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A Complete Guide to Private Student Loans
The average cost of college in the U.S. is $38,270 per year, including books, supplies, and daily living expenses, according to the Education Data Initiative. While grants and scholarships can significantly lower your out-of-pocket expenses, they typically don’t cover the full cost of your college education.
Student loans, both federal and private, can help bridge this gap in financial aid to allow you to attend the college of your choice. Federal student loans are funded by the government. They tend to offer the best rates and terms, but come with borrowing limits. If you still have gaps in funding, you can turn to private student loans.
Private student loans are funded by banks, credit unions, and online lenders. Private lenders set their own eligibility criteria, and interest rates generally depend on a borrower’s creditworthiness. While private student loans don’t offer all the same borrower protections as federal loans, they can still be a smart choice to help you pay for educational expenses, as long as you do your research.
This guide offers private student loan basics, including what they are, how they work, their pros and cons, and how to apply for one.
Key Points
• Private student loans are offered by banks, credit unions, and online lenders. They are a funding option for students after federal student loans have been exhausted.
• Approval for private student loans typically depends on the borrower’s creditworthiness; students may need a cosigner due to limited credit history.
• Private loans may lack flexible repayment plans and protections that federal loans offer.
• Funds are usually sent directly to the educational institution to cover tuition and fees; any remaining amount is disbursed to the student.
• It’s essential to thoroughly research and compare private loan options, considering factors like interest rates, repayment terms, and borrower protections, before making a decision.
What are Private Student Loans?
Often when people talk about student loans, they’re referring to federal student loans, which are provided by the federal government. Private student loans, by contrast, are funded by banks, credit unions, and online lenders. Students typically turn to private student loans when federal loans won’t cover all of their costs.
You can use the money from a private school loan to pay for expenses like tuition, fees, housing, books, and supplies. Interest rates for private student loans may be variable or fixed and are set by the lender. Repayment terms can be anywhere from five to 20 years.
Unlike federal student loans, borrowers must pass a credit check to qualify for private student loans. Since most college students don’t have enough credit history to take out a large loan, a cosigner is often required.
How Do Private Student Loans Work?
Loan amounts, interest rates, repayment terms, and eligibility requirements for undergraduate private student loans vary by individual lender. If you’re in the market for a private student loan, it’s key to shop around and compare your options to find the best fit.
To get a private student loan, you need to file an application directly with your lender of choice. Based on the information you submit, the lender will determine whether or not you are approved and, if so, what rates and terms you qualify for.
If you’re approved, the loan proceeds will typically be disbursed directly to your university. Your school will apply that money to tuition, fees, room and board, and any other necessary expenses. If there are funds left over, the money will be given to you to use toward other education-related expenses, such as textbooks and supplies.
Repayment policies vary by lender, but typically you aren’t required to make payments while you’re attending school. Some lenders will allow you to defer payments until six months after you graduate. However, interest typically begins accruing as soon as the loan is dispersed. Similar to unsubsidized federal student loans, the interest that accrues while you’re in school is added to your loan balance.
The Pros and Cons of Private Student Loans
| Pros of Private Student Loans | Cons of Private Student Loans |
|---|---|
| Apply any time of the year | May require a cosigner |
| Higher loan amounts | Less flexible repayment options |
| Choice of fixed or variable rates | No loan forgiveness programs |
| Quick application process | Can lead to over-borrowing |
| Options for international students | No federal subsidy |
If federal financial aid — including grants, work-study, and federal student loans — isn’t enough to cover the full cost of college, private student loans can fill in any gaps. Just keep in mind that private student loans don’t offer the same borrower protections that come with federal student loans. Before taking out a private student loan, it’s a good idea to fully understand their pros and cons.
The Benefits of Private Student Loans
Here’s a look at some of the advantages that come with private student loans.
Apply Any Time of the Year
Unlike federal student loans, which have application deadlines, you can apply for private student loans any time of the year. As a result, they can be helpful if you’re facing a mid-year funding shortfall or if your college expenses go up unexpectedly.
Higher Loan Amounts
Federal loans have annual maximums. For example, a first-year, dependent undergraduate can borrow up to $5,500 for that year. The aggregate max a dependent student can borrow from the government for their entire undergraduate education is $31,000. Private student loan limits vary with each lender, but you can typically borrow up to the full cost of attendance, minus any financial aid received.
Choice of Fixed or Variable Interest Rates
Federal loans only offer fixed-rate loans, while private lenders usually give you a choice between fixed or variable interest rates. Fixed rates remain the same over the life of the loans, whereas variable rates can change throughout the loan term, depending on benchmark rates.
Variable-rate loans usually have lower starting interest rates than fixed-rate loans. If you can afford to pay off your student loans quickly, you might pay less interest with a variable-rate loan from a private lender than a fixed-rate federal loan.
Quick Application Process
While federal student loans require borrowers to fill out the Free Application for Federal Student Aid, or FAFSA, private student loans do not. You can apply for most private student loans online in just a few minutes without providing nearly as much information.
In some cases, you can get a lending decision within 72 hours. By comparison, it typically takes one to three days for the government to process the FAFSA if you submit electronically, and seven to 10 days if you mail in the form.
Options for International Students
While you never want to default on your student loans (since it can cause significant damage to your credit), it can be nice to know that private student loans come with a statute of limitations. This is a set period of time that lenders have to take you to court to recoup the debt after you default. The time frame varies by state, but it can range anywhere from three to 10 years. After that period ends, lenders have limited options to collect from you.
However, that’s not the case with federal student loans. You must eventually repay your loans, and the government can even garnish your wages and tax refunds until you do.
Options for International Students
International students typically don’t qualify for federal financial aid, including federal student loans. Some private lenders, however, will provide student loans to non-U.S. citizens who meet specific criteria, such as attending an eligible college on at least a half-time basis, having a valid student visa, and/or adding a U.S. citizen as a cosigner.
When we say no fees required we mean it.
No origination fees and late fees
when you take out a student loan with SoFi.
The Disadvantages of Private Student Loans
Private student loans also have some downsides. Here are some to keep in mind.
May Require a Cosigner
Most high school and college students don’t make enough income or have a strong credit history to qualify for private student loans on their own. Though some lenders will take grades and income potential into consideration, most students need a cosigner to qualify for a private student loan. Your cosigner is legally responsible for your student debt, and any missed payments can negatively affect their credit. If you can’t repay your loans, your cosigner is responsible for the entire amount.
