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When deciding between online classes (also called e-learning) and in-person classes, both have perks and drawbacks. Online learning may offer more flexibility, while in-person classes might provide better face-to-face interaction and networking opportunities.

Since the 1950s, schools have used e-learning tools, starting with slide projectors and TV-based classes. Online learning gained significant traction during the pandemic when students couldn’t attend in person, forcing schools to rethink and redesign the learning process. Although enrollment in online courses has dipped a bit recently, it’s still a popular choice, with about 53.5% of higher education students enrolled in online or distance learning programs in 2022.

Even though more than half of college students opt for some form of online learning, the choice between online and in-person classes ultimately depends on what works best for you.

Keep reading to learn the differences between online vs in-person classes and find out which one might be a good fit for you.

Advantages of Online Classes

As technology advances and more schools launch online learning opportunities, the appeal of distance learning may pique your interest. So if you’re wondering whether online classes are right for you, here are some of the advantages to consider.

Flexibility

Whether you’re juggling a full-time job, raising a family, or handling a bit of everything, it can be a challenge to balance it all. This can make finding time for in-person classes feel nearly impossible. Online classes let you fit your studies into a schedule that works for you, as long as you meet the deadlines. Plus, with internet access, you can usually work on your courses from just about anywhere.

Convenience

Driving from appointments to work and then to school can quickly eat up your free time and your gas budget. Online classes can save you that commute time, giving you more time to study and do the things you enjoy.

Cost Savings

Online courses are often more budget-friendly than in-person programs. A big reason is due to the fact that you don’t have to worry about extra costs like gas, parking, and meals. Plus, some schools even offer online learning credits, which can help lower your tuition bill when you choose to take classes online.

Self-Paced Learning

Everyone learns differently. Some people are visual learners, while others need to listen to grasp the coursework. Online courses can give you the flexibility to learn in the way that works best for you. For example, your school might offer different options for how you receive coursework and resources, like e-books, PDFs, lecture recordings, and more.

Recommended: Tips for Navigating Night Classes

Advantages of In-Person Classes

In-person classes also come with perks. Here’s a look at some of the benefits of attending classes in person.

Face-to-Face Interaction

Interactive learning can make it easier for some students to absorb and comprehend the material. Joining group discussions and working on projects may help you understand the content better and allow you to connect with your classmates and professors.

Structured Environment

Some students need structure to learn effectively. In-person classes in classrooms, labs, and lecture halls offer a focused, distraction-free environment where you can stay fully engaged in your lessons. It’s a place where you can really concentrate on your studies without worrying about distractions like car alarms, barking dogs, or ringing phones breaking your focus.

Access to Resources

When you attend school in person, you have access to a wide range of resources right at your fingertips, like libraries and tutoring programs. One of the most valuable resources is your professor, who you can ask questions, get feedback from, and visit during office hours for extra support. With online classes, you might have to wait a bit to get a response, and some resources may require a visit to campus to use them.

Networking Opportunities

In-person classes offer unique networking opportunities that are hard to match online. If you thrive in a classroom setting, enjoy face-to-face interactions, and like getting involved in clubs and organizations, in-person classes could be a great fit. Being on campus helps you naturally connect with peers, professors, and guest speakers, which can build valuable relationships and a strong professional network for when you’re ready to launch your career.

Recommended: College Freshman Checklist for the Upcoming School Year

Challenges of Online Classes

While online classes offer plenty of benefits, there are also some drawbacks to keep in mind.

Self-Discipline and Time Management

Taking online classes, like working from home, requires self-discipline and time management skills. Without a set class schedule that keeps you in a specific place at a certain time each week, it can be tough to stay on track, especially if you’re prone to procrastination. If managing your time is a challenge, you might find it harder to fully benefit from what online learning has to offer.

Technical Requirements

To take online courses, you’ll usually need access to a computer and the internet. For some students, this can be a costly challenge if they need to upgrade their computer or increase storage space. Plus, if your internet goes down or your computer crashes, it can keep you from completing important coursework.

Limited Social Interaction

While online students will get to know their professors, they might never actually meet them in person. Also, it can also be harder to build relationships with classmates since interactions aren’t face-to-face. Connecting with your professor and other students might require more effort, which could be a drawback for some when it comes to taking online classes.

Challenges of In-Person Classes

Here are a few drawbacks to consider if you’re thinking about enrolling in on-campus classes.

Commuting and Scheduling Conflicts

For students who don’t live on campus, commuting to in-person classes can be time-consuming, tiring, and costly, not to mention the stress of dealing with traffic every day. If you’re considering an on-campus program, it’s important to think about how the daily commute might impact your schedule and energy levels.

Potential Distractions

Being on campus can sometimes mean dealing with unexpected distractions, like noise in common areas, interruptions from classmates, use of devices, or other activities going on around you. Certain distractions can make it harder to stay focused during study sessions or class time.

