Is it cheaper to rent or buy a home? It depends.

Whether you’ve long dreamed of owning a place of your own or you just keep hearing that you’re throwing away money on rent, you may be ready to calculate the financial advantages and disadvantages of renting vs. buying a home.

But deciding what move is best for you involves much more than comparing your monthly rent to a potential mortgage payment. Determining the financial impact of buying a home includes considering short- and long-term costs, the benefits of building equity, and what your financial situation might look like after closing.

Not sure where to start? We’ll walk you through some important things to consider before deciding if you should rent or buy.

• Rent vs. buy: What kind of house can you afford?
  • Determine the size of your down payment
  • Calculate your debt-to-income ratio
  • Factor in an emergency fund
  • Estimate the costs of ongoing maintenance
• How long do you want to stay where you are?
  • Remember that equity increases over time
  • Factor in selling costs if you plan to move
• Next steps: Don’t forget the emotional questions

Rent vs. buy: What kind of house can you afford?

Before you decide to rent or buy, think about what buying means for your financial situation. Namely, just how much house can you afford to buy?

Answering that question may go beyond straightforward factors like your income, your credit profile and housing prices in your area. Consider not just what the home costs, but what it will take to keep making your mortgage payments and maintain (or improve) the value of your home. If homeownership is on your mind, it’s a good time to review your finances to see if you’re ready to buy a home.

Keep in mind that the house you can afford to buy might look very different from what you can afford to rent. And if the rental property looks more attractive to you, you might choose to rent instead of buy, even if buying a home makes sense financially.

Determine the size of your down payment

When you purchase a home, you’ll generally need to put some money down. While some loans require a down payment of as little as 3% of the total price, most buyers will need to put down 20% if they want to avoid paying private mortgage insurance.

In addition to your down payment, you’ll also need to cover closing costs. These costs are generally 2% to 5% of the home purchase price, or between $4,000 and $10,000 for a home that costs $200,000.

Calculate your debt-to-income ratio

When assessing your ability to repay your mortgage, a lender will consider your debt-to-income ratio along with your credit. This ratio compares your monthly debt payments to your monthly gross income. Lenders usually want to see that those monthly payments are less than 43% of your monthly income, although that figure may change from situation to situation. 

Keep in mind that lenders may also consider what your debt-to-income ratio would look like after giving you a loan — not just your current ratio.

Factor in an emergency fund

Before you consider purchasing a home, think about whether you’ll have enough money left over for an emergency savings account. An emergency savings account is a financial cushion to help you cover unexpected situations or expenses, like unplanned medical bills or a busted water heater — and a homeowner’s budget can differ from that of a renter.

As a rule of thumb, experts say you should plan to have three to six months’ worth of living expenses saved in an emergency fund. If you buy a home and aren’t able to work emergency savings into your budget, you might be unable to pay your mortgage if an unexpected event changes your financial situation.

Estimate the costs of ongoing maintenance

One of the costs that can catch prospective homeowners off-guard is the cost of ongoing maintenance. If you’re a renter, a cracked window, broken pipes or a damaged roof usually isn’t your problem to fix. But when you’re the owner, those maintenance costs fall on your shoulders.

Maintenance costs vary based on the age and location of your home. According to a 2017 survey from Zillow and Thumbtack, the average unexpected cost of owning a home is $9,080 per year, of which $3,021 is landscaping, cleaning and maintenance (the remainder is property taxes, utilities and homeowners insurance).

While those maintenance costs are just an average, make sure you factor in these expenses when deciding if renting or buying makes more sense for you.

How long do you want to stay where you are?

If you’re trying to decide between renting and buying, another thing to consider is how long you play to stay in the area you’re in now if you buy.

Buying a home is a long-term commitment, which means it’s typically not worth it for just a short-term stay. If you’re craving settling down somewhere and sticking around for years, buying a home can make sense. But if you prefer flexibility and want to be able to move around without much issue, renting is most likely the better option for you.

Before you decide, weigh the tradeoffs between putting down roots or having the freedom to pick up and move at a moment’s notice. How long you decide to stay somewhere can impact not just the logistics of moving, but also the economic component of whether you should rent or buy.

Remember that equity increases over time

If anyone’s ever told you you’re just throwing away money on rent, they’re probably saying that your monthly payments only benefit your landlord or property owner. When you buy, part of your mortgage payment goes to building equity in your home. But that value might not be especially impressive if you leave your home well before the end of the mortgage.

Equity is the difference between what the home is worth and how much you owe on a mortgage. Your equity will increase as you pay down the mortgage or as your home value increases over time.

But in the first few years of owning a home, you’ll build equity slowly because more of those loan payments go toward paying down the interest on your mortgage rather than the principal loan balance.

As you own the home longer, more of your mortgage payment goes toward the principal, increasing your equity. If you don’t plan to stay in your home for the long term, you might sell it without as much equity as planned.  

Factor in selling costs if you plan to move

While it is possible to sell your home within a few years of purchasing it, the associated costs might not make it a sound investment. When you sell your home, you’re generally on the hook for several expenses that can add up quickly and outweigh what you earn on the sale.

Aside from the costs of making repairs, staging your home and making updates to ensure it shows well, you also have to pay a commission to the real estate agent, which can average 5% to 6% of the home sale price. For a $200,000 home, you could end up spending $10,000 to $12,000 just on the real estate commission to sell the home.

If you sell your home within a few years of buying, your home may not have had time to gain enough value — or to build up enough equity — for you to cover these costs.

For example, if you purchase a home for $200,000 and sell it for $208,000 two years later, you might need to spend as much as $12,480 in real estate agent commission to sell the home. While the sale price of the home has increased by $8,000, you’ve spent enough money in fees to give you a loss of $4,480 on the sale.

Next steps: Don’t forget the emotional questions

The nitty-gritty financial questions that go into deciding between renting and homeownership are a crucial part of the process. But don’t forget the other important aspect of deciding to rent or buy — what it means for your life beyond the balance sheet.

We touched on some of these questions earlier, like how long you want to stay in one place or what sort of home you actually want to live in. But there are other things to keep in mind, like whether you want to take on the responsibility of homeownership. For example, needing to take care of your own repairs might seem simple right up until it’s time to find a crew to replace your roof.

Ultimately, the financial aspects of renting vs. buying are just part of making your decision. Considering everything that goes into both renting and buying will help you make not just a smart choice, but one you’re comfortable with, too.

Want to learn more? Check out some of our top mortgage lenders for first-time homebuyers.

• Homebridge Mortgage: Homebridge offers resources that specifically cater to first-time homebuyers.
• Rocket Mortgage: Consider Rocket Mortgage if you’d prefer an online-first experience.
• PennyMac Mortgage: PennyMac offers a wide variety of home loans and shares current rates on its site, which can be helpful for people looking to buy their first home.
• USAA Mortgage: USAA is a good option for military members and their families. 

Rent vs. buy calculator

Find out if it makes more financial sense for you to buy a home or rent one with our rent vs. buy calculator.

If you’ve ever deposited a check in your bank account, you probably noticed it can take some time before the funds are available for you to use.

Banks commonly put a hold on newly deposited checks, restricting availability of the money for a time. If you need the money right away, a check hold can be a frustrating experience.

But there’s good news. Federal law limits the maximum amount of time financial institutions can hold funds — usually no more than two business days. And a check hold can protect you in case the deposited check bounces or you’ve been a victim of check fraud.

Let’s look at what a check hold is, how long it can last, and why a bank restricts the available funds in the first place.

• What is a check hold?
• How long will the check hold last?
• Why might a bank put my check on hold?
• How will I know if a check is on hold?
• What should I do about a check on hold?

