Every item on this page was chosen by an ELLE Decor editor. We may earn commission on some of the items you choose to buy.
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WLIVE Wood Lift Top Coffee Table
Now 31% Off
Credit: WLIVE
Let work be out of sight and out of mind with this multipurpose coffee table—which is a total steal for under $100. Flip it up to create a work station for your nine-to-five, then stow your laptop and other office essentials away in the hidden storage compartment for post-work entertaining.
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Zesthome Washable Area Rug
Now 10% Off
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Adding or swapping out an area rug might be the easiest (and most affordable) way to give your living room a dramatic upgrade. Even better, this one is washable, so you won’t need to stress about stains.
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Kakamay Woven Basket
Now 25% Off
The possibilities for this durable woven basket are endless: Use it as a hamper, a space to store blankets, or a coastal-inspired planter. It’s large enough to stash everything from pet supplies to laundry.
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COLAMY Upholstered Armchairs
Now 14% Off
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The padded arms and curved backrest on these reading chairs promise maximum comfort. While the beige will blend in seamlessly with any home decor style, this set of two also comes in funkier hues for a bolder statement.
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Kate and Laurel Arendahl Traditional Arch Mirror
Now 35% Off
Credit: Kate and Laurel
This accent mirror will give any room a vintage aesthetic for less than $100. Reviewers say it’s very easy to hang, which is always a plus, and it comes in five finishes.
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Irontar Rattan Nightstands
Now 23% Off
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This set of two rattan nightstands comes with plenty of storage for all of your evening essentials. Our favorite part? The discreet built-in phone charging port.
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Marsail Armless Desk Chair
Now 50% Off
Credit: Marsail
Up your work-from-home game with this viral office chair that’s equal parts comfortable and stylish. The armless design allows you to sit criss-cross, and the white leather will look chic among any home office setup.
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nuLOOM Rigo Hand Woven Jute Area Rug
Now 38% Off
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This jute rug is high-quality enough to stand on its own for a natural look, but it could also act as a textured base for layering.
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Walker Edison Saxon TV Stand
Now 45% Off
Credit: Walker Edison
This midcentury-inspired piece is sturdy enough to become your home’s entertainment hub. It can support screens up to 80 inches, comes complete with a cord management system, and has plenty of storage for everything from speakers to video game controllers. Should you already have your entertainment setup squared away, it can also be used as a dining room buffet table.
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KDG 2-Pack Cordless Table Lamps
Now 33% Off
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Chances are, you’ve admired these trendy cordless lamps at a restaurant recently. Recreate the look at home with these table lamps that boast multiple brightness settings. Because they’re so easy to move, you can use them for everything from bedside reading to indoor and outdoor dinner parties.
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Nathan James Amalia Wood Accent Table
Now 28% Off
Credit: Nathan James
This easy-to-assemble wooden table is compact enough to place beside a couch or your bed. We recommend decking out the rattan shelf with a stack of your favorite coffee table books.
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Peakoly Wood Knot Decor
Now 30% Off
Credit: Peakoly
Sometimes, the smallest changes can make the biggest impact. Fill a sparse coffee table or a bookshelf with this wooden knot that will add professional-looking dimension and texture to your space.
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Vevor Artificial Olive Tree
Now 37% Off
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Whether you’re gardening-averse or don’t have a lot of natural light in your home, this faux olive tree will add a welcome touch of greenery to any room.
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State Cashmere Fringed Throw Blanket
Credit: State Cashmere
Cozy up on the couch for a movie marathon with this cashmere blanket made from ethically sourced materials. The soothing neutral shade and fringed detail embody that effortless quiet luxury look.
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Jaxx Alon Daybed
Now 21% Off
Credit: Jaxx
Not only is this daybed a sleek chaise for relaxing, it also folds out to become a queen-size mattress for overnight guests. Choose from 11 colors to perfectly match your space.
Madison McGee is a lifestyle editor for Hearst Magazines. She can usually be found reading, exploring New York’s many indie bookstores, cheering on the Baltimore Ravens and the Ole Miss Rebels, or wishing she was lying on the beach.
Do you want to learn how to turn $10,000 into $100,000? Growing $10,000 into $100,000 might seem kind of impossible or far-fetched, but with the right mindset and plans, it could be a reality. Whether you want to make extra income, run a full-time business, or if you are just looking to learn how to…
Do you want to learn how to turn $10,000 into $100,000?
Growing $10,000 into $100,000 might seem kind of impossible or far-fetched, but with the right mindset and plans, it could be a reality.
Whether you want to make extra income, run a full-time business, or if you are just looking to learn how to turn your $10K into $100K quickly, there are many options that may interest you.
Best Ways To Turn $10,000 Into $100,000
Below are the best ways to turn $10,000 into $100,000.
Recommended reading: How To Turn $1,000 Into $10,000
1. Start an online business
Starting an online business could be a game-changer in growing your $10,000 to $100,000.
I started an online business years ago, and it has paid me well over $100,000 over the years, so I know that this is possible.
Here are some ideas for online businesses:
Here are some ideas for in-person businesses that you advertise for online but still get to work from home or on your own schedule:
Sell dog treats – Sell baked dog treats that you make. Learn more at How I Earned Up to $4,000 Per Month Baking Dog Treats (With Zero Baking Experience!).
Car detailing – Sell a mobile car-cleaning service where you go to the customer.
Meal prep – Help people eat healthily with pre-prepared meals that you deliver or they pick up.
Lawn care – Sell gardening or landscape services.
Dog walking – Take care of pets for busy owners. Learn more at 7 Best Dog Walking Apps To Make Extra Money.
Tutoring – Share your knowledge in a subject and teach others online or in person.
Local tour guide – Use your local knowledge to guide visitors around your town.
Starting a business doesn’t have to be expensive either. Typically, all you need for most of the businesses listed above is small affordable pieces of equipment or a few supplies (like a laptop or cleaning tools).
2. Start a blog
Starting a blog can be a great option if you’re looking to grow your $10,000 into $100,000.
A blog is a website where you can share your thoughts, knowledge, or experiences. You write posts that people can read, interact with, and share. And yes, you can make money from blogging!
I make money online by blogging, and I actually didn’t spend any money to start. It took me about 2 years to begin earning $10,000 every month.
And, I have now earned over $5,000,000 with my blog over the years.
I began my website, Making Sense of Cents, in 2011, and I started my blog without much planning, just wanting to share my own money journey, not even realizing that people could make money with websites.
So, how do you earn money through a blog? Here are some ways:
Ad revenue – Place ads on your blog and earn every time a reader clicks or views the ad.
Affiliate marketing – Recommend products and earn a commission if your readers buy through your links.
Selling products – Create and sell your ebooks or courses.
Services – Sell your expertise as a service such as consulting or coaching.
Blogging is a process that requires patience, but with consistent effort, making $100,000 from your blog may be possible.
You can learn how to start a blog with my free How To Start a Blog Course (sign up by clicking here).
3. Invest in real estate
There are many ways to turn $10,000 into $100,000 in real estate.
I’ve done some real estate side hustles myself, and I know many others who do too. Getting into real estate doesn’t have to cost a lot, and there are several side hustles in real estate that you can start even if you’re new or have limited money to work with.
These include:
House hacking – Buy a home, live in part of it, and rent out the rest. This could include renting out a duplex (and living in the other half) or even just a spare room in your house. This way, the rent you receive helps pay your mortgage. Look for multi-unit properties where you can live in one part and rent out the others.
Long-term rental property – You could buy a property and rent it out to long-term renters, such as for a year or longer.
REITs (Real Estate Investment Trusts) – Invest in REITs, which are companies that own and manage real estate properties. By investing in REITs, you can spread your money across different properties without having to manage them yourself.
Airbnb rentals – Rent out a spare room or your entire place to travelers through Airbnb. Make your space cozy and welcoming to attract guests. Make sure to check local laws about renting out your place and set a competitive price.
Rent out storage space – Rent out any unused land or space for storage. Whether it’s a parking spot, closet, basement, attic, or any unused area, people are willing to pay for storage. List your space on platforms like Neighbor to earn extra income.
Flip homes – While flipping homes usually requires more than $10,000 to start, it’s a popular way to turn a small investment into a larger profit. If you’re skilled and enjoy renovation projects, buy a house, fix it up, and sell it for a higher price.
Recommended reading: 23 Best Real Estate Side Hustles To Make Extra Money
4. Invest in the stock market
Investing in stocks means buying a piece of a company like Walmart, Apple, or Amazon. The price of individual stocks can go up or down, and if it goes up, you might turn $10,000 into $100,000.
I, for example, prefer long-term investing. I diversify my investment portfolio, meaning I spread it out across different companies. This way, if one company doesn’t do well, I don’t lose all my money.
One way to diversify is by investing in funds like exchange-traded funds or mutual funds. These are collections of stocks bundled together, which can lower your risk compared to investing in individual stocks.
How quickly you can turn $10,000 into $100,000 depends on the market and the stocks or funds you choose. It could take a year or decades. Patience is key.
This is a screenshot I took from Investor.gov of their compound interest calculator.
If you are wanting to invest in the stock market, with an average return of 8%, it might take about 30 years to reach $100,000 without additional contributions. You may be able to shave some years off that by automatically reinvesting dividends, though (if you are invested in dividend stocks). This is great, though, and shows the power of compound interest.
Note: Some people choose short-term investing to make money quickly in the stock market. However, this approach requires thorough research on your investment decisions, understanding various fees, knowing your risk tolerance, and more before opening a brokerage account. While the right strategy can sometimes lead to profits, the wrong one can mean that you lose a lot of money.
Recommended reading: How To Start Investing For Beginners With Little Money
5. Flip items for resale
Turning $10,000 into $100,000 might seem impossible, but one way to work toward this goal is by flipping items for profit. You can start by looking around your home for things you no longer use or even items that people are trying to get rid of.
You might be surprised by how much money you can make by selling items like old phones, laptops, clothes, and even furniture that you no longer need.
