Financial Topics Archives

Jan

2026

An investor looks at his investment account on a tablet, considering whether to use leverage for a trade.

What Is Leverage In Finance

By Samuel Becker | Growing Wealth, invest, Investing, Terminology | Comments Off

Table of Contents

What Is Leverage?
How Leverage Works
Example of Leverage
Pros and Cons of Leverage
Leverage vs Margin
Types of Leverage
Leveraged Products
Volatility and Leverage Ratio
FAQ

In finance, leverage is the practice of borrowing funds to establish bigger positions. Leverage increases the potential for larger returns. But using leverage also increases the risk of loss.

In general, only qualified investors may use leverage when they invest, which they can typically access via a margin account. Margin is a type of loan from a brokerage. Trading on margin is a type of leverage.

As an investor, it’s critical to understand leverage and the additional risks involved if you plan to day trade or make other types of short-term investments.

Key Points

• In investing, leverage refers to the practice of borrowing money to place bigger trades, using a margin loan from a brokerage.

• Thus the use of leverage requires access to a margin account, which is subject to strict rules regarding account minimums and trade requirements.

• While leverage can amplify gains, it also magnifies losses and comes with additional risks and costs.

• Only qualified investors may open a margin account, owing to the higher risk of loss.

• Different types of leverage exist, including financial leverage used by businesses to raise capital, and operating leverage used to analyze fixed and variable costs.

What Is Leverage?

In finance, leverage refers to using a small amount of capital to establish bigger positions, using borrowed funds. This is called trading on margin, and it’s a strategy generally available only to qualified investors.

The use of margin is governed by rules from the Financial Industry Regulatory Authority (FINRA). A margin loan must be backed with cash and other securities, a minimum amount of cash must be maintained in the account, and the margin debt must be paid back with interest, whether investing online or through a traditional brokerage.

Trading With Cash vs. Margin

With a cash brokerage account, an investor can only purchase investments they can cover with cash. If an investor has $5,000 in cash, they can buy $5,000 worth of securities.

A margin account, however, allows qualified investors to borrow funds from the brokerage to purchase securities that are worth more than the cash they have on hand.

In the above example, an investor could borrow up to $5,000, which doubles the amount they can invest (depending on any account restrictions), and place a $10,000 trade.

Although leverage is about borrowing capital in an effort to increase returns when investing in stocks and other securities, if the trade moves in the wrong direction, though, you could suffer a loss — and you’d still have to repay the margin loan, plus interest and fees.

How Leverage Works

In leveraged investing, the leverage is debt that qualified investors use as a part of their investing strategy.

Leverage typically works like this: An investor wants to make a large investment, but doesn’t have enough liquid capital to do it. If they qualify, they use the capital they do have in conjunction with margin (borrowed money) to make a leveraged investment.

If they’re successful, the return on their investment is greater than it would’ve been had they only invested their own capital.

In the event that the investor lost money, they would still have to repay the money they’d borrowed, plus interest and fees.

Increase your buying power with a margin loan from SoFi.

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Example of Leverage

Let’s say an investor has $10,000 worth of cash and securities in their account. Generally speaking, and assuming they qualify for margin funds, the investor can borrow up to another $10,000, and place a $20,000 trade, though the brokerage firm could impose stricter limits or other restrictions.

That’s because the Federal Reserve’s Regulation T requires a 50% initial margin deposit, minimum, for trading on margin.

Thus, when using margin to buy stocks or other securities, an investor typically can borrow up to 50% of the value of the trade. The cash and securities are collateral for the loan, and the broker also charges interest on the loan, which adds to the cost — and to the risk of loss. (Margin rules can vary, however, depending on the securities being traded and other factors.)

Pros and Cons of Leverage

On the surface, leverage can sound like a powerful tool for investors — which it can be. But it’s a tool that can cut both ways: Leverage can add to buying power and potentially increase returns, but it can also magnify losses, and put an investor in the hole.

Pros of Leverage	Cons of Leverage
Adds buying power	Increased risks and costs
Potential to earn greater returns	Leveraged losses are magnified
If you qualify, using leverage can be easy	Not all investors qualify for the use of leverage, i.e., margin

Leverage vs Margin

Leverage is a type of debt. And as noted, margin is a type of leverage that can be used to make investment trades. It’s similar to a line of credit for a brokerage account that qualified investors can access.

Leverage can be used by businesses to expand operations or invest in new equipment or to fund an acquisition. Ideally, the use of leverage will generate additional revenue to cover the cost of the debt.

Leverage vs Margin
Leverage	Margin
A loan from a bank for a specific purpose	A loan from a brokerage for investing in financial instruments
Can be used by businesses or individuals	Only qualified investors have access to margin trading
Leverage may be used to expand business operations or achieve other goals	Can be used to increase investment buying power
Borrowed capital generally must be repaid according to the terms of the loan.	Margin loans must be repaid with interest, and fees.

Types of Leverage

So far, we’ve mostly discussed leverage as it relates to the financial markets for investors. But there are other types of leverage, too.

Financial Leverage

Financial leverage is used by businesses and organizations as a way to raise money or access additional capital without having to issue additional shares or sell equity. For instance, if a company wants to expand operations, it can take on debt to finance that expansion.

The main ways that a company may do so is by either issuing bonds or by taking out loans. Much like in the leverage example above, this capital injection gives the company more spending power to do what it needs to do, with the expectation that the profits reaped will outweigh the costs of borrowing in the long run.

