Nov
08
2024

What Is Carried Interest?

By | Growing Wealth, invest, Investing | Comments Off on What Is Carried Interest?

Carried interest is a compensation arrangement commonly used in private equity, hedge funds, and venture capital investments. General partners or GPs may receive a percentage of investment profits in the form of carried interest. This is similar to the way that certain stocks pay out profits to shareholders as dividends.

If you’re considering an investment in private equity, a hedge fund, or venture capital, it’s important to understand how carried interest works and what it means for you.

Key Points

•   Carried interest is a compensation arrangement where general partners receive a percentage of investment profits, typically around 20%, incentivizing them to achieve strong fund performance.

•   Before general partners receive carried interest, limited partners must first get back their original capital, and the fund may need to meet a minimum hurdle rate.

•   Carried interest is taxed at the long-term capital gains rate if held for more than three years, which can be controversial due to perceived tax advantages.

•   Understanding carried interest is crucial for investors in private equity, hedge funds, or venture capital, as it affects expected returns and highlights the importance of fund performance.

•   In venture capital, carried interest tends to involve longer investment periods, with returns realized through company exits like IPOs, mergers, or acquisitions.

Carried Interest Explained


Carried interest is one of several ways that a general partner may be compensated. General partners are individuals or entities that have a say in how investment funds are managed.

Private equity funds, hedge funds, real estate funds, and venture capital funds can have multiple general partners, each of whom is entitled to a share of the fund’s profits. These profits may be paid out in the form of royalties, capital gains, dividends, or carried interest.

There’s no universal carried interest definition; it’s simply a performance-based fee that’s used to incentivize the fund’s general partners or money managers. Generally, the higher the fund’s profits, the more carried interest the general partners collect.

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How Carried Interest Works


Carried interest, often simply called “carry,” works by rewarding an investment fund’s general partners for strong performance.

A typical payout structure is 20% of a fund’s returns, though compensation can vary from one fund to another. Market trends can push payouts higher or lower at any given time. General partners can also collect an annual management fee. For instance, the fee may be 2% of the fund’s assets under management (AUM).

There are some rules to know about when and how carried interest is paid to GPs:

•   For general partners to receive carried interest, fund investors must first receive back the amount of capital they put in. These investors are referred to as limited partners or LPs and how they’re paid depends on the fund’s structure.

•   The fund may need to achieve a minimum rate of return called a “hurdle rate” before any carried interest is paid out to GPs.

•   Carried interest may be withdrawn if a fund underperforms. This may happen if LPs do not receive back the amount of capital they put in.

Here’s what investors should know about carried interest, in a nutshell: When they invest in a private equity fund, hedge fund, or venture capital fund, they (altogether) typically get ~80% of the profits and the GPs get the rest. Knowing how to define carried interest matters if you plan to explore these types of alternative investments for your portfolio.

Tax Treatment of Carried Interest


Taxes on investments affect the level of returns you get to keep. Taxing carried interest is a controversial topic, thanks to a loophole in the Internal Revenue Code (IRC). Section 1061 allows for carried interest held for longer than three years to be taxed at the long-term capital gains rate.

Long-term capital gains are taxed at 0%, 15%, or 20%, depending on your income and household size. Short-term capital gains, meanwhile, are taxed at ordinary income tax rates. For the 2024 tax year, the maximum income tax rate for the highest earners was 37%. Additionally, that will remain the same for the 2025 tax year.

Lawmakers have argued that the current tax rules regarding carried interest allow wealthier taxpayers to sidestep higher tax rates by holding carried interest for longer than three years. Proposed legislation, such as the Carried Interest Fairness Act of 2024, has been pieced together in an attempt to close the loophole and apply ordinary income tax rates on carried interest. But despite being introduced, that particular piece of legislation has (at the time of publication) not advanced.

Carried Interest in Different Contexts


How does carried interest work in different investment settings? How GPs and LPs receive payouts can depend on the type of investment involved.

Private Equity


Private equity refers to an investment in a company that is not publicly listed or traded on a stock exchange. Private equity funds can hold numerous investments in a single basket, offering investors exposure to a range of different companies, including ones that have been delisted from an exchange and ones that have yet to launch an initial public offering (IPO).

