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If you’re finding your student loan debt difficult to manage, one option for tackling it is to leverage your home equity. It’s possible to do this through the student loan cash-out refinance program offered by Fannie Mae or through a general cash-out refinance.

Either option would allow you to use the excess value of your home to pay off student loan debt directly. Plus, because you would be consolidating your student loan debt into your mortgage, you’d have to make just one payment each month. You might also secure a lower interest rate than you had on your student loans.

Still, there are major downsides to consider before paying off student loans with home equity. For one, the student loan debt won’t actually go away — you’ll still owe that money. Additionally, you could lose access to student loan benefits and protections. And, if you aren’t able to stay on top of monthly payments, your home is on the line.

Using a Student Loan Cash-Out Refinance to Pay Off Student Loans

With a cash-out refinance, you take out a new mortgage for an amount that exceeds what you currently owe. You then get the difference in cash, which you could then use to pay off your student loan debt.

One option for doing this is through Fannie Mae’s Student Loan Cash-out Refinance program, which is specifically designed to allow homeowners to use their home equity to pay off student loans. To qualify, borrowers must use the funds from the cash-out refinance to fully pay off at least one of their student loans. Additionally, it’s stipulated that this loan must belong to the individual who applied for the refinance.

For borrowers who don’t qualify for the Fannie Mae program, or who want to use their cash for costs other than student loan repayment, it’s also possible to get a general cash-out refinance through another lender.

Whether you go with Fannie Mae or another lender, there are typically certain requirements that a borrower must meet to qualify for a cash-out refinance. Generally, there are stipulations for credit score, debt-to-income ratio, and the amount of equity in the home after closing. As such, it’s helpful to determine before applying how much equity you have in your home.

Recommended: First-Time Homebuyer Guide

Should I Tap Into My Home Equity to Pay Off Student Loans?

Using the equity you’ve earned in your home to pay off your student loans may sound like an easy fix. But before you commit to refinancing, you’ll want to weigh the decision carefully. While it may make sense for some, a student loan cash-out refinance won’t work for everyone. Here are a few pros and cons to consider as you make your decision.

Benefits of Paying Off Student Loans with Home Equity

Like most financial decisions, paying off your student loans with the equity you’ve earned on your home is a multifaceted decision. Here are some of the ways you could find it beneficial:

•   You may be able to get a better rate. Securing a lower interest rate is potentially the most appealing reason to use the equity in your home to pay off student loans. As part of your decision-making process, consider reviewing mortgage options at a few different lenders. While reviewing rate quotes from each lender, do the math to determine if paying off student loans with home equity will truly reduce the amount of money you spend in interest. If there are any fees or prepayment penalties, make sure to factor those in. Keep in mind this isn’t the only way to get a better rate either — another option to explore is student loan refinancing.

•   You may get more time to pay off your loan. When making your decision, also take into account the length of the mortgage term. The standard repayment plan for student loans is a 10-year term, unless you have already consolidated them, in which case you could have a term of up to 25 years. With a mortgage, term lengths can be as long as 30 years. Just keep in mind that while repaying your debt over a longer time period could lower monthly payments, it may also mean you pay more in interest over the life of the loan.

•   You can streamline your payments. Another benefit is reducing the number of monthly payments you need to keep track of. Instead of paying your mortgage and each of your student loans, those bills will get consolidated into a single payment. Streamlining your payments could help you stay on top of your payments and make your finances a little bit easier to manage.

Recommended: Home Affordability Calculator

Downsides of Paying Off Student Loans with Home Equity

There are a few potential negatives that could impact your decision to pay off student loans with your home equity:

•   You risk foreclosure. Using your home equity to pay off your student loans could potentially put your home at risk. That’s because you’re combining your student loans and mortgage into one debt, now all tied to your home. That means if you run into any financial issues in the future and are unable to make payments, in severe cases, such as loan default, your home could be foreclosed on.

•   Your student debt won’t really disappear. When you use your home equity to pay off your student loans, you’ll still owe that debt. Only now, it’s part of your mortgage.

•   You’ll lose access to student loan benefits and protections. When you do a student loan cash-out refinance, you’ll no longer be eligible for borrower protections that are afforded to borrowers who have federal loans. These benefits include deferment or forbearance, as well as income-driven repayment plans. If you’re pursuing student loan forgiveness through one of the programs available to federal borrowers, such as Public Service Loan Forgiveness, consolidating your student loan debt with your mortgage would eliminate you from the program. As such, it may not make sense to use the equity in your home to pay off your student loans if you’re currently taking advantage of any of these options.

•   You could owe more than your home is worth. As you weigh your options, consider comparing the available equity in your home to the amount you owe in student loans. In some cases, you may owe more in student loan debt than you have available to use in home equity under the various loan guidelines. If you end up owing more than what your home is worth, that could make it tough to sell your home, as you’d need to add your own funds to repay your loan balance.

When It’s Time to Leverage Your Home Equity

Cashing in on your home equity isn’t as easy as withdrawing money from your checking account, but it’s also not as difficult as you might think. A good first step is to contact a mortgage lender, who will order an appraisal of your home and help you to get started on the paperwork.

This is also a good time to explore another way to leverage home equity to pay bills: a home equity line of credit (HELOC). When you take out a HELOC, you can borrow (and pay interest on) only as much as you need at a given time, up to a preapproved credit limit. A HELOC monthly payment calculator can be a useful tool as it will help you understand what monthly payments might look like if you follow this path. If you have a great rate on your existing mortgage and don’t want to refinance into a higher rate, a HELOC might be a good alternative.

