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An installment loan consists of a lump sum of money you repay over time. Auto loans, personal loans and mortgages are common examples of installment loans.

The term installment loan, sometimes called “installment credit,” refers to a financial agreement wherein a lender offers you a lump sum of money you’ll have to repay over time. People tend to seek installment loans for big purchases like a new car or financing for a home. Effectively repaying your loan in full and on time can elevate your credit score.

We’ll thoroughly discuss installment loans in this guide, weigh their pros and cons and help you decide if this funding is right for you. 

How do installment loans work? 

A person can acquire an installment loan by applying with a financial institution such as a bank or credit union. Each lender has distinct criteria they’d like applicants to meet and specific loan terms. 

On average, installment loans can offer borrowers anywhere from $1,000 to $100,000 and typically have repayment periods that range from one to 30 years. 

If you’re approved for an installment loan, the lender will provide you with the funds to use for whichever purpose is outlined in your loan agreement. Then, you’ll be expected to repay the money you borrowed in weekly or monthly installments — plus any interest generated by your loan’s annual percentage rate (APR).

Interest rates play a substantial role in your loan repayment plan. When you carry a balance on a loan, your APR will be factored in to determine how much interest you’ll be responsible for. If you have a six percent interest rate and you have a balance of $100 due, you’ll end up paying 50 cents in interest. The lower your remaining balance is, the less interest you’ll pay for the remainder of your loan.

Installment loans differ from revolving credit (like a credit card) in terms of use. With an installment loan, you borrow money for a specific purchase and then pay it off for good. With revolving credit, you repeatedly borrow and repay funds for various purchases in perpetuity.

Do installment loans affect your credit score?

Installment loans influence your score in several ways. When you first apply for funds, lenders will review your credit report. This counts as a hard inquiry to the major credit bureaus and may briefly lower your score.

How you manage your loan repayments can also affect your score for better or worse; consistently paying your minimum balance for each billing cycle can significantly increase your credit score by demonstrating financial responsibility and vice versa.  

Managing an installment loan also contributes to your credit mix — a factor that can potentially raise your credit score based on your current number of open accounts.

5 types of installment loans

A variety of installment loans are available for eligible borrowers. Below are five examples of some of the most common loans you’ll encounter.

Auto Loans

Auto loans help borrowers obtain vehicles with relative ease and gradually repay what they owe over several years. A person’s monthly car note is largely determined by auto loan rates, APR and their down payment amount. Auto loans for bad credit borrowers might offer smaller amounts or have stricter repayment terms.

  • Main advantage: Help borrowers lease or finance vehicles.
  • Main disadvantage: Good credit or more is needed for the best auto rates.

Buy Now, Pay Later Loans

When shopping online, you may be able to apply for a buy now, pay later loan. These funding options let you split a purchase into installments and spread across several weeks or months. These loans normally cover purchases between $50 to $1,500.

  • Main advantage: Splits eligible purchases into installment payments.
  • Main disadvantage: It’s easy for people to borrow more than they can afford.

Mortgages

Mortgages are some of the largest and longest-lasting installment loans a person can apply for. Banks typically offer mortgages with 30-year terms, though this can vary depending on things like the economy and a borrower’s credit profile.

  • Main advantage: This can help you purchase a home that you can eventually own.
  • Main disadvantage: Mortgages are hard to obtain and can be expensive in the long term.

Personal Loans

Personal installment loans can come in multiple forms, including debt consolidation, medical loans and joint loans. 

  • Main advantage: Lump sum funding that can have versatile uses.
  • Main disadvantage: Normally comes with high interest rates and additional fees.

Student Loans

These are some of the first installment loans that people might be eligible for because they have more open-ended eligibility requirements. Government institutions and banks are usually willing to offer these loans to students with little or no credit history. They might even defer repayment until after graduation.

  • Main advantage: Low or no credit score requirements for students, eligible for debt forgiveness and deferment plans.
  • Main disadvantage: Come with loan caps and can take 10 to 30 years or more to repay.

Should I use an Installment Loan?

Installment loans are helpful for making important purchases, though one can potentially overborrow if they take out too many loans without a solid repayment plan set. You should use installment loans if you believe you can reliably make your minimum payment amounts each period. 

If your financial situation changes, it’s important to notify your lender as soon as possible. Writing a goodwill letter that accurately explains your circumstances can pave the way for leniency and give you more time to marshal your finances.

How knowing your credit score can help you get a loan

People can use installment loans to help make major purchases and boost their credit, so long as they have a plan to repay what they owe. Knowing your credit profile can give you a better sense of the loans you’re currently eligible for. Get a free credit assessment from Lexington Law Firm today.

Source: lexingtonlaw.com

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“A national secondary market for construction financing could allow lenders, like state housing finance agencies and banks, to provide the investment capital needed to get multifamily housing projects built and keys in families’ hands.”

This is the conclusion of a new report published by the Center for Public Enterprise, a nonprofit organization that promotes the expansion of public sector projects.

Such lenders, the report states, could underwrite mezzanine construction loans under the assumption that a national housing construction fund would have the ability to buy these loans on the secondary market. This could make the overall cost to entry — which is already low — more digestible.