I’ve personally flipped many items for resale over the years, and it can be a good way to earn extra cash!
Here are some ideas:
Sell electronics and furniture – Websites like Craigslist and Facebook Marketplace are great for selling bigger items like furniture because you can arrange easy local pickups.
Fashion and accessories – Platforms like eBay or Facebook Marketplace are good for selling clothes, especially if they’re branded. These sites help you reach a wide audience and make shipping easy. For jewelry you don’t wear, sites like Worthy can help you find them a new home.
Yard sales – Yard sales can be a fast way to earn money, especially if you have many items to sell. While you might not make as much money for each item, the total can still add up nicely!
If you want to take it a step further, you can start buying items to flip for a profit. Look for furniture that needs a bit of cleaning, high-end clothing that needs repair, or appliances that need new parts. Fix them up and sell them for a higher price.
I have a friend who does this for a living, and some of their best flips include:
Buying an item for $10 and selling it for $200 just 6 minutes later.
Purchasing a security tower for $6,200 and selling it for $25,000 just one month later.
Buying a prosthetic leg for $30 at a flea market and selling it for $1,000 on eBay the next day.
They’ve even found a free chair and eventually did so many flips directly from that free chair and made over $100,000! You can learn more at How We’ve Turned A Free Chair Into $103,000.
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This free workshop will teach you how to get into the flipping business. It will teach you how to resell furniture, electronics, appliances, and anything else you can find.
6. Buy an established business
One way to possibly turn $10,000 into $100,000 is by buying a business.
Investing $10,000 in buying an existing business could potentially grow your investment to $100,000. When you buy a business, you’re entering into an established cash flow and you don’t have to start from scratch because the business already has customers, a recognized name, and ongoing operations.
And, you might find a business where you can see clear ways to improve it, which means that you can improve your investment.
This is actually close to the line of work I was in before I started Making Sense of Cents – I was an investment analyst and valued businesses (among other investments) for a living. So, I saw a lot of businesses be bought and sold over the years.
Here are some steps to start with when it comes to buying a business:
Look around – Search for businesses on sale.
Ask questions – Why is the owner selling?
Research – Look for businesses that match your interests and talents. You will do better in a business you like!
Talk money – See if the numbers make sense.
Get help – A business adviser can help you understand the details.
Make a deal – If it looks good, start the buying process.
Buying a business is a BIG decision, but with the right one, your $10,000 investment could turn into $100,000. I do highly recommend getting professional advice from a financial advisor before making a business or asset purchase to make sure you make a smart choice.
Recommended reading: Are Laundromats Profitable? How Much Do Laundromats Make?
7. Sell on Etsy
Etsy can be a great place for you to turn your $10,000 into $100,000 by selling items online.
You can start your own Etsy store with products you make or find. People love buying unique things like handmade crafts, vintage items, and custom art.
Selling digital products is one of my favorite ways to make money because it requires much less than $10,000 to start. Creating digital products is a way to possibly even earn passive income. By designing products that people can download and use, you enter a market with very low overhead costs.
Some digital product ideas include templates for social media branding, weekly routine printables, printable wall art, and more.
Do you want to make money selling printables online? This free training will give you great ideas on what you can sell, how to get started, the costs, and how to make sales.
8. Peer-to-peer lending
When you have $10,000 that you want to grow, you might want to consider peer-to-peer (P2P) lending. This is when you lend your money online and receive it back with interest. It’s similar to being a bank, but you’re lending to individual people instead.
Starting with peer-to-peer lending works like this:
Find a reputable P2P platform that suits your needs.
Deposit your $10,000 to fund loans.
Before committing, make sure to read and understand all terms and conditions, such as the potential earnings, risks, and interest rates.
The interest you earn from these peer-to-peer loans becomes your profit over time.
Remember, investing involves risks, and loans may not be repaid, which can affect your return.
9. Invest in crypto
Cryptocurrency, like Bitcoin, is not something that I personally invest in, but it can be a way to possibly grow your money.
Remember:
To use money you’re okay with risking
That there’s no guaranteed win
To always play it safe with your hard-earned cash
This digital money can sometimes be like a roller coaster – sometimes it goes up, sometimes it goes down. But if you make wise decisions, it could help grow your cash.
10. Flip websites for profit
Flipping websites can be a way to increase your $10,000 into a much larger amount. It’s similar to renovating and selling houses, but it’s done online.
I know several people who have bought websites with the goal to flip too!
You can start by searching for a website to purchase, such as by searching listings on Flippa. Look for sites with potential but require improvement. They should cover a solid topic but may need improvements in things like content, design, or improving page views.
Recommended reading: How I’ve Made $80,000 Selling Blogs
11. Start a YouTube channel
Starting a YouTube channel can be a fun and creative method to grow your $10,000 investment. It will most likely cost you less than $10,000 to start a YouTube channel, but there are ways to spend that amount of money to get started faster (such as buying a course on YouTube or buying expensive camera equipment).
Let’s simplify the process into easy steps:
Choose a topic – Pick something you love or know a lot about.
Create your channel – Sign up on YouTube and set up a channel for free.
Make videos – Use a camera or smartphone to record your videos.
Grow your channel – Post regularly, share your videos on social media, and more.
Monetize your channel – When you get 1,000 subscribers and 4,000 hours of watch time, you can apply for the YouTube Partner Program.
Recommended reading: 22 Ways To Make Money Online Without Paying Anything
12. Turn $10K into $100K through education
One great way to turn your money into more is to learn through higher education, whether that be college, a certificate, or learn a trade.
You can start by looking for jobs with a strong outlook and high salaries, and even by using online resources or talking to a career advisor to find the best fit for you.
Then, you’ll want to pick a reputable college or trade school. You’ll want to factor in the cost and the potential return on your investment. Community colleges or public schools can be more affordable, for example.
Now, there are many costs when it comes to going back to school. There is tuition, books, lab fees, parking, and more. It most likely may end up costing you more than $10,000 to go back to school, but if you choose a solid career path and are smart with your college costs, then it could be a wise step.
Frequently Asked Questions
Below are answers to common questions about how to turn $10,000 into $100,000.
How long does it take to turn $10,000 into $100,000?
The time it takes to turn $10,000 into $100,000 depends on your investment strategy and the rate of return. If you are wanting to invest in the stock market, with an average return of 8%, it might take about 30 years to reach $100,000 without additional contributions. But, if you buy an existing business, go back to school and get a higher-paying career, or start your own business, then you may be able to turn $10,000 into $100,000 even quicker.
What is the fastest way to turn $10K into $100K?
The fastest way to multiply your money could be high-risk investments like day trading stocks or real estate flipping. Remember, high rewards come with high risks, so be careful with any fast-growing strategies.
How to turn $10K into $100K in a month?
Turning $10K into $100K in a month is extremely risky and unlikely. Most investments that promise such quick returns are highly speculative, so you could lose your money just as fast. I highly recommend that you be careful if someone tells you that they can help you turn $10,000 into $100,000 in one month.
How to turn $10K into $100K in a year?
Turning $10K into $100K within a year involves high risk and aggressive investment approaches as well, but it is possible. This may include buying an existing business and really putting in some hard work to improve it.
How to turn $10K into $100K in 2 years?
Yes, you can be able to turn $10,000 into $100,000 in 2 years. This could be through ways such as starting your own online business (such as by selling digital products or a blog), buying an existing business, or even going back to school to get a higher-paying job.
How to turn $10K into $100K in 5 years?
Yes, you can potentially turn $10,000 into $100,000 in 5 years. This could be achieved through different methods such as starting your own online business (like selling digital products or creating a blog), purchasing an existing business, or even furthering your education to find a higher-paying job.
Can you turn $10K into a million?
Yes, you may be able to turn $10,000 into $1,000,000, but this will most likely take a lot of time. So, patience is key!
How to Turn $10,000 into $100,000 – Summary
I hope you enjoyed this article on how to turn $10,000 into $100,000.
To make more money from your $10,000 investment, you may want to think about using the internet to start a business. Websites like Etsy can help you sell handmade items, or you can make money from a blog or YouTube channel. You can also try traditional ways of investing, like buying stocks or real estate. You can be very involved, like flipping houses, or less involved, like putting money into peer-to-peer lending or high-interest savings accounts.
As you can see, there are many different investment options and business models depending on your financial goals and risk tolerance.
The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.
In the United States, the median home price reached $431,000 in the third quarter of 2023. Unless they’ve been stockpiling money, most people don’t have enough cash to purchase a home outright. That’s why mortgages exist. To help you understand your financing options when you’re looking to buy a house, here’s an overview of the five types of mortgages available to residential buyers.
What is a mortgage?
A mortgage is a type of loan used to purchase real estate. If you don’t repay the loan as agreed, the lender has the right to take the property from you, sell it and use the money from the sale to cover your balance. This is a process known as foreclosure.
When you’re shopping for a mortgage, it’s important to understand the terminology used by real estate agents, brokers and other professionals.
Principal is the amount of money you borrow. For example, if you need to borrow $380,000 to cover the cost of a home, you have a principal balance of $380,000.
Interest is the cost of borrowing money. It’s usually expressed as a percentage, for example, 5.8 percent. A high interest rate could increase your total cost of ownership by hundreds of thousands of dollars, so it’s important to shop around for the best rates.
Your loan term is how long you have to pay back the loan. The two most common loan terms are 15 years and 30 years. So, for example, if you have a 30-year mortgage, you have 30 years to pay back the principal balance.
When you shop for a mortgage, you also need to think about your monthly payment. In many cases, you’re required to put property taxes and homeowners insurance premiums into an escrow account. If this applies to your situation, your monthly mortgage payment will be higher to account for insurance and taxes.
5 types of mortgages
Although every mortgage has the same basic purpose, different types of mortgages address different situations. Here are the five most common.