In a private equity arrangement, GPs can be compensated with carried interest. Limited partners receive the original capital they invested, along with a share of the profits as dividends, less any fees they pay to own the fund.

Hedge Funds


Hedge funds pool money from multiple investors to make investments. These funds can hold a range of different investments, including stocks, bonds, commodities, real estate, derivatives, land, and foreign currency. Risk is typically higher with a hedge fund, but investors may earn a higher rate of return.

Hedge fund payouts generally follow the same pattern as private equity funds. The GPs receive ~20% of the profits as carried interest, once the fund reaches the minimum hurdle rate. The remaining profits are paid to limited partners as dividends, along with the return of their original capital investment, which they receive first.

Venture Capital


Venture capital funds pool money from multiple investors to fund startups and early-stage companies. This is essentially a form of private equity investment, with some differences.

Investment holding periods may be longer compared to private equity funds and returns are not realized until a company within the fund exits. That can happen if the company decides to go public with an IPO, merges with another company, or is acquired.

Investors can receive the proceeds of an exit as compensation, along with the return of their original capital. General partners receive carried interest, which is again around 20%, but may be higher or lower based on the fund’s performance and its hurdle rate.

Future of Carried Interest


Carried interest has received significant attention from lawmakers and the executive office. Some policymakers have discussed taxing carried interest as ordinary income for those making $400,000 or more, while others would like the loophole closed altogether. Closing the loophole could cut down on tax avoidance among some taxpayers, allowing the federal government to recoup more tax dollars.

HOwever, whether any major changes will be implemented remains to be seen.

What is an alternative to carried interest? One option proposed in the UK is growth shares. Growth shares entitle the shareholder to returns based on future growth. However, this strategy seems on the surface to be very similar to carried interest in terms of the tax benefits it delivers to GPs.

The Takeaway


Carried interest, meaning how general partners get paid, is an important consideration when determining which alternative investments to include in your portfolio. Carried interest is a compensation arrangement under which general partners receive a portion of investment profits, and that’s typically around 20%. This can be a fairly high-level way to invest, of course, so it may be a good idea to get your toes wet with a simple brokerage account before worrying about carried interest. If you have yet to start investing, it’s easy to open a brokerage account online.

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For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

FAQ


Why is carried interest controversial?


Carried interest is controversial because some critics have argued that it allows wealthier taxpayers to benefit from a tax loophole.

How much is carried interest taxed?


In the U.S., carried interest is taxed at the capital gains tax rate. Short-term capital gains are taxed at ordinary income tax rates. Carried interest held for more than three years, however, is subject to the lower long-term capital gains tax rate.

What is the average carried interest?


A typical carried interest payout for general partners is 20% of the fund’s profits. This is paid in addition to a 2% annual management fee. Funds may need to achieve a minimum rate of return before carried interest can be paid out.

Photo credit: iStock/Andrii Yalanskyi

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Nov
08
2024

Understanding VA Loan Assumption: A Guide for Veterans and Homebuyers

By | Home Ownership, mortgage | Comments Off on Understanding VA Loan Assumption: A Guide for Veterans and Homebuyers

If you purchased your home with a VA loan but are ready to move on, you may be able to benefit from VA loan assumption. VA loan assumption allows someone else to take over your existing VA loan mortgage — and unlike when you originated your VA loan, the new borrower doesn’t necessarily have to be a military servicemember, veteran, or surviving spouse to qualify. However, your eligibility for this program depends on a few factors, including when you took out your VA loan, and has a few caveats to understand. We’ll explain below.

What Is VA Loan Assumption?

VA loan assumption is a process in which a new borrower can “assume,” or take over, an existing VA mortgage loan. As mentioned above, you don’t have to be eligible to take out a VA loan to be eligible to assume one.

In other words, using VA loan assumption, the homebuyer could take over the existing VA loan rather than securing a brand-new mortgage to buy the home (or buying it in cash). A VA loan has some benefits vs. a conventional loan, and assuming the loan may offer the buyer a lower interest rate (as VA loans often have competitive rates). On the seller side, loan assumption could attract more buyers and help a home sell more quickly.