It could also be a good idea to check your credit score. To secure a cash-out refinance, many lenders will likely require a credit score of 620 or higher. That being said, the minimum score required depends on many factors, such as credit, income, equity, and more. If you don’t meet the minimum FICO score requirement for your chosen program, you might want to try to improve your credit score before applying.

At the very least, you’ll likely need to gather necessary documents so you have them handy. Get together your latest tax filings, pay stubs, and bank statements. Lenders use those documents to evaluate whether you have the savings and cash flow to pay back a fatter mortgage, and they may ask for when you apply to refinance.

The Takeaway

When used responsibly, home equity can be a useful tool in helping to improve your overall financial situation — including using home equity to pay off student loans. While there could be upsides, such as streamlining payments and securing a better rate, it’s important to also weigh the drawbacks, like losing access to student loan protections and putting your home on the line. Depending on how much you owe on your student loans, a cash-out refi or a home equity line of credit (HELOC) might be a good way to settle some or all of your student loan debt and even consolidate multiple loans into one payment.

SoFi now offers flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively low rates. And the application process is quick and convenient.

FAQ

Is it smart to use home equity to consolidate debt?

It can be. If you can obtain a lower interest rate on a home equity loan, home equity line of credit (HELOC), or even a cash-out refinance, it could make sense to consolidate debt this way. And if you have multiple types of debt (student loan debt, credit card debt, for example), it might simplify things to have one monthly payment. But it does mean you would lose access to student loan forgiveness and forbearance benefits, and securing debt with your home does involve risk.

Is it a good idea to take out a home equity loan to pay for college?

While you can pay for college with a home equity loan, it might be better to find a student loan for that expense because if you are unable to make payments on your home equity loan, your property could be at risk.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

^²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

SOHL-Q424-143

You may give little thought to the Federal Reserve, but the Fed looms large over your life as you borrow, save, spend, and invest.

The Fed’s mission is to control inflation and maintain maximum employment. The goals can be at odds with each other.

Let’s look at the Federal Reserve’s origin story and what the central banking system is currently up to.

How It All Began

A secret meeting in 1910 on an island off Georgia laid the foundation for the Federal Reserve. After a series of financial panics and recessions in the Gilded Age, six men gathered at the Jekyll Island Club to write a plan to reform the nation’s banking system.

At that time, U.S. banks held large reserves of cash, but they were scattered. During a crisis, the reserves would be frozen. In addition, the supply of currency was inelastic and supplies of gold limited. And U.S. banks could not operate overseas.

The Panic of 1907 — a worldwide financial crisis surpassed only by the Great Depression — galvanized Congress, and particularly Senate Finance Committee Chairman Nelson Aldrich. In the fall of 1910, Aldrich and his Jekyll Island colleagues developed a plan for a central bank with 15 branches. The national body would set discount rates for the system and buy and sell securities.

Political wrangling ensued, but Congress passed, and President Woodrow Wilson signed the Federal Reserve Act in 1913. The bill resembled the Aldrich plan.

The law called for a central banking system with a governing board and multiple reserve banks. The hybrid structure endures.

A golden factoid: Banking panics before 1913 tested the mettle of Manhattan banks, but what is now the most influential of the 12 reserve banks, the Federal Reserve Bank of New York, is home to the world’s largest gold storage reserve, with about 500,000 gold bars owned by the U.S. government, foreign governments, other central banks, and international organizations.

The First Century of the Federal Reserve

Before the Fed was born, financial panics caused by speculation and rumors led to the call for a central banking authority that would support a healthier banking system.

World War I, 1914 to 1918

The Federal Reserve Board and the 12 reserve banks were just getting organized as war broke out in Europe. But once the nation entered World War I, the Fed quickly became a major player by supporting the U.S. Treasury’s war bond effort and offering lower interest rates to member banks when the proceeds were used to buy bonds.

The Fed also gave better interest rates to banks purchasing Treasury certificates. Lower rates led to increased borrowing by businesses and households, which stimulated economic growth. But the increased money supply eventually led to rising prices. When the war ended, the Fed took action to control that inflation.

Stock Market Crash of 1929

On Oct. 28, 1929, now known as “Black Monday,” the Roaring Twenties ended with a thud when the Dow Jones Industrial Average dropped nearly 13%. The market collapsed the next day. It was the most devastating stock market crash in U.S. history.

Many economists and historians blame the Fed for the crash because of its decision to raise interest rates in 1928 and 1929 to control over speculation (what today might be called “irrational exuberance”) in the stock market.

Leaders decreased the money supply starting in 1928 and pressured member banks in 1929 to rein in their loans to brokers and charge a higher rate on broker loans.

The Great Depression, 1929 to 1941

The deepest downturn in U.S. history lasted from 1929 to 1941. The contraction began in the United States and reverberated around the globe.

The banking panics in 1930 and early 1931 were regional, but in late 1931 the commercial banking crisis spread throughout the nation. The Fed’s efforts to contain the collapse were not enough, and the situation reached rock bottom by March 1933.

On March 6, 1933, President Franklin Roosevelt — who’d been inaugurated just two days before — announced a weeklong suspension of all banking transactions. Legislative intervention soon followed.

