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Jun
16
2025

Long Put Option Guide

By | Growing Wealth, invest, Investing | Comments Off on Long Put Option Guide


Editor's Note: Options are not suitable for all investors. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Please see the Characteristics and Risks of Standardized Options.

The simplest options strategies include purchasing calls or puts — typically called “going long.” For the bearish investor who believes an asset will see price declines over a well-defined period of time, the simplest strategy may be to purchase puts on those assets, also known as a long put strategy.

This strategy allows buyers to benefit from downward price moves while limiting losses to the premium paid upfront. Take a closer look at how long puts work, including their profit and loss potential, breakeven pricing, and how they differ from short puts or other bearish positions.

Key Points

•   A long put is a bearish options strategy where the buyer gains the right to sell the underlying asset at a set price within a specific timeframe.

•   The maximum loss for a long put is limited to the premium paid for the contract.

•   Maximum profit is realized if the underlying asset’s price falls to zero, minus the premium paid.

•   The breakeven point is calculated by subtracting the put option’s premium from its strike price.

•   Long puts can be used for speculation, hedging existing positions, or as part of multi-leg options strategies.

What Is a Long Put?

The term “long put” describes the strategy of buying put options. The investor who purchases a put has purchased the right to sell an underlying security at a specific price over a specific time period. Being the buyer and holder of any options makes you “long” that option contract.

Because the contract in question is a put, the investor is long the put and expects the put option’s value to increase as the underlying asset declines. The put option holder is bearish vs. bullish on the underlying asset as they expect its price to go down.

Conversely, an investor who sells a put option would hold a short position, which they might do if they expect the price of the underlying asset to rise or remain neutral, instead of fall.

Maximum Loss

In comparison to other options trading strategies, long puts are low risk due to their limited and well-defined downside. The maximum amount an investor can lose is the premium paid at the initiation of the transaction.

Maximum Loss = Premium Paid

Because different options trading platforms have different commission structures (some of which may be commission-free), commissions are typically omitted from profit and loss calculations.

Maximum Profit

The maximum gain for a long put strategy occurs when the underlying asset drops to zero. While this potential gain is also limited and defined, it may exceed the potential downside and could be significant. The maximum gain on a long put strategy is defined as the strike price of the put less the premium paid.

Maximum Profit = Strike Price – Premium Paid

Breakeven Price

The breakeven price on a long put strategy occurs at the strike price less the premium. Note that the formula for the maximum gain and the breakeven price is the same but the metrics represent different outcomes.

The breakeven price is the point at which the investor begins to make a profit. As the price drops past breakeven toward zero, hopefully, the investor can realize the maximum gain possible.

Breakeven Price = Strike Price – Premium Paid


💡 Quick Tip: How do you decide if a certain online trading platform or app is right for you? Ideally, the online investment platform you choose offers the features that you need for your investment goals or strategy, e.g., an easy-to-use interface, data analysis, educational tools.

Why Investors Use Long Puts

Investors utilize a long put strategy for three main reasons:

•   Speculation: The investor identifies an asset they believe will decrease in price over a defined time period. Buying a long put allows the investor to profit from this forecasted price decrease if it happens.

•   Hedging: Sometimes an investor already holds an asset like a stock or exchange-traded fund (ETF), and could be concerned that the price of the asset may drop in the short term, but still wants to hold the asset for the long term.

By purchasing a long put, the investor can offset any short-term losses through gains on the put and keep control of the underlying asset. For most assets, this strategy may serve as relatively low-cost downside protection.

•   Combination strategies: For experienced investors, long puts can be part of complicated multi-leg strategies involving the sale or purchase of other options, both calls and puts, to pursue different investment objectives.

Long Put vs Short Put

In contrast to a long put, a short put options strategy occurs when the investor sells a put. The seller of a put options contract is obligated to buy shares in the underlying security from the option holder at the strike price if the option is exercised.

Short put strategies differ from long puts in structure, obligation, and market outlook:

Long Puts

 Short Puts
Investor role Buyer Seller
Investor responsibility Right/Discretion Obligation
Investor outlook — Asset Bearish Neutral to Bullish
Risk Premium (Strike Price – Premium)
Reward (Strike Price – Premium) Premium

Long Put Option Example

An investor has been watching XYZ stock, which is trading at $100 per share. The investor believes the $100 share price for XYZ is excessive and believes the share price will fall over the next 30 days.

The investor purchases a long put with a strike price of $95 per share for a premium of $5 and an expiration date of 60 days from today. Because options contracts are sold based on 100 share lots, the price for this contract will be $5 x 100 = $500.

The options contract gives the investor the right to sell 100 shares of XYZ at $95 for the next 60 days.

The breakeven price on this investment is:

Breakeven Price = Strike Price – Premium Paid

Breakeven Price = $95 – $5 = $90

Should XYZ be trading below $90 at expiration, the option trade will be profitable.

