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Is Using a Personal Loan for Taxes a Good Idea?

Paying throughout the year via payroll deductions and estimated tax payments is best. But if you’re facing a big tax bill, a personal loan may let you avoid costly IRS penalties and interest.

Taylor Medine Taylor Medine Updated June 10, 2022

Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as "Credible."

Every year, about a third of all taxpayers wait until the last minute to file their federal income tax returns. If you were one of them and underestimated your 2021 tax obligation, you could soon receive an IRS notice demanding you pay an unexpected balance.

If you made a mistake calculating your taxes or filed your return but didn’t pay the full amount you owe, you could get a CP14 notice from the IRS — the service usually sends them out within 60 days of deciding your tax return misstated the amount you owe.

If you owe taxes that you can’t fully cover on your own, a personal loan could be an option.

Here’s what you need to know about loans for tax debt:

  • Can you get a loan for tax debt?
  • What to do if you owe taxes
  • Pros and cons of using a personal loan for tax debts
  • IRS payment plans vs. personal loans vs. credit cards
  • What if you can’t pay your taxes?

Can you get a loan for tax debt?

Yes, you can use a personal loan to pay off tax debt. However, you should consider other options before choosing a personal loan. For example, you might be able to sign up for an IRS payment plan or hardship extension.

If you decide to take out a personal loan for tax debt, be sure to consider as many lenders as possible to find the right loan for you. Credible makes this easy — you can compare your prequalified rates from our partner lenders in the table below in two minutes.

LenderFixed ratesLoan amountsLoan terms (years)Origination fee?


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
7.99% - 29.99% APR $10,000 to $35,0002, 3, 4, 5Yes
  • Fixed APR: 7.99% - 29.99% APR
  • Min. credit score: Does not disclose
  • Loan amount: $10,000 to $50,000
  • Loan terms (years): 2, 3, 4, 5
  • Time to fund: If approved, funds sent within 24-72 hours†
  • Fees: Origination fee
  • Discounts: No
  • Eligibility: Available in all states except CO, CT, HI, KS, NH, NY, ND, OR, VT, WV, WI, and WY
  • Customer service: Phone
  • Soft credit check: Yes
  • Min. Income: None
  • Loan Uses: Debt consolidation, home improvement, wedding, travel, medical expenses, and other purposes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
9.95% - 35.99% APR $2,000 to $35,000**2, 3, 4, 5*Yes
  • Fixed APR: 9.95% - 35.99% APR
  • Variable APR: N/A
  • Min. credit score: 550
  • Loan amount: $2,000 to $35,000**
  • Loan terms (years): 2, 3, 4, 5*
  • Time to fund: As soon as the next business day (if approved by 4:30 p.m. CT on a weekday)
  • Fees: Origination fee
  • Discounts: Autopay
  • Eligibility: Available in all states except CO, IA, HI, VT, NV NY, WV
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Loan servicer: Avant
  • Loan Uses: Debt consolidation, emergency expense, life event, home improvement, and other purposes
  • Min. Income: $1,200 monthly


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
7.99% - 15.19% APR $10,000 to $50,0003, 4, 5, 6Yes
  • Fixed APR: 7.99% - 15.19% APR
  • Variable APR: N/A
  • Min. credit score: 700
  • Loan amount: $10,000 to $50,000
  • Loan terms (years): 3 to 6
  • Time to fund: Next business day
  • Fees: No prepayment penalty
  • Discounts: None
  • Eligibility: Available in all 50 states
  • Customer service: Phone
  • Soft credit check: Yes
  • Min. Income: Does not disclose
  • Loan Uses: Debt consolidation, home improvement, self-employment, and other purposes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
8.99% - 35.99% APR $2,000 to $50,0002, 3, 4, 5Yes
  • Fixed APR: 8.99% - 35.99% APR
  • Variable APR: N/A
  • Min. credit score: 600
  • Loan amount: $2,000 to $50,000
  • Loan terms (years): 2, 3, 4, 5
  • Time to fund: As soon as 1 to 3 business days after successful verification
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all states except DC, IA, VT, and WV
  • Customer service: Phone
  • Soft credit check: Yes
  • Loan servicer: Best Egg and Blue Ridge Bank
  • Min. Income: None
  • Loan Uses: Credit card refinancing, debt consolidation, home improvement, and other purposes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
6.99% - 24.99% APR $2,500 to $35,0003, 4, 5, 6, 7No
  • Fixed APR: 6.99% - 24.99% APR
  • Min. credit score: 660
  • Loan amount: $2,500 to $35,000
  • Loan terms (years): 3, 4, 5, 6, 7
  • Time to fund: As soon as the next business day after acceptance
  • Fees: Late fee
  • Discounts: None
  • Eligibility:  Available in all 50 states
  • Customer service: Phone
  • Soft credit check: Yes
  • Loan Uses: Auto repair, credit card refinancing, debt consolidation, home remodel or repair, major purchase, medical expenses, taxes, vacation, and wedding