What is a check hold?

When you deposit a check, the money isn’t always available right away. The amount of time that it takes for your funds to become available is sometimes referred to as a check hold. It means the bank is holding the money and you can’t spend it yet.

Not all banks and credit unions use the same check hold period. The maximum deposit hold period was established by the federal Expedited Funds Availability Act, and your bank or credit union generally can’t hold deposit funds past that period. But there is no minimum hold period. Your bank decides whether it will release the funds to you faster than the maximum hold period.

How long will the check hold last?

The financial institution will decide how long to keep your check on hold based on the size of the check, who the check is coming from and your account history. Your bank’s account agreement should explain when you can expect funds to be released under certain situations.

Generally, funds from deposited checks can be available the next business day if …

• The check is for less than $200.
• It’s a certified check, drawn on another account at your financial institution, or a government check.
• You made the deposit in person at your bank with the help of a bank employee.

Funds will generally be available on the second business day if …

• The check is for more than $200 (although you can get $200 of the amount on the first business day and the remaining funds when the hold ends).
• You make the deposit at an ATM at your bank.
• You make the deposit after the financial institution’s cut-off time for the day.

It’s possible for a bank to hold a check longer than two business days — the law allows banks to do so in certain circumstances. But the law also says the extended hold should be for “a reasonable period of time” — generally between two and seven business days.

Your bank can keep the check on hold longer, but it must prove that the amount of time is “reasonable.” And it must tell you when you make the deposit (or within one business day if you don’t make the deposit in person) that the hold will be longer, why it’s holding the funds and when the money will be available to you.

Just because your check is on hold, it doesn’t necessarily mean there’s anything wrong. The bank is just taking some additional time to ensure the funds clear before it gives you the OK to use them. Once the hold is over and your check has cleared, you’ll be free to use the money

What does ‘business day’ mean?

By now, you’ve probably noticed we’ve been talking about “business days” rather than “calendar days.” A business day is generally considered 9 a.m. to 5 p.m. local time on weekdays (excluding federal holidays), not weekends.

That means if you deposit a $100 check in your bank account at 11 a.m. on Friday, and that check is drawn on an account at the same bank, the next day your deposit could be available would be Monday (a business day) — not Saturday or Sunday.

Why might a bank put my check on hold?

While it can be annoying to have your funds put on hold, banks hold checks for a reason: to  ensure the funds clear before you spend them. Without a hold, you might end up spending money you think you have — only to find out that the check hasn’t cleared, causing you to  overdraw your account and rack up hefty overdraft fees.

Hold policies vary from bank to bank, but there are some common reasons your check might be subject to a longer delay.

• You’ve recently opened the account.
• Your checking account has been overdrawn too much in the past six months.
• The deposit being made is more than $5,000.
• You make the deposit at an ATM that isn’t owned by your bank or credit union.
• Your bank believes that the check will be uncollectible.
• The check has been redeposited because it was first returned unpaid.

Banks put checks on hold to protect you from honest banking mistakes — and from check scams that can cheat people out of their money.

One common scam works like this: Someone gives you a fake check for more than you’re owed (for example, someone buys something from you online and sends you a check for too much money). Then the scammer asks you to send back the overpayment amount. The scammers’ checks can look just like real checks, and it can take weeks for banks to detect the fraud. While the check is on hold, the scammer hopes you’ll send a real check for the “overpayment” amount before you realize their check was fake.

A check hold is one way the banks try to combat such scams.

How will I know if a check is on hold?

Banks have different policies for when to issue holds and for how long. If and how you’re notified of a hold will also vary by bank. But your bank is required to give you disclosures that detail its check-hold policy and how long a check can be on hold.

If you deposit your check at a bank, your teller should be able to tell you how long the check hold will last and when your funds will be available. After depositing, some banks will issue you a deposit receipt that will include info about the hold and when you can expect the funds to be available.

What should I do about a check on hold?

There’s not much you can do while waiting out a check hold. Your bank will do the work and the funds will be available to you when the check clears. But if you’re concerned about when that will happen, you can contact your bank to see how long it could take for the funds to become available.

Check holds occur often and are out of your control for the most part. But if you keep your account in good standing, you can limit the hold time to only what’s necessary. A bank may hold your checks for additional days if your account has been repeatedly overdrawn. So be sure to monitor your account closely and avoid spending more than your available balance.

Next steps: Tips to make deposits go smoothly

Here are some things you can do that may help your deposit clear as quickly as possible.

• Properly endorse the check.
• Make deposits in person at your bank and be prepared with your ID in case a teller requests it.
• If you make the deposit through an ATM, use one owned by your bank. An ATM deposit could take longer to clear if made through a device your financial institution doesn’t own.
• If you’re making a mobile deposit, take a clear picture of the check (use a well-lit location and a dark background for contrast, and be sure all four corners of the check are visible in the frame).
• Be alert to clues that a check you received may be fake. For example, if the postmark on the envelope doesn’t match the city and state of the bank the check is supposedly drawn on, it could be a fake check. And if you receive a check for more than the transaction amount, don’t agree to refund the overpayment portion — that’s a common check scam.
• Have your paycheck deposited directly into your bank account. Electronic deposits can often be available on the same business day.

In some cases, it may make sense to ask for payment in cash rather than a personal check or business check. Cash deposits are typically available on the day of deposit.

Pros

• Online application process
• Money may be available as soon as the next business day

Cons

• Extremely high APRs
• Low borrowing limits

What you need to know about a MaxLend loan

MaxLend is an online tribal lender that offers small, short-term installment loans of up to $3,000 — if you’re a returning customer. New customers may apply to borrow up to $1,500.

The company positions itself as an alternative to payday loans. Loan funds may be available in as little as one day and don’t require collateral or good credit.

Here are a few things you should know if you’re considering a loan from MaxLend.

Extremely high APRs

MaxLend may get you fast access to cash, but this comes with a big downside: MaxLend loan fees are incredibly high. Its annual percentage rates, or APRs, range from 471% to 841%.

For comparison, a typical payday loan comes with fees that equate to an APR of almost 400%, according to the Consumer Financial Protection Bureau. MaxLend is easily more expensive than this high-cost borrowing option.

Fees are charged for every $100 borrowed

MaxLend advertises its fees based on a rate per $100 borrowed. For example, if you borrow $100 and choose a weekly repayment rate, you’ll pay up to $14.75 in fees each week for each $100 that you borrow. If you decide to make your repayment monthly, you’ll pay a fee of up to $59 every month for each $100 that you borrow.

Seeing fees in dollar amounts rather than an APR can make comparing loan options confusing. It’s a good idea to ask to see the APR to get a clearer idea of how a MaxLend loan stacks up against other lenders.

$3,000 maximum loan amount

Compared to some traditional personal loans, MaxLend offers a much lower loan amount and shorter repayment period. Its minimum loan amounts are just $100, and the maximum ranges from $1,500 to $3,000. (If it’s your first MaxLend loan, the maximum loan amount you may qualify for is $1,475.)

MaxLend says the typical repayment period is nine months for a new borrower.

Good credit isn’t required

Personal loans can be difficult to qualify for if you have bad or no credit. That’s because many personal loans are unsecured, meaning there is no collateral, such as a car or savings account, to back up the loan.

MaxLend doesn’t require collateral, and it also doesn’t require you to have good credit. To qualify, you’ll need to have a verifiable income source and meet an unspecified minimum income — but MaxLend isn’t transparent about the exact minimum income you’ll need to be eligible for one of its loans.