Operating Leverage

Operating leverage is an accounting measure used by businesses to get an idea of their fixed versus variable costs. When calculating operating leverage, a company looks at its fixed costs as compared to variable costs to get a sense of how the costs of borrowing are affecting its profitability.

Understanding operating leverage helps to evaluate whether a company’s borrowing is profitable (called the debt-to-equity ratio).

Using Borrowed Money to Invest

While many investors utilize margin, it’s also possible to borrow money from an outside source (not your broker or brokerage) to invest with. This may be appealing to some investors who don’t have high enough account balances to meet the thresholds some brokerages have in place to trade on margin.

If an investor doesn’t meet the margin requirements, looking for an outside loan — a personal loan, a home equity loan, etc.— to meet that threshold may be an appealing option.

But, as mentioned, investors will need to consider the additional costs associated with borrowing funds, such as applicable interest rates. So, before doing so, it may be a good idea to consult a financial professional.

Leverage in Personal Finance

The use of leverage also exists in personal finance — not merely in investing. People often leverage their money to make big purchases like cars or homes with auto loans and mortgages.

A mortgage is a fairly simple example of how an individual may use leverage. They’re using their own money for a down payment to buy a home, and then taking out a loan to pay for the rest. The assumption is that the home will accrue value over time, growing their investment.

Leverage in Professional Trading

Professional traders tend to be more aggressive in trying to boost returns, and as such, many consider leverage an incredibly important and potent tool. While the degree to which professional traders use leverage varies from market to market (the stock market versus the foreign exchange market, for example), in general most pro traders are well-versed in leveraging their trades.

This may allow them to significantly increase returns on a given trade. And professionals are given more leeway with margin than the average investor, so they can potentially borrow significantly more than the typical person to trade. Of course, they also have to stomach the risks of doing so, too — because while it may increase returns on a given trade, there is always the possibility that it will not.

Leveraged Products

There are numerous financial products and instruments that investors can use to gain greater exposure to the market, all without increasing their investments, like leveraged ETFs.

Leveraged ETFs

ETFs, or exchange-traded funds, can have leverage baked into them. ETFs are typically baskets of stocks, bonds, or other assets that mirror a relevant index, such as the S&P 500.

Leveraged ETFs, or LETFs, use derivatives so that investors may potentially double (2x), triple (3x) or short (-1) the daily gains or losses of the index. Financial derivatives are contracts whose prices are reliant on an underlying asset.

Leveraged ETFs are highly risky, owing to their use of derivative products.

Volatility and Leverage Ratio

A leverage ratio measures a company’s debt profile, and gives a snapshot of how much debt a company currently has versus its cash flow. Companies can use leverage to increase profitability by expanding operations, etc., but it’s a gamble because that profitability may not materialize as planned.

Knowing the leverage ratio helps company lenders understand just how much debt they’ve taken on, and can also help investors understand whether a company is a potentially risky investment given its debt obligations.

The leverage ratio formula is: total debt / total equity.

Volatility is another element in the mix, and it can be added into the equation to figure out just how volatile an investment may be. That’s important, given how leverage can significantly amplify risk.

The Takeaway

Leverage can help investors, buyers, corporations and others do more with less cash by using borrowed funds. But there are some important considerations to keep in mind when it comes to leverage. In terms of leveraged investing, it has the potential to magnify gains — but also to magnify losses, and increase total costs.

Utilizing leverage and margin as a part of an investing or trading strategy has its pros and cons, and investors should give the risks serious consideration.

If you’re an experienced trader and have the risk tolerance to try out trading on margin, consider enabling a SoFi margin account. With a SoFi margin account, experienced investors can take advantage of more investment opportunities, and potentially increase returns. That said, margin trading is a high-risk endeavor, and using margin loans can amplify losses as well as gains.

Get one of the most competitive margin loan rates with SoFi, from 4.75% to 9.50%*

FAQ

What is leverage in simple terms?

In simple terms, the concept of leverage means to use a small amount of force to create a larger outcome. As it relates to finance or investing, this can mean using a small amount of capital to make large or outsized trades or investments.

What is an ordinary example of leverage?

An example of leverage could be a mortgage, or home loan, in which a borrower makes a relatively small down payment and borrows money to purchase a home. They’re making a big financial move with a fraction of the funds necessary to facilitate the transaction, borrowing the remainder.

Why do people want leverage?

Leverage allows investors or traders to make bigger moves or take larger positions in the market with only a relatively small amount of capital. This could lead to larger returns — or larger losses.

Photo credit: iStock/StockRocket

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Jan

2026

Why Your Debt to Income Ratio Matters

By Jody McMaster | Credit, Debt Payoff, personal_loan, Terminology | No Comments

Your debt-to-income ratio is a measure of how much you owe tracks against how much you take in. This figure is frequently used by lenders to evaluate how creditworthy an applicant is, or how likely they are to be able to pay their debt back on time. It also helps lenders determine what interest rate to charge borrowers.

A low DTI ratio demonstrates that there is probably sufficient income to pay debts and take on more. Typically, a DTI should be no more than 36% to obtain favorable credit. Here, learn more about what DTI is and how to calculate yours.

Key Points

• A person’s DTI or debt-to-income ratio is calculated by dividing total monthly debt payments by gross monthly income and multiplying by 100.

• Many lenders’ DTI guidelines are that housing expenses should not exceed 28% of gross monthly income and total debt payments should not exceed 36%.