Conventional
A conventional loan is a mortgage that’s not part of a government program. You get this type of mortgage through a private bank or credit union. One of the main advantages to getting a conventional loan is you don’t have to pay for private mortgage insurance if you make a down payment of at least 20 percent of the purchase price of the home.
Private mortgage insurance is a type of insurance that protects your lender in the event you default on your loan. You have to pay extra for PMI, so avoiding it is a good way to keep your costs as low as possible.
One of the major drawbacks of conventional mortgages is they have stringent credit requirements. You generally need a score of at least 620, making conventional loans a poor fit for subprime (scores ranging from 580 to 619) or deep subprime (scores below 580) borrowers.
Conforming
Every conforming mortgage must follow (conform to) the standards set by Fannie Mae and Freddie Mac, which are home mortgage agencies backed by the U.S. government. Both agencies provide funds to banks, making more mortgages available to American consumers.
To conform to the Fannie Mae and Freddie Mac standards, lenders must vet mortgage applicants carefully. This means you generally need decent credit to qualify. You also need an acceptable debt-to-income ratio. This ratio compares your monthly debt payments to your gross monthly income to make sure your estimated mortgage payment isn’t too high.
The main drawback of a conforming mortgage is that there’s a limit to how much you can borrow. The Federal Housing Finance Agency has announced that the 2024 baseline loan limit for a single-family home is set at $766,550. In areas with a high cost of living, the loan limit for a single-family home is $1,149,825.
Government-backed
A government-backed loan is insured by the federal government, but it’s issued by a private lender, giving you the best of both worlds. One of the biggest advantages of government-backed loans is that banks view them as less of a risk than other types of loans. Therefore, you may get approved even if your credit score is too low for a conventional mortgage.
One potential drawback is that you may have to pay for private mortgage insurance if you can’t afford to put down 20 percent on a home. This increases the total cost of purchasing.
These are the three most common types of mortgages backed by government agencies:
VA loans: To thank veterans and current members of the military for their service, the Department of Veterans Affairs backs loans for eligible service members. The biggest advantage of getting a VA loan is that you don’t always have to make a down payment. You do need to meet certain lending requirements, however.
FHA loans: The Federal Housing Administration backs some loans to make it easier for Americans to purchase their homes. If you qualify for an FHA loan, you may be able to put down as little as 3.5 percent. FHA loans are also available to consumers with scores below 580, making them an attractive alternative if you can’t qualify for a conventional mortgage due to your credit history.
USDA loans: The U.S. Department of Agriculture backs loans made to borrowers in rural areas. To qualify, you must meet the minimum income and credit requirements.
Interest-only
An interest-only mortgage is a special type of adjustable-rate mortgage (you’ll learn more about adjustable rates in the next section). During the first few years, you don’t pay back any of the principal balance. Instead, you just pay the interest.
After this initial period, you begin paying the principal and the interest. Since the rate is adjustable, it changes each year based on market conditions.
The main advantage of an interest-only loan is that you have a low payment for the first few years. That said, your payment will go up eventually. Your interest rate may also increase significantly.
Jumbo
Jumbo mortgages are ideal for borrowers living in areas with very high costs of living. For example, it’s tough to find a home in the Los Angeles area that costs less than $1 million. You might not get very far with the conforming mortgage loan limit.
A jumbo mortgage allows you to borrow more than the conforming limit set by Fannie Mae and Freddie Mac. Due to the amount of money involved, your lender may require excellent credit and a low DTI ratio. It may also take longer to get approved for this type of mortgage.
How does interest work on a mortgage?
Lenders offer fixed-rate mortgages and adjustable mortgages. A fixed-rate mortgage is exactly what it sounds like—a home loan with a fixed interest rate, a rate that stays the same for the entire loan term.
The main advantage of a fixed-rate loan is that you know exactly how much you’ll pay every month. You don’t have to play guessing games based on changes in the market. That said, if you apply for a mortgage when rates are high, you’ll be locked into the same rate unless you refinance your loan.
An adjustable-rate mortgage has an interest rate that goes up and down. If you apply when rates are high, there’s a chance the rate could go down in the future. However, there’s also a chance your rate will go even higher, increasing your monthly payment beyond what you can comfortably afford.
Tips for getting the best loan terms
To keep your costs in check, follow these tips to get the best loan terms available:
Save up: Save as much as you can for a down payment. The more money you put down, the less you have to borrow.
Shop around: You don’t have to go with the first lender you find. Take time to compare rates and find the best deal for your situation.
Clean up your credit: Some types of mortgages are only available to consumers with good credit. If you have low scores, work to increase them before you apply for a home loan.
If your credit is holding you back from the home of your dreams, don’t despair. The team at Lexington Law may be able to help by addressing any inaccurate negative items listed on your credit reports.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
Interest rates are fees that you pay while borrowing money until you completely repay a loan.
Interest rates are calculated with the formula A=P(1+rt), which can help you find the total interest on a loan.
Having a higher credit score can help you qualify for lower interest rates.
In essence, interest rates work by determining how much a borrower must pay a lender while using a loan. Learning about things like interest and APR can help you understand how much you’ll have to pay for a loan in total—and how much you can charge when lending your funds to someone else.
This guide will explore how interest rates are calculated and how they apply to different types of loans. We’ll also share some of Credit.com’s helpful financial tools, including our interactive calculators.
What Is Interest?
When borrowers lend their money to another person or organization, they charge interest until the loan is repaid in full. The precise amount of interest that you’ll pay for a loan depends on several factors, including the total amount you initially borrow and the time it takes you to repay the loan.
When it comes to money in savings accounts, interest works to your benefit—financial institutions will pay you for the privilege of using your funds.
How Are Interest Rates Calculated?
Simple interest and compound interest are two common methods that lenders use when charging borrowers.
You can find out how much simple interest you might have to pay on a loan with the formula A = P (1 + rt).
A – the total amount that a loan costs when fees are taken into account
P – the principal amount that you initially borrow when you take out a loan
r – the rate of interest that a lender charges annually
t – the overall time it takes you to repay a loan. This is calculated in years
Here’s an example of the formula at play:
The principal amount you borrow is $5,000.
The bank sets your interest rate at 3%.
It takes you five years to pay back the loan.
In this case, A is $5,750.
Using this information, the formula should be $5,750 = $5,000 x (1 + 0.03 x 5).
Compound interest calculates interest growth (like in a savings account) based on the principal amount and all previous interest payments over a set period. The formula to find compound interest is CI = P( 1 + r/n)nt.
CI – your total compound interest
P – the principal amount
r – the annual interest rate
n – the number of times your interest compounds in a year—this can be daily (365), monthly (12), or annually (1)
t – the total amount of time that passes on a loan or investment
Compound interest on a loan can be exponentially costly, while compound interest on an investment or savings account can generate great profit over time.
Here’s an example of how compound interest can build income in a savings account:
The principal amount you invest is $5,000.
Your interest rate is 4%, or 0.04 in decimal form.
The interest on your account is compounded annually (1).
You commit to a 10-year investment plan.
Plug those numbers into the formula, and you’ll get $5,000 ( 1 + 0.04/1) x 1 x 10, which will equal $7,401.22 in compound interest.
Keep in mind that we didn’t factor in additional contributions with this example. Investors who add more funds to their accounts each month can increase their earnings from compound interest.
What Is the Difference Between APR and APY?
APR represents your annual percentage rate, though people may simply say interest instead of using this term. This works for credit cards but not all types of loans. For most loans, APR also includes fees that are slightly more costly than the base interest rate.
Annual percentage yield (APY) refers to the amount of interest you’ll earn on an investment each year. When shopping around for compound interest savings accounts, the APY is your estimated rate of return.
How Is APR Calculated?
Similar to simple interest, there’s a formula to calculate APR:
APR = ((Interest + Fees / Principal amount) / Number of days in your loan term)) x 365 x 100.
When calculating APR, it’s important to add interest and fees together beforeyou divide your principal amount. After that, you’d divide the resulting amount by the number of days in your loan term, then you’d multiply the resulting number by 365 (to represent each day of the year) by 100.
How Is Your Interest Rate Determined When You Borrow Money?
Your credit history, the lender’s unique policies, and the base rate influenced by the Federal Reserve determine how much interest you’ll initially receive.
Market factors influence your base rate. This includes economic trends and changes made by the Federal Reserve.
Each bank sets lending rates and policies that apply to all of its patrons.
If you have a higher credit score, you have a better chance of earning a lower interest rate.
Why Is Your Credit Score Important?
Lenders use credit scores to gauge which applicants will most likely repay a loan. Having a good or excellent credit score shows lenders that you tend to repay your loans on time and that you don’t borrow more than you can afford to repay.
Poor credit, however, can cause lenders to doubt your ability to repay any funds that they give you. To make up for this doubt, lenders might give you higher interest rates to discourage you from borrowing too much money or being late with your payments.
Different Types of Interest Rates
Interest rates have different nuances depending on the type of loan they’re tied to. For example, home mortgage rates factor in fees and taxes, while interest rates for credit cards are a bit more straightforward. Below, we’ve tallied up several examples.
Credit Card Interest Rates
Credit card interest is calculated based on factors like the balance on your card and the transaction you’re initiating. Moreover, lenders might charge penalty APR if a cardholder repeatedly misses payments or exceeds their credit limit.
The best way to figure out how interest affects your credit card is by learning your account’s daily periodic rate (DPR). You can find your DPR by taking your APR, converting it into a decimal, and then dividing by 365.
Mortgage Interest Rates
A works differently than a credit card’s interest rate largely due to the various items that factor into it. Mortgage insurance, property taxes, and realtor fees can all influence the APR on your home.
It’s best to check your credit score and report before buying a home, as your credit health will greatly affect your mortgage APR. Other factors that impact your rate include:
The state you live in
What type of property you want to buy
How much you’re putting down
The type of lending you qualify for
Auto Loan Interest Rates
It’s helpful to make sure you understand all of the common terms about auto loans before you sign any documents. Most auto loans also follow the simple interest formula we explored earlier. However, the fine print can include items like paperwork fees and title fees that can result in surprise expenses.