If XYZ stock falls to $0 at expiration, the investor could realize their maximum possible profit:

Maximum Profit = Strike Price – Premium Paid

Maximum Profit = $95 – $5 = $90 profit per share or $9,000 per put option

However, if XYZ stock stays above $90 at expiration, the investor would incur their maximum possible loss, and the option will expire worthless:

Maximum Loss = Premium Paid

Maximum Loss = $5 per share or $500 per put option

Even if XYZ rose above the $100 price at purchase, the investor’s loss remains limited to the premium paid, or $500 in this example.

The Takeaway

Long put options provide a potentially accessible starting point for those exploring bearish strategies. The trading strategy may provide limited downside risk and potential profit if the underlying asset declines.

SoFi’s options trading platform offers qualified investors the flexibility to pursue income generation, manage risk, and use advanced trading strategies. Investors may buy put and call options or sell covered calls and cash-secured puts to speculate on the price movements of stocks, all through a simple, intuitive interface.

With SoFi Invest® online options trading, there are no contract fees and no commissions. Plus, SoFi offers educational support — including in-app coaching resources, real-time pricing, and other tools to help you make informed decisions, based on your tolerance for risk.

Explore SoFi’s user-friendly options trading platform.

FAQ

What is the long put option strategy?

A long put strategy involves buying a put option in anticipation that the underlying asset will decline in value. The buyer gains the right — but not the obligation — to sell the asset at a predetermined strike price before the option expires. This strategy can be used to profit from a downward move or to hedge an existing long position. The risk is limited to the premium paid, while potential profit increases as the asset’s price drops.

What is the most successful options trading strategy?

There is no single “most successful” options strategy — success depends on the trader’s goals, risk tolerance, and market outlook. For bearish views, long puts or bear spreads may be appropriate. For bullish views, strategies like covered calls or long calls are commonly used. More advanced traders may use iron condors or straddles for neutral markets. Each strategy carries trade-offs in terms of cost, complexity, and risk-reward profile. No strategy guarantees returns.

How can traders make money on long puts?

To profit from a long put, the price of the underlying asset must fall below the breakeven point, which is the strike price minus the premium paid. As the asset’s price drops, the value of the put typically increases, which may allow the trader to sell the option at a profit or exercise the option to sell the asset at a higher strike price. The lower the asset falls, the greater the potential profit — up to the maximum if the asset drops to zero.

When should an investor consider a long put?

An investor might consider a long put when they expect the price of an asset to decline within a defined time period. This strategy allows them to potentially profit from the downside move while limiting their maximum loss to the premium paid. Long puts can also serve as a form of short-term insurance for a long position in the stock, especially in volatile or uncertain markets. However, because options lose value over time, long puts are generally best suited for situations where a significant price move is expected before expiration.

Photo credit: iStock/Paul Bradbury

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.

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.

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 emailing customer service at [email protected]. Please read the prospectus carefully prior to investing.

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Jun
16
2025
percentage sign

What Is Interest Rate Risk?

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

Interest rate risk refers to the possibility that a fixed-income asset, such as a bond, could rise or fall in value owing to changing interest rates. Interest rate risk also has implications for businesses.

When interest rates rise, bond values on the secondary market tend to fall, and vice versa: When interest rates decline, bond values tend to rise. A bond’s duration, or maturity, comes into play as well. Bonds with longer durations (i.e., more time to maturity) are more susceptible to interest rate risk.

Interest rate risk also applies to securities such as CDs (which may have floating rates), as well as loans with variable rates. These instruments can have an impact on consumers, as well as companies, who might see their debt payments increase on variable-rate loans, for example.

Key Points

•   Interest rate risk usually refers to the impact of interest rate changes on bond values.

•   When interest rates rise, bond values tend to fall, and when interest rates drop, bond values rise.

•   Longer duration bonds — those with more time to maturity — are more vulnerable to interest rates changes.

•   Interest rate risk can also impact stocks indirectly, when a company’s cash flow or performance is impacted by changes in borrowing costs and investment returns.

•   Investors with fixed-income investments may seek ways to mitigate interest rate risk.

How Does a Bond Work?

Bonds are a type of loan, with the bond issuer effectively borrowing money from the investor. The issuer could be the federal government, a state or local government, or a company.

In return for the loan, the investor is promised that they will be repaid the full amount of the bond (the principal) — plus a predetermined amount of interest (the coupon rate) — on a specific date.

Traditionally, most bonds have paid a fixed rate, although there are some with a variable or “floating” interest rate.
Bonds come with an expiration or “maturity” date, when the value of the bond must be paid back in full to the investor, plus interest.

While there’s no such thing as a safe investment, investors typically consider bonds to be lower-risk than stocks and some other investments.