• A low debt-to-income (DTI) ratio, typically 36% or less, can indicate better creditworthiness and ability to repay debt.

• Lenders may accept DTI ratios up to 43% or 50% if borrowers have strong credit scores, savings, and down payments.

• Strategies to lower DTI include increasing income, decreasing debt through consolidation loan, and using the snowball or avalanche method.

First, a Debt-to-Income Ratio Refresher

In case you don’t know how to calculate the percentage or have forgotten, here’s how it works.

DTI = monthly debts / gross monthly income

Say your monthly debt payments are as follows:

• Auto loan: $400

• Student loans: $300

• Credit cards: $300

• Mortgage payment: $1,300

That’s $2,300 in monthly obligations. Now, say gross monthly income is $7,000.

$2,300 / $7,000 = 0.328

Multiply the result by 100 for a DTI ratio of nearly 33%, meaning 33% of this person’s gross monthly income goes toward debt repayment.

💡 Quick Tip: Wherever you stand on the proposed Trump credit card interest cap, one of the best strategies to pay down high-interest credit card debt is to secure a lower interest rate. A SoFi personal loan for credit card debt can provide a cheaper, faster, and predictable way to pay off debt.

What Is Considered a Good DTI?

The federal Consumer Financial Protection Bureau advises homeowners to consider maintaining a DTI ratio of 36% or less and for renters to consider keeping a DTI ratio of 15% to 20% or less (rent is not included in this ratio).

In general, mortgage lenders like to see a DTI ratio of no more than 36%, though that is not necessarily the maximum.

For instance, DTI limits can change based on whether or not you are considering a qualified or nonqualified mortgage. A qualified mortgage is a home loan with more stable features and without risky features like interest-only payments. Qualified mortgages limit how high your DTI ratio can be.

A nonqualified mortgage loan is not inherently high-risk or subprime. It is simply a loan that doesn’t fit into the complex rules associated with a qualified mortgage.

Nonqualified mortgages can be helpful for borrowers in unusual circumstances, such as having been self-employed for less than two years. A lender may make an exception if you have a high DTI ratio as long as, for example, you have a lot of cash reserves.

In general, borrowers looking for a qualified mortgage can expect lenders to require a DTI of 43% or less.

Under certain criteria, a maximum allowable DTI ratio can be as high as 50%. Fannie Mae’s maximum DTI ratio is 36% for manually underwritten loans, but the affordable-lending promoter will allow a 45% DTI ratio if a borrower meets credit score and reserve requirements, and up to 50% for loans issued through automated underwriting.

In the market for a personal loan? Some lenders may allow a high DTI ratio because a common use of personal loans is credit card debt consolidation. But most lenders will want to be sure that you are gainfully employed and have sufficient income to repay the loan.

Front End vs Back End

Some mortgage lenders like to break a number into front-end and back-end DTI (28/36, for instance). The top number represents the front-end ratio, and the bottom number is the back-end ratio.

A front-end ratio, also known as the housing ratio, takes into account housing costs or potential housing costs.

A back-end ratio is more comprehensive. It includes all current recurring debt payments and housing expenses.

Lenders typically look for a front-end ratio of 28% tops, and a back-end ratio no higher than 36%, though they may accept higher ratios if an applicant’s credit score, savings, and down payment are robust.

How Can I Lower My Debt-to-Income Ratio?

So what do you do if the number you’ve calculated isn’t your ideal? There are two ways to lower your DTI ratio: Increase your income, or decrease your debt.

Working overtime, starting a side hustle, getting a new job, or asking for a raise are all good options to boost income.

Strangely enough, if you choose to tackle your debt by only increasing your payments each month, it can have a negative effect on your DTI ratio. Instead, it can be a good idea to consider ways to reduce your outstanding debt altogether.

The best-known debt reduction plans (or payoff plans) are likely the snowball and avalanche methods, but there’s also the fireball method, which combines both strategies.

If credit card debt is an issue, here’s a tip: Instead of canceling a credit card, it might be better to cut it up or hide it. In the world of credit, established credit in good standing is looked upon more favorably than new. Eliminating a long-standing line of credit can lower your score.

Another way to decrease your debt could be to get a debt consolidation loan or credit card consolidation loan. This is a kind of personal loan, hopefully at a lower interest rate than your credit card offers. If so, it can save you on interest and give you just one simple loan to pay every month.

These personal loans are typically offered with a fixed interest rate and a term of one to seven years.

Recommended: How to Apply for a Personal Loan

The Takeaway

Your debt-to-income ratio matters because it affects your ability to borrow money and the interest rate for doing so. In general, lenders look at a lower DTI ratio (say, 28% to 36% maximum in some situations) as favorable, but sometimes there’s wiggle room. If you are struggling with high-interest debt, such as credit card debt, paying it off can positively impact your DTI. There are methods such as the debt snowball method, the debt avalanche technique, or taking out a personal loan.

Whether or not you agree that credit card interest rates should be capped, one thing is undeniable: Credit cards are keeping people in debt because the math is stacked against you. If you’re carrying a balance of $5,000 or more on a high-interest credit card, consider a SoFi Personal Loan instead. SoFi offers lower fixed rates and same-day funding for qualified applicants. See your rate in minutes.

SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

FAQ

How do you calculate DTI?

To calculate your debt-to-income ratio, or DTI, divide your total monthly debt payments by your gross monthly income, then multiply that figure by 100 to get the percentage.

What is a good DTI?

