Debt comes in many forms. You’ve probably used a credit card. Maybe you got a student loan to pay for your education or a home loan to buy a house. Some people use debt to pay bills or even to pay off other debt.

Debt can help you achieve your financial goals, but it can also burden you with higher payments that you can’t afford. To use debt well, you should know which types are productive and which aren’t, how to assess whether you have too much or not enough, and when and how to pay it down.

Good debt, bad debt

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Whether debt is good or bad depends primarily on how you use the money. “Good” debt helps you increase your income or acquire assets. “Bad” debt is used to buy things that almost never appreciate in value, like cars, clothing, electronics, or other consumer goods or services. Carrying a balance on a credit card is also an example of bad debt.

Examples of good debt include student loans, business loans and mortgages — all things that one might expect to provide more value than the amount of debt.

It’s important to remember that even so-called good debt can be risky. A college degree might not enable you to land a high-paying job. Many start-up businesses never become profitable. Property values don’t always go up.

The decision to take on debt should be weighed carefully even if the debt is for a productive reason. Don’t borrow unless you have a clear plan for repayment.

When to pay down debt

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If your debt keeps you awake at night, you may have more than you can handle. That’s a sign that you should pay down some or all of it before you borrow more.

Paying down debt can help you …

• Improve your standard of living
• Spend more on your needs and wants instead of on interest payments
• Become more financially secure
• Cut the number of monthly bill payments you have to track
• Boost your credit health
• Model good financial behavior for your kids

How to pay down debt

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The basics

The first step to try to reduce your debt is to make a complete and accurate list of what you owe. For each debt, write down the name of the creditor, total amount you owe, minimum monthly payment, interest rate, and whether your payments have been late or on time.

The second step is to call each of your creditors to find out whether you can get a lower rate, longer repayment term or other relief. Even if the answer is no, you’ll have a better understanding of your situation and you’ll know your options.

Snowball or avalanche?

The third and fourth steps are to build a budget to find the maximum amount you can afford to pay every month toward your debt and decide how to prioritize your debt repayment. You should always make (at least) the minimum payment for every debt every month to help protect your credit scores.

Two popular debt repayment strategies are known as the snowball and the avalanche methods.

• Snowball — Make all the minimum payments for your various debts and then apply the rest of your available budget toward your smallest debt amount. When your smallest debt is paid off, start applying your available budget toward your next-smallest debt until that one is zeroed out, and so on. Disadvantage: the snowball method ignores interest rates, which can make paying down debt more expensive. But that might not be your most important concern.
• Avalanche — Make all your minimum payments and then apply the rest of your budget toward whichever debt has the highest interest rate. When that debt is paid off, use your available budget for whichever debt has the next-highest rate. Disadvantage: if your highest-rate debt takes many months or years to pay off, you won’t get the early win of paying off a smaller debt to help motivate you.

If you’re not sure which method to use, you can combine the two strategies. For example, you could pay off your smallest debt first for a quick win and then focus on your highest-rate debt for bigger savings.

Other options

If neither the snowball nor avalanche method is adequate for your situation, you might need to consider more-drastic options to reduce your debt. Here are four possibilities.

• Balance transfer card — Transferring your current credit card balances to a new card with a lower interest rate. You could save on interest if you follow the rules of the balance transfer offer and pay down the balance before the introductory interest rate (if available) expires. Though you may have to pay a balance transfer fee, typically around 3% of the amount transferred.
• Debt consolidation — Refinancing multiple debts with high interest rates into one loan with a lower rate. For example, you could get a personal loan and use the money to pay off your credit cards or other obligations. Debt consolidation could make it easier to pay down your debt and reduce your interest expense by making it so you only have to pay one bill every month — but your lender might charge an origination fee on the new loan.
• Credit counseling — Setting up a strict debt-management plan and negotiating with credit card issuers to try to get lower rates on your existing debt. You may have to pay a monthly fee to any credit counseling agency or company that you work with in exchange for their help. Be careful when selecting a debt counselor, as some unscrupulous ones exist.
• Debt settlement — Hiring a company or agency to try to negotiate partial forgiveness of some of your debt so that it’s more manageable for you. The Consumer Financial Protection Bureau generally does not recommend debt settlement.

When you’re weighing your options, it’s important to know that all of these strategies take time to complete. They could also affect your credit scores, and they may involve fees that wipe out any savings from a lower rate or debt settlement offer that you get.

Now that you’ve mastered the basics of how to use debt and when and how to pay it off, you’re ready to learn more about specific types of debt and might feel comfortable shopping for a new credit card or personal loan.

Though each type of debt has its own specific requirements, the essentials are the same. You should understand your financial goals and reasons for borrowing, know how much you owe, and have a smart, strategic plan to pay down your debt when it’s appropriate for you to do so. Make sure you’re familiar with the fundamentals of credit along with how to build and maintain it.

Personal loans have some key differences from revolving credit, like credit cards or lines of credit. With a personal loan, you get a set amount of money and repay it in monthly payments, called installments, for a predetermined time period. Repayment terms vary. Depending on your loan, your loan term could range from one year to seven years, though that will vary by lender.

After you’ve paid the debt in full, the loan ends and your account is closed. To borrow more money, you’d have to apply for another loan.

If you’re considering getting a personal loan, you’ll want to understand the jargon you’ll encounter during the process. Terms like “collateral,” “credit score,” “prepayment penalty” and “prime rate” could throw you for a loop if you don’t know what they mean.

We’ll guide you through basic personal loan definitions and some terms you should understand before taking out a loan.

• How do personal loans work?
• What to know before you apply
• Personal loan lingo: The definitions

How do personal loans work?

Personal loans can be secured or unsecured. For a secured loan, you must put up some personal property as collateral, like a savings account or certificate of deposit. If you default on the loan, the lender typically has the right to seize your collateral as payment for the loan.

Unsecured personal loans aren’t backed by collateral. Instead, lenders look at factors like your financial history and credit to decide whether you qualify for the loan. Because they’re not secured, unsecured personal loans often come with a higher interest rate than you might get for a secured loan.

Personal loans are available from banks, credit unions, online lenders and peer-to-peer lending platforms.

What to know before you apply

Before you apply for a personal loan, you should think about why you want it and evaluate other options. If you’re thinking about using a loan for something you want but don’t need, it’s probably better to save up for it instead of borrowing and paying interest. If that’s not an option though, make sure you can afford adding the monthly payments into your budget.

If you want to use a personal loan to pay off debt, consider other options as well, like a card with an introductory 0% rate on balance transfers. Paying the balance in full before the introductory rate ends means you won’t have to pay any interest on the transferred balance.

But failing to pay your balance in full by the end of the intro period could cause you to owe a lot in interest on any remaining balance. You’d have to keep your eye on the introductory time frame to make it worth your while.

When you apply for a personal loan, the lender will typically pull your credit. This can involve what’s known as a hard inquiry, which could stay on your credit reports for about two years, and could negatively affect your credit scores, depending on your situation.

Personal loan lingo: The definitions

When you’re comparing loan options, there are some common terms you’ll want to understand. Browse this list to help guide your research.

Annual percentage rate

APR is the amount of interest and other costs (such as fees) that you pay to borrow money, expressed as an annual rate. The APR represents the total annual cost of borrowing money.

Automatic payment

An automatic payment is an amount that’s deducted automatically from your bank account and paid to your lender as your loan payment. Some lenders offer a rate discount if you agree to set up automatic payments.

Collateral

Collateral is property that you own and offer your lender to secure your loan. If you don’t repay the loan, the lender can typically claim the collateral to pay the loan.

Credit report

Credit reports show information about your use of credit and credit history. The three major consumer credit bureaus — Equifax, Experian and TransUnion — each prepare a credit report that may be used by lenders. They generally include personal information like your payment history, how many credit accounts you have, how much credit you’re using and how long you’ve been using credit. Most reports include your name, Social Security number, current and former addresses, and employer history.

