Secured credit cards are designed to help individuals improve their credit history and score. However, these cards differ from traditional unsecured cards in a few ways, and it’s important to understand all the details before you apply for a secured card.
What Is a Secured Credit Card?
A secured card is one with a credit limit that’s secured by collateral you put up. In the case of these cards, the collateral is a cash deposit you make to secure the credit limit. Typically, your credit limit is equal to your deposit, and you may have an option for how much that is.
For example, some cards allow you to deposit $200 to $3,000 to open your card account. So if you choose to deposit $500, your credit limit will be $500.
Your deposit is held by the credit card company the entire time you have the card. If you fail to make payments on your balance in a timely manner, the credit card company may close your account and use the deposit funds to cover its losses. This reduces risk for the lender, which is why these card companies are willing to offer credit cards to people with no or bad credit.
Once you close your account—assuming you’ve paid off your balance—you get your security deposit back.
Other than the factors surrounding the security deposit, a secured credit card typically works like any other credit card. You can use it to pay for purchases anywhere it’s accepted—these are usually Visa or Mastercard cards, so they’re accepted widely. If you carry over a balance each statement cycle, you’ll be charged interest on it in keeping with the rates associated with your card.
Building Credit With a Secured Credit Card
Secured credit cards aren’t a magic elixir for your credit. You have to manage these accounts appropriately to get the benefits. Here are some tips for building credit with a secured credit card.
Don’t apply randomly for credit cards. Every application could result in a hard inquiry on your credit report, bringing your score down further. Instead, do your research. Check your own credit, and consider what type of credit the lender is looking for before you apply. That increases your chances of getting approved the first time.
Make sure the cardholder reports your payments. Credit card companies don’t actually have to report your payments—so some won’t report to any bureaus, while others report to just one or two. Ideally, you want to work with a secured credit card lender that will report to all three credit bureaus. That way, your timely payments can help you build your credit on each of your credit reports.
Make every payment on time. Failing to make a payment can result in a negative mark on your credit reports, which defeats the entire purpose of the card. It can also result in hefty missed payment fees, which increase your balance even more.
Don’t max out your credit limit. Try to keep your utilization below 30%. That means if you have a credit limit of $1,000, keep your balance at $300 or lower. Your credit utilization—how much of your credit limit you use—impacts your credit score.
Don’t expect your credit to improve immediately. It takes time to build your credit via any means.
Tools like our Credit Report Card can help you keep track of your credit score and the factors affecting it so you can make good and informed decisions when building credit.
How to Choose a Secured Credit Card
When shopping for a secured credit card, consider the following factors:
Likelihood of approval. Don’t apply for a card you know requires good or excellent credit if you have poor credit. That just creates unnecessary hard inquiries.
Annual fee. You want to pay as little as possible for the benefit of building your credit. A few secured credit cards have no annual fee, but most do. Look for options with the most competitive annual fees, which tend to be under $40 per year.
Credit reporting. The best secured credit card options are those that report to all three credit bureaus. Plenty of secured credit card companies do, so you don’t have to settle for one that doesn’t.
Competitive interest rates. Rates for bad-credit products tend to be higher than average in general. However, you can find secured credit cards with more competitive rates, and you should definitely compare these cards to each other to find the lowest possible rate.
Account management tools. Look for a card lender that makes it easy for you to manage your account well. Payment reminders, online portals and apps can keep you in the know about your balance and reduce the risks you’ll miss a payment.
Next Steps After Using a Secured Card
Once you’re approved for and start building credit with a secured card, continue to plan for your financial future. At some point, hopefully, your credit will improve enough that you qualify for cards with better rates, limits, and perks.
Once you establish new cards, you might consider closing your secured credit card account because you may not want to keep paying an annual fee on a card that no longer serves your needs. However, closing your account might hurt your credit by potentially increasing your credit utilization ratio and also by affecting your average credit age, so weigh the pros and the cons of closing your card before making a choice. Visit Credit.com to learn more about our products like ExtraCredit® that could help you stay on top of your credit.
A home improvement loan is an unsecured personal loan that you use to cover the costs of home upgrades or repairs. Lenders provide these loans for up to $100,000. A home improvement loan comes in a lump sum, and you repay it in monthly installments, usually over two to 12 years.
How do home improvement loans work?
Unlike with home equity financing, home improvement loans do not require collateral. Whether you qualify and the loan’s interest rate are based on information like your credit and income. Missed or late home improvement loan payments will negatively impact your credit.
Home improvement loans vs. equity financing
A home improvement loan makes sense if you don’t have enough equity in the home or don’t want to use it as collateral. Equity is your home’s value minus what you owe.
If you have equity, you could get a lower monthly payment on a home equity loan or line of credit.
Home equity loan
Home equity loans come in lump sums and have fixed interest rates, so monthly payments never change. You repay this loan in monthly installments over a term as long as 15 years.
Compare to personal loans: Home equity loans work similarly to personal loans, but they often have lower rates and longer repayment terms.
Home equity line of credit
A HELOC is an open credit line that you draw on as needed during a renovation and pay interest only on what you borrow. This variable-rate option works best if you don’t mind a fluctuating monthly payment and need more borrowing flexibility.
Compare to personal loans: A HELOC lets you borrow at any time over a period of about 10 years, which can be ideal for long-term projects or unexpected expenses. A personal loan offers a one-time cash influx.
Home improvement loan pros and cons
Here are the pros and cons of using personal loans for home improvement projects:
Pros
Payments are fixed. Personal loans have fixed monthly payments, so you can reliably budget for them.
Funding is fast. Online applications typically take a few minutes, and funds are often available within a day or two, while funds from a HELOC or home equity loan can take a few weeks to become available.
No collateral required. Unlike an auto or home loan, unsecured personal loans don’t require collateral, so the lender can’t take your possessions if you don’t make the payments.
Cons
They can have high rates. Because the loan is unsecured, the interest rate may be higher than on a home equity loan or home equity line of credit, which typically have single-digit rates.
No tax benefits. You can’t claim a tax deduction on the interest paid on home improvement loans as you might be able to do with mortgage interest.
How to compare home improvement loans
Pre-qualify and compare offers from multiple lenders to find the right loan for your project. Here are important features to compare among home improvement loans:
Annual percentage rate: APRs represent the entire cost of the loan, including fees the lender may charge. If you’re a member of a credit union, that may be the best place to start. The maximum APR at federal credit unions is 18%.
Monthly payment: Even if you get a low rate, be sure the monthly payments fit into your budget. Use a home improvement loan calculator to see what loan amount, rate and repayment term you need to get an affordable monthly payment.
Loan amount: Some lenders cap amounts at $35,000 or $40,000. If you think your project will cost more than that, look for a lender that offers larger loans.
Loan term: A loan with a long repayment term may have low monthly payments, but you’ll pay more interest over the life of that loan than one with a shorter repayment term.
Ability to add a co-signer or co-borrower: Some lenders let you add a co-signer or co-borrower to your application. Adding someone with better credit or higher income to the loan application may help reduce your APR or increase the amount you can borrow.
Home improvement loan rates
Home improvement loan rates are 6% to 35.99%. Lenders decide your rate on a home improvement loan primarily by using your credit score, credit history and debt-to-income ratio.
Here’s what personal loan rates look like, on average:
Borrower credit rating
Score range
Estimated APR
Source: Average rates are based on aggregate, anonymized offer data from users who pre-qualified in NerdWallet’s lender marketplace from Nov. 1, 2023, through Nov. 30, 2023. Rates are estimates only and not specific to any lender. The lowest credit scores — usually below 500 — are unlikely to qualify. Information in this table applies only to lenders with maximum APRs below 36%.
How to get a home improvement loan
To get a home improvement loan, first compare lender offers with other options, check your rate and monthly payments, prepare documents and apply.
Let’s break down those steps:
Compare options. Compare the best home improvement lenders against each other and with other financing options, like credit cards and home equity financing. You’re looking for the one that costs the least in total interest, has affordable monthly payments and fits your timeline.
Check your rate and monthly payments. Have a firm cost estimate for your project before this step. Many online lenders and some banks let borrowers pre-qualify to see potential personal loan offers before applying — but you’ll be asked how much you want to borrow. Pre-qualifying involves a soft credit pull.
Prepare documents. Once you’ve chosen a lender, gather the documents you’ll need to apply. This can include things like W-2s, pay stubs, proof of address and financial information.
Apply. You may have to apply in person at smaller banks and credit unions, but larger ones and online lenders have online applications. Many lenders can give you a decision the same day you apply. After that, expect to see the funds in your bank account in less than a week.
How to use a home improvement loan
Unsecured loans can cover almost any purchase. How much you need varies based on your location, home size and how extensive your plans are.
Here are some common projects and how much you could pay for each, based on the most recent cost estimates available:
Other types of home improvement financing
Government assistance
Starting in 2023, homeowners can get tax credits for some energy-efficient updates, like new doors, windows, insulation, heat pumps and air conditioners. The Energy Efficient Home Improvement Credit and Residential Clean Energy Credit are listed on the IRS website.
The North Carolina Clean Energy Technology Center maintains a database that includes state and local incentives for eco-friendly home improvement projects.
When it’s best: Consider applying if your project and finances meet the criteria outlined by these programs. They can help make upgrades more affordable.
Cash-out refinancing
When it’s best: Consider this option if mortgage rates are lower than the one you’re paying now.
Credit cards
You can strategically use a credit card to cover the cost of your upgrades. Rewards cards can get you paid as you upgrade, while a card with a 0% introductory APR can cover short-term home renovations.
When it’s best: Use a credit card for projects small enough that you won’t max it out. You should typically aim to pay your full balance every month. You’ll need good or excellent credit (690 credit score or higher) to qualify for a zero-interest or rewards card.
All too often we make investing far more complicated than it really is. I was guilty of this when I first started investing back in 1993. Like the search for the Holy Grail, I was convinced that there was a perfect asset allocation plan. And I searched for it. I spent hours upon hours trying to construct the perfect investment plan.