“The size of the investments needed to get typical multifamily housing projects moving is small: mezzanine loans covering less than 20% of project costs could bring average costs of capital down significantly, allowing shovels to get into the ground,” the report reads.

Due to the well-documented issues facing housing supply across the U.S., and coupled with high home prices and persistently high interest rates, multifamily housing starts have slowed despite low vacancy rates nationwide. But when demand comes back, new housing that “should have been built has not been, starting another price cycle,” the report explained.

Establishing a national housing construction fund has the potential to reduce burdens on builders and lenders caused by higher rates. It could also potentially create “an economic environment where housing production achieves a degree of insulation from the business cycle factors that are not indicative of housing demand,” the report said. This could lead to a situation where housing production becomes “smoother and more stable across time.”

Since policy proposals tailored to the needs of housing construction haven’t materialized to any meaningful degree, stakeholders are reliant on monetary policy — a “broadsword, not a scalpel” when it comes to the interests of the housing industry. Price pressures are addressed primarily by making it more difficult to conduct business operations as opposed to addressing the root issues specific to a particular industry.

“If monetary policy is successful in reducing demand — often by inducing a recession — then eventually, interest rates normalize and, theoretically, demand comes back,” the report states. “And herein lies the problem: housing stock, particularly multifamily housing, takes time to build — far more time than it takes to produce most other goods and services Americans use on a daily basis.

“When the economy comes back, the new units which should have been available for a resurgent consumer market are not available because construction did not occur during the trough of the cycle.”

These actions also serve to teach builders that should there be a monetary policy instrument used to impact the economy, it will also likely be bad for them, leading to a pullback in construction activity in preparation for a policy change. This necessitates federal tools that can help to more precisely alleviate these burdens on housing construction, the report suggests.

“National housing researchers, including Freddie Mac, estimate that the housing supply shortfall across the country is between 1 million and 5 million homes. There are many policy levers that must be pulled to get there,” the report reads.

“A financing lever with the ability to partially insulate housing investment from the volatility of the business cycle has been, until now, a missing piece among the array of tools and interventions. We hope that a housing construction fund, as outlined here, can fill that gap.”

Source: housingwire.com

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This just in: Houses are expensive. But some houses are really expensive. If you have your heart set on a luxurious oceanside mansion (or just a modest home in an ultra-high-cost city like New York or San Francisco), you may need to seek out a jumbo mortgage: one whose dollar amount surpasses the conforming loan limits set by the Federal Housing Finance Administration (FHFA) each year. In 2024, that limit is $766,550 in most cases, though in some high-cost areas the limit can range up to $1,149,825. Any mortgage that exceeds those amounts is considered a jumbo loan.

What Are Jumbo Loans?

Jumbo loans are those in which the mortgage total surpasses the conforming loan limits set by the FHFA. The conforming loan limits change annually. As noted above, in 2024, a jumbo loan is one whose total is $766,550 or more in most areas, though in select high-cost areas, the limit goes up to $1,149,825.

Your mortgage total is the amount of money you borrow in order to purchase a house — an amount that can be calculated by subtracting your down payment from the agreed home purchase price. (Keep in mind, though, that this figure isn’t the same as how much you’ll pay in full over the lifetime of the loan, since you’ll also owe interest to the bank that provides the loan. Still have questions? Check out our mortgage payment calculator with interest.)

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Jumbo vs Conventional Loan

Conventional loans are offered privately through banks, credit unions, and other financial institutions, unlike other loans which are supported by a government agency such as the Federal Housing Administration (FHA) or USDA (U.S. Department of Agriculture). Conventional loans are easily the most common type of home loan.

Jumbo loans are a type of conventional loan. But whereas most conventional loans are also conforming loans and are available with a minimum down payment as low as 3% for first-time homebuyers, jumbo loans are considered nonconforming and typically require a larger down payment — usually at least 10%. You’ll also likely need a very high credit score in order to be eligible to take out a jumbo loan.

Determining Jumbo Loan Limits

As we’ve seen above, the specific jumbo loan limits where you live (or where you’re planning to buy a home) will vary depending on the area’s cost of living. The FHFA offers a convenient conforming loan map that allows you to see what the conforming loan limits (otherwise known as jumbo loan limits) are in your area, broken down by county.

How Loan Limits Are Calculated

The jumbo loan limit is determined each year by the FHFA using current housing price data. That way, the limits are tied to real information in the world about how much it actually costs to buy a home in a given area. Conforming loan limits — also known as the jumbo loan limits — change each year; new limits for the coming year are typically announced in late November.

Current Jumbo Loan Limits

As mentioned above, in 2024, the jumbo loan limit for the vast majority of the U.S. is $766,550, and the highest conforming loan limit, in the most expensive places to live, is $1,149,825. To see exactly what the jumbo loan limits are in your area, visit the FHFA’s map.

