Jul
12
2024

Timberland Investment: Benefits and Risks

By | Growing Wealth, invest, Investing | Comments Off on Timberland Investment: Benefits and Risks

An increasing number of investors looking for diversification and long-term profits have turned their focus to timberland investments, a strategy that involves purchasing and managing forested land for profit.

Timberland provides a special combination of potential long-term land value appreciation, revenue from lumber sales, and in some cases environmental advantages. This strategy also, however, comes with a unique set of risks and challenges owing to climate and geographical factors.

What Exactly Is a Timberland Investment?

Buying forest land with the primary goal of managing and harvesting the timber for profit is known as a forestry investment. Because the growth and production of timber is not correlated with the stock or bond markets, timberland investing is considered an alternative asset class.

It also may be a hedge against inflation, as the demand for lumber and other wood-based products tends to grow over time, and rarely tracks the movement of stock and bond markets.

Periodic wood sales, land value appreciation, and prospective leasing opportunities for recreational use or conservation easements are some of the ways that a timberland investment may pay off over time.

Investments in timberlands that are managed responsibly may yield a renewable resource, and balance commercial interests with environmental management. This asset class combines aspects of real estate and agricultural investment to provide a practical investment in natural resources.

Ways to Invest in Timberland

Large institutional investors like pension funds and universities may own millions of acres of timberland outright. While land management on that scale may be difficult for retail investors, individuals can invest in this asset class through mutual funds as well as exchange-traded funds (ETFs) that are focused on forest land, and companies that supply infrastructure or produce timber-based goods.

REIT investing (real estate investment trusts) is another avenue that individual investors can use to access timberland investing. Certain types of REITs include lumber-producing properties, and related real estate.

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How Can Timberland Be Profitable?

Timberland can be a desirable alternative investment since it can provide income from a number of sources. The main source of income is the recurring sales of harvested timber, which is utilized in many different businesses such as energy, paper, and construction. But timberland offers a range of potential growth opportunities, including:

•   The value of timber itself. Trees gain value over time as they grow, and the demand for timber tends to increase as well — a potential upside for investors long term.

•   Land value. The land itself may also increase in value over time. By building infrastructure, such as roads, bridges, and trails that increase accessibility and appeal for a variety of applications, investors may also see higher land values, or profits from land use deals.

•   Potential for development. After the trees have been harvested, a property may be developed for residential or commercial use.

•   Recreational activities. Additionally, timberland can make money through leases for outdoor activities like fishing, hunting, and ecotourism, or by selling carbon credits. While preserving the forest’s natural health, long-term income can be realized through effective management and sustainable methods.

Benefits of Investing in Timberland

There are several advantages to investing in forestry that may provide both financial and environmental benefits. Timber is a tangible good with steady demand in sectors like building, paper, and energy — unlike stocks, which may be volatile and subject to market swings.

As a result, timberland investments typically have a low correlation with traditional asset classes such as stocks and bonds. One of the main advantages of investing in timberland is that it offers portfolio diversification, which can help investors manage risk.

The consistent biological development of trees — which, depending on species, temperature, age, and other factors, increases their volume by an average of 5% annually — makes forest investment attractive. Timberland may yield relatively consistent, long-term profits from the sale of timber, as well as possible increases in property values. As such, it offers a hedge against inflation, as timber prices tend to rise with general price levels.

While not exactly known as a green investing strategy, investments in timberland may promote environmentally sound forestry methods, and aid in carbon sequestration, which improves the ecological health of forests and the planet as a whole.

Additionally, owning timberland may result in tax benefits, such as possible deductions for land management initiatives like conservation easements.

Timberland investors can benefit greatly from the expansion of the housing sector in particular, since they can take advantage of the growing demand for building materials.

Risks and Challenges of Timberland Investing

Although investing in timberland has many advantages, there are also risks and challenges that potential investors need to take into account.

Timber prices may be subject to market volatility, which might result in inconsistent revenue from sales of timber. Furthermore, timberland is an illiquid asset, which means that selling it rapidly without risk of loss is challenging.

Wildfires, pests, and diseases are examples of environmental dangers that can seriously harm wood supplies and lower the investment’s value.

It can be expensive and time consuming to manage a timberland investment because it calls for specific knowledge and constant attention to forestry techniques and markets.

The profitability and operational flexibility of timberland investments may be impacted by modifications to laws and policies pertaining to environmental protection and land use.

Timberland Investing Pros and Cons

Potential Advantages

 Risks and Challenges
Portfolio diversification May succumb to volatility in certain markets
Potential for long-term profits Highly illiquid
A hedge against inflation Vulnerable to climate change and environmental risk factors
Environmental benefits Political issues and land disputes
Potential tax advantages Management/maintenance costs
Tends to rise with housing market Regulatory hurdles

Alternative Investments With SoFi

Investing in timberland can be a wise alternative investment, since it can provide income as well as potential profits from a number of sources. And because the demand for timber is typically steady over time, investors in this asset class may be able to enjoy long-term growth.