I’ve mellowed a bit since then. I’ve ditched my micro cap value fund for a much simpler asset allocation. It’s not that a micro cap fund, a China ETF, or mortgage REITs are bad investments. Rather, I’m no longer convinced that such asset classes are necessary to achieve my investment goals. I’m also not convinced such a complicated portfolio will outperform a simpler approach.
This Philosophy informs my responses when I receive email from readers about their own investments. They want to know if they should have a small cap value fund, or REITs, or a dividend fund, or dozens of other asset classes in their investment portfolio. This article and podcast is in response to all of those questions and similar emails I’ll certainly receive in the future.
How the Pros See Asset Allocation
There are a number of excellent sources we can turn to for investment ideas. Here are four of them.
Target Date Retirement Funds
The major mutual fund companies offer target date retirement funds. These fund of funds as they are called, split the amount of your investments into several mutual funds. Reviewing exactly which funds these target date investments to use give us insight into the asset allocation chosen by the likes of Fidelity.
Robo Advisors
Much like target date retirement funds, we can also peer into the asset allocation plans of automated investment services. Three of the most popular are Betterment, Wealthfront, and Future Advisors. Wealthfront, for example, has an excellent white paper on its investment philosophy. It not only shows its asset allocation plans for taxable and retirement accounts, but it also provides an in depth explanation for the asset classes it has chosen.
Investment Books
Any number of investment books provide excellent ideas on asset allocation plans. Two of my favorites are All About Asset Allocation by Ric Ferri and Unconventional Success by David Swenson. I interviewed Ric about his investment philosophy in Podcast 3. I’ve written about David Swenson’s model asset allocation plan as well. Both are worth reviewing.
Bogleheads Forum
The Bogleheads Forum has a wealth of information about investing. Of particular interest to asset allocation plans is what they call Lazy Portfolios. That resource lists a number of asset allocation plans that are easy to implement and maintain. It’s a great resource.
Same Kind of Different as Me
What’s interesting about the above resources is that none of the asset allocation plans is identical. While some are similar, they all take a slightly different approach. So much for the “perfect” asset allocation plan. It doesn’t exist.
As I was pursuing the Bogleheads forum while writing this article, I came across the following comment:
I couldn’t say it better myself.
Alternatives to Stocks
In fact, it’s worth mentioning that plenty of investors look for alternatives to stocks to further diversify their portfolio and have a little fun with their investing, while still growing their nest egg.
For example, Masterworks is an investment platform that lets you buy shares in blue-chip artworks: Pieces by household names like Andy Warhol. The blue-chip art index has outperformed the S&P 500 over the last 18 years, making blockbuster art a quirky but potentially lucrative addition to your personal portfolio. Find out more about Masterworks in our full review.
Of course, all of this raises an important question. How do we choose the asset allocation plan that is best for us?
Related:
The Perfect Asset Allocation Plan for You
Given that there is no one “right” investment plan, the key is to find a solid plan that fits your personality and investment options. You can start with any of the asset allocation models listed above, and then customize it to fit your investing style. To do that, consider these four factors:
Risk Tolerance: The starting point is to understand how much volatility you can handle. This comes with experience. As you start to invest, you typically don’t have a lot of money invested. As a result, losing 50% (the 2007-2009 market dropped 57%) seems awful, but the actual dollar loss may not be much. If you have $1 million invested, losing 50% can be traumatic.
Complexity: I know some investors that embrace complexity. Their portfolios have literally dozens of asset classes. They don’t invest in one or two international funds, they invest in country-specific ETFs and slice the U.S. market into six or more asset classes. It’s a lot to manage, particularly when it comes time to rebalance. If that kind of complexity is not your cup of tea, keep your portfolio simple. It’s more than reasonable to build a well-diversified portfolio with just three or four asset classes.
Boredom: Some would be bored with a 3-fund portfolio. They aren’t interested in a wildly complex portfolio, but they do want some exposure to additional asset classes. These often include REITs, small cap, and emerging markets. If that’s you, and it’s certainly me, expand your portfolio to cover one or more of these asset classes. The key is to find a plan you’ll stick with in good times and bad.
Investing Options: Finally, we have to work with the investing options available to us, particularly in a 401k or other workplace retirement plan.
Rob Berger is the founder of Dough Roller and the Dough Roller Money Podcast. A former securities law attorney and Forbes deputy editor, Rob is the author of the book Retire Before Mom and Dad. He educates independent investors on his YouTube channel and at RobBerger.com.
Do you want to learn how to sell breast milk and make extra money? If you have extra breast milk, then selling it can be a good way for moms to make some extra money while also helping babies (and others) who need it or want it. Today you will learn how to sell breast…
Do you want to learn how to sell breast milk and make extra money?
If you have extra breast milk, then selling it can be a good way for moms to make some extra money while also helping babies (and others) who need it or want it.
Today you will learn how to sell breast milk safely and legally, how much money you might be able to make, and how to make more milk if you want to.
Recommended reading: 27 Ways To Make Money on Maternity Leave
Key Takeaways
Selling breast milk can help you make extra income as well as help babies in need.
Correct hygiene and storage are extremely important, as you don’t want anyone to get sick from your milk.
You can use websites and milk banks to sell or give away your breast milk. Some moms might give their milk away for free, while others might want to sell it for some extra money. There’s no right or wrong way.
You can earn around $1 to $2 for each ounce of breast milk. Babies usually drink about 20 to 30 ounces each day, so this means you could make a good amount of money.
How To Sell Breast Milk
Is selling breast milk legal?
Selling breast milk is legal in most countries, such as in the United States.
However, you will want to check the rules in your area about selling bodily fluids as this will help you follow the law when you sell your breast milk. If you contact any of the milk banks listed below, they should be able to help you figure this out.
Is there a market for breast milk?
Yes, there is definitely a market for breast milk. Some new moms produce more milk than their babies need, and some moms struggle to produce enough.
By selling your extra milk, you can help parents who need milk, while making extra money. The demand for breast milk is mainly driven by mothers who struggle with low milk production or those who cannot produce milk at all.
But, there are other reasons why people buy breast milk as well, such as bodybuilders like breast milk because it’s high in fat and has a lot of calories.
You can decide who you want to sell your breast milk to. So, if anything makes you uncomfortable, simply state so.
Also, it is hard work pumping milk, so you will want to carefully think about the pros and cons to make sure it is worth it for you.
How much can you sell breast milk for?
If you have a large milk supply, you may be able to make a decent side income by selling your breast milk, and you may be able to earn around $1 to $2 per ounce.
I’ve read stories online where some people say that they earn $1,000 or even $2,000 a month selling their breast milk. While that’s most likely not the norm, as that would be a lot of extra milk supply that you have, you may still be able to earn at least some extra cash from the breast milk that you won’t be using.
6 Best Places To Sell Breast Milk
Below are the best places to sell breast milk to.
1. Only the Breast
Only the Breast is a popular site specifically for buying and selling breast milk. On this website, you can create breast milk listings and connect with possible buyers.
I browsed the site and they currently have over 3,000 listings for breast milk for sale. You can sell your breast milk in bulk for $0.25 to $0.50 per ounce, or not in bulk at $1.00 per ounce. You can also choose to sell your milk through a local listing on this site.
There were also several hundred listings on this site from people who were looking for specific breast milk to buy, which is a good sign that there are a lot of buyers out there!
With Only the Breast, you can also choose who you sell your breast milk to, such as only for babies and not for adults to drink.
2. Tiny Treasures Milk Bank
Tiny Treasures Milk Bank is a milk bank that pays $1.10 an ounce to healthy breastfeeding mothers for their time and effort. This company will give you the breast milk storage bags to put your milk into, but you will have to use your own pump.
This company works with Prolacta BioScience to make life-saving human milk-based nutritional products for ill and premature infants. They mostly sell their products to hospitals, but some are also used for research.
3. BreastfeedingMomsUnite
BreastfeedingMomsUnite is an online milk community and classified site covering all things related to breastfeeding, including the sale of breast milk.
You simply start by creating a milk ad with information about you and what you are selling. Once you have agreed on a deal with a parent, you then ship them your breast milk, usually on dry ice to make sure that it stays frozen.
4. Craigslist
Craigslist is a site where you can post an ad for selling pretty much anything, such as breast milk. While it is not the most specific site for this purpose, your listing can possibly reach a wide audience in your local area.
In your ad on Craigslist, you will want to include a picture of the milk you are selling, your price, and some information about you such as your medical history and drug use.
I did a quick search on Craigslist and found breast milk listings in several cities and the prices ranged from around $1.00 to $5.00 per ounce.
As always with Craigslist, be careful when dealing with potential buyers (make sure to meet in a public place) and you will want to make sure you have safe transactions.
5. Facebook groups
There are many Facebook groups that are dedicated to the buying and selling of breast milk.
You can search for groups in your area or country and join them to connect with potential buyers.
I hopped on Facebook and simply searched for “sell breast milk” in the search bar and a ton of Facebook groups popped up that I could join to sell breast milk. There are breast milk sale groups for different countries, different states, and even ones that are for a specific purpose (such as for sick babies or even bodybuilders).
Then, you will most likely post an ad for your breast milk, or see if there are any “wanted” listings that suit what you are trying to sell.
Donating breast milk
Donating breast milk can be a great way to help moms who are having trouble nursing or babies in need of human milk.
To donate breast milk, you may want to contact milk banks or organizations that handle milk donation such as the Human Milk Banking Association of North America (HMBANA). HMBANA is dedicated to making sure that all babies have access to human milk, either through breastfeeding or the use of pasteurized donor breast milk. Check out their website to find out more details on how to become a donor.
Another idea that you might also be interested in is donating your breast milk through informal milk sharing. La Leche League International mentions that some families practice cross-nursing or co-nursing, where babies receive human milk from people who are not their parents.
Before you donate your breast milk, you will need to make sure that it’s safe, and donated breast milk should be free from contamination to make sure the baby who is drinking the milk is safe. The American Academy of Pediatrics and the Food and Drug Administration recommend milk banks over online sites for this reason.