The good news is that some private student loans allow for a cosigner release.That means that after you make a certain number of on-time payments, you can apply to have the cosigner removed from the loan.
Less Flexible Repayment Options
March 26, 2025: The SAVE Plan is no longer available after a federal court blocked its implementation in February 2025. However, applications for other income-driven repayment plans and for loan consolidation are available again. We will update this page as more information becomes available.Federal student loans offer several different types of repayment plans, including income-driven repayment (IDR) plans, which calculate your monthly payment as a percentage of your income.
With private student loans, on the other hand, usually the only way to reduce your monthly payment is to refinance the loan to a lower interest rate, a longer repayment term, or both. Keep in mind that by lowering your monthly payment via a longer repayment period, you’ll typically end up paying more in interest over the life of the loan.
No Loan Forgiveness Programs
Federal student loans come with a few different forgiveness programs, including Public Service Loan Forgiveness (PSLF) and Teacher Loan Forgiveness. While these programs have strict eligibility requirements, they can help many low-income borrowers. Private lenders, on the other hand, generally don’t offer programs that forgive your debt after meeting certain requirements.
If you’re experiencing financial hardship, however, the lender may agree to temporarily lower your payments, waive a payment, or shift to interest-only payments.
Can Lead to Over-Borrowing
Private loans typically allow you to borrow up to 100% of your cost of attendance, minus other aid you’ve already received. Just because you can borrow that much, however, doesn’t necessarily mean you should. Borrowing the maximum incurs more interest over the duration of your loans and increases your payments, which can make repayment more difficult.
Recommended: How to Save Money in College
No Federal Subsidy
Subsidized federal student loans, awarded based on financial need, come with an interest subsidy, meaning the government pays your interest while you’re in school and for six months after you graduate. This can add up to a significant savings.
Subsidies don’t exist with private student loans. Interest accrues from Day One, and in some cases, you might need to make interest payments while still in school. If you don’t pay the interest as you go, it’s added to your debt as capitalized interest when you finish school. (This is also the case with federal unsubsidized loans.)
Federal vs Private Student Loans
Here’s a look at the key differences between federal vs. private student loans.
The Application Process
Federal student loans are awarded as a part of a student’s financial aid package. In order to apply for federal student loans, students must fill out the FAFSA each year. No credit check is needed to qualify.
To apply for private student loans, students need to fill out an application directly with their preferred lender. Application requirements vary depending on the lender. A credit check is typically required.
Recommended: Financial Aid vs Student Loans
Interest Rates
The interest rates on federal student loans are fixed and are set annually by Congress. Once you’ve taken out a federal loan, your interest rate is locked for the life of the loan.
For the 2024-2025 school year, the federal student loan interest rate is 6.53% for undergraduates, 8.08% for graduate and professional students, and 9.08% for parents. The interest rates, which are fixed for the life of the loan, are set annually by Congress.
Private lenders, on the other hand, are free to set interest rates. Rates may be fixed or variable and depend on several factors, including your (or your cosigner’s) credit score, loan amount, and chosen repayment term. Private student loan rates may start as low as 3.47%, according to the Education Data Initiative.
Repayment Plans
Borrowers with federal student loans can select from several different federal repayment plans , including income-driven repayment plans. You can defer payments while enrolled at least half-time and immediately after graduation.
Repayment plans for private loans are set by the individual lender. Many private student loan lenders allow you to defer payments during school and for six months after graduation. They also have a variety of repayment terms, often ranging from five to 20 years.
Keep in mind that for federal student loans, access to all income-based plans is currently cut off for new borrowers while the Trump administration reevaluates.
Options for Deferment or Forbearance
Federal student loan borrowers can apply for deferment or forbearance if they encounter financial difficulties while they are repaying their loans. These options allow borrowers to pause their loan payments (interest, however, will typically continue to accrue).
Some private lenders may offer options for borrowers who are facing financial difficulties, including short periods of deferment or forbearance. Some also offer unemployment protection, which allows qualifying borrowers who have lost their job through no fault of their own to modify payments on their student loans.
Loan Forgiveness
Borrowers with federal student loans might be able to pursue loan forgiveness through federal programs such as PSLF or Teacher Loan Forgiveness, or after paying down their balances on an IDR plan for a certain period of time.
Since private student loans aren’t controlled by the government, they are not eligible for federal loan forgiveness programs. Though private lenders will often work with borrowers to avoid default, private student loans are rarely forgiven. Generally, it only happens if the borrower becomes permanently disabled or dies, but even then it is up to the specific lender.
Should You Consider Private Student Loans?
There are many different types of student loans. It’s generally a good idea to maximize federal student loans before turning to private student loans. That way, you’ll have access to income-driven repayment plans, loan forgiveness programs, and extended deferment and forbearance periods.
If you still need money to cover tuition or other expenses, and you (or your cosigner) have strong credit, a private student loan can make sense.
Private student loans can also be useful if your expenses suddenly go up and you’ve already maxed out federal student loans, since they allow you to access additional funding relatively quickly. You might also consider a private student loan if you don’t qualify for federal loans. If you’re an international student, for example, a private loan may be your only college funding option.
Another scenario where private student loans can make sense is if you only plan to take out the loan short-term. If you’ll be able to repay the loan over a few years, private student loans could end up costing less overall.
Recommended: When to Apply for Student Loans
How to Get a Private Student Loan
Here’s a look at the steps involved in getting a private student loan.
1. Shop around. Your school may have a list of preferred lenders, but you’re not restricted to this list. You can also do your own research to find top lenders. As you evaluate lenders, consider factors like interest rates, how much you can borrow, the loan term, when you must start repayment, any fees, and if the lender offers any hardship programs.
2. See if you can prequalify. Some lenders allow borrowers to get a quote by filling out a prequalification application. This generally involves a soft credit inquiry (which won’t impact your credit score) and tells you what interest rates and terms you may qualify for. Completing this step can help you decide if you need a cosigner.
3. Gather your information. To officially apply for a private student loan, you typically need to provide your Social Security number, birthdate, and home address, as well as proof of employment and income. You may also need to provide other financial information, such as your assets, rent or mortgage, and tax returns. If you have a cosigner, you’ll have to provide their personal and financial details as well.
4. Submit your application. Once you’ve completed your application, the lender will typically contact your school to verify your information and eligibility. They will then process the student loan and notify you about your approval and disbursement of your money.
💡 Quick Tip: Parents and sponsors with strong credit and income may find much lower rates on no-fee private parent student loans than federal parent PLUS loans. Federal PLUS loans also come with an origination fee.