Eligibility for VA Loan Assumption

Even when a new buyer is taking over a VA assumable loan, the original lender will still want to see proof of the new borrower’s creditworthiness. (After all, repayment of the remainder of the balance will now fall to the new borrower.) Here’s what you need to know about eligibility requirements for VA loan assumption:

For the Assumer

The person taking over the loan still needs to prove their creditworthiness to the lender or VA. The VA doesn’t specify a minimum credit score, but most lenders want to see a score of at least 620.

The assumer’s debt-to-income ratio (DTI) also matters, and should be no higher than 41%. They’ll also need to have sufficient income and be able to pay the VA loan assumption fee, which is 0.5% of the total loan balance — and the difference, if any, between the home’s sale price and the existing loan balance.

For the Seller

Those who took out a VA loan to purchase their home anytime after March 1, 1988, are eligible to sell their home via loan assumption. Be sure to triple-check that your lender will release you from the liability of the loan — otherwise, if the new borrower fails to repay or makes late payments, it could hit your credit score. And once the deal goes through, recheck to be sure your lender has finalized the release. (If you don’t yet have a VA loan but are wondering what is a VA loan and could I get one, briefly: You may be eligible for a VA loan if you are a member of the military, veteran, Reserve or National Guard member, or surviving spouse. You’ll need to get a Certificate of Eligibility from the VA in order to apply for a VA loan.)

Recommended: VA Loan Calculator

Benefits of VA Loan Assumption

As mentioned above, VA loan assumption has benefits on both sides of the table.

For buyers, taking advantage of a VA assumable loan could be very attractive if current mortgage rates are generally higher than the rate on the existing loan. Although creditworthiness still needs to be proven to the lender, if you’re wondering how long does it take to assume a VA loan, rest assured that the underwriting process may be faster since the mortgage is already written.

For sellers, having an assumable loan could expand your pool of potential buyers and help the house sell faster. Transferring a loan may also take less time than going through the process of waiting for the buyer’s new mortgage to pay off your debt.

Risks and Considerations

While there are benefits that can make VA loan assumption worth considering, there are risks and drawbacks to consider, too.

For one thing, while the new borrower doesn’t need to be eligible for a VA loan to take one over, you won’t be able to take out a new VA loan until the loan that’s being assumed is fully paid off. (Normally, you can use a VA loan multiple times to buy a house.) Additionally, you must check with your mortgage lender to ensure you can obtain release of liability for the loan to avoid impacts to your credit score after managing the loan is out of your hands.

On the buyer’s side, assuming a loan may offer better interest rates — but require more cash up front to pay the owner for the equity they’ve stored in the home. Depending on how long the loan has been in place, that total may be higher or lower than a traditional down payment.

VA Loan Assumption Process

If you want to put your home on the market with the option to assume your VA loan, you’ll need to take these steps.

1.    First, reach out to your lender and let them know your intentions. You can also use this opportunity to ask about the release of liability once the loan has been transferred.

2.    In your home sale listing, market the fact that an assumable loan option is available. This may be attractive to many buyers and increase the speed of your sale.

3.    Once you have a prospective buyer, you’ll need to offer full disclosure about the terms of the loan. (If the buyer turns out to be a service member, veteran, or surviving spouse, inquire about a “substitution of entitlement,” which is used when one person who is VA-loan eligible takes over a loan from another.)

4.    At the time of sale, you’ll need to wait for the borrower to be qualified by your lender or the VA to ensure they’re deemed creditworthy enough to take over the loan. Closing will also involve the cash payment to make up the difference to the agreed-upon purchase price.

5.    Once the loan is transferred, ensure you have documentation of your release of liability from the VA or your lender.

VA Funding Fee for Loan Assumption

While VA loans are generally low-cost ways to buy a home, they do come with a funding fee — and assumed loans have one too. However, the fee is only 0.5% in the case of assumed VA loans, which is far lower than the 1.25%-3.3% it might cost to take out such a loan in the first place.

Recommended: VA Loan Buyers Guide

Release of Liability

We’ve said it before, but it bears repeating: As the seller, you’ll want to make sure you have a document stating your liability for the loan has been released once the loan transfer is completed. Otherwise, you may see impacts on your credit score for financial behaviors you have no control over.

Comparison: VA Loan Assumption vs. New VA Loan

Here’s how VA loan assumption vs. new VA loans compare, at a glance.