Qualifying for a Jumbo Loan

Jumbo loans are, well, big — which means the qualification metrics for getting a home loan are pretty strict. (After all, that’s a whole lot of money the lender stands to lose if you default.) While every lender has its own specific algorithm for qualifying potential borrowers, here are some rules of thumb when it comes to qualifying for a jumbo loan:

Credit Score Requirements

While there’s no specific credit score that guarantees you’ll qualify for a jumbo loan, most lenders will likely require a high one — after all, it’s a fairly risky prospect to lend that much money to someone. Credit scores range from 300 to 850. Scores of 670 to 739 are considered good; scores of 740 to 799 are considered very good, and scores of 800 and above are considered exceptional.

Down Payment Requirements

We touched on this briefly, but jumbo loan lenders often require their borrowers to provide a more substantial down payment than conventional loan lenders do. While a minimum of 10% is a good rule of thumb, some lenders may ratchet up the minimum to 25% or 30%.

Considering how large jumbo loans are already, that means you’ll probably need a significant amount of cash lying around in order to successfully apply for one — 10% of $800,000, a relatively small jumbo loan, is already $80,000.

Debt-to-Income Ratio Requirements

Your debt-to-income ratio, or DTI, is a measurement of your existing debt burden expressed as a percentage. It’s calculated by totalling all your monthly debt payments and dividing that figure by your gross monthly income.

Conventional loans usually required a DTI of 50% or lower — and that’s the absolute max. (Many lenders cut off qualification at lower percentages.) Again, while there’s no one advertised maximum DTI for a jumbo loan, you’ll likely want to have as little debt as possible in order to qualify — not to mention in order to have the money on hand each month to make that massive mortgage payment.

Income and Asset Documentation

Jumbo loan lenders are, of course, primarily concerned with your ability to repay the loan. That means that, along with the above-mentioned factors, they’ll also want proof that you earn a reliable and high income — and in some cases that you’ve already stockpiled enough wealth that you’ll be able to make your payments for several months even if you lose your job. For this reason, qualifying for a jumbo loan can be especially challenging for a self-employed worker.

Advantages and Disadvantages of Jumbo Loans

So, now that you understand them better, is a jumbo loan right for you? Like any financial decision, taking out a jumbo loan has both benefits and drawbacks to carefully consider. Here are some of the pros and cons of jumbo loans.

Advantages of Jumbo Loans

Jumbo loans offer those who qualify the opportunity to purchase a costly home that they might otherwise not have access to. They may also be available at similar interest rates to lower conforming loans, and both fixed and adjustable rates are available in 15- and 30-year terms.

Disadvantages of Jumbo Loans

On the other hand, jumbo loans are, well, jumbo-sized — which means the total amount you’ll pay over time is, too. Even a low interest rate can add up to a lot on a large principal balance, and jumbo loans also have more stringent qualification and down payment requirements than their conforming counterparts. Associated closing costs and fees can be higher, too.

Alternatives to Jumbo Loans

If you find yourself having trouble qualifying for a jumbo loan, you could look into other nonqualifying mortgages, such as bank statement loans — or potentially borrow a significant amount of money from family or friends. However, if the home you’re vying for is that much of a stretch, it may make more financial sense to find something a bit more modest and apply for a conforming loan instead.

The Takeaway

Jumbo loans are large mortgages that don’t conform to the limits set by the FHFA — and therefore come with stricter qualification requirements. While jumbo loans can help those who qualify to access a high-value house, they can also be hard to keep up with unless your income is correspondingly high.

When you’re ready to take the next step, consider what SoFi Home Loans have to offer. Jumbo loans are offered with competitive interest rates, no private mortgage insurance, and down payments as low as 10%.

SoFi Mortgage Loans: We make the home loan process smart and simple.

FAQ

What does a jumbo loan mean?

Jumbo loans are those whose totals exceed the conforming loan limits set each year by the FHFA. For 2024, that limit is $766,550 in the vast majority of the U.S.; in some areas with a high cost of living, the conforming loan limit can be as high as $1,149,825.

What are the disadvantages of a jumbo loan?

Along with their extra-large monthly mortgage payments, jumbo loans also come with stricter eligibility requirements and higher minimum down payments. In most cases, you’ll need to pony up at least 10%, and some lenders may require as much as 30% up front.

Why are jumbo loan limits necessary?

Most mortgage loans issued in the U.S. are guaranteed by Fannie Mae and Freddie Mac, which helps reduce risk for lenders and ensure that loans are affordable and available to homebuyers. But the guarantee has to stop somewhere, and conforming loan limits draw that line. This is why jumbo loans have more stringent borrower requirements than conforming loans — lenders who make jumbo loans don’t have Fannie Mae and Freddie Mac to fall back on if a jumbo borrower defaults.

Photo credit: iStock/Wirestock

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

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

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

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

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.

SOHL-Q324-009

Source: sofi.com

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Creating a budget grocery list is a smart way to save money while ensuring you have all the essentials you need. With the right items on your list, you can enjoy nutritious and delicious meals without overspending.

Whether you’re trying to cut down on expenses, build healthier eating habits, or just make grocery shopping easier, having a well-planned list is key. Here are 12 must-have items that should be on your budget grocery list to help you stay on track and make the most of your money.