Credit score

Your credit scores are numerical representations of the information in your credit reports. Depending on the credit-scoring model used, scores typically range from 300 to 850. Lenders often view credit scores as an indication of how likely you are to repay debt. Higher scores may indicate to lenders that you are more likely to make payments on time and repay the loan as agreed.

Default

If you fail to repay a loan according to the terms of your loan agreement, the loan will usually be considered to be in default.

Delinquent

When you make late payments or miss payments, your credit account will be considered delinquent.

Direct deposit

Direct deposit is a service where money is electronically deposited into a bank account (without a paper check). If you’re approved for a personal loan, your lender may offer to directly deposit the funds into your bank account.

Fixed interest rate

A fixed interest rate doesn’t change or adjust with an index during part of the term or the entire term of the loan.

Installment loan

An installment loan is a loan for a fixed amount of money that requires payments at specific intervals for a set period of time. Personal loans are a type of installment loan as well as auto loans, student loans and home loans.

Interest/interest rate

Interest is what you pay to borrow a sum of money, not including fees or additional charges. The interest rate is expressed as a percentage of the amount of money you borrowed. Interest rates are usually annualized.

Lender

A lender is a company, organization or individual that makes a loan to a borrower. Lenders can include banks, credit unions, finance companies, online lenders and peer-to-peer lenders.

Monthly payment

Your monthly payment is the amount that you’re required to pay to the lender by a specific date each month until your loan has been repaid in full.

Online loan application

An online loan application is a form that you’re required to complete via the internet to apply for a loan from a lender. Some lenders allow you to check if you prequalify online, which can give you an idea of whether you may get the loan if you submit a loan application online. Prequalification isn’t a guarantee of approval, and if you’re approved, you may be offered different terms than what you saw on your prequalification offer.

Origination fee

An origination fee is a fee that some lenders charge for initiating your loan application and issuing your loan. An origination fee is usually calculated as a percentage of your loan amount.

Peer-to-peer lending

If you opt for peer-to-peer lending, you’re getting a loan from individuals or investors who lend to you without the use of a traditional financial institution, such as a bank or credit union. Borrowers and lenders are typically matched through a peer-to-peer, or P2P, online lending service, sometimes called a “platform.”

Prepayment penalty

A prepayment penalty is a fee that some lenders charge if you pay off all or part of your loan early. The penalty compensates the lender for interest you didn’t pay because you made fewer payments than the lender expected to receive.

Prime rate

The prime rate is the lowest interest rate that commercial banks will charge borrowers with the best credit. To qualify for this rate, you typically need to have excellent credit. The Wall Street Journal publishes a prime rate that’s a consensus of large commercial banks’ rates.

Principal

Principal is the amount of money you borrowed from your lender, excluding interest. As you pay off your loan, this amount will decrease.

Repayment term

Your repayment term is the maximum amount of time you have to repay the loan in full.

Secured loan

A secured loan is backed by collateral that your lender can typically collect if you fail to repay the loan as agreed.

Unsecured loan

An unsecured loan is not backed by collateral.

Variable interest rate

A variable interest rate is a rate that can change during the loan term. Your loan agreement should specify how this rate is determined and under what circumstances it can change. A variable interest rate usually changes with the prime rate, as published in the Wall Street Journal.

Bottom line

A personal loan can be a helpful financial tool when you need money for a big expense or to consolidate debt. But it’s important to understand exactly what you’re agreeing to when you take out a personal loan. And you need to have a solid plan for repaying the loan according to your agreement with the lender.

Learning common personal loan terms, and researching how personal loans work, can help you feel more confident that you’re making a good decision and getting a personal loan with the best terms for you.

*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.

Many homeowners who are moving rely on money they’ll get from the sale of their current home to fund the purchase of a new one. But closing dates don’t always align, and when that happens, you can find yourself in a precarious financial balancing act.

A bridge loan can help provide funding for the purchase of a new home if you were relying on the funds from sale of your existing home to purchase the new one. But there are drawbacks to this kind of short-term borrowing aimed at “bridging” a financial gap.

Let’s look at how bridge loans work, who might qualify for one and the pros and cons of this type of short-term financing.

• What is a bridge loan?
• How can you use a bridge loan?
• How do you repay a bridge loan?
• Pros and cons of bridge loans

What is a bridge loan?

A bridge loan is a type of short-term loan that may be used in real estate transactions when the buyer lacks the funds to finance the purchase of the new property without the prior sale of the first property.

“A bridge loan is temporary financing to provide a way — figuratively, a ‘bridge’ — to purchase an additional home without first selling a home,” says Michael Hausam, a real estate and mortgage broker with the Hausam Group at Vista Pacific Realty in Irvine, California.

The maximum amount you can borrow with a bridge loan is usually 80% of the combined value of your current home and the home you want to buy, though each lender may have a different standard. For example, if your current home is worth $250,000 and the home you want to buy is worth $330,000, your maximum bridge loan amount would be calculated this way: ($250,000 + $330,000) x .80 = $464,000.

As you read, you might ask, “What’s equity in a home?”. Equity is the difference between the current market value of your home and what you owe.

How can you use a bridge loan?

A bridge loan in real estate can be used to buy another home before you sell your current one. A bridge loan essentially helps fund your new home purchase. For example, you might use it to cover closing costs for a new mortgage.

You can also use a bridge loan to present an offer without a financing contingency when you make an offer to purchase a home. A financing contingency is a contract clause that allows a buyer to get back money put down without penalty in the case the buyer cannot secure financing. Sellers tend to prefer offers with fewer contingencies, but it’s important to have protections in place in case you can’t secure funding.

A bridge loan can also help you get a leg up over other buyers in a hot housing market. For example, if a seller is interested in a quick sale (and many are), the seller may be more willing to make a good deal for a buyer who has the money to close quickly.

How do you repay a bridge loan?

Bridge loans typically must be repaid within 12 months or less. Most people pay off their bridge loan with money from the sale of their current home, but there are other repayment options. Bridge loans may be structured in a number of different ways but commonly have a balloon payment at the end where the full amount is due by a certain date.

You may be able to wait a few months after the close of the bridge loan before you have to start making payments, though this will depend on the particular loan you have been approved for.

Pros and cons of bridge loans

As with any loan product, bridge loans have potential advantages and potential disadvantages for borrowers. Before applying for any kind of loan, it’s important to understand and weigh the pros and cons.

Pros of bridge loans

• Faster financing: The application process and closing on a bridge loan typically takes less time than other types of loans.
• Purchasing flexibility: Getting approved for a bridge loan can give you the funds you need to close on a new home before you sell your current one. That means if you find a home you love, you might be able to buy it without waiting for your old home to sell.
• Remove contingencies from your offer: Sellers may look more favorably on purchase offers that aren’t contingent upon the sale of another home.
• Less housing hassle: You can use a bridge loan to help buy a new house before selling an existing home.

Cons of bridge loans

“Compared with conventional loans, bridge loans are more expensive with greater upfront fees and higher rates,” Hausam says.

• High interest rates: Since lenders have less time to make money on a bridge loan because of their shorter terms, they tend to charge higher interest rates for this type of short-term financing than for conventional loans.
• Origination fees: Lenders typically charge fees to “originate” a loan. Origination fees for bridge loans can be high — as much as 3% of the loan value.
• Equity required: Because a bridge loan uses your current home as collateral for a loan on a new home, lenders often require a certain amount of equity in your existing home to qualify, for example 20%.
• Sound finances: To be approved for a bridge loan typically requires strong credit and stable finances. Lenders may set minimum credit scores and debt-to-income ratios. Generally speaking, if your financial situation is shaky, it could be difficult to get a bridge loan.

Perhaps the biggest risk of a bridge loan is that if your home doesn’t sell by the time you need to begin repaying your bridge loan, you’re still responsible for the debt. Until your old home sells, you’ll essentially be paying three loans: the two mortgages on the houses and then also the bridge loan.

And because the bridge loan is secured by your first home as collateral, if you default on your bridge loan, the lender may even be able to foreclose on the home that you are trying to sell.