Buying and Selling Bonds

An investor can sell a bond before it reaches its full maturity. If the bond issuer is doing well and the bond is in high demand, the investor could sell it on the secondary market and see a capital gain. If not, the sale might be made at a loss.

Because interest rates impact a bond’s value, the risk here is that rising rates could make a bond’s current rate less attractive. By the same token, if interest rates drop, and an investor is holding bonds with a higher rate, the value of those bonds will rise.

Interest Rate Risk and Timing

In other words, when investors buy fixed-rate bonds, they’re taking the risk that the interest rate may go up after they’ve already made their purchase.

If interest rates do increase, then new bonds are issued with higher rates, which means that existing bonds with lower returns are in lower demand, lowering the bonds’ value.

In general, longer-term bonds are more sensitive to interest rate risk than those with shorter terms. The higher interest rates rise after the bond was purchased, the more of an impact that can have on the investor’s return on investment.

Examples of Interest Rate Risk

The Office of Investor Education and Advocacy of the U.S. Securities and Exchange Commission (SEC) offers two contrasting examples to illustrate this concept.

In the first example, they assume that a Treasury bond has a 3% interest rate. A year later, interest rates drop to 2%. But investors who bought their bonds at 3% continue to receive that interest rate, making it a more valuable investment than new bonds paying just 2%.

If that bond is sold before it reaches its maturity date, the price would likely be higher than it was in the previous year. The bond’s yield to maturity, though, will be down for investors purchasing it at the higher price.

In the second example, instead of rates going down from the original 3%, rates go up to 4%. In that scenario, investors looking to sell their bonds would be competing with new bonds that offer a 4% rate. So the price of the bond that pays 3% may well fall, with the yield going up.

How Interest Rates Can Impact Stocks

Stocks can also be subject to interest rate risk, in that rate changes can impact a company’s bottom line via potentially higher borrowing costs, and expected return on investments (including CDs, which can have a variable rate).

While the impact of interest rates on stocks is indirect, interest rate risk is nonetheless a concern for equity investors as well.

Interest Rate Risk Management

One way to handle investment risk is with diversification. This means building a diversified portfolio that includes a variety of different asset classes, such as stocks, mutual funds, real estate or other asset classes.

Diversified investment portfolios may offer some risk insulation so that if one area takes a financial hit, possible growth in another area could balance out that risk.

Get up to $1,000 in stock when you fund a new Active Invest account.*

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*Customer must fund their Active Invest account with at least $50 within 45 days of opening the account. Probability of customer receiving $1,000 is 0.026%. See full terms and conditions.

Interest Rate Risk and High-Yield Bonds

There are pros and cons to high-yield bonds. These types of bonds — corporate bonds that were issued by companies looking to raise capital, or by “fallen angel” companies whose credit rating has dropped—might sound attractive to investors because the notion of receiving a relatively high rate of interest is appealing. But along with the high yield is the potential for a higher degree of risk.

Bonds receive ratings on their creditworthiness, with S&P Global Ratings and Moody’s serving as two of the main credit-rating agencies. Bonds with quality ratings are less likely to go into default. When a bond goes into default, interest is less likely to be paid on time, if at all, and investors may also lose their initial investment.

Bonds with high ratings include U.S. Treasury bonds and notes issued by the federal government, and those issued by large companies considered to be stable.

Bonds with lower ratings tend to need to offer higher coupon rates to entice investors. In other words, they often need to offer high-yield bonds.

When deciding whether to include high-yield bonds in their portfolio, investors may want to consider the pros and cons of doing so.

Pros of High-Yield Bonds

•  Consistent yields. Bonds typically come with an agreed-upon and consistent yield, which makes the amount owed to the investor predictable as long as the company doesn’t go into default (and many don’t).

•  Priority payment if the company fails. If assets of a failed company are liquidated, bondholders would be first in line for payouts, ahead of stockholders.

•  Possible price appreciation. If the credit rating of the company issuing the bond improves, it’s possible that the bond’s price will go up.

•  Potentially less sensitive to interest rate changes. When this is the case, it may be because high-yield bonds tend to have shorter terms than investment-grade bonds, which may be why they often have less sensitivity to fluctuations in interest rates.

Cons of High-Yield Bonds

•  Higher default rates. Because of the higher risk involved, more of these bonds default. When this happens, the investor can lose all funds, including the original principal they invested.

•  Harder to sell. There can be lower demand for this type of bonds, which can make it harder to sell them at a desired price (or at all).

•  Possible price depreciation. If a company’s credit rating drops further, then the price can further depreciate.

•  Sensitivity to interest rate changes. All bonds, including high-yield ones, are subject to interest rate risk.

The Takeaway

Bonds are a popular investment choice because they are less volatile than stocks, but they are not without risks. Interest rate risk is the potential for a bond value to drop as market interest rate rises (the opposite is also true). High-yield bonds are just as susceptible to interest rate risk as corporate or municipal bonds.