1. Dried Beans

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Dried beans are cheap and full of nutrition. They provide protein and fiber while being low in calories. Perfect for vegetarian and vegan diets, they make a great addition to any budget grocery list.

2. Potatoes

Image Credit: Yelena Yemchuk from Getty Images Pro.

Potatoes are cost-effective and versatile. They can be used in many dishes and are great for those on a budget. You can bake, boil, or mash them for a frugal and filling meal.

3. Peanut Butter

Image Credit: Atlasstudio.

Peanut butter is a budget-friendly staple. It’s a good source of protein and healthy fats. You can eat it alone or use it in various recipes to add flavor and nutrition.

4. Oatmeal

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Oatmeal is one of the cheapest and healthiest grains. It’s low in calories, high in fiber, and magnesium. It’s a versatile option for breakfast, snacks, or lunch.

5. Eggs

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Eggs are a cheap source of protein and nutrients. They cost less than ten cents per serving and can be used in many recipes, from omelets to baked goods.

To learn more: 100+ Frugal Meals for When You’re Broke or on a Budget

6. Bananas

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Bananas are a budget staple. They’re inexpensive, easy to store, and perfect for a quick snack or to add to meals.

7. Apples

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Apples are a great budget-friendly fruit. Look for cheaper varieties like Red Delicious and Gala. They’re nutritious and easy to find, making them perfect for a frugal grocery list.

8. Rice

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Rice is a great value food for any budget. It’s widely used in Mediterranean diets and can be added to stir fry or burritos. Add spices for extra flavor.

9. Lentils

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Lentils are a budget-friendly protein source. You can make plant-based meat alternatives or stretch meals by adding them to ground turkey. They’re versatile and nutritious.

10. Carrots

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Carrots are cheap and full of nutrients like fiber, potassium, and beta carotene. They help with weight loss, eye health, and cholesterol. Buy whole carrots instead of baby carrots to save more money.

11. Pasta

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Pasta is a versatile, budget-friendly option. It’s cheap and can be used in many dishes, from main courses to side dishes. Top it with sauce, cheese, or butter for a frugal meal.

12. Canned Tomatoes

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Canned tomatoes are cheaper than fresh and perfect for budget meals. They can be added to stews or sauces. Buying organic canned tomatoes can also save money.

Find 50 more Budget Grocery list ideas

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Want to save money while eating healthy? This guide has a list of affordable food options to keep you full. From meats to grains, fruits to veggies, this budget grocery list has everything you need.

To learn more: The 60 BEST Budget Grocery List Items for Cheap Eating

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More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!

Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.

Source: moneybliss.org

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Looking for the best ways to get free money from the government? Getting free money from the government might sound too good to be true, but there are actually several ways you can receive financial assistance. From helping with monthly expenses to finding unclaimed funds, these programs and resources can be a big help. The…

Looking for the best ways to get free money from the government?

Getting free money from the government might sound too good to be true, but there are actually several ways you can receive financial assistance. From helping with monthly expenses to finding unclaimed funds, these programs and resources can be a big help. The key is knowing where to look and meeting eligibility requirements.

This article will show you different ways to get extra money from the government. Whether you need help with your bills or want to get back money that belongs to you, there are many options for you.

Best Ways To Get Free Money From the Government

Below are the best ways to get free money from the government – for housing, children, health insurance, food, and more.

1. Apply for unemployment benefits

If you lose your job, you might be eligible for unemployment benefits. These benefits can help you cover some of your expenses while you look for a new job.

To qualify, you usually need to have worked a certain amount of time in the past year. Each state has its own rules, so you should check your state’s specific requirements.

You can apply for unemployment benefits online or by phone, and be ready to provide details about your recent jobs and earnings. This will help determine how much you can get each week.

The benefit amount is based on a percentage of your earnings from your previous job. It can range from about 40% to 60% of your past earnings. This money can be a helpful bridge while you search for new work.

Each week, you’ll need to report if you’re still unemployed and looking for a job. Some states may also ask you to document your job search activities so it’s important to follow these rules to keep receiving benefits.

Unemployment benefits probably won’t cover all your expenses, but they can make a tough time a little easier. Remember to apply as soon as you lose your job to start getting support right away.

2. Check for child tax credits

Child tax credits can be a big help for families.

You might be able to get money back from the government if you have kids such as for childcare or for just having children. The amount you can get depends on your income and the number of kids you have.

The Child Tax Credit now gives up to $2,000 for each child.

Make sure you check if you qualify for these credits. You can find out more by visiting the IRS website or talking to a tax expert.

3. Women, Infants, and Children (WIC)

The Women, Infants, and Children (WIC) program helps pregnant women, new mothers, and young children get healthy foods. This program is a great way to get extra help when you need it the most, and this is free government money for low-income families. It’s focused on keeping you and your little ones healthy and well-fed.

If you’re pregnant, you can get help right away and continue to receive it for up to six months after giving birth. If you have children, they have to be under the age of 5.

To qualify, you need to meet income guidelines and show that you are at nutritional risk. This can include being underweight or having a diet low in essential nutrients. WIC then provides monthly benefits that can be used to buy specific foods like milk, eggs, and fruits.