What is considered a good DTI can vary along with the type of credit you are trying to secure. In some cases, a figure between 28% and 36% is considered on target, but in others, a ratio of 50% could be acceptable. Talk to your potential lenders to learn more.

What is the 28-36 rule?

The 28/36 rule is a guideline used regarding mortgages to determine how much a borrower can afford to spend on housing and overall debt. The rule says that a borrower should spend no more than 28% of their gross monthly income on housing (mortgage, property taxes, insurance) and a maximum of 36% on all debts (including housing). This is one way lenders may evaluate a prospective borrower’s creditworthiness.

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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.

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Jan

2026

Negotiating a Credit Card Debt Settlement

By Bonnie Gibbs Vengrow | Credit, Debt Payoff, Financial Independence, personal_loan | No Comments

If you have unmanageable credit card debt, you might consider credit card debt settlement, a process where you negotiate with your credit card company or a debt collector to pay off less than the total amount owed. The creditor agrees to forgive a portion of the debt in exchange for a lump-sum payment or a payment plan.

This guide provides more information about negotiating a credit card debt settlement.

Key Points

• Credit card debt is unsecured debt, meaning it’s not backed by assets.

• Credit card debt settlement options include lump sum payments and workout agreements for debt relief.

• Debt settlement can lead to frozen accounts and a drop in credit scores.

• Personal loans and balance transfers offer alternatives to consolidate and reduce debt.

• Ignoring debt collectors can result in credit damage and legal problems.

The Difference Between Secured and Unsecured Debt

First, take a closer look at the type of debt a credit card typically is. When a credit card company issues a credit card, it’s offering you credit. It’s taking a chance on getting its money back, plus interest. It’s more than likely that the credit card you have is considered unsecured.

Unsecured debt isn’t connected to any of your assets that a credit card company can seize in the event that you default on your payments. Essentially, the credit card company is taking your word for it that you are going to come through with the monthly payments.

Secured debt works a bit differently. They’re backed by an asset, like your car or home. If you default on a secured debt, your lender could seize the asset and sell it to pay off your debt. Mortgages and auto loans are two common types of secured debt.

Recommended: What Is a Credit Card Interest Cap?

Credit Card Debt Negotiation Steps

The process of negotiating credit card debt usually begins when you have multiple late or skipped payments — not just one. A good first step is to find out exactly how much you owe, and then research the different options that may be available to you. Examples include a payment plan, an increase in loan terms or lowered interest rates.

Once you have that information, you’re ready to negotiate. You can start by calling your credit card company and asking for the debt settlement department. Or, you can send a note by email or regular mail.

You may have to go through a number of customer service reps and managers before striking a deal, but taking the initiative can show creditors that you are handling the situation honestly and doing what you need to do.

When you do reach an agreement, be sure to get the agreed-upon terms in writing.

Types of Credit Card Debt Settlements

Here are some options when it comes to credit card debt settlement.

Lump Sum Settlement

This type of agreement is perhaps the most obvious option. Essentially, it involves paying cash and instantly getting out of credit card debt. With a lump sum settlement, you pay an agreed-upon amount, and then get forgiveness for the rest of the debt you owe.

There is no guarantee as to what lump sum the credit card company might go for, but being open and upfront about your situation could help your cause.

Workout Agreement

This type of debt settlement offers a degree of flexibility. You may be able negotiate a lower interest rate or waive interest for a certain period of time. Or, you can talk to your credit card issuer about reducing your minimum payment or waiving late fees.

Hardship Agreement

Also known as a forbearance program, this type of agreement could be a good option to pursue if your financial issues are temporary, such as the loss of a job.

Different options are usually offered in a hardship agreement. Examples include lowering interest rate, removing late fees, reducing minimum payment, or even skipping a few payments.

Why a Credit Card Settlement May Not Be Your Best Option

Watching your credit card balance grow each month can be scary. Depending on your circumstances, a settlement may be the best solution for you.

However, it’s not without its drawbacks. For starters, a settlement may result in your credit card privileges being cut off and your account frozen until a settlement agreement is reached between you and the credit card company.

Your credit score could take a hit, too. This is because your debt obligations are reported to the credit bureaus on a monthly basis. If you aren’t making your payments in full, this will be noted by the credit bureaus.

That said, by negotiating a credit card settlement, you may be able to avoid bankruptcy and give the credit card company a chance to recoup some of its losses. This could stand in your favor when it comes to rebuilding your credit and getting solvent again.

Solutions Beyond Credit Card Debt Settlements

Personal Loan

Consolidating all of your high-interest credit cards into one low-interest unsecured personal loan with a fixed monthly payment can help you get on a path to pay off the credit card debt. Keep in mind that getting this kind of loan, often called a credit card consolidation loan, still means managing monthly debt payments. It requires the borrower to diligently pay off the loan without missing payments on a set schedule, with a firm end date.

For this reason, a personal loan is known as closed-end credit. A credit card, on the other hand, is considered open-end credit, because it allows you to continue to charge debt (up to the credit limit) on a rolling basis, with no payoff date to work towards.

Recommended: Guide to Unsecured Personal Loans

Transferring Balances

Essentially, a balance transfer is paying one credit card off with another. Most credit cards won’t let you use another card to make your payments, especially if it’s from the same lender. If your credit is in good shape, you can apply for a balance transfer credit card to pay down debt without high interest charges.