Investors can work to mitigate that risk through portfolio diversification and careful selection of bonds.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

Invest with as little as $5 with a SoFi Active Investing account.

FAQ

Why do bond prices fall when interest rates are rising?

Bond prices typically fall on secondary markets when interest rates rise because newer-issued bonds are more attractive and see higher demand.

Why are longer-maturity bonds more sensitive to interest rate risk?

When a bond has a longer maturity, i.e., five years or more, interest rates are likely to fluctuate more over that extended period. This can impact a bond’s value over time.

Is there interest rate risk if you hold onto a bond until maturity?

Yes. If an investor purchases a bond at a certain rate, and they only redeem the bond at maturity, they are locked into the interest rate of the bond. If interest rates rise, for example, the investor is losing out on potentially higher rates. If interest rates decline, however, that could spell good news for the investor.


INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. 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.

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

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

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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Jun
13
2025
Average Personal Loan Interest Rates and What Affects Them

Average Personal Loan Interest Rates & What Affects Them

By | Budgeting & Goals, Financial Independence, personal_loan | Comments Off on Average Personal Loan Interest Rates & What Affects Them

You may have seen personal loans advertised as starting at a certain interest rate or annual percentage rate (APR). But when you check your personal loan interest rate, you may find that what is offered to you is significantly higher. Why is that?

The average personal loan interest rate is dependent on several factors, including the amount borrowed, credit history, and income, among others. Average interest rates for personal loans may also differ depending on the type of the loan. Here are some factors that may affect the personal loan interest rate you’re approved for.

Key Points

•   Personal loan interest rates are influenced by factors such as credit score, income, and loan amount.

•   Higher credit scores generally secure lower interest rates on personal loans.

•   Secured personal loans require collateral, whereas unsecured loans do not.

•   Employment stability and income levels can significantly affect personal loan rates offered.

•   Personal loans can be beneficial for consolidating high-interest debt or financing large purchases.

Average Personal Loan Interest Rates By Credit Score

The APR for a personal loan is calculated by looking at several factors, including the requested amount, the applicant’s income history, and the reasons for borrowing. One of the biggest factors, however, is an applicant’s credit score. In general, the higher a borrower’s credit score, the lower the loan interest rate they will be offered.

Here’s a look at average personal loan interest rates for different credit scores as of May 2025.

Credit Score

 Average estimated APR
Excellent credit (720 to 850)

 13.88%
Good (690-719) 15.38%
Fair (630-689) 19.77%
Bad (300-629) 19.83%

Factors That Can Lower Personal Loan Interest Rates

One thing to know about how personal loans work is that your unique credit profile will likely affect the interest rate offered to you. Here’s a look at some ways you may be able to qualify for a lower personal loan interest rate.

Building Your Credit Score

Building your credit score can potentially be a way to qualify for a personal loan with better rates and terms. Some strategies that can help you positively impact your credit profile include:

•  Checking your credit report It’s a good idea to get copies of your credit reports (you have three; one each from Equifax®, TransUnion®, and Experian®) and make sure that your personal information — e.g., name, address, phone number, Social Security number — is correct in each one. Also look for any erroneous public record information, such as lawsuits or bankruptcies filed that you were not a part of and any errors or inaccuracies in the credit accounts section. You can dispute any errors with the credit reporting agency.

•  Lowering your credit utilization ratio Your credit utilization ratio — the amount of debt you have compared to the amount of credit available to you — plays a large part in credit score calculation. Paying down your debt will lower this ratio. Financial experts suggest keeping the ratio at 30% or lower (10% or lower is ideal).

•  Avoiding late payments Late payments can have a large and lasting impact on your credit score. If there are any late payments in your history, you may be able to minimize their impact by creating a record of on-time payments moving forward. Setting up autopay for debt payments is one way to make sure those payments are made regularly and on time.

Secured vs Unsecured Personal Loans

How a personal loan works depends on the type of personal loan you choose. As you research loan options, you may come across options for secured and unsecured personal loans.

What’s the difference between a secured and unsecured personal loan?

•  A secured personal loan requires the borrower to pledge collateral to guarantee the loan. This collateral is something of value that the borrower owns, such as a car, investments, or a savings account. If the borrower cannot or does not make the loan payments, then the lender can seize that collateral to recoup its losses.

•  An unsecured personal loan, also called a signature loan, is backed by the borrower’s estimated creditworthiness. If the borrower can’t pay back the loan, the lender can’t take any of their property or valuables to recoup its loss. The lender can, however, take other steps to recoup its loss, such as suing the borrower, which may affect the borrower’s credit score and future financial options.

Personal loans are commonly unsecured loans. However, some lenders offer secured personal loans, which can allow borrowers with fair credit to qualify for a loan or get a better rate than they otherwise would with an unsecured loan.