Does Everyone Get Approved for Private Student Loans?
No, not everyone gets approved for private student loans. Lenders assess various factors to determine eligibility, such as credit history and income. Students with limited credit history may need a cosigner to qualify. Here are the key factors lenders consider:
• Credit score
• Income and employment status
• Cosigner’s creditworthiness
• Enrollment status at an eligible school
If you don’t meet these qualifications, you can apply with a cosigner who does.
Apply for a Private Student Loan with SoFi
Private student loans are offered by banks, credit unions, and online lenders to help college students cover their educational expenses. They are not part of the federal student loan program, and generally do not feature the flexible repayment terms or borrower protections offered by federal student loans.
However, private student loans come with higher loan limits, and the borrowing costs are sometimes lower compared to their federal counterparts.
If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.
FAQ
Why would someone get a private student loan?
Students typically turn to private student loans when federal loans won’t cover all of their costs. Private student loans come with higher borrowing limits than their federal counterparts. The aggregate max dependent students can borrow from the government for their entire undergraduate education is $31,000, which is sometimes not nearly enough to cover the cost of attendance.
With private loans, on the other hand, you can typically borrow up to the total cost of attendance, minus any financial aid received, every year. This gives you more flexibility to get the financing you need. Keep in mind, though, that private student loans do not come with the same federal protections and benefits offered by federal student loans.
Will private student loans be forgiven?
Private student loans aren’t funded by the government, so they don’t offer the same forgiveness programs. In fact, private student loan forgiveness is rare.
If you experience financial hardship, however, many lenders will work with you to stay out of default. They may agree to temporarily lower your payments, waive a payment, or switch to interest-only payments. Or, you might qualify for deferment or forbearance, which temporarily postpones your payments (though interest continues to accrue).
Are private student loans paid to you or the school?
Private student loans are typically disbursed directly to the school to cover tuition, fees, and other educational expenses. Any remaining funds after those costs are covered are then refunded to the student, which can be used for additional expenses like housing, textbooks, and personal living costs.
SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).
SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FOREFEIT YOUR EILIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).
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.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SOISL-Q125-021
Read moreMar
18
2025
15 Ways to Invest $10,000 Right Now in 2024
If you have $10,000 that you can earmark for investing purposes, count yourself lucky. There are many ways to invest $10,000 right now, whether you’re thinking about long-term goals like retirement, or you’re interested in learning more about how to invest in the stock market.
A $10,000 investment can compound over the years into a substantial sum — although there is always the risk of loss when investing any amount of money. Whether you are a beginner or an experienced investor, investing $10,000 takes research and discipline to follow through on the choices that make sense for you.
Key Points
• Identify your financial goals and risk tolerance before choosing a strategy for investing $10,000.
• Retirement plans such as IRAs and 401(k)s offer tax advantages that may help you boost your savings.
• Putting your money in low-risk, high-yield savings accounts, which typically offer rates that are 8x or more those of average savings accounts, can help your money grow.
• Investing in ETFs, index funds and other mutual funds, alternatives, or individual stocks is higher risk, but may offer higher returns in time.
• One of the most effective ways to spend $10,000 is to pay off high-interest debt, which can cost thousands in interest payments over time.
What to Know Before You Invest $10,000
Before you review some of the different ways you can invest your money, it helps to identify what your goals are. After all, you don’t have to put the entire amount into a single option; you can split your money into various pots, so to say.
It may help to ask yourself some questions about what is important to you:
• Do you want to invest for a specific purchase or life event, such as buying a home or welcoming a child?
• Do you want to invest toward a more secure retirement and old age, perhaps by funding a retirement account?
• Are you interested in using the money you have to help you learn more about investing basics?
• Would it be prudent to pay off credit card debt, since eliminating debt is an investment by effectively increasing your net worth?
Understanding Growth vs. Risk
In addition to thinking about your goals, it’s important to consider what your risk tolerance is. While there are many ways to invest, some may involve more risk (or reward) than others. Some investors may want to swing for the fences with a high-risk venture, while others prefer to keep their cash as safe as possible.
As you weigh your investing choices, from stocks and bonds to alternative investments, keep in mind that higher-risk investments tend to offer more growth — with the downside that there’s a higher risk of losing money. Lower-risk investments, like buying bonds, generally offer lower returns (but also less risk of losing money).
15 Ways to Invest $10,000
Whether you want to be a hands-off type of investor or more of an active investor, there are countless choices to consider. We summarize 15 possibilities here.
While some of these may count as conventional options (e.g., investing via a retirement or college savings account), some are less so (e.g., investing in a business).
1. Start With an IRA
Opening an IRA provides you with the opportunity to save for your retirement, supplement existing retirement plans, and potentially benefit from tax advantages. A traditional or Roth IRA can be a great vehicle for tax-advantaged, long-term investments.
The annual IRA contribution limit for 2024 is $7,000; $8,000 for those 50 and older.
Traditional IRAs allow for pre-tax contributions and tax-deferred growth, while Roth IRAs involve after-tax contributions and qualified tax-free withdrawals in retirement.
Other types of IRAs include SEP and SIMPLE IRAs. SEP IRAs are for small business owners and self-employed individuals, while SIMPLE IRAs are for employees and employers of small businesses. These have different contribution limits and rules than ordinary traditional or Roth IRAs.
In all cases, though, an IRA is just a tax-advantaged type of account. You must select investments to fill the IRA you choose.
Recommended: IRA Contribution Calculator: Check Your Eligibility
Get a 1% IRA match on rollovers and contributions.
Double down on your retirement goals with a 1% match on every dollar you roll over and contribute to a SoFi IRA.1
1Terms and conditions apply. Roll over a minimum of $20K to receive the 1% match offer. Matches on contributions are made up to the annual limits.
2. Increase Your 401(k) Contributions
Another way to invest $10,000 is to increase your 401(k) contributions at work. Like IRAs, these are tax-advantaged accounts. Generally, you establish your 401(k) contributions through your workplace plan, and the money is deducted from your paycheck.
You could, however, increase your withholdings so that you’re adding $10,000 more to your accounts (or a percentage of that), as long as you don’t exceed the annual contribution limit.
Unlike IRAs, which have a fairly low annual contribution limit, you can save as much as $23,000 in your 401(k) for tax year 2024. If you’re 50 and up, you can save an additional $7,500, for a total of $30,500.