Many balance transfer credit cards offer an introductory 0% APR, but keep in mind that a sweet deal like that usually only lasts about six to 18 months. After that introductory rate expires, the interest rate can jump back to a scary level — and other terms, conditions, and balance transfer fees may also apply.

Credit Consumer Counseling Services

Credit consumer counseling services often take a more holistic approach to debt management. You’ll work with a trained credit counselor to develop a plan to manage your debt. Typically, the counselor doesn’t negotiate a reduction in debts owed. However, they may be able to have your loan terms extended or interest rates lowered, which would lower your monthly payments. (Note that extending a loan term typically results in more interest paid over the life of the loan.)

A credit counselor can also help you create a budget, offer guidance on your money and debts, provide workshops or educational materials, and more.

Many credit counseling agencies are nonprofit and offer counseling services for free or at a low cost. You can search this list of nonprofit agencies that have been certified by the Justice Department.

The Takeaway

When credit card debt starts to become unmanageable, negotiating a credit card debt settlement may be an option to consider. There are different types of settlement options to consider. Understanding what’s available to you — and what makes sense for your financial situation and needs — can help you make an informed decision. If a settlement isn’t right for you, there are other solutions, such as a personal loan or credit counseling services, that may be a better fit.

Credit cards have an average APR of 20%–25%, and your balance can sit for years with almost no principal reduction. Personal loan interest rates average 12%, with a guaranteed payoff date in 2 to 7 years. If you’re carrying a balance of $5,000 or more on a high-interest credit card, consider a SoFi Personal Loan instead. See your rate in minutes.

SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

FAQ

What percentage of debt will credit card companies settle for?

Credit card companies may settle for repayment of a reduced amount of the total debt, often between 20% and 80% of the outstanding balance. The exact percentage varies based on factors like the age and amount of the debt and the account holder’s ability to demonstrate financial hardship.

Can I negotiate a credit card settlement?

To negotiate credit card debt settlement yourself, decide what you can afford to pay and offer to settle with the creditor in a lump sum or installment plan. The creditor is not obligated to negotiate, but you may be successful.

Will creditors accept a 50% settlement?

Some creditors may accept 50% of the amount owed as part of a debt settlement. Others may want 75%–80% of what you owe. It can make sense to start low with your first offer and negotiate from there.

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Jan

2026

What Is Nondischargeable Debt?

By Krystal Etienne | Debt Payoff, personal_loan | Comments Off

Nondischargeable debt are debts that cannot be eliminated by bankruptcy. Typically, this kind of debt includes child support, alimony, student loans, and some tax bills, among others.

Though on the surface bankruptcy may appear to produce an opportunity for a fresh start, nondischargeable debts prevent it from being a true end-all solution to funds owed. Learn the details here.

Key Points

• Nondischargeable debt cannot be eliminated through bankruptcy.

• Nondischargeable debt includes child support, alimony, student loans, and specific tax bills.

• This kind of debt remains legally owed even after bankruptcy and can grow.

• Nonpayment can lead to severe financial consequences.

• Strategies for managing include budgeting, additional income, and debt consolidation.

• Personal loans are an increasingly popular alternative to higher-interest debt. These unsecured loans are cheaper, safer, and more transparent than credit cards.

What Does Nondischargeable Debt Include?

Nondischargeable debts can include home mortgages, certain taxes, child support, and student loans, and can vary based on the chapter of bankruptcy filed.

A debt may also be considered nondischargeable if a creditor formally objects to a discharge in court and wins.

When a debt is discharged through bankruptcy, the debtor is relieved of any legal obligation to pay it back, and the creditor is prevented from taking any further action to collect that debt. This includes contacting the debtor or filing a lawsuit.

Personal loans, credit card debt, and medical bills are types of debt generally considered dischargeable.

Nondischargeable debt, on the other hand, does not dissolve in a bankruptcy filing. The debtor remains liable for payment even after the filing is complete. These are types of debt that Congress has deemed unforgivable due to public policy.

Types of Nondischargeable Debt

Nineteen categories of nondischargeable debt apply for Chapters 7, 11, and 12 of the Bankruptcy Code. (A more limited list of exceptions applies to cases under Chapter 13.)

Except in unique circumstances, if a debt falls under one of these categories, it is not considered dischargeable.

1. Debt incurred from U.S. taxes or a customs duty.

2. Debt for money, property, or services obtained fraudulently or under false pretenses.

3. Any debt excluded from bankruptcy filing paperwork (unless the missing creditor received prior notice and had ample time to respond to the filing).

4. Debt acquired due to fraud, larceny, or embezzlement while working as a fiduciary.

5. Debt contracted for a domestic support obligation, including child support and alimony.

6. Debt from intentionally harming another person or their property.

7. Tax debt as a result of a fine, penalty or forfeiture that is, at minimum, 3 years old.

8. Student loan debt (unless not discharging the debt would impose an “undue hardship”).

9. Debt incurred due to the death or injury of someone caused by the debtor while operating a vehicle, vessel, or aircraft while intoxicated.

10. Any debts that were or could have been listed in a prior bankruptcy filing, and the debtor waived or was denied a discharge.

11. Debt obtained by committing fraud or misappropriating funds while acting as a fiduciary at a bank or credit union.

12. Debt incurred for the malicious or reckless failure of a debtor to fulfill any commitment to a federal depository.

13. Debts for any orders of restitution.

14. Debt incurred by penalty in relation to U.S. taxes.

15. Any debt to a spouse, former spouse, or child that is incurred through a separation or divorce.

16. Debts incurred due to condominium ownership or homeowners association fees.

17. Legal fees imposed on a prisoner by a court for costs and expenses related to a filing.

18. Debts owed to a pension, profit-sharing, stock bonus, or another retirement plan, as well as any loans taken from an individual retirement annuity.