Ready to expand your portfolio's growth potential? Alternative investments, traditionally available to high-net-worth individuals, are accessible to everyday investors on SoFi's easy-to-use platform. Investments in commodities, real estate, venture capital, and more are now within reach. Alternative investments can be high risk, so it's important to consider your portfolio goals and risk tolerance to determine if they're right for you.

Invest in alts to take your portfolio beyond stocks and bonds.

FAQ

What are the key advantages of investing in timberland?

Timberland investments offer several benefits, such as portfolio diversification, inflation protection, the potential for consistent long-term earnings, sustainable forestry, and possible tax advantages.

What are the major risks and challenges of timberland investments?

The major risks and challenges of timberland investments include market fluctuations affecting timber prices, illiquidity of the asset, environmental threats such as wildfires and pests, high management costs, and regulatory changes impacting land use and profitability.

Is timberland investment a good way to diversify?

Investing in forestry may help to lower overall investment risk because it has a low correlation with other conventional asset classes like stocks and bonds.

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An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. This and other important information are contained in the Fund’s prospectus. For a current prospectus, please click the Prospectus link on the Fund’s respective page. The prospectus should be read carefully prior to investing.
Alternative investments, including funds that invest in alternative investments, are risky and may not be suitable for all investors. Alternative investments often employ leveraging and other speculative practices that increase an investor's risk of loss to include complete loss of investment, often charge high fees, and can be highly illiquid and volatile. Alternative investments may lack diversification, involve complex tax structures and have delays in reporting important tax information. Registered and unregistered alternative investments are not subject to the same regulatory requirements as mutual funds.
Please note that Interval Funds are illiquid instruments, hence the ability to trade on your timeline may be restricted. Investors should review the fee schedule for Interval Funds via the prospectus.

Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.
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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Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

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.

SOIN-Q224-1900857-V1

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Jul
12
2024

What Is an ATM Card?

By | Budgeting & Goals, Financial Independence, money | Comments Off on What Is an ATM Card?

An ATM card is a type of bank card that allows you to access your bank account at an automated teller machine (ATM). You can use the card to withdraw cash, check your balance, and perform other banking transactions at ATMs. Unlike a debit card, however, you can’t use an ATM card to make purchases or get cash back in a grocery store.

Here’s a closer look at what ATM cards are, how they work, and how they differ from debit cards.

How ATM Cards Work

ATM cards first came out in the late 1960s as a way to enable account holders to withdraw funds from a checking account at an ATM. While they’ve largely been replaced by debit cards, banks still issue ATM-only cards for some checking and savings accounts.

To use an ATM card, you simply insert your card into an ATM. The machine then reads the magnetic stripe or embedded chip on the card and prompts you to enter your personal identification number (PIN), which verifies your identity as the account holder. Once authenticated, you can perform a number of different transactions, such as withdrawing cash, transferring funds between accounts, and checking your account balance. Some banks also allow you to use an ATM card to deposit cash or checks into an account.

ATM Cards vs Debit Cards

The terms “ATM card” and “debit card” are often used interchangeably, but they are not the same thing. While most debit cards can also be used as ATM cards, ATM cards can’t be used in all the same ways as debit cards.

Along with offering all the functionality of an ATM card, a debit card also allows you to make purchases both in-store and online, just as you would with a credit card. Unlike using a credit card, however, the payment immediately gets deducted from the linked checking account.

While some debit cards allow you to choose “credit” at the payment terminal when you shop, this doesn’t turn it into a credit card. The only difference between selecting “credit” instead of “debit” when making a purchase with a debit card is that there will be a short delay in the processing of the transaction — anywhere from a few hours to three days.

Another difference between debit and ATM cards is that debit cards have the word “Debit” printed on the front.

Because debit cards offer more functionality than ATM cards, these days you will typically receive a debit (not an ATM-only) card when you open a new bank account.

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Benefits of Using an ATM Card

Here’s a look at some of the advantages of ATM cards.

•   Convenience: ATM cards allow you to access your funds at an ATM rather than through a teller. As a result, you don’t have to stand in line at the bank, and you can manage your account at any time (not only during the bank’s business hours).

•   No spending temptation: Since ATM cards cannot be used for purchases, they can help you avoid impulse spending and better manage your finances.

•   No fees (when used correctly). As long as you use your ATM card at in-network ATMs, you can avoid getting hit with any ATM fees.

Drawbacks of Using an ATM Card

•   You can still overdraft: If you opt into overdraft services, you may be able to withdraw more money that you have in your account. The bank may view this as a loan and charge transfer fees and interest.

•   Limited functionality: ATM cards can only be used to manage your account at an ATM. You can’t use this type of card for purchases, making it less convenient than a debit card.

•   Withdrawal limits: Some ATM cards come with relatively low daily withdrawal limits, which can be a challenge at moments when you want access to higher amounts of cash.

Keeping ATM Cards Secure

Your ATM card allows you to get your hands on your money, so you don’t want it (or your PIN) to fall into the wrong hands. Some safeguards to keep in mind:

•   Keep your ATM card securely stored. No one should have access to the card but you, so be sure to keep it in a safe place, just like you would cash, checks, or credit cards. If your card gets lost or stolen, it’s important to immediately notify your bank.