3. Open a High-Yield Savings Account
If you open a high-yield savings account with a competitive interest rate, this is a lower-risk way to save. As of August 2024, top high-yield savings accounts were offering as much as 5.50% annual percentage yield (APY). Just remember that terms vary considerably from bank to bank, and there are no guarantees the rate will remain constant.
Still, that means a $10,000 deposit in a high-yield savings account with a 5.0% APY could yield roughly $511 in interest in one year, assuming interest is compounded monthly, and there are no further deposits that year, and that the APY doesn’t change.
Another benefit of putting your money in a bank account is that your funds are typically FDIC-insured, up to $250,000, per depositor, per insured bank, for each account ownership category.
4. Be Debt Free
Knowing how to invest $10,000 today does not have to mean finding a high-performing stock. Simply paying off high-interest-rate debt can be like earning a guaranteed rate of return.
Think about it: If you’re carrying a $5,000 balance on a credit card that charges a 15.99% annual percentage rate (APR), paying off your balance means you are “saving” all that interest, rather than paying it to your card.
Given that most credit card issuers compound interest daily, those charges can add up to hundreds or even thousands of dollars per year (depending on your actual balance, and APR).
5. Beef Up Your Emergency Fund
Putting some or all of your $10,000 into an emergency fund could also pay off down the road. Having cash on hand to cover life’s inevitable curveballs means that you wouldn’t have to put more expenses on a credit card in a crisis, or take out a home loan or line of credit, and end up paying interest on borrowed funds.
Keeping your emergency fund in a high-yield savings account, as noted above, could offer another potential upside in the form of interest gained.
6. Get Healthy with an HSA
Another way to invest is to max out your Health Savings Account (HSA) contributions. Individual contributions are limited to $4,150 for 2024; $8,300 for a family. The money in the HSA account is yours, even if you switch jobs or health plans.
An HSA can be triple-tax advantaged. That means your contributions, which are typically made via withholdings from your paycheck, are tax-deductible, investment growth within the HSA builds tax-free, and you can withdraw funds for qualifying health-related expenses tax-free, too.
If you use HSA funds for non-qualified expenses before age 65, you could face a 20% penalty on the withdrawals.
However, if you don’t use the account much over the years, then you can use the account like a traditional IRA once you reach age 65. That means: You’d owe tax on the withdrawals, but you wouldn’t face a penalty — and you could use the funds for any purpose (not only health-related expenses).
7. Try U.S. Treasuries
Investing $10,000 in government bills, notes, and bonds is another way to help your money grow over time. U.S. Treasury bonds are often considered one of the safest investments, as they have the full faith and credit of the U.S. government backing them. Treasuries are available in short-, medium-, and long-term maturities.
Treasury bills are short-term debt securities that mature within one year or less.Treasury notes are longer-term and mature within 10 years.Treasury bonds mature in 30 years and pay bondholders interest every six months. Treasury Inflation-Protected Securities, or TIPS, are notes or bonds that adjust payments to match inflation. Investors can buy tips with maturities of five, 10 and 30 years; they pay interest every six months.
Recommended: How to Buy Treasury Bills, Bonds, and Notes
8. Explore Alternative Assets
Experienced investors who have a sizable portfolio and a sophisticated understanding of various markets might want to explore the world of alternative assets.
Alternative investments — commonly known as alts — differ from conventional stock, bond, and cash categories. Alts include a variety of securities such as commodities, foreign currencies, real estate, art and collectibles, derivative contracts, and more.
Alts are considered high-risk, but they may offer the potential for portfolio diversification. It’s also important to know they typically aren’t as regulated or transparent as traditional assets.
9. Build a Business
Starting your own venture is an intriguing idea in today’s tech-driven world. Taking $10,000 to fulfill an entrepreneurial dream could lead to future profits. But as with any business, success isn’t guaranteed and there is always the possibility of loss.
That said, it doesn’t have to take much capital to start a small business online or just offer your services to the market. Maybe you’re a professional with expertise in a certain area or perhaps you’ve honed a particular craft. You could consult with the Small Business Administration or other resources that might help you develop a solid business plan and put your $10,000 investment to good use.
10. College Savings
You could also invest $10,000 to help your kids or other family members via a college savings plan. The most common of these is a 529 college savings account.
These accounts, also known as qualified tuition plans, give individuals the option to save for college (or even elementary and secondary school and some training programs) on behalf of a beneficiary, while providing tax advantages. All states offer 529 plans; some offer a tax deduction for your contributions. Withdrawals for qualified educational expenses are tax free.
Be sure to understand the rules pertaining to the 529 plan you choose, because contribution limits vary from state to state, as do the investment options within the account.
11. Consider Low-Cost ETFs and Index Funds
If you’re looking for a low-cost investment option, you might want to consider
looking into index funds. Index funds are a type of mutual fund that utilize a passive investing strategy, i.e. they track an index like the S&P 500. They are not actively managed like some mutual funds, which have a live portfolio manager at the helm.
Most exchange-traded funds (ETFs) also rely on passive strategies, and as such typically have very low expense ratios. Lower investment fees can help investors keep more of their returns over time.
One of the advantages of investing in low-cost index funds and ETFs is that there are so many flavors of different funds these days. Stocks, bonds, REITs, small caps, large caps, sector funds, and dividend companies — these are just some of the fund types available.
12. Explore Municipal Bonds
If taxes are a concern, you may want to explore municipal bonds or bond funds, as these bonds are issued by state and local governments to pay for infrastructure and other amenities. Munis, as they’re called, feature interest income that is exempt from federal income tax, and sometimes state and local tax in the state where the bond was issued.
Investors might be helping to build a city park, better roads, or a new football stadium, for example. Those who like the idea of investing in a way that aligns with their personal values might find munis appealing.
13. Use a Robo Advisor
One way to go about building an investment portfolio is through a robo advisor service, also known as an automated portfolio. These computer-based platforms use sophisticated algorithms to select investments (typically low-cost ETFs), based on the risk tolerance and other objectives you indicate through a questionnaire.
The robo advisor then builds a portfolio, and provides services such as rebalancing and, in some cases, tax-loss harvesting for you.
You can invest in a robo advisor portfolio within an IRA or other type of account, as long as it’s offered by your broker or plan sponsor.
14. Get Real Estate Exposure with REITs
A real estate investment trust, or REIT, offers a way to invest in income-producing real estate without owning the properties directly. REITs can be advantageous because they must distribute at least 90% of taxable income to shareholders as dividends.