19. Debt obtained for violating federal or state securities laws, common law, or deceit and manipulation in connection with the purchase or sale of any security.

Recommended: Paying Tax on Personal Loans

How Will Nondischargeable Debt Affect Me?

Nondischargeable debt is just like any other debt in the sense that it must be paid off on time to avoid negative consequences.

If a debt is left unpaid for too long, the creditor may sell the debt to a collection agency, which then may result in any number of the following repercussions:

• Significantly lowering a credit score

• Flagging a borrower as “high risk” to future lenders

• Decreasing the odds of approval for future credit offerings

• Increasing high-interest rate offers with less favorable terms

• Adding negative remarks to your credit history

• Activating a lien against a property or asset

• Prompting creditors to pursue legal action

• Enacting wage or asset garnishment

How Can I Resolve Nondischargeable Debts?

Making plans to resolve any outstanding debts as soon as possible is key to managing a credit history and salvaging future credit opportunities. Here are strategies for paying off debts to consider.

Stop Using Credit

The first step toward debt resolution is to stop accruing it. Many people rely on credit cards, with the average American having almost $6,500 in debt as of February 2025, according to TransUnion®, one of the major credit bureaus.

Making a point not to purchase anything that can’t be bought with cash outright can help curb unnecessary expenses. This includes larger purchases that may require financing. Leaving credit cards at home and removing their information from online payment systems can also help remove the temptation of using them.

Create a Budget

According to a 2024 Debt.com survey, 89% of Americans said making a budget helped them get out of or stay out of debt.

A monthly plan including income and expenses can help reveal where extra money might be coming in and where you can cut back on unnecessary spending. A plan will provide a holistic view of spending habits, allowing for larger decisions to be made about how to change habits in order to fit new, debt-focused priorities.

Cutting back on expenses and carefully tracking spending can help reveal extra dollars and cents needed to pay down debts.

Start a Part-Time Job

When paying down debt is a top priority, taking on another job or picking up additional hours at your current one can be extremely helpful.

An extra check here and there can provide funds to make additional payments on debts, helping to dissolve them more quickly. Consider options such as working weekends at a local coffee shop, picking up a temporary gig in food delivery, or freelancing for additional income.

Recommended: 19 Jobs That Pay Daily

Consolidate Debt

Applying for a personal loan is a strategy for managing several debts simultaneously. Though it may seem counterintuitive to take on another loan, a personal loan can be used to pay off multiple existing lines of credit, such as credit cards, and consolidate them into one loan with a single monthly payment and, possibly, a lower interest rate.

In addition to comparing rates, it’s important to make sure you understand how a new loan could benefit you in the long run. For instance, if your monthly payment is lower because the loan term is longer, it might not be a good strategy, because it means you may be making more interest payments and therefore paying more over the life of the loan.

However, a debt consolidation loan could help streamline payments and ease the anxiety that comes with being responsible for managing numerous lines of credit.

💡 Quick Tip: Credit card interest rates average 20%-25%, versus 12% for a personal loan. And with loan repayment terms of 2 to 7 years, you’ll pay down your debt faster. With a SoFi personal loan for credit card debt, who needs credit card rate caps?

The Takeaway

Nondischargeable debts cannot be eliminated by bankruptcy, and without proper management, they could worsen your current financial situation. Like any other debt, nondischargeable debt must be paid off on time in order to avoid negative repercussions. Creating a plan to handle outstanding debts as soon as possible is a smart choice. A personal loan is one option to consider in this situation.

SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

FAQ

What does it mean if a debt is non-dischargeable?

Non-dischargeable debt is debt that cannot be eliminated by bankruptcy.

What type of debt cannot be discharged?

Debts that cannot be discharged in bankruptcy include alimony, child support, most types of taxes, most student loans, and debt resulting from fraud and other criminal activity.

How do I remove discharged debt from my credit report?

If discharged debt is still on your credit report, you will have to contact each of the big three credit reporting bureaus and file a dispute, giving information to verify that the item(s) should be removed.

*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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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.

This article is not intended to be legal advice. Please consult an attorney for advice.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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Jan

2026

15 Scholarships for Hawaiian Students to Apply for in 2026-27

By Marcy Lovitch | Student Loans, student_loan | Comments Off

Finding the right financial aid can make all the difference when pursuing higher education. For Hawaiian students, there are numerous scholarships available for the 2026-27 academic year, specifically designed to support your educational journey.

Whether you’re seeking aid based on academic performance, financial need, or cultural background, these scholarships offer valuable opportunities. If you have a Native Hawaiian lineage, here are 15 prominent scholarships you may want to apply for.

Key Points

• Scholarships are available for Hawaiian students based on both financial need and academic excellence, ensuring opportunities for a wide range of applicants.

• Many scholarships for Hawaiian students emphasize cultural preservation and support individuals who demonstrate a commitment to their Hawaiian heritage.

• Some scholarships target students pursuing degrees in specific fields such as health care, education, and environmental sciences.

• Scholarships are available for high school seniors, undergraduates, and graduate students, offering assistance at different stages of education.

• In addition to scholarships, Hawaiian students can apply for grants, federal student loans, and private student loans to help pay for college.