It’s possible to negotiate some of the fees that dealerships present before signing any paperwork. Arming yourself with knowledge, a sizeable down payment, and a strong credit score all grant valuable bargaining power during the negotiation process.
Fixed Interest Rates vs. Variable Interest Rates
Banks may offer fixed interest rates or variable interest rates on their loans and credit cards. With a fixed interest rate, the APR on your loan can’t change unless your financial institution notifies you and then adjusts it.
Variable interest rates can fluctuate based on changes to the economy and the “prime rate” the Federal Reserve sets for financial institutions. Fixed interest rates are more predictable, but they can occasionally cost more than the prime rate. Variable rates ebb and flow, but they can occasionally be lower than the prime rate.
Get Better Interest Rates With Credit.com
Your credit score can help you secure fantastic loans with low interest rates. Seeking personal finance advice before you apply can greatly improve your chances of scoring low-interest loans and phenomenal promotional opportunities.
Sign up with Credit.com—we’ll provide you your Vantage 3.0 credit score and a breakdown of how it works. There are also tools to help you plan what areas of your credit you would like to work on.
Inside: Learn what 24 an hour is how much a year, month, and day. Plus tips to budget your money. Don’t miss the ways to increase your income.
You’re probably wondering if I made $24 a year, how much do I truly make? What will that add up to over the course of the year when working? Is $24 an hour good?
Is this wage something that I can actually live on? Or do I need to find ways that I can increase my hourly wage? How much more is $24.50 an hour annually?
When you finally start earning $24 an hour, you are happy with your progress as an hourly employee. Typically, this is when many hourly employees start to become salaried workers.
In this post, we’re going to detail exactly what $24 an hour is how much a year. Also, we are going to break it down to know how much is made per month, bi-weekly, per week, and daily.
That will help you immensely with how you spend your money. Because too many times the hard-earned cash is brought home, but there is no actual plan for how to spend that money.
By taking a step ahead and making a plan for the money, you are better able to decide how you want to live, make sure that you put your money goals first, and not just living paycheck to paycheck struggling to survive.
The ultimate goal with money success is to be wise with how you spend your money.
Knowing 24 dollars an hour is how much a year will help you manage money wisely.
If that is something you want too, then keep reading. You are in the right place.
$24 an Hour is How Much a Year?
When we ran all of our numbers to figure out how much is $24 per hour is as an annual salary, we used the average working day of 40 hours a week.
40 hours x 52 weeks x $24 = $49,920
$49,920 is the gross annual salary with a $24 per hour wage.
As of June 2023, the average hourly wage is $33.58 (source).
Let’s break down how that number is calculated
Typically, the average workweek is 40 hours and you can work 52 weeks a year. Take 40 hours times 52 weeks and that equals 2,080 working hours. Then, multiply the hourly salary of $24 times 2,080 working hours, and the result is $49,920.
That number is the gross income before taxes, insurance, 401K, or anything else is taken out. Net income is how much you deposit into your bank account.
That is just under the $50000 salary threshold, but lower than the 60K salary, which is desired to become middle-income worker.
Work Part Time?
But you may think, oh wait, I’m only working part-time. So if you’re working part-time, the assumption is working 20 hours a week at $24 an hour.
Only 20 hours per week. Then, take 20 hours times 52 weeks and that equals 1,040 working hours. Then, multiply the hourly salary of $24 times 1,040 working hours, and the result is $24,960.
How Much is $24 Per Month?
On average, the monthly amount would average $4,160.
Annual Amount of $49,920 ÷ 12 months = $4,160 per month
Since some months have more days and fewer days like February, you can expect months with more days to have a bigger paycheck. Also, this can be heavily influenced by how often you are paid and on which days you get paid.
Plus by increasing your wage from $20 an hour, you average an extra $8320 per year. So, yes a few more dollars an hour add up!
Work Part Time?
Only 20 hours per week. Then, the monthly amount would average $2,080.
How Much is $24 per Hour Per Week
This is a great number to know! How much do I make each week? When I roll out of bed and do my job, what can I expect to make at the end of the week?
Once again, the assumption is 40 hours worked.
40 hours x $24 = $960 per week.
Work Part Time?
Only 20 hours per week. Then, the weekly amount would be $480.
How Much is $24 per Hour Bi-Weekly
For this calculation, take the average weekly pay of $960 and double it.
$960 per week x 2 = $1,920
Also, the other way to calculate this is:
40 hours x 2 weeks x $24 an hour = $1,920
Work Part Time?
Only 20 hours per week. Then, the bi-weekly amount would be $960.
How Much is $24 Per Hour Per Day
This depends on how many hours you work in a day. For this example, we are going to use an eight-hour workday.
8 hours x $24 per hour = $192 per day.
If you work 10 hours a day for four days, then you would make $240 per day. (10 hours x $24 per hour)
Work Part Time?
Only 4 hours per day. Then, the daily amount would be $96.
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
$24 Per Hour is…
$24 per Hour – Full Time
Total Income
Yearly (52 weeks)
$49,920
Yearly (50 weeks)
$48,000
Monthly (173 hours)
$4,160
Weekly (40 Hours)
$960
Bi-Weekly (80 Hours)
$1,920
Daily Wage (8 Hours)
$192
Net Estimated Monthly Income
$3,176
**These are assumptions based on simple scenarios.
Paid Time Off Earning 24 Dollars an Hour
Does your employer offer paid time off?
As an hourly employee, you may or may not get paid time off.
So, here are the scenarios for both cases.
For general purposes, we are going to assume you work 40 hours per week over the course of the year.
Case # 1 – With Paid Time Off
Most hourly employees get two weeks of paid time off which is equivalent to 2 weeks of paid time off.
In this case, you would make $49,920 per year.
This is the same as the example above for an annual salary making $24 per hour.
Case #2 – No Paid Time Off
Unfortunately, not all employers offer paid time off to their hourly employees. While that is unfortunate, it is best to plan for less income.
Life happens. There will be times you need to take time off for numerous reasons – sick time, handling a family emergency, or even vacation.
So, let’s assume you take 2 weeks off without paid time off.
That means you would only work 50 weeks of the year instead of all 52 weeks. Take 40 hours times 50 weeks and that equals 2,000 working hours. Then, multiply the hourly salary of $24 times 2,000 working hours, and the result is $48000.
40 hours x 50 weeks x $24 = $48,000
You would average $192 per working day and nothing when you don’t work.
$24 an Hour is How Much a year After Taxes
Let’s be honest… Taxes can take up a big chunk of your paycheck. Thus, you need to know how taxes can affect your hourly wage.
Also, every single person’s tax situation is different.
On the basic level, let’s assume a 12% federal tax rate and a 4% state rate. Plus a percentage is taken out for Social Security and Medicare (FICA) of 7.65%.
Gross Annual Salary: $49,920
Federal Taxes of 12%: $5,990
State Taxes of 4%: $1,997
Social Security and Medicare of 7.65%: $3,819
$24 an Hour per Year after Taxes: $38,114
This would be your net annual salary after taxes. Less than $40000 per year!
To turn that back into an hourly wage, the assumption is working 2,080 hours.
$38,114 ÷ 2,080 hours = $18.32 per hour
After estimated taxes and FICA, you are netting $18.32 an hour. That is $5.68 an hour less than what you thought you were paid.
This is a very highlighted example and can vary greatly depending on your personal situation. Therefore, here is a great tool to help you figure out how much your net paycheck would be.
Plus budgeting on a just over $18 an hour wage is much different.
$24 an Hour Budget – Example
You are probably wondering can I live on my own making 24 dollars an hour? How much rent or mortgage payment can you afford on 24 an hour?
Using our Cents Plan Formula, this is the best-case scenario on how to budget your $24 per hour paycheck.
When using these percentages, it is best to use net income because taxes must be paid.
In this example, we calculated $24 an hour was $18.32 after taxes. That would average $3,819 per month.
According to the Cents Plan Formula, here is the high-level view of a $24 per hour budget:
Basic Expenses of 50% = $1588.08
Save Money of 20% = $635.23
Give Money of 10% = $317.62
Fun Spending of 20% = $635.23
Debt of 0% = $0
Obviously, that is not doable for everyone. Even though you would expect your money to go further when you are making double the minimum wage. So, you have to be strategic in ways to decrease your basic expenses and debt. Then, it will allow you more money to save and fun spending.
To further break down an example budget of $24 per hour, then using the ideal household percentages is extremely helpful.
recommended budget percentages based on $24 per hour wage:
Category
Ideal Percentages
Sample Monthly Budget
Giving
10%
$308
Savings
15-25%
$666
Housing
20-30%
$1,019
Utilities
4-7%
$208
Groceries
5-12%
$333
Clothing
1-4%
$42
Transportation
4-10%
$166
Medical
5-12%
$208
Life Insurance
1%
$17
Education
1-4%
$23
Personal
2-7%
$62
Recreation / Entertainment
3-8%
$125
Debts
0% – Goal
$0
Government Tax (including Income Taxes, Social Security & Medicare)
15-25%
$984
Total Gross Income
$4,160
**In this budget, prioritization was given to basic expenses. Thus, some categories like giving and saving were less.
24 an hour Salary
Many times, you don’t make exactly 24/hr. You may make $24.08 or $25.61. So, here is a handy calculator to figure out your exact hourly salary wage.
At this $24 hourly wage, you are more than likely double the minimum wage. Things should be easy to live off this $24 hourly salary.
Even though this is over $47000 salary, which means it can still be a tough situation.
Is it doable? Absolutely.
In fact, $24 an hour is higher than the median hourly wage of $19.33 (source). That seems backward, but typically salaried workers earn more per hour than hourly workers.
Can you truly live off $24 an hour annually?
You just have to have the desire to spend less than your income. Plus consistently save.
If you are constantly struggling to keep up with bills and expenses, then you need to break that constant cycle. It is possible to be smart with money.
You need to do is change your money mindset.