Income and Employment Status

Your income and employment status may affect the rate you’re offered on a personal loan. Lenders generally see borrowers with solid, steady income as lower risk and, therefore, offer them lower rates. If you’re a freelancer, independent contractor, or business owner, you might need additional paperwork to prove your income than you would if you work a W-2 job.

If your income is irregular, having a creditworthy co-applicant may help you get approved for more favorable interest rates. Asking someone to be a co-applicant is a big commitment, though, and having a conversation about all that it entails can help alleviate any concerns of both parties.

Factors That May Increase Personal Loan Interest Rates

Lenders must assess how risky an unsecured loan might be and the likelihood of the loan being paid back. To do that, they look at the applicant’s credit history, employment status, and loan amount requested, among other factors. Here are some things that may lead a lender to think a loan is more risky — and potentially offer a higher rate to the borrower.

Credit Score

An applicant’s credit score is one factor that affects the personal loan interest rate they might be approved for. In general, the lower the applicant’s credit score (which indicates poor management of credit in the past), the higher the rate of interest they will be offered. Improving your credit over time may make it possible to qualify for a loan with a lower interest rate.

Debt-to-Income Ratio

Debt-to-income (DTI) ratio refers to how much debt someone has in relation to how much income they have. To calculate your DTI, you add up your monthly debts (including mortgage payments, car payments, and credit card payments) then divide that number by your gross monthly income and multiply by 100. DTI ratio is expressed as a percentage. In general, the higher your DTI ratio, the riskier you may seem to lenders. Each lender sets its own DTI ratio requirement.

Unemployment

A personal loan application will ask for proof of income, usually in the form of W2s or tax returns from prior years. The lender wants to know that a borrower has a steady source of income. If a loan applicant is unemployed, it may be harder — but not impossible — to have a loan approved.

Recent Bankruptcy

Bankruptcy will appear on an applicant’s credit report and stay there for seven to 10 years, typically making it challenging to be approved for a personal loan. Applying with a cosigner can make it easier to be approved for a personal loan after recent bankruptcy. But keep in mind that if you are unable to repay the loan, your cosigner would be responsible for the debt.

Awarded Best Personal Loan by NerdWallet.
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Is a Personal Loan the Right Choice for You?

Individual circumstances really determine whether a personal loan is the right choice for any one person.

•  A personal loan can be a good option for people who want to consolidate high-interest debt, like that of credit cards, to save money. For a debt consolidation loan to be successful, it’s important to discontinue using the credit cards to accumulate more debt.

•  Having a fixed interest rate and steady payment amount can be helpful when using a personal loan to cover a big purchase. A personal loan is installment debt with a payment end date, in contrast to the revolving debt of a credit card.

•  A personal loan is still debt and increases a person’s overall debt load, so it can be a good idea to have a sense of how you’ll repay it. Making late payments or failing to repay the loan can negatively affect your credit score.

A personal loan rate calculator can be a helpful tool to estimate your personal loan rate and will not affect your credit score. Your offered rate may vary slightly when you officially apply for a loan, but an estimate can give you a good benchmark for comparison.

Recommended: How to Apply for a Personal Loan

The Takeaway

Personal loan interest rates vary depending on an applicant’s financial circumstances but can also vary by lender, so it can make sense to shop around for rates. If your credit profile is not as strong as it could be, you may want to work on building your credit before applying for a personal loan. This can help increase your chances of loan approval, as well as your odds of getting approved for a loan with a favorable interest rate.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.


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

FAQ

What is a good interest rate on a personal loan?

A good interest rate on a personal loan could be under the almost 14.00% average for those with superior credit as of May 2025. At that time, some of the lowest rates for personal loans began at around 7.99%.

Is 10.00% a good personal loan rate?

Yes. If you have good to very strong credit (720-plus), you could qualify for a 10.00% APR, which is considered a good personal loan interest rate. It is lower than the average personal loan rate for borrowers with excellent credit, which is 13.88% as of May 2025.

Is 12.00% a good personal loan rate?

Yes, a 12.00% APR is considered a good personal loan rate as of May 2025. You would probably need a very strong credit score (possibly 720 or higher) to qualify for this rate. It beats the average personal loan interest rate for excellent credit, which is 13.88%.

Which bank has the lowest interest rate on personal loans?

According to Forbes Advisor, the best low-interest personal loans are currently available from SoFi, Upgrade, LendingClub, PenFed, Happy Money, and U.S. Bank.

What is a personal loan interest rate?

A personal loan’s interest rate is the cost you pay each year to borrow money expressed as a percentage. The interest rate does not include fees charged for the loan. The annual percentage rate (APR) of a personal loan is the cost you pay each year to borrow money, including fees, expressed as a percentage. The higher the APR, the more you’ll pay over the life of the loan.