Here are a few tips for safe breast milk donation:
Always use sterile containers when you pump and store your breast milk.
Freeze your breast milk as soon as possible after pumping to preserve its quality.
Label your containers with the date of pumping to make it easier for donation centers to track and manage their inventory.
Make sure to follow the guidelines that the milk bank or donation group tells you (there’s usually a list that they will give you so that you know what to do and what not to do).
Things To Think About When Donating Or Selling Breast Milk
Here are some things to think about when selling breast milk.
Health and safety considerations
Before you sell your breast milk, you will, of course, want to make sure that it’s really clean and safe. So, this means you should get a good breast pump, keep everything clean, and store the milk in the correct temperatures at the right time.
Also, usually you cannot donate or sell breast milk if you are a smoker, if you have positive STD results, if you use medications, have tattoos, had a recent organ or tissue transplant, had a recent blood transfusion, and more. Milk banks typically want breast milk from healthy donor mothers.
You may have to take a blood test, get tested for things such as HIV, syphilis, or illegal drugs, and more before you can qualify to sell or donate breast milk. Some companies may require samples of breast milk as well before you get started.
Legal aspects
If you’re selling breast milk online, you should always be honest about yourself and your milk. You should share info about your health, what you eat, and how you live because it affects the milk’s quality and what a person may be looking for. This is SUPER important!
Challenges and risks
Selling breast milk can be a bit tricky as you have to find a place to sell it, usually on websites or social media groups. Sending it can be hard too, because it has to stay really cold so that it doesn’t melt and become spoiled.
Also, it takes a lot of time and effort to pump, which all moms know.
Personally, I pumped for over one year, and I found it to be very hard and time consuming. So, you will want to make sure that it is worth it for you.
If you remember these things and stay healthy and safe, selling your breast milk can be a good way to earn money and help babies who need it.
How To Increase Your Milk Supply
If you want to sell breast milk, you may be interested in knowing how to increase your supply. To help increase your milk supply, here are some tips.
Milkology course
Milkology is a site that has several breastfeeding and pumping resources. It is a resource for breastfeeding mothers who want to learn how to increase their milk supply.
I personally took this course when I was learning how to breastfeed and pump breast milk, and I thought it was very helpful (and affordable!).
These resources cover everything related to breastfeeding and nursing, including how to maintain a healthy breast milk supply which can be super helpful for those who want to sell breast milk.
To increase milk supply, here are some tips to get started:
Nurse frequently – Aim for at least 8 to 12 feedings a day, approximately every two to three hours. Eventually, you can lower it, but in the beginning this is very important.
Breast pump – You will want to use a breast pump to help with milk production without feeding a baby, especially if you plan to sell breast milk. A hands-free pump is also a lifesaver so that you can do things while pumping.
Relax – I know this is easier said than done, but relaxing can really help to increase your milk supply. So, you may want to watch some TV, read a book, or eat a snack while pumping.
Include lactation-supporting foods in your diet – This includes foods such as fenugreek, oatmeal or oat milk, fennel seeds, lean meat and poultry, and garlic.
By using these tips and taking the Milkology course, you may be able to increase your breast milk supply so that you can sell more breast milk.
Frequently Asked Questions About How To Sell Breast Milk
Below are answers to common questions about how to sell breast milk.
Who buys breast milk?
Some people who might buy your breast milk include moms who can’t make enough milk and parents who adopt babies. Some adults might also buy it for themselves too.
Is it wrong to sell breast milk instead of donating it?
I know how hard it is to pump and to find the time to do so. I believe that your time is worth something, so do not feel bad about selling your breast milk if that is what you want to do. Plus, I have talked to many moms who have said that they would gladly pay for breast milk when they need it, because they know how hard it is to do and how valuable a mother’s time is.
Is it ethical to sell breast milk to bodybuilders online?
Some bodybuilders drink donor breast milk because of the high protein, calories, and fat in it. The ethics of selling breast milk to bodybuilders is personal, and some believe it’s an acceptable and mutually beneficial arrangement as long as both parties consent (the mother and the bodybuilder that is), but other people may find it inappropriate. It’s really just a personal decision.
How to sell breast milk to bodybuilders?
To sell breast milk to bodybuilders, you can create a listing on breast milk classifieds sites and make sure your listing targets the bodybuilding community. You can also join specific forums or Facebook groups for bodybuilders and breastfeeding to connect with potential buyers. I did a quick search on Facebook and I found several Facebook groups that are all about selling breast milk to bodybuilders, so that is probably a good place to start if you are interested.
Where can I find milk banks near me?
To find milk banks near you, you can look for accredited milk banks through the Human Milk Banking Association of North America (HMBANA). They have a directory on their website with a list of approved banks in North America. Also, you can check for local milk banks or lactation support groups in your area.
Where to sell breast milk online?
To sell breast milk online, you can use websites like Only the Breast. They help people who want to buy and sell. You can also put up ads on regular websites or join Facebook groups for this.
How To Sell Breast Milk – Summary
I hope you enjoyed this article on how to sell breast milk.
Selling breast milk is such a hot topic. I understand that pumping breast milk can be tough and finding time for it can be a challenge. It’s important to remember that your time is valuable, so don’t feel guilty about selling instead of donating your breast milk, if that’s something you choose to do.
There are many places to sell breast milk to as well, so you can actually make extra money doing this.
Have you ever thought about selling breast milk? What do you think about selling breast milk?
Many people want to buy a home but think it isn’t possible because they don’t have money to put toward a down payment. Traditionally, lenders require a 20% down payment toward your mortgage.
But a 20% down payment adds up to a lot of money. For example, if you plan to purchase a $150,000 home, you’d need to come up with a $30,000 down payment. Many people cannot afford this, but fortunately, the 20% rule is a lot less common than you might think.
Is a buying a house with no money down possible?
The National Association of Realtors (NAR) reports that 39% of non-owners believe they need a 20% down payment or more and 22% believe they need a 10% to 14% down payment.
But neither of these are true. Many mortgage lenders will let you buy a home by putting down as little as 3%. And some lenders will let you skip the down payment altogether.
NAR also found that 61% of first-time homebuyers made a down payment between zero and 6%. So, it’s safe to say that a 20% down payment isn’t the standard anymore. But unfortunately, many consumers choose not to pursue homeownership because they believe this down payment myth.
Weighing the Pros and Cons of No Down Payment Mortgages
Is there any reason to aim for 20% down when most home buyers buy with a down payment less than 20%? If you can afford it, yes, the 20% rule is still a wise choice.
The more money you put toward your mortgage, the less debt you’ll have to repay and the less your monthly payment will be. Plus, there are several drawbacks to putting down less than 20%:
Less favorable rates: If you pay less than 20%, lenders will probably see you as a risky investment. And they will take this into consideration when calculating your mortgage rates. In general, you can expect to pay a higher interest rate if you put down a smaller down payment.
Higher closing costs: Closing costs are based on the size of your mortgage. So, the smaller your down payment is, the higher your closing costs will be. However, you may be able to get around this if you live in a state where it’s typical for the seller to pay the closing costs.
Private mortgage insurance (PMI): Private mortgage insurance is a type of mortgage insurance designed for borrowers who make a down payment lower than 20%. It protects your mortgage lender in case you end up defaulting on your loan.
PMI can cost as much as 1% of your total monthly mortgage payment. So for a $150,000 mortgage, you’ll end up paying $150 per month.
However, this may not be that bad, especially if you have a less expensive mortgage. And once you reach 20% home equity, you can cancel your PMI and get rid of these extra payments.
Check Out Our Top Picks for 2023:
Best Mortgage Lenders
How to Buy a House With No Money Down
Fortunately, there are several lending programs that do not require a down payment. Here are five payment assistance programs that will help you buy a home with little to no down payment.
1. VA Loans
VA loans are a valuable option for eligible military veterans, active-duty service members, and certain surviving spouses. These government-backed loans offer several benefits, making homeownership more accessible and affordable through the use of a VA loan.
100% Financing and No Down Payment
One of the most significant advantages of VA loans is the 100% financing, meaning you won’t need to make a down payment when utilizing a VA loan. This can save borrowers a substantial amount of money upfront, making it easier to enter the housing market.
No Private Mortgage Insurance (PMI) Requirement
Unlike conventional loans that require PMI for down payments less than 20%, VA loans do not require PMI. This can save borrowers hundreds or even thousands of dollars per year in mortgage insurance premiums when using a VA loan.
VA Funding Fee
While VA loans offer numerous benefits, there is a one-time funding fee charged to help offset the costs of the program. The funding fee is 2.15% of the total loan amount for first-time users of VA loans and 3.3% for subsequent uses.
This fee can be financed into the VA loan, reducing the out-of-pocket expenses for the borrower. In some cases, borrowers may be exempt from the funding fee, such as those with service-connected disabilities.
Certificate of Eligibility
To apply for a VA loan, borrowers need to obtain a Certificate of Eligibility (COE) from the Department of Veterans Affairs. The COE verifies the borrower’s eligibility for the VA loan program based on their military service or, in some cases, the service of their spouse. The COE can be requested online through the Department of Veterans Affairs website, by mail, or through an approved lender.
Additional Benefits
VA loans also offer competitive interest rates, more lenient credit requirements, and flexible underwriting guidelines compared to conventional loans. Additionally, there are no prepayment penalties, allowing borrowers to pay off their VA loans early without incurring additional fees.
2. Navy Federal Credit Union
Navy Federal Credit Union’s loan program is similar to what the VA offers. It offers a zero down mortgage and no mortgage insurance. And Navy Federal’s funding fee is only 1.75%.
Navy Federal offers a 30-year loan and a 30-year jumbo loan. 30-year loans have a loan limit of $424,100 while jumbo loans are available up to $1 million. However, you will have to be a Navy Federal member to qualify.
3. USDA Loans
If you’re looking to move to a rural area, you might qualify for a USDA loan. The United States Department of Agriculture Housing Program was designed to aid rural development and is aimed at low-income families. USDA loans offer 100% financing with low interest rates.