•   Protect your PIN. Try to avoid writing your pin down, especially on or near your ATM card. Also be careful to never give any information about your PIN (or ATM card) over the phone. For example, if you get a call from someone claiming to be from your bank or the police asking to verify your PIN, don’t offer the information. Hang up and call your bank directly.

•   Monitor your account. Another type of bank fraud, called ATM skimming, can occur where criminals put a hidden electronic device on an ATM card reader that gets information from a bank card whenever a customer uses the machine. Though rare, it’s wise to regularly check your bank statements and account activity to ensure there aren’t any unauthorized withdrawals from your bank account. If you notice anything suspicious, contact your bank immediately.

Recommended: Bank Scams and How to Avoid Them

Alternatives to ATM Cards

ATM cards are a valuable money management tool but they’re not the only option. Here are some alternatives to ATM cards to consider.

•   Debit cards: A debit card allows you to make ATM withdrawals like ATM cards do, but can also be used to make purchases wherever debit cards are accepted.

•   Credit cards: These cards allow you to borrow funds up to a certain limit for purchases, with the added benefit of building credit history. However, they require responsible use to avoid debt.

•   Prepaid Cards: Prepaid cards work like debit cards but are not linked to a bank account. You load funds onto the card and can use it for purchases and ATM withdrawals.

•   Mobile payment apps: Apps like PayPal, Venmo, and Apple Pay allow you to make transactions and manage money electronically without needing a physical card.

The Takeaway

An ATM card allows you to utilize an ATM and perform basic account management functions without talking to — or waiting for — a teller. They can be an ideal tool for those who primarily need cash and basic banking services. However, ATM cards offer limited functionality compared to debit and credit cards, which can be a drawback in an increasingly digital economy.

When deciding whether to use an ATM card, you’ll want to consider your financial habits, needs, and the level of convenience you’re looking for. Exploring alternatives such as debit cards, credit cards, and mobile payment apps can help you find the best solution for managing your finances effectively.

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Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.50% APY on SoFi Checking and Savings.

FAQ

Do I need a PIN for my ATM card?

Yes, you need a personal identification number (PIN) to use your ATM card. You’ll set your PIN when you receive your card. You’ll then need to enter it any time you access your account at an ATM, whether you’re withdrawing cash or simply checking your balance. This creates an added layer of protection to prevent unauthorized access to your funds.

Can I use my ATM card like a credit card?

No, you cannot use an ATM or debit card like a credit card. A true ATM card can only be used to manage your account at an ATM. A debit card functions like an ATM card but also allows purchases. When you make purchases with a debit card, however, the money is directly debited from your checking account. By contrast, a credit card allows you to borrow funds up to a limit and repay them later, typically with interest.

What if my ATM card is lost or stolen?

If your ATM or debit card is lost or stolen, you’ll want to immediately report the loss to your bank in order to prevent unauthorized transactions. Your bank will freeze or cancel the card and issue a replacement, usually with a new card number and PIN. After that, you’ll want to monitor your account closely for any suspicious activity. If the lost card was a debit card, you’ll also need to update any automatic payments linked to that card with the new card information to ensure continuity.

Photo credit: iStock/Milan Markovic

SoFi members with direct deposit activity can earn 4.50% 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 4.50% 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 4.50% 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 8/27/2024. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.

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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.

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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SOBK-Q224-1883065-V1

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Jul
11
2024

HECM vs HELOC Loans, Compared

By | Home Ownership, mortgage | Comments Off on HECM vs HELOC Loans, Compared

As a homeowner, chances are you’ve worked hard to build equity in your property — and if you’re facing a big purchase or unexpected financial need, it may make sense to convert that wealth into cash. But there are a variety of ways to go about it, each with their own benefits and drawbacks. In this article, we’ll walk you through the differences between a Home Equity Conversion Mortgage (HECM) and a Home Equity Line of Credit (HELOC), so you can determine which, if either, is right for you.

What Is an HECM?

Let’s take a look at HECMs first. An HECM is a type of reverse mortgage that allows homeowners aged 62 or over to take out a lump sum against the value of their home. (There are other types of reverse mortgages on the market that may be available to younger applicants, but these are privately offered and not backed by the Department of Housing and Urban Development, or HUD, as HECMs are. There’s also such a thing as an HECM for purchase, which helps those 62 and over finance a principal home.)

For some seniors, HECMs are especially attractive because the loan and its interest don’t need to be repaid until the last surviving borrower permanently vacates or sells the home (or dies). While there are usually upfront fees involved, for some borrowers, this arrangement can feel like free money.

However, because interest is building over time and not being repaid, HECMs can eat into the equity you’ve built in your home, which may be less than ideal if you’re planning to pass it on to an heir as an asset. Along with receiving a less valuable investment, your heirs will also be on the hook to pay the loan in full upon your death — or otherwise surrender the title to the lender.

What Is a HELOC?

A home equity line of credit, or HELOC, works differently than an HECM. A HELOC is kind of like a secured credit card, except it’s secured with your home’s equity. In fact, in some cases, it may literally come with a card — or a checkbook — attached to the account.