Bottom line

A bridge loan might seem attractive, but you should weigh the costs and risks carefully. Before you apply, you might want to consider other options, such as a home equity line of credit, personal loan, 401(k) loan or home equity conversion mortgage. These types of loans could also help you move out of your current home and into your new one, and potentially without the level of risk interest and fees associated with bridge loans.

*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.

For borrowers looking for quick money and a straightforward application process, flex loans offer access to a line of credit that works similarly to a credit card. High interest rates are common, which can make this type of loan expensive and financially risky.

Most people appreciate flexibility, which is probably why flex loans can sound so appealing. But with a flex loan, you could pay a high price for that convenience — even triple-digit APRs. Read on to find out more about what to consider with a flex loan.

What is a flex loan?

A flex loan isn’t really a loan at all — it’s an unsecured open line of credit. If your loan application is approved, you can withdraw cash at any time up to your approved credit limit, which can be a few hundred to thousands of dollars, depending on the lender and how much you’re borrowing.

In some ways, a flex loan works like a credit card. Flex loans come with a credit limit. You’ll be charged interest for amounts you’ve borrowed. You should get a monthly statement. You’ll have to make at least a minimum payment every month. And you might be charged a fee daily, monthly or even every time you use your flex loan.

It’s important to understand the difference between a flex loan and a personal line of credit from a bank or credit union. Many banks and credit unions offer lines of credit for individual borrowers and businesses. Rates, fees and repayment terms depend on multiple factors, including your credit scores, or whether your line of credit is secured with collateral or is unsecured. Good credit and collateral may help qualify borrowers for favorable terms on a line of credit from a bank or credit union.

But flex loans are unsecured and can be an option if you have rough credit or little to no credit history. Flex loan lenders may not require a credit check. But as with virtually any type of credit, the more risk the lender assumes, the higher the interest rate you’re likely to pay.

Dangers of flex loans

Before we get to the bad news, here’s a look at what’s attractive about flex loans.

• You can borrow all or some of the funds you have available.
• You may be able to get money quickly.
• You may get flexible payment terms, like a minimum-payment option.
• If you don’t borrow up to your limit right away, you’ll preserve your ability to borrow more later on.
• You might not need good credit to qualify for a flex loan.

But those benefits come with some clear dangers.

Sky-high interest

While many states have laws that aim to regulate predatory lending, the cost of short-term loans can be extremely high. For example, according to a 2017 report from the National Consumer Law Center, laws in some states allow certain lenders to charge triple-digit APRs. And if a state allows a lender to calculate interest on a daily basis, the amount of interest you pay on a flex loan could really balloon.

Minimum payments add up to big interest

Like credit cards, flex loans may allow you to make minimum monthly payments — but that often adds up to maximum interest. Minimum payments make it hard to completely pay off your balance, because interest continues to accrue.

Flexible borrowing can lead to excessive debt

Flex lenders may tout the fact that you have to apply for the line of credit only one time, and you can use it repeatedly as long as you haven’t reached your limit. Unlike a closed-end installment loan, flex loans might not have a specific end date. It’s potentially a recipe for trouble the same way it can be with credit cards — you continue to borrow and pay interest without substantially reducing the amount you owe.

Because a flex loan is an open line of credit that you can borrow against at any time up to your limit, you might take on more debt than you can manage now or in the future, when your financial situation might be different. A closed-end personal loan with a fixed loan amount and specific repayment term doesn’t come with this risk.

Bottom line

Flex loans (which have more in common with a line of credit than an installment loan) may give you fast access to cash, but you could pay a high price for that convenience. Triple-digit APRs, composed of high interest rates and fees, aren’t uncommon for flex loans. And if there’s no end date for the debt, you can continue borrowing and paying high rates indefinitely. Look at the terms of any flex loan offer carefully — you’ll want to fully understand the pitfalls and costs before you go that route.

If you have healthy credit or collateral, you may be able to get better terms and interest rates with other types of borrowing, like a personal loan, a payday alternative loan (if you’re a member of a participating federal credit union) or even a credit card.

And before you borrow money, always think about why you want a loan, how much you want to borrow and how you’ll repay that amount. If you need cash for a short-term emergency, consider getting a temporary part-time job or side gig, or borrowing from a friend or family member who can help you out with a repayment plan that will be more affordable for you than a costly flex loan.

*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.

Updated October 10, 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: Marcie Geffner

Pros

• Considers factors beyond your credit scores
• Potential to receive funding within one business day after accepting loan

Cons

• May charge an origination fee of up to 12% of the loan amount
• APR may be high
• Limited loan term options

Upstart requirements and other personal loan details

Considers factors beyond your credit scores

Upstart looks beyond your credit scores when considering you for a personal loan. In addition to your credit scores, credit reports and current income, it considers your employment status and any degrees you earned or higher-ed programs you’re currently enrolled in.

Interest rates may be high

All Upstart personal loans have a fixed interest rate. The maximum interest rate is on the higher end charged by traditional personal loan lenders.

Fast funding times

Upstart says that it will disburse your loan funds within one business day of approval, depending on what time you apply for the loan. But note that how quickly you can access the funds may also depend on your bank.

Minimum three-year term

Upstart offers limited loan term options. You can choose either a three- or five-year term. But there’s no prepayment penalty, so you can pay off your loan sooner without a fee. If you want a shorter loan term, you’ll need to look elsewhere.

A closer look at an Upstart personal loan

If you’re considering a personal loan through Upstart, here are some additional details to know.

• Upstart’s personal loan amounts can range from $1,000 to $50,000 (but it depends on your state).
• Co-signers for a personal loan aren’t accepted.
• Upstart charges both late fees and origination fees, with origination fees ranging from 0% to 12%.

Here are some of Upstart’s minimum requirements to get a loan.

• No bankruptcies in the previous 12 months or currently delinquent accounts on your credit reports
• Fewer than six inquiries on your credit reports in the previous six months, not including inquiries related to student loans, auto loans or mortgages

And take note: Upstart may withdraw your loan approval if there’s a significant drop in your credit scores or you take on additional debt between the time your loan is offered and when you receive funding.

Who an Upstart loan is good for

An Upstart personal loan could be good for someone with a limited credit history and fair to good credit. Since the lender lets you apply for personal loan prequalification, Upstart could also be ideal for someone who wants to shop around and compare loan offers.

Remember, being prequalified isn’t a guarantee that you’ll be offered a loan — you’ll still need to provide more information before you can be approved and receive an official loan offer.

If you’re considering borrowing a larger amount, you may want to look elsewhere. If you were charged the maximum origination fee — 12% — on a $20,000 loan, you’d end up paying $2,400. Lenders typically deduct the fee from the loan funds.

How to apply with Upstart

You can apply for prequalification on Upstart’s website. To apply for prequalification, you’ll need to provide information like your name, birthdate, address and phone number and desired loan amount. You may also have to provide your primary source of income, as well as savings, checking and investment account balances.

Completing the form triggers a soft credit inquiry, which doesn’t affect your credit scores. If you prequalify, you’ll be able to see your estimated loan offers.

If you choose an offer and are approved, you could receive your funds by the next business day.

Alternatives to an Upstart personal loan

If you’re not sure if an Upstart personal loan is right for you, here are a couple of options to consider.

• SoFi: A SoFi personal loan may be good for someone who wants more loan term options.
• TD Bank: If you want a personal loan without an origination fee, TD Bank may be worth exploring.

Earnest is no longer originating new personal loans. Instead, the company has partnered with Fiona, a site that helps people compare multiple personal loan lenders with one application. Learn more in our Fiona review.

Looking for an alternative? Check out our recommendations.

What you need to know about an Earnest personal loan

Earnest personal loans are best for people who have fair to good credit scores, steady income, money in their savings account, low debt and a history of on-time payments. But you won’t be able to apply for an Earnest personal loan if you live outside of Washington, D.C., or the 45 states where it operates.