In 1933 the Glass-Steagall Act separated commercial and investment banking and gave the federal government and Federal Reserve enhanced powers to deal with the economic crisis, which led to the creation of the Federal Deposit Insurance Corp. and regulation of deposit interest rates. (At an FDIC-insured bank today, deposits are insured up to $250,000 per depositor, per institution, and per ownership category.)

The Banking Act of 1935 gave the Fed more independence from the executive branch; shifted power from the regional reserve banks to the Board of Governors, based in Washington, D.C.; and led to the modern form of the Federal Open Market Committee (FOMC), the Fed’s main monetary policymaking committee, which consists of the Fed governors in Washington and the presidents of the 12 regional banks.

World War II, 1941 to 1945

The Fed’s role during World War II was similar to its role in World War I. Its main mission became financing the war, and it helped the Treasury Department market war bonds in cooperation with commercial banks and businesses.

The reserve banks also reduced their discount rate to 1% and set a rate of half a percentage point for loans secured by short-term government obligations. During the war years, the Fed kept its eye on inflation by regulating consumer credit. It required large down payments and shorter terms on loans used to buy a variety of consumer goods.

Korean War, 1950 to 1953

At the start of the Korean War, inflation was a growing concern. But the Fed was once again under pressure — this time from the Truman administration — to help finance the war effort.

In February 1951, the Fed declared its independence in fiscal matters, and in March, the Treasury and the Fed announced that they had reached an accord on how they would handle “debt management and monetary policies” going forward.

The Great Inflation, 1970s and ’80s

Keeping inflation under control has always been an important role for the Fed, but in the 1970s, when the stock market slumped and the country found itself in an inflation crisis so deep it was known as the “Great Inflation,” it became a special challenge.

Check the history books and you’ll find plenty of finger-pointing. It was President Richard Nixon’s fault for disengaging from the gold standard. Or maybe it was the Fed’s fault for employing a confusing stop-go monetary policy that had interest rates going up, then down, then back up.

Then new Fed chairman, Paul Volcker, took over in 1979 and switched the Fed’s goal from targeting interest rates to targeting the money supply. It was painful. The prime lending rate (the rate banks offer their most creditworthy customers when they’re looking to take out a line of credit or a loan) skyrocketed to over 21% at one point.

Unemployment reached double digits in some months. The country went through two recessions. But eventually, prices stabilized.

And the federal funds rate hasn’t been in the double digits since the mid-1980s.

The Great Recession, 2007 to 2009

When a period in U.S. history is labeled “great,” it’s often anything but. During the Great Recession, home prices fell. Unemployment rose. Gross domestic product fell. And in 2008, the market crashed.

Home prices had peaked at the beginning of 2007, and the subprime mortgage market had been busy.

This recession was, for many Americans, the worst of times; they lost their jobs, their homes, and their confidence in the economy.

Enter the Fed, which started by tackling the slump with a traditional response: From September 2007 to December 2008, the Fed lowered the federal funds rate from 5.25% to zero to 0.25%, and FOMC policy statements noted that it would be keeping the rate at exceptionally low levels for a while. But it didn’t stop there.

In 2008 it also began its first round of quantitative easing, buying $600 million in mortgage-backed securities, and continued that effort in 2009. Also in 2008, President George W. Bush signed the $700 million Troubled Asset Relief Program into law. Two more rounds of quantitative easing started in 2010 and 2012 under President Barack Obama.

Recommended: Common Recession Fears and How to Cope

The Covid Crisis, the Fed, and Inflation

At the onset of the Covid-19 pandemic and resulting recession in 2020, making sure the U.S. economy did not fall into a prolonged recession became a higher priority than maintaining inflation at the Federal Reserve’s 2% target rate.

The Fed seeks to control inflation by influencing interest rates. When inflation is too high, the Fed typically raises its benchmark interest rate to slow the economy and tame inflation. When inflation is low, the Fed often lowers the federal funds rate — the interest rate that banks use when they lend money to one another overnight — to stimulate the economy.

After keeping the rate near zero, in March 2022, the Fed approved its first rate increase in more than three years. Between March 2022 and July 2023, the Fed raised rates eleven times, the fastest tightening campaign since the 1980s. The Fed held rates at 5.25% to 5.50% from July 2023 to September 2024. Then as the cuts seemed to achieve their goal, inflation slowed. Inflation, as evidenced by the Consumer Price Index (CPI), peaked in June 2022 and has improved since then. The most recent CPI data, for the 12 months ending in September 2024, showed inflation at 2.4%, close to the Fed’s 2% goal. Given this, in September 2024, the Fed decided it was time to begin cutting the rate. Some economists anticipate further cuts in 2025.

How the Federal Reserve Affects Your Finances

So how do the Fed’s decisions have an impact on you as an individual consumer? For one, banks base their prime rate on the federal funds rate; the prime rate is generally 3 percentage points higher. This rate in turn helps determine the rates that lenders offer their customers.

Fed rate hikes increase the cost of borrowing money for a mortgage or to pay for a car, or for carrying a credit card balance. Rate increases also create a more volatile stock market that could hurt 401(k) plans, increase the amount you earn on a CD, or affect what you might pay for a bond. (Fortunately there are some way to protect your money from inflation next time it rears its head. For example, if you can swing it, buying a house vs. being a renter may help protect you from inflation because you can lock in a fixed monthly payment long term. You can also read up on how to invest during a time of inflation.)