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
8.3% - 35.89% APR $1,000 to $40,0003, 5Yes
  • Fixed APR: 8.3% - 35.89% APR
  • Min. credit score: 600
  • Loan amount: $1,000 to $40,000
  • Loan terms (years): 3, 5
  • Time to fund: Usually takes about 2 days†
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all 50 states
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Loan servicer: LendingClub Bank
  • Min. Income: None
  • Loan Uses: Debt consolidation, paying off credit cards, home improvement, pool loans, vacations, and other purposes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
7.99% - 35.99% APR $2,000 to $36,5002, 3, 4, 5, 6Yes
  • Fixed APR: 7.99% - 35.99% APR
  • Min. credit score: 580
  • Loan amount: $2,000 to $36,500
  • Loan terms (years): 2, 3, 4, 5, 6
  • Time to fund: As soon as the next business day
  • Fees: Origination fee
  • Discounts: Autopay
  • Eligibility: Available in all states except NV and WV
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Min. Income: $20,000
  • Loan Uses: Home improvement, consolidate debt, credit card refinancing, relocate, make a large purchase, and other purposes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
5.99% - 23.99% APR $5,000 to $100,0002, 3, 4, 5, 6, 7
(up to 12 years for home improvement loans)
No
  • Fixed APR: 5.99% - 23.99% APR
  • Min. credit score: 660
  • Loan amount: $5,000 to $100,000
  • Loan terms (years): 2, 3, 4, 5, 6, 7*
  • Time to fund: As soon as the same business day
  • Fees: None
  • Discounts: Autopay
  • Eligibility: Available in all states except RI and VT
  • Customer service: Phone, email
  • Soft credit check: No
  • Loan servicer: LightStream
  • Min. Income: Does not disclose
  • Loan Uses: Credit card refinancing, debt consolidation, home improvement, and other purposes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
18.0% - 35.99% APR $1,500 to $20,0002, 3, 4, 5Yes
  • Fixed APR: 18.0% - 35.99% APR
  • Min. credit score: None
  • Loan amount: $1,500 to $20,000
  • Loan terms (years): 2, 3, 4, 5
  • Time to fund: As soon as 1 to 2 business days after approval
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Must have photo I.D. issued by U.S. federal, state or local government
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Min. Income: Does not disclose


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
7.74% - 17.99% APR $600 to $50,000 (depending on loan term)1, 2, 3, 4, 5No
  • Fixed APR: 7.74% - 17.99% APR
  • Min. credit score: 660
  • Loan amount: $600 to $50,000*
  • Loan terms (years): 1, 2, 3, 4, 5
  • Time to fund: 2 to 4 business days after verification
  • Fees: None
  • Discounts: None
  • Eligibility: Does not disclose
  • Customer service: Phone, email
  • Soft credit check: No
  • Min. Income: Does not disclose
  • Loan Uses: Debt consolidation, home improvement, transportation, medical, dental, life events