A HELOC allows you to borrow money against the value of your home, but doesn’t require you to take one large lump sum. Instead, you can borrow what you need through the HELOC’s draw period, and then repay it during the repayment period that follows. This arrangement may help some people borrow less overall, which in turn could mean paying less for the loan by way of interest. Some HELOC users borrow and repay money repeatedly during the draw period.

However, a HELOC is still a loan — and it still comes with costs. Some HELOCs allow borrowers to make interest-only payments during the draw period. However, once the principal comes due during the repayment period, the monthly payments will be much larger.

Key Differences

While HECMs and HELOCs are similar in some ways, there are some important differences that set them apart — and which may help you determine which is best suited to your needs.

Borrower Age Requirements

HECMs are only available to homeowners aged 62 and over.

HELOCs, on the other hand, don’t have any borrower age requirements — but they do have minimum equity requirements, and the lender will also check out your credit score and proof of income to qualify you for the loan. (Your credit history and other financial information will be part of the lending qualification decision for both HELOCs and HECMs.)

Collateral Requirements

Both HECMs and HELOCs are secured by your home, and you’ll need to have built up home equity in order to have value to borrow against.

Every lender has different specific requirements, but for a HELOC, you’ll generally need to own at least 15% or 20% of your home’s value. For an HECM, you’ll usually need to own a substantially greater portion of your home: 50% is a general rule of thumb, and some lenders may require you to have even more equity than that.

Repayment Requirements

Finally, as discussed above, there are substantial differences in HECM vs. HELOC repayment policies.

HECMs have upfront costs, but the loan principal and interest don’t come due until after the last surviving borrower sells the property, permanently moves out of the home, or dies.

HELOCs, on the other hand, are split into a draw period and a repayment period. During the draw period, when you can borrow against your home’s value, you may be able to make interest-only payments; both principal and interest will come due in the repayment period. The draw period is often 10 years long, and the repayment period may be another 10 or even 20 years.

Pros of an HECM

So, what are some of the benefits of a reverse mortgage?

•   Money up front with no interest until later. For seniors who are planning to live in their home until they die — and don’t necessarily want to pass the property on to heirs — an HECM can provide an additional income stream that doesn’t require repayment during their lifetime.

•   HECM funds aren’t taxable. Because money you borrow with an HECM isn’t considered income, you don’t owe income taxes on it.

Cons of an HECM

And now, some HECM drawbacks:

•   You’ll decrease your home’s value as a personal investment. Because an HECM is borrowed against your equity and repayments don’t begin until after you move out or die, it will decrease the value of your property as an investment for you and your family.

•   You’ll probably still have to pay upfront fees. Even for those who see HECM funds as “free money,” origination fees and other upfront costs can still add up to a sizable amount.

•   Your home could be foreclosed if you fail to make other payments. Property taxes, homeowners association fees, and homeowners insurance premiums will all still be due regularly, and if you don’t pay them, your HECM lender could take possession of your home.

•   Your heirs may face a challenging decision. If you don’t repay your HECM during your lifetime, your heirs will either have to repay the loan in full or surrender the property to the lender — and they’ll be forced to make that decision fairly soon after your death as the transaction typically needs to happen within one to six months.

Pros of a HELOC

Now, let’s take a look at the best reasons to consider a HELOC in the question of HECM vs. HELOC.

•   Lower interest rates than other forms of credit. Because a HELOC is secured by your home, it may offer lower interest rates than comparable types of loans like unsecured credit cards.

•   Borrow only what you need. HELOCs allow you to flexibly borrow only what you need during the draw period, rather than taking out a lump sum.

•   HELOC interest may be tax-deductible if you are using the funds you borrow to make improvements on your home.

Cons of a HELOC

There are drawbacks to HELOCs, too, to be aware of. For instance:

•   Variable interest. Most HELOCs have variable interest rates, which means your monthly payment can be unpredictable as market conditions change.

•   Decreased equity. Like any loan taken against your home’s value, a HELOC can decrease the amount of equity you own — which in turn decreases the value of your home investment (until the loan is repaid).

•   HELOCs open you up to foreclosure. If you fail to make your HELOC payments, the lender can foreclose on your home (even if you’re still making payments on your primary home mortgage loan).

HELOC vs HECM: Which Option Is Better?

In the end, only you can determine which of these loans makes the most sense for your personal situation — or if it would be better to find another way entirely to meet your financial needs. Both HELOCs and HECMs put your home on the line and decrease the equity you’ve worked hard to build in your property.

For those age 62 and over who are eligible to apply for an HECM — and who don’t plan on leaving the home to heirs — a reverse mortgage could offer access to cash without many costs in the short term.

For those who are looking for a more flexible way to borrow against their home equity, a HELOC may help you convert your home value to cash at a lower interest rate than other types of loans. However, variable-rate interest can make payments unpredictable, and if you choose interest-only payments during the draw period, you may be stuck with much higher bills later on when repayment comes due.

The Takeaway

HELOCs and HECMs can help eligible borrowers use the value they’ve built in their home to their advantage by converting some of it to cash in the short term. However, both are forms of debt, and therefore costs and risks are involved. One major advantage of HELOCs is that anyone with sufficient equity in their home can apply for a HELOC, whereas HECMs are only for those age 62 and over.