Here are the eligibility requirements you must meet to qualify for a USDA loan:
When buying a home it must be within the USDA’s boundaries: Although this loan targets rural areas, some suburban areas may still qualify. You can look at this map on the U.S. Department of Agriculture’s website to see if your location falls within the USDA’s geographical boundaries.
Your household income can’t exceed a certain threshold: This applies to everyone living in the household, even if they won’t be listed on the mortgage. For instance, if you have a parent living with you who collects Social Security, this counts toward the gross income of all members of a household. The maximum household income varies by state and county so you can find out if you qualify here.
See also: Best Home Loans for Low-Income Borrowers
4. Lease-Option
A lease-option (also known as rent-to-own) allows you to rent a home with the option to buy it at a predetermined price after a certain period. A portion of your monthly rent may be applied toward the purchase price or down payment. This can be a solid option if you need more time to save for a down payment or improve your credit.
5. Seller Financing
In some cases, the seller may be willing to finance the property for you, allowing you to purchase the home without a traditional mortgage. This arrangement typically requires a contract outlining the terms of the loan, including the interest rate, payment schedule, and any potential penalties.
Seller financing can be a viable option if you have a strong relationship with the seller or if the seller is having difficulty selling the property.
6. Crowdfunding
Crowdfunding is a method where you raise money from multiple individuals, typically through online platforms. You can set up a campaign to raise funds for your down payment or even the entire purchase price. This method may work best if you have a strong network of friends, family, and supporters who are willing to contribute to your home-buying goal.
7. Shared Equity Agreements
Shared equity agreements involve partnering with an investor who provides a portion or all of the down payment in exchange for a percentage of ownership in the property. When the property is sold or refinanced, the investor receives a return on their investment based on the agreed-upon share of equity. This can be an attractive option if you can’t afford a down payment but are willing to share future appreciation in the home’s value.
8. Housing Assistance Programs
There are numerous local, state, and federal housing assistance programs that offer grants, low-interest loans, or other forms of financial support to help eligible individuals purchase a home with no money down. These programs often have specific requirements, such as income limits, property location, or first-time homebuyer status. Be sure to research and apply for any programs for which you might be eligible.
Low Down Payment Loans
If you’re unable to buy a house with no money down but can afford a small down payment, consider these low down payment options that can help make homeownership more accessible.
1. 97% LTV mortgages
97% LTV mortgages is a loan program that is offered to first-time homebuyers by Fannie Mae and Freddie Mac. They require a 3% minimum down payment and private mortgage insurance.
Here are the guidelines for the program:
You’ll need a credit score of at least 680
One of the borrowers must be a first-time homeowner
Manufactured housing isn’t permitted
Gifts, grants, and other funds may be used toward the down payment
2. Federal Housing Administration (FHA) Loans
The Federal Housing Administration (FHA) was established in 1934 to reduce the requirements to qualify for a mortgage. This government-backed mortgage program offers flexible requirements, making it an attractive option for first-time homebuyers.
Here are the guidelines you’ll need to meet to qualify for an FHA loan:
Credit Score Requirements
The minimum credit score required to qualify for an FHA loan is 500. The specific down payment requirements depend on your credit score:
If your credit score is between 500 and 579, you’ll need to make a 10% down payment.
If your credit score is 580 or higher, you’ll have to make a 3.5% down payment.
Seller Contributions
FHA loans allow sellers to contribute up to 6% of the closing costs. This can help reduce the upfront costs for the buyer and make it easier to afford the purchase.
Mortgage Insurance Requirements
Mortgage insurance is required for an FHA loan, protecting the lender in case the borrower defaults on the loan. However, once you build 20% equity in the home, you can refinance to a conventional loan to eliminate the mortgage insurance requirement.
Debt-to-Income Ratios
FHA loans accept high debt-to-income (DTI) ratios, allowing borrowers with significant existing debt to still qualify for a mortgage. The FHA typically requires a maximum DTI of 43%, but exceptions can be made for borrowers with compensating factors, such as substantial savings or a history of making large payments on time.
3. HomeReady Mortgage
The HomeReady mortgage is a Fannie Mae program designed for low-to-moderate-income borrowers. It requires a down payment as low as 3% and offers flexible underwriting guidelines, making it an attractive option for first-time homebuyers or those with limited credit history.
4. Home Possible Mortgage
Similar to the HomeReady mortgage, the Home Possible mortgage is a Freddie Mac program that allows for a down payment as low as 3%. It is designed to help low-to-moderate-income borrowers achieve homeownership and offers flexible underwriting guidelines.
5. State and Local Homebuyer Assistance Programs
Many state and local governments offer homebuyer and down payment assistance programs that provide grants or low-interest loans to help cover down payment and closing costs. These programs typically have income and property location requirements, so be sure to research and apply for any programs for which you might be eligible in your area.
Each of these low down payment mortgage options has its own set of eligibility requirements and potential benefits. Be sure to research and compare these options to determine which one best aligns with your financial situation and home-buying goals.
Preparing for Homeownership
Before jumping into the home buying process, it’s essential to prepare yourself financially and mentally. This section covers tips for improving credit scores, creating a budget, and managing debt to make the home buying process smoother.
Credit Score Improvement Tips
Improving your credit score involves checking your credit report for errors and disputing any inaccuracies. Ensure that you pay your bills on time and reduce outstanding debt as much as possible. Keep credit card balances low, avoid opening new credit accounts, and consider requesting a credit limit increase without increasing your spending.
Creating a Budget
Creating a budget requires tracking your income and expenses to understand your spending habits better. Categorize your expenses and set realistic limits for each category. Allocate funds for saving and investing, including a down payment and emergency fund, and regularly review and adjust your budget as needed.
Managing Debt
Managing your debt effectively involves prioritizing high-interest debt and paying more than the minimum payment. Consider debt consolidation or refinancing options to secure a lower interest rate. Avoid taking on new debt before applying for a mortgage and create a debt repayment plan that you can stick to.
Understanding the Total Cost of Homeownership
Understanding the total cost of homeownership means factoring in property taxes, insurance, maintenance, and utility costs. Estimate homeowners association (HOA) fees if applicable and consider the costs of furnishing and updating the home. Prepare for potential increases in expenses over time, such as property tax hikes.
How to Choose the Right Mortgage Option
With various mortgage options available, it’s crucial to select the one that suits your financial needs and long-term goals. This section discusses factors to consider when choosing a mortgage, such as loan term, interest rates, and mortgage insurance.
Fixed-Rate vs. Adjustable-Rate Mortgages
Fixed-rate mortgages have a consistent interest rate for the loan’s duration, providing stability and predictable monthly payments. In contrast, adjustable-rate mortgages (ARMs) have an initial fixed-rate period followed by periodic rate adjustments, which may result in lower initial payments but potential rate increases over time.
Mortgage Term: 15-Year vs. 30-Year
The mortgage term plays a crucial role in determining the overall cost of your mortgage. 15-year mortgages typically have lower interest rates and allow for faster equity buildup, but require higher monthly payments. 30-year mortgages offer lower monthly payments, but result in more interest paid over the loan’s lifetime.
Mortgage Insurance Considerations
PMI may be required for conventional loans with less than a 20% down payment. Loans backed by the federal government, such as FHA, VA, or USDA loans, may have different insurance requirements or fees.
Assessing Your Long-Term Goals
When choosing a mortgage option, consider how long you plan to live in the home and whether your financial situation or housing needs may change. Evaluate the potential for home value appreciation and the impact on your future financial goals.
Planning Your Next Steps
Assess Your Financial Situation
The amount of money you choose to put toward a down payment is a personal choice. If you feel ready for homeownership but know that a 20% down payment isn’t feasible for you, there are many options available to help you.
The best place to start is by looking at your monthly budget and seeing what you can realistically afford. Use a mortgage calculator to reverse engineer your goal and find your ideal home purchase. Consider factors like property taxes, insurance, and maintenance costs, as well as any debts you currently have.
Get Pre-Approved
Get pre-approved for a mortgage before you start house hunting. This will give you an idea of how much you can afford, and it will show sellers and real estate agents that you’re a serious buyer.
To get pre-approved, you’ll need to provide your lender with documentation such as pay stubs, bank statements, and tax returns. They’ll then assess your credit score and financial history to determine how much they’re willing to lend you.
Shop Around for the Best Mortgage
Shop around for the best mortgage rates and terms. Don’t just settle for the first lender you come across. Compare different lenders and loan programs to find the best fit for your financial situation. Look for competitive interest rates, low fees, and flexible repayment terms.
Work with a Knowledgeable Real Estate Agent
A good real estate agent can help you find a home that fits your needs and budget. They’ll also guide you through the home buying process, making it less stressful and ensuring you don’t make any costly mistakes.
Attend First-Time Homebuyer Classes
Consider attending first-time homebuyer classes or workshops. Many local organizations and government agencies offer educational resources for first-time homebuyers. These classes can help you understand the ins and outs of the home buying process and give you the knowledge you need to make informed decisions.
Save for Unexpected Expenses
Even if you’re able to buy a home with no money down, it’s a good idea to have some savings set aside for unexpected expenses. These might include moving costs, home repairs, or furnishing your new home.
Build an Emergency Fund
In addition to saving for unexpected expenses, it’s also important to have an emergency fund in place. This should be enough to cover three to six months’ worth of living expenses in case you lose your job or face another financial emergency.
Be Patient and Stay Disciplined
Home buying is a complex process, and it can take time to find the right home and secure financing. Stay focused on your goals, be disciplined with your spending, and remember that homeownership is a long-term investment.
Conclusion
Buying a home with no money down is possible, but it may not be the best choice for everyone. Consider your financial situation, your long-term goals, and the various mortgage options available to you before deciding on a zero down payment mortgage. With careful planning and preparation, you can make your dream of homeownership a reality, even if you don’t have a large down payment saved up.