A closer look at a MaxLend loan

Here are a few other MaxLend features to know about before you apply.

• No prepayment penalty — There are no penalties for repaying your MaxLend loan early, which can be a good way to mitigate its high loan fees.
• For emergency use — MaxLend recommends its loans for any emergency situations when you may be considering a payday loan.
• Loans aren’t available in every state — MaxLend doesn’t offer loans in Arkansas, Connecticut, Georgia, Massachusetts, Minnesota, New York, North Dakota, Pennsylvania, Vermont, Virginia, Washington or West Virginia.

Should I apply for a MaxLend loan?

A MaxLend loan should only be considered as a last resort — it’s a very expensive way to borrow money. A MaxLend loan may seem like a safer option than pledging your car title for a title loan, but its APRs are so high that you should shop around before you apply. If you miss payments, you could get trapped in a cycle of debt.

And the lender isn’t transparent about all of its eligibility requirements, which could potentially cause confusion when applying for a loan.

So before you turn to a MaxLend loan, explore other options that might be available to you. Consider using an existing credit card in an emergency. The average APR on a credit card is far less than what you’d pay with a MaxLend loan.

You also may want to consider a payday alternative loan from a federal credit union — the interest rate on these small, short-term loans can’t be higher than 28%, and you can’t be charged more than $20 to apply.

If you need a loan to pay for a large expense like a costly medical bill, talk to your provider. It may be able to offer an alternative, like a payment plan or a medical credit card, which could help you pay off the debt without paying the high fees that MaxLend charges.

If you decide to apply for a MaxLend loan as a last resort, make sure to read your entire loan agreement before you sign so you’ll understand any additional fees you might face during your loan term.

How to apply with MaxLend

To be eligible for a MaxLend loan, you’ll need to meet these requirements.

• Be at least 18 years old
• Have verifiable income deposited into checking account that meets minimum income requirements (though MaxLend doesn’t say what that minimum requirement is)
• Have a bank account open for a minimum period of time (MaxLend doesn’t specify how long)
• Not currently be in a bankruptcy case or intend to file for bankruptcy

Here’s how MaxLend’s application process works.

• You’ll complete an application online by entering information such as the loan amount you’re requesting, your income amount and your bank details.
• A customer service representative will call you to verify your information.
• If approved, you’ll e-sign your loan documents and the money will be sent to your bank account, usually within one business day. But keep in mind that it may take longer to access your cash.

Not sure if MaxLend is right for you? Consider these alternatives.

• OneMain Financial: If a low credit score is holding you back from applying with another lender, you may want to apply for prequalification with OneMain Financial — the company may consider you even if you have bad credit.
• Earnin: If you just need a small paycheck advance to hold you over, Earnin might be a good choice. The app offers early access to your paycheck — between $100 and $500 — with no interest or fees. (You tip what you think is fair.)

*Approval Odds are not a guarantee of approval. Credit Karma determines Approval Odds by comparing your credit profile to other Credit Karma members who were approved for the personal loan, or whether you meet certain criteria determined by the lender. Of course, there’s no such thing as a sure thing, but knowing your Approval Odds may help you narrow down your choices. For example, you may not be approved because you don’t meet the lender’s “ability to pay standard” after they verify your income and employment; or, you already have the maximum number of accounts with that specific lender.

The Check Casher Licensing Act of 1998 made payday loans illegal in the state of Pennsylvania.

Payday loans are small, short-term loans that you typically have to repay by your next payday, along with fees. These fees are usually very high, which can trap you in a cycle of debt.

Even though payday loans are illegal in Pennsylvania, you may have other options if you need a loan for an emergency or unexpected expense.

We’ve selected four alternatives to payday lenders in Pennsylvania. Keep reading to see if one of them may be right for your financial situation.

• Earnin: Good for early access to payday funds
• OneMain Financial: Good for people with bad credit
• Kashable: Good for employer-based financing
• Mariner Finance: Good for 15-day satisfaction guarantee

Earnin: Good for early access to payday funds

Why you may want to consider Earnin: If you just need a little extra cash to hold you over between paychecks, the Earnin app allows you to cash out up to $750 that you’ve already earned per pay cycle, without being charged mandatory fees or interest.

You’ll repay Earnin automatically with a deduction from your bank account once you receive your paycheck.

• Job eligibility — Even with a steady income, not everyone will be eligible to use Earnin. You’ll have to meet several requirements, which includes having a “consistent” pay schedule.
• No interest or fees — While you won’t be charged mandatory interest or fees, Earnin encourages you to tip an amount you think is appropriate.
• Fast funding possible — If you sign up for Earnin’s “Lightning Speed” feature and are willing to pay a fee, the lender says you may receive the money “in minutes” of requesting it. If you don’t have Lightning Speed, your money will typically be available within one to three business days, according to Earnin.
• No credit check — To qualify for a cash out, Earnin won’t ask for your Social Security number or check your credit.

Read our Earnin app review to learn more.

OneMain Financial: Good for people with bad credit

Why you may want to consider OneMain Financial: If you were considering a payday loan because you have shaky credit and haven’t been able to qualify for a traditional loan, OneMain Financial may be an option for you.

The company offers secured and unsecured loans ranging from $1,500 to $20,000 and will look at other factors beyond your credit scores to determine whether to offer you a loan. (The lender may offer different terms on Credit Karma.)

If you’re worried that you won’t qualify for a loan on your own, you can also add a co-applicant, which may improve your likelihood of being approved or help you qualify for a lower rate.

• Loan terms — OneMain offers loan terms ranging from 24 months to 60 months, so you won’t have the stress of trying to repay the loan by your next payday.
• High APRs — The company’s starting interest rate is higher than what you’ll find with some other personal loan lenders, though it’s significantly lower than the fees and interest you’d pay with a typical payday loan lender.
• Prequalification available — If you want to check your potential rate before applying, you can apply for prequalification, which won’t affect your credit scores. But qualification isn’t a guarantee that you’ll be approved for a loan — and if you are approved, your rate and terms may change after you officially apply.
• Branches — You can apply online, but if you’d like you can also visit a branch. OneMain has more than 1,500 branches in 44 states across the country, so check its website to see if there’s a branch near you.
• Potentially fast funding — Once you’re approved for a loan, OneMain says you may receive your loan funds as soon as the next business day.

For more details, read our OneMain Financial personal loan review. 

Kashable: Good for employer-based financing

Why you may want to consider Kashable: If you have a stable job but a less-than-stellar credit history, Kashable might be able to offer you a personal loan. But there’s a catch: You have to work at certain employers that Kashable partners with to be eligible. In some states, certain federal government employees may also be eligible to use Kashable.

• Loan repayments via direct deposit — Kashable offers personal loans between $250 and $20,000, with loan terms ranging from six months to 24 months. The company will deduct your loan repayments directly from your paycheck, which may be a pro or con depending on how you like to handle your bills.
• Competitive starting APR — Kashable has a competitive starting APR, but the lender says that rate is available only to “high-credit borrowers.” Its rates can go much higher, and its highest rates are more in line with what OneMain Financial offers — both are still likely better options than a payday loan, though.
• Quick funding promise — If you’re approved for a Kashable loan, the company says you should receive the funds in your bank account within three business days.
• Prequalification available — Kashable also offers the option to apply for prequalification to check your potential rate. But keep in mind that prequalification isn’t a guarantee of loan approval. And if you officially apply and are approved for a loan, your rate and terms may change.

Read our Kashable review to learn more.

Mariner Finance: Good for satisfaction guarantee

Why you may want to consider Mariner Finance: Mariner Finance offers personal loans between $1,000 and $25,000. (If you apply online, those loan amounts change to between $1,500 and $15,000.)