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
6.99% - 35.99% APR $2,000 to $50,0002, 3, 4, 5Yes
  • Fixed APR: 6.99% - 35.99% APR
  • Min. credit score: 640
  • Loan amount: $2,000 to $50,000
  • Loan terms (years): 2, 3, 4, 5
  • Time to fund: As soon as one business day
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all states except IA, ND, WV
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Min. Income: None
  • Loan Uses: Debt consolidation, home improvement, vehicles, small business, new baby expenses, and other purposes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
7.99% - 23.43% APR10 $5,000 to $100,0002, 3, 4, 5, 6, 7No
  • Fixed APR: 7.99% - 23.43% APR10
  • Min. credit score: Does not disclose
  • Loan amount: $5,000 to $100,000
  • Loan terms (years): 2, 3, 4, 5, 6, 7
  • Time to fund: 3 business days
  • Fees: None
  • Discounts: Autopay
  • Eligibility: Available in all states except MS
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Min. Income: Does not disclose
  • Loan Uses: Solely for personal, family, or household uses


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
11.69% - 35.93% APR7 $1,000 to $20,0003, 5Yes
  • Fixed APR: 11.69% - 35.93% APR7
  • Min. credit score: 560
  • Loan amount: $1,000 to $50,000
  • Loan terms: 3 to 5 years 8
  • Time to fund: Within one day, once approved9
  • Loan types: Debt consolidation, pay off credit cards, home improvements, unexpected expenses, home and auto repairs, weddings, and other major purchases
  • Fees: Origination fee
  • Discounts: Autopay
  • Eligibility: A U.S. citizen or permanent resident; not available in DC, SC, WV
  • Customer service: Phone, email
  • Soft credit check: Yes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
8.49% - 35.97% APR $1,000 to $50,0002, 3, 5, 6Yes
  • Fixed APR: 8.49% - 35.97% APR
  • Min. credit score: 560
  • Loan amount: $1,000 to $50,000*
  • Loan terms (years): 2 to 7
  • Time to fund: Within a day of clearing necessary verifications
  • Fees: Origination fee
  • Discounts: Autopay
  • Eligibility: Available in all states except West Virginia
  • Customer service: Email
  • Soft credit check: Yes
  • Min. Income: Does not disclose
  • Loan Uses: Debt consolidation, credit card refinancing, home improvement, and other purposes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
5.4% - 35.99% APR4 $1,000 to $50,00053 to 5 years4Yes
  • Fixed APR: 5.4% - 35.99% APR4
  • Min. credit score: 580
  • Loan amount: $1,000 to $50,0005
  • Loan terms (years): 3 to 5 years4
  • Time to fund: As fast as 1 business day6
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all 50 states
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Min. Income: $12,000
  • Loan Uses: Payoff credit cards, consolidate debt, take a course or bootcamp, relocate, make a large purchase, and other purposes
Compare rates from these lenders without affecting your credit score. 100% free!

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All APRs reflect autopay and loyalty discounts where available | LightStream disclosure | 10SoFi Disclosures | Read more about Rates and Terms

What to do if you owe taxes

If you end up with a tax bill, here are a few options to manage the debt:

Set up a payment plan with the IRS

Depending on how much you owe in taxes, you might be able to set up a short- or long-term payment plan through the IRS. Keep in mind that while there’s no fee to set up a short-term plan, long-term plans charge anywhere from $31 to $225, depending on how you apply for the plan.

Also note that interest and some penalties will continue to accrue until your balance is paid off.

Tip: If you’re a low-income taxpayer who signs up for a long-term payment plan, you might qualify for a waiver or reimbursement of the fees charged for setting up the plan.

Learn More: Everything You Should Know Before Taking Out a Tax Refund Advance

Apply for a hardship extension

If paying taxes will cause undue hardship — meaning you’ll face a substantial financial loss if you pay your taxes by the due date — you might qualify for a short-term or long-term hardship extension. This could give you an extra six to 18 months to pay off your tax debt.

Keep in mind: While you won’t owe interest on any taxes you pay before the due date, interest will accrue on the amount you pay after the due date. You might also be charged penalty fees if you don’t pay your balance off by the end of the extension.

Check Out: Online Cash Advance: What Is It and What Are the Alternatives?