You can invest in REITs through buying REIT shares, mutual funds, or ETFs. While the benefits of REITs include passive income and portfolio diversification, REITs can be illiquid and sensitive to interest rate changes.
15. Pick Individual Stocks
Learning how to pick stocks is a lifelong endeavor. A committed stock investor typically does research on company fundamentals and other factors — such as its leadership team, reputation, and comparison to industry averages — before buying actual company shares.
For many investors, investing in individual stocks can be more rewarding than buying shares of a mutual fund, which may contain hundreds of stocks. Investing in individual shares allows you to put your money directly into organizations or products you believe in. Depending on the company, you may be able to choose between common or preferred stock (preferred shares qualify for dividend payouts).
And while equity markets can be volatile, over the last 20 years, the average return of the stock market as represented by the S&P 500 Index has been about 7.03%, adjusted for inflation.
The Takeaway
Deciding how to invest $10,000 is an exciting proposition. You can begin by recognizing your ideal level of risk, and identifying what your short- and long-term goals are. Once you set those key parameters, it’s easier to choose among the many investment options to find one that suits your aims and your comfort level.
Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
Photo credit: iStock/Ridofranz
SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.
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.
Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at https://sofi.app.link/investchat. Please read the prospectus carefully prior to investing.
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.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
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.
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.
SOIN0322049
Read moreMar
18
2025
39 Passive Income Ideas to Build Wealth in 2024
Table of Contents
With inflation and interest rates rising, many people are looking for ways to generate additional income these days — and finding reliable sources of passive income, which require less effort than most jobs — has become particularly desirable.
Creating and managing passive income streams isn’t a truly passive activity, however. Generating passive income usually requires upfront work, or sometimes a substantial investment to get the ball rolling. And depending on what your passive income ideas are, whether you’re renting out property or selling a product via online platforms, you’ll likely have ongoing tasks to keep the money coming in.
That said, passive income can in some cases deliver more income with less effort than a traditional job that requires a fixed number of hours per week.
Key Points
• Passive income is money earned without active involvement.
• High-interest savings accounts, investing in business, P2P lending, and rental properties are some ways to generate passive income.
• Benefits of passive income include extra money with less effort, freedom, and flexibility.
• Initial work and investments are often needed to set up a stream of passive income.
• The opposite of passive income is active income, which usually involves a job and is also known as earned income.
What Is Passive Income?
Passive income is money that you earn without active involvement. In other words, it is income that isn’t attached to an hourly wage or annual salary. Passive income ideas could include things like cash flow from rental properties, dividend stocks, sales of a product (that requires little or no effort), royalties, and more.
Essentially, these side hustles can help you earn money without contributing much, if any, active effort. If you are paid for a service you perform, that’s active income — you have to put in time and energy in order to get paid. If you can continue making money while staying mostly hands-off, that can be a form of passive income. That doesn’t mean you won’t have to put work in up front to get started — you probably will. But besides some maintenance, passive income shouldn’t require your active involvement.
There are obvious benefits to these low-effort side hustles over traditional active income. Earning more money without putting in more hours offers the opportunity to make extra cash without burning yourself out. If you’re successful enough, it might even give you the freedom and flexibility to quit your day job and do whatever you want instead, whether that’s going to school, traveling, writing, or making art.
39 Passive Income Ideas to Help You Make Money
There are a number of ways to earn passive income. Some options, like the following types of passive income, take relatively little active supervision.
- Open a High-Yield Savings Account
- Invest In a Business
- Become a Peer-to-Peer (P2P) Lender
- Buy a Rental Property
- Invest in Crowdfunded Real Estate
- Invest in Index Funds or Dividend Stocks
- Invest with an Automated Advisor
- Start a Retirement Account
- Join an Affiliate Program
- Rent Out Your Car
- Advertise on Your Car
- Rent Your Parking Space
- Rent Storage Space
- Invest in Real Estate Investment Trusts (REITs)
- Rent Your Bike
- Airbnb or Rent Out a Room
- Pet Sit in Your Home
- House Sit for Someone
- Buy and Sell Domain Names
- Rent Your Tools
- Invest in Royalties
- Purchase a Billboard
- Purchase a Blog
- Create an Online Course
- Sell Digital Products
- License Your Photos
- Create a Mobile App
- Sell a Product
- License Your Music
- Self-Publish a Book
- Sell Blank Books
- Create Greeting Cards
- Sign Up for Dropshipping
- Start a Blog
- Start a YouTube Channel
- Publish an Ebook
- Create a Podcast
- Start an ATM Business
- Start a Vending Machine Business
1. Open a High-Yield Savings Account
A high-yield savings account (HYSA) is an alternative to traditional savings accounts, and they’re attracting more attention these days thanks to higher interest payments that might be 2% or more. By simply putting your money in the bank, you may be able to start to earn passive income on it. If you invest in an FDIC-insured account, the first $250,000 of your money is protected. There are both banks and online platforms which offer a high-yield savings account.
Savings accounts are generally appealing because they are a separate place to store money you don’t necessarily want to use on day-to-day expenses. For example, it could be a good place to save for emergencies, or even to save for a vacation or a move across the country.
When you find a high-interest savings account, take a look at the fine print. What conditions are attached for you to get that rate? The financial institution may require you to have a certain amount of money deposited into that account each month, maintain a certain balance or have your bills automatically deducted from it. You may need to use your debit card a predetermined number of times, as yet another example — or be limited in the number of transactions that can take place each month.
Tip: Using an online high-yield savings account calculator can help you estimate how much you can earn in interest over time.
Earn up to 3.80% APY with a high-yield savings account from SoFi.
No account or monthly fees. No minimum balance.
9x the national average savings account rate.
Up to $3M of additional FDIC insurance.
Sort savings into Vaults, auto save with Roundups.
2. Invest In a Business
Although this may take an up-front investment, buying into a business and becoming a silent partner can be another passive income source.
Even if the company you are thinking of investing in seems solid, it’s important to have an understanding of the challenges the organization may face. There are some red flags to look out for, such as a company whose revenue is earned from just a couple of clients — or just one client — as opposed to several.
It’s also important to lay out the exact terms of your investment and compensation.
3. Become a Peer-to-Peer (P2P) Lender
Peer-to-peer (P2P) lending platforms are another type of crowdfunding that allows people to borrow money from individual investors. Through these sites, you can be matched with an individual seeking a loan, and lend your money at a rate that could be higher than the usual bank rates.