SoFi now offers flexible HELOCs. Our HELOC options allow you to access up to 95% of your home’s value, or $500,000, at competitively low rates. And the application process is quick and convenient.

Unlock your home’s value with a home equity line of credit brokered by SoFi.

FAQ

What are the differences between HELOC and HECM?

An HECM is a type of reverse mortgage. It is a loan available solely to homeowners aged 62 and over. With an HECM, the principal and interest payments don’t become due until the borrower moves out of the home or passes away, which can make them attractive for some seniors (but challenging for those hoping to pass on the home to heirs). A HELOC, on the other hand, is a more flexible line of credit that allows you to borrow money as needed, up to the maximum amount you qualify for, against your home’s equity. Unlike HECMs, HELOCs do not have age eligibility requirements.

What are the downsides of an HECM loan?

HECMs lower the equity you own in your home, and since interest and principal are building up unpaid over time, the value of your ownership can decrease dramatically over the course of the loan’s lifetime. Furthermore, the entire sum of the loan becomes due when the last surviving borrower vacates the home or passes away, which means your heirs will need to pay up — or they will forfeit the property to the lender.

Is there an age requirement for a HELOC?

Unlike HECMs, HELOCs do not have age requirements. However, your lender will still assess your creditworthiness, and there are also minimum equity requirements to ensure you own enough of your home’s value to borrow against.

Photo credit: iStock/VioletaStoimenova

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

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

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.

²To obtain a home equity loan, SoFi Bank (NMLS #696891) may assist you obtaining a loan from Spring EQ (NMLS #1464945).

All loan terms, fees, and rates may vary based upon individual financial and personal circumstances and state.

You may discuss with your loan officer whether a SoFi Mortgage or a home equity loan from Spring EQ is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit brokered through SoFi. Terms and conditions will apply. Before you apply for a SoFi Mortgage, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and loan amount. Minimum loan amount is $75,000. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria.

SoFi Mortgages originated through SoFi Bank, N.A., NMLS #696891 (Member FDIC), (www.nmlsconsumeraccess.org). Equal Housing Lender. SoFi Bank, N.A. is currently NOT able to accept applications for refinance loans in NY.

In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

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Jul
11
2024

Home Equity Conversion Mortgage (HECM) vs Reverse Mortgage

By | Home Ownership, mortgage | Comments Off on Home Equity Conversion Mortgage (HECM) vs Reverse Mortgage

A reverse mortgage is a popular way for retirees to supplement their retirement income. A home equity conversion mortgage (HECM) is the Federal Housing Administration’s reverse mortgage program, which allows borrowers to withdraw some of the equity in their home. It has stricter eligibility requirements than other reverse mortgages, but it is also the only reverse mortgage insured by the U.S. Government.

Here’s a look at the unique aspects of an HECM compared to a traditional reverse mortgage, the pros and cons, and the all-important fees that come with reverse mortgage financing arrangements.

What Is a Reverse Mortgage?

A reverse mortgage loan is a way to obtain financing using your home as security. In most cases, the home must be your primary residence. You, as the borrower, receive either a lump sum or an amount each month. You accrue interest and pay fees based on the amount you receive, and the amount you owe the lender increases over time. As your loan balance increases, your home equity decreases. You pay back the loan when you sell the house, permanently move away, or pass away.

When someone with a reverse mortgage dies, the heir who has inherited the house settles the loan balance, either by repaying the outstanding loan amount, selling the home and keeping any remaining proceeds after settling the loan, or signing over the deed to the lender.

What Is an HECM?

A home equity conversion mortgage (HECM) is one type of reverse mortgage. It is the most popular type of reverse mortgage, but it is only available to people aged 62 and older. This is the only reverse mortgage insured by the U.S. Government and is only available through a lender approved by the Federal Housing Administration (FHA). (It’s not to be confused with an HECM for purchase, which allows homebuyers aged 62 and older to purchase a home with the loan proceeds from a reverse mortgage.)


💡 Quick Tip: You deserve a more zen mortgage. Look for a mortgage lender who’s dedicated to closing your loan on time.

Key Similarities

HECMs and other types of reverse mortgages share similarities. One is that they are a popular way for seniors to supplement their income if they have significant equity in their home. Another is that borrowers remain responsible for paying the property taxes and homeowners insurance for the life of the loan.

Key Differences

There are always reverse mortgages pros and cons. But there are also key differences when you examine an HECM vs. a reverse mortgage.

•   Age of borrowers: A reverse mortgage is an option for anyone aged 55 or older. An HECM is only available to those aged 62 or older.

•   Payout options: Reverse mortgages typically only offer a lump-sum payout. An HECM has more options, such as a lump sum, monthly payouts, or a credit line.

•   Stricter eligibility requirements: The HECM property must be a primary residence, the homeowner must have a certain amount of equity, and the homeowner must have the ability to pay property taxes and homeowners insurance.

•   FHA-insured: The HECM is the only reverse mortgage insured by the U.S. federal government and is only available through an FHA-approved lender.

•   Mortgage insurance: This may not be required for a proprietary mortgage, but it is for an HECM.

•   Lending limits: For an HECM the lending limit is $1,149,825 for 2024. Lending limits may be higher for other reverse mortgages.