Higher Costs

In-person classes often come with extra expenses, such as gas, parking, and on-campus meals. While these expenses can add value by providing access to facilities and resources, they are something to consider when budgeting for your education.

Recommended: What Is the Cost of Attendance in College?

Choosing the Right Format

Even after weighing the pros and cons of online versus in-person classes, it can be hard to choose. Each has their benefits, so it really depends on your learning style, flexibility, and what you need.

To help you decide, consider:

•   How you like to learn

•   Your other responsibilities, like a job or family commitments

•   Whether commuting is easy for you

•   Your academic and career goals

For example, if you’re self-motivated and good at managing your own tasks, online classes might be a great fit. But if you find home distractions make it hard to focus, the structure of an in-person classroom might work better.

Also, remember that some schools offer hybrid learning, where you can mix both in-person and online classes. This way, you can enjoy the best of both worlds.

The Takeaway

Deciding between online and in-person classes (or a mix of both) is all about finding what works best for you. Each option has its perks and drawbacks.

Online classes might give you more flexibility and help you save money, which can make them a good choice if you’re on a budget or have a busy schedule. On the other hand, in-person classes often offer a more structured environment, which can be ideal if you thrive on routine. No matter your learning style, it’s all about choosing what fits your needs best and sets you up for success.

And finally, you’ll need to find a way to pay for your classes. Your options include cash savings, scholarships, grants, and federal and private student loans.

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

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

FAQ

Are online classes easier than in-person classes?

Online classes aren’t necessarily easier than in-person classes; they require self-discipline, time management, and motivation. While online courses offer flexibility, they often have similar workloads and expectations as traditional classes. Success depends on a student’s ability to adapt to the online learning environment and stay engaged with the material.

Can online classes be just as effective as in-person classes?

Yes, online classes can be just as effective as in-person ones, maybe even more so, depending on how you learn. If you need hands-on experiences and face-to-face interaction, in-person classes might be a better fit. But if you like working at your own pace and managing your own schedule, online classes could be the way to go.

How do I stay motivated in an online class?

To stay motivated in an online class, set clear goals and create a study schedule. Break tasks into manageable steps, participate actively in discussions, and stay organized. Find a quiet, dedicated workspace, connect with classmates for support, and reward yourself for meeting milestones to maintain engagement and accountability.

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SOISL-Q324-040

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Being a mystery shopper (or secret shopper) can sound like a dream come true: A company pays you, as an independent contractor, to hit the stores and buy things. You earn money by posing as a patron at a place of business and help evaluate the quality of the products and services.

However, not all mystery shopping jobs are legit (there are plenty of scams out there) and even the real jobs generally don’t pay enough to allow you to leave your day job. Still, working as a secret shopper can be a fun way to earn some extra cash. Read on to learn more about this type of marketing work and how to become a mystery shopper.

What Is Mystery Shopping?

Mystery shopping means a company hires you to use its services covertly. For example, you might bring your car into a shop for an oil change, buy a new pair of jeans at the mall, or eat at a new restaurant. The crucial factor is that the company’s employees don’t know by whom you are employed or that you are evaluating them, so you’ll gain insight into what typical operations are like. The purpose is for the company to gather your feedback to improve their business.

What Happens During Mystery Shopping?

During mystery shopping, you’ll head to the assigned business location and act like an average customer. You might have the job of returning something or noting the tidiness of the workspace.

After you complete your task, you’ll likely submit a write-up or complete a survey describing your experience, including what went well or how the company could sharpen their services. Generally, once the company receives your feedback, they will pay you.

How Much Do Mystery Shoppers Make?

According to Indeed, mystery shoppers across America earn $12.23 per hour on average, which would equal $28,597 if employed full time. Typically, you receive compensation per task instead of per hour. However, mystery shopping can be time-consuming, which is why the hourly pay is relatively low. Additionally, some mystery shopping opportunities don’t offer compensation.

While some side jobs, such as renting out a portion of your home, help you build passive income streams, mystery shopping pays by the gig. Therefore, to make continuous money, you’ll have to repeatedly take on mystery shopping jobs.

Can Mystery Shopping Be a Full-Time Job?

Companies pay mystery shoppers for their help, usually in the form of a flat fee. They may also repay all or part of the expenses you incurred performing the work. In either case, mystery shopping isn’t typically profitable enough to be a full-time job, though it can be a fun, low-cost side hustle. Remember, the time that mystery shopping takes and the hidden expenses such as unreimbursed travel expenses can reduce the value of your reimbursements.

Additionally, as independent contractors, mystery shoppers don’t receive benefits, such as health insurance and paid time off. Also, if you are self-employed, saving for retirement is on you.

As a result, you’ll need to subtract those costs from what you think you could earn as a full-time mystery shopper. With an average salary of $28,597 a year, it may be challenging to make ends meet.

Would Mystery Shopping Be Considered Variable or Fixed Income?