What is the interest rate on a $40,000 loan?

The interest rate on a $40,000 personal loan will depend on the lender, the loan’s term, and the creditworthiness of the borrower. The APR can range anywhere from the single digits to 35.99% or possibly higher.

What is a good interest rate for an unsecured personal loan?

A good interest rate for an unsecured personal loan can range anywhere from 7.99% to 13.88% as of May 2025. However, you will likely need to have excellent credit to qualify.

Photo credit: iStock/alexsl

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

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

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

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

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

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13
2025
Beginner’s Guide to a Bedroom Remodel_780x440

Beginner’s Guide to a Bedroom Remodel

By | Growing Wealth, Home Ownership, mortgage | Comments Off on Beginner’s Guide to a Bedroom Remodel

Is your bedroom cluttered, depressing, and lacking warmth and coziness? If so, perhaps it’s time for a bedroom remodel, an awakening of a room that can range from paint to structural changes.

If you’re a homeowner looking to spice up or calm down your bedroom, know that bedroom remodels can have a return on investment of 20% to 45%, according to Angi, the home improvement site, as of mid-2025.

The steps you can take to renovate rooms aren’t too onerous and can often be done without the help of a contractor or other professional. Let’s take a look at the cost to remodel a bedroom, bedroom remodel ideas, and how to pay for a bedroom remodel.

Key Points

•   Bedroom remodels can increase home value by 20% to 45%.

•   The average cost for a bedroom remodel is around $20,000, depending on the project.

•   Painting and decluttering are simple, cost-effective ways to refresh the bedroom.

•   Simple bedroom makeovers, involving paint, new bedding, and accessories, can be DIYed.

•   Larger projects, involving structural changes or plumbing, often need professional help.

How Much Does It Cost to Remodel a Bedroom?

The typical bedroom costs $20,000 as of mid-2025, according to Angi. However, the amount of money you put into a bedroom remodel depends on what you’re trying to achieve. Do you simply want to change up your décor, including your bed, bedside tables, and desk? Or do you want to paint the room a different color and add some window treatments?

You may also be looking at more extensive changes, such as ripping up carpeting and putting in new flooring, installing new windows, or building custom cabinetry in your closet.

The good news is that most bedroom remodels are less costly than renovations that entail taking down walls, rewiring electrical systems, and installing pipes, though some bedroom remodels may call for these types of tasks.

With a bedroom remodel, you’re less likely to be doing major construction that requires hiring licensed professionals like a carpenter, plumber, or general contractor. And even if you have to rely on the services of a vendor, there are likely other aspects of the project you can tackle yourself.

Recommended: The Top Home Improvements to Increase Your Home’s Value

Simple Bedroom Remodel Ideas

Decluttering is a tried-and-true way to visually open up a room. That means organizing books and magazines, laundry or piles of clothes, and furniture. Here are some other ways.

Painting

What color will turn your current space into your dream bedroom? Some of the major brands and independent companies offer online color consultations. And then, if you feel up to the task, you can avoid hiring a painter by painting your walls yourself.

You’ll want to take stock of the current trim and match a color to it. You’ll also want to consider how the room changes color depending on the time of day. Sometimes a room that looks white in the evening can take on a yellowish tint during the light of day.

You’ll want to make sure you have all the equipment you need to get the work done efficiently and well. This includes paintbrushes, a paint roller and pan, rags, sandpaper, and drop cloths.

The great thing about paint is, if you feel you’ve done a poor job in spots, you can always paint over it.

Flooring

What you do with your floors is going to depend largely on personal taste. Your choices include wall-to-wall carpeting, wood or wood-engineered flooring with or without area rugs, and tile or ceramic flooring, which works best in humid climates.

You’ll want to think about how your flooring will complement the rest of the room, including furniture. You’ll also want to take your comfort into consideration. Carpeting, for example, muffles sound, while wood flooring does not.

Some people don’t like walking barefoot on anything besides carpet, for example, while others prefer the look of bare floors.

Cost may also come into play here as wood flooring is generally more expensive than carpeting, $6 to $25 per square foot. Carpeting typically runs $3.50 to $11 a square foot, HomeAdvisor notes.

Furnishings

While some homeowners may want to keep the bedroom furniture they’re currently using, others choose to sell or donate what they have and start over.

If you’re in the latter group, you’ll want to consider the paint and flooring you’ve chosen when looking for a new bed and headboard, bedside tables, desk, and dresser.

Looking online for bedroom remodel ideas can be a low-cost way to design your bedroom décor, with many blogs and websites linking to online retailers for easy purchase.

Social media sites like Houzz and Pinterest have scores of photos and boards delineated by room, color, and style to help you brainstorm.

