call today to discuss your home-buying plans.
The joy our furry and feathered friends add to our lives is priceless. But pet ownership does come at a dollars-and-cents cost. From basics like adoption fees and food to expensive emergency veterinary care, being a pet parent can be, well, ruff on your bank account.
Pet loans are one way to pay for the expenses of having a pet, but it’s usually a good idea to consider alternatives before going into debt.
Read on to learn about how pet loans may be able to help you meet the financial demands of pet ownership and what other options are available.
What Is Pet Financing?
Pet financing refers, essentially, to taking out a personal loan to pay for the cost of owning a pet. While some banks may market the loans specifically as pet loans, they work the same way.
A personal loan is unsecured debt, which means the bank doesn’t have any collateral to turn to in the event the loan is not repaid. This means that personal loans, including pet loans, may have stricter eligibility requirements and higher interest rates. 💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. SoFi personal loans come with no-fee options, and no surprises.
Cost of Owning a Pet
While the specifics will depend on what kind of pet you own — a fish costs a lot less to feed and care for than a Great Dane — all types of pet ownership come with some costs involved. Here are some of the common expenses you may encounter:
• Purchase or adoption fees, which can vary significantly. Buying a purebred puppy could cost thousands of dollars, while an adoption fee might be a nominal $25 for a cat at the shelter.
• Regular veterinary check-ups and vaccines, which pets need in order to be safe (and, in the case of the rabies vaccines in some U.S. states, legal to keep)
• Food, which can run the gamut from cheap kibble to expensive raw or fresh foods
• Supplies you need to keep your pet safe and happy, like food and water dishes, beds, crates, litter boxes and litter, collars and leashes, or treats.
• Veterinary care or medical procedures that may cost far more than regular upkeep, like dental work or surgery to repair a broken bone
What Can I Use a Pet Loan For?
Because a pet loan is basically just a personal loan, you can use the money for pretty much anything you want. (If the bank you’re borrowing from is offering a pet loan specifically, you can check and ensure that there are no rules or restrictions around what the money can be used for.)
Here are some of the most common ways you might use the funds from a pet loan.
Pet Purchase Financing
If you’re purchasing a pricy purebred, or if the setup phase of pet ownership comes at a steep cost (i.e., if you’re getting into saltwater fish tanks), you might want to use the money from your pet loan to fund the purchase or adoption of your pet.
Pet ownership tends to be more expensive in the first year or so than in subsequent years, since new pets may often need to be spayed or neutered or have their first rounds of puppy or kitten shots. Using a pet loan to get into pet ownership may make sense if you know you’ll have the money to pay back the loan and afford continued care throughout the pet’s life.
Pet Health Care Financing
Just as with humans, health-care related costs for pets can be high. The average cost of routine vet care can be as much as $350 on average during the first year of pet ownership, and $250 per year after that.
That may not sound like much. But alongside other major expenses, like food — which can run as high as $500 or more per year on its own — vet bills can really add up, and may be a reason some owners choose to take out a pet loan.
Pet Surgery Financing
We all hope our four-legged friends never need major medical care, but when they do, it can be just as worrisome for our wallets as our hearts. For instance, even a routine surgery like a spay can cost up to $600 at a private veterinary practice. And if your dog needs a dental cleaning — which is done under anesthesia— the cost may jump tp $1,500 or higher
So using a pet loan to pay for a pet’s surgery can make a lot of sense, though there are still other alternatives to consider (which we’ll get into below).
Pet Care Financing
As anyone who has a dog or cat who can’t or won’t travel knows, pet care can be expensive, particularly if you’re paying for overnight pet-sitting for several days in a row.
Whether you’re boarding your kitty or pup or enlisting the help of a professional pet watcher, you might spend around $50 per night or more. This adds up quickly when you factor in other costs of travel. That’s why pet care might be another reason to take out a pet loan.
Pet Store Financing
For pet owners, a trip to the pet store can feel like being a kid in the candy shop. But most of the items you can purchase cost far more than a nickel or a quarter.
You could use a pet loan to purchase supplies from the pet store, such as feeding dishes, bedding, treats, and toys. (If you’re hoping to finance your own pet store, on the other hand, you’d probably want to look into a business loan.)
Can I Get Pet Financing With Bad Credit?
Like any type of financing, the better your credit, the easier it is to get a pet loan — especially since, again, it’s an unsecured form of debt and therefore riskier for the bank.
While many factors about your financial situation will be assessed, like your income, other current debts, and job stability, you’ll likely need a credit score of at least 610 or higher to qualify. And some banks may have a higher minimum credit score than that.
💡 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.
Reasons to Take Out a Pet Loan
From a financial stability perspective, it may be a good idea to avoid going into debt to take care of your pet, though in some cases, a pet loan may be the best option.
For example, if you need to take out a loan to afford a pet at all, it might be worth waiting until you’re in a stronger financial state before getting into pet ownership.
But if you already have a pet and are facing unexpected medical costs, taking out a pet loan may make more financial sense than, say, going into credit card debt for treatment. Still, a personal loan can impact your overall financial situation in a multitude of ways, so it’s worth considering all your options before making a plan.
Alternatives to Pet Loans
If you’re considering taking out a pet loan, here are some alternatives to put on the table before you sign the paperwork.
• Pet insurance can help lower the overall cost of veterinary care from the start. However, like human insurance, you may need to be careful to work with a vet who’s in-network in order to glean any savings.
• A veterinary payment plan may be available at your local clinic and may even offer 0% interest options based on your financial need. If you work with a private veterinary clinic, it’s worth asking if they have payment plans available, even if they don’t advertise them.
• Veterinary schools and low-cost clinics may offer the same care at a lower cost, whether to help new veterinarians with their training or simply to provide options for lower-income pet owners in the community.
• Savings can be a good option if you have an ample emergency cushion saved up, and may allow you to avoid going into debt. However, if your pet loan is at a low enough interest rate and you’re still working on building up an emergency savings fund, you might not want to break into it for Fido.
• Credit cards are another option that allow you to pay off large bills over time, and some credit cards offer a promotional 0% interest period. That said, if you are unable to pay off the debt in full before the promotional period ends, you may be stuck with an APR of 20% or higher, and that kind of interest rate can make it even more challenging to get out of debt.
The Takeaway
A pet loan can help you finance some of the costs of pet ownership. But keep in mind it’s still a form of debt, so it’s worth carefully considering alternative options before you sign up.
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
Can I take out a loan for a dog?
If your credit history is strong enough, you may be able to take out a pet loan — a type of personal loan — to pay for the cost of adopting or purchasing a dog, or any of the costs associated with their care thereafter. However, if you can’t afford to own a dog out of pocket, you’ll want to think carefully about whether or not it’s a smart financial move.
What credit score do you need for pet financing?
While each bank has its own specific requirements around minimum credit scores, for most personal loans, including pet loans you won’t be able to qualify with a score lower than 610. (Of course, your credit score isn’t the only thing that matters. The bank will also look at your income, existing debts, job stability, and more.)
What do you do if you can’t afford to keep your pet?
There are many options available to those who’ve found they can’t afford to keep their pets. While turning your pet over to a humane shelter or otherwise rehoming them with a trustworthy family is one way to go, you may also be able to lower the cost of pet care by visiting low-cost veterinary clinics or taking out a pet loan.
Photo credit: iStock/AleksandarNakic
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.