Fixed income is a set sum of money that you can expect on a regular basis. For example, when you earn a salary, you will usually get paid the same amount weekly or bi-weekly.

On the other hand, variable income fluctuates weekly or bi-weekly. Since the income earned from mystery shopping can vary by company and project, your mystery shopping income is usually variable.

💡 Quick Tip: Want a simple way to save more everyday? When you turn on Roundups, all of your debit card purchases are automatically rounded up to the next dollar and deposited into your online savings account.

Do Mystery Shoppers Pay Taxes?

The IRS requires you to file an income tax return if your net earnings from mystery shopping (or any side hustle) were $400 or more for the year. If you netted less than $400 from mystery shopping, the IRS stipulates that you still have to file an income tax return if you meet any other filing requirements listed in the Form 1040 and 1040-SR instructions. Remember to keep records of your expenses so you can maximize your deductions.

Becoming a Secret Shopper

If you strategically acquire legitimate mystery shopping jobs, you can make quick cash to pad your budget every month. Here are steps to becoming a secret shopper:

•   Search online for mystery shopping opportunities from businesses.

•   Vet the advertisement and company to ensure the opportunity isn’t a scam.

•   Apply to the mystery shopping job.

•   If necessary, submit a background check and sign any related disclosures or professional agreements.

•   After the company grants you access, check their website for jobs and select one you’d like to complete.

The Mystery Shopping Providers Association (MSPA) has an online database to help you find honest, authentic mystery shopping jobs. In addition, the organization offers two certifications that make you a more desirable mystery shopper for companies. You can earn the MSPA’s silver certificate online and participate in a day-long workshop for the gold certification.

Recommended: A Guide to Ethical Shopping

Benefits of Becoming a Mystery Shopper

By becoming a secret shopper, you’ll enjoy the following perks:

•   You earn money for shopping, trying a delicious meal, or spending the night at a hotel.

•   You can create your own schedule and practice a healthy work-life balance.

•   You may get to keep what you buy.

•   You can often work during evenings and weekends if that is your only available time.

•   You decide for whom you want to work, meaning you can be selective when choosing jobs.

•   You are your own boss to a large extent, setting your schedule.

•   You can supplement income from your day job with mystery shopping or even try going full time.

•   You’ll have variety and excitement from new experiences every day.

•   You can help companies you like improve their products and services.

Drawbacks of Becoming a Mystery Shopper

If you’re considering becoming a mystery shopper, it’s a good idea to be mindful of potential downsides:

•   You likely won’t have steady earnings like a typical job, meaning some weeks will be more lucrative than others. In addition, each job may pay differently.

•   Frequent travel can put extra miles on your car and possibly cause damage. Even if you’re reimbursed for miles, you may still lose more money through oil and tire changes.

•   You’ll probably have to sift through countless scams while looking for jobs. If you fall prey to one, you’ll likely lose money or waste time.

•   Payment could take up to 90 days to receive.

•   Starting out, you usually won’t be able to access some of the better assignments available only to seasoned shoppers.

Recommended: How to Earn Residual Income

Tips Before Becoming a Mystery Shopper

If you’re planning on becoming a secret shopper, consider this advice on staying organized and achieving success.

Keeping Receipts

You’ll likely submit receipts for many mystery shopping jobs. Therefore, you may spend time mailing, faxing, or scanning receipts. It’s recommended to make copies for your own records to ensure you retain proof of completed jobs.

Signing Up for Multiple Sites and Companies

To make substantial income, you’ll probably work with numerous companies. As a result, you’ll typically have to become well-versed in the methods and preferences of a plethora of businesses. It can be a good idea to organize your work into files for each company to keep you from getting mixed up.

Watching Your Income and Taxes

You’ll likely owe taxes on the income if you earn more than $400 as a mystery shopper. Therefore, it’s recommended to meticulously track your earnings to ensure your income level is accurate on your tax return.

Watching for Scams

Unfortunately, not all mystery shopping jobs are legitimate. Scammers devise websites and advertisements to look authentic. Here, some signs to watch out for:

•   A dead giveaway of a scam is typically the requirement that you must pay to access a job. Companies with legitimate mystery shopping opportunities won’t charge you or demand that you transfer money from your bank account. Additionally, since MSPA lists mystery shopping jobs at no charge, you should not have to pay to view opportunities.

•   Any mystery shopping job that promises you’ll make thousands of dollars during your first month is also likely to be fraudulent. While it is possible to generate significant income by mystery shopping, it takes time and certifications to access better-paying work. Even then, you would have to work at least 40 hours per week to earn enough to live on.

•   Beware scammers who use the MSPA name to con you into their fraud. MSPA is an excellent resource, but scammers posing as the organization try to lure mystery shoppers. The MSPA posts jobs but does not directly employ mystery shoppers. It can be wise to avoid advertisements for jobs with the MSPA, as they tend to be fake.