If your budget allows, this might be an area to bring in the help of an interior designer. An interior designer may be able to see things you don’t, such as whether you need a large desk for working from home, a bench at the end of the bed for sitting, or a changing table if you plan to grow your family in the near future.

On a tight budget? Many people find cheap furniture online, at flea markets, and from freecycle resources. Refinishing it, painting it, or otherwise freshening it up can be a fun, affordable, hands-on way to update a bedroom.

More Extensive, and Expensive, Bedroom Remodels

While bedroom remodels are typically less wide-ranging than those of a kitchen or bathroom remodel, you may opt for larger changes that can drive up your cost.

These include altering the function and structural design of a room, which may require the use of a professional.

Structural Changes

If you own a home or are looking to buy a property, the lack of an ensuite bathroom might be a big deal. Maybe you’d like to be able to pad into the bathroom in the middle of the night without tiptoeing through the hallway.

Depending on the layout of the bedroom and the rooms near it, this may necessitate turning a closet into a bathroom or building a door through a wall that conjoins your bedroom with that hallway bathroom.

Either way, you’re probably looking at hiring a plumber, carpenter, electrician, and contractor. While this type of remodeling affords you more options than sticking with your current footprint, it comes with added costs to be aware of.

Lighting and Fans

Adding recessed lights requires the work of a licensed electrician, who may have to work around obstacles like heating ducts, and will charge for both installing and wiring each light.

Ceiling fans, while pretty and useful, will likely also require hiring a professional installer to burrow through your ceiling, connect to electricity, and complete the necessary patchwork afterward.

Recommended: Guide to Buying, Selling, and Updating Your Home

Paying for It

Creating a budget and payment plan is key, no matter the size of your bedroom remodel. Some changes are so small that homeowners can pay upfront.

Those with more extensive remodels might use a home equity loan or home improvement loan. These allow you to tap into the value of your home and use the funds to finance your bedroom remodel. They typically have comparatively low interest rates, since they are secured loans with your property as collateral, but obtaining them can take a little while.

Another option would be a home improvement loan. These are a kind of personal loan, which allows you to obtain a lump sum of cash and then pay it back over time with interest. This is usually a fixed-rate personal loan, and the term extends from one to seven years in most cases.

Recommended: Personal Loan Calculator

The Takeaway

A bedroom remodel currently costs $20,000 on average. This price reflects more than just a coat of paint and a new lighting fixture, so it is possible to do the job on a tighter budget and transform your space into a dream bedroom. It could also improve the value of your home. To pay for a bedroom renovation, you might use savings, consider tapping your home equity, or take out a personal loan.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.


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

FAQ

How much is the typical bedroom remodel?

The average bedroom remodel costs about $20,000 as of 2025, but it’s possible to spend much less or more, depending on the scope of your project.

How long does it take to renovate a bedroom?

Depending on the extent of the work you are doing, it could take a weekend, several weeks, or even months, if structural changes are part of the plan. It’s a highly individual process.

How can you finance a bedroom remodel?

To finance a bedroom remodel, you might dip into your savings, tap home equity, or take out a personal loan. Credit cards should typically be your last resort due to their high interest rates.


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2025
What Are Convertible Bonds?: Convertible bonds are a form of corporate debt that also offers the opportunity to own the company’s stock.

What Are Convertible Bonds?

By | Financial Independence, Growing Wealth, invest, Investing, Terminology | Comments Off on What Are Convertible Bonds?

Convertible bonds are a type of corporate debt security that provide fixed-income payments like a bond, but can be converted to common shares of stock. As such, they’re often referred to as “hybrid securities.”

Most convertible bonds give investors a choice. They can hold the bond until maturity, or convert it to stock at certain times during the life of the bond. This structure protects investors if the price of the stock falls below the level when the convertible bond was issued, because the investor can choose to simply hold onto the bond and collect the interest.

Key Points

•   Convertible bonds are known as hybrid securities because they offer investors some fixed-income features as well as equity features.

•   Convertible bonds offer fixed-income payments, as well as the potential to be converted to a pre-set number of common stock shares in the company.

•   The investor can obtain shares based on the conversion ratio, which is determined at the time of purchase.

•   The conversion price per share is also built into the bond contract.

•   There’s no obligation to convert these securities. When the bond matures, the investor can either take their principal, or convert it to the corresponding shares.

How Do Convertible Bonds Work?

Companies will often choose to issue convertible bonds to raise capital in order to not alienate their existing shareholders. That’s because shareholders may be uneasy when a company issues new shares, as it can drive down the price of existing shares, often through a process called stock dilution.

Convertible bonds are also attractive to issue for companies because the coupon — or interest payment — tends to be lower than for regular bonds. This can be helpful for companies who are looking to borrow money more cheaply.

What Are the Conversion Ratio and Price?

Every convertible bond has its own conversion ratio. For instance, a bond with a conversion ratio of 3:1 ratio would allow the holder of one bond to convert that security into three shares of the company’s common stock.