That’s because investors taking part in peer-to-peer lending tend to bear the bulk of any risk. It is possible that borrowers will default on their loans, leading to a higher risk if an investor were to lend money with a lower credit rating, for example. Returns are never guaranteed and while investors will receive a return on the money they invest, they could also lose some or all of it in the long run.
💡 Learn more: Understanding How P2P Lending Works
4. Buy a Rental Property
Another popular passive income source is rental property. You might want to purchase a home to rent out to an ongoing tenant or list a property on a short-term rental site. Hiring a property management company lessens your day-to-day involvement, thereby making this venture a more passive income strategy than active.
Obviously, setting up this type of income requires a pretty big outlay, and it may be a while before your investment property generates a profit over and above the many expenses required to run it. In addition, there are always risks in the rental markets to keep in mind.
💡 Learn more: Investment Property Guide for Beginners
5. Invest in Crowdfunded Real Estate
If you don’t have thousands of dollars to spend on a piece of property, you can always check out your options on crowdfunded real estate sites. These may require a smaller initial investment, and likewise the costs are also shared.
Crowdfunded real estate investments can be complex, however, and you’ll want to balance the risks and rewards.
6. Invest in Dividend Stocks
When companies choose to share a portion of their profits with the investors who own shares of the firm, those payments are called dividends, and they work generally the same way from company to company.
Typically, dividends are paid in cash (though some might be paid in stock), on a regular schedule. Dividends are usually paid quarterly, though there are variations.
Investors might receive dividends from companies they’re invested in, or from mutual funds they’re invested in that hold shares of dividend-paying companies.
There is no guarantee that investing in dividend stocks will continue to earn you passive income. As Liz Young Thomas, Head of Investment Strategy at SoFi, points out, “A stock’s dividend yield will fluctuate because it’s based on the stock’s price and prices can be volatile. You should also consider other factors like a company’s track record of increasing the dividend, the dividend payout ratio, debt load, and cash on hand when determining the overall health of an investment.”
💡 Learn more: What Is Dividend Income? Can You Live Off It?
7. Invest with an Automated Advisor
If you’re just getting started with investing, you may want to use automated investing tools to help you choose the appropriate allocation of assets for your goals.
Typically, an automated platform — also called a robo-advisor — is a digital investing service that provides you with a questionnaire so you can establish your financial goals, risk preferences, and time horizon.
On the backend, a sophisticated algorithm then recommends a pre-set, automated portfolio that aligns with your responses. These portfolios often have lower account minimums compared with traditional brokers, and the portfolios themselves are typically comprised of low-cost exchange-traded funds (ETFs) — which adds to the cost efficiency of some robo products.
You can use a robo investing as you would any account — for retirement, as a taxable investment account, or even for your emergency fund — and you typically invest using automatic deposits or contributions. The allocation in each portfolio is usually pre-determined, and investors cannot change the investments.
Tools such as SoFi’s Automated Investing allow you to automatically invest each month and potentially grow your portfolio over time.
8. Start a Retirement Account
When you open your retirement account, you can choose to invest it however you want. For example, you could open an individual retirement account (IRA) online.
One way to earn income in a retirement account is by investing in mutual funds. You can choose the level of risk you want to take with your money by finding a mutual fund that is higher or lower risk.
💡 Learn more: 4 Easy Steps to Starting a Retirement Plan
9. Join an Affiliate Program
When you join a company’s affiliate program, you earn a commission from every product that someone purchases from that company. All you have to do is post the link on your blog, website, or social media pages. Amazon Associates is a great place to start.
10. Rent Out Your Car
Another one of the best passive income opportunities is renting out your car on a site like Turo. It’s basically the Airbnb of cars, and, according to Turo, the average annual income for one car on the site is $10,516.
11. Advertise on Your Car
If you have a clean driving record as well as a newer car, consider getting in touch with a car advertising agency. You simply drive around town with ads on your car and easily generate passive income.
12. Rent Your Parking Space
Do you have space in your driveway that you aren’t using? Then rent it out on platforms like Stow It, where you can find people who will pay to rent out the space.
13. Rent Storage Space
If you have extra space in your garage, shed, or storage unit, then you could start earning passive income by using a peer-to-peer storage site like Stashii to find people who need your space.
14. Invest in Real Estate Investment Trusts (REITs)
An alternative to becoming a property owner or landlord are real estate investment trusts, or REITs. REITs are publicly traded companies on the stock market that own income-producing real estate. They give you the chance to invest in real estate portfolios. REITs sometimes come at a higher risk than other funds.
You might consider investing in a REIT that focuses on storage units. For example, one option is Public Storage, which has ownership or interest in 2,548 properties located in 38 states.
💡 For more alternative investment options, check out: Alternative Investments: Definition and Types
15. Rent Your Bike
Perhaps you don’t have a car, but you do have a bike that’s just sitting around. Your bike could be a lucrative passive income source, especially if you live in a high-traffic area. List your bike on Spinlister to get started.
16. Airbnb or Rent Out a Room
Even if you don’t own an investment property, with your landlord’s permission, you may be able to rent out a room in your apartment or list it on Airbnb.
17. Pet Sit in Your Home
If you love pets, you can earn passive income by welcoming pets into your home while their owners are on vacation. For instance, you could charge $30 to $80 per day just for running a doggy daycare. You can gain clients through word of mouth or use a site like Rover to find customers.
18. House Sit for Someone
When your friends go out of town, they may need someone to stay in their home and do simple things like water their plants and collect their mail. You can easily make money and have somewhere new to stay for a little bit. Along with making yourself available to friends, you can sign up to be a house sitter on HouseSitter.com.
19. Buy and Sell Domain Names
Some domain names are cheap, while others cost a lot of money because they are in high demand. One thing you could do to start another passive income stream is to purchase domain names you think will be popular. Purchase low for around $10 to $100 and then sell them for a much higher price later on.
20. Rent Your Tools
Have you ever done a home improvement project that required you to purchase tools? You may never need to use those tools again. Thankfully, now you can rent tools, and rent out your tools, on peer-to-peer platforms such as Sparetoolz to earn passive income.
21. Invest in Royalties
Let’s say you don’t have any songwriting ability, but you would like to make money on other artists’ work. You can invest in royalties through Royalty Exchange and earn passive income on the intellectual property.
22. Purchase a Billboard
You can make thousands of dollars per month if you own a billboard where companies can advertise their products and services. Do your research and make sure you get the right permits before committing to a billboard.
23. Purchase a Blog
If you don’t have the time or energy to create content for your own blog, then look into ones that are already successful and see if the owners are willing to sell. You could also hire someone to manage your blog so that you’re truly earning in a passive way.