Knowing What You Signed Up For

It’s easy to get carried away when perusing mystery shopping opportunities. So before you click away, it’s a good idea to read the details about the opportunity first. For example, although you might see a job at your favorite store, the location might be an hour away instead of the one that’s a five-minute drive from home. Therefore, it’s wise to study jobs carefully before committing to something you may not enjoy or receive enough compensation for it to be worthwhile.

The Takeaway

Mystery shopping can be a fun way to earn extra money. Just keep in mind that it may not be the most profitable side hustle out there, and finding legitimate opportunities can be challenging. Still, the added perks of trying new products and having new experiences can make mystery shopping an enjoyable hobby that also puts a little extra padding in your bank account.

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Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

Is mystery shopping too good to be true?

Mystery shopping is a viable side gig that can increase your income by completing jobs for businesses that are looking to improve. However, scammers try to lure in would-be mystery shoppers by promising huge paychecks for quick jobs. Any mystery shopping job that sounds too good to be true probably is. That said, a wide array of mystery shopping jobs pay modest rewards that can pad your wallet.

Do mystery shoppers get to keep what they buy?

Mystery shoppers sometimes get to keep what they buy. It depends on the company’s policies for the specific job. The business might allow you to keep purchases in some cases and ask for you to return them in others.

Do mystery shoppers get paid upfront?

In most cases, mystery shoppers do not get paid upfront. It usually takes 30 to 90 days to receive payment for a mystery shopping job.

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Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

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SOBNK-Q424-031

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Money pools provide a platform for friends, relatives, or colleagues to combine their savings. The purpose of this arrangement is to leverage each member’s financial resources to save money, reach short-term money goals, or create financial security.

While money pools gained popularity centuries ago in developing countries, such as India and Southern Africa, they have continued to provide a banking solution for migrant communities in the U.S. Here’s a look at how money pools work and how they benefit folks that don’t have access to traditional banking products like savings accounts.

Read on to learn:

•   What is a money pool?

•   How do money pools work?

•   What are the pros and cons of money pools?

What Is a Money Pool?

So, what are money pools exactly?

A money pool is when a group of individuals (friends, family members, neighbors, or coworkers) combine their savings into one pot. The group decides on a monthly contribution amount they will each put into the pool.

Then, every month, one person from the group will receive the total sum of the money pool to do as they wish. The group can either draw names to decide who gets the money or make an arrangement based on a mutual understanding. Funds are distributed monthly until the entire pool is depleted. In this way, it’s somewhat akin to peer-to-peer lending.

However, money pools don’t just happen; they must have a responsible party that organizes the group. The money pool organizer tackles tasks such as collecting the money, tracking contributions, and planning distributions. The organizer keeps order, so each member understands and adheres to the group’s guidelines.

Money pools mainly exist in developing countries, with minimal access to credit or banking solutions like savings accounts. However, many U.S. immigrant communities nationwide use money pools as a solution for helping people within the community pay bills or save for financial goals. It can also serve as an example of pay-it-forward finance and helping those close to you.

Recommended: Short-Term Financial Goals to Set for Yourself

How Do Money Pools Work?

A money pool works like this: Let’s say a group of three friends decide to create a money pool. They decide that they will contribute $400 per month creating a $1,200 money pool. Each month, one friend from the group will receive $1,200. No matter who receives the funds for the month, every person in the group continues to contribute so the money pool amount always has $1,200 in it.

A money pool provides an immediate source of funds for someone needing to pay for unexpected expenses. In other words, the money pool can act as an interest-free loan to pay off medical expenses you can’t afford, car repairs, or tuition costs. A money pool can also provide a forced savings method for the last person who receives the funds.

The organizer usually determines who should receive the funds first. They may consider financial needs to assess the arrangement of the distribution of funds.

Reasons Why People Use Money Pools

For centuries, people have been using money pools around the world as an alternative to traditional savings solutions. However, folks are more likely to use money pools if they have:

•   Limited or no access to traditional banking institutions.

•   A bad credit score that making it challenging to qualify for financing.

•   Minimal financial resources; the money pool can be a way to save money with a low income.

•   The need to borrow or save money.

Examples of Money Pools

Money pools exist around the world and often go by various names. In U.S., Americans usually refer to this type of arrangement as a money pool or rotating savings and credit association (ROSCA).

Different communities call money pools by different names. Some examples of other names for money pools are:

•   Tandas in south and central Mexican communities

•   Cundinas between northern Mexico and Washington state

•   Susus in the Caribbean

•   Pandeiros in Brazil

•   Hui in Asia

•   Arisan in Indonesia

•   Ayuuto in Somalia

Recommended: Creative Ways to Save Money

How to Determine if You Should Join a Money Pool

If a money pool piques your interest, consider a few key points before moving forward with this financial decision.

•   Affordability of recurring payments. Make sure you can afford and have the money discipline to contribute the recurring payment amounts. A money pool isn’t like a traditional savings account where you can pull money out whenever you want. Think carefully to be sure that contributing won’t put you in a financial bind.