This is what you say to yourself… Okay, I have aspirations and goals to increase how much I make. This is the time to start diversifying my income into multiple streams and start investing. I am going to stretch my 24 dollars per hour.
In the next section, we will dig into ways to increase your income, but for now, is it possible to live on $24 an hour?
Yes, you can do it, and as you can see it is possible with the sample budget of $24 per hour.
Living in a higher cost of living area would be more difficult. So, you may have to get a little creative. For example, you might have to have a roommate. Move to a lower cost of living area where rent is cheaper.
Also, you must evaluate your “fun spending” items. Many of those expenses are not mandatory and will break your budget. You can find plenty of free things to do without spending money.
5 Ways to Increase Your Hourly Wage
This right here is the most important section of this post.
You need to figure out ways to increase your hourly income because I’m going to tell you…you deserve more. You do a good job and your value is higher than what your employers pay you.
Even an increase of 50 cents to $24.50 will add up over the year. An increase to $25 an hour is a milestone!
1. Ask for a Raise
The first thing to do is ask for a raise. Walk right in and ask for a raise because you never know what the answer will be until you ask.
If you want the best tips on how specifically to ask for a raise and what the average wage is for somebody doing your job, then check out this book. In this book, the author gives you the exact way to increase your income. The purchase is worth it or go down to the library and check that book out.
2. Look for A New Job
Another way to increase your hourly wage is to look for a new job. Maybe a completely new industry.
It might be a total change for you, but many times, if you want to change your financial situation, then that starts with a career change. Maybe you’re stressed out at work. Making $24 an hour is too much for you and you’re not able to enjoy life, maybe changing jobs and finding another job may increase your pay, but it will also increase your quality of life.
3. Find a New Career
Because of student loans, too many employees feel like they are stuck in the career field they chose. They feel sucked into the job that they don’t like or have the potential they thought it would.
For many years, I was in the same situation until I decided to do a complete career change. I am glad I did. I have the flexibility that I needed in my life to do what I wanted when I needed to do it. Plus I am able to enjoy my entrepreneurial spirit.
4. Find Alternative Ways to Make Money
In today’s society, you need to find ways to make more money. Period.
There is no way to get around it. You need to find additional income outside a traditional nine-to-five position or typical 40 hour a week job. You will reach a point where you are maxed on what you can make in your current position or title. There may be some advancement to move forward, but in many cases, there just is not much room for growth.
So, you need to find a side hustle – another way to make money.
Do something that you enjoy, turn your hobby into a way to make money, turn something that you naturally do, and help others into a service business. In today’s society, the sky is the limit on how you can earn a freelancing income.
Must Read: 20 Genius Ways on How to Make Money Fast
5. Earn Passive Income
The last way to increase your hourly wage is to start earning passive income.
This can be from a variety of ways including the stock market, real estate, online courses, book sales, etc. This is where the differentiation between struggling financially to becoming financially sound.
By earning money passively, you are able to do the things that you enjoy doing and not be loaded down, with having a job that you need to work, and a place that you have to go to. And you still make money doing nothing.
Here is an example:
You can start a brokerage account and start trading stocks for $50. You need to learn and take the one and only investing class I recommend. Learn how the market works, watch videos, and practice in a simulator before you start using your own money.
One gentleman started with $5,000 in his trading account and now has well over $36,000 in a year. Just from practice and being consistent, he has learned that passive income is the way for him to increase his income and also not be a slave to his job.
Tips to Live on $24 an Hour
In this last section, grasp these tips on how to live on $24 an hour. On our site, you can find lots of money saving tips to help stretch your income further.
Here are the most important tips to live on $24 an hour. More importantly stretch how much you make, in case you are in the “I don’t want to work anymore” mindset. Highlight these!
1. Spend Less Than You Make
First, you must learn to spend less than you make.
If not you will be caught in the debt cycle and that is not where you want to be. You will be consistently living paycheck to paycheck.
In order to break that dreadful cycle, it means your expenses must be less than your income.
And when I say income, it’s not the $24 an hour. As we talked about earlier in the post, there are taxes. The amount of taxes taken out of your paycheck is called your net income which is $24 an hour minus all the taxes, FICA, Social Security, and Medicare is taken out. That is your net income.
So, your net income has to be less than your gross income.
2. Living Below Your Means
You need to be happy. And living on less can actually make you happier. Studies prove that less is better.
Finding contentment in life is one thing that is a struggle for most.
We are driven to want the new shiny toy, the thing next door, the stuff your friend or family member got. Our society has trained you that you need these things as well.
Have you ever taken a step back and looked at what you really need?
Once you are able to find contentment with life, then you are going to be set for the long term with your finances.
Here is our story on owning less stuff. We have been happier since.
3. Make Saving Money Fun
You need to make saving money fun. If you’re good, since you must keep your expenses low, you have to find ways to make your savings fun!
It could be participating in a no spend challenge for the month.
It could be challenging friends not to go to Target for a week.
Maybe changing your habits and not picking up takeout and planning meals.
Whatever it is challenge yourself.
Find new ways of saving money and have fun with it.
Even better, get your family and kids involved in the challenge to save money. Tell them the reason why you are saving money and this is what you are doing.
Here are 101 things to do with no money. Free activities without costing you a dime. That is an amazing resource for you and you will never be bored.
And you will learn that a lot of things in life you can do for free. Personally, some of the best ones are getting outside and enjoying some fresh air.
4. Make More Money
If you want if you do not settle for less, then find ways to make more money. If you want more out of life, then increase your income.
You need to be an advocate for yourself.
Find ways to make more money.
It could be a side hustle, a second job, asking for a raise, going to school to change careers, or picking up extra hours.
Whatever path you take, that’s fine. Just find ways to make more money. Period.
5. No State Taxes
Paying taxes is one option to increase what you take home in each paycheck.
These are the states that don’t pay state income taxes on wages:
Alaska
Florida
Nevada
New Hampshire
South Dakota
Tennessee
Texas
Washington
Wyoming
It is very interesting if you take into account the amount of state taxes paid compared to a state with income taxes.
Also, if you live in one of the higher taxed states, then you may want to reconsider moving to a lower cost of living area. The higher taxes income tax states include California, Hawaii, New Jersey, Oregon, Minnesota, the District of Columbia, New York, Vermont, Iowa, and Wisconsin. These states tax income somewhere between 7.65% – 13.3%.
6. Stick to a Budget
You need to learn how to start a budget. We have tons of budgeting resources for you.
While creating a budget is great, you need to learn how to use one.
You do not have to budget down to every last penny.
You need to make sure your expenses are less than your income and that you are creating sinking funds for those irregular expenses.
Budget Help:
7. Pay Off Debt Quickly
The amount that you pay interest on debt is absolutely absurd.
Unfortunately, that is how many of these companies make their money is from the interest you pay on debt.
If you are paying 5% to even 20-21% or higher, you need to find ways to lower that debt quickly.
Here’s a debt calculator to help you. Figure out your debt-free date.
Make that paying off debt fast is your target and main focus. I can tell you from personal experience, that it was not until we paid off our debt that we finally rounded the corner financially. Once our debt was paid off, we could finally be able to save money. Set money aside in separate bank accounts and pay for cash for things.
It took us working hard to pay off debt. We needed persistence and patience while we had setbacks in our debt-free journey.
Here are resources now for you to pay off your debt:
Jobs that Pay $24 an Hour
You can find jobs that pay $24 per hour. Polish up that resume, cover letter, and interview skills.
Job Search Hint: Always send a written follow-up thank you note for your interview. That will help you get noticed and remembered.
First, look at the cities that require a minimum wage in their cities. That is the best place to start to find jobs that are going to pay higher than the federal minimum wage rate. Many of the cities are moving towards this model so, target and look for jobs in those areas.
Possible Ideas:
Virtual Assistant – Get free training NOW!
Freelance writer
Class A Truck Driver
Managers
Entry Level Marketing Jobs
Data Entry Clerks
Customer service managers
Bank tellers
Maintenance workers
Freight broker – Learn how easy it is to start!
Administrative assistants
Athletic Trainers
Event Planners
Security guard
Movers
Warehouse workers
Companies that pay more than $24 per hour: Costco, Wayfair, Amazon, Best Buy, Target, Wells Fargo, Disney World, Disney Land, Bank of America, JP Morgan, Cigna, Aetna, etc
$24 Per Hour Annual Salary
In this post, we detailed 24 an hour is how much a year. Plus all of the variables that can impact your net income. This is something that you can live off.
How much is 24 dollars an hour annually…
$49,920
In this post, we highlighted ways to increase your income as well as tips for living off your wage.
Use the sample budget as a starting point with your expenses.
You will have to be savvy and wise with your hard-earned income. But, with a plan, anything is possible!
Still thinking I don’t want to work anymore, you aren’t alone and need to start to plan for your early retirement.
Learn exactly how much do I make per year…
Know someone else that needs this, too? Then, please share!!
Did the post resonate with you?
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.
Pet owners spent an average of $491 on veterinary care for their fur kids in 2021, the most recent year for which data was available, according to the U.S. Bureau of Labor Statistics
. But if your pet requires surgery or emergency treatment, vet bills can cost thousands of dollars. Buying pet insurance can help defray these expenses. Your first step is to get pet insurance quotes.
How to get pet insurance quotes
You can get quotes from the best pet insurance companies online, though most companies also give you the option to speak with a human. Note that we’re focusing on how to get pet insurance quotes for dogs and cats in this article. If you want insurance for your iguana, guinea pig, bird or ferret, you’ll need to work with an insurance company that specializes in exotic pets, such as Nationwide.
Key terms in this article
Deductible
The amount of your pet’s veterinary bill that you’ll need to pay before pet insurance kicks in.
Reimbursement level
The percentage of your vet’s bill that insurance will cover after you’ve met the deductible.
Annual limit
The maximum dollar amount your pet insurance company will pay for covered care in a year.