Scholarships for Native Hawaiians

Scholarships are essentially free money from different organizations, groups, or institutions to be used toward your education. Since these are awards, the money doesn’t need to be paid back. They can help make affording college easier and may even eliminate the need to apply for federal or private student loans.

Below you’ll find some of the more commonly touted Native Hawaiian scholarship opportunities. However, this list is only partial, and you can find others through the Hawai‘i Community Foundation, the Office of Hawaiian Affairs, and by using SoFi’s scholarship search tool. You can also register for a chance to win a $2,500 SoFi Scholarship simply by entering your name and email address.

Here are the top 15 scholarships you can consider applying for if you are of Hawaiian ancestry:

1. Native Hawaiian Chamber of Commerce Scholarship

Sponsored by the Native Hawaiian Chamber of Commerce, this scholarship is geared toward students pursuing study in the area of business administration at an accredited two- or four-year college institution in Hawaii or the continental U.S.

Applicants for this must exhibit interests in the Hawaiian language, culture, and history, and have a commitment to contribute to the greater community.

2. Native Hawaiian Health Scholarship Program

The Native Hawaiian Health Scholarship Program (NHHSP) is a merit scholarship given to students seeking a degree in the field of healthcare. Some of the health professions include physician, nurse, dentist, clinical psychologist, dietitian or nutritionist, and social worker, among others. It’s important to note the eligible health professions may change each year.

Native Hawaiian students enrolled full-time at an accredited college or university in Hawaii can apply. Recipients who receive an NHHSP award are obligated to work full-time in medically underserved areas in Hawaii for a minimum of two years and a maximum of four.

Along with covering the student’s tuition and other education-related costs, the scholarship provides a monthly stipend for their full-time work requirement in their health care discipline.

3. Second Century Scholarship

The Second Century Scholarship is an award available to all Native Hawaiians attending any of the 10 campuses and educational centers within the University of Hawaii system. Since the scholarship is need-based, students who apply need to show they qualify for the requisite amount of financial aid.

Award amounts differ and are determined by the applicant’s financial need and the availability of funds. Native Hawaiian students can apply for financial aid through their campus financial aid offices. All regular financial aid deadlines apply.

4. Jean Ileialoha Beniamina Scholarship for Ni‘ihau Students Fund

A need-based scholarship, the Jean Ileialoha Beniamina Scholarship for Ni‘ihau Students Fund is for students who reside on either Kaua‘i or Ni‘ihau Island. Current Ni‘ihau residents or Kaua‘i residents who are one or two generations removed from Ni‘ihau Island are given preference, along with those students who are proficient or fluent in the Hawaiian language.

5. Blossom Kalama Evans Memorial Scholarship Fund

The Blossom Kalama Evans Memorial Scholarship Fund is sponsored by the Hawai‘i Community Foundation, which has over $7 million dollars a year available for scholarships from more than 300 funds.

College juniors, seniors, or those going on to grad school can apply. Applicants must be a resident of Hawaii and attend college in the state. Preference is given to those students who major in Native Hawaiian or Hawaiian studies.

6. Prince Kūhiō Hawaiian Civic Club Scholarship

The Prince Kūhiō Hawaiian Civic Club, an organization dedicated to the preservation and perpetuation of Hawaiian values, culture, and education, sponsors scholarships open to a variety of students pursuing degrees or certificates.

Preference for these awards are given to Hawaiian students that have engaged in community service or volunteer work, along with individuals pursuing degrees in the Hawaiian language, culture, studies, journalism, or education.

In addition, there is a vocational scholarship program for students who live in Hawaii. Applicants need to be enrolled at least part-time in a vocational degree program, including associate degrees, or a certification program on a list of their approved educational institutions and approved programs in Hawaii.

7. Warren Nakupuna Ah Loo Memorial Scholarship

This merit-based prize, named for the late civil servant Warren Nakupuna Ah Loo, is funded by the Nakupuna Foundation, a nonprofit committed to the advancement of the Native Hawaiian community.

Created for high school graduates or anticipated graduates from one of Hawaii’s Kamehameha Schools, the Warren Nakupuna Ah Loo Memorial Scholarship is designed to support students attending college anywhere in the U.S. who are pursuing studies in STEM (science, technology, engineering, or math).

8. Rosemary & Nellie Ebrie Scholarship

This scholarship, also sponsored by the Hawai‘i Community Foundation, is for Native Hawaiians who were born and currently reside on the island of Hawai‘i, otherwise known as the Big Island.

Applications for the Rosemary & Nellie Ebrie Scholarship are open to undergraduate and graduate students who demonstrate financial need.

9. Asian & Pacific Islander American Scholarship Program

Asian & Pacific Islander American (APIA) Scholars offers a range of scholarships for students who identify as Asian, Native Hawaiian, or Pacific Islander. These awards are for undergraduate students who are already attending a U.S. accredited college or university, and range from $2,500 for one-year awards to $20,000 for multi-year awards.

APIA scholarships give special focus to those students who live at or below the poverty level and are first-generation college students. Applicants also must be a citizen, national, or legal permanent resident of the U.S.

How Do I Know if I’m Eligible for Native Hawaiian Scholarships?

The term Native Hawaiian refers to a person with origins in the aboriginal, indigenous people who settled in Hawaii, founded the Hawaiian nation, and exercised sovereignty over their territory. A Native Hawaiian person is also considered to be a Pacific Islander, which refers to those people from Polynesian, Micronesian, and Melanesian cultural backgrounds.