•   Trustworthiness of key members. You may feel uncomfortable contributing to a money pool with a group of members you don’t know well. Instead, consider creating a money pool with people you know and trust.

•   Organization of the money pool. Someone must be the organizer if you establish your own money pool. Money pool apps are available to help you organize your group and streamline contributions and distributions.

If you’re still on the fence, you may want to explore Community Development Financial Institutions or CDFIs as an alternative solution. What is a CDFI? These financial institutions cater to underserved communities. In addition, CDFIs offer banking products such as checking accounts to those who may have been turned away by traditional banking institutions. So, if you have a low credit score or are struggling to find a suitable savings vehicle, CDFIs could be worth considering.

Pros of Money Pools

Money pools can be advantageous to consumers for the following reasons:

•   Provide access to cash. A money pool offers an alternative solution for accessing funds if individuals don’t have access to lending institutions.

•   Members instill accountability. The social pressure of accountability encourages the group members to adhere to the money pool commitment.

•   Interest-free loans. Money pools provide an interest-free way to pay for unexpected expenses like medical bills or car repairs.

Recommended: What Is a Lifeline Checking Account?

Cons of Money Pools

While money pools have benefits, they can also have some drawbacks, including:

•   Funds in the account are not interest-bearing. Members can grow their money in other interest-bearing accounts, like a high-yield saving account.

•   Members who don’t make payments put the group at financial risk. Members of the money pool could suffer a financial loss if someone doesn’t contribute when they are supposed to. This is especially true for the last member to receive the lump sum.

•   Risk of social disapproval. You must make an agreed-upon payment or you could be kicked out of the money pool and face social consequences such as being shunned from your community.

Recommended: Different Types of Savings Accounts

The Takeaway

Money pools allow a group of people to combine their savings while helping each other financially. Each member contributes to a fund of money, which is then disbursed to members sequentially, allowing every person involved to receive a lump sum of cash. While this type of savings vehicle is used in the U.S., it’s more prevalent in developing countries since financial resources are often limited.

3 Money Tips

1. Typically, checking accounts don’t earn interest. However, some accounts do, and online banks are more likely than brick-and-mortar banks to offer you the best rates.
2. If you’re faced with debt and wondering which kind to pay off first, it can be smart to prioritize high-interest debt first. For many people, this means their credit card debt; rates have recently been climbing into the double-digit range, so try to eliminate that ASAP.
3. When you feel the urge to buy something that isn’t in your budget, try the 30-day rule. Make a note of the item in your calendar for 30 days into the future. When the date rolls around, there’s a good chance the “gotta have it” feeling will have subsided.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

Is there a reason for developed countries to use money pools?

Yes, for communities with limited access to traditional banking and credit, money pools can offer a platform to help individuals achieve their financial goals.

Are money pools safe?

While there is a risk of members failing to contribute to a money pool, the peer pressure of the group usually ensures they will go to great lengths to make timely payments. So even though it’s possible, loss typically occurs only rarely.

Do money pools still exist?

Yes, money pools exist. You may find them in developing countries as well as the U.S.

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

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
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No-interest loans offer borrowers a way to obtain financing without the additional cost of interest. Instead, you are only responsible for paying back the original amount you borrowed, or the principal.

That may sound like a great deal, but financing offers that tout a 0% annual percentage rate (APR) often come with a catch: If you don’t follow the terms outlined in your loan agreement to the letter, you can end up paying interest on the full amount that you borrowed. In addition, some lenders charge fees for short-term zero-interest loans, which means you’ll end up paying back more than you borrow.

Read on to learn what no-interest loans are, how they work, and any potential costs that may be involved.

Are Interest-Free Personal Loans Real?

Yes. It is possible to get a personal loan with no interest. Also referred to as zero-interest or 0% APR loans, no-interest loans are essentially loans that let you borrow money without additional interest charges, provided you closely follow the loan’s terms and conditions.

What you can use a no-interest personal loan for will depend on the lender and type of loan you apply for. For example, some zero-interest loans, like certain auto loans, can only be used for financing a car, while others are only available for a specific retail purchase.

Interest-free loans aren’t necessarily cost-free, however. Some of these loans come with fees, such as a set-up, origination, or application fee. Also, many so-called “interest-free loans” charge something called deferred interest.

Deferred interest is a delay in interest charges for a set time period. If you pay off your loan balance in full by the end of the zero-interest term, you won’t pay any interest. If you don’t pay the loan in full by that time, the lender may charge retroactive interest charges going back to the day you took out the loan, even if you’ve already paid off a good portion of your balance.

If you get hit with any of these charges, an interest-free loan could end up being more expensive than a regular personal loan.


💡 Quick Tip: Some personal loan lenders can release your funds as quickly as the same day your loan is approved.

How Do Interest-Free Personal Loans Work?