A red herring is a preliminary prospectus filed by a company that’s planning an initial public offering, or IPO. While a red herring prospectus includes coverage of the company’s operations, total estimated IPO amount, management and competitive market standing, it doesn’t reveal the share price or number of shares to be issued.
The SEC reviews the red herring prospectus, and all subsequent iterations, to make sure that all information is accurate before allowing the company to transition to the final investment prospectus phase.
A red herring prospectus has both investment and regulatory implications for companies heading toward an IPO, and any investors who may be interested in obtaining IPO stock.
Key Points
• A red herring in an IPO is a preliminary prospectus filed by a company that provides information on operations, estimated IPO amount, management, and market standing.
• A red herring is not final, and investors must take into considerations that the filing doesn’t include the share price for the IPO or the number of shares to be issued.
• The SEC reviews a red herring prospectus to make sure that all information is accurate before allowing the company to transition to the final investment prospectus phase.
• Red herrings offer investors some insight into the pros and cons potentially associated with trading IPO shares of the company in question.
IPOs, Explained
An initial public offering is the process through which a private company goes public, with shares of the company’s stock available to the investing public. The term “initial public offering” simply refers to a new stock issuance on a public exchange, which allows corporations to raise money through the sale of company stock.
Red Herring Prospectus
When a company transitions from a private company to public stock issuance, they must file a prospectus, a formal document sharing the new company’s structure, the purpose of the issue, underwriting, board of directors, and other relevant details with the Securities and Exchange Commission (SEC).
That prospectus, while not final, may help potential investors make investment decisions based on the information included in the prospectus. A prospectus doesn’t just cover stocks — it’s also required for bonds and mutual funds.
While all stocks include some degree of risk, IPO shares are particularly high-risk investments. Despite the media hype around many IPOs, which often focuses on big wins, the history of IPOs shows plenty of losses as well, owing to the volatility of these shares.
The risks associated with IPO stock is a significant reason why investors are typically asked to meet certain requirements in order to trade IPO shares through a brokerage. 💡 Quick Tip: Access to IPO shares before they trade on public exchanges has usually been available only to large institutional investors. That’s changing now, and some brokerages offer pre-listing IPO investing to qualified investors.
How a Red Herring Works
Prospectuses are dynamic and change regularly, as new information about a company comes forth. So, an investment prospectus will likely have multiple drafts before a final draft is released after SEC review.
In a red herring document, the prospectus is incomplete and noted as such, with the word “Red Herring” included on the prospectus cover. That disclaimer lets readers know not only that the prospectus is incomplete, but also that the company has filed for an upcoming IPO. The term “red herring” refers to both the initial prospectus and the subsequent drafts.
Additionally, a stock cannot complete its IPO until it fulfills the S-1 registration statement process, which is a primary reason why a red herring prospectus doesn’t include a stock price or the number of shares traded.
The SEC will review a red herring prospectus prior to its release to ensure that all information is accurate and that the document does not include any intentional discrepancies, falsehoods, or misleading information.
Recommended: A Guide to Tech IPOs
Once regulators clear the registration statement, the company can go ahead and transition out of the red herring IPO phase and enter into the final investment prospectus phase. The time between the approval of the registration process and the time that it reaches its “effective date” (which clears the stock for public trading) is 15 days.
In clearing the IPO for stock market trading, the SEC confirms the necessary information is included in the final prospectus, and that the information is accurate and compliant, based on U.S. securities law. Once the company gets through that hurdle they can continue moving through the IPO process. 💡 Quick Tip: Before opening any investment account, consider what level of risk you are comfortable with. If you’re not sure, start with more conservative investments, and then adjust your portfolio as you learn more.
Red Herring Pros and Cons
Any investor looking to invest in an IPO stock should understand the benefits and investment risks when it comes to red herrings and in investing in IPOs.
Red Herring Advantages
• Useful overall information on the company. While investors won’t find any information on pricing or share amounts, they can review company history, operational strategies, management team, potential IPO amount, and market performance, among other company particulars.
• Some financial data points. Red herring IPOs may provide valuable information about how a company plans to use proceeds from an IPO stock offering. Knowing, for example, that a company plans to use stock proceeds to grow the company or to pay down debts gives investors a better indication of company direction, which they can use to make more informed investment decisions.
• Risk factors. Under a section known as “Risk Factors”, a soon-to-be publicly-traded company lists any potential risk factors that could curb performance and growth. Legal or compliance problems, abundant market competition, and frequent management turnover are just some of the potential risks included in a red herring IPO prospectus – and investors should factor those risks into any potential investment decision.
Red Herring Disadvantages
• No pricing data. The biggest drawback of red herring IPO prospectus is the fact that the documents don’t provide any guidance on IPO stock pricing or number of shares available. These are obviously critical components of any investment decision, but investors must wait until the registration statement process is fully complete before that data is available.
• Shifting information. IPO company information can and does change from document version to version. Investors need to be diligent and stay apprised of all information on red herring prospectuses, from version to version, if they’re interested in an IPO stock.
• Uncertainty. If government regulators cite deficiencies in a red herring prospectus they may half the IPO process until they’re addressed.
Recommended: SPAC IPO vs Traditional IPO: Pros and Cons of Investing in Each
Red Herring Example
A red herring prospectus when filed with the SEC may have the words “Red Herring” stamped on the document as a reminder to prospective investors that the information in the document is subject to change, and that the securities (i.e. shares of stock, or bonds) are not available for sale until the SEC has approved the final prospectus.
The statement typically included in a new company’s prospectus may say:
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.
The Takeaway
The red herring prospectus is the first version of a new IPO company S-1 prospectus, and may be the first detailed impression that institutional investors and the investing public gets of an initial public offering.
By providing all the necessary information on a new publicly traded company (minus the opening share price and the number of shares available), a red herring prospectus can introduce investors to a new stock, which can provide much of the information necessary for investors to decide whether they’re interested in the company, and willing to assume the risks involved in trading IPO shares (if eligible).
Whether you’re curious about exploring IPOs, or interested in traditional stocks and exchange-traded funds (ETFs), you can get started by opening an account on the SoFi Invest® brokerage platform. On SoFi Invest, eligible SoFi members have the opportunity to trade IPO shares, and there are no account minimums for those with an Active Investing account. As with any investment, it’s wise to consider your overall portfolio goals in order to assess whether IPO investing is right for you, given the risks of volatility and loss.
Invest with as little as $5 with a SoFi Active Investing account.
FAQ
How does a red herring document differ from the final prospectus?
The red herring document is usually shorter than the final filing with the SEC. In addition the final document contains the number of shares in the IPO, as well as the IPO price.
Are there any legal or regulatory requirements associated with red herring documents?
Yes. The SEC must validate all claims and data included in the red herring to ensure that it does not include any false information, or anything that might violate existing laws and regulations. Once the red herring passes muster,
Can investors rely on the information provided in a red herring document when making investment decisions?
Investors may use the red herring document to inform their basic understanding of the company that is seeking an IPO, but it may not be enough to guide an actual decision to buy shares.
Are there any risks or limitations associated with red herring documents that investors should be aware of?
Red herring documents are an important part of a new company’s IPO process, and as such they contain key information about the company, but investors need to be aware that the details are not finalized, and the terms may change before the final prospectus is filed.
Photo credit: iStock/GOCMEN
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Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. IPOs offered through SoFi Securities are not a recommendation and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation.
New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For SoFi’s allocation procedures please refer to IPO Allocation Procedures. 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.
A new week, a new 1% down mortgage product, the latest coming from Fort Washington, Pennsylvania based lender Newrez.
Call it a sign of the times, with housing affordability the worst it has been in decades thanks to high home prices and elevated mortgage rates.
Known as “RezSource,” the new program relies upon a 2% lender contribution to minimize out-of-pocket costs.
It takes a standard 3% down payment mortgage backed by Freddie Mac and whittles it down to just 1%.
And it’s available to both low-income borrowers and first-time home buyers. Read on to learn more.
RezSource 1% Down Offers Up to $5,000 in Lender Contributions
Similar to other programs, the latest 1% down mortgage from Newrez includes a 2% lender contribution.
This means the borrower winds up with a mortgage set at 97% LTV, the maximum allowed for a conforming loan backed by the likes of Fannie Mae or Freddie Mac.
The end result is less money required from the borrower, an equity cushion, and potentially easier qualification.
The maximum dollar amount of the lender contribution is $5,000, which is determined by the lesser of 2% of the appraised value or purchase price.
My understanding is this 2% doesn’t need to be paid back as it is a credit to the borrower.
For example, someone buying a $250,000 property would be able to maximize the credit while only needing $2,500 via their own contribution.
And even this 1% can come from a variety of flexible sources, whether it’s gift funds from family member, or homebuyer assistance from an eligible non-profit or government agency.
Taken together, they’d come to the table with $7,500 (only $2,500 from their own sources), resulting in a 3% down payment.
This is enough to qualify for Freddie Mac Home Possible, which comes with reduced mortgage insurance premiums and reduced or waived pricing adjustments.
Who Qualifies for RezSource?
Owner-occupied home buyers purchasing a primary residence
Income must be at/below area median limit
Can be a first-time buyer or repeat buyer
Loan must be a 30-year fixed-rate product
Minimum loan amount of $25,000 ($10k in Michigan)
In order to qualify for RezSource, you need to meet the general requirements of Freddie Mac Home Possible.
Most importantly, this includes an income that is no more than 80% of the Area Median Income (AMI) based on where the property is located, which you can look up here.
The property must also be an owner-occupied, primary residence. But 1-4 unit properties, condos, co-ops, and even manufactured homes are eligible with certain restrictions.
If all occupying borrowers are first-time buyers, homebuyer education is required for at least one borrower.
It’s unclear what the minimum FICO score requirement is, though it’s likely 620 or higher.
In terms of loan type, the Newrez program only allows for 30-year fixed rate loans, and the minimum loan amount is $25,000 in all states but Michigan ($10,000).
Is RezSource a Game Changer?
Ultimately, this new offering from Newrez is all about the 2% lender contribution.