A personal loan through Earnest can be used for credit card consolidation, home improvements, wedding or honeymoon costs, moving or medical costs, or for a security deposit on a rented house or apartment.

In addition to personal loans, Earnest offers student loans and student loan refinancing.

Loan amounts up to $75,000

Earnest personal loans are available in amounts ranging from $5,000 to $75,000. Both its minimum and maximum loan amounts are higher than a number of other lenders.

Some lenders offer small loans in amounts as little as $1,000 or $2,000. On the flipside, some lenders cap their personal loan amounts at $50,000 or less.

Although a large loan might be ideal for home improvements, consider taking the time to create a budget and a plan for paying it back before applying for a large loan.

Financial health-based loan approval and terms

Earnest says it considers a range of factors beyond your credit scores when evaluating your eligibility for a loan. But you do need fair to good credit scores.

Here are some of the factors that Earnest considers when determining whether you qualify for a personal loan.

• How much you have in your savings account
• How much you spend versus how much you earn
• Growth of bank account balances
• Your amount of debt
• History of on-time payments
• How often you pay late, overdraft or insufficient-funds fees

Competitive interest rates

Starting annual percentage rates for an Earnest personal loan are competitive, and the maximum APR is lower than many other lenders. While some lenders charge a maximum APR of 36%, Earnest’s APRs are capped at below 20%.

Long application process

If you need quick funding, Earnest may not be ideal for you. A decision on your loan application can take five to 10 business days, and Earnest notes that the timeline may vary if it needs additional information from you. If you’re approved, you may receive funds within one to two business days after you sign the loan paperwork.

A closer look at an Earnest personal loan

Here are some other details to know about Earnest personal loans.

• Steady income required: You must have proof of steady income and have had no bankruptcies within the past three years.
• No collection accounts: To qualify, you can’t have open collection accounts.
• Limited loan terms: Earnest only offers 36-, 48- and 60-month loan terms, though you can pay off your loan early without worrying about any prepayment penalty.
• No co-signers: Earnest doesn’t offer the option for you to apply with a co-signer. Having a co-signer with good credit may help you qualify for a loan or help you get a lower interest rate.

Who is an Earnest personal loan good for?

An Earnest loan might be a good fit for you if you have strong credit, have good financial habits and want a large personal loan without the added cost of origination fees.

With no origination fees, an Earnest personal loan might be a less expensive way to consolidate debt, compared with a balance transfer credit card.

Just keep in mind that if you’re borrowing an amount closer to Earnest’s maximum of $75,000, a longer loan term will result in smaller monthly payments — but you’ll end up paying more interest overall on the loan.

If you need a small loan for emergency expenses, you’ll want to look somewhere else.

How to apply with Earnest

Earnest offers an online prequalification application. Within a few minutes, you can see if you might qualify for an Earnest loan and — if you do qualify — what your interest rate range might be. Just remember that these rates may change based on the information you provide in the formal application.

To see your estimated interest rate, Earnest will run a soft credit inquiry, which won’t affect your credit scores.

You must be a U.S. citizen or have a green card to qualify, be at least 18 years old and a resident of Washington, D.C., or one of the states where Earnest lends. If you live in Alabama, Delaware, Kentucky, Nevada or Rhode Island, scratch this lender from your list.

To check your potential loan rate, you’ll need to provide some personal information.

• Full name
• Email address
• Home address
• Desired loan amount
• Annual income
• Social Security number

If you decide to apply for Earnest, you’ll then need to submit a formal application online, which will result in a hard credit inquiry.

Since Earnest doesn’t offer new personal loans, consider these options instead.

• Upstart: Upstart says it goes beyond your credit scores and uses artificial intelligence to see if you qualify for a personal loan.
• LendingPoint: A LendingPoint personal loan might be a good option for someone with lower credit scores.

*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.

What you need to know about a Citi personal loan

Citi offers unsecured personal loans in amounts as low as $2,000 with competitive fixed interest rates.

Competitive rates

To qualify for Citi’s lowest interest rates, you’ll need the following:

• “Excellent” credit (according to Citi)
• Loan term of 24 or 36 months

Wide range of loan amounts

Citi offers personal loans from $2,000 to $30,000. And at $2,000, its minimum loan amount is low compared to many lenders — particularly other banks, which can have minimums of $3,000 to $5,000.

Personal loan details

Citibank is a global bank with almost 700 branches across the U.S. Here are a few other things to know.

• Loan terms — Citibank offers loan terms between 12 and 60 months.
• Funding time — If approved for a loan, you could receive funds as soon as the same business day if they’re deposited into a Citi bank account, or within two business days if they’re deposited into an account at another bank.

Who a Citi personal loan is good for

A Citi personal loan could be a good option for someone with strong credit. Those who qualify for the bank’s competitive interest rates might find a Citi personal loan comes in handy to consolidate existing high-interest debts.

It could also be an ideal choice if you want a smaller loan to cover an emergency expense or minor home improvement, or if you want a shorter loan term of 12 months.

How to apply with Citi

You can see if you prequalify for a Citi personal loan online or over the phone.

If this personal loan isn’t right for you, consider this other option

• Discover: If you want a personal loan with the option to pay off debt directly to your creditors, Discover is a good option.

*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.

Getting a bank loan in this situation may seem like an obvious solution, but it might prove difficult if, for example, you’ve got bad credit. That’s where this special type of financing may be able to help — business owners with low credit scores might find they have a better chance of getting a merchant cash advance, or MCA.

Merchant cash advances provide an upfront sum of cash that’s repaid over time from future credit card sales. But like any financial product, MCAs have their pros and cons. One upside is an immediate improvement in your business’s cash flow. You’ll have money on hand to pay overdue, current and new bills. But one major downside is that MCAs are expensive and repaying them may make your business’s financial situation worse in the long run.

Let’s take a closer look at merchant cash advances to find out if it’s a potential solution for your small-business cash flow problem.

What is a merchant cash advance?

An MCA converts anticipated debit and credit card sales into immediate capital. These cash advances technically aren’t loans, since there’s no bank, no interest rate and no set repayment period. Instead, a financing company supplies a sum of money upfront in exchange for a specified percentage of sales over time — also known as receivables — as the form of repayment. These receivables are primarily paid to your business through debit and credit card purchases.

What a merchant cash advance costs

A merchant cash advance has three components.

1. Cash advance

The cash advance is the amount of cash you request and receive upfront.

2. Repayment amount

The repayment amount is the total amount you’ll pay back for the merchant cash advance. Since a merchant cash advance isn’t technically a loan, it doesn’t have a true annual percentage rate. But that doesn’t mean MCAs don’t come with additional costs. In fact, this type of financing can involve a variety of fees, which are added to the total repayment amount. If an equivalent APR were calculated, it could be more than 80%, depending on how quickly you repaid the merchant cash advance.

The most significant MCA fee is the factor rate, which is the primary way an issuer determines the cost of your cash advance. When using factor rate to calculate the total repayment amount, your lender multiplies your cash advance by the rate, which typically ranges from 1.1 to 1.5.

For example, if you received a $10,000 cash advance with a 1.4 factor rate as the only thing determining your borrowing cost, your total repayment amount would be $14,000, making your fee $4,000 — that’s essentially a 40% fee on your cash advance.

Your factor rate depends on a number of things, such as your industry, business’s health and credit card sales history, all of which help determine your level of risk to the financing company.

3. Holdback rate

The holdback rate is the percentage of daily debit and credit card sales used to pay back your cash advance. Holdback rates vary, but can range from 5% to 20%.

Say you received a merchant cash advance with a repayment amount of $65,000 and a 10% holdback rate. On these terms, repayment would begin after the MCA and then continue until 10% of your daily credit card sales totaled $65,000. So if your daily debit and credit card sales average is $5,000, and assuming you’re open for business every day, it could take more than four months to pay back the $65,000 advance.