New VA Loan VA Loan Assumption
Must be eligible military servicemember, veteran or surviving spouse Eligibility not required
Funding fee of 1.25%-3.3% Funding fee of 0.5%
No required down payment Buyer must pay difference between existing equity and loan balance

The Takeaway

Assuming a VA loan can be a valuable way for borrowers to save money on interest (and enjoy a shorter repayment period) while also allowing veterans to market their home for sale in an attractive way.

SoFi offers VA loans with competitive interest rates, no private mortgage insurance, and down payments as low as 0%. Eligible service members, veterans, and survivors may use the benefit multiple times.

Our Mortgage Loan Officers are ready to guide you through the process step by step.

FAQ

Who can assume a VA loan?

Anyone who can prove their creditworthiness to the lender and afford to pay the difference can assume an available VA loan. However, if that party would not be qualified to take out their own VA loan in the first place, the original lender will not be able to take out a new VA loan until the existing one is paid off by the new borrower.

Does the assumer need to be a veteran?

The assumer of a VA loan does not need to be a veteran. However, if they are not a veteran, the original VA loan borrower will not be able to take out a new VA loan for themselves until the original loan has been paid off.

Can any VA loan be assumed?

Any VA loan issued after March 1, 1988 is eligible for assumption.

Photo credit: iStock/SethCortright

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

*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.

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.

†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

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Nov
08
2024

What Is a Cardholder Name?

By | Financial Independence, money, Terminology | Comments Off on What Is a Cardholder Name?

A cardholder name is the name of the account holder or authorized user, printed or embossed on a debit or credit card. It helps ensure that transactions are linked to the correct account. However, it may not be the same as the individual’s legal name.

While it is typically no longer common for a merchant to verify a cardholder name with a person’s identification, many merchants do reserve the right to refuse a purchase if the name on the card does not match a person’s actual name. Learn more about cardholder names and the role they play in your financial life.

Key Points

•   A cardholder name is the name of the account holder or authorized user embossed or printed on a debit or credit card, linking transactions to the correct account.

•   It may differ from the legal name due to typos or name variations, but it can be important to have that corrected.

•   Merchants can refuse purchases if the cardholder name doesn’t match the ID.

•   Cardholder names are crucial for aligning transactions with accounts.

•   Name changes or misspellings can be corrected by contacting the bank for a new card.

Definition and Importance of Cardholder Name

When you open a bank account, you will enter your personal information, including your legal name, as part of the account opening process. Depending on the type of account that you open, your bank may send you a credit or debit card to more easily make transactions on your account. In most cases, the name on your account will be embossed or printed on your card — this is referred to as your cardholder name.

While most of the time, your cardholder name is also your full and legal name, that is not always the case.

•   You may use a nickname (say, Jon Smith vs. Jonathan F. Smith) or other variation of your name. For instance, people with a hyphenated last name may not use both of those names.

•   In some cases, you may change your name after opening the account (often in cases of a marriage or divorce).

•   It may be that you made a typo or misspelled your name when you opened the account. (You can typically correct that and have a new corrected card issued to avoid problems.)

In most cases, with bank accounts and credit card accounts, you must use your legal name. This is part of efforts to prevent bank fraud and money laundering. That said, in some instances, you may be able to use, say, a preferred first name vs. your legal first name.

What’s more, merchants do reserve the right to deny a purchase if there’s a mismatch between the name on the card and a person’s name (say, on their ID) when they are using a debit card or a credit card.

For these reasons, it can be a wise move to make sure your cardholder name matches your legal name.

Cardholder names are important because they help align the transactions made with your card and your account, whether that may be your checking account (in the case of a debit card) or your line of credit (with a credit card).

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Where to Find Your Cardholder Name

The most obvious place to find your cardholder name is on the front of your credit or debit card itself. It is often embossed (or raised), but many cards today show the cardholder name with the letters printed vs. being raised.

If you have lost your card or don’t have immediate access to it and want to check your cardholder name, you may also be able to find it in your online banking account.

Common Issues With Cardholder Names

While it’s common for a cardholder’s legal name to be their cardholder name, there are a few times when this might not be the case.

Misspellings and Variations

Occasionally you may apply for a new credit or debit card with a variation of your full legal name. You may also make a typo on your application, causing the bank to send you a card with a misspelling of your name. While technically you may be able to use your debit or credit card with a name that is not your full and legal name, it’s wise to contact your bank or financial institution to get a replacement card with your correct name.