The main perk is that the lender is chipping in 2% of the purchase price on your behalf, which is certainly a plus. Who doesn’t like free money?
But beyond that, you still need to qualify for the monthly payment, and keep your DTI ratio below maximum allowable limits.
So this product might be best served for the borrower who has sufficient income, but is perhaps a little light in the asset department.
Note that other lenders offer 1% down mortgages as well, including the 1% Down Payment program offered by Zillow Home Loans.
There’s also Guaranteed Rate OneDown, which comes with $1,000 in closing cost assistance, and Guild Mortgage’s 1% Down Payment Advantage, which includes a temporary rate buydown.
The nation’s top lender, UWM, also offers a similar 1% down program with a 2% grant, as does Rocket Mortgage ONE+.
In other words, many 1% down mortgage programs exist and you’ll need to compare and contrast the pros and cons of each.
Things to look for include maximum lender contribution, max area median income allowed, and additional perks, like closing cost credits and PMI waivers.
And as always, you’ll need to compare mortgage rates from the different lenders, which will also add up over time via your monthly payment.
An ideal combo should include the largest lender contribution, a low mortgage rate, and limited closing costs.
Looking to learn the best ways to make money while you sleep? Do you ever feel worn out from your regular routine and tired of struggling to manage your money? Just picture being able to earn money even when you’re sleeping, without having to work long hours. In this article, I will show you 19…
Looking to learn the best ways to make money while you sleep?
Do you ever feel worn out from your regular routine and tired of struggling to manage your money? Just picture being able to earn money even when you’re sleeping, without having to work long hours.
In this article, I will show you 19 ways to help you reach financial freedom by earning passive income, such as while you sleep.
Having different ways to make money might seem like something crazy, but with the right plan and some hard work, it can actually happen.
In fact, I earn income all the time while I am sleeping and I love it. Now, that doesn’t mean that it’s easy. Some of the ways below will be harder than others, and they may take up a lot of time still. But, you may be able to earn money throughout the day from the hard work that you put in.
Key Takeaways
There are many ways to make money while you sleep, such as by blogging, selling digital products on Etsy, renting out storage space or real estate, putting your money in a high yield savings account, earning dividends, and more.
Some are easier to start than others – so make sure to think about the pros and cons, such as how much time it may take you or how much money you will need to start (your minimum investment!).
19 Best Ways To Make Money While You Sleep
Below are 19 ways to make money while you’re asleep.
1. Blogging
My favorite way to make money while I’m sleeping is by blogging, and it is a great way to make passive income while you sleep. I have been blogging for many years now (since I started Making Sense of Cents, I’ve made more than $5,000,000 from my blog), and I am able to work and earn money while I am asleep, such as by selling digital products, display advertising, and through affiliate marketing.
This is because readers read my blog posts throughout the day and night, even when I am not working. I have blog posts and advertising on my site, for example, that earn me income throughout the day.
So, what is a blog? A blog is like the article you’re reading now, written and published on a website. It’s basically a collection of written content. You can start a blog about many different topics, such as finance (like my blog!), recipes, family, health, wellness, pets, sports, outdoors, travel, and more.
Other similar ways to make money in your sleep include starting a podcast or a social media account, such as on TikTok or Instagram.
Recommended reading: The 25 Most-Asked Blogging Questions To Get You Started Today
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In this free course, I show you how to create a blog, from the technical side to earning your first income and attracting readers.
2. Affiliate marketing
If you want to learn how to make money overnight (such as when you’re sleeping), then my absolute favorite way is affiliate marketing.
This is one of the main ways I make money on my blog, but you don’t need a blog to do affiliate marketing either. You can do affiliate marketing on Instagram, Facebook, Pinterest, an email list, and more.
Affiliate marketing is when you share products or services from other companies with readers, subscribers, or people that you know. When someone buys through your referral link, you get a commission and earn some money from the company.
Here’s an example: Let’s say you write about a book on your blog and provide a link to it. If someone buys that book through your referral link, you get a commission.
You’ve probably bought things through affiliate marketing many, many times over the years. I definitely have!
Recommended reading: Affiliate Marketing Tips For Bloggers – Free eBook
3. Selling printables
Making and selling printables is another good way to make money without much active effort.
Printables are digital items that people can download and print at home. They can be things like games for a bridal shower, checklists for grocery shopping, planners for managing budgets, invitations, coloring pages, quotes designed to be printed and hung on walls, and more.
I buy printables all the time, and so do other people. In fact, I bought a printable the other day for my daughter – one that would help her learn the alphabet that I could print out at home for her.
Making printables can be a passive way to earn money. You only need to make one digital file for each product, and you can sell it as many times as you want. All you need is a laptop or computer and an internet connection, which makes it a low cost way to start a business.
Recommended reading: How I Make Money Selling Printables On Etsy
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.
4. Investing in real estate
Investing in real estate is a popular way to make passive cash flow while you sleep.
By purchasing rental properties, you can earn a steady flow of rental income from tenants and guests. Also, your property’s value will most likely appreciate over time, which can increase your net worth.
You can invest in residential properties, commercial real estate, short-term rentals (such as starting an Airbnb), REITs (real estate investment trusts), and more. There are pros and cons of each, so you will want to think about that before you get started.
Recommended reading:
5. Starting a YouTube channel
Starting a YouTube channel is another way to make money while you sleep. This is because you can add affiliate links to your videos, generate ad revenue, form brand sponsorships, and sell products within videos as well.
You’ll need to create videos that entertain, educate, or inform viewers, and get as many views to your videos as you can (for the most part, more page views usually does mean more income).
As your YouTube content becomes more popular, you will earn passive income from past videos while working on new content.
Recommended reading: How I Grew From 0 Subscribers To Over $100,000 On YouTube In Less Than One Year
6. Dropshipping
Dropshipping is a type of business where you sell items on an online store, but you don’t do the shipping. Instead, you have a supplier that does the shipping for you.
So, this means that you don’t need to keep any products in stock yourself.
That doesn’t mean that this is easy, though – you have to find trustworthy suppliers and make sure your customers get their orders on time. You will also need to create a website, find a way to differentiate yourself from other dropshippers, take pictures of the items you are selling, answer customer questions, and find ways to grow your store.
The types of items that you can sell in a dropshipping store include clothing, electronics, home decor, pet supplies, luggage, stationary, craft supplies, books, and more.
7. Online courses
I have made over $2,000,000 from selling courses over the years – courses that I have personally created.
Making and selling online courses is a great way to earn money at any time of the day – even while sleeping.
Some examples of courses that can be created include:
Parenting and family
Health and wellness
Woodworking
Dog training
Standardized tests preparation
Playing the guitar
Teaching a language
Traveling
Painting
Cooking
And so much more!
I have taken courses on all sorts of topics over the years, such as baby sleep classes, personal finance, credit card rewards, and so much more.
Creating an online course is one of the fastest ways to use your time, increase your earnings, and help more people.
Recommended reading: How I’ve Made Over $1,000,000 From My First Course Without a Big Launch
8. High yield savings accounts
A high yield bank account is a low-risk method to make extra cash while you sleep.
These types of savings accounts earn a higher interest rate than a regular savings account, so your money grows faster.
You will want to make sure that you pick a trustworthy bank and check the interest rates regularly because they can go up or down. Some people move their money into high yield savings accounts often so that they can get the highest interest rates.
Remember, these accounts usually over the long run have lower interest rates compared to stocks or real estate, but they give you a stable and secure way to earn money.
I personally use Marcus by Goldman Sachs as they have a very high rate. You can get up to 5.40% at the time of this writing through a referral link bonus. According to this high yield savings account calculator, if you have $10,000 saved, you could earn $540 with a high yield savings account in a year. Whereas with normal banks, your earnings would only be $46.
9. Dividends
Buying stocks that pay dividends is another way to earn money while sleeping.
When you invest in these stocks, you get a portion of the company’s earnings on a regular basis.
Here’s how dividends work: If you have shares of a company that gives you money because you own them, that’s called a dividend. So, if you own 10 shares of Company XYZ, and they give you $5 in dividends every year, you’ll get $50 in total for that year. Usually, companies give out dividends four times a year. In the example, the $5 they give you every year will likely be divided into $1.25 for each quarter (four times a year).
Recommended reading: What Are Dividends & How Do They Work? A Beginner’s Guide
10. Rent out your garage
If you have extra land or space in your home that you’re not using, you can make money by letting other people use it for storage.
You can rent storage space for things like cars, boats, boxes, and more. This could be your garage, driveway, closet, basement, attic, or even just a shelf.
A website where you can list your storage space is Neighbor. On this site, you can make between $100 and $400 or more every month. How much you earn depends on how much people in your area want to rent and what kind of space you’re renting out.
Recommended reading: Neighbor Review: Make Money Renting Your Storage Space
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You can use this website to list your unused space for rent and make up to $15,000 per year by doing so. With Neighbor, you can rent out your garage, driveway, basement, parking lot, shed, warehouse, carport, attic, street parking, or even a closet.
11. Hosting webinars
Webinars are like online classes or workshops about specific subjects (I’ve included a list below of some examples). If you’re an expert in something, you can record a webinar and charge people to attend or sell products and services related to the topic during the webinar.
You can also record your webinars and let people watch them whenever they want, which can bring in money while you are sleeping or on vacation.
For example, you could host a webinar about:
Starting an e-commerce store – Teach participants the ins and outs of setting up and running a successful online store.
Digital marketing strategies for small businesses – You could share online marketing techniques to help businesses grow their online presence, such as tips for TikTok, Instagram, Pinterest, Google SEO, and more.
Stock market investing for beginners – You could share advice and tips for newbies in the world of stocks, mutual funds, index funds, bonds, S&P, and investment portfolios.
How to make money with affiliate marketing – You could teach the strategies behind successful affiliate marketing sites.
How to invest in fine wine – Or, any other type of investment! If there is something specialized that you invest in that is different from normal, you may be able to generate interest in your webinar.
And so much more.