With a standard personal loan, you pay back both the principal amount plus interest in regular (fixed) installments over the term of the loan. Interest is the cost of borrowing the funds. With a no-interest loan, however, you skip that additional interest charge. Instead, you only repay the original amount borrowed in regular installments.

Typically, no-interest loans have introductory offers that provide 0% APR for a set period of time. For example, a furniture or appliance store may say you can get interest-free financing for 24 months. If you don’t pay the balance in full by then, you’ll pay interest on any remaining balance (and, in some cases, the full balance).

Zero-interest loans are typically facilitated through third-party lenders, not by the stores themselves. These lenders may have specific eligibility criteria that borrowers must meet to qualify for 0%-interest personal loans, such as a certain minimum credit score, income level, and employment history.

No-Interest Loan Options

Here’s a look at some of the different types of 0-interest loans available.

Nonprofit Loan With No Interest

Some nonprofit and local organizations offer no-interest loans to people in financial need, individuals who have experienced emergencies, or businesses that operate in low-income communities. In some cases, there are strings attached, such as having to use the loan for a specific purpose.

In addition, some universities offer 0% APR emergency loans to students that are experiencing a financial emergency.

Medical Loans

Medical care can be expensive, but medical loans can help. To help make the cost of treatments and procedures more manageable, some doctors and medical practices participate in a no-interest loan program. While these services can be helpful, some charge a high interest rate if you don’t pay your bill in full by a certain deadline.

Recommended: How to Pay for Medical Bills You Can’t Afford

Car Loans

Some auto dealerships offer no-interest car loans to attract buyers. They may only do this at certain times of the year (to clear out space for new models) or when they want to get rid of slower-selling cars.

While a 0%-interest car loan is tempting, these loans often have shorter repayment terms, which means monthly payments may be high. Taking the 0-percent car financing deal could also mean missing out on incentives such as generous manufacturer rebates. It’s important to compare this with the average car loan interest rate, which can help you determine if a low-interest or cash-back incentive might offer more overall savings.

Recommended: Smarter Ways to Get a Car Loan

Retail Loans

Stores that sell furniture, appliances, electronics, and other big-ticket items will often offer no-interest loans to incentivize buyers to close a deal. But borrower beware: These loans often charge deferred interest, which means that if you don’t pay off the entire amount by a set time period, you’ll pay interest on the entire amount, even if you’ve already paid off most of the balance.

Buy Now, Pay Later Programs

Some online retailers offer buy now, pay later (BNPL) programs that provide interest-free loans for any shopping you do on their site. These plans often split up costs over several payments scheduled two to four weeks apart.

As long as you make payments as agreed, you typically won’t pay interest. However, if you miss a BNPL payment, you may be charged late fees and/or interest on your unpaid balance. Depending on the amount charged by the BNPL lender and how these fees are structured, they can add up quickly.

Pros of a 0%-Interest Personal Loan

Interest-free personal loans come with some significant advantages. Here are some to consider.

Complete a Purchase Without Waiting

An interest-free loan can make it possible to buy something you need now, even if you don’t have the available cash to cover the cost. Often, these loans allow you to pay for a purchase in multiple installments over time without any added expense.

Potential Savings in Interest Charges

A 0%-interest loan could help you save a significant amount of money in interest compared to putting a purchase on a credit card and carrying a balance over several months.

Flexible Qualification Requirements

Some lenders offer interest-free loans with a low bar to entry. Some BNPL companies, for example, won’t run a credit check. As long as you have a checking account with a positive balance and a steady paycheck, you may be able to get approved.

Cons of No-interest Personal Loans

Interest-free loans also have several potential downsides. Here are some you’ll want to keep in mind.

Fees

Some interest-free loans and BNPL apps offer no-interest loans but charge fees. Lenders may charge set-up fees, account maintenance fees, and/or late payment fees.

Deferred Interest

If you don’t follow the terms outlined in your loan agreement, you could end up paying interest on the original amount that you borrowed, not merely your unpaid balance.

Encourages Impulse Buying

Zero-interest loans, where you only need to repay the principal balance, often lure people into impulsively buying expensive items, like cars, appliances, and other luxury goods, they can’t really afford.

Pros of a No-Interest Loan	Cons of a No-Interest Loan
Allows you to get a needed purchase right now	May come with fees that can increase the amount you have to repay
Saves money on interest	If you don’t pay in full by a set date, the lender may charge interest retroactively
May not require a credit check	Could encourage impulse purchasing

Interest-Free Loan Alternatives

Here are some alternatives you may want to consider, including exploring a debt consolidation loan
if you’re managing high-interest debt from multiple sources.

Personal Loans

One of the biggest benefits of a personal loan calculator is that they often charge lower fixed interest rates when compared to other forms of lending, like credit cards. Before applying, you can use a personal loan calculator to estimate your monthly payments and understand how different loan amounts and terms could fit into your budget.