You may be scratching your head at why Fed rate cuts in the fall of 2024 didn’t immediately result in reduced interest rates on home mortgage loans. The short answer is that lenders look at multiple economic data points when they set rates, and the Fed’s action, while important, is not the only factor.

Prospective homebuyers may be wondering, is this a good time to buy a house? The answer is a very personal one, and chances are it won’t be found in scrutinizing the Fed’s movements. Emotions are also involved: Owning a home not only gives you a place where you enjoy living, but homeownership can help build generational wealth and some people may want to begin building that equity immediately, especially when future mortgage rates, like Fed rate cuts, are not within their control.

Recommended: What to Learn From Historical Mortgage Rate Fluctuations

The Takeaway

If you’re planning a vacation, you might not want to tuck away a book on the history of the Federal Reserve. (Or maybe you will. No judgment.) The Fed has a dual mandate to aim for maximum employment and price stability, and it has historically raised interest rates as the antidote for rising inflation.

If you find yourself musing about buying a home soon, it’s important to look at the history of mortgage rates to put the current conditions into context, and it helps to read up on the benefits of homeownership.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

What is the prime rate?

The prime interest rate is the interest rate that banks charge the customers they consider to be the lowest risk — those who have a good credit history and are deemed least likely to default on a loan or miss payments.

What does the Federal Reserve do?

The Federal Reserve has several roles. It sets monetary policy, with a goal of maximum employment and stable inflation. It also regulates banks and other financial institutions. Its overall objective is to control risks to the economy and financial markets.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SOHL-Q424-133

Maybe you’ve spent a serious amount of time watching HGTV and now have visions of turning your kitchen into a chef’s paradise. Or perhaps you have an entire Pinterest board full of super-deep soaking tubs that you’re dreaming about.

Either way, the home improvement bug has bitten you, and you’re hardly alone. In the U.S. $827 billion was spent on home improvement from 2021 to 2023, according to the U.S. Census Bureau American Housing Survey. For a bit more context, consider that the average American spent more than $9,542 on home improvement projects in 2023 — with spending up 12% over 2022. That’s a lot more than just buying a new bathroom sink.

While your home might be begging for some updates and improvements, not all of us have close to $10,000 stashed away in a savings account. For many people, realizing their home improvement goals means borrowing money. But how exactly?

Read on to learn about some of your options, including a home equity loan, a home equity line of credit (HELOC), and a home improvement loan. We’ll share the situations in which home equity loans, HELOCs, and home improvement loans work best so you can figure out which home improvement loan option is right for you.

What’s the Difference Between Home Equity Loans, HELOCs, and Home Improvement Loans?

If you’ve figured out how much a home renovation will cost and now need to fund the project, the options can sound a bit confusing because they all involve the word “home.”

What’s more, you may hear the term “home equity loan” loosely applied to any funds borrowed to do home improvement work. However, there are actually different kinds of home equity loans to know about, plus one that doesn’t involve home equity at all.

So, before digging into home improvement loans vs. home improvement loans vs. HELOCs, consider the basics for each:

•   A home equity loan is a lump-sum payment that a lender gives you using the equity in your home to secure the loan. These loans often have a higher limit, lower interest rate, and longer repayment term than a home improvement loan.

•   A home equity line of credit, or HELOC, is a revolving line of credit that is backed by your equity in your home. It operates similarly to a credit card in that the amount you access is not set, though you will have a limit on how much you can access.

•   A home improvement loan is a kind of lump-sum personal loan, and it is not backed by the equity you have in your home. It may have a higher interest rate and shorter repayment term than a home equity loan. What’s more, it may have a lower limit, making it well suited for smaller projects.

Worth noting: If you use your home as collateral to borrow funds, you could lose your property if you don’t make payments on time. That’s a significant risk to your financial security and one to take seriously.

Next, here’s a look at how key loan features line up for these options.

How Much Can I Borrow?

The sky isn’t the limit when borrowing funds. This is how much you will likely be able to access:

•   For a home equity loan, you can typically borrow up to 85% of your home’s value, minus what’s owed on your mortgage. So if your home’s value is $300,000, 85% of that is $255,000. If you have a mortgage for $200,000, then $255,000 minus $200,000 leaves you with a potential loan of $55,000. You can do the math quickly with a home equity loan calculator.

•   For a HELOC, you can often access up to 90% of the equity you have in your home, though some lenders may go even higher. In that case, you are likely to pay a higher interest rate. In the scenario above, with a home valued at $300,000 and a mortgage of $200,000, that means you have $100,000 equity in your home. A loan for 90% of $100,000 would be $90,000. As with other lines of credit, your credit score and employment history will likely factor into the approval decision. To figure out what payments might be on a HELOC, you can use a HELOC repayment calculator.

•   For a home improvement loan, the amount you can borrow will depend on a variety of factors, including your credit score, but the typical range is between $3,000 and $50,000 or sometimes even more.

What Can the Funds Be Used for?

Interestingly, some of these funds can be used for purposes other than home improvement costs. Here’s how they stack up:

•   For a home equity loan, you can certainly use the funds for an amazing new kitchen with a professional-grade range, but you can also use the money for, say, debt consolidation or college tuition.

•   For a HELOC, as with a home equity loan, you can use the money as you see fit. Redoing your patio? Sure. But you can also apply the cash to open a business, pay for grad school, or knock out credit card debt.

•   For a home improvement loan, there is often the requirement that you use the funds for, as the name suggests, a home improvement project, such as adding a hot tub to your property. In some cases, you may be able to use the funds for non-home purposes. Your lender can tell you more.