While your total repayment amount never changes, your payments will vary day-to-day as your sales volume fluctuates. When your sales increase, you’ll owe more toward your balance for that day. When your sales decrease, you’ll owe less.

Pros and cons of a merchant cash advance

While the idea of getting cash quickly for your business can be tempting, consider the benefits and drawbacks of merchant cash advances before you decide it’s for you.

Pro: You don’t have to offer up collateral

Merchant cash advances are unsecured, which means you won’t have to pledge your home, car or other assets.

Pro: Your odds of approval may be higher

Chances of being approved for a merchant cash advance tend to be higher. The Federal Reserve’s 2017 Small Business Credit Survey found that 79% of businesses that applied for an MCA were approved, compared to 54% that were approved for a Small Business Administration loan or line of credit and only 50% that were approved for a personal loan. Companies that offer merchant cash advances typically consider the age of your business and your credit card sales when determining your eligibility.

Con: MCAs can come at a high cost

A merchant cash advance can be risky for small businesses. It consumes a chunk of the cash that comes in — even when sales are lower than usual, which could put additional strain on cash flow until the advance is paid off.

Also, the factor rate for an MCA is fixed, and is applied to the entire cash advance upfront. This means that paying it off early won’t lower the cost of the MCA, which is unlike how interest on a typical loan works. With a personal loan, for example, you may be able to pay less to borrow the funds overall by paying your balance off early.

Con: You could fall into deeper debt

Some merchant cash advance companies will offer an advance to businesses that already have one. This practice, which is known as “stacking,” can trap businesses in debt. Applying for multiple merchant cash advances means having multiple repayment demands from your incoming cash, which could prove too costly for the business to manage.

Con: They’re complicated and not federally regulated

Compared to other types of business financing, merchant cash advances are complex. A 2018 Federal Reserve report revealed that consumers found MCAs overall to be confusing for a number of reasons, including …

• The true cost was difficult to determine.
• Descriptions of merchant cash advances were vague or confusing.
• Industry jargon associated with MCAs was perplexing.
• Mistakes and assumptions about merchant cash advances are likely, based on consumers’ past experiences with traditional bank loans.

Part of why there’s so much confusion around merchant cash advances is because this form of financing isn’t federally regulated. Instead, it’s regulated by each state’s Uniform Commercial Code. This means that merchant cash advances aren’t subject to banking laws like the Truth in Lending Act, which helps protect consumers against inaccurate and unfair lending practices by requiring lenders to provide loan cost details.

Alternatives to a merchant cash advance

There are lots financing options out there (some potentially less expensive than MCAs) — so a merchant cash advance isn’t the only way to get funds for your business. One such option includes unsecured personal loans, which offer fixed terms and interest rates typically between 4% and 36%.

Another option is a business credit card. And if your card reports to the credit bureaus, you’ll have the added benefit of being able to use the card to build your business credit. It may even offer benefits like free employee credit cards or cash back rewards on business purchases.

Bottom line

A merchant cash advance comes with significant risks. Its high fees and complicated terms could leave you in need of more money.

Take some time to shop around and consider all the options available to you. Ask questions and read the fine print. The more you know, the easier it can be to choose the right solution for your business.

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Car title loans are designed for people who need cash fast to pay bills, manage debt or cope with an emergency.

If you own a vehicle outright or owe very little on it, a car title loan — informally known as a “fast auto loan” — can be easy to get. But fast and easy doesn’t necessarily mean good. You’ll pay high fees for this type of loan, and you’ll risk losing your car.

Here are three things to know before you drive away with a car title loan, and some alternatives to consider.

• 1. To get a car title loan, you need to own your car or have equity in it
• 2. Car title loans have high fees and interest rates
• 3. If you can’t repay a car title loan, you could lose your car
• Alternatives to car title loans

1. To get a car title loan, you need to own your car or have equity in it

A car title loan is a small secured loan that uses your car as collateral. Car title loans tend to range from $100 to $5,500 — an amount typically equal to 25% to 50% of the car’s value. The loan term is short — usually just 15 or 30 days. And although it’s called a “car” title loan, this type of loan also applies to other vehicles, including trucks and motorcycles.

To get a car title loan, you’ll need clear title — 100% ownership of the car, without any liens — or at least some equity in your vehicle.

Car title loans are also called “pink-slip loans,” “title pledges” or “title pawns.” The term “pink slip” comes from the pink paper that car titles in California were once printed on.

In addition to your car title, the lender will typically want to see your car, a photo ID and proof of insurance.

If you get approved for a car title loan, you give your car title to the lender in exchange for the loan. You get your title back once you pay off the loan.

2. Car title loans have high fees and interest rates

With a car title loan, it’s not uncommon for lenders to charge around 25% of the loan amount per month to finance the loan. For example, if you get a 30-day car title loan for $1,000 and the fee is 25% ($250), you’d have to pay $1,250, plus any additional fees, to pay off your loan at the end of the month.

This translates into an annual percentage rate, or APR, of more than 300%. That’s much higher than many other forms of credit, including credit cards.

When you get a car title loan, the lender must tell you the APR and total cost of the loan. You can compare this information across other lenders to help find the best offer possible for you.

3. If you can’t repay a car title loan, you could lose your car

If you get a car title loan and you can’t repay the amount you borrowed, along with all of the fees, the lender might let you roll over the loan into a new one. When you do this, you add even more fees and interest onto the amount you’re rolling over.

Let’s say you have a $500 loan with a $125 fee. At the end of the 30-day term, you are unable to pay it all back. You pay the $125 fee and roll over the $500 balance into a new loan with a 25% fee. If you pay your new loan off, you’ll have paid a total of $250 in fees on the $500 you borrowed. If you continue to roll over your loan, you could end up in a cycle of additional fees that make it impossible to repay the lender.

If you find yourself in a situation where you can’t pay off the debt, the lender could repossess your car. And you could end up paying even more in fees to get the vehicle back, along with the past-due amount. Assuming you can’t pull that together, you’ll be left scrambling to find (and pay for) new means of transportation.

Alternatives to car title loans

Car title loans aren’t the only way to get cash quickly. Consider these potential options, which could be less expensive than a car title loan.

Look into a “payday alternative” loan from a federal credit union

As an alternative to dangerously expensive payday loans, some federal credit unions offer “payday alternative” loans (aka PALs) of $200 to $1,000. You have to be a credit union member for at least a month to qualify for a PAL, and you’ll have to pay back the loan in one to six months. But the application fee for PALs is restricted to $20 or less — and the maximum allowed interest rate is 28%. That’s a high rate, but it’s still a lot less than the APR you could end up paying for payday loans, which could even be as much as 400%.

Apply for a personal loan with a co-signer

A co-signer with good credit may help you qualify for an unsecured personal loan. But co-signers have to take on a lot of risk, so finding someone may be difficult. When someone becomes a co-signer, they share responsibility with you for paying back the loan. If you miss a payment, their credit could take a hit along with yours.

Take a credit card cash advance

If you have a credit card with an available balance, taking a cash advance may be a way to borrow money with a lower APR than a car title loan. But cash advance APRs are typically much higher than regular purchase APRs (some cash advance APRs are more than 27%). Also keep in mind that in addition to the APR, you’ll be charged a cash advance fee. It’s common to see a cash advance fee of around 5%.

Bottom line

Before getting a car title loan, consider less-expensive alternatives. If it’s your only option for fast cash, compare a few offers to get the best possible APR, and borrow only what you can pay back within the loan term.

In the meantime, focus on building your credit and establishing a budget. And consider finding a credit counselor to guide you in managing your debt and creating a budget — to help you avoid resorting to a car title loan down the road.

*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.

This article was fact-checked by our editors and Jennifer Samuel, senior product specialist for Credit Karma. It has been updated for the 2019 tax year.

Rockets and revolutionaries have earned Alabama a special place in U.S. history.

The Cotton State — which is home to the U.S. Space & Rocket Center, the late civil rights leader Martin Luther King Jr.’s church and the Rosa Parks Museum — tries to go easy on filers. If you pay Alabama state taxes, you have just three state income tax rates and tax brackets to consider.