Every convertible bond also comes with its own conversion share price, which is set when the conversion ratio is decided. That information can be found in the bond indenture of convertible bonds.

Convertible bonds can come with a wide range of terms. For instance, with mandatory convertible bonds, investors must convert these bonds at a pre-set price conversion ratio.

There are also reverse convertible bonds, which give the company — not the investor or bondholder — the choice of when to convert the bond to equity shares, or to keep the bond in place until maturity.

But it also allows the investor to convert the bond to stock in the case where they’d make money by converting the bond to shares of stock when the share price is higher than the value of the bond, plus the remaining interest payments.

In general, these options are not available when investing online.

How Big Is the Convertible Bond Market?

As of 2024, the size of the U.S. convertible bond market was estimated to be about $270 to $280 billion. Securities have been issued by hundreds of companies. But note that these numbers are miniscule compared to the U.S. equity market, which has trillions in value and thousands of stocks.

The total size of the convertible bond market does expand and contract, though, often with the cycling of the economy. In 2024, the total convertible bond issuance reached nearly $88 billion, versus $55 billion in 2023, and $29 billion in 2022. This may reflect the higher interest-rate environment, and companies’ desire to minimize debt payments.

Recommended: How Does the Bond Market Work?

Reasons to Invest in Convertible Bonds

Why have investors turned to convertible bonds? One reason is that convertible bonds can offer a degree of downside protection from the bond component during stock volatility. The companies behind convertibles are obligated to pay back the principal and interest.

Meanwhile, these securities can also offer attractive upside, since if the stock market looks like it’ll be rising, investors have the option to convert their bonds into shares. Traditionally, when stocks win big, convertibles can deliver solid returns and outpace the yields offered by the broader bond market.

For example, in 2024, the U.S. convertibles market returned 11.4%, outpacing the performance of all major fixed-income indices. And over the 10-year period ending December 31, 2024, convertible bonds have delivered a higher yield than equities, according to data by Bloomberg.

Recommended: Stock Market Basics

Downsides of Convertible Bonds

One of the biggest disadvantages of convertible bonds is that they usually come with a lower interest payment than what the company would offer on an ordinary bond. As noted, the chance to save on debt service is a big reason that companies issue convertibles. So, for investors who are primarily interested in income, convertibles may not be the best fit.

There are also risks. Different companies issue convertible debt for different reasons, and they’re not always optimal for investors. Under certain conditions, convertible financing can lead to “death spiral financing.”

What Is Death Spiral Debt?

The death spiral is when convertible bonds drive the creation of an increasing number of shares of stock, which drives down the price of all the shares on the market. The death spiral tends to occur when a convertible bond allows investors to convert to a specific value paid in shares, rather than a fixed number of shares.

This can happen when a bond’s face value is lower than the convertible value in shares. That can lead to a mass conversion to stock, followed by quick sales, which drives the price down further.

Those sales, along with the dilution of the share price can, in turn, cause more bondholders to convert, given that the lower share price will grant them yet more shares at conversion.

How to Invest in Convertible Bonds

Most convertibles are sold through private placements to institutional investors, so retail or individual investors may find it difficult to buy them.

But individual investors who want to jump into the convertibles market can turn to a host of mutual funds and exchange-traded funds (ETFs) to choose from. But because convertibles, as hybrid securities, are each so individual when it comes to their pricing, yields, structure and terms, each manager approaches them differently. And it can pay to research the fund closely before investing.

For investors, one major advantage of professionally managed convertible bonds funds is that the managers of those funds know how to optimize features like embedded options, which many investors could overlook. Managers of larger funds can also trade in the convertible markets at lower costs and influence the structure and price of new deals to their advantage.

The Takeaway

Convertible bonds are debt securities that can be converted to common stock shares. These hybrid securities offer interest payments, along with the chance to convert bonds into shares of common stock.

While convertible bonds are complex instruments that may not be suitable for all investors, they can offer diversification, particularly during volatile periods in the equity market. Investors can gain exposure to convertible bonds by putting money into mutual funds or ETFs that specialize in them.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

Invest with as little as $5 with a SoFi Active Investing account.

FAQ

Why would an investor choose convertible bonds?

Convertible bonds offer downside protection for an investor’s principal, and also offer the potential to see equity gains as well.

What is the difference between a corporate bond and a convertible bond?

The main difference is that a corporate bond pays a fixed rate of interest that’s typically higher than a convertible bond coupon. But a regular corporate bond doesn’t offer access to an equity upside the way a convertible bond can.

Can a convertible bond be converted into cash?

Yes. First, in some cases a convertible bond may offer the option to convert to cash value rather than a pre-set number of company shares. Then, there is always the option to redeem the bond at maturity for its cash value.

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For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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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.

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

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