Mariner has a 15-day satisfaction guarantee: If you aren’t satisfied with the loan, you can return the money within 15 days and you won’t have to pay any finance charges or penalties.

• Secured and unsecured loans — Like OneMain Financial, Mariner Finance offers both secured and unsecured loans. But remember that if you default on a secured loan, you may lose the property you used as collateral.
• Soft inquiry for prequalification — Mariner Finance offers the ability to apply for prequalification. This process is done using a soft credit inquiry, which won’t affect your credit scores. If you accept an offer and officially apply, the company will perform a hard credit inquiry to check your credit again, which could lower your credit scores by a few points.
• Unclear APRs — Mariner isn’t very transparent about its personal loan rates. The company doesn’t post its full range on its website — only its maximum rate, which is on par with the other lenders mentioned here.
• Co-signers allowed — If you aren’t sure if you can qualify for a loan on your own, you can apply with a co-signer, which may improve your odds of being approved.

Read our Mariner Finance personal loan review for more info.

How we picked these lenders

We examined lenders that may offer personal loans to people with less-than-perfect credit and allow a co-applicant or co-signer. We also looked at other eligibility requirements, loan amounts, ease of application and prequalification options that may make these personal loans an appealing alternative to payday loans in Pennsylvania.

If you don’t think any of these lenders will work, you may also want to consider applying for a payday alternative loan from a federal credit union. With these short-term loans, the credit union can’t charge you more than $20 to process your application, and there’s also a cap on interest rates.

*Approval Odds are not a guarantee of approval. Credit Karma determines Approval Odds by comparing your credit profile to other Credit Karma members who were approved for the personal loan, or whether you meet certain criteria determined by the lender. Of course, there’s no such thing as a sure thing, but knowing your Approval Odds may help you narrow down your choices. For example, you may not be approved because you don’t meet the lender’s “ability to pay standard” after they verify your income and employment; or, you already have the maximum number of accounts with that specific lender.

You have more than one credit score — and they might not all be the same.

That makes trying to pinpoint the average credit score a challenge. But when people talk about average credit scores, often they’re referring to FICO® credit scores. And in 2023, the average FICO® Score 8 — the most widely used scoring model — was 715, according to Experian.

But why do you have so many different credit scores? And what are some of the other average credit scores?

• You don’t have just one credit score
• Average FICO credit scores
• Average VantageScore credit scores

You don’t have just one credit score

When people say “credit score” they’re usually talking about just one credit score. But the truth is that we all can have multiple credit scores, and they may not all be the same. That’s because there are different credit-scoring models that can be used for the information in each of your credit reports. That’s the reason you have multiple scores. For example, there are industry-specific scores based on the information in your credit reports.

Credit bureaus

Credit-reporting agencies, or credit bureaus, collect your credit history information for your credit report. There are three major consumer credit bureaus: Equifax, Experian and TransUnion — and your credit score might be different with each one. Here are some common reasons for that.

• When credit bureaus receive data — Your lenders may report information to each credit bureau at slightly different times. This would mean that one credit score or another may not always reflect your most current account info.
• What data your lenders send to the bureaus — While many lenders supply information to all three bureaus, some may report to only one or two of them. Different data being reported may result in different scores.
• When you check your scores — If your credit scores among the different bureaus are different, it may be because you’re checking them at different times. Your credit data is sent to the bureaus regularly, so checking one score this week and another score the next may result in you seeing different credit scores.

Credit-scoring models

Your credit scores may also be different based on how it’s calculated. A credit-scoring model is a formula used to calculate a credit score based on the information in your credit report. But there are a lot of different scoring models out there.

Two frequently used models are FICO and VantageScore®.

For many credit-scoring models, the goal is similar: to predict how likely you are to pay back a loan on time.

That’s why you can see different credit scores depending on whether you’re looking at a VantageScore or a FICO score.

Both FICO and VantageScore have credit-scoring models that are used in a wide variety of industries. These scoring models have evolved over the years to reflect new technology or other important updates.

But even if you’re comparing only FICO scores, there are other types, which include FICO Score 8, FICO Score 9 and some FICO scores that are specific to certain industries.

Industry-specific scores

If you’re looking to apply for a credit card or a car loan, the credit scores that each lender sees may be different.

That’s because not only does FICO have different base credit-scoring models — it also has scores specific to different industries.

For example, a lender may look at FICO® Bankcard Score 8 when making a decision on a credit card application or FICO® Auto Score 8 when making a decision about an auto loan.

Additionally, these industry-specific scores may have different ranges. For example, base FICO scores go from 300 to 850, while the FICO® Bankcard Score 8 and FICO® Auto Score 8 range from 250 to 900.

Average FICO credit scores

What is the average credit score? There are a number of ways to dive into the data. We’ll go through average credit scores by year, age group and state.

Average credit scores by year

The average FICO score of 715 increased by one point from 2022 to 2023. These are the annual average U.S. FICO credit scores, using data from Experian.

States with the highest average credit scores in 2023

States with the lowest average credit scores in 2023

Average credit scores by age group

Average VantageScore credit scores

VantageScores have been slowly inching up over the last four years — according to the VantageScore October 2023 CreditGuage report — but there was an increase in delinquency rates and average credit card balances from 2022 to 2023.

Average score over time

Next steps

How do your scores measure up against the average credit scores? If you’re not sure, now is a good time to check.

Even if you know what your credit scores are, it’s a good idea to periodically check for errors in your reports and look for ways to improve them. You can use Credit Karma to check your TransUnion and Equifax credit reports. And if you want to check your Experian credit report, you can do so at AnnualCreditReport.com.

Buying a home is a big financial investment. And even if you don’t have the cash to purchase a home outright, you’ll probably still need money on hand for a down payment.

If you haven’t saved for a down payment, though, you might be considering other ways to get access to the money you need now, including your 401(k). That’s because some 401(k) plans let you borrow money from your retirement savings without penalty and pay it back over time.

But even if you aren’t planning to retire any time soon, taking a loan from your 401(k) can come with big drawbacks, like missing out on potential investment growth. So before you dip into your nest egg, consider if it’s really the best option for you.

• Can I take out a 401(k) loan without penalty to purchase a home?
• 401(k) home loan considerations
• Is a 401(k) home loan right for you?
• Should I make a 401(k) withdrawal instead?
• What are my alternatives to a 401(k) home loan?

Can I take out a 401(k) loan without penalty to purchase a home?

While not all 401(k) plans allow you to take out a loan from your account, a good many do. Vanguard reported that in 2020, 79% of its 401(k) plans allowed participants to borrow from their retirement accounts.

Be sure to check with your plan sponsor to see what’s allowed. If your retirement plan allows you to take a loan from your 401(k), you may be able to use that money for a home down payment or closing costs.

One important distinction to note: You can’t borrow money from an IRA.

401(k) home loan considerations

Here are some things to consider before you take out a 401(k) home loan.

How much can you borrow from your 401(k)?

Even if your 401(k) plan allows loans, there’s a limit on how much you can borrow — typically up to 50% of your vested balance, with a maximum loan amount of $50,000.

Let’s say you have a vested balance of $130,000 in your 401(k) account. In this scenario, you wouldn’t be able to borrow the full 50%, or $65,000, of your vested account balance. The most you’d be able to borrow would be $50,000.

Some plans make an exception to the 50% rule, although they’re not required to: If 50% of your vested account balance is less than $10,000, your plan may allow you to borrow up to $10,000.

You usually must repay the loan within five years. But if you use your 401(k) home loan to buy a house that will be used for your primary residence, some plans may give you more than five years.