24. Create an Online Course
If you have a special skill or knowledge about a certain topic, you may be able to create a video course where you teach people about that topic and charge them to take the course.
25. Sell Digital Products
You may want to research online platforms where you can sell everything from digital art to e-books. Whether you’re an artist, graphic designer, or writer, you can create digital products to sell online.
26. License Your Photos
Many companies, bloggers, and individuals use stock photos on a regular basis. You may be able to upload your best photos to stock media platforms and earn passive income on them.
27. Create a Mobile App
If you’ve been dreaming about an amazing phone app that you think a lot of other people would use, you may want to look into hiring a development team to create it.
28. Sell a Product
You may be able to earn passive income through sales of a product that you create. This could be a book that you write or a physical product that you design and make. You might also list items you already own on sites like eBay and earn extra income through those sales.
29. License Your Music
Do you love to write songs? Then you could license your music and start earning passive income. You’ll just have to team up with a music licensing company to get started.
30. Self-Publish a Book
Through platforms like Amazon’s KDP, you can self-publish a book and earn a royalty on it every time someone makes a purchase. You will be able to set the price of your book and be in full control of your book’s Amazon page, where you can list pictures of the book, reviews, and videos promoting it.
31. Sell Blank Books
You can start selling books online without having to write anything. How? By focusing on blank books, such as journals, sketchbooks, and planners. Simply find a design you believe will appeal to people and begin collecting royalties when people buy your books.
32. Create Greeting Cards
Another artistic endeavor that could be a good passive income stream is creating greeting cards that you sell to a wholesale or retail stationery company that accepts independent artist submissions.
33. Sign Up for Dropshipping
If you want to sell products and make money online but don’t want to store any of the goods, you could always look into dropshipping to create passive income. With dropshipping, you don’t have to have much money to start since you don’t need inventory to fulfill orders for customers.
34. Start a Blog
Blogging seems like a pretty cool space to operate in and gives you a lot of creative freedom. You can make your blog all about crafts, share tutorials, ideas, and more. It’s up to you how your space operates.
Blogging might seem like too much work to many people, but it doesn’t have to be a full-time job for everyone. For some people, blogging can be fun after a day at the office — and, with time and effort, it could turn into something more lucrative.
Here are a few ideas on how you can make passive income from blogging:
• Affiliate marketing
• Google AdSense: Cost Per Click and Cost Per Impression
• Sponsored posts
• Selling products
35. Start a YouTube Channel
If you enjoy creating videos more than writing, then consider starting your own YouTube channel. Once you get enough viewers, you can begin to generate passive income through YouTube advertising.
36. Publish an Ebook
Like an online course, an ebook is a way to share your expertise with the world. Anyone can self-publish a book online through services like Amazon’s Kindle Direct Publishing, iBooks Author, or Kobo Writing Life.
The percentage of royalties you earn varies depending on the publisher. Of course, the more marketing you do, the more copies you’re likely to sell — and there’s no shortage of online marketing strategies to investigate. But once you write and publish the e-book, it’s out there ready to generate passive income for you.
37. Create a Podcast
Podcasts are still popular, and they can generate some passive income for you. If you start a podcast that resonates with people, then you can grow your audience and monetize your show by sponsoring with ad partners. If you get enough listeners, you may be able to sign up for podcast advertising networks.
38. Start an ATM Business
When people are out at a bar or nightclub or they’re frequenting a cash-only business, they may need cash right away. If you own an ATM business and you place your ATM in high-traffic locations, you could start to generate passive income through surcharge fees. Typically, you could earn around $3 per withdrawal.
39. Start a Vending Machine Business
Similar to an ATM business, a vending machine business allows you to use your creativity and determine high-traffic areas where you could make a lot of money. If you buy in bulk, you’ll be able to save on the snacks and drinks you purchase for your machines.
Potential Benefits of Earning Passive Income
There are only 24 hours in a day. If you go to a job each day that pays you a set amount of money, that is the maximum amount that you’ll ever make in a 24-hour period. That is called earned income.
By investing some of that earned income into different passive income ideas, you may be able to increase your earnings. Diversifying your income stream may also improve your financial security. Some benefits of passive income are:
• More Free Time: By earning money through passive income sources, you might be able to free time in your schedule. You may choose to spend more time with your family, pursue a creative project or new business idea, or travel the world.
• Financial Security: Even if you still plan to keep your 9-to-5 job, having multiple sources of income could help increase your financial security. If you lose your job, become sick, or get injured, you may still have money coming in to cover expenses. This is especially important if you are supporting a family.
• Tax Benefits: You may want certain legal protections for your personal assets or to qualify for tax breaks. Consulting with an attorney and/or tax advisor to explore setting up a formal business structure like a sole proprietorship, a limited liability company (LLC), or a corporation, for example, might help you decide if this is a good route for your particular situation.
• Location Flexibility: If you don’t have to go into an office each day, you’ll be free to move around and, possibly, live anywhere in the world. Many streams of passive income can be managed from your phone or laptop.
• Achieve Financial Independence: The definition of financial independence is having enough income to cover your expenses without having to actively work in order to cover living expenses. This could allow you to retire early and have more freedom to live your life the way you choose. Whether you’re interested in retiring early or not, passive income can be one way to help you reach financial independence.
• Pay Off Debt: Passive income may help you to supplement your income so that you will have the opportunity to pay off any debts more quickly.
Potential Downsides of Earning Passive Income
Although it might sound like a dream come true to quit your job and travel the world, earning through passive income is not quite that simple.
• Earning Passive Income Is Not a Passive Activity: Whether you’re generating passive income through a rental income, running a blog, or in another way, you will still need to put in some time and effort. It takes upfront investment to get these income sources up and running, and they don’t always work out as planned.
If, for example, you run an Airbnb, you have to maintain the property, ensure a high-quality experience for guests, and address any issues or concerns guests may have to secure positive reviews.
• Passive Income Requires Diversity: In order to earn enough passive income to quit your job and cover all your expenses, you would most likely need more than one source of income. Although you may no longer need to clock into a 9-to-5 job, you will likely still need to spend time managing multiple income streams.
• It’s Lonely at the Top: It might sound great to never have to go to the office again and to have the freedom to travel, but earning money through passive income can become lonely.
Not having anyone to talk to during the day might make you feel lonely, and if you aren’t self-motivated, you may find it difficult to stay on task if you need to manage your passive income streams.