Recommended: How to Find a Contractor for Home Renovations & Remodeling

How Will I Receive the Funds? How Long Will It Take to Get the Money?

Consider the different ways and timing you may encounter when getting money from these loan options:

•   With a home equity loan, you receive a lump sum payment of the funds borrowed. The timeline for getting your funds can be anywhere from two weeks to two months, depending on a variety of factors, including the lender’s pace.

•   With a HELOC, you open a line of credit, similar to a credit card. For what is known as the draw period (typically 10 years), you can withdraw funds via a special credit card or checkbook up to your limit. It typically takes between two and six weeks to get the initial approval, but some lenders may be faster.

•   With a home improvement personal loan, you receive a lump sum of cash. These tend to be the quickest way to get cash: It may only take a day or so after approval to have the funds available.

How Much Interest Will I Pay?

How much you pay to access funds for your project will vary. Take a closer look:

•   For a home equity loan, you typically get a lower interest rate than some other loan types, since you are using your home equity as collateral. These are typically fixed-rate loans, so you’ll know how much you are paying every month. At the end of 2024, the average rate of a fixed, 15-year home equity loan was 8.49%.

•   For a HELOC, the line of credit will typically have a rate that varies with the prime rate, though some lenders offer fixed-rate options. HELOCs may have lower interest rates than personal and home equity loans, but you will need a high credit score to snag the lowest possible rate.

•   For home improvement loans, which are a kind of personal loan, rates vary widely. Currently, you might find anything from 6.99% to 36% depending on the lender and your qualifications, such as your credit score. These loans are typically fixed rate.

How Long Will I Have to Repay the Funds?

Repayment terms differ among these three options:

•   For home equity loans, you will agree to a term with your lender. Terms typically range from five to 20 years, but 30 years may be available as well.

•   With a HELOC, you usually have a draw period of 10 years, during which you may pay interest only. Then, you may no longer withdraw funds, and move into the principal-plus-interest repayment period, which is often 20 years.

•   With a home improvement personal loan, your repayment terms are typically shorter than with the other options and will vary with the lender. You may find terms of anywhere from one to seven years or possibly longer.

Here’s how these features compare in chart form:

Which Home Improvement Loan Option Is Better?

Now that you’ve learned about the features of these loan options, here’s some guidance on which one is likely to be best for your needs.

When Home Equity Loans Make Sense

Here are some scenarios in which a home equity loan may be a good choice:

•   If you have significant home equity and are looking to borrow a large amount, a home equity loan could be the right move to access a lump sum of cash.

•   If you want to have a long repayment period, the possibility of a 30-year term could be a good fit.

•   When you are seeking to keep costs as low as possible, these loans may offer lower interest rates.

•   A home equity loan can be a wise move when you need cash for other purposes, such as debt consolidation or educational expenses.

•   Some interest payments may be tax-deductible, depending on how you use the funds, which could be a benefit of this kind of loan.

When HELOCs Make Sense

A HELOC may be your best bet in the following situations:

•   You aren’t sure how much money you need and like the flexibility of a line of credit.

•   You want to keep your payments as low as possible in the near future. HELOCs can usually be an interest-only loan during the first 10-year draw period of the arrangement.

•   A HELOC can be a good fit for people who are doing a renovation in stages, and want to draw funds as needed versus all upfront.

•   You need cash for something other than just home renovation, such as to pay down credit card debt or fund tuition.

•   Depending on what you put the money toward, interest payments may be tax-deductible to a degree.

When Home Improvement Personal Loans Make Sense

Consider these upsides:

•   These personal loans tend to have a straightforward, fast application process, and often have fewer fees, such as no origination fees.

•   Home improvement loans are usually approved more quickly than other kinds of home loans.

•   These loans can be a good way to borrow a small sum, such as $3,000 or $5,000 for a project you need to complete quickly (say, a bathroom without a functional shower).

•   Home improvement loans can be a good option for new homeowners, who haven’t yet built up much equity in their home but need funds for renovation.

•   For those who are uncomfortable using their home as collateral, this kind of loan can be a smart move.

The Takeaway

Home improvement is a popular pursuit and can not only make daily life more enjoyable, it can also boost the value of what is likely your biggest asset. If you are ready to take on a renovation (or need to pay off the bills for the reno you already did), you’ll have options in terms of how to access funds.

Depending on your needs and personal situation, you might prefer a home equity loan, a home equity line of credit (HELOC), or a home improvement personal loan. Why not start by looking into a HELOC? A line of credit is a super-flexible way to borrow.

SoFi now offers flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively low rates. And the application process is quick and convenient.

FAQ

Can a HELOC only be used for repairs or renovations?

You can use the funds you draw from a home equity line of credit (HELOC) for pretty much anything you can think of. But if you are hoping to take advantage of a tax deduction for the interest you pay on your HELOC, it will need to be used to buy, build, or substantially improve a home.

Is a HELOC a second mortgage?

Yes, if you are still paying off the mortgage on your home, a home equity line of credit (HELOC) that is secured by that property would be considered a second mortgage. The same is true of a home equity loan.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

^²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

SOHL-Q424-132

Home equity loans, home equity lines of credit (HELOCs), and cash-out refinances are all borrowing options that allow homeowners to access the equity they’ve built in their home. By tapping into home equity — the difference between a home’s current value and the amount still owed on the mortgage — homeowners can secure funds to meet other financial goals, such as making home improvements.