Suspended retirement contributions

Before you take out a 401(k) home loan, think about your long-term financial goals as well as your short-term goals.

If you reduce contributions to your retirement account while you’re repaying the loan, you could lose a valuable opportunity to save for retirement, because you can only contribute up to the federal contribution limit. On top of that, if you stop contributions altogether, you’ll also miss out on any employer-matching contributions. 

Repayment if you leave your job

If you think you’ll want to leave your job in the next few years, review what your plan says about 401(k) loan repayment if you leave. Some 401(k) plans require you to repay the entire loan balance if you leave (or lose) your job.

If you don’t repay the loan in full, the unpaid amount will be treated as a withdrawal from your retirement account. You’ll be required to pay income tax on the distribution — and if you’re under 59 ½ or don’t meet another exemption, you may be charged a 10% penalty.

Is a 401(k) home loan right for you?

Whether or not you should take out a 401(k) loan to help pay for your home purchase is a personal decision, but there are a few more things to think about before you do.

• Will you qualify for a mortgage without the loan? Using a 401(k) to stretch yourself financially and get a mortgage that’s more than you can afford probably isn’t a good idea. You may have trouble repaying the loan, which could put you in a precarious financial situation.
• What return on investment will you be forgoing? When you borrow money from your 401(k), that money is no longer sitting in your retirement account with a chance at a return on your investment — you could be missing out on years of investment growth for each year you need to pay back the loan.
• Will the loan help you qualify for a lower interest rate on your mortgage or eliminate your need for PMI? If you can save money in the long run by paying a lower interest rate or not paying private mortgage insurance, or PMI, a 401(k) home loan might make sense. But you’ll have to do the math for your particular situation — if you aren’t sure, think about consulting a financial planner to help crunch the numbers.

Should I make a 401(k) withdrawal instead?

Withdrawing money from your 401(k) before retirement, as opposed to borrowing from it, is usually a bad financial move. Not only will you be taking the money that you’ve invested for your golden years — leaving you with less for retirement — you may be hit with an early-withdrawal penalty.

Unless you’re 59½ or qualify for another exception, you’ll have to pay tax on the amount you withdraw — plus a 10% penalty. Though that penalty may be waived on up to $10,000 withdrawn from a traditional, SIMPLE or Roth IRA if you use the money to buy, build or rebuild your first home.

If you’re experiencing financial hardship, your plan may offer the option of a hardship withdrawal. You’ll still need to pay tax on the withdrawal amount, and you may also need to pay the 10% penalty. But the amount you take for a hardship withdrawal can’t be paid back to your retirement plan like a 401(k) loan can.

What are my alternatives to a 401(k) home loan?

If you decide that a 401(k) home loan isn’t your best option, there are several alternatives that may help you purchase a home.

Down payment assistance from a state or local program

Are you a first time or low-income homebuyer? You might qualify for down payment assistance through a state or local program. For example, the Connecticut Housing Finance Authority offers a down payment loan, usually between 3% and 3.5% of the purchase price.

Down payment assistance from family

You can use gifts from family members to help you come up with enough money for a down payment. Check with your lender about what documentation it would need for down payment funds that you’ve received as a gift.

Wait and save for your house

While you might want to buy a house now, in some cases it may be better to wait and save up enough for a down payment so that you don’t have to borrow extra money.

Review your budget and see if there are areas where you can cut your spending. You may also want to consider earning some additional income on the side to help shorten the time it takes you to save.

Next steps

If you want to learn more about whether a 401(k) loan is the right option for you, it’s a good idea to review how 401(k) loan repayment works. You should also review how much house you can afford and look closely at what it costs to buy a house where you want live — so that you don’t end up borrowing more than you can manage to repay.

You can also use our 401(k) calculator to help determine how much money you may be able to save by the time you retire.

*Approval Odds are not a guarantee of approval. Credit Karma determines Approval Odds by comparing your credit profile to other Credit Karma members who were approved for the personal loan, or whether you meet certain criteria determined by the lender. Of course, there’s no such thing as a sure thing, but knowing your Approval Odds may help you narrow down your choices. For example, you may not be approved because you don’t meet the lender’s “ability to pay standard” after they verify your income and employment; or, you already have the maximum number of accounts with that specific lender.

Whether your car broke down or you’ve got an expensive medical bill, you might wonder if you can get an emergency loan when you have bad credit.

Although there are companies that market loans for people with bad credit, you’ll want to proceed with caution. Some emergency loans can be extremely expensive and potentially trap you in a cycle of debt.

We’ll break down some emergency loan options for bad credit as well as some alternatives you may want to consider.

Can I get an emergency loan with bad credit?

You can find lenders that market loans to people with bad credit. While some may promise you quick cash, they can also come with some serious drawbacks. Here are a few types of emergency loans that might be available if you have a credit history with some dings in it — and what you should consider before you apply.

Payday loan

A payday loan is typically a short-term, high-cost loan that you’ll need to repay by your next payday. Limits on how much you can borrow vary by state, but payday loans are generally $500 or less.

Payday lenders often charge fees that makes these loans an extremely expensive way to borrow money. While some states regulate the fees that payday lenders can charge, these loans are still very expensive, often with fees that equate to APRs of 400% or more, according to the Consumer Financial Protection Bureau.

Payday loans come with a risk of trapping you in debt. If you’re unable to pay the loan back when it comes due, you may need to “re-borrow” by rolling it over to a new loan — but that will usually mean paying additional fees.

You should consider a payday loan only as a last resort.

Payday alternative loan

If you’re a member of certain federal credit unions, you may be able to apply for a payday alternative loan, or PAL. These small-dollar loans (amounts between $200 and $1,000) have a one-time processing fee that won’t exceed $20 and interest rates that can’t be more than 28%.

These short-term loans are often more favorable than payday loans for people who qualify. Unlike payday loans, the loan term on PALs typically ranges from one to six months. Plus, there’s a cap on borrowing: You can’t take out more than three payday alternative loans within six months.

If you’re a member of a federal credit union that offers them, a PAL is a good emergency loan option to consider.

Title loan

If you own a car, you may be able to borrow against the equity in your vehicle with a title loan. These loans let you borrow a small amount of money that usually must be repaid within 30 days.

In exchange, you give the lender the title to your car as collateral for the loan. These loans don’t necessarily require a credit check. Once you repay the loan and the monthly fee that is charged — which is often 25% of the total loan, or the equivalent of a 300% APR  — you’ll get your car title back. But if you can’t afford to repay the loan, the lender may repossess your car.

Title loans, like payday loans, can trap you in a cycle of debt. If you’re unable to pay the loan when it’s due, you may be able to roll it over into a new loan by paying additional loan fees. A 2016 study from the Consumer Finance Protection Bureau found that 1 out of every 5 people who have to roll over their title loans wind up with a car repossessed.

A title loan should only be considered if you’ve run out of other options. 

Unsecured personal loan

Unsecured personal loans are loans that don’t require you to put up property as collateral to the lender. Unlike payday loans and title loans, these personal loans are installment loans, meaning you repay the amount borrowed, plus interest, over a set period of time.

Unsecured personal loans often have lower interest rates than a typical payday loan and feature longer loan terms. But they also may be more difficult to qualify for because there’s no collateral the lender can repossess if you don’t make your payments.

If you qualify for a favorable rate, an unsecured loan could be a good option for you.

Credit card cash advance

A credit card cash advance is like taking a short-term loan from your credit card. When you request a cash advance, you’re asking to use the available balance on your credit card to withdraw money.