Married Names and Name Changes

Legally changing your name (such as when you get married or divorced) may cause your cardholder name to be different from your new legal name. While it is common for people to contact their financial institution to update the name on their account (and debit or credit card), it may not be required.

It can be a smart idea to have your cardholder name updated to match your new legal name at your earliest convenience. To update the name on your account as well as your cardholder name, contact your bank or credit union (or your credit card issuer). They can usually change the name on your account as well as ship you a new card with your updated name.

Recommended: Savings Account Interest Calculator

Cardholder Name vs. Authorized User

Many credit card and other financial accounts allow the primary account holder to add authorized users to their account. A fact about debit cards and credit cards is that an authorized user is someone who can use the card to make purchases but ultimately is not responsible for the account or the debt.

Here are some points to know about this arrangement:

•   Generally, each authorized user who is added to an account will receive their own card with their own cardholder name.

•   In some cases, an authorized user’s card will have the same card number as the primary account holder, while other times each authorized user has a different credit or debit card number.

Regardless, when adding an authorized user to an account, be sure you trust the person to use the card responsibly as it’s your personal finances on the line.

Protecting Your Identity: Best Practices

Identity theft is a real and growing concern, with the Federal Trade Commission (FTC) receiving more than one million reports of this problem via its website in 2023. It’s smart to take precautions to safeguard your personal details to avoid this scenario and related bank fraud.

One best practice for protecting your identity is to make sure to shield your credit or debit card from unauthorized use. Avoid giving out your debit card’s personal identification number, or PIN, and don’t lend your cards to people.

If you’re a frequent online shopper or place orders by phone, you might look into using what are known as virtual card numbers to further protect your account. Many credit cards offer the ability to generate these virtual card numbers which are good for a one-time use. They are typically created via a browser extension or an app.

Recommended: How to Write a Check

The Takeaway

Most credit and debit cards have the name of the account holder or authorized user embossed or printed on the card, as a way to ensure that only the correct person with privileges uses the card. While often the cardholder name is the full and legal name of the account holder, that is not always the case if, say, you have recently changed your name or you use a variation of your name. In these instances, you may want to update your card so it reflects your legal name.

Are you shopping for a bank account with a debit card and other features to suit your financial needs? Check out all that SoFi offers.

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FAQ

Can my cardholder name be different from my legal name?

Yes, the name on your card may differ from your full and legal name and you may be able to still use your card to make purchases or withdraw money. However, it can be wise to have your card updated if, say, you changed your name when you got married or if your name was accidentally misspelled. Your bank or card issuer can revise your account information and send you a new card with an updated cardholder name.

What should I do if my cardholder name is incorrect?

While you may be able to make purchases with the card and be legally liable for any purchases made to your account, even if the name is not your full and legal name, it’s wise to update it. You can contact your bank, credit union, or other financial institution. They will be able to send you an updated card, usually at no cost to you.

How does my cardholder name affect online purchases?

When using a debit card or a credit card online, you will usually be asked to enter your cardholder name during checkout. You may also need to enter your name to register as a customer. While in most cases your legal name and your cardholder name match, if not, you’ll want to make sure to type in the name that is actually printed on your credit or debit card when you are entering your payment information. If the name on your card differs from your legal name, you may want to have your cardholder name updated to align with it.

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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.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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Nov
08
2024

What Is a Crossed Check? Definition & Example

By | Financial Topics, Terminology | Comments Off on What Is a Crossed Check? Definition & Example

While not common in the United States, a crossed check has parallel lines running across it or across its top left corner, indicating that it is only able to be deposited, not cashed. This can provide an additional level of security and can help prevent fraud.

Learn more about crossed checks and how they impact financial processes.

Key Points

•  Crossed checks, marked with parallel lines, must be deposited, not cashed, enhancing security and preventing fraud.

•  These checks are uncommon in the U.S., but prevalent in parts of Europe and Asia, as well as Mexico and Australia.

•  Benefits include increased security, fraud prevention, and risk mitigation by requiring deposit into a bank account.

•  Drawbacks include restricted use in countries like the U.S. and potential delayed access to funds.

•  Crossed checks cannot be “uncrossed” by the payee, but possibly by the payor.