While these three types of loans do have similarities, there also are key differences in how each one works. Understanding the differences in a home equity loan vs. HELOC vs. cash-out refi can help you better determine which option is right for you.

Defining Home Equity Loans, HELOCs, and Cash-Out Refi

To start, it’s important to know the basic definitions of home equity loans, HELOCs, and cash-out refinances.

Home Equity Loan

A home equity loan allows a homeowner to borrow a lump sum that they’ll then repay over a set period of time in regular installments at a fixed interest rate. Generally, lenders will allow homeowners to borrow up to 85% of their home’s equity.

This loan is in addition to the existing mortgage, making it a second mortgage. As such, a borrower usually will make payments on this loan in addition to their monthly mortgage payments. To better understand what kind of payment might be due each month, it is helpful to use a home equity loan calculator.

HELOC

A HELOC is a line of credit secured by the borrower’s home that they can access on an as-needed basis, up to the borrowing limit. The amount of the line of credit is determined by the mortgage lender and based on the amount of equity a homeowner has built, though it can be up to 90% of the equity amount. Like a home equity loan, this is a second mortgage that a borrower assumes alongside their existing home loan.

How HELOCs work is somewhat like a credit card, in that it’s a revolving loan. For example, if a borrower is approved for a $30,000 home equity line of credit, they can access it when they want, for the amount they choose (though there may be a minimum draw requirement). The borrower is only charged interest on and responsible for repaying the amount they borrowed.

Another point that borrowers should keep in mind is that there is a draw period of 5 to 10 years, during which a borrower can access funds, and a repayment period of 10 to 20 years. During the draw period, the monthly payments can be relatively low because the borrower pays interest only. During the repayment period, on the other hand, the payments can increase significantly because both principal and interest have to be paid.

Cash-Out Refinance

A cash-out refinance is a form of mortgage refinancing that allows a borrower to refinance their current mortgage for more than what they currently owe in order to receive extra funds. With a cash-out refinance, the borrower’s current mortgage is replaced by an entirely new loan.

As an example, let’s say a borrower owns a home worth $200,000 and owes $100,000 on their mortgage at a high interest rate. They could refinance at a lower interest rate, while at the same time taking out a larger mortgage. For instance, they could refinance the mortgage at $130,000. In this case, $100,000 would replace the old mortgage, and the borrower would receive the remaining amount of $30,000 in cash.

Recommended: First-time Homebuyer Guide

Home Equity Loans and HELOCs vs. Cash-Out Refi

Here’s a look at how a home equity loan vs. HELOC vs. cash-out refinance stack up when it comes to everything from borrowing limit to interest rate to fees:

Borrowing Limit

With a home equity loan, lenders generally allow you to borrow up to 85% of a home’s equity. HELOCs allow borrowers to tap a similar amount, sometimes as much as 90%. Cash-out refinances, on the other hand, have a slightly lower borrowing limit — up to 80% of a borrower’s equity. The exception is a VA cash-out refi; here it is possible to borrow up to 100% per VA rules, although some lenders may impose a lower ceiling.

Interest Rate

With a home equity line of credit, the interest rate is usually adjustable. This means the interest rate can rise, and if it does, the monthly payment can increase. Home equity loans, meanwhile, generally have a fixed interest rate, meaning the interest rate remains unchanged for the life of the loan. This allows for more predictable monthly payment amounts.

A cash-out refinance can have either a fixed rate or an adjustable rate. Homeowners who opt for an adjustable rate may be able to access more equity overall.

Type of Credit

Both home equity loans and cash-out refinances are installment loans, where you receive a lump sum that you’ll then pay back in regular installments. A HELOC, on the other hand, is a revolving line of credit. This allows borrowers to take out and pay back as much as they need at any given time during the draw period.

Fees

With a home equity loan, HELOC, or cash-out refinance, borrowers may pay closing costs. HELOC closing costs may be lower compared to a home equity loan, though borrowers may incur other costs periodically as well, such as annual fees, charges for inactivity, and early termination fees.

When It Might Make Sense to Borrow

A home equity loan vs. HELOC vs. cash-out refi have varying use cases. With a fixed interest rate, home equity loans can allow for predictable payments. Their lower interest rates can make them an option for borrowers who want to consolidate higher interest debt, such as credit card debt.

HELOCs, meanwhile, provide more flexibility as borrowers can take out only as much as they need, allowing borrowers to continually access funds over a period of time. A cash-out refinance can be a good option for a borrower who wants to receive a large lump sum of money, such as to pay off debt or finance a large home improvement project.

Which Option Is Better?

Like most things in the world of finance, the answer to whether a cash-out refinance vs. HELOC vs. home equity loan is better will depend on a borrower’s financial circumstances and unique needs.

In all cases, borrowers are borrowing against the equity they’ve built in their home, which comes with risks. If a borrower is unable to make payments on their HELOC or cash-out refinance or home equity loan, the consequence could be selling the home or even losing the home to foreclosure.

Scenarios Where Home Equity Loans Are Better

A home equity loan can be the right option in certain scenarios, including when:

•   You want fixed, regular second mortgage payments: A home equity loan generally will have a fixed interest rate, which can be helpful for budgeting as monthly payments will be more predictable. Some may appreciate this regularity for their second monthly mortgage payment.