To apply, you need to contact your state or local WIC office (you can start by Googling “WIC + your state name”). They will tell you what documents to bring and where to go for your appointment.

4. Use SNAP for food assistance

SNAP stands for Supplemental Nutrition Assistance Program. It’s a government program that helps low-income families buy healthy food. If you qualify, you get an EBT card loaded with funds every month.

Using SNAP is easy. You can use your EBT card at most grocery stores and it works just like a debit card.

To qualify for SNAP, you need to meet certain income and other eligibility requirements. These can include having a low income based on your household size.

SNAP can be a huge help if you’re struggling to afford groceries. It allows you to buy essential foods like fruits, vegetables, meats, and dairy products.

5. Free and reduced breakfast and lunch at school

Your child may be able to get free or reduced-price meals at school through several programs, and these programs make sure kids have healthy meals every day.

The most well-known program is the National School Lunch Program (NSLP). It provides low-cost or free lunches to millions of children in public and nonprofit private schools.

Schools many times also have the School Breakfast Program. This is similar to the lunch program but focuses on providing a nutritious morning meal.

In addition to these programs, there is the Special Milk Program. This program provides milk to children who do not participate in other meal programs.

Some schools offer the Community Eligibility Provision (CEP). This allows schools in high-need areas to serve breakfast and lunch at no cost.

To find out if your child is eligible, check with your school. They can guide you through the application process and let you know what your child qualifies for.

6. Seek Temporary Assistance for Needy Families (TANF)

Temporary Assistance for Needy Families (TANF) is a government program that can help you if you’re facing hard times. It provides financial aid to families with children who are struggling to make ends meet and can help with childcare, job training, and finding work.

To apply for TANF, you need to contact your local TANF office. They will help you through the application process and let you know what documents you need.

It’s important to know that each state runs its own TANF program, so the benefits and services might vary. Be sure to ask your local office (you can also reach out to the U.S. Department of Health and Human Services) what specific help they can offer.

7. Low-Income Home Energy Assistance Program (LIHEAP)

If you need help paying your energy bills, you might qualify for the Low-Income Home Energy Assistance Program (LIHEAP). This program helps low-income households with their heating and cooling costs.

LIHEAP provides federal funds to reduce energy costs. This can include help with your energy bills and dealing with energy crises.

You can also get help making your home more energy-efficient. This is known as weatherization and might include things like adding insulation or fixing drafty windows.

8. Early Intervention and Head Start

Early Intervention services are great for families with young children who have special needs. These services help kids from birth to age three. They offer things like speech therapy, occupational therapy, and more. Most services are free, and others have a sliding scale fee. They make sure your child gets the help they need, even if you can’t pay.

Head Start programs are for kids aged three to five. They help with early learning and development. Head Start also supports families with health and dental services.

Both Early Intervention and Head Start focus on getting kids ready for school. They help children learn and grow in important ways and also support families by connecting them to resources they may need.

You can usually self-refer your child to these programs (each state has its own), or ask your pediatrician for a referral.

9. Apply for college grants

College grants are a great way to get free money for school. Unlike loans, you don’t have to pay back grants. They can help cover your tuition, books, and other school expenses.

One of the most well-known grants is the Pell Grant. For the 2023-24 school year, the maximum Pell Grant is $7,395. This grant is for students with financial need.

Another option is the Federal Supplemental Educational Opportunity Grant (FSEOG). This is for students with exceptional financial need. The amount you can get depends on your school and your financial situation.

To apply for these grants, you’ll need to complete the Free Application for Federal Student Aid (FAFSA). The FAFSA helps the government determine how much aid you qualify for.

Many states and schools also offer their own grants. Check with your school’s financial aid office to see what you might be eligible for. It’s a good idea to apply for as many grants as you can.

Grants can make a big difference in paying for college, so it’s worth the effort to apply. Make sure to look for scholarships too!

10. Public Student Loan Forgiveness (PSLF) program

The Public Student Loan Forgiveness (PSLF) program can help if you work in public service. This includes jobs like teaching, nursing, firefighting, and more. If you work in these fields and have federal student loans, you may be able to get your remaining loan balance forgiven after ten years of payments.

To qualify, you must work full-time for a qualified government or nonprofit organization. You also need to make 120 qualifying monthly payments under a qualifying repayment plan. Only payments made after October 1, 2007, count toward the 120 payments required.

The program mainly benefits people who work in low-paying, but important, public service jobs. It’s a way to give back while also getting financial relief. Though the application process can be long and require careful tracking, many find the effort worth it when their loans are wiped out.

11. Claim Earned Income Tax Credit (EITC)

The Earned Income Tax Credit (EITC) gives low- to moderate-income workers and families a tax break.

If your income is under a certain amount, you might qualify. This credit can either reduce the taxes you owe or increase your refund. For 2024, the EITC amounts can go up to $3,995, based on your income and family size.

To claim the EITC, you need to file a tax return, even if you do not owe any taxes. You should fill out Form 1040 and a Schedule EIC if you have qualifying children.