To get a pet insurance quote, you’ll generally need to provide your ZIP code and the following information about your animal:
Species (dog or cat).
Weight (for mixed-breed dogs).
Once you’ve entered your pet’s basic information, you may have the option to customize your quote. For example, if you want to save money on monthly premiums, you could increase your deductible. Or if you’re willing to pay more each month for increased coverage, you could raise the policy’s annual limit or reimbursement level.
Can I insure multiple pets on the same policy?
Some pet insurance companies let you cover multiple animals on the same plan. You may have a single deductible for all covered animals or pay a separate deductible for each pet, depending on the policy.
Even if the insurer doesn’t allow more than one pet to be covered on a policy, you may get a multipet discount if you enroll more than one animal. Many pet insurance companies offer multipet discounts of 5% to 10%.
Types of pet insurance plans
When you get pet insurance quotes, you may be able to choose either an accident-only plan or an accident and illness plan. You may also be able to add a wellness plan to your pet insurance to cover routine vet care. Note that not all carriers offer all types of plans.
Accident and illness plan
An accident and illness plan helps with costs if your animal companion gets sick or injured. It can reimburse you for part of your vet bills if your pet is hurt in an accident or develops an illness such as cancer, thyroid problems or arthritis.
An accident and illness plan usually doesn’t cover pre-existing conditions, which are health issues that showed symptoms before your pet insurance took effect. However, some insurers may help with costs related to a hereditary condition or birth defect if the symptoms didn’t surface until later in life. Other policies offer this coverage as an add-on.
Accident-only pet insurance
An accident-only plan helps you pay for your pet’s care if they’re injured in an accident, but it won’t cover treatment related to an illness. For example, if your furry pal gets hit by a car, is bitten by another animal or swallows a toy, your insurer would typically foot part of the bill. But there’s no coverage if your pet is diagnosed with a condition like hip dysplasia, cancer or a metabolic disorder.
Though the coverage is limited, it’s usually cheaper than more comprehensive plans. Some companies offer accident-only plans to animals that may not otherwise qualify for coverage due to their age.
Wellness plans
Pet insurance covers unexpected veterinary expenses your dog or cat may incur, but a wellness plan helps you pay the expected costs of keeping your pet healthy. Usually purchased as a separate plan or add-on, you can use a wellness plan to help pay for routine care like checkups, vaccinations, dental cleanings, spaying and neutering and microchipping.
🤓Nerdy Tip
Wellness plans may help you budget better for veterinary expenses by spreading them out over a 12-month period, but they may not actually save you money. Before buying wellness coverage, compare the cost of the plan to the cost of the covered services you’ll use in a given year.
What factors affect your pet insurance price?
The type of plan you choose will affect your pet insurance price. Accident-only plans are usually cheaper than more comprehensive accident and illness plans. Other factors that determine how much pet insurance costs include:
Cat vs. dog: Cats live longer than dogs on average, but they tend to have fewer health problems over their lifespans. Many felines are indoor-only cats, so they’re less exposed to accidents and illnesses compared with dogs. Dogs are also more likely to have hereditary problems.
Breed: Purebred animals are often pricier to insure because they’re more prone to breed-specific illnesses than mixed-breed pets. Pet insurance for larger dogs tends to be more expensive than coverage for small dogs, as large-breed dogs have shorter life expectancies and frequently develop more health problems in a shorter timespan.
Age: Older pets are at higher risk of developing health issues, so as your dog or cat ages, you’ll probably pay more for pet insurance.
Location: Where you live affects the cost of pet insurance because veterinary costs vary widely by location. Since most pet policies reimburse a percentage of vet bills, you can expect your pet premiums to be higher if you live in an area where pet health care is pricey.
Deductibles, reimbursement level and annual limit: If you have a high deductible and a low reimbursement level and annual limit, you’ll pay less in premiums. However, your out-of-pocket costs for vet bills will be higher. Conversely, a low deductible combined with a high reimbursement level and annual limit increases your premiums, but your out-of-pocket expenses will be lower if your pet gets sick or injured.
🤓Nerdy Tip
Pet insurance generally doesn’t cover pre-existing conditions. Your pet’s risk of developing a health issue increases as they get older, so buying a policy early can up the odds that future conditions will be covered.
How to compare pet insurance quotes
Your monthly premium isn’t the only factor to consider when comparing pet insurance quotes. You’ll also need to evaluate how much you’ll pay out of pocket when your pet needs care, as well as what services are covered. Here are some things every pet parent should know before choosing a policy.
Deductibles
You’ll need to pay an out-of-pocket pet insurance deductible before your insurer will cover part of your vet bill. If your policy has an annual deductible, your policy will cover care after you’ve hit the deductible for the year. However, some policies have a per-incident or per-condition deductible that applies when your pet develops a new health condition.
Say you hit your per-condition deductible when your pet developed a bladder infection. If you took them back to the vet a few weeks later for allergy treatment, another deductible would apply since it’s a new condition.
Generally, you’ll pay higher premiums if you choose a low deductible.
Reimbursement rates
Your reimbursement rate is the percentage of covered services your insurer will pay for. But this amount is often applied before the deductible. For instance, suppose you have a policy with an 80% reimbursement level and a $250 deductible. If your pet incurred a $1,000 vet bill, here’s how your pet insurance reimbursement rate might factor in:
$1,000 (vet bill) x 0.8 (80% reimbursement rate) = $800.
$800 – $250 (deductible) = $550 (covered by pet insurance).
$1,000 – $550 = $450 (your out-of-pocket cost).
Annual limits
The annual limit is the maximum amount the policy will pay during a 12-month period. Once you reach the annual limit, you’ll need to pay out of pocket for veterinary care. Many insurers offer an unlimited option.
Waiting periods
A waiting period is a specified amount of time that must elapse before pet insurance kicks in. Many policies have a two-day waiting period for accidents and a 14-day waiting period for injuries. Some specific conditions like orthopedic problems and cruciate ligament issues may have longer waiting periods.
What’s included
Before you buy insurance, make sure you understand what your pet insurance policy covers. Find out how your policy defines pre-existing conditions and whether it pays for things like hereditary conditions and behavioral issues.
How to save money on pet insurance
Pet insurance doesn’t have to break your budget. To save money on pet insurance costs, follow these tips:
Compare quotes. To make sure you’re getting a competitive rate, get quotes from several insurance companies.
Look for discounts. You may qualify for discounts if you’re a member of certain groups, like AAA or the AARP, or if you’re a military member or veteran.
Find out if your employer offers pet insurance as a voluntary benefit. Some employers partner with pet insurance providers to offer discounted plans for workers who are pet parents.
Bundle policies. You may be able to save by bundling policies, e.g., a pet policy and an auto policy, with the same insurer.
Increase your deductible. If you’re willing to pay more out of pocket for an unexpected veterinary bill, increasing your plan’s deductible can save you money on premiums.
Think carefully about wellness plans. If your pet is healthy, has already been spayed or neutered and microchipped, and is up to date on their vaccines, a wellness plan may cost more than you’d pay out of pocket at the vet.
Frequently asked questions
How much does pet insurance cost?
The average pet insurance premium for an accident and illness plan in the U.S. was about $676 for dogs and $383 for cats in 2023, according to the North American Pet Health Insurance Association. That breaks down to a monthly premium of $56 for dogs and $32 for cats.
What’s the best pet insurance company?
Metlife, Embrace and Pets Best are at the top of NerdWallet’s list of the best pet insurance companies. However, be sure to compare several pet insurance companies to find the best policy for your animal’s needs.
What information do you need for a pet insurance quote?
You’ll typically need to provide your pet’s name, sex, species, breed (including size if it’s a mixed-breed dog), age and ZIP code to get a pet insurance quote.
Our goal here at Credible Operations, Inc., NMLS Number 1681276, referred to as “Credible” below, is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders who compensate us for our services, all opinions are our own.
Home equity loan
Home equity line of credit (HELOC)
Interest rate
Fixed
Variable
Monthly payment amount
Fixed
Variable
Closing costs and fees
Yes
Yes, might be lower than other loan types
Repayment period
Typically 5-30 years
Typically 10-20 years
FAQ
What is a rate lock?
Interest rates on mortgages fluctuate all the time, but a rate lock allows you to lock in your current rate for a set amount of time. This ensures you get the rate you want as you complete the homebuying process.
What are mortgage points?
Mortgage points are a type of prepaid interest that you can pay upfront — often as part of your closing costs — for a lower overall interest rate. This can lower your APR and monthly payments.
What are closing costs?
Closing costs are the fees you, as the buyer, need to pay before getting a loan. Common fees include attorney fees, home appraisal fees, origination fees, and application fees.
If you’re trying to find the right mortgage rate, consider using Credible. You can use Credible’s free online tool to easily compare multiple lenders and see prequalified rates in just a few minutes.
Debt can be both beneficial and harmful. It can help you buy a home, pursue higher education, or start a business. However, excessive debt can lead to financial stress and mental health issues like depression and anxiety. This article will help you distinguish between good and bad debt to make informed financial decisions.
Key Takeaways
Good debt helps improve your financial future by investing in appreciating assets or enhancing your earning potential, such as through education, real estate, or starting a business.
Bad debt finances depreciating assets or unnecessary luxuries, such as cars, clothes, and other consumer goods, leading to financial strain due to high-interest rates and reduced value over time.
Some debts fall into a gray area and can be beneficial or detrimental depending on how they are managed, such as consolidating high-interest debt into a lower-interest loan or borrowing to invest with calculated risk.
Good Debt vs. Bad Debt
Good debt typically involves borrowing for investments that grow in value or generate income over time, like education or real estate. Bad debt usually involves borrowing for depreciating assets or unnecessary expenses, like luxury items or cars. However, accumulating too much debt, even if it starts as good debt, can become a problem if your monthly debt payments become unmanageable.
Isn’t all debt bad?
Not all debt is bad. Debt becomes problematic when it’s unnecessary or avoidable. The mindset of trying to ‘keep up with the Joneses’ or believing ‘only the best will do’ can lead to unwise borrowing.