And you don’t have to worry that the top rate will rise, thanks to a restriction by the state Constitution that aimed to stabilize the tax environment. But if you choose not to itemize deductions on your state return, it’ll take some math, a chart and a bit of patience to figure your Alabama standard deduction.

Learn more about the state’s individual income tax and its relatively simple process for filing your Alabama state tax returns.

• What are some basics of Alabama state taxes?
• What are some Alabama deductions and credits to know?
• How can I file an Alabama state tax return?
• What if I owe and can’t pay?
• How can I track an Alabama tax refund?

What are some basics of Alabama state taxes?

Taxing body

Alabama has several taxes, including sales tax, use tax and county-level property taxes. The state also has an individual income tax, which is collected by the Alabama Department of Revenue, or ADOR.

If you have tax-related questions, call 1-334-242-1170 or submit a help request online. The ADOR also offers online FAQs about filing and paying income tax, ordering forms, checking on your refund and related topics. And it has nine regional Taxpayer Service Centers that offer assistance Monday through Friday from 8 a.m. to 5 p.m. Central time.

Filing and payment deadline

For 2019 state taxes, the state has extended the filing and payment deadline. Alabama residents now have until July 15, 2020 to file their state returns and pay any state tax they owe for the year. As with the federal deadline extension, Alabama won’t charge interest on unpaid balances between April 15 and July 15, 2020.

While this year is a bit different, generally the income tax filing deadline in Alabama is the same as the federal tax return due date — April 15. If the federal deadline falls on a holiday or weekend, the IRS will extend it to the next business day.

If you can’t file your Alabama state tax on time, you get an automatic six-month extension to complete your return. But if you owe tax, you must pay it on or before the original due date. The extension doesn’t extend your time to pay your taxes, and you could face penalties and interest if you don’t pay your tax on time.

Filing statuses

Alabama’s filing statuses for individual tax returns are …

• Single
• Married filing a joint return
• Married filing a separate return
• Head of family

Common-law couples can file as married filing a joint return.

Alabama income tax rates

You won’t have to worry about rising income tax rates in Alabama. The top rate can’t go above 5% because of the limit imposed by the state Constitution. The rates are 2%, 4% and 5%, and your marginal tax rate will depend on your income and filing status.

What are some Alabama deductions and credits to know?

You can choose to itemize your deductions or take a standard deduction on your Alabama state tax return, whichever helps reduce your tax burden.

Alabama standard deduction

Like the federal standard deduction, your filing status plays a role in determining your Alabama standard deduction. But the state also takes your Alabama adjusted gross income into account.

Personal exemptions and deductions

Alabama’s personal exemption is $1,500 if your filing status is single or married filing separately, or $3,000 if your status is married filing jointly or head of family with a qualifying person. If you’re a dependent or student, you can still claim your own personal exemption, even if you’re claimed as a dependent on someone else’s tax returns.

The state offers several tax deductions. Here are a few that are available for 2019.

• Federal income tax deduction — The federal government generally allows taxpayers who itemize to deduct up to $10,000 in state and local taxes paid each year. Alabama flips that scenario and allows state residents to deduct their federal income tax for the year less any federal tax credits the filers claimed. And you don’t have to itemize your Alabama deductions in order to claim this one.
• Medical and dental expenses — If you itemize deductions on your Alabama return, you may be able to deduct qualified medical and dental expenses that exceed 4% of your Alabama AGI.
• FICA taxes — Alabama allows you to take an itemized deduction of the federal Social Security and Medicare taxes your employer withheld from your income.
• Real estate taxes — If you paid property tax on any noncommercial property you owned in any state, you can take an itemized deduction for that amount. This doesn’t include any real estate taxes paid as part of your mortgage payments.
• Contributions to a College Counts Alabama 529 savings plan — You may be able to deduct contributions of up to $5,000 a year (or $10,000 for married filing jointly) to a College Counts Alabama 529 savings plan for qualified higher education expenses. Contributions to the Prepaid Affordable College Tuition Program also qualify.
• Contributions to a Catastrophe Savings Account — If you deposit money in a savings account labeled as a Catastrophe Savings Account, you may be able take a deduction for your deposits, up to certain limits per year. You can use the account to pay for repair costs or other losses if your home is damaged by a catastrophic storm or flood and your costs or losses aren’t covered by your homeowner’s insurance.

How can I file an Alabama state tax return?

To file your Alabama state tax return electronically, you can use the state’s free tax-filing system at My Alabama Taxes, or MAT. You can pay any tax due by using your checking account (for free) or by credit card (but there’s a fee). You can also use a paid tax professional or one of the online tax preparation and filing service approved by ADOR. Some providers may charge fees, so review terms, conditions and costs before choosing an e-file provider.

To file by mail, send your relevant tax forms to the Alabama Department of Revenue at one of these addresses, depending on which form you file and whether you include a tax payment.

• Form 40 without payment: P.O. Box 154, Montgomery, AL 36135-0001
• Form 40 with payment: P.O. Box 2401, Montgomery, AL 36140-0001
• Form 40A without payment: P.O. Box 327465, Montgomery, AL 36132-7465
• Form 40A with payment: P.O. Box 327477, Montgomery, AL 36132-7477
• Form 40NR without payment: P.O. Box 154, Montgomery, AL 36135-0001
• Form 40NR with payment: P.O. Box 2401, Montgomery, AL 36140-0001

If you’re owed a refund, the ADOR will start releasing refunds on March 1, 2020. If you e-file, you can expect your refund in about eight to 10 weeks after receiving your filing acknowledgment from the ADOR. Refunds for paper filers take eight to 12 weeks to process, and refunds for first-time filers can take up to 12 weeks to process.

If that sounds like a long time, there’s a way to speed up your refund. Download the IDEMIA eID app from the App Store or Google Play, and then take a selfie and a photo of your driver’s license for authentication by the Alabama Law Enforcement Agency to verify your identity. Then go to My Alabama Taxes to register your IDEMIA eID for faster processing.

What if I owe and can’t pay?

Alabama doesn’t offer an installment payment plan to people who can’t afford to pay their income taxes. But the state has an Office of Taxpayer Advocacy to help you resolve tax disputes if they linger after you’ve used appeals and methods of review. You can reach the office by calling 1-334-242-1055 or by mail at P.O. Box 327005, Montgomery, AL 36132-7005.

How can I track an Alabama tax refund?

To track your refund status, call the state’s refund hotline at 1-855-894-7391 or check online by going to the My Alabama Taxes portal and clicking on the “Where’s My Refund” link. You’ll need to provide your Social Security number (or the first one listed on a joint return), the tax year in question and your expected refund amount.

Bottom line

Filing a state tax return in Alabama is a mixed bag of simple and complex. Just three tax rates and brackets make it easier to understand which applies to your tax situation. But you’ll have to do some calculating to determine your standard deduction.

If you have questions, you can visit one of the Taxpayer Service Centers, submit a question online or call the ADOR for help. And remember to pay your tax on time since there are penalties if you’re late and there’s no way to set up a payment plan with the Department of Revenue.

Jennifer Samuel, senior tax product specialist for Credit Karma, has more than a decade of experience in the tax preparation industry, including work as a tax analyst and tax preparation professional. She holds a bachelor’s degree in accounting from Saint Leo University. You can find her on LinkedIn.

For 2019, the state has six tax rates and tax brackets — and state legislators are considering replacing all of them with a flat tax rate sometime in the future.

Meanwhile, South Carolina is trying to simplify its income tax process with its MyDORWAY portal, which allows taxpayers to file and pay their taxes online. If you live or earn income in South Carolina, here’s information to help you file your South Carolina state tax return.

• What are some basics of South Carolina state taxes?
• What are some South Carolina deductions and credits?
• How can I file a South Carolina state tax return?
• What if I owe and can’t pay?
• How can I track a South Carolina tax refund?

What are some basics of South Carolina state taxes?