12. Get housing vouchers

Housing vouchers are a great way to get help with rent. They are commonly known as Section 8. These vouchers help low-income families, seniors, and people with disabilities afford safe and decent housing.

To get a voucher, your income must be below a certain level and this varies by location and family size.

With a voucher, you can choose any housing that meets program requirements. This gives you some freedom to pick a home that suits your needs best. The government will pay part of the rent, making it more affordable for you.

13. See if you qualify for down payment assistance

Buying a home can be tough, especially when it comes to saving for a down payment. That’s where down payment assistance programs can help prospective homeowners.

These programs come in many forms. You might find grants, loans, or other types of aid to help you with the down payment. Each state offers different programs and some are more generous than others.

To qualify, you’ll need to meet certain requirements. These can include income limits or being a first-time homebuyer.

14. Apply for Supplemental Security Income (SSI)

Supplemental Security Income (SSI) is a program that gives monthly payments to people who are disabled, blind, or over 65 and have limited income. You may get help with food, rent, and medical bills.

To apply for SSI, visit the Social Security Administration (SSA) website. There, you can find the application forms and details about the process. You may need to provide information about your finances and living situation.

The application can be done online, by phone, or in person. If you’re under 18 or applying for someone under 18, there are special forms for children.

15. Look for health insurance in the marketplace

We all know that health insurance can be very expensive. Before you skip it, I highly recommend comparing pricing of health insurance on the Health Insurance Marketplace to see if you can find something more affordable for you and your family.

It’s a great way to get coverage and possibly save money. Sometimes, if you qualify, you can get free or low-cost health insurance plans.

Go to Healthcare.gov to start, and each state has its own Marketplace, so follow the specific steps for your state. It can be a little confusing, so make sure you have no distractions and can spend some time doing this.

During the open enrollment period, you can choose a new plan or keep your current one. If you’ve had a big life event, like losing your job, you might qualify to sign up outside the usual enrollment times.

16. Medicaid

Medicaid is a state and federal program that helps people with low incomes get health care. If you qualify, you can receive free or low-cost medical services, like doctor visits, hospital stays, and even prescription drugs.

Medicaid is especially helpful for families, pregnant women, seniors, and people with disabilities.

One of the best parts is that Medicaid covers a wide range of services – you can get help with dental care, mental health services, and even long-term care.

Your income and family size usually determine if you can get Medicaid.

17. Search for unclaimed money

You might have unclaimed money waiting for you. This money comes from many sources like unpaid wages, forgotten bank accounts, or unclaimed insurance benefits.

You can check by going to unclaimed.org, the website managed by the National Association of Unclaimed Property Administrators (NAUPA).

Each state has its own database for unclaimed property. Check your state’s website to see if there is money owed to you.

Frequently Asked Questions

There are several ways you can get money from the government to help with different needs, like paying for food or getting extra support if you don’t make a lot of money.

What ways can I get money from the government?

There are many ways to get free government money. You can apply for unemployment benefits if you lose your job. Families can also check for child tax credits, which give extra money for children. Programs like WIC and SNAP can help with paying for food, and students can get free and reduced breakfast and lunch at school.

How can I get help from the government if I don’t make a lot of money?

Low-income families can use programs like WIC (Women, Infants, and Children), SNAP (Supplemental Nutrition Assistance Program), TANF (Temporary Assistance for Needy Families), LIHEAP (Low-Income Home Energy Assistance Program), and more to get help from the government if they don’t make a lot of money.

How can I borrow money from the government?

The government offers student loans for education through programs like FAFSA. Small businesses can apply for loans from the Small Business Administration (SBA). There are also some loan programs based on specific needs like starting a farm or buying a home.

What is FAFSA?

FAFSA stands for Free Application for Federal Student Aid. It’s a form that students fill out to get financial aid for college. It can help you get grants, loans, and work-study opportunities to pay for your education.

Can I borrow money from my social security benefits?

No, you cannot borrow money from your Social Security benefits. Social Security is designed to provide income during retirement or if you become disabled, so it’s not a source of loans or advance cash.

Is there free grant money for bills and personal use?

Yes, there can be grants for specific needs like paying utility bills or home repairs. You might also find grants for education, food, and health care. Check with local and federal agencies to see if you qualify for any of these grants.

How do I find out if I qualify for any government assistance?

You can visit government websites or contact local agencies. Many state and local governments have online tools to check your eligibility. It’s also helpful to reach out to community organizations that can guide you through the application process.

How To Get Free Money From the Government – Summary

I hope you enjoyed this article on the best ways to get free money from the government.

There are many ways to get free money from the government, such as for housing, to help pay for your children’s expenses, to afford health insurance, to buy food, and more.

Note: There may be changes or updates to the free government programs above. I recommend contacting the program to learn more. Also, please be sure to stay safe with your sensitive information and only use official websites (look for .gov websites and official government organization websites to start with to avoid scams).

What do you think of these free government programs? Have you ever used any of the ways above to get free money from the government?

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Source: makingsenseofcents.com

Apache is functioning normally

Student loans are often the go-to choice for families who need help paying for a child’s college education. But as you put together your financing plan, you may find there are other options worth considering — including using a home equity line of credit, or HELOC, to cover some college costs.