Definition of a Crossed Check

A crossed check is one that is marked, usually with two parallel lines horizontally across the entire front of the check or just across the top left corner. The words “& Co.”, “& Company”, “And Company” or “Not Negotiable” may also appear with the lines.

A crossed check may not be directly cashed — instead, the funds from a crossed check must be first deposited into an account such as a checking account. It can’t be signed over to anyone else, nor can the payee “uncross” it (though the payor might be able to).

Crossed checks originated with the British, codified with the Bills of Exchange Act of 1882 in the United Kingdom and the Negotiable Instruments Act of 1881 in India. Crossed checks (sometimes referred to as crossed cheques) are still common in certain areas of the world, including several European and Asian countries, Mexico, and Australia. However, they are virtually unused in the U.S. banking system.

If you are overseas and sending a crossed check to someone in the U.S., you should make sure that the recipient has an account that is able to accept it.

Recommended: APY Calculator

Benefits of a Crossed Check

Here are a few of the benefits of crossed checks:

Enhanced Security

Whether you’re using online or traditional banking, security can be paramount for many consumers. When you cross a check, you are ensuring that the check cannot be cashed and instead must be deposited into an account. This increases security and ensures that there is a trail of who deposited the check.

Fraud Prevention

Another benefit of crossing a check is helping to ward off fraud. While it is typical for banks to require identification when cashing a check, this process is not quite as secure as requiring a check to be deposited into a bank account, such as a high-yield checking account.

By requiring deposit, a crossed check can be fully verified and the transaction then processed. This can help reduce the risk of banking fraud.

Risk Mitigation

Businesses often engage in risk mitigation, trying to reduce the risk of certain types of transactions. Using crossed checks can help reduce the risk of something going wrong with a particular type of check. This is because a crossed check is required to be deposited into a bank account and cannot immediately be cashed. This can provide an additional level of security to these types of check payments, allowing time for verification and lowering the overall risk of the transaction.

Limitations and Drawbacks

While there are some benefits and reasons to use crossed checks, there are a few limitations and drawbacks that you’ll want to be aware of.

Restricted Use

One of the biggest drawbacks is that the recipient may not have a bank account that is able to accept crossed checks. This is especially true if the recipient lives in a county where crossed checks are not particularly common (such as the United States). If a U.S. bank does accept a crossed check, you will have to wait for it to clear vs. being able to cash it.

Delayed Access to Funds

Another drawback is that it may cause delays for the recipient to access their money. When you cash a check at a bank or other financial institution, you can generally receive the money right away. However, with a crossed check, the check must be deposited into an account with a financial institution. This may mean a delay of several days for the check recipient to access their money, depending on how long it takes for the check to clear.

Example of a Crossed Check

You are unlikely to see an example of a crossed check in the U.S. However, if you are in another country, you might see one. It would likely have these elements:

•  It would have two crossed parallel lines that were added when the payor was writing the check. These might go horizontally across the entire front of the check. Or they might cross the top left-hand corner on a diagonal.

•  Sometimes, the words “& Co.” or “not negotiable” (or similar phrases) may also be added.

Typically, it’s not possible for a recipient to uncross a check once these marks have been made.

Recommended: 39 Passive Income Ideas to Help You Make Money

The Takeaway

A crossed check (sometimes referred to as a crossed cheque due to its British origins) is marked by two parallel lines across the front of the check. A crossed check cannot be cashed directly — instead, it must be deposited into an account at a bank, credit union, or other financial institution. This can help to mitigate risk, prevent fraud, and enhance the overall security of the process. While crossed checks are not generally used in the United States, they are still quite common in several other countries around the world.

If you are based in the U.S. and looking for a bank account that can make money management easier, see what SoFi offers.

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.


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.

FAQ

Are crossed checks still widely used?

Crossed checks are still widely used in the banking industry, but only in certain countries. Crossed checks are not very common in the United States, which may explain why many Americans have not heard of them or are not familiar with them. Rather, they are usually part of personal banking in some European and Asian countries, as well as Mexico and Australia.

Can a crossed check be uncrossed?