A personal loan comes with a set repayment period and consistent monthly payments. Most personal loans are unsecured, but if you’re looking to secure a lower interest rate or need a larger loan amount, you might consider a secured personal loan, which uses collateral like a car or home to reduce the lender’s risk.


💡 Quick Tip: If you’ve got high-interest credit card debt, a personal loan is one way to get control of it. But you’ll want to make sure the loan’s interest rate is much lower than the credit cards’ rates — and that you can make the monthly payments.

0% APR Credit Card

With a 0% introductory purchase APR credit card, you won’t be charged interest on your purchases for a certain period of time, such as 12 or 18 months. If you use this type of card to make an expensive purchase and pay it off within the introductory period, it’s like an interest-free loan. At the end of the promotional period, however, any outstanding balance on your account would be subject to the regular purchase APR, and you’d be expected to pay the balance with interest.

Borrow Money From Loved Ones

Sometimes, asking a friend or family member for a loan might not be a bad option. As with any loan, you want to make sure you can repay it. Clear communication with a loved one in a strong financial situation — and perhaps a contract to define the terms of the loan, including whether or not interest will be charged — is a good way to keep money from hurting your relationship.

Recommended: Family Loans: Guide to Borrowing & Lending Money to Family

The Takeaway

Zero-interest loans do have their appeal. But they may cost you more than other financing alternatives in the end. Many zero-interest loan lenders charge fees. Plus, borrowers who fail to repay their balance before the interest-free period is over may face interest charges retroactive to the beginning of the loan term.

Before you jump at a 0-interest loan offer, it’s a good idea to take a close look at the terms of the deal, along with your budget. Are there any fees involved? If so, it may not be a great deal after all. Will you be able to meet the requirements necessary to maintain a 0% interest rate? If not, you may want to consider a more affordable alternative financing option.

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.

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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.

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 .

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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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Although many people haven’t heard of these policies, borrowers can get insurance coverage for a personal loan. In the event you get injured, sick, lose your job, or die, the insurer will make loan payments for you.

Personal loan protection insurance is available to borrowers for specific situations that prevent them from repaying their loan. Although costs vary and raise your monthly expenses, loan insurance can help you out in a tight spot, protect your credit, and prevent the financial burden from falling on your family. Read on to learn if loan insurance may be right for you.

What Is Loan Insurance?

Loan protection insurance is coverage borrowers can purchase for various loans — such as personal loans — to guard against situations where the borrower can’t repay the loan. Typically, personal loan insurance covers the borrower when they suffer a disability, injury, job loss, or death. The personal loan protection policy pays a prearranged amount to satisfy the borrower’s balance.

Is Personal Loan Insurance Required?

Personal loan insurance is not mandatory when you obtain a personal loan, and a lender can’t refuse to give you a personal loan because you don’t insure it. However, if you get a secured loan, you may have to insure the collateral you put up. Borrowers with unsecured loans won’t have these concerns, although they will likely have a higher interest rate.

If a lender ever tells you they won’t provide you a loan unless you purchase loan insurance from them, know that you have options. You can report the lender to your state’s attorney general, insurance commissioner, or the Federal Trade Commission.

How Much Is Insurance on a Loan?

You can pay for loan insurance either through a one-time payment or monthly premiums. Your premium will vary based on several factors. First and foremost is the loan balance, with bigger loans incurring higher insurance costs. Paying your premium with an upfront lump sum can decrease the cost.

Your coverage will also determine personal loan insurance costs. For example, you might purchase a $15,000 policy for a $20,000 loan because you have $5,000 in savings. This protection would cost less than a $20,000 policy.

Your location and lender will also influence how much your personal loan insurance costs. Therefore, it’s recommended to shop around for personal loan lenders, just as you would when looking for a new bank or investment firm.

What Are the Benefits of Personal Loan Insurance?

Personal loan insurance helps when you can’t repay your loan. Here are the specific ways a personal loan protection policy benefits you:

Prevent Delinquency or Default

If you suffer a severe injury that prevents you from working, any lost income could result in missed payments. If you have personal loan insurance, it will repay the loan, and you won’t need to worry about delinquent (late) payments or default (failure to repay the loan).

Protect Your Credit Score

Late payments and defaulted loans are reported to the credit bureaus, and that can negatively impact your credit report, causing your credit score to drop. A low credit score can hurt your chances of qualifying for competitive interest rates. You don’t need to worry about late payments and default if you have personal loan insurance, so you can feel confident your credit score won’t be damaged if you’re not able to pay the loan.

Protect Your Dependents and Coborrowers

Similar to life insurance policies, personal loan insurance can help your beneficiaries so your family won’t have to pay off the loan if you cannot. You can purchase a plan that covers coborrowers as well, protecting spouses, loved ones, and business associates from the financial burden.