Both types of borrowing have advantages and disadvantages that may influence your decision to use one or both to pay for school. Read on for a look at student loans vs. HELOCs, and how each can be used to help with your family’s educational and financial goals.

What Is a HELOC?

A home equity line of credit, or HELOC, is a revolving line of credit provided by a private lender and secured with the equity you have in your home.

HELOCs are sometimes confused with home equity loans, but they are not the same thing. Because a HELOC is a line of credit, you pay interest only on the amount of money you’ve actually borrowed. Payments can vary from month to month, and as you replenish the account by making payments, you can borrow from it again. With a lump-sum home equity loan, a borrower receives all the money upfront and pays interest on the entire loan amount from day one.

A HELOC can be used to pay for just about anything — including tuition, books and supplies, housing, transportation, and other college expenses. But because the line of credit is secured with your home, if you fall behind on your payments, you could risk foreclosure. And should you decide to sell your home, you may be required to repay what you currently owe.

Recommended: Different Types of Home Equity Loans

What Are Student Loans?

Student loans allow students and, in some cases, their parents, to borrow money to pay for a college education. Here’s how the two main types of student loans work:

Federal Student Loans

There are a few different types of federal student loans, and each has its own rules when it comes to how much you can borrow and how the money is repaid. But generally, they offer lower interest rates than many other types of loans and include more protections for borrowers, including temporary relief programs in case of financial hardship, and even the potential for loan forgiveness.

To apply for federal student aid, you must submit the Free Application for Federal Student Aid (FAFSA®) form. If you qualify for assistance and accept what’s offered, the school will apply your federal loan funds to your outstanding account charges (tuition, fees, etc.). Whatever is left after that will then be turned over to you to use for other educational costs.

Private Student Loans

Private student loans are issued by nongovernment lenders, such as banks, credit unions, and other financial service companies. Because they aren’t backed by the federal government, these loans do not offer the same repayment options or safety-net protections as federal loans. So, if your family (student and/or parents) qualifies for federal student loans, you’ll probably want to tap those first. However, if you’ve exhausted your federal financial aid and require additional funds, you may find you can get the help you need by borrowing through a private lender.

Key Differences Between a HELOC and Student Loans

While you may decide to use federal or private student loans, a HELOC, or all three types of financing to help pay for a college education, it’s important to be aware of some key differences in how they work.

Interest Rates

•   Federal student loans are usually the way to go for borrowers who are looking for the lowest interest rates available. These loans come with a fixed interest rate that is set by the government, so once you sign on the dotted line, you can expect to pay the same rate for the life of the loan. But different types of federal student loans have different interest rates, and the way interest starts accruing on these loans also varies. If you have a subsidized loan, for example, you won’t accrue any interest while you’re in school, for six months after you leave school, or during any deferment. The U.S. Department of Education pays the interest during these periods. The interest on an unsubsidized loan starts accruing immediately, however, and it is the borrower’s responsibility.

•   Private student loans are generally available with a choice of a fixed or variable interest rate, but these rates, which are set by the individual lenders, can vary quite a bit — so it can be a good idea to shop for the most competitive offer based on your creditworthiness and other qualifications.

•   HELOCs have a variable interest rate, which means the rate can fluctuate over time. This could be good or bad, depending on which way interest rates are going. If rates drop, the borrower could benefit; but if they rise, it may make it harder to keep up with the payments. Still, because a HELOC is secured with your home, the interest rate may be lower than with other types of unsecured borrowing, such as personal loan or credit card. And because it’s a line of credit and not a lump-sum loan, you’ll only be charged interest on the amount you’ve actually borrowed.

Recommended: Student Loan Interest Rates Guide

Fees

•   Federal student loan borrowers are often surprised to learn they’ll be expected to pay an origination fee on each loan they receive. Origination fees are currently 1.057% for federal subsidized and unsubsidized loans for undergraduate and graduate students, and 4.228% for federal PLUS loans for parents and graduate students. The lender who is servicing the loan also may charge a fee if a payment is more than 30 days late.

•   Private student loan fees also can vary based on the lender you choose. Some may charge an origination fee or fees for late payments, while others, including SoFi, have zero fees on student loans.

•   HELOC fees can vary depending on the lender, but they often include an application/origination fee, notary fee, title search, appraisal fee, credit report fee, document prep fee, and recording fee. There also may be an annual maintenance fee, and charges for early termination or account inactivity.

Repayment Terms

•   Federal student loans offer the most repayment options for borrowers, including a fixed payment plan that ensures loans are paid off within 10 years and income-driven plans that base your monthly payment on your earnings and your family size. Some borrowers also may be able to have a portion of their loans forgiven. And those who have multiple federal student loans may choose to consolidate them into a single Direct Consolidation Loan. Another plus: Student and parent borrowers may be eligible for a deferment period if they become unemployed, experience an economic hardship, or serve in the military.

•   Private student loans have different repayment terms depending on the lender, and can often be repaid over a period of 10 to 15 years or longer, usually starting six months after graduation. There is no loan forgiveness with a private student loan, but some lenders, including SoFi, may offer borrowers a student loan deferment period that’s similar to what some federal loans offer. However, you can expect your loan to continue accruing interest during this time.