Pros of an HECM

The main advantages of an HECM are that monthly payments are not required because the loan is paid back when the home is sold. Also, lenders do not set a minimum credit score to qualify. The table below lists the pros of an HECM.

Pros of an HECM

No required monthly payment Borrowers can pay down the principal each month, pay just interest, or pay nothing at all until the home is sold.
No minimum credit score Lenders do not look for a minimum credit score, but they may do a credit check to look for federal tax liens or loan delinquencies.
FHA-insured The FHA protects you if your mortgage is more than your home’s value.
No spending restrictions You can spend the money from an HECM on whatever you like.
No income taxes The money from an HECM is not subject to income tax.
Guaranteed income As long as you stay in your home, you are guaranteed the income from an HECM.
Home ownership When it is time to sell your home, any remaining equity after paying off the mortgage belongs to you or your heirs.

Cons of an HECM

In the HECM vs. reverse mortgage equation, the cons of an HECM are mostly related to the strict eligibility requirements listed in the table below.

Cons of an HECM

Age requirements You must be at least 62 years of age. This applies to your spouse also if you are applying together.
Home maintenance You must live in the home as your primary residence and maintain it appropriately.
Free of debt payments You must be free of debt payments and up-to-date on your insurance and property taxes.
Scams are rife Some HECMs are scams. It’s wise to consult a financial advisor before signing anything so that you understand the terms and consequences of the loan.
Potential loss of aid The IRS does not consider an HECM as income, so you do not have to pay taxes on the financing. However, the money may affect any Supplemental Security Income or Medicaid you may be eligible for.

Comparing Costs and Scenarios

A reverse mortgage does not require a monthly payment, but you will pay origination, servicing, and third-party fees, property taxes, and insurance. These fees are paid back when you sell your home, move, or pass away.

The amount that you can borrow through a reverse mortgage will be less than the full value of your home to cover the cost of insurance and origination fees. Also, the younger you are the less you can borrow because you are expected to live longer, giving the loan more time to grow before the debt is paid. If you’re thinking about a reverse mortgage, it might be wise to also look at a home equity line of credit (HELOC), which is another way to borrow based on the equity you have in your home. HECM vs. HELOC is worth considering as there are costs and benefits in each case.

Insurance Premiums

For an HECM, you will likely pay a mortgage insurance premium (MIP) at closing and an annual MIP for the life of the loan. The MIP charge at closing is based on the home’s appraised value or the HECM loan limit, whichever is less. Insurance fees are typically 2% of your home’s appraised value upfront, and then you will be charged an additional 0.5% of the total loan value annually. There will also be an origination fee of around 3% of the loan value.

The HECM loan limit is $1,149,825 for 2024.

Origination Fee

Your lender will charge an origination fee for processing your HECM loan. According to the U.S. Department of Housing and Urban Development (HUD), the lender can charge 2% of the first $200,000 of your home’s value plus 1% of the amount over $200,000 or $2,500, whichever is the greater amount. However, the lender cannot charge more than $6,000.

Here are a few scenarios for an HECM loan with different home values and the associated costs. Note that not all lenders charge the maximum fee, so it pays to shop around.

1.    Home value: $100,000

The home’s value is less than $125,000 so the lender will charge $2,500.

2.    Home value: $175,000

Since the home is valued at more than $125,000 but less than $200,000, the lender will charge a maximum of 2% of the home’s value, or $3,500.

3.    Home value: $350,000

Since the home is valued at greater than $200,000, the lender may charge up to 2% ($4,000) plus 1% for the remaining $150,000 ($1,500), for a total of $5,500.

Servicing Fee

The servicing fee covers the cost of calculating and sending statements and making sure taxes and insurance premiums are up to date. If the interest rate is fixed or annually adjusted, the monthly fee may be around $30. If the interest rate is adjusted monthly, the fee might be slightly higher and around $35. At closing, the lender may set aside the servicing fee and add the cost to your loan balance each month.

Third-Party Fees

Third-party fees are closing costs and include survey and appraisal fees, title and title insurance fees, and credit checks. These are likely to be in the range of $1,000 to $2,000.

Interest Rates for HECMs

Reverse mortgage interest rates are another factor to consider. It’s not easy to find the interest rates for HECMs. However, you can find recent average rates on the HUD website. The interest rate will vary between private and HECM loans, but the latter tend to have lower interest rates because they are backed by the FHA.

Fixed vs. Adjustable Interest Rate

Most lenders offer monthly adjustable interest rates. The lender calculates an adjustable HECM by including an index and setting a margin. The margin does not change after the loan is originated, but the index fluctuates according to the market. Reverse mortgage borrowers can’t typically predict how much interest they will ultimately pay because the term of the loan is uncertain and interest continues to mount over the life of the loan. How much interest will ultimately accrue is somewhat uncertain for both variable and fixed rate reverse mortgages, so it is wise to discuss the pros and cons with a lender and with a financial advisor as well.


💡 Quick Tip: A home equity line of credit brokered by SoFi gives you the flexibility to spend what you need when you need it — you only pay interest on the amount that you spend. And the interest rate is lower than most credit cards.