12. Peer-to-peer lending
Peer-to-peer (P2P) lending is when you lend money to people or businesses who need loans, and they pay you back with interest.
Websites like LendingClub and Prosper let you spread out your money to lots of borrowers, which lowers the risk if someone can’t pay you back.
As borrowers make their payments, you get a part of the interest, which adds to your passive income streams that you can make without working.
With a peer-to-peer lending site, people can borrow money from a group of lenders like you and me, rather than from a traditional financial institution like a bank. People use peer-to-peer lending sites for all sorts of reasons such as debt consolidation, home improvement, small business financing, investment opportunities, and more.
13. Selling stock images and graphics
If you like taking pictures, you can make money in your sleep by selling stock images on websites like Shutterstock, Getty Images, or Adobe Stock.
People buy stock images for all sorts of reasons, such as to put on their website, within articles and blog posts, on social media, and more. I buy stock images all the time because they can help to make a blog post more enjoyable to read (you can find several stock images within this blog post, in fact).
A great thing about stock content websites is that they can bring in money even when you’re not actively working. You take pictures, put them on the site, and they can keep making money for a long time.
Some common types of pictures that you can sell include travel, business, people, food, animals, health, fashion, sports, and more.
Recommended reading: 18 Ways You Can Get Paid To Take Pictures
14. Start a membership site
Creating a membership site where people pay a regular fee (such as each month or each year) for special content, resources, or services is a way to make money.
Some examples of membership sites that you can start include:
Stock image library – You can sell a collection of pictures or videos that subscribers can use for their own projects (such as their own business). Subscribers pay for access to this media library. I personally have been paying for a stock photo membership for years, and I think they are amazingly helpful.
Newsletter – Send valuable and special content straight to your subscribers’ email inboxes regularly where you charge a subscription fee for access.
Mastermind groups – You can form small, focused groups of individuals who come together to support and challenge each other in achieving their goals, and you charge a membership fee for participation. I have seen mastermind groups go for anywhere from free to tens of thousands of dollars a year to participate.
Freelance job board – You can start a site where freelancers can find real job listings and opportunities. Members pay for access to these job listings because they want to find real jobs that pay (instead of having to weed through fake ads or low paying ones).
Consulting or coaching services – You can give personalized advice, coaching sessions, or access to a private community for members looking for guidance in a specific area, like life coaching or business consulting.
Fitness membership – You can create a platform with workout plans, meal plans, and wellness tips. Members pay a monthly fee for access to this content.
Digital downloads library – You can create a library of downloadable resources like ebooks, templates, or software. Subscribers gain access by becoming members.
Community forum – You could create a community around a shared interest or hobby where members can engage in discussions, ask questions, and share experiences, and you charge a fee for access.
Online courses membership – You can start a platform where you have courses on a specific subject, like photography, cooking, or digital marketing, where subscribers then pay a monthly fee to access the content.
Keep in mind, the secret to a successful membership site is giving real benefits to your subscribers. So, whether it’s great content, a helpful community, or useful resources, make sure your members feel like they’re getting what they paid for so that they keep their subscription for months and years to come.
15. Sleep studies and mattress testing
Taking part in sleep studies and mattress testing will most likely not be a long-term, reliable source of income, but it can earn you some extra money while you literally sleep.
You can find these by researching local sleep clinics or mattress companies that have paid studies or testing. Many universities also pay for sleep studies, such as the Harvard Division of Sleep Medicine.
The amount of money you can make depends on the specific study or testing, but it can be an interesting way to earn some extra money or get a free mattress for your time.
16. Vending machine business
Running a vending machine business can be a good way to make money, and you can sell different kinds of products. You may be able to earn over $1,000 a month with a well-run vending machine business.
Here are some ideas of what you can sell in a vending machine:
Snacks and drinks:
Chips
Candy
Nuts and seeds
Cookies
Soda
Bottled water
Energy drinks
Juices
Healthy and organic food:
Granola bars
Dried fruits
Nut mixes
Organic snacks
Low-calorie drinks
Hot drinks:
Coffee (regular, decaf, specialty)
Tea
Hot chocolate
Frozen treats:
Ice cream
Frozen yogurt
Popsicles
Fresh food:
Sandwiches (pre-packaged)
Salads (in sealed containers)
Fruit cups
Yogurt parfaits
Personal care and hygiene items:
Tampons and pads
Toothbrushes and toothpaste
Hand sanitizer
Makeup
Vitamins and supplements
First aid kits
Pain relievers
Electronics and accessories:
Phone chargers
Headphones
Power banks
Office and school supplies:
Notebooks
Pens and pencils
Sticky notes
USB drives
Specialized items:
Fishing bait and supplies
Beauty and skincare products
Baby items (diapers, wipes, toys, snacks)
Recommended reading: How I Make $7,000 Monthly With A Vending Machine Business
17. Amazon FBA
Amazon FBA (Fulfillment by Amazon) is where sellers store products in Amazon’s fulfillment centers, and Amazon handles customer shipping, returns, and customer service on the seller’s behalf. By using FBA, you can sell a variety of products without worrying about storing inventory or handling shipping logistics.
You would be finding the products to sell, though. Even if you have no experience selling on Amazon, you can earn money selling household goods, toys, books, electronics, and so on.
If you want to learn more about starting an Amazon business, I recommend signing up for this free training that will teach you how to sell products on Amazon and make $100 to $500 per day.
Recommended reading: How To Work From Home Selling On Amazon FBA
18. Write a book
People can buy books at any time of the day, including while you are sleeping.
Self-publishing online platforms, such as Amazon KDP (Amazon’s Kindle Direct Publishing platform), allow you to reach a broad audience without the need for a traditional publisher.
Writing your own book is a great way to make money from home, and there is probably something helpful that you could write about (even if you think otherwise!). One very popular topic right now is romance novels, in fact.
Recommended reading: How Alyssa is making $200 a DAY in book sales passively
19. Develop and sell an app
If you have technical skills, developing and selling an app can be a way to make money overnight while you are sleeping.
Creating your own app, whether it’s a helpful tool, a fun game, or something else, can help you to make passive income.
Even though it will take some work and money up front, once your app is in the app stores, it can generate revenue no matter the time.
Some ideas for apps that you could create include a budgeting tracker, meal planner, fitness tracker, meditation app, travel itinerary planner, and more.
You will want to do some research, and make sure that there are people who want to use the app that you are thinking about creating, of course. You could start brainstorming ideas by thinking about what kind of app you think could be helpful in your life to have.
Frequently Asked Questions On How To Make Money While You Sleep
Below are answers to common questions on how to make money while you sleep.
What is passive income?
Passive income is money you earn without actively working, and instead, it comes from investments, businesses, or assets that require minimal effort on your part. Now, that doesn’t mean that making passive income is easy, as you will most likely have to put in a lot of work in the beginning to get started. But, it can be well worth it to make money at any time of the day. Passive income is personally my absolute favorite way to make money.
Which businesses make income overnight? What businesses make money while you sleep?
A few businesses that can generate income even when you’re not actively working are online stores, affiliate marketing websites, and selling printables. These businesses run online, making them accessible to customers 24/7 so people can use them.
What did Warren Buffett say about making money while you sleep?
Warren Buffett, a successful investor and businessman, is quoted as saying, “If you don’t find a way to make money while you sleep, you will work until you die.” This goes to show how important it is to find ways to make money without constantly working a regular 9-to-5 job.
What is the best way to make money while you sleep? – Summary
I hope you enjoyed this article on how to make money while sleeping. As you can see, there are many full-time jobs and side hustles to make money while you sleep such as:
Blogging
Affiliate marketing
Selling printables
Investing in real estate
Starting a YouTube channel
Dropshipping
Selling online courses
Putting your money in high yield savings accounts
Dividends
Rent out your garage
Hosting webinars
Peer-to-peer lending
Selling stock images
Start a membership site
Sleep studies and mattress testing
Vending machine business
Amazon FBA
Write a book
Develop and sell an app
Do you want to learn how to make money while you sleep?
When you’re shopping for a mortgage, you’ll likely see two of the most common repayment terms — 30 years and 15 years — no matter which lender you shop with. Each term has its benefits and drawbacks, and the better option depends on your unique situation. Here’s a look at the pros and cons of 15-year mortgages, how to qualify for one and what mortgage rates you might expect.
Pros and cons of a 15-year mortgage
A 15-year mortgage can be a great option if you want to save money on interest and can afford higher monthly payments. But before taking out a 15-year home loan, consider the pros and cons of choosing this term.
15-year fixed-rate mortgage vs. ARM
Home loans may come with a fixed rate or an adjustable rate. A fixed rate won’t change throughout the life of the loan, even if market rates rise or fall. That means your monthly principal-and-interest payments won’t change either, which can be helpful for budgeting purposes.
With an adjustable-rate mortgage (ARM), your interest rate is fixed rate for a certain number of years and then fluctuates at regular intervals. A 15-year ARM is less common, so you’ll likely see the adjustable-rate option when taking out a 30-year mortgage. The frequency at which your rate changes depends on the loan you choose, but it’s common to see 5/1, 7/1, 10/1, 5/6, 7/6 and 10/6 ARMs.
The top number indicates the fixed period, while the bottom number shows how often the rate can change. With a 5/1 ARM, for instance, your rate remains fixed for five years, then fluctuates once a year through the rest of the loan term. And with a 5/6 ARM, your rate will be fixed for five years and then will change every six months.
ARMs typically come with rate caps, so your rate can only increase by so many percentage points even if market rates skyrocket. In general, an ARM can make sense if you plan to stay in your home for a short time, or you’re willing to risk potentially higher rates for possible rate decreases in the future.
How to qualify for a 15-year mortgage
Lenders consider several factors when evaluating prospective borrowers. In general, you’ll need to meet the following criteria to qualify for a conventional mortgage loan.
Credit score: You’ll typically need a credit score of at least 620 when you apply for a conventional home loan, though a higher credit score might be necessary in some cases. Loans backed by the Federal Housing Administration (FHA), U.S. Department of Agriculture (USDA) and Department of Veterans Affairs (VA) often have looser qualifying criteria because they pose less risk for lenders.