Recommended: Types of Personal Loans

Types of Loan Insurance

Loan insurance goes beyond personal loans. You can purchase coverage for the following loan types:

Business Loans

Business loans can help small business owners get their companies off the ground or sustain operations. These loans can fund equipment purchases, scaling efforts, or fund payroll. As a result, they are crucial for small businesses in getting established or enduring a market downturn.

Business loan insurance will pay out if the owner or a crucial employee can no longer work. This policy names the lender as the beneficiary and repays the loan on the borrower’s behalf. Business loan insurance can keep a company afloat if it is struggling due to slowed operations and a hefty financial obligation.

Personal Loans

A personal loan is a flexible financial tool that a borrower can use for many purposes. For example, common personal loan uses include repaying high-interest debt or remodel your kitchen.

Personal loan insurance protects the borrower in case they can’t repay the loan due to a serious life event. You may want to consider purchasing insurance for a high-balance personal loan if your dependents and beneficiaries can’t afford to pay it without you.

Recommended: What Is a Personal Loan?

Student Loans

Student loans cover the cost of higher education. Borrowers can take out student loans from either the federal government or private lenders (or both), but these loans have different terms and conditions, and it’s important borrowers know the difference.

Federal student loans are canceled if the borrower dies. Similarly, Direct PLUS loans are canceled if the parent or student dies. As a result, insurance is usually unnecessary for federal student loans.

Private lenders don’t typically discharge student loans when the borrower dies. Instead, they may pursue family members, cosigners, or anyone mentioned in the contract for repayment. Therefore, student loan insurance can be a good investment if you’re concerned about resolving unpaid balances for borrowers who die or become disabled.

Home Loan

A mortgage loan, also called a home loan, is likely your highest debt balance, and the idea of not being able to repay it because of injury, illness, or death is scary. Mortgage protection insurance is for a specific balance your beneficiaries will receive if something happens to you.

For example, if you have $150,000 left on your mortgage, your policy will be for that same amount. If you pass away with $100,000 left, your coverage will pay the balance and transfer the leftover $50,000 to your family.

When applying for mortgage protection insurance, there are fewer health-related questions and standards than for life insurance, so it’s easier to get approved. However, wider accessibility comes with a higher premium cost.

Mortgage protection insurance policies come in all shapes and sizes. You might have coverage solely in the event of your death, or you can limit the payout to your mortgage balance to reduce costs. These policies vary depending on the lender and product type. It’s important to thoroughly understand the policy before committing so you understand exactly what you’re paying for.

Reasons for Getting Loan Protection

Loan protection insurance allows you to safeguard your finances when unexpected crises occur. For example, it ensures that loan repayment won’t be a burden if you’re struggling with illness or unemployment. Similarly, your family won’t have to repay your debts if you die. But it’s important to understand the coverage to determine if it suits your needs.

While loan protection is usually optional, its primary advantage is that it offers borrowers some peace of mind. It allows you to focus on your recovery or job search instead of worrying about meeting loan obligations and maintaining financial stability.

There are other kinds of insurance that are not directly tied to your financial products but can still help pay off debts if you get injured, have a long-term illness, or die.

Disability Insurance

You can also include disability as a condition for your loan insurance. While some policies only cover the borrower’s death, you can add disability to expand your coverage. Doing so means you’ll receive financial relief if you can no longer work due to an illness or injury.

Life Insurance

Your life insurance policy offers a payout if you die. However, it can specifically insure your personal loans and lines of credit if you have high balances. The advantage of the limited coverage is you don’t have to pass a medical examination as you would with a traditional life insurance policy. The drawback is the policy will be more expensive.

Pros and Cons of Loan Protection

Here is a comparison of the pros and cons of loan protection insurance:

Pros	Cons
Offers peace of mind	Increases the cost of the loan
Financial relief during hardship	Might accrue interest
Protects your credit score	Lenders may deny coverage
Avoids delinquency or default on loans
Flexibility for various situations and loan types
Protects dependents
Coverage is optional

The Takeaway

Loan insurance for a personal loan covers scenarios where you become disabled, unemployed, or deceased. This coverage allows you to maintain strong credit instead of missing payments. In addition, it protects your loved ones from unexpected debt. As a result, purchasing insurance when taking out a personal loan can grant peace of mind and help you focus on what matters most.

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 loan insurance?

Loan insurance is a policy from a lender providing a payout to cover your loan if you can’t repay it. You can purchase coverage for situations where you become disabled, lose your income, or die.

How much is insurance on a loan?

The cost of a loan insurance premium depends on multiple factors, such as the loan size, the lender, your location, and if you pay the premium in one shot. In addition, your insurance may have an interest rate, increasing its cost.

What is the benefit of personal loan insurance?

The advantage of personal loan insurance is that your loan will be repaid even if you lose your income or die. As a result, you don’t have to worry about a situation where your loved ones must dig their way out from under your debt. In addition, you’ll preserve your credit score because you won’t fall behind or default on the loan.

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About the author

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Photo credit: iStock/Pekic

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.

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.

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