•   You want to get a lump sum while keeping your existing mortgage intact: Unlike a HELOC, where you draw just as much as you need at any given time, a home equity loan gives you a lump sum all at once. Plus, unlike a cash-out refinance, you aren’t replacing your existing mortgage. That way, if the terms of your current mortgage are favorable, those can remain as is.

Recommended: The Different Types Of Home Equity Loans

Scenarios Where HELOCs Are Better

In the following situations, a HELOC may make sense:

•   You have shorter-term or specific needs: Because HELOCs generally have a variable interest rate, they can be useful for shorter-term needs or for situations where a borrower may want access to funds over a certain period of time, such as when completing a home renovation.

•   You want the option of interest-only payments: During the draw period, HELOC lenders often offer interest-only payment options. This can help keep costs lower until the repayment period, when you’ll need to make interest and principal payments. Plus, you’ll only make payments on the balance used. A HELOC interest-only repayment calculator can help borrowers understand what those monthly payments might be.

Scenarios Where Cash-Out Refi Is Better

Cash-out refinances can make sense in these scenarios:

•   You need a large sum of money: If there’s a need for a large sum of money, or if the funds can be used as a tool to improve your financial situation on the whole, a cash-out refinance can make sense.

•   You can get a lower mortgage rate than you currently have: If refinancing can allow you to secure a lower interest rate than your current mortgage offers, then that could be a better option than taking on a second mortgage, as you would with a home equity loan or HELOC. If interest rates have risen since you first took out your loan, however, a cash-out refi could mean paying more in interest over the life of the loan.

•   You want just one monthly payment: Because a cash-out refinance replaces your existing mortgage, you won’t be adding a second monthly mortgage payment to the mix. This means you’ll have only one monthly payment to stay on top of.

•   You have a lower credit score but still want to tap your home equity: In general, it’s easier to qualify for a cash-out refinance vs. HELOC or home equity loan since it’s replacing your primary mortgage.

The Takeaway

Cash-out refinancing, HELOCs, and home equity loans each have their place in a borrower’s toolbox. All three options give borrowers the ability to turn their home equity into cash, which can make it possible to achieve important goals, consolidate debt, and improve their overall financial situation.

Homeowners interested in tapping into their home equity may consider getting a HELOC or taking a cash-out refinance with SoFi. Qualifying borrowers can secure competitive rates, and Mortgage Loan Officers are available to walk borrowers through the entire process.

FAQ

Can you take out a HELOC and cash-out refi?

If you qualify, it is possible to get both a HELOC and cash-out refinance. Qualified borrowers can use their cash-out refinance to help repay their HELOC.

Is it easier to qualify for a HELOC or cash-out refi?

It is generally easier to qualify for a cash-out refinance. This is because the cash-out refi assumes the place of the primary mortgage, whereas a HELOC is a second mortgage.

Can you borrow more with a HELOC or cash-out refi?

Ultimately, the amount you can borrow with either a cash-out refi or HELOC will depend on how much equity you have in your home. That being said, a HELOC can offer a slightly higher borrowing limit than a cash-out refi, at up to 90% of a home’s equity as opposed to a top limit of 80% for a cash-out refinance.

Are HELOCs or cash-out refi tax deductible?

Interest on your cash-out refinance or HELOC can be tax deductible so long as you use the funds for capital home improvements. This includes projects like remodeling and renovating.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

^²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

SOHL-Q424-144

It’s time to file your taxes again. But before you do, it’s a good idea to consider whether there are any last-minute tax moves you can make to lower your tax liability and/or simplify the tax filing process.

Read on to learn some tax tips before April 15th arrives.

Why End-of-Year Tax Prep Is Important

The end of the year and start of the new year can be an ideal time to get your affairs in order for the upcoming tax season, especially when it comes to reducing your tax burden. One way to do that is through what’s known as tax-loss harvesting (you’ll learn more details below).

This and other financial moves can be complicated and may require additional preparation or the assistance of a tax preparer or financial planner, which is why an early start can be important.

It’s also a key moment to make sure that you have all the information you need to file properly. If you are missing tax forms, now’s the time to work on getting them before you get too close to the April 15th filing deadline.

Smart Tax Prep Moves to Make

Ready to learn the details? Here are eight moves to make by the end of the year that could save you time and money when Tax Day rolls around.

1. Look at Tax Code Changes

The Internal Revenue Service’s tax code can and does change regularly. Tax brackets can shift (say, in response to inflation’s impact). In addition, the standard deduction often rises, which can help lower your taxable income. For example, for tax year 2024 (filing in April 2025), the standard deduction for married couples filing jointly is $29,200; in tax year 2025, it goes up to $30,000. For single filers, the standard deduction is $14,600 for tax year 2024 and $15,000 for tax year 2025.

2. Grab All Available Itemized Deductions

It’s also a great time to review what itemized deductions you may have. Beyond state and local packages, you’ll also want to consider any medical expenses, charitable donations, home mortgage interest, or any losses you may have incurred as the result of a natural disaster or theft.

Keep in mind you can still make charitable donations, schedule doctor’s visits, and pay for certain expenses before the end of the year to potentially offset your taxes.

💡 Quick Tip: Tired of paying pointless bank fees? When you open a bank account online you often avoid excess charges.

3. Review Your Contribution Limits

Some of the contributions you can make include putting money in your (health savings account (HSA)), 529 college savings account, and your Individual Retirement Account (IRA). For HSAs and IRAs you generally have until April 15 to make these contributions.