•   HELOC borrowers usually are required to make at least a minimum monthly payment during their account’s “draw” period. When the draw period ends — typically after 10 years — access to the line of credit ends and the lender sets up a repayment schedule based on the balance owed.

Credit Requirements

•   Federal student loan borrowers who are undergraduates don’t have to worry about passing a credit check as part of their application process — and they don’t need a cosigner to get a loan. Though parents and graduate students do have to pass a credit check to get a federal loan, there’s no required minimum credit score.

•   Private student loan lenders may have different credit requirements, but all borrowers (including undergraduates) should expect to go through a credit check. Lenders generally will be looking for a solid credit history, a good-to-excellent credit score, and other factors that show the borrower — alone or with the help of an eligible student loan cosigner — has the ability to repay the loan.

•   HELOC credit requirements can vary, but typically lenders require that you have at least 15% to 20% equity in your home, a healthy debt-to-income ratio that shows you can afford to take on the added debt load, and a credit score that indicates you can reliably repay the money you owe.

Tax Deductibility

•   Federal student loan interest payments can qualify for a tax deduction of up to $2,500, as long as you used the loan to pay eligible higher education expenses for yourself, your spouse, or a dependent. And you don’t have to itemize deductions on your return to get the tax break: The interest you pay is considered an income adjustment, so there’s no separate form to fill out.

•   Private student loan interest payments qualify for the same tax deduction as federal student loans, with the same requirements.

•   HELOC borrowers can only claim their interest payments as a deduction if they used the borrowed funds to “buy, build, or substantially improve your home.” Interest paid on money used for college doesn’t qualify for a tax break.

Borrowing Limits

•   Federal student loans have different borrowing limits based on the loan type and your student status (undergraduate or graduate) or if you’re a parent.

•   Private student loan limits can vary by lender; there is no set borrowing limit as with most federal loans. However, the maximum amount you can borrow may be based on your school’s estimated cost of attendance minus any other forms of financial aid you receive, your creditworthiness, and other factors.

•   HELOC lenders typically will allow you to tap into your home equity for 85% or more of your home’s current appraised value minus the amount you currently owe, So, for example, if your home is valued at $350,000 and you owe $250,000, you might qualify for a HELOC that’s $47,500 ($350,000 x 85% = $297,500 – $250,000 = $47,500).

Alternative Options

Although a HELOC can be used to pay for college — especially if you find you need more money than you can get in student loans — there are other options that could help your family manage education costs.

Scholarships and Grants

A wide range of scholarships and grants are available to students who are willing to take the time to do some research and apply. And this type of financial aid, which can come from private organizations, colleges, and other sources, doesn’t have to be repaid.

Work Study or a Part-Time Job

A work-study program or part-time job can also help pay some college costs. A student can check with the financial aid office at his or her school to learn more about participating in federal or state work-study programs. And local businesses like coffee shops, restaurants, retail stores, and markets often hire college workers to help out at night and on the weekends.

529 Plans

If your student is still a few years away from attending college, you may want to look into a state-sponsored 529 college savings plan, also known as a qualified tuition program. These tax-advantaged plans offer parents and others an opportunity to save ahead for a family member’s college expenses.

The Takeaway

Using a HELOC vs. student loans to pay for college has advantages and disadvantages. Because you only have to pay interest on the amount you actually borrow, a HELOC can be an affordable alternative, or addition, to lump-sum student loans. And since your home is used as collateral with a HELOC, the interest rate may be lower than with some other borrowing options. Of course, this also means you could lose your home if you can’t make your HELOC payments.

You may want to exhaust any federal financial aid for which your family is eligible — and check out potential private student loan offers — before turning to a HELOC for help. Federal student loans offer borrower protections you can’t expect with a HELOC, and you won’t be putting your home at risk.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

FAQ

Can I use both a HELOC and student loans?

Yes, if the federal financial aid for which you are eligible doesn’t cover all your college costs, you may choose to combine a HELOC with both federal and private student loans. You may want to compare all your options before moving forward, however, and it may be helpful to make a plan for how you expect to use and repay the money you borrow.

Does the interest rate on a HELOC vary?

Yes, a HELOC comes with a variable interest rate, which means the interest rate you pay could fluctuate based on movements in the underlying benchmark interest rate or index.

Are student loan interest rates fixed?

Federal student loans have fixed interest rates, so you’ll pay the same rate for the life of the loan. Private student loans may be offered with a choice of a fixed or variable interest rate.

Can you use a HELOC to pay off student loans?

If you can qualify for a lower interest rate, you might consider using a HELOC to pay off your student loans. But it’s important to keep in mind the upfront and ongoing costs that come with a HELOC — and you’ll lose the tax deduction you receive for the interest paid on your student loans. You’ll also lose the protections that student loans offer borrowers, and you could put your home at risk if it turns out you can’t make your HELOC payments.

Photo credit: iStock/andresr

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
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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.

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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 .

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Source: sofi.com