But a cash advance may be charged at a higher interest rate than your purchase APR and have transaction fees, likely making it more expensive than the equivalent purchase with your credit card. Cash advances also might start accruing interest immediately, so you’ll probably want to begin making payments shortly after you borrow the money.

Do the math on your purchase to decide if this option makes financial sense for you.

Alternatives to emergency loans for bad credit

There may be other options available to pay for your emergency needs. Before you turn to a potentially high-cost solution, consider these other options.

Ask for a repayment plan

If you don’t want to take out a loan, you can try to negotiate a payment plan or a longer payment period for another bill. Creditors may offer you a low-interest loan or be willing to reduce the amount that you owe. It’s a good idea to talk with your current creditors before exploring other loan options.

Explore charitable financial assistance grants

Depending on your situation, you may qualify for an emergency assistance grant or loan.  Some states and cities offer hardship grants to residents. For example, residents of Dane County, Wisconsin, can apply for emergency assistance grants if their family is facing eviction or foreclosure. Check with your state or local area to see what hardship grants may be available.

Ask your employer for a loan or advance

If you’re employed, your employer may be able to help you to bridge a short-term financial difficulty. Before you pursue an emergency loan, check with your employer to see if it can offer a loan or an advance on your next paycheck.

And if you’re a full-time or part-time federal employee, you may be eligible to receive a no-interest hardship loan of up to $1,500 through the Federal Employee Education and Assistance fund.

Use a credit card in your wallet

While credit cards can come with high interest rates, those rates are still usually less costly than other kinds of financing like payday and title loans. You also may be able to apply for a new credit card with a low or no-interest introductory APR offer.

Using a credit card might provide the short-term relief that you need. But if you do use one, make sure you have a plan to pay off your balance quickly, so you don’t accumulate too much interest.

What’s next?

Once your need for an emergency loan has passed, it’s a good idea to start planning for the next time an emergency pops up. You can start by creating a budget and putting money away in an emergency fund.

You’ll also want to think about ways to improve your credit, so you may have more options available to you in the future if you need to finance expenses.

To start, focus on making on-time payments on your current accounts and lowering any existing account balances since those are among the key factors in your credit scores.

Whether you need to fix a leaky roof or borrow money for your child’s education, if you have equity in your home, you might consider a home equity loan.

A home equity loan lets you access the existing equity in your home — or the difference between what you owe on your mortgage and what your home’s value is. You may sometimes hear this loan option referred to as a second mortgage.

Unlike with a traditional first mortgage that you use to buy a home, you can use the money borrowed with a home equity loan to help you pay for major expenses, even if it’s not related to your home.

While this can make a home equity loan sound appealing, it’s important to remember that it’s a secured loan — meaning you’re using your property as collateral. Just like your original mortgage, if you can’t repay your loan as agreed, the lender could foreclose on your home.

• How does a home equity loan work?
• How much can I borrow with a home equity loan?
• How do I repay a home equity loan?
• Are home equity loans a good idea?
• What are some other financing options?

How does a home equity loan work?

A home equity loan lets you tap into the equity that you’ve built in your home. You can use the money that you borrow for more than home-related expenses. For instance, you can use the money to pay for your child’s college, their wedding or a kitchen remodel.

When you apply for a home equity loan, a lender must give you important loan disclosures, such as the amount you can borrow, the interest rate — including whether it’s a variable interest rate — and any fees. Common fees in your closing costs can include an origination/underwriting fee, appraisal fee, document prep fees, broker fees and application fees.

Home equity loans are for a lump sum of money and usually come with a fixed interest rate. Be sure to pay close attention to any fees that the lender charges — these can vary from lender to lender, so it’s smart to shop around for the best loan terms for your situation.

Depending on how you use the money, the interest you pay may be tax deductible. If you use the money to buy, build or substantially improve the home securing the loan, you may be able to deduct those expenses.

How much can I borrow with a home equity loan?

Your lender will determine how much you can borrow by looking at a number of different factors, including your income, debt-to-income ratio, the value of your home and your credit history.

The maximum amount a lender will usually approve is 85% of the equity in your home.

For example, say your home’s appraised value is $300,000 and you owe $200,000 on your mortgage. The maximum amount you’ll likely be approved for is $85,000. Here’s how to calculate that, assuming you don’t have any other liens on your home.

• Home appraised value: $300,000
• Mortgage loan balance: $200,000
• Equity in your home: $100,000
• Potential home equity loan amount: $85,000 (85% of the equity you have in your home)

You’ll probably need to build up a good amount of equity in your home before you’re able to borrow a large amount of money.

How do I repay a home equity loan?

If you take out a home equity loan, you’ll begin making monthly loan payments in addition to your regular mortgage payments. Repayment is very similar to how a traditional mortgage is repaid. Your loan payments will go toward principal (the amount borrowed) and interest (your charge for borrowing money).

Are home equity loans a good idea?

Home equity loans may not be a good idea for everyone, but for some situations you might want to consider it. Here are a few.

You’ve built up enough equity in your home

Because the amount of money you can borrow is tied to the amount of equity you have in your home, you’ll want to ensure you’ve built up enough equity before applying for a loan. Remember, most lenders only let you borrow up to 85% of the equity in your home. So the equity you’ve acquired is an important factor to consider.

If you made a larger down payment when you bought your home, you’ll likely have more equity.

You qualify for a favorable interest rate

Lenders look at more than just your home equity when deciding how much to lend you and at what interest rate. Your lender will assess your ability to repay the loan and can base your interest rate based on factors such as income, debt and credit history. A lower interest rate could mean you pay less over the life of the loan.

You can handle the increased monthly payments

When you borrow more money, you’ll have more to repay each month. If you can handle the increased monthly payments in your budget, a home equity loan may help advance your financial goals.

But remember, if you aren’t sure you’ll be able to handle the monthly payments, a home equity loan is a risky idea. If you’re not able to make the larger monthly payments, there’s a chance you could lose your home to foreclosure.

What are some other financing options?

If you need extra money, there are other financing options that may work better for you.

HELOC

Home equity lines of credit, or HELOCs, also let you borrow against your home equity, but they work differently. Rather than borrowing a lump sum of money for a set period of time, a HELOC functions more like a credit card. You’re given a credit limit and can draw on that line of credit when you need it, rather than getting the money upfront. You’ll make payments on how much you actually borrow, not how much you’ve been approved to borrow.

Most HELOCs have a variable interest rate that fluctuates based on an index like the prime rate. That means you could pay more money if your rate increases.

HELOCs still require you to use your home as collateral, so you could end up losing it if you can’t keep up with the monthly payments and end up defaulting on the loan.

You may have a minimum or maximum withdrawal requirement on your account, and you may have a draw period when you’re able to withdraw funds. You may have to repay your outstanding debt all at once after the draw period ends or over a period of time.

Cash-out refinance

If you’re looking for another way to access the equity in your home, a cash-out refinance may be an option. During the mortgage refinancing process, you’ll pay off your existing mortgage with a new one. People may refinance to get a lower-rate loan, switch from a variable to a fixed interest rate or change the length of their mortgage.

A cash-out refinance lets you refinance your home for more than what you currently owe on your loan. The difference can be given to you as a lump sum.

Unsecured personal loan

If you don’t want to use your home as collateral for a loan, you might consider an unsecured personal loan. With an unsecured loan, you can borrow money without using any collateral for the loan. But because these are seen as a riskier loan for the lender to make, they often come with higher interest rates.

What’s next?

While a home equity loan can seem like an attractive way to access cash, you’ll want to be sure it’s the right option for you because it does come with some risks. It’s a good idea to consider other loan options and shop around with different lenders for the best rate for you.