The Takeaway

An HECM is a type of reverse mortgage. It has stricter eligibility requirements compared to other reverse mortgages. To qualify for an HECM, you must be aged 62 or older and should be relatively free of debt.

There are benefits to an HECM. For example, it is FHA-insured and you don’t have to pay tax on the payouts. However, an HECM may affect your eligibility for Supplemental Security Income or Medicaid. Also, the lending limits are lower for an HECM. Seekers of a reverse mortgage or an HECM should be careful not to fall victim to a scam and a fraudulent loan — do your research carefully and only work with a lender that has a good reputation. Consider asking a trusted financial advisor for a recommendation.

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


SoFi Mortgages: simple, smart, and so affordable.

FAQ

Is an HECM the same as a reverse mortgage?

An HECM is a type of reverse mortgage. However, it is only available to people aged 62 and older. An HECM is insured by the U.S. federal government and is only available through a Federal Housing Administration (FHA)-approved lender.

What are the main differences between an HECM vs. reverse mortgage?

The main differences between an HECM and a reverse mortgage are that an HECM is only available to those aged 62 or older. An HECM is also FHA-insured. The payout options are often more flexible for an HECM, whereas a private reverse mortgage might only offer a lump sum payout.

Are the qualifications the same for an HECM and reverse mortgage?

No. For an HECM, you must be 62 years old or older, whereas other reverse mortgages are available to those 55 and over. For an HECM, the property must be your primary residence, and the equity requirements might be higher for an HECM than a private reverse mortgage. Also, the lender will want to see that you can pay property taxes and homeowners insurance.

Photo credit: iStock/LordHenriVoton

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

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

²To obtain a home equity loan, SoFi Bank (NMLS #696891) may assist you obtaining a loan from Spring EQ (NMLS #1464945).

All loan terms, fees, and rates may vary based upon individual financial and personal circumstances and state.

You may discuss with your loan officer whether a SoFi Mortgage or a home equity loan from Spring EQ is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit brokered through SoFi. Terms and conditions will apply. Before you apply for a SoFi Mortgage, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and loan amount. Minimum loan amount is $75,000. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria.

SoFi Mortgages originated through SoFi Bank, N.A., NMLS #696891 (Member FDIC), (www.nmlsconsumeraccess.org). Equal Housing Lender. SoFi Bank, N.A. is currently NOT able to accept applications for refinance loans in NY.

In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.


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.

¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.

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Jul
11
2024
How to Build Credit Over Time_780x440

10 Strategies for Building Credit Over Time

By | Credit, Financial Independence, personal_loan | No Comments

Broadly speaking, the best way to build credit is actually quite straightforward: Be the kind of borrower you’d want to lend to. While that might sound simple, it isn’t always second nature to know exactly how to go about doing that. For instance, you might know it’s critical to make payments on time, but you might not be aware that it’s important to keep your unused credit cards open.

If you’re setting out on your journey toward building credit, here’s a rundown on how to build credit, with 10 strategies you can stick to.

Strategies for Building Credit

1. Acquire Credit

Perhaps the first crucial step in how to build credit is to acquire credit accounts. For someone who does not have a credit history of their own, getting a co-signer or becoming an authorized user on an established cardholder’s account can help you get started. You might also consider a secured credit card or applying for a credit card designed specifically for students. Or you can look into a credit-builder loan.

In the long run, however, you’ll be in a much stronger position if you can borrow in your name alone. Establishing credit of your own can make it easier to borrow in the future for such things as an auto loan, a personal loan, or even a mortgage.

2. Pay Bills Consistently and On Time

Timely payments are crucial, and making at least the minimum payment each month on a revolving credit line can make a positive impact on your credit score.

That’s because payment history makes a bigger impact on a person’s credit score than anything else. A borrower’s credit score summarizes their health and strength as a borrower, and payment history makes up 35% of that score on a credit rating scale. So the most important rule of credit is this: Don’t miss payments.

Many lenders will actually allow you to customize due dates so they line up with pay dates, and most let you set up automatic payments from a checking or savings account. Take the time to find what works for you to make your payments in a timely fashion.

Recommended: When Are Credit Card Payments Due?

3. Manage Your Credit Utilization Rate

The further away a person is from hitting their credit limit, the healthier their credit score will be, in most circumstances. A borrower’s debt-to-credit ratio, also known as the credit utilization rate, should ideally be no more than 30%. Higher utilization rates can negatively affect a person’s credit score.

Paying revolving credit lines in full each month can have a positive impact on your credit score because doing so essentially lowers your credit utilization rate. Additionally, keeping tabs on your credit utilization rate before continuing to swipe is key to using a credit card wisely.

4. Keep Unused Credit Cards Open

Lenders want to see accounts maintained in good standing for a long time. As such, a credit history looks better when it has a solid number of accounts in good standing that have been open for a while. When debt accounts are closed, that history ends, and eventually closed accounts drop off your credit report entirely.

To keep this from happening, avoid closing old credit cards, even if you’re not using them anymore. You might consider using these accounts to automate a few bills, like car insurance or a monthly subscription account, to avoid account closure due to inactivity.