Taxing body

The South Carolina Department of Revenue, or SCDOR, collects taxes in the state.

For individual income tax information, you can call 1-844-898-8542 and select Option 1. Phone hours are Monday, Tuesday, Thursday and Friday from 8:30 a.m. to 4:45 p.m. and Wednesday from 9:30 a.m. to 4:45 p.m. You can also send an email to IITax@dor.sc.gov.

For technical help with MyDORWAY, call 1-844-898-8542 and select Option 2 and then Option 1, or send an email to MyDORWAY@dor.sc.gov.

You can also get help with tax matters at SCDOR’s Taxpayer Service Centers.

Filing and payment deadline

For 2019 state taxes, the state has extended the filing and payment deadline. South Carolina residents now have until July 15, 2020, to file their state returns and pay any state tax they owe for 2019. As with the federal deadline extension, South Carolina won’t charge interest on unpaid balances between April 15 and July 15, 2020.

You don’t need to do anything to get this extension. It’s automatic for all South Carolina taxpayers. But keep in mind that if you’re expecting a refund, you might want to go ahead and file as soon as possible. During the coronavirus crisis, the state is continuing to process tax returns and issue refunds.

While this year is a bit different, generally your state return is due April 15, the same day as your federal tax return. If the 15th falls on a weekend or holiday, returns should be due on the next business day. But if you e-file, you get until May 1 to file your return and pay any tax you owe.

If you can’t file on time, send Form SC4868 to SCDOR, IIT Voucher, P.O. Box 100123, Columbia, SC 29202 to request a six-month extension. If you’ll owe tax, you must pay it by April 15 to avoid a penalty even if you ask for more time to file your return.

To request a filing extension online, go to MyDORWAY and select “Individual Income Tax Payment” to pay the tax owed. When you make the payment, MyDORWAY will submit your extension request automatically without requiring further forms or paperwork.

Filing statuses

South Carolina uses the same filing statuses as the federal government.

• Single
• Head of household
• Married filing jointly
• Married filing separately
• Qualifying widow(er) with dependent child

Use your federal filing status for your state return.

South Carolina income tax rate

In 2019, income tax rates in South Carolina range from zero to 7%. The state tweaks its tax brackets annually to adjust for inflation.

What are some South Carolina deductions and credits?

Standard deductions and personal exemptions

The state’s standard deductions conform with federal standard deduction amounts. Those deduction amounts are …

• $12,200 for single filers and those married filing separately
• $18,350 for those filing as head of household
• $24,400 for married couples filing jointly and qualifying widow(er)s.

South Carolina also has a dependent exemption of $4,190 for each eligible dependent, plus an additional $4,190 exemption for each child younger than 6.

Itemized deductions

South Carolina’s income tax calculations start with your federal taxable income. Since federal taxable income is the number you arrive at after taking either the federal standard deduction or itemizing deductions, there’s no option to itemize on your South Carolina income tax return.

Instead, the state has several subtractions you can take, if eligible. For example, if you got a refund from the state and had to report that as income on your federal tax return, you might be able to subtract it from taxable income on your state return.

Tax credits

South Carolina offers numerous credits for individuals and businesses. For 2019, some available credits included the following:

• A nursing home credit worth 20% of expenses (capped at $300) related to supporting themselves or another person in a nursing home in any state. There are qualifications for receiving the credit and the maximum credit amount is $300.
• An individual income tax credit of $25 for each individual ($50 total if filing jointly) for receiving a marriage license during the tax year indicating they successfully completed a qualifying premarital preparation course.
• A refundable tax credit of up to $11,000 for paying tuition for a qualifying child with exceptional needs to attend an eligible school.
• A two-wage earner credit for married couples filing jointly if both have earned income subject to South Carolina tax. Couples can’t claim this credit if they file separately, and the amount you can claim is capped at $210.
• A child and dependent care credit that allows filers to claim 7% of their federal credit (up to $210 for one child or $420 for two or more children). The credit is prorated for those who lived in the state only part of the year, and you can’t qualify at all if you’re married filing separately.

How to file your South Carolina state tax

You have multiple options for filing your South Carolina state tax return. Here are a few.

• E-filing with a participating software vendor through the IRS Free File tool, if you meet income, age and other requirements. Be aware, vendors can have varying criteria for who qualifies to file for free. If you don’t meet their criteria, they may require you to pay a fee in order to file with them.
• E-filing your South Carolina state tax return for free with MyDORWAY. You’ll need to create an account to use the portal.
• Filing with the help of a paid tax professional.

You can also download and print forms from the SCDOR website and mail a paper return. Here are the mailing addresses.

• If you’re expecting a refund or owe no tax:
  SC1040 Processing Center, P.O. Box 101100, Columbia, SC 29211-0100
• If you owe tax:
  Taxable Processing Center, P.O. Box 101105, Columbia, SC 29211-0105
• If you’re requesting an extension:
  South Carolina Department of Revenue, Income Tax, P.O. Box 125, Columbia, SC 29214-0013

What if I owe and can’t pay?

If you can’t pay your South Carolina state tax bill on time, you must wait until the SCDOR sends you a notice before you can request a payment plan. There are multiple payment plans. For example, you can get a plan for 12 months or shorter for debts of $999 and less — or for 48 months or shorter for tax debts of at least $10,000.

The SCDOR charges a $45 fee to set up a payment plan. You must meet requirements for establishing a plan. And you won’t be able to get a payment plan if you have an active levy or garnishment with the department.

Even if you can’t pay your tax in full by the filing deadline, you should pay as much as you can in order to reduce the amount of interest and penalties that accrue on the unpaid balance.

How can I track a South Carolina tax refund?

To check on the status of your refund, call 1-803-898-5300 or 1-844-898-8542, or use MyDORWAY.

Bottom line

South Carolina tries to make filing your return easier with its free online portal. When you sign up, create a complex password that’s different from the passwords you use for other websites. Creating a strong password is a vital step you can take to help protect your information.

A senior product specialist with Credit Karma, Janet Murphy is a CPA with more than a decade in the tax industry. She’s worked as a tax analyst, tax product development manager and tax accountant. She has accounting degrees and certifications from Clemson University and the U.S. Career Institute. You can find her on LinkedIn.

This article was fact-checked by our editors and Jennifer Samuel, senior product specialist for Credit Karma. It has been updated for the 2019 tax year.

Like most states, Maryland has complicated personal income tax laws, so filing your state taxes could make you feel downright crabby.

But you can make the process less painful by learning more about how to file your Maryland state taxes. Getting up to speed on credits and deductions might also help you reduce your overall state tax burden.

• What are the basics of Maryland state taxes?
• What are Maryland’s income tax rates?
• What are some Maryland deductions?
• What are some Maryland tax credits?
• How can I file a Maryland state tax return?
• What if I owe and can’t pay?
• Can I track a Maryland tax refund?

What are the basics of Maryland state taxes?

If you want to prepare and file a state tax return in Maryland, here’s some info that could help make the process easier.

Taxing body

The Comptroller of Maryland is responsible for collecting taxes from individual taxpayers. It has 12 branch offices and offers free in-person tax preparation services.

There are four ways to get help with filing your tax forms and making your tax payments.

• Call 1-800-638-2937 or 1-410-260-7980 from central Maryland, Monday through Friday from 8:30 a.m. to 7 p.m. Feb. 3 to April 15, 2020, if you have any tax questions. During tax season, the phone lines have extended hours. Hearing-impaired or TTY users should call via Maryland Relay at 711.
• Email taxhelp@comp.state.md.us.
• Visit a branch office.
• Mail your queries, including your name, address and other details, to …
  Comptroller of Maryland
  Revenue Administration Center
  Taxpayer Service Section
  110 Carroll Street
  Annapolis, MD 21411-0001

Filing and payment deadline

For 2019 state taxes, Maryland has extended the filing and payment deadline. Maryland residents now have until July 15, 2020 to file their state returns and pay any state tax they owe. As with the federal deadline extension, Maryland won’t charge interest on unpaid balances between April 15 and July 15, 2020.