• Getting Started May Require Investment: Depending on how you plan to create passive income, it may require an initial financial investment. You may need money for a down payment on an investment property, the development of a product you plan to sell, or for investment into dividend stocks.
Managing Passive Income Streams
No matter which type of passive income you choose to pursue, it’s important to keep track of your personal finances and both your short-term and long-term financial goals.
Tracking multiple sources of income in a monthly budget can be a complex task. To be profitable, it’s important to pay attention to how much money you put into the maintenance of your passive income stream(s), such as property upkeep or monthly online services.
SoFi is one option to simplify how you manage your income streams because it allows you to see all of your financial information in one place. In the app, you can keep track of your monthly income and create goals for your passive income, such as a home, vacation, or retirement, and automate your personal finances.
The Takeaway
Establishing passive income streams is one way to diversify your income and can help you build wealth and achieve financial freedom in the long term. There are a variety of ways to earn passive income, such as through investing, rental properties, and automated investing.
Some passive income sources require a financial commitment or upfront investment, such as purchasing a rental property, and others may require a time commitment. And passive income, of course, is rarely 100% passive. Often there is considerable time and effort that goes into setting up a passive income stream. And some sources of passive income (from investing, real estate, running a business or creative endeavor) require ongoing maintenance.
Once you’re earning passive income, you can think about where to put that money. Whether you’re able to generate a passive income stream from your investments, or that’s a goal of yours, consider opening an Active Invest account with SoFi Invest. You can invest in stocks, exchange-traded funds, and SoFi also offers an automated portfolio.
SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
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.
Claw Promotion: Customer must fund their Active Invest account with at least $50 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.
SOIN0423006 Read more
Mar
18
2025
A User’s Guide to New Day Trading Lingo
A new interest in trading and investing in recent years has sparked new nicknames, jargon, and day trading lingo. For most, the jargon used on Wall Street and in other facets of the financial industry was largely unknown outside of the markets. But with more and more people trading and investing, it can be helpful to know what certain terms and phrases actually mean.
Note, of course, that language is always evolving, and that there may be even newer phrases out there that we’ve yet to include!
Popular Day Trading Lingo in 2025
Tendies
This term is short for chicken tenders, which is a way of saying gains or profits or money. The phrase originated with self-deprecating jokes by 4Chan users making fun of themselves as living with their mothers, who rewarded them with chicken tenders, or tendies.
STONKS
This is a playful way of saying stocks, or of referring more broadly to the world of finance. The obvious misspelling is a way of making fun of the market, and to mock people who lose money in the market. It became a popular meme — of a character called Meme Man in front of a blue board full of numbers — used as a quick reaction to someone who made poor investing or financial decisions.
Diamond Hands
This is an investor who holds onto their investments despite short-term losses and potential risks. The diamond refers to both the strength of their hands in holding on to an investment, as well as the perceived value of staying with their investments.
Paper Hands
This is the opposite of diamond hands. It refers to an investor who sells out of an investment too soon in response to the pressure of high financial risks. In another age, they would have been called panic sellers.
YOLO
When used in the context of day trading or investing, the popular acronym for the phrase “you only live once” is usually used in reference to a stock a user has taken a substantial and possibly risky position in.
Bagholder or Bag Holder
This is a term for someone who has been left “holding the bag.” They’re someone who buys a stock at the top of a speculative runup, and is stuck with it when the stock peaks and rolls back.
To the Moon
This term is often accompanied by a rocket emoji. Especially on certain online stock market forums, it’s a way of expressing the belief that a given stock will rise significantly.
GUH
This is similar to the term “ugh,” and people use it as an exclamation when they’ve experienced a major loss. It came from a popular video of one investor on Reddit who made the sound when they lost $45,000 in two minutes of trading.
JPOW
This is shorthand for Jerome Hayden “Jay” Powell, the current Federal Reserve Chair, also popular on online forums as the character on the meme “Money Printer Go Brrr.” Both refer to Federal Reserve injections of capital in response to the COVID-19 pandemic, as well as “quantitative easing” policies.
Position or Ban
This is a demand made by users on the WallStreetBets (WSB) subreddit to check the veracity of another user’s investment suggestions. It means that a user has to deliver a screenshot of their brokerage account to prove the gain or loss that the user is referencing. It’s a way of eliminating posters who are trying to manipulate the board. Users who can’t or won’t show the investments, and the gain or loss, can face a ban from the community.
Recommended: What is a Brokerage Account and How Do They Work?
Roaring Kitty
This is the social media handle of Keith Gill, the Massachusetts-based financial adviser who’s widely credited with driving the 2021 GameStop and meme stock rally with his Reddit posts and YouTube video streams.
Apes Together Strong
This refers to the idea that retail investors, working together, can shape the markets. It is sometimes represented, in extreme shorthand, by a gorilla emoji. And the phrase comes from an earlier meme, which references the movie Rise of Planet of the Apes, in which downtrodden apes take over the world. In the analogy, the apes are retail investors. And the idea is that when they band together to invest in heavily-shorted stocks like GameStop, they can outlast the investors shorting those stocks, and make a lot of money at the expense of professional traders, such as hedge funds.
Hold the Line
This is an exhortation to fellow investors on WSB. It is based on an old infantry battle cry. But in the context of day traders, it’s used to inspire fellow board members not to sell out of stocks that the forum believes in, but which have started to drop in value.
DD
This refers to the term “Due Diligence,” and is used to indicate a deeply researched or highly technical post.
HODL
“HODL” is an abbreviation of the phrase “Hold On For Dear Life.” It’s used in two ways. Some investors use it to show that they don’t plan to sell their holdings. And it’s also used as a recommendation for investors not to sell out of their position — to maintain their investment, even if the value is dropping dramatically. HODL (which is also used in crypto circles) is often used by investors who are facing short-term losses, but not selling.
KYS
This is short for “Keep Yourself Safe,” and it is a rare bearish statement on WSB and other boards. It’s a way of advising investors to sell out of a given stock.
The Takeaway
Many retail traders have found a new home on message boards — and created a new language in the process. Some of the phrases are based on pop culture and memes, others are appropriated from terms used for decades. No matter the origins, it’s clear that the investors using these phrases are evolving the way retail investors talk about investing online and maybe IRL as well.
Learning to speak the language of the markets can be helpful, too, so that you don’t miss anything important when researching investment opportunities. That doesn’t mean it’s absolutely necessary, but it may help decipher some of the messages on online forums.
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Photo credit: iStock/FG Trade
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