However, some types of debt can provide significant benefits, such as financing a home or investing in education. These types of debt can offer a good return on investment and help you improve your financial situation. It’s crucial to understand the difference between beneficial and harmful debt.
What is good debt?
Good debt is debt that helps you make money or have a home to live in. It could be beneficial In a literal sense (a return on investment) or figuratively (enhancing your skills and earning potential). Either way, good debt allows you to invest in yourself and your future.
Here are a few examples of good debt.
Education
Investing in your education is a strategic move that can enhance your future success. By gaining knowledge and skills, you increase your chances of securing better jobs and advancing in your career.
Many people experience a return on their educational investment within a few years, though this varies by industry. Before committing to a college or secondary education, thoroughly research the field you wish to enter. Consider average salaries, potential for career advancement, and typical career ceilings.
The value of student loan debt hinges on the earning potential associated with the degree you pursue. Make informed decisions to ensure your educational investment pays off.
Starting a Business
It takes money to make money, and starting a business is a prime example of this principle. Most businesses require an initial investment, and often it’s substantial. You can use a loan to launch your business and facilitate its growth.
Starting a business involves risks, just like any other investment. Conduct thorough research on your industry to understand what strategies have succeeded or failed for others. Evaluate the risks and decide if taking out a loan is a wise choice for your situation.
Be cautious of high-interest loans, such as payday loans or unsecured personal loans, as they can lead to financial strain due to their high repayment costs. It’s important to know how much you’re borrowing. Loans come with an annual percentage rate (APR), which represents the interest rate as a percentage of the principal amount borrowed. This rate determines how much you will pay for the borrowed money over time.
Real Estate
A great example of good debt vs. bad debt is real estate because you’ll see a return on your investment directly. Borrowing money to invest in real estate earns you equity in the property. Equity is the difference between the property’s value and how much you owe in debt.
Typically, real estate appreciates, but there’s always the risk of losing value, such as what occurred during the 2008 housing crisis. As long as you pay down your mortgage as planned or even ahead of schedule, you’ll build equity faster.
Investing in real estate can be for personal use, such as a primary residence, or for investment purposes, such as commercial or rental properties.
Like any investment, do your research and make sure you’re making a good choice before taking on real estate debt. Investing in an area where the property values don’t appreciate or buying a rental home in an area that isn’t rented often can lead to bad real estate debt.
What is bad debt?
People tend to assume that all debt is bad, but bad debt specifically refers to debt used to finance depreciating assets. Unlike investments in appreciating assets, this type of debt involves spending on items that lose value over time.
Here are a few examples of bad debt:
Cars
You need a car to get from Point A to Point B. That’s a given. However, you don’t need a luxury car or a car you can’t afford to pay for without financing. It’s best to pay cash for a car if you can because it’s a depreciating asset.
When you borrow money to buy a car, you pay interest on the loan and lose money on the value of the car. Most cars lose 20% of their value during the first year after you drive them off the lot.
When you don’t have the money to buy a car outright or your money isn’t enough to buy a reliable car, look for the best financing terms. Many manufacturers offer low interest rates or 0% APR for borrowers with great credit.
If you anticipate buying a car soon, it’s time to work on your credit before taking out a car loan to get the best deal. Auto loans require you to factor in different things before taking them.
Clothes and Other Necessities
Buying clothes is a necessity, but borrowing money for them is not advisable. Clothes often have inflated prices and do not increase in value, meaning you pay more than their actual worth. Consider shopping at overstock sales or second-hand stores, where items are often much cheaper than in retail stores.
Borrowing money for everyday expenses like food, household goods, and other consumer items is also not a wise financial decision. Using a credit card for convenience is fine, but it’s important to pay off the balance in full each month. Failing to do so can lead to accumulating high-interest debt, making it difficult to escape the debt cycle.
Luxury
You should not borrow money to purchase luxury items. Why not? Just look at the name—luxury. You don’t ‘need’ these items, but you buy them anyway.
There’s nothing wrong with spoiling yourself occasionally, but not at the expense of your future. Rather than racking up credit card debt to buy luxurious items, determine what you want and save for it. Set a timeline and divide the amount you’ll need by the number of months until you potentially buy it. Save that amount of money each month, and you should reach your goal within your desired timeline.
Yes, this requires a great deal of patience. But, when you purchase luxury items with debt, you rack up interest charges and end up paying much more for them than they’re worth.
What debts fall in the gray area?
Some debts don’t fit neatly into ‘good’ or ‘bad’ categories and depend on the circumstances. Here are a couple of examples.
Borrowing to Pay Off Debt
Paying off high-interest credit card debt with a low-interest loan can be a good idea, but here’s when it becomes a bad debt. If you consolidate your debt into a 0% or low-interest rate loan but do not allocate the “extra” money saved towards your debt, you’ll end up in the same situation.
The key is to pay the same amount of money to the debt but with a lower set monthly payment and interest rate. More of your payment will go towards the loan’s principal, paying it down faster. This means you’ll pay less interest over the life of the loan and have more money in your pocket in the future.
If you continue to make the minimum payments using your “saved” money, then it’s a bad debt, as it won’t benefit you.
Borrowing to Invest
Investing on margin may be possible for experienced investors with the right credentials. While leveraging in this way can be profitable, it’s not guaranteed. If the investment fails, you’ll lose more than you borrowed, resulting in significant debt.
However, if your investment performs well and generates profit after repaying the margin, then borrowing to invest can be considered a successful financial strategy.
Final Thoughts
Recognize the difference between good and bad debt. Use debt wisely by investing in appreciating assets, making timely payments, and avoiding high-interest loans. Develop a financial plan to manage debt and achieve your goals.
Managing debt wisely is essential for financial success. Prioritize timely payments, avoid high-interest loans, and focus on investments that enhance your financial health. By understanding and differentiating between good and bad debt, you can make informed decisions and achieve your financial goals.
Frequently Asked Questions
How can I determine if my education loan is good debt?
Education loans can be considered good debt if they lead to a degree or certification that significantly enhances your earning potential. Before taking out a loan, research the average salaries in your chosen field and the employment rates for graduates. If the potential income increase outweighs the cost of the loan, it can be considered good debt.
Are there any strategies for managing bad debt?
Yes, there are several strategies to manage bad debt. These include creating a budget to track and limit spending, consolidating high-interest debts into a lower-interest loan, prioritizing paying off high-interest debt first, and avoiding accumulating additional debt by making smarter spending choices.
What are some warning signs that my debt is becoming unmanageable?
Warning signs that debt is becoming unmanageable include missing payments, using one credit card to pay off another, maxing out credit cards, being unable to save money, and experiencing stress or anxiety about finances. If you notice these signs, it might be time to seek financial advice or consider debt counseling.
Can consolidating debt improve my credit score?
Consolidating debt can improve your credit score if it helps you make timely payments and reduces your overall credit utilization ratio. However, it’s essential to avoid accumulating new debt and to use the consolidation loan responsibly by sticking to a repayment plan.
Is it ever a good idea to borrow money for luxury items?
Borrowing money for luxury items is generally not advisable as it leads to bad debt. Luxury items do not appreciate in value and often result in high-interest payments if financed through credit cards or loans. It’s better to save up for luxury purchases and pay in cash to avoid unnecessary debt and interest charges.
How can I ensure that borrowing to start a business is good debt?
To ensure that borrowing to start a business is good debt, conduct thorough market research, create a detailed business plan, and have a clear understanding of your industry. Assess the potential return on investment and ensure that you can make loan payments without compromising your financial stability. Consider seeking advice from financial advisors or mentors in your industry.
What steps can I take to avoid falling into bad debt?
To avoid falling into bad debt, create and stick to a budget, live within your means, save for purchases instead of using credit, and avoid high-interest loans. Additionally, focus on building an emergency fund to cover unexpected expenses and regularly review your financial situation to make adjustments as needed.
Part of teaching your kids to be more independent is giving them money as part of an allowance. It can be an exciting time for your child — remember when you first got your hands on some cash? It can also be fraught with some bumps along the way as your child learns sound money management skills.
That’s not to say it’s not worth it. Rather, deciding on how to give them money and helping them budget their allowance can take time, but your kids will thank you for it. Read on for ways that you may handle this part of parenthood and help your child build financial literacy.
What Is an Allowance?
An allowance for kids is a predetermined amount of money you give them on a consistent basis, most commonly on a weekly or monthly cadence. You can choose to have your child earn their allowance by completing chores or “jobs” or do none at all. The idea is that with an allowance, your child can learn the value of work (if you have them do chores), gain experience handling money, and learn responsibility.
The decision to give an allowance is up to the family. The same holds true regarding whether the allowance is earned by completing chores. Depending on the age, some parents may feel more comfortable with giving their kids cash. Some may feel older kids can handle their own debit card and a children’s checking account — with some limits, of course.
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Types of Allowances
The type of allowance you give your child is based on your preferences, what you want your child to learn, and their needs. Here are some options for how an allowance can work.
Chore-Based Allowance
The chore-based allowance tends to be the most common, where a child is given some household tasks and offered a certain amount once these tasks are complete.
• Tasks typically will depend on your child’s age and their readiness to handle certain types of responsibilities.
• It can be wise to assign tasks your child can realistically accomplish so that they don’t wind up feeling discouraged.
For example, say your nine-year-old wants to start doing chores regularly to receive allowance money, which they plan to save up to buy a new science kit. Based on what they’ve demonstrated to you in the past, you believe they’re able to load the dishwasher and help put the laundry away. You discuss this with your child, and you both agree that you’ll give them a weekly allowance if they complete all their assigned chores.
Pure Allowance
Some parents would rather teach their child money management skills without connecting this to some sort of labor. Instead of asking your child to complete chores, parents agree to give them an allowance — typically a consistent amount in cash or perhaps put on a debit card connected to a bank account. While your child may still do chores around the house, the allowance isn’t contingent upon its completion.