Consider a personal loan

If you’d rather deal with a personal loan lender instead of the IRS, you might consider paying off your taxes with a personal loan. In fact, the IRS says that often the cost of a loan is less than the penalties and interest the IRS charges under federal law.

Most personal loans are unsecured, which means you won’t have to worry about collateral. These loans typically range from small loans of a few hundred dollars up to $100,000 or more, depending on the lender.

You’ll generally need good to excellent credit as well as verifiable income to qualify for a personal loan. The time to fund for personal loans is generally one week — though some lenders will fund approved loans as soon as the same or next business day.

Tip: Depending on the lender, you’ll typically have one to seven years to repay a personal loan, which could give you more time to pay off your debt compared to a payment plan.

However, keep in mind that you’ll pay more in interest on a long-term personal loan compared to a short-term loan.

If you decide to take out a personal loan for your tax debt, be sure to consider how much the loan will cost you over time. You can estimate how much you’ll pay for a loan using our personal loan calculator below.

Enter your loan information to calculate how much you could pay

? Enter the total amount borrowed $
? Enter your annual interest rate %
or
? Enter the amount of time you have to repay your loan years
Total Payment $
Total Interest $
Monthly Payment $

With a $ loan, you will pay $ monthly and a total of $ in interest over the life of your loan. You will pay a total of $ over the life of the loan.


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Learn More: How to Check If a Personal Loan Company Is Legitimate

Use a credit card

You could also consider putting your tax balance on a credit card. Some cards offer 0% APR introductory periods, which means you could avoid paying interest if you can repay the balance by the end of this period.

However, if you can’t pay off the card in time, you could be stuck with hefty interest charges.

Watch out! IRS payment processors typically charge a fee of up to 1.99% for using a credit card. If you owe $2,500, for example, you could end up with a fee of $49.75 if you pay it with a credit card.

Check Out: 5 Alternatives to Consider Before Getting a Car Title Loan

Pros and cons of using a personal loan for tax debts

If you’re considering a personal loan for tax debt, be sure to consider the pros and cons first:

Pros of using a personal loan

  • Funding can be quick. Some lenders offer fast personal loans that could help you cover your tax bill without delay. If you’re approved, you’ll generally have the funds within a week —though some lenders also offer next- or even same-day loans.
  • Wide variety of repayment terms available. A personal loan could give you ample time to pay off your debt. Repayment terms for personal loans usually range from one to seven years, depending on the lender.
  • Options available for less-than-perfect credit. While some lenders require good to excellent credit to qualify for a personal loan, others are willing to work with borrowers who have poor or fair credit. For example, you might be able to get a personal loan with a 600 credit score or lower from several lenders. Just keep in mind that personal loans for bad credit typically come with higher interest rates compared to good credit loans.

Cons of using a personal loan

  • Might have to pay fees. Depending on the lender, you might have to pay origination fees, late fees, or prepayment penalties — all of which could add to the overall cost of your loan. Keep in mind that if you take out a personal loan with one of Credible’s partner lenders, you won’t have to worry about prepayment penalties.
  • Interest might be high. You might pay more in interest on a personal loan than you would on an IRS payment plan or extension, depending on your credit.
  • Requires a credit check. When you apply for a loan, the lender will use a hard credit check to review your credit. This could have a negative impact on your credit score. However, this is generally only temporary, and your score could bounce back within just a few months.

Learn More: Where to Get a Personal Loan

IRS payment plans vs. personal loans vs. credit cards

As you compare your options, here are several important points to keep in mind:

APRTermFeesPenalties
IRS payment planFederal short-term rate plus 3%
(this rate changes quarterly)
  • Short-term plan: Up to 120 days
  • Long-term plan: Up to 6 years (depending on what you owe)
  • Short-term plan: $0
  • Long-term plan: $31 to $225* (depending on whether you set up the plan online, by phone, or in person)

*Low-income taxpayers might qualify for a waiver or reimbursement of setup fees
0.25% of the tax due per month
Personal loanVaries1 to 7 years
(depending on the lender)
Might charge:
  • Origination fees
  • Late fees
  • Prepayment penalties
None, as long as monthly payments are made on time and in full
Credit cardVaries
(some cards have a 0% APR introductory period)
N/A
(credit cards have no set payoff date)
Might charge:
  • Annual fees
  • Late fees
  • Over-limit fees penalties
  • Cash advance fees
None, as long as:
  • Monthly payments are made on time and in full
  • You don’t spend more than your limit