Generally a crossed check can not be uncrossed by the payee. The whole purpose of crossing a check is to make sure that it must be deposited into a bank account. This lets the signer of the check be able to track where the funds have gone, in case there are any issues. However, in some cases the payor (the person making out the check) could write “crossing canceled” across the face of the check to undo the crossing.

Are crossed checks common in the United States?

Crossed checks are not common in the United States, though they are still widely used in other parts of the world. In fact, because crossed checks are so uncommon in the United States, you may have trouble depositing a crossed check in the U.S.

Photo credit: iStock/AndreyPopov

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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.

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Nov
08
2024

What Is a Microdeposit?

By | Family Finances, money, Terminology | Comments Off on What Is a Microdeposit?

Microdeposits are small amounts of money, usually less than $1, temporarily added to your account. They are generally used to confirm that a bank account is valid and able to accept funds. Another reason a microdeposit might be used is as a security feature when you are linking your bank account to another bank account or to a third-party service, such as a budgeting app.

You are typically asked to verify the amount of a microdeposit to ensure that you are the account holder. This can help reduce the risk of fraudulent activity on a bank account. Learn more about microdeposits and how they can impact your banking activity.

Key Points

•   Microdeposits are small, temporary deposits, usually under $1, that are used to verify bank account ownership.

•   Microdeposits can help verify someone is the legal owner of a bank account they’re trying to link to or otherwise access.

•   To verify ownership of an account, users must report the exact amounts of (typically) two small deposits received during account linking.

•   Verifying accounts through microdeposits can help reduce the risk of someone trying to fraudulently access account funds. Unexpected microdeposits can, however, indicate a scam.

•   Microdeposits deposits are usually temporary and withdrawn by the issuing bank within a few days.

Defining a Microdeposit

Microdeposits are a type of deposit, or funds added to your bank account, but in this case in very small amounts. Here are more details about how they work.

Small Temporary Deposits

The term microdeposit describes one or more small transfers of funds, each typically less than $1. They are usually sent by one bank to another bank when an account holder tries to link two bank accounts, such as for transferring money between them or perhaps for overdraft protection. They may also be sent when you are validating that you want your bank account linked to a particular service.

These deposits are usually temporary; you aren’t actually being paid for anything. After the microdeposits are sent, the account holder typically verifies their amounts. The funds are usually withdrawn by the issuing bank within a few days.

Purpose and Use Cases

One of the biggest reasons banks use microdeposits is to verify that a particular person is the owner of a specific bank account. Microdeposit verification is often used when someone tries to link a bank account to a type of account at a different bank. Using microdeposits allows the bank to authenticate that the person requesting the linkage actually is the owner of the account. This helps to reduce fraud and ensure the safety and security of accounts.

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How Microdeposits Work

The way microdeposits work is typically straightforward. If you enter your bank’s routing and account number to link your account to another bank or third-party service, you may receive microdeposits. Generally two microdeposits are sent, each for an amount under $1.

Once you receive the microdeposits in the bank account that you are trying to link, you will go back to the other site and verify the microdeposits by typing in their amount. Shortly after the microdeposits are sent (generally within a couple of days), the bank will then withdraw the money that was deposited. This ensures that there is no net change in your account’s value after the microdeposit process is complete.

Why Microdeposits Are Used

One of the primary reasons that banks use microdeposits is to prevent bank account fraud. These deposits help to verify that you are the legal owner of a bank account you are trying to link to or otherwise use. Without this step, it might be possible for an unauthorized person to link your account to another account and then possibly withdraw money from your account or commit other fraudulent activity.

Identifying and Confirming Microdeposits

A crucial step to the microdeposit process is identifying and confirming the microdeposits. It usually takes a few days for the microdeposits to show up in your account. Once you see them, you can return to the app or bank account where you initiated the linking process. By entering the amount of the microdeposits, you usually complete the microdeposit confirmation process.

One thing to watch out for is if you receive microdeposits you are not expecting. If you see microdeposits in your account when you have not tried to link it to another account, contact your bank’s customer service or fraud department. You may be targeted by a fraud or phishing attack, meaning that someone may be attempting unauthorized access to your account.

Recommended: How to Transfer Money From One Bank to Another

Potential Drawbacks and Limitations

While they are quite common, there are a few potential drawbacks and limitations of the microdeposit process:

Delayed Transactions and Clearance Times

The microdeposit process typically takes a couple of days for the deposits to arrive and be verified. This means that linking your bank account to another account or service is unlikely to happen instantaneously or even in a single day.