You don’t need to do anything to get this extension – it’s automatic.

While this year is a little different, generally the annual deadline to file your state tax returns in Maryland is April 15. If that’s a Saturday, Sunday or legal holiday, the deadline for the tax filing season is extended to the next business day.

If you requested a federal extension and don’t expect to owe any tax to Maryland, but you need more time to file your state return, the commonwealth grants an automatic six-month filing extension — and you don’t have to request a separate state extension to get it. But if you owe tax, you should submit Form 510C to request an extension and pay any amount due. You can submit an extension request online through the state’s iFile interactive application.

Filing statuses

Maryland recognizes six tax filing statuses.

• Dependent (for any individual who can be claimed as a dependent on someone else’s federal return, regardless of the individual’s marital status)
• Head of household
• Single
• Qualifying widow(er) with a dependent child
• Married filing jointly
• Married filing separately

For more details, check a chart on the comptroller’s website. It says most individual taxpayers should use their federal filing status.

Filing requirements

If your Maryland gross income (which is your total federal income plus any Maryland additions to income) exceeds the threshold for your filing status, you’ll likely have to file a Maryland state tax return. Here are the minimum filing levels for 2019 taxes.

What are Maryland’s income tax rates?

Maryland has two tax rate schedules: one for taxpayers whose filing status is single, dependent or married filing separately; and another one for taxpayers whose filing status is head of household, qualifying widow/widower or married filing jointly. Each schedule has eight tax brackets, with rates ranging from 2% to 5.75% and a set amount of tax associated with each bracket.

Maryland personal exemption

Although personal exemptions have been suspended for your federal income taxes, you may be able to take one for your Maryland state taxes.

If your federal adjusted gross income is $100,000 or less, you’ll likely qualify for a $3,200 personal exemption (unless you’re filing as a dependent eligible to be claimed on someone else’s tax return). Exemption amounts are reduced for single filers with federal AGI of more than $100,000 and at $150,000 for those married filing jointly, as head of household or as a qualifying widow(er). And it phases out completely for single or married filing separately taxpayers with federal AGI of more than $150,000. For joint filers, heads of household and qualifying widow(er)s, it phases out at $200,000-plus.

What are some Maryland deductions?

Maryland offers both standard deduction amounts and the ability to itemize deductions, but the option you can use will depend on how you filed your federal income tax return.

Maryland standard deduction

Maryland’s standard deduction allows taxpayers to reduce their Maryland adjusted gross income by 15%, with minimums and maximums set depending on filing status.

The standard deduction for taxpayers filing as single, married filing separately or dependent taxpayer ranges from $1,500 to $2,250, depending on your income. Taxpayers filing as married filing jointly, head of household or qualifying widow(er) have a standard deduction range of $3,050 to $4,550.

If you took the standard deduction on your federal return, you must also take the Maryland standard deduction on your state return. But if you itemized on your federal return, you can opt to either itemize on your Maryland state return or take the state standard deduction.

Itemized deductions

For 2019, Maryland offers a number of subtractions that you can use to reduce your taxable income. Here are a few.

• If you adopt a child with special needs through a public or nonprofit adoption agency, you can deduct up to $6,000 in related expenses. The deduction is up to $5,000 for adopting a child without special needs.
• If you are active-duty military, you can deduct up to $15,000 of federally taxable military pay if you earned it while serving overseas. You must meet income limitations to take this subtraction.
• Starting in 2019, if qualified, you may be able to subtract up to $15,000 of military retirement income, including death benefits, that you receive if you’re 55 or older, and up to $5,000 if you’re younger than 55.
• Parents of foster children may be able to subtract up to $1,500 of unreimbursed expenses incurred on behalf of their foster child. The foster parent and child must meet certain qualifications.
• If you purchase a Maryland Prepaid College Trust or contribute to a Maryland college investment plan, you may be able to deduct up to $2,500 (if you meet certain qualifications).
• If you do a living organ donation, you may be able to subtract up to $7,500 of unreimbursed travel and lodging expenses and lost wages incurred because of the donation.
• Filers teaching full time in a Maryland elementary or secondary school (K–12) may deduct up to $250 ($500 for joint filers) of unreimbursed expenses they paid during the tax year to buy supplies for their students to use in the classroom — or that they used in preparation for or during teaching in the classroom. But they can’t deduct the same expenses that they used to claim an educator’s tax deduction on their federal return.

What are some Maryland tax credits?

Maryland offers a number of tax credits and deductions for taxpayers who qualify. The list includes the following:

• Earned income tax credit — Maryland residents who claimed and received the federal earned income tax credit may be able to receive a state-level credit, provided they meet eligibility and income requirements.
• Student loan debt relief credit — If you’ve spent at least $20,000 on undergraduate or graduate student loan debt, or both, you may be able to take this credit.
• Child and dependent care credit — If you were eligible for the federal child and dependent care credit, and you meet income requirements, you may be able to take a tax credit equal to a percentage of your federal credit. And starting in 2019, a portion of the credit may be refundable.
• State poverty level credit — If your Maryland state tax is more than 50% of your federal earned income credit, and both your earned income and federal adjusted gross income are below the poverty level for the number of people in your family, you may be able to claim a nonrefundable credit of 5% of your earned income.
• Quality teacher incentive credit — Qualified teachers who paid tuition to take graduate courses required to maintain their teaching certification may qualify for a tax credit.
• Venison donation credit — Hunters with a deer management permit who legally hunt and harvest an antlerless deer can donate the processed meat to a venison donation program to feed people in need in Maryland. By doing this, you can receive a credit of up to $50 per deer, up to a maximum of $200 in any tax year, with some exceptions.
• Endowments of Maryland historically black colleges and universities — If you make a donation to certain permanent funds at Bowie State University, Coppin State University, Morgan State University or the University of Maryland Eastern Shore (historically black schools), you may be able to take a credit of 25% of the donation amount.

How can I file a Maryland state tax return?

You can e-file your state tax return using external services such as professional tax preparers or software. You can also file on the Maryland comptroller’s website, drop off a paper return at any of the branch offices or mail a paper return. The tax can be paid by personal check, money order, credit card or, if you file electronically, by direct debit. If you use a credit card, you’ll have to pay a convenience fee.

What if I owe and can’t pay?

If you can’t pay your taxes by the filing deadline, you can request a payment plan. But you should still file your state tax return by the filing deadline. You can seek a payment arrangement by …

• Setting up a new payment agreement online
• Calling 1-410-974-2432 or 1-888-674-0016
• Replying to the tax bill you receive for the amount due

If you don’t arrange a payment plan or pay your taxes, the state can take a number of enforcement actions, including …

• A late payment penalty of up to 25% of the tax amount you owe
• Interest charges
• Nonrenewal of motor vehicle license and registration
• Withholding renewal of certain state-issued business or professional licenses
• Interception of state or federal tax refunds or vendor payments
• Salary lien
• Tax lien on assets
• Seizure of bank accounts, cash, liquor licenses, equipment, vehicles, business inventory or real property
• Posting tax delinquency information online
• Referral of debt to a collection agency

Can I track a Maryland tax refund?

You can track your Maryland tax refund in three ways.

• Call 1-410-260-7701 or 1-800-218-8160
• Email taxhelp@comp.state.md.us
• Go online to the Maryland tax website

Bottom line

The Maryland comptroller’s website has a lot of well-organized and taxpayer-friendly information to help you pay what you owe. If you have more questions or you’re ready to file your return, click on “Maryland Taxes” on the site’s home page, scroll down to “Individual Taxpayers,” look for “Information by Tax Type” and then click on the “Income Tax” link to find everything you need.

Jennifer Samuel, senior tax product specialist for Credit Karma, has more than a decade of experience in the tax preparation industry, including work as a tax analyst and tax preparation professional. She holds a bachelor’s degree in accounting from Saint Leo University. You can find her on LinkedIn.