Here’s what you might expect to pay for each of these options if you had a $5,000 tax bill you wanted to pay off within one year:

  • IRS payment plan: If you sign up for a long-term plan by phone, it would cost you $149 in setup fees and potentially $150 in penalties. Keep in mind that Interest rates on these plans might fluctuate since rates update quarterly. This means you might pay $300 or more in addition to your tax balance. An IRS payment plan might be a good idea if you can afford to pay off your taxes quickly to avoid racking up penalty charges — such as in six months or less.
  • Personal loan: Interest rates on personal loans vary depending on your credit as well as the lender. If you took out a $5,000 personal loan with a 10% interest rate and a one-year term, you’d pay a total of $5,274 over the life of your loan. A personal loan could be a good option if you need a longer period of time to pay your tax debt.
  • Credit card: Interest rates on credit cards can be much higher than personal loans. If you charged $5,000 to a credit card with an APR of 16.13%, you’d pay a total of $5,447. A credit card might be a good choice if you have a small tax debt and can use a 0% APR introductory offer to repay your balance quickly while avoiding interest. Just remember that if you can’t pay off your card in time, you could be stuck with substantial interest charges.

If you decide to take out a personal loan, be sure to consider as many lenders as you can to find the right loan for your needs. Credible makes this easy — you can compare your prequalified rates from multiple lenders in two minutes.

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  • One simple form, easy to fill out and your info is protected
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What if you can’t pay your taxes?

You may also receive a C14 notice if you filed your tax return and didn’t pay all the taxes you owe. The notice will include your unpaid taxes, penalties, and interest. Keep in mind that if you fail to both file and pay your taxes, you could face a combined 5% tax penalty.

Tip: Filing and then applying for an extension or payment plan is generally a better move than not filing at all. This way, you can avoid paying excessive penalties and interest.

You could also consider using a credit card or personal loan — some lenders offer emergency personal loans that could help you cover your balance quickly.

If you owe money and aren’t sure what to do next, a tax professional can help you navigate the filing and extension process.

Keep Reading: Where to Get a $10,000 Personal Loan


About Rates and Terms: Rates for personal loans provided by lenders on the Credible platform range between 5.40%-35.99% APR with terms from 12 to 84 months. Rates presented include lender discounts for enrolling in autopay and loyalty programs, where applicable. Actual rates may be different from the rates advertised and/or shown and will be based on the lender’s eligibility criteria, which include factors such as credit score, loan amount, loan term, credit usage and history, and vary based on loan purpose. The lowest rates available typically require excellent credit, and for some lenders, may be reserved for specific loan purposes and/or shorter loan terms. The origination fee charged by the lenders on our platform ranges from 0% to 10%. Each lender has their own qualification criteria with respect to their autopay and loyalty discounts (e.g., some lenders require the borrower to elect autopay prior to loan funding in order to qualify for the autopay discount). All rates are determined by the lender and must be agreed upon between the borrower and the borrower’s chosen lender. For a loan of $10,000 with a three year repayment period, an interest rate of 7.99%, a $350 origination fee and an APR of 11.51%, the borrower will receive $9,650 at the time of loan funding and will make 36 monthly payments of $313.32. Assuming all on-time payments, and full performance of all terms and conditions of the loan contract and any discount programs enrolled in included in the APR/interest rate throughout the life of the loan, the borrower will pay a total of $11,279.43. As of March 12, 2019, none of the lenders on our platform require a down payment nor do they charge any prepayment penalties.

About the author
Taylor Medine
Taylor Medine

Taylor Medine is a Credible authority on personal finance. Her work has been featured on Bankrate, Experian, The Balance, Business Insider, Credit Karma, and more. She’s also the author of The 60-Minute Money Plan, a self-published intro to budgeting guide for people who hate budgeting.

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