Account Restrictions and Holds

If you see microdeposits hit your account and you haven’t tried to link your account to any other bank or third-party app, you’ll want to contact your bank’s fraud or customer service department right away. This is because it may mean that someone else has tried to link your bank account to another account or service. This is one of the common bank scams, and your account may need to have some restrictions put in place.

Confusion and Misunderstandings

Seeing microdeposits in your checking account may cause confusion, even if they are part of a process you initiated. You might well see one of these little deposits and spend time asking yourself who would be sending you 17 cents or whatever the amount may be. Understanding what microdeposits are and perhaps noting in your calendar when they are likely to hit can help clear up any confusion or misunderstandings.

Recommended: 10 Personal Finance Basics

Scams Using Microdeposits

If you see microdeposits in your account when you have not tried to link your account, you may be the victim of a mobile deposit scam or other type of fraud. Here’s how these typically work:

•   Scammers may try to link your account to another account, generating microdeposits in your account.

•   They then try to get you to authenticate the deposits via a verification message.

•   If you do confirm the amounts (thinking the request is legitimate), they may be able to link your account to one they control, with the goal of withdrawing money from your account.

If you ever see microdeposits in your account that you didn’t initiate, follow these steps:

•   Do not verify the microdeposit.

•   Do not click on any links or downloads connected with the microdeposit and verification request.

•   Contact your bank’s security or fraud department immediately.

•   You might also let the Federal Trade Commission at ftc.gov know of this scam so they can take appropriate steps.

Protecting yourself from this kind of scam is important as fraud rises, with 2.6 million Americans enduring some form of fraud in 2023, according to the FTC.

Recommended: How to Write a Check

The Takeaway

Microdeposits (sometimes referred to as micro deposits or micro-deposits) are small deposits to your account, generally used to verify that your account is valid and owned by you. Microdeposits are often two small, temporary deposits (usually under $1) that, when confirmed, allow two accounts or your account and a service to be linked. Though microdeposit verification is usually a security measure, unexpected microdeposits can be a signal of a scam in progress, so be wary.

If you’re looking for a banking partner that makes accessing and growing your money easy, see what SoFi offers.

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.


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.

FAQ

Are microdeposits refunded or removed from the account?

Yes, microdeposits are generally refunded from your account, usually a few days after they are deposited. One example might be if you receive two microdeposits, for $0.11 and $0.34. A few days after the deposits, the bank will generally withdraw the money, usually with one withdrawal transaction. In this case, it would be a withdrawal for $0.45. This means that the microdeposit process has no long-lasting effect on your overall balance.

Do microdeposits affect my available balance or account status?

Microdeposits don’t have a huge impact on your available balance, because of how small they are. You will see a very small increase in your available balance due to the microdeposits, but that will go away after a few days. That is because the bank that put the microdeposits into your account will also withdraw that money after a few days, leaving your account balance as if there had been no deposits.

What if I can’t locate or identify the microdeposit amounts?

If you can’t locate or identify the microdeposit amounts, it may mean that there was a problem with the linking process. It’s possible that you had a typo or other error when inputting your routing and account numbers. Keep in mind also that it can take a couple days for these microdeposits to show up in your account. If it’s been a few days, you might try to restart the linking process or contact your bank’s or the third-party service’s customer service department.

Photo credit: iStock/SrdjanPav

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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.

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.

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Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or other eligible status, be residing in the U.S., and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates reserved for the most creditworthy borrowers. If approved, your actual rate will be within the range of rates at the time of application and will depend on a variety of factors, including term of loan, evaluation of your creditworthiness, income, and other factors. If SoFi is unable to offer you a loan but matches you for a loan with a participating bank, then your rate may be outside the range of rates listed above. Rates and Terms are subject to change at any time without notice. SoFi Personal Loans can be used for any lawful personal, family, or household purposes and may not be used for post-secondary education expenses. Minimum loan amount is $5,000. The average of SoFi Personal Loans funded in 2023 was around $33K. Information current as of 2/26/24. SoFi Personal Loans originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org). See SoFi.com/legal for state-specific license details. See SoFi.com/eligibility for details and state restrictions.

✝ To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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