Contributions to a traditional IRA or HSA often can reduce your taxable income, as long as you are eligible to contribute and to take a deduction. While contributions to a Roth IRA can help you save on taxes in the future, they won’t reduce your current tax liability.

Here are contribution limits for tax year 2024 as well as what to expect for 2025:

•   IRAs: The annual contribution limit for a traditional and Roth IRA is $7,000 for both 2024 and 2025. Those 50 and older can contribute an additional $1,000 per individual, for a total of $8,000 per year.

•   HSAs: In 2024, you can contribute up to $4,150 if you are covered by a high-deductible health plan (HDHP) just for yourself, or $8,300 if you have coverage for your family. In 2025, you can contribute up to $4,300 if you are covered by a HDHP for yourself, or $8,550 if you have family coverage. Those age 55 and older can contribute an additional $1,000.

•   529s: Individual states sponsor 529 plans and set varying total account maximums. You’ll also want to keep in mind that the IRS counts contributions to 529 plans as gifts. Individuals can gift up to $18,000 to a 529 plan in 2024 ($19,000 in 2025) without those funds counting against the lifetime gift tax exemption amount.

4. Consider Tax-Loss Harvesting

Tax-loss harvesting can be a tool to offset losses in non-retirement accounts. Simply put, tax-loss harvesting allows you to use realized losses to offset any gains. So, if you have investments that are below cost basis, you may want to discuss your situation with your financial planner or tax advisor to see if tax-loss harvesting is a good option.

Recommended: Tax Season Help Center 2025

5. Review Your Savings

Were you able to save some money over the last year but haven’t invested it yet? If it’s just sitting in your savings account, now may be the time to consider some tax-efficient investing.

When deploying a tax-efficient investment strategy, it’s crucial to know how an investment is going to be taxed. Ideally, you’d want more tax-efficient investments in a taxable account.

Conversely, you may want to hold investments that can have a greater tax impact in tax-deferred and tax-exempt accounts, where investments can grow tax-free.

Next, it is helpful to know that some investment types are inherently more tax-efficient than others. That insight can aid you in making the best investment choices for the type of investment account that you have. For example, ETFs’ tax efficiency is considered superior to that of mutual funds because they don’t trigger as many taxable events. Investors can trade ETFs shares directly, while mutual fund trades require the fund sponsor to act as a middle man, activating a tax liability.

6. Consider a Roth Conversion

You might have a traditional IRA and wonder if you should convert it into a Roth IRA instead for tax purposes. Deciding to convert a traditional IRA to a Roth IRA comes down to a few factors, all of which are personal to each individual investor. This may make it important to weigh the pros and cons carefully. You may want to discuss this kind of year-end tax move with a financial advisor before making a decision.

An IRA rollover can happen a few ways:

•   Via an indirect rollover, where the owner of the account receives a distribution from a traditional IRA and can then contribute it to a Roth IRA within 60 days.

•   Via a trustee-to-trustee, or direct rollover, where an account owner tells the financial institution currently holding the traditional IRA assets to transfer an amount directly to the trustee of a new Roth IRA account at a different financial institution.

•   Via a same trustee transfer, used when a traditional IRA is housed in the same financial institution of the new Roth IRA. The owner of the account alerts the institution to transfer an amount from the traditional IRA to the Roth IRA.

7. Perform a Financial Checkup

It’s common for life circumstances to change from one year to the next. Maybe you got a new job, had a baby, or bought a new home.

If you’ve experienced changes in your life, consider taking some time now to reevaluate your financial goals, as well as your estate planning. For example, owning a home and being responsible for a mortgage can impact your discretionary spending. Similarly, if you recently became a parent or pet owner, you may think about adjusting your finances to prepare for the added expenses.

💡 Quick Tip: Most savings accounts only earn a fraction of a percentage in interest. Not at SoFi. Our high-yield savings account can help you make meaningful progress towards your financial goals.

8. Top up Your 401(k)

The more you contribute to your 401(k) account, generally the lower your taxable income is in that year. So if you haven’t yet reached your maximum contribution, now may be the perfect time to do so. Here’s some food for thought:

•   If you contribute 15% of your income to your 401(k), for instance, you’ll only owe taxes on 85% of income.

•   Say your annual income is $50,000. If you contribute 15% of your salary annually, $7,500 will be deposited into your 401(k) account, and you will be taxed on $42,500. That could save you thousands on your taxes.

To max out a 401(k) for tax year 2024, an employee would need to contribute $23,000 in salary deferrals; $30,500 if they’re over age 50. In 2025, the max for employee salary deferrals is $23,500; those over age 50 can contribute up to $31,000. Note: In 2025, those aged 60 to 63 may contribute up to $34,750, thanks to SECURE 2.0.

Some investors might think about maxing out their 401(k) as a way of getting the most out of this retirement savings option. Others may want to put the money elsewhere. Again, talking with a financial professional can help you weigh the implications of these end-of-year money moves.

The Takeaway

The end of the year and then the start of tax season are ideal times to get ready to file your return by April 15th. Specifically, it may be in your best interests to find ways to mitigate your tax bill. You might rethink your retirement savings vehicles or try tax-loss harvesting (selling securities at a loss in order to reduce your tax bill), for instance.

As you are thinking about your finances, you might also take a minute to look at your banking partner and make sure it’s a good fit for your finances.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Photo credit: iStock/Passakorn Prothien

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SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.