Check your credit scores and reports to get a sense of whether you might be able to qualify for a loan at attractive terms. You may want to work on improving your credit before you apply.

And before you take out a loan of any kind, take some time to think through why you need a loan and how you’ll repay the money. You don’t want to borrow more than you can afford to repay.

These offers are no longer available on our site: Capital One® Spark® Cash for Business, Capital One Spark Cash Select for Good Credit

Updated November 6, 2024

This date may not reflect recent changes in individual terms.

Editorial Note: Intuit Credit Karma receives compensation from third-party advertisers, but that doesn’t affect our editors’ opinions. Our third-party advertisers don’t review, approve or endorse our editorial content. Information about financial products not offered on Credit Karma is collected independently. Our content is accurate to the best of our knowledge when posted.

Written by: Erica Gellerman

Pros

• Generous, simple rewards rate on all purchases
• Annual fee waived for the first year
• Good sign-up bonus
• Free employee cards

Cons

• No bonus rewards categories
• $95 annual fee after the first year

What you need to know about the Capital One® Spark® Cash for Business

The Capital One® Spark® Cash for Business comes with straightforward benefits that are easy to earn and redeem. Here’s what you need to know about the card.

2% cash back on purchases

If you’re looking for a simple business cash back card, the Capital One® Spark® Cash for Business delivers. It offers 2% cash back on all purchases, so there’s no need to keep track of categories. There’s also no limit on how much cash back you can earn, and the rewards don’t expire as long as your account is open.

The Capital One® Spark® Cash for Business also makes redemption easy. You can set your account to automatically redeem your cash back rewards at a set time each year or when your balance reaches a certain amount.

No bonus rewards categories

While a 2% cash back rate is a solid offer, depending on where you spend your money, you might be missing out on a bigger rewards. Some cards offer a higher cash back amount for spending in certain categories, like travel, office supplies or advertising.

If you find that your business spending falls into specific categories, you might consider choosing a card that rewards those categories at a higher rate.

There’s a nice sign-up bonus

The Capital One® Spark® Cash for Business offers a nice sign-up bonus for anyone who meets the spending requirements. If you spend $4,500 on purchases within your first 3 months after opening the account, you’ll earn a one-time $500 cash bonus.

With the card’s annual fee waived for the first year, you can get that cash bonus and continue to earn cash back without having to pay for that additional cost of having the card (at least until year two).

Employee cards for no additional charge

Have employees that need to use the credit card? The Capital One® Spark® Cash for Business makes it easy. You can add employee cards for free and keep things in check by setting spending limits for each card.

Plus, you’ll earn 2% cash back for all the purchases your employees make with the card.

Annual fee

These rewards do come at a cost. The Capital One® Spark® Cash for Business charges an annual fee of $0 intro, $95 after first year. But don’t let the annual fee scare you off without first calculating whether it’s worth it for your business.

Do the math to see if you’ll still come out ahead after paying the annual fee. If your business spends at least $4,750 per year, you’ll earn enough in cash back rewards of offset the annual fee.

Other things you should know

The Capital One® Spark® Cash for Business offers some other bonus features that are designed to make life easier for entrepreneurs.

• Travel with less worry. This card comes with emergency travel-assistance services and no foreign transaction fees.
• Streamline your bookkeeping. You can download purchase records into Quicken, QuickBooks and Excel formats.
• Breathe a little easier with your big purchases. This card offers purchase security, which helps protect your eligible purchases from theft or damage for the first 90 days after purchase — up to $10,000 per claim and $50,000 per cardholder.

Who this card is good for

The Capital One® Spark® Cash for Business is a great card for business spending at— and no limit to how much you can earn — you can rack up rewards quickly. If you spend enough to offset the annual fee, the cash back structure makes this card a simple win.

But remember, the cash back benefits are only helpful if you pay your full statement balance off by the due date each month.

Not sure this is the card for you? Consider these alternatives.

While the Capital One® Spark® Cash for Business is a good card for many business owners, here are some options that may be a better fit for your specific situation.

• The Business Platinum Card® from American Express: If your business has you on the road often, this card could be a good option.
• Ink Business Preferred® Credit Card: If your business has a lot of everyday business expenses, this could be a good option.
• Capital One Spark Cash Select for Good Credit: Don’t use a card enough to justify paying an annual fee? A different Capital One Spark business card like this one might be a good fit.

These offers are no longer available on our site: Capital One® Spark® Cash for Business, Capital One Spark Cash Select for Good Credit

Updated October 18, 2024

This date may not reflect recent changes in individual terms.

Editorial Note: Intuit Credit Karma receives compensation from third-party advertisers, but that doesn’t affect our editors’ opinions. Our third-party advertisers don’t review, approve or endorse our editorial content. Information about financial products not offered on Credit Karma is collected independently. Our content is accurate to the best of our knowledge when posted.

The Citi Rewards+℠ Student Card is no longer available. For another option, learn more about the Discover it® Student Chrome.

Written by: Erica Gellerman

Pros

• Points round-up offer
• No annual fee
• N/A intro APR on purchases

Cons

• Bonus points are capped
• OK rewards rate

What you need to know about the Citi Rewards+® Student Card

Depending on your spending habits, the Citi Rewards+® Student Card could be a reasonably good option for you if you’re a college or graduate student. But it has some unique features you should know about before you make your decision.

Two points on gas and groceries, with a limit

Spend a lot on gas and groceries? You’re in luck. The Citi Rewards+® Student Card offers two Citi ThankYou points for every $1 spent on eligible gas station and supermarket purchases. But this bonus rate only applies to the first $6,000 that you spend on these categories each year. After that, you’ll earn the standard one point for each $1 spent, and you’ll earn one point for every $1 spent on all other purchases.

Take note: Citi doesn’t have a standard point-to-dollar conversion like some other cards. Instead, the value of your points will depend on what you’re redeeming them for.

Sign-up bonus

The sign-up bonus on the Citi Rewards+® Student Card is relatively easy to reach: Spend $500 on purchases in the first 3 months from account opening and you’ll receive 5,000 points. This is a decent offer for student credit cards — some don’t come with sign-up bonuses. But compared to other cards that don’t charge an annual fee, this bonus is on the low end.

Round-up feature

The Citi Rewards+® Student Card offers a unique feature that benefits people who frequently make small purchases: The rewards points round-up. Your rewards points will be rounded up to the nearest 10 points for each purchase that you make. If you spend $2 on coffee, you’ll earn 10 rewards points. If you spend $15 on lunch, you’ll earn 20 rewards points, all thanks to the round-up feature.

Depending on what type of charges you usually make on your credit card, the round-up feature could help make up for the low base rewards rate this card offers. But with larger purchases, the round-up feature is less valuable. For example, if you buy a coffee for $2 and earn 10 points, that’s five points for each dollar you’ve spent. But if you purchase textbooks for $142 and earn 150 points, you’re getting only 1.06 points for each dollar you’ve spent.

Flexible redemption options

Once you earn your rewards points, you can spend them in a number of different ways. Here are some of your redemption options.

• Purchases on Amazon.com or Bestbuy.com
• Gift cards
• Travel rewards
• Cash rewards of $50 or $100
• Statement credit to pay for eligible purchases
• Charitable contributions
• Student loan or mortgage payments (redeem for checks to make payments)

Introductory APR for purchases

Do you have a large purchase coming up that will take you some time to pay off? With the Citi Rewards+® Student Card, you’ll get an intro N/A APR on purchases for . This means that you won’t be charged interest on purchases that you make during this introductory period, as long as you make the scheduled minimum payments on time. But make sure you have a plan to pay off the charges by the end of the intro period — once it’s up, you’ll be charged the standard purchase APR, which is a variable 18.99% - 28.99%.