It’s important to note people who are born in Hawaii but don’t have any ancestral links aren’t considered to be Native Hawaiians.

Scholarships for Native Hawaiian Women

If you’re a Native Hawaiian woman, you have the opportunity to apply for scholarships specifically created to support your educational pursuits. These scholarships include:

1. Ida M. Pope Memorial Scholarship

Women of Hawaiian ancestry can apply for the Ida M. Pope Memorial Scholarship through the Hawai‘i Community Foundation. This scholarship is set up to benefit a female student pursuing a career in the field of health, education, or STEM. Applicants need to demonstrate financial need, be a resident of Hawaii, and enroll as a full-time student.

2. Ka‘ehu Scholarship Fund

Another women-only scholarship offered through Hawai‘i Community Foundation, the Ka‘ehu Scholarship Fund, is for female-identifying students working toward earning an undergraduate or graduate degree.

The need-based award gives preference to women of Hawaiian ancestry that identify as LGBT and have participated in community service, clubs, and/or high school athletics.

3. AAUW Honolulu Branch Education Funds

The American Association of University Women (AAUW) promotes equity and education for women and girls. The Honolulu branch of AAUW offers need-based scholarships for Hawaiian female undergraduate students who already have some college credits.

The AAUW Honolulu Undergraduate Scholarship is for women who have already completed some college (a minimum of 12 credits), but had to halt their education for certain life circumstances. For this reason, the application is open to those who are 21 or older.

Female students must already be accepted or enrolled as a full- or part-time undergraduate in a college, community college, university in Hawaii, or online program from a regionally accredited public or private not-for-profit educational institution. Applicants need to be a Hawaiian resident and demonstrate financial need.

AAUW Honolulu also has graduate scholarships that are offered and administered through the Hawai‘i Community Foundation.

4. The Betty Bell Scholarship for Kauai Women

Established in 2020, the Betty Bell Scholarship for Kauai Women benefits women from the island of Kauai who demonstrate a strong work ethic and may not normally have the opportunity to go to college.

The prize is named after Betty J. Bell, the first licensed pharmacist on the island of Kauai, who was a strong advocate for women, especially for those who wanted to achieve their career dreams. Her namesake scholarship prioritizes working mothers, as well as women who are returning learners who had started college but didn’t get to complete their degree.

The scholarship is administered through the Hawai‘i Community Foundation, and applicants must be a resident of Kauai Island and demonstrate financial need.

5. Ka’iulani Home for Girls Trust Scholarship

A need-based scholarship, the Ka’iulani Home for Girls Trust Scholarship supports female students of Hawaiian ancestry who are full-time college freshman or sophomores.

Women must be of Hawaiian ancestry, residents of Hawaii, and attend an accredited, two- or four-year, not-for-profit college or university within the Aloha state.

Recommended: 10 Popular Scholarships for Women

Can I Get a Scholarship for Being Hawaiian?

Yes, there are many scholarships for those who are of Hawaiian ancestry as well as for individuals who are Hawaiian born and residents of the state.

How Do I Get a Hawai’i Promise Scholarship?

If you are planning to attend one of the University of Hawaii’s seven community colleges, you can apply for a Hawai’i Promise Scholarship. This scholarship offers money from the state of Hawaii, along with the University of Hawaii, to provide qualified students with all of their direct education costs (tuition, books, fees) that aren’t met by other forms of financial aid.

In 2023, almost $3.8 million was awarded to 1,774 eligible students in the UH Community College system, with the average award per student equaling $2,142.

To qualify for a Hawai’i Promise Scholarship, you’ll need to be enrolled in at least 6 credits per semester at a UH Community College, be a resident of Hawaii, and complete the Free Application for Federal Student Aid (FAFSA). You’ll then be notified by your campus if you’re eligible for the scholarship.

Recommended: Important FAFSA Deadlines to Know

What Is Native Hawaiian Exemption Tuition?

Students who can show proof of their Native Hawaiian ancestry may be able to get a Native Hawaiian Tuition Waiver. Those who apply must have a financial need based on information given on the FAFSA form.

The waiver applies to part of your tuition (not fees) and you must be at least a part-time student (6 credits) and attending an institution within the University of Hawaii system.

Recommended: What Is Need-Based Financial Aid?

The Takeaway

There are a multitude of scholarship opportunities available for Native Hawaiians, aka people who are of Hawaiian ancestry. Scholarships for Native Hawaiians can be need- or merit-based and are open to undergraduate, graduate, vocational students, and community college attendees. Since competition for scholarships can be fierce, being able to apply for specific scholarships can give a Native Hawaiian student a major leg up when it comes to paying for college.

Other ways to pay for college include cash savings, grants, federal student loans, and private student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

FAQ

If I was born and live in Hawaii, does that make me a Native Hawaaian?

Not necessarily. A Native Hawaiian is a person who is a descendant of one of the original Polynesian settlers in Hawaii. You can be a Native Hawaiian and not live in Hawaii, or even not have been born there, but you must have indigenous ancestry.

Do you have to live in Hawaii to be eligible for a scholarship?

It depends. Some Native Hawaiian-specific scholarships require the applicant to be a Hawaiian resident, but it’s not always a prerequisite.

How much does it cost to go to school in Hawaii?

The average cost for tuition and fees for a four-year college program is $7,723 for in-state students and $20,995 for out-of-state students. Tuition for private colleges or universities in Hawaii clocks in at $17,121.

Photo credit: iStock/davidf

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Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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