Hybrid Approach to Allowance
Parents who want to teach their kids about reaching a goal (and also how money is tied to work) can take the hybrid approach. Here, you’ll give your child a regular allowance that isn’t contingent on any chores. However, you give them an opportunity to earn more money by taking on extra chores around the house. In that way, they’d get more experience in allowance management.
• For example, your child receives $5 a week, but they want to earn more so they can head to the local arcade for their friend’s birthday party or see their savings grow.
• Based on their age and ability, you have them do a chore or two (pulling weeds in the yard or taking out garbage). Once the tasks are complete, you give your child the amount you agreed upon.
How Much Allowance Should You Give Out?
The amount you should give your child will depend on several factors. Ultimately, it will depend on your budget and what you can afford to give your child. One popular formula is to give a child $1 or $2 per week for every year of age, which would mean $8 or $16 for an eight-year-old and $16 or $32 for a 16-year-old.
You might consider not just the age of your child but also how challenging or time-consuming the task is. A couple of other pointers:
• If you’re unsure what’s a good amount, you can ask some of your trusted parent friends or family members about what they’re giving their child.
• If your child reaches the age where they can get a part-time job, you may even consider lowering the amount or not giving an allowance at all since they can earn their own pocket money.
Whatever the amount you choose to give, make sure you set clear expectations. This means spelling out the chores in detail (is the child making their bed every day or just on weekdays, for instance?). It also means determining how much money will be paid, when, and how, as well as what (if anything) they will receive if a task is not fully completed. This can result in headaches down the road.
Advantages of Giving an Allowance
There are plenty of upsides to giving an allowance. Consider the following:
Teaching Money Management
Giving an allowance, whether tied to chores or now, gives your child an opportunity to understand how money works. Plus, it can teach them that the items they want to purchase or activities they want to do cost money. It gives them hands-on experience earning, saving, and spending, providing a valuable lesson in money management for kids.
They’ll learn about what it takes to purchase something, such as looking at price tags in the store.
• To go a step further, you can even teach the concept of saving and investing money and why that can help them as well.
• If you open a children’s or teen’s bank account for your child’s allowance money, that will teach valuable basic banking and financial literacy skills too. They might see how interest compounds and grows their savings, for instance.
• The same holds true if they get a debit card (typically one where you can view and possibly approve their spending).
Teaching Responsibility
An allowance can teach your child what it means to be responsible with money. They can learn not to spend their earnings on snacks if they’re saving for, say, a video game. They can learn to safely store their funds, be patient until their next paycheck rolls around, and earn extra money if they’re eager to accumulate a certain amount.
Building Confidence
Giving kids an allowance can help boost their confidence because it can show them you believe they’re ready to earn and manage their own money. They may also feel proud of their ability to make cash and spend it as they see fit, whether that means buying themselves new clothes or making a donation to a favorite charity.
Creating a Safe Space to Learn
Instead of having kids learn about money and other types of responsibilities when they’re grown, giving an allowance can give them a bit of a head start. You can help guide them to make their own decisions, which can include making money mistakes without huge consequences. Any errors they make can be an opportunity for you to teach your kid about what they can do differently next time.
Recommended: Guide to Opening a Bank Account for a Minor
The Takeaway
If you choose to give your child an allowance, whether it depends on chores or not, it can be a good way for them to learn how to manage a bit of money responsibly. You might have them work for the money, not work at all, or have them earn a bonus for doing additional chores.
Whatever amount you give, showing your child how to save their money in a savings account is a great teaching opportunity.
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FAQ
What is a fair allowance for kids?
A fair allowance for kids should be based on age and what you feel is appropriate. Many parents provide $1 or $2 per week for each year of the child’s age (meaning, if a child is 10, they get $10 or $20 per week). You might survey other parents in your circle and see what they give their kids as a way of coming up with a ballpark figure.
Are allowances bad for kids?
In most cases, allowances can have several advantages for kids, such as learning how to handle money and becoming more responsible. However, some parents may believe that allowances aren’t appropriate and should in no way feel obligated to give one.
How do parents give allowance?
Parents can give an allowance in a weekly, biweekly, or monthly cadence (or whatever other frequency suits them). They can also give a consistent amount or vary it depending upon tasks completed. In addition, an allowance can be paid as cash, on a debit card for older kids, or deposited into children’s bank account or an account that their parent holds for them.
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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
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Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
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.
If you aren’t able to qualify for a conventional mortgage, there are other methods of financing to consider.
Some, like government loan programs and down payment assistance grants, are relatively low risk.
But other methods, like borrowing from a retirement account, should be approached with extreme caution.
Today’s housing market is tough for hopeful homebuyers. The combination of high prices and high mortgage rates means that many potential buyers find themselves priced out of the market altogether — or out of the typical methods of mortgage financing, anyway.
It’s no wonder: The U.S. is in the throes of an ongoing housing shortage, driving up prices on what little inventory is available. And mortgage rates have skyrocketed in recent years, rising from around 3.25 percent for a 30-year fixed at the end of 2021 to 8 percent by late 2024. As of mid-May, Bankrate’s latest survey of large lenders showed an average 30-year fixed rate of 7.12 percent.
Fortunately, whether you’re unable to qualify for a conventional mortgage or just want to explore all your options, there are other, less traditional financing methods out there. Here are six alternative, more creative home financing ideas for eager homebuyers to think about. (Some have a certain amount of risk involved, though, so consider your financial situation carefully.)
1. Down payment assistance programs
Saving enough for a down payment can be a huge barrier to homeownership. Most state and local governments offer down payment assistance programs, which provide a low-risk method of getting some much-needed financial help. Each program will have a different set of qualifications that must be met, but they are typically offered mostly to first-time homebuyers, buyers with low or moderate incomes and people who plan on using the home as their primary residence.
Taking advantage of one of these programs does not exclude you from needing a mortgage — you will still need one — but many come in the form of grants that don’t have to be paid back. They may also take the form of low-interest or zero-interest loans, deferred-payment loans or forgivable loans, which typically don’t need to be paid back as long as you remain in the home for a specified period of time.
2. Government loan programs
If you aren’t eligible for a conventional mortgage, look into the mortgage programs backed by U.S. government agencies. Many come with low or even no down payment requirements, if you qualify, and many have lower credit score requirements as well:
VA loans: Available to active-duty military members and veterans, as well as some military spouses, VA loans are guaranteed by the U.S. Department of Veterans Affairs. For qualified borrowers, most require no down payment and have low or no minimum credit scores.
FHA loans: An FHA loan is insured by the Federal Housing Administration. These loans have lower down payment and credit score requirements than conventional loans and are especially popular among first-time buyers. However, they do require the buyer to purchase mortgage insurance.
USDA loans: Buyers in rural areas may qualify for a USDA loan. These were created by the U.S. Department of Agriculture to encourage homeownership in non-urban regions — the home must be located in a USDA-approved area. These loans require no down payment and tend to have looser credit requirements than conventional mortgages.
3. Balloon and piggyback loans
These unusual types of mortgages both have major disadvantages, but they can be useful in certain situations. A balloon mortgage is so named because it involves a relatively short length of time with low or even no monthly payments, followed by one big lump-sum payment at the end of the term, known as a balloon payment. These are not very common because they’re risky for both the borrower and the lender: You might be lulled into a false sense of security in the first few years, but you will still owe the full amount in the end, so you must be sure you’ll be able to afford the full amount by then. House-flippers often like these loans because when they sell the house, they are able to put the proceeds toward the balloon payment.
A piggyback loan carries less risk, but it does have downsides. As the name implies, it is really two mortgage loans, one piggybacking on the other. This means two different interest rates, two monthly payments and two sets of closing costs. Piggyback loans are often referred to as 80/10/10 loans because you get one loan for 80 percent of the purchase price and one for 10 percent, with the remaining 10 percent being paid upfront as the down payment. The benefit is that it can eliminate the need for private mortgage insurance.
4. Rent-to-own
Sometimes called a lease-to-buy program, renting to own a home is not unlike leasing a car: You rent the place for now, with an option to buy it later. Typically, a pre-arranged contract spells out the terms of the eventual purchase, including the price, and the tenant may choose to exercise the purchase option or not. Often, a portion of the rent payments is applied toward the purchase price if the tenant decides to buy. These arrangements can be great for those who can’t afford to buy a home yet but are diligently working their way toward it. However, if property values change drastically or you are still unable to afford a mortgage at the end of the rental term, you could lose money or run into other issues.
5. Seller financing
In rare cases, a buyer may be able to secure financing directly from the seller of the home, particularly if the seller owns the home free and clear. Seller or owner financing is similar to a traditional mortgage, but rather than a bank lending you money, the home’s owner is lending it to you and taking on the debt themselves. This may be beneficial to buyers who would not qualify for financing otherwise — in some cases, buyers may take out a mortgage for part of the purchase price and finance the rest via the seller. However, these situations usually involve a much higher interest rate than a standard mortgage, and they often require a balloon payment as well.
6. Borrowing from a retirement account
Finally, if you’re really between a rock and a hard place, you could potentially borrow from a retirement account to pay for your home — but it’s a risky step. Taking out a 401(k) loan is generally not recommended. There are likely to be limitations on how much you can take out, and doing so could mean paying penalties and taxes. And even though you’re borrowing your own money, you’ll still have to pay yourself back, with interest.
In addition, remember that your 401(k) is tied to your job — if you leave your current job for whatever reason, you may have to pay the money back more quickly than you’d anticipated or risk tax and early-withdrawal penalties. And you can’t borrow from a 401(k) from a company you no longer work for unless you’ve rolled it over into another account.
Bottom line on how to finance a home
If you don’t qualify for a conventional mortgage right now, there are several nontraditional, alternative ways to finance a home purchase — or at least help to finance it. However, while some options are solidly government-backed, others are very risky. Do your research and be sure you’re choosing a financing method that will work for your specific needs. It may be smart to consult with a financial advisor as well.