Other features worth considering

Interested? There are a few more things you should know before you make your decision.

• The Citi Rewards+® Student Card doesn’t have an annual fee.
• When you redeem your first 100,000 rewards points each year, you’ll get 10% of those points back as a bonus. So if you redeem 20,000 points, you’ll get a 2,000-point bonus.
• If you plan to travel abroad, leave this card at home. It comes with a 3% foreign transaction fee on all foreign purchases.
• You must be a student or graduate student to qualify for this card.

Who this card is good for

The Citi Rewards+® Student Card could be a good choice if most of your monthly spending goes to gas and groceries, and you frequently make small purchases. With the two-point bonus you earn at gas stations and supermarkets, as well as the round-up bonus, you could accrue points quickly.

But before racking up all those points, check to see if your spending on gas and groceries is usually over $6,000 per year. If it is, know that you’ll only earn one point for each $1 that you spend over that limit. If you can qualify for a card other than a student card, you may be able to find one without annual fees that offers a higher rewards rate. If that’s the case, it may make sense to find a card that offers bonus points on more categories or that doesn’t have an earning limit.

These offers are no longer available on our site: Capital One® Spark® Cash for Business, Capital One Spark Cash Select for Good Credit

Saving enough money for a down payment on a house can take a long time – but is a down payment loan a good option for homebuyers?

The short answer is: probably not. You likely won’t find many options for a down payment loan — which is a personal loan that you use to make a down payment on a home. And those that do exist come with some drawbacks.

Instead, you may have better luck looking for a mortgage that doesn’t require a 20% down payment.

Let’s look at some down payment options that could help you on the road to financing your dream home.

• Why is a down payment important?
• How much do you need for a down payment?
• Can I get a down payment loan?
• Tips to save for a down payment

Why is a down payment important?

Saving for a down payment can be difficult, but putting money down on a home purchase is a good idea for multiple reasons.

• Lower monthly payments — The more money you put down, the less you’ll have to borrow to buy your home. A smaller loan amount usually means smaller monthly mortgage payments.
• Less interest — Reducing the amount you borrow may mean you’ll pay less interest over the life of your mortgage. For example, let’s say you’re purchasing a $200,000 home with a 4% interest rate. If you put 10% down, you’d pay $129,365 in interest over 30 years. By putting 20% down, you’d pay $114,991 in interest over 30 years — saving you more than $14,374 in interest.
• Avoiding private mortgage insurance — If you put down less than 20%, you’ll likely have to pay private mortgage insurance, or PMI, though a few types of home loans don’t require it. This extra insurance will increase your monthly payment amount.
• Instant equity — Equity is the difference between how much your home is currently worth and the amount you owe on it. If home values decline, you could end up owing more on your mortgage than your house is worth. Making a down payment can help create equity that may protect you from fluctuations in your home’s value.

How much do you need for a down payment?

You may have heard that you need a down payment equal to 20% of the total cost of the home you want to buy — but that’s not always the case. How much you actually need for a down payment depends on the type of mortgage you’re considering.

Let’s look at the different types of mortgage loans and their down payment requirements.

• Conventional loans — Depending on the mortgage lender, down payment requirements can be as small as 3%. But if you’re putting down less than 20%, most lenders will require you to pay PMI. Conventional loans are the most common, currently making up roughly two thirds of all mortgage loans.
• Federal Housing Administration loans — FHA loans are available to borrowers who are putting down as little as 3.5%, but they require mortgage insurance.
• Veterans Affairs loans — Current service members, eligible veterans and surviving spouses may be able to get a mortgage with a low, or even no, down payment without having to pay PMI. But borrowers may have to pay an upfront fee for VA loans.
• U.S. Department of Agriculture loans — Zero down payment loans are available for eligible applicants, but you’ll need to pay mortgage insurance to the USDA to use this loan program.

Can I get a down payment loan?

The good news: You may not need to put down 20% in order to get a mortgage. The bad news is that not putting down that much on a conventional mortgage may mean a costlier loan, if you can get one. Or, if you qualify for a loan with a lower down payment requirement, you may still need to come up with thousands of dollars. For example, a 3% down payment on a $250,000 home is still $7,500.

If you’re coming up short with the funds for a down payment, you may be wondering if it’s possible to cover the cost of a down payment with a loan. Let’s take a look at some loan options you may be considering.

Piggyback loan

If you have less than 20% to put down on a home purchase, lenders typically require you to pay for mortgage insurance. But by “piggybacking” a home equity loan or home equity line of credit onto your main mortgage, and putting some money down, you may be able to avoid PMI.

Here’s how it works: You might put 10% down, borrow 80% with a traditional mortgage, and borrow the remaining 10% with a piggyback home equity loan.

The drawback here is the piggyback second loan often comes with a higher interest rate that may also be adjustable — meaning it could go even higher during the life of the loan.

Personal loan

What about getting a personal loan to cover your down payment? That’s not usually a doable (or advisable) option for a few reasons.

• It increases your debt-to-income ratio. When reviewing a mortgage application, lenders typically look at a borrower’s debt-to-income ratio, which is all of the debt payments you make each month divided by your gross monthly income. Taking out a personal loan for a home down payment means that loan will affect your DTI calculation — and could possibly raise your DTI to exceed the lender’s allowable limits.
• Fannie Mae doesn’t allow it. One of the government-sponsored companies that guarantees conventional loans won’t accept a personal loan as a funding source for down payments.
• It can make you look like a risky borrower. Lenders view a sizeable down payment as reducing their risk. Using a personal loan for a down payment might signal to a lender that the borrower isn’t a good risk for a loan.

Down payment assistance programs

If you’re a first-time or low-income homebuyer, you might qualify for help through a state or local homebuying program. Some of these programs may offer down payment loans for qualifying borrowers.

For example, the California Housing Finance Agency’s MyHome Assistance Program offers a loan of up to 3.5% of the purchase price or appraised value of the home, which can help some first-time homebuyers to make their down payment.

Help from friends or family members

You can use monetary gifts from friends or family members for your down payment, as long as you provide a signed statement to your lender that the money is a gift and not a loan. Check with your lender about specific documentation it will need and how much of your down payment can come from a gift.

Tips to save for a down payment

Ultimately, there are many advantages to saving for a down payment, rather than trying to borrow the funds you’ll need. Setting funds aside may take a little longer but could help you save on costs in the long run.

Here are some tips to help you save toward a down payment on a home.

• Know how much you need. You know you need a down payment, but how much is it actually going to be? It’s good to know exactly how much cash you’ll need so you can begin making a plan to save it. Calculate how much money you’ll need for a down payment, as well as other expenses like closing costs.
• Make a plan. Calculate how much you’re currently saving each month and how long it will take to reach your down payment goal. If that timeline isn’t as short as you’d hoped, you might want to take a look at your budget and see if you can find ways to cut back on your discretionary spending.
• Make your savings automatic. Once you’ve started making cuts, start putting money into a separate savings account that’s been earmarked for your down payment. Automate regular transfers to this savings account, and avoid taking money out of the account for anything other than a down payment.

Next steps: Make a down payment plan

The reality is most homebuyers need to have some money to put down on their home purchases. If you’re struggling to come up with a down payment, you probably won’t find many options for a down payment loan. And the options that are available may come with higher costs.

But by understanding how much you really need to save for a down payment and making some savvy spending and saving moves, saving for a down payment doesn’t have to be out of reach.