Dec
12
2024

Guide to Taxes and Mutual Funds

By | Growing Wealth, invest, Investing | Comments Off on Guide to Taxes and Mutual Funds

Mutual fund investors pay taxes on the income or capital gains they see from their investments. But the specific tax treatment of mutual fund investments depends on several variables, which can breed confusion. For a long time, mutual funds have been a popular investment vehicle for millions of investors, largely because they offer an easy way to purchase no-fuss, diversified assets with relative ease. This out-of-the-box diversification and risk mitigation is something that individual stocks can’t match.

Read on to learn how taxes on mutual funds work, what investors should expect or anticipate when dealing with mutual funds and the IRS, and some strategies for tax-efficient investing.

Key Points

•   Mutual fund investors must pay taxes on income or capital gains distributed by the fund, including dividends, interest, and realized capital gains.

•   The tax treatment of mutual fund investments varies depending on the type of fund and the income or capital gains it generates.

•   Shareholders may owe taxes on mutual fund holdings even without selling shares, due to realized gains from distributions.

•   The amount of tax paid depends on the type of fund, income or capital gains, and the investor’s tax situation.

•   Strategies to minimize taxes include investing in tax-efficient funds, using tax-deferred accounts, and employing a buy-and-hold strategy to avoid short-term capital gains taxes.

Quick Mutual Fund Overview

A mutual fund is a pooled investment vehicle that allows individuals to invest in a professionally managed portfolio of stocks, bonds, and other securities. Mutual funds are managed by professional portfolio managers who use the pooled capital to buy and sell securities according to the fund’s stated investment objective. When investors buy into a mutual fund while online investing, they’re purchasing a spectrum of assets all at once.

Mutual funds can be actively managed, where the portfolio manager actively buys and sells securities in the fund, or passively managed, where the fund tracks an index. Mutual funds are a popular way for individuals to diversify their portfolios and access professional investment management.

Recommended: How to Buy Mutual Funds Online

Do You Pay Taxes on Mutual Funds?

Mutual fund investors generally need to pay taxes on any income or capital gains the mutual fund distributes, including dividends, interest, and realized capital gains from the sale of securities within the fund.

It’s worth noting that mutual funds can be structured in different ways, and the tax treatment of mutual fund investments can vary depending on the specific type of mutual fund. For example, some mutual funds are classified as tax-exempt or tax-deferred, which means that they are not subject to certain taxes or that taxes on the income or gains from the fund are deferred until later.

When a mutual fund distributes income or capital gains to its investors, it must provide them with a Form 1099-DIV, which reports the distribution amount and any associated taxes. Investors are then responsible for reporting this income on their tax returns and paying any taxes that are due.

How Are Mutual Funds Taxed?

Mutual funds are taxed based on the income and capital gains they generate and distribute to their investors. This income and capital gains can come from various sources, such as dividends on stocks held by the fund, interest on bonds held by the fund, and profits from the sale of securities within the fund.

The tax treatment of mutual fund investments can vary depending on the type of fund and the type of income or capital gains it generates. Here are some general rules to keep in mind:

Paying Tax on “Realized Gains” from a Mutual Fund

It may come as a surprise that shareholders may owe taxes on their mutual fund holdings even if they don’t sell shares of the fund. That’s because shareholders still generate income from those holdings, which are often called “realized” gains.

Mutual funds are often actively managed, meaning that a portfolio manager regularly makes decisions about what the fund contains by buying and selling investments — a process that can net profits. Those profits, or gains, are then passed back to shareholders as distributions (or as dividends) or reinvested in the fund.

When shareholders are awarded distributions from funds, they see a “realized” gain from their investment. For that reason, shareholders may end up owing tax on investments that they have not sold or may have lost value over the year.

Paying Capital Gains on Mutual Funds

Most investors likely know that when they sell shares of a mutual fund, they’ll need to pay taxes on the earnings. Specifically, they’ll pay capital gains tax on the profit from selling an investment. The capital gains tax rate will vary depending on how long an investor holds the investment (short-term versus long-term).

Because funds contain investments that may be sold during the year, thereby netting capital gains, investors may be responsible for capital gains taxes on their mutual fund distributions. As each fund is different, so are the taxes associated with their distributions. So reading through the fund’s prospectus and any other available documentation can help investors figure out what, if anything, they owe.

How Much Tax Do You Pay on Mutual Funds?

The amount of tax you may need to pay on mutual fund investments depends on the type of fund, the type of income or capital gains the fund generates, and your individual tax situation.

Here are some general rules to keep in mind:

•   Dividends: Dividends paid by mutual funds are taxed at different rates, depending on whether the payouts are ordinary or qualified dividends. Qualified dividends are taxed at a lower rate than ordinary dividends; they’re taxed at the long-term capital gains rate, which ranges from 0% to 20%. In contrast, ordinary dividends are taxed at an investor’s ordinary income tax rate.

•   Interest: The tax on the interest income from mutual funds depends on whether the payout comes from tax-exempt bonds, federal debt, or regular fixed-income securities. Depending on the type of asset, the interest may be taxed at ordinary income tax rates or exempt from certain taxes.

•   Capital gains: When a mutual fund sells securities for a profit, it may realize a capital gain, which is subject to tax. The tax rate on capital gains depends on how long the securities were held and your tax bracket. Short-term capital gains (on securities held for one year or less) are taxed at the same rate as ordinary income. In comparison, long-term capital gains (on securities held for more than one year) are generally taxed at the lower capital gains tax rate.

How to Minimize Taxes on Mutual Funds

Here are a handful of ways to potentially lower taxable income associated with mutual funds:

Know the Details Before You Invest

Do your homework! The holdings in each fund and how they’re managed will ultimately play a significant role in the tax liabilities associated with each fund. Before investing in a specific mutual fund, it’s worth digging through the prospectus and other documents to understand what to expect.