DTI ratio: Your debt-to-income (DTI) ratio shows the amount of debt you carry relative to your monthly income. Most lenders prefer a DTI below 36%, though some will accept a DTI of up to 50%.
Down payment: Some lenders may allow for a down payment as low as 3% of the loan amount, but you may need a down payment as high as 20% in some cases. Requirements vary by lender and loan type.
Employment: Lenders often check two years’ worth of employment history when you apply for a mortgage.
Qualification requirements can vary with each lender and the loan you want to take out. Before you apply for a mortgage, you can research lenders and ask about their requirements to determine your approval odds. Consider doing a preapproval, which can help you check how much you can borrow.
Comparing current 15-year mortgage rates
Your mortgage is likely the largest loan you’ll ever take out, so it’s wise to compare rates before applying. Even a slightly lower rate could help you pay much less in interest costs over the life of your 15-year term.
For instance, if you’re approved for a $350,000 home loan with a 15-year term, a 7% interest rate and a 3% down payment, you’d pay $209,845 in interest over your loan term. But the same loan with a 6.75% rate would cost just $201,303 in interest.
While your rate depends on many factors (including location), here’s a look at current 15-year mortgage rates from some well-known lenders, as of November 2023.
How to find the best rate and lender
Finding the best mortgage lender and the lowest interest rate comes down to doing some prep work. Take the following steps to find the best deal when you get a home loan:
Check your finances. Pull your credit reports and look for any reporting errors that are dragging your credit score down. Also check your credit score, which will directly impact the rate you receive. The best rates are usually reserved for borrowers with excellent credit.
Research several lenders. Create a list of prospective lenders you may want to borrow from. These could be traditional banks, credit unions or online lenders.
Compare rates and terms. Lenders often list available mortgage rates and terms on their websites. Using a mortgage calculator, you can estimate your monthly payment based on the potential loan size, down payment and interest rate.
Get pre-qualified. Once you’ve narrowed your list of lenders, check whether they offer a pre-qualification tool on their websites. Pre-qualifying involves providing some basic personal and financial information to get insight into potential rates and loan amounts.
Apply for the loan. After you’ve found a lender and a home loan that works for you, you’ll need to formally apply for the mortgage. Expect to provide in-depth personal and financial information as part of the application process.
Frequently asked questions (FAQs)
As of November 22, 2023, the average interest rate for a 15-year mortgage is 7.06%. But rates vary by lender, so it’s important to shop around and compare loans.
While 15-year mortgage rates are currently high, they will likely decrease at some point. The National Association of Realtors predicts rates may decline through fall and winter of 2023 if the federal funds rate stabilizes.
Your interest rate is the percentage your bank charges you to borrow money. Your APR includes both the interest rate and the fees you’ll pay for your mortgage loan, such as broker fees and points. Both rates are expressed as a percentage, so you can use them to compare multiple loan options.
Whether a 15-year is better than a 30-year mortgage depends on your situation. A longer term comes with a lower payment, but you’ll pay more in interest costs over time.
“So when it comes to a 15-year mortgage, the question that most people need to answer is: ‘Am I comfortable with this higher monthly payment?’ and ‘Is paying the home off more quickly a priority for me versus using that monthly cash for other purposes?’” says Jon Bodan, a strategic financing adviser at Real Estate Bees.
“There’s no right or wrong answer here,” Bodan adds. “But if you have other savings and are contributing to your retirement, then doing a shorter-term mortgage can be another good way to build net worth and wealth.”
Interest rates on 15-year mortgages are often slightly lower compared to 30-year home loans. Because repayment terms are shorter with 15-year mortgages, lenders take on less risk. Thus, the rates borrowers receive for shorter-term mortgages tend to be lower.
Life is expensive and paying for rent can take up a significant chunk of your paycheck. In an ideal world, 30 percent of your income should go towards rent and housing costs. But life happens and you may come up short on rent due to loss of income or other unexpected expenses, leaving you wondering if you should take out a loan to pay rent. Coming up short on your rent payment is an extremely stressful situation and you’ll be looking for ways to make your rental payment and avoid eviction.
If you find yourself in this situation, what do you do? There are several options to weigh and taking out a loan to pay rent is one of them. Let’s walk through the pros and cons of rent loans and discuss several options you can consider if you’re behind on rent payments.
Is it possible to take out a loan to pay for rent?
If you get behind on rent payments, you’re not alone. In fact, more than 7 million renter-occupied households are behind on just last month’s rent alone. So, what are your options and is it possible to take out a loan to pay for rent? The short answer is yes, you can.
Using a loan to pay rent is an option. You can obtain a personal loan to pay rent and for some people, it’s a good idea. However, before you take out rent loans, you need to consider if it’s the right choice for you.
Pros of using a personal loan for rent
If you’re strapped for cash and need to pay for rent, there are some plus sides to taking out a personal loan for rent.
Pro #1: Provides a window of time for re-assessing your finances
By taking out a personal loan to cover your rent, you buy yourself some time to get your budget back on track. With a personal loan, you can pay for rent (either what you owe from missed payments or for future rent payments). Once you pay your rent, you’ll find yourself less stressed and you’ll think more clearly so you can get your budget back in a place where you can pay your loan back and have enough money for future rent payments.
Pro #2: Gives you flexibility
Personal loans allow you to use the loan money for anything you need. So, taking out a personal loan gives you the flexibility to use the money for rent or any other expense you need to cover. This flexibility is enticing for renters who need some financial help as the loan doesn’t specify what you can and cannot use the money for.
Pro #3: You can shop loan ranges and rates
Before taking out a personal loan, you’ll be able to shop around for loan ranges and rates. Make sure to compare your findings before you make a decision. You can take out a loan for as little as $1,000 or as much as $60,000 if needed. You can also compare interest rates.
It is important to try and find a loan with a low interest rate so you don’t accrue more debt than is absolutely necessary.
Pro #4: Can build a credit score
This is both a pro and con of personal loans, depending on how diligent you are with repayment. If you make your loan repayments in full and on time every single time, you’ll pay the loan off within the limits and build your credit score. If your credit score took a hit or is low, this is one way to rebuild your credit history.
However, it’s essential that you meet the terms of the loan for this to benefit you.
Cons of using a personal loan for rent
As with everything, when there are pros there are cons. Before taking out a loan to pay rent, consider the negative impacts of rent loans.
Con #1: You’ll pay interest
With any type of loan, you’ll pay interest on the amount you borrow. So, if you take out a personal loan toward rent, not only will you pay the rent money, you’ll also be paying money toward the interest.
If you have no other options, then taking out a loan for rent allows you to make your payment, stay in your apartment and come up with a new financial plan. Keep in mind that you’ll pay more with this option because of interest.
Con #2: Adds to debt
When you take out a personal loan to pay rent, you’re adding to the overall amount of debt you have. This may compound your stress and overall debt, causing more problems down the road. Also, when you rent, you aren’t putting money toward eventually owning an asset as with a mortgage toward a house. So, you’re compiling debt without working toward an eventual purchase.
Con #3: Could harm your credit score
If you fail to make your monthly loan payment, you could seriously damage your credit score putting you at risk for further financial hardship.
How to find a personal loan to pay back your rent?
If you’ve come to the conclusion that a personal loan is right for you, then you’ll need to know where to look and find one. Most financial institutions will offer loans and you can shop around for the loan that is right for you. Here are some places you can go to find a personal loan to pay back your rent:
Bank
Credit union
Online banks
Loan comparison websites
Because different places offer different rates on your loan, it’s smart to get several recommendations before taking out a loan.
Other options to pay back your rent
Unsure that a personal loan is right for you? We also have provided several other options to consider when you need money to pay back your rent. Before taking out a loan, you could consider:
1. Talking to your landlord
When you first realize that you may not have the money to pay your rent or if you’ve missed the due date, you’ll want to talk to your landlord immediately. Getting in front of the issue and addressing it openly is always a wise move.
Ask your landlord if he/she is willing to defer rent, offer a payment plan or waive late fees. You never know unless you ask!
2. Borrowing from a friend or family member
Do you have a trusted friend or family member that could loan you money for rent payback? If so, this is a less expensive option compared to getting a personal loan. Sometimes, close family or friends will loan you the money, interest-free, which is always a better option.
3. Call 211
You can the 211 community phone line to get referrals for services, like financial resources. If you’re in a bind, try calling this number and get in touch with local resources that can help with rent relief.
4. Consider a roommate
Imagine your rent payment being cut in half. Would that free up some of your budget? The answer is most likely yes. If you have space, you may consider getting a roommate who can share the cost of rental expenses and save you money, too.
5. Get a side gig
Nowadays, there are several side hustles that you can do from home, after work or at your convenience that pays well and would help your income. If you can get a side hustle that’ll cover the additional money you need for rent, this is a great option because it puts you in control of your money and you don’t need a loan to cover the extra expense of rent paybacks.
6. Reallocate your budget
Sometimes, we spend money on things like coffee, eating out or shopping and don’t realize how much of our budget it’s taking up.
Before you take out a personal loan, take a hard look at your expenses and budget to see where you can trim the fat. If there are areas to cut back on and reallocate expenses to rent payback, do this before taking out a personal loan.
Know your financial options
Now that you understand the pros and cons of loans to pay rent, you can make an informed decision if this is right for you. As always, you may want to consult a financial advisor before making a big decision like this to get professional guidance on what is best for you and your situation.
The information contained in this article is for educational purposes only and does not, and is not intended to, constitute legal or financial advice. Readers are encouraged to seek professional legal or financial advice as they may deem it necessary.
Sage Singleton is a freelance writer with a passion for literature and words. She enjoys writing articles that will inspire, educate and influence readers. She loves that words have the power to create change and make a positive impact in the world. Some of her work has been featured on LendingTree, Venture Beat, Architectural Digest, Porch.com and Homes.com. In her free time, she loves traveling, reading and learning French.