5. Diversify Your Credit Mix

Having a diverse mix of credit products can also have a positive impact on a person’s credit, accounting for 10% of a credit score calculation.

Opening at least one credit card is a good step for most borrowers. Using a personal loan to finance a large purchase with a relatively low interest rate, and paying off that personal loan on time, can also have a positive impact on a person’s credit. Student loan refinancing can be another way to diversify your credit mix, while potentially lowering your interest rate.

However, while having a mix of credit can help your standing as a borrower, it’s not a good idea to open a line of credit that’s not needed just to increase your mix of credit types. Instead, stick to applying only for credit you actually need and that you’re confident you can afford to pay off.

6. Check Your Credit Report

It’s recommended to check your credit reports from the three major credit bureaus at least once a year. Doing a regular review of your reports is a good way to monitor your overall credit health and understand the impacts of different activities. It’s also important to make sure that everything listed in your credit report is accurate, and to flag any errors or fraudulent activity.

Where Can You Track Your Credit Score?

You can get a free copy of your credit report every 12 months from each of the three major credit bureaus (Equifax, Experian, and TransUnion). Request your copy online by visiting AnnualCreditReport.com. Note that you can also request a copy anytime you experience an adverse action based on your credit report (like being denied for a loan), among other circumstances.

Checking your credit score is even easier. While it’s not included in your credit report, you can get your current score from your credit card company, financial institution, or on a loan statement. Another option is to use a free credit score service or site. If you’re tracking changes to your credit score, it’s helpful to know how often your credit score updates and then check in accordingly.

7. Limit Credit Applications

When making major life changes, like starting a job, getting married, or having children, sometimes multiple lines of credit might be helpful to get through it all. Financial institutions understand that, but they also know that, historically, people who borrow a lot of money at once from multiple sources tend to have more difficulty paying them back. Spreading out credit applications over time whenever possible typically has a lower impact on an overall credit score.

Recommended: What Is the Average Credit Card Limit?

8. Avoid Overspending

Perhaps one of the most effective ways to ensure you keep building your credit in the right direction is to only spend what you can afford to pay off. This will help you more easily maintain a lower credit utilization rate, and it can prevent you from racking up a balance and falling into a debt spiral.

Plus, if you pay off your balance in full each month, as opposed to only making the minimum payment, you can avoid incurring interest charges. This is a perk that’s foundational to what a credit card is.

9. Get Credit For Other Bills You Pay

If you’re early in your credit building journey, it can help to get credit for other payments you’re making on time, such as your rent payment, utility bills, or even streaming services fees. For instance, Experian Boost adds on-time payments in other accounts to your Experian credit report. There are also a plethora of rent-reporting services out there that will report your timely rent payments to the credit bureaus.

10. Pay Off Any Existing Debt

Another important strategy toward building credit is to pay down any debt you may currently have. Especially important when it comes to the time it takes to repair credit, saying goodbye to existing debt allows you to lower your credit utilization rate, which in turn builds your credit score. There are a number of tactics out there for paying off debt, from a debt consolidation loan to a balance transfer credit card.

What Is a “Good” Credit Score?

A “good” credit score is considered within the range of 670 to 739 under the FICO Score, the credit scoring model most commonly used by lenders. “Very good” is considered anywhere from 740 to 799, while “exceptional” is 800 and above.

Keep in mind, however, that these exact credit score ranges can vary a bit from model to model. For instance, in the VantageScore® range, a score of 661 to 780 is considered “good.” In general though, anything in the upper 600s is generally within the range of a “good” credit score.

How Long Does it Take to Build Your Credit Score?

According to Experian, one of the three major credit bureaus, it generally takes around three to six months of data to generate an initial credit score.

Credit card issuers typically don’t report account activity until the end of the first billing cycle, so it’s worth waiting a month or two before you check in on the status of your score. If you’re anxious to ensure your activity counts, it’s also a good idea to check with your issuer to make sure they report to the credit bureaus.

What Can You Do with “Good” Credit?

The importance of having good credit can’t be overstated. By building credit, you’ll have easier access to borrowing opportunities in the future, whether that’s an auto loan for a new car or a mortgage for a new home. A better credit score also allows you to secure better terms, such as lower interest rates and a higher borrowing capacity.

The Takeaway

As you can see, there are a number of ways to build credit. First and foremost, you’ll want to make sure you’re following the tenets of responsible credit usage, as these are arguably the best ways to build credit. From there, you can consider additional credit building strategies, such as ensuring that your on-time rent and utility payments count.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

How long does it take to build credit?

Once you open your first credit account, it generally takes around three to six months to start building a credit score.

How do I establish credit with no credit history?

There are several ways to establish credit if you have no credit history. Some strategies to explore include becoming an authorized user on a friend or family member’s credit card account, applying for a secured credit card, applying for a retail card, taking out a credit-builder loan, and reporting your on-time rent and utility payments to the credit bureaus.

How can I improve my credit as quickly as possible?

Though it takes time to repair or build credit, there are some steps you can take. For starters, work on paying down credit cards with high balances. And be sure to pay your bills on time, every time. If you’re having trouble keeping track of due dates, consider setting up autopay or calendar reminders for yourself.

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 .

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.

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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