For example, an investor can typically find out ahead of time if a mutual fund makes capital gains distributions or how often a fund pays out dividends. Those types of income-generating events will need to be declared to the IRS come tax time.

Some investors may look for tax-efficient funds specifically designed to help mutual fund investors avoid taxes.

Use a Tax-deferred Account

Some brokerage or investment accounts — including retirement accounts like IRAs and 401(k) plans — are tax-deferred. That means they grow tax-free until the money they contain is withdrawn. In the short term, using these types of accounts to invest in mutual funds can help investors avoid any immediate tax liabilities that those mutual funds impose.

Recommended: Are Mutual Funds Good for Retirement?

Hang Onto Your Funds to Try and Avoid Short-term Capital Gains

If the goal is to minimize an investor’s tax liability, avoiding short-term capital gains tax is important. That’s because short-term capital gains taxes are steeper than the long-term variety. An easy way to ensure that an investor is rarely or never on the hook for those short-term rates is to subscribe to a buy-and-hold investment strategy.

This can be applied as an overall investing strategy in addition to one tailor-made for avoiding additional tax liabilities on mutual fund holdings.

Talk to a Financial Professional

Of course, not every investor has the same resources, including time, available to them. That’s why some investors may choose to consult a financial advisor specializing in these services. They usually charge a fee, but some may offer free consultations. For some investors, the cost savings associated with solid financial advice can outweigh the initial costs of securing that advice.

How Do You Report Mutual Funds on Your Taxes?

If you own mutual funds, you will generally need to report any income or capital gains you receive from the fund on your tax return.

Mutual funds are required to provide their investors with a Form 1099-DIV, which reports the amount of any dividends, interest, and capital gains distributions the fund paid out during the year. Make sure to keep this form for your records and use it to help complete your tax return.

You will then need to report any dividends, interest, and capital gains distributions you received from your mutual fund on your tax return, specifically on IRS Form 1040 or Schedule D (Form 1040).

The Takeaway

Mutual fund taxes are generally unavoidable, but with a little planning, you may be able to minimize the amount you get taxed. Employing some of the above strategies can help you minimize your mutual taxes. For example, those investing for long-term financial goals, like retirement, can use tax-deferred accounts as their primary investing vehicles. And by using those accounts to invest in mutual funds and other assets, they can help offset their short-term tax liabilities.

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Opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.¹

FAQ

Do you pay taxes when you sell mutual funds?

Yes, you may be required to pay taxes when you sell mutual funds. The specific taxes you may be required to pay will depend on several factors, including the type of mutual funds you are selling, how long you have held the funds, and the type of gains you have earned from the sale.

Are mutual funds taxed twice?

Mutual funds are not taxed twice. However, some investors may mistakenly pay taxes twice on some distributions. For example, if a mutual fund reinvests dividends into the fund, an investor still needs to pay taxes on those dividends. Later, when the investor sells shares of the mutual fund for a gain, they’ll have to pay capital gains taxes on those earnings.

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How Income Tax Withholding Works

What Is Income Tax Withholding and How Does It Work?

By | Life & Career, money | Comments Off on What Is Income Tax Withholding and How Does It Work?

“What happened?!” may be your response when you look at your paycheck and see all of those deductions, whittling your hard-earned cash down to a (much) lower figure than you expected.

And perhaps, if you look more closely, you’ll notice a line on your paystub that shows a major amount of money subtracted and think, What is withholding tax? And why do they take so much?

Federal and state withholding taxes, also known as “taxes withheld,” are funds that your employer takes out and sends to the government to help federal programs. These taxes have a purpose, and in the long run, you’ll probably be glad they are deducted from your check rather than owed as a mega lump sum on Tax Day.

Read on to learn more about tax withholding, including factors that impact how much gets deducted and how to calculate your withholding taxes.

Key Points

•   Income tax withholding deducts money from your paychecks to cover your estimated tax liability, preventing large year-end bills.

•   Factors that affect tax withholding include income, filing status, claimed allowances, and extra withholding requests.

•   You can adjust your W-4 form to balance withholding, avoiding overpayment or tax debt.

•   Withholding exemptions are available for those with no tax liability.

•   Withheld taxes support federal programs and public services.

What is Income Tax Withholding?

Many people think their taxes are due mid-April, but the Internal Revenue Service (IRS) actually requires you to pay as you go, meaning you need to pay most of your tax during the year, as you receive income, rather than at the end of the year. When you see those federal and possibly state and local taxes being whisked out of each paycheck, that’s exactly what is happening.

A withholding tax is an amount, based on your salary, that your employer sets aside and then pays directly to the government on your behalf. It’s a credit against the full amount of personal income tax you will owe for the year. By doing this, your employer is helping you avoid a surprise tax bill come April. Tax withholding also helps ensure you won’t owe interest or a penalty for paying too little tax during the course of the year.

That said, how much is deducted from your paycheck can vary depending on a variety of factors. You are able to designate what portion of your check goes toward your taxes on the IRS W-4 form (more on that in a bit).

•   If you allocate too much, that means more than necessary is taken out, and you will likely receive a tax refund when you file your taxes.

•   If you set aside too little, you will probably owe a balance or have what’s known as a “tax bill” due during tax season to make up the difference.

Your federal withholding tax rate depends on your income and tax bracket.

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Factors That Determine Tax Withholding

There are several factors that determine just how much tax is withheld from your paycheck, whether it arrives as a paper check or via direct deposit. These include:

•   How much you earn: Generally, the more you earn, the higher the rate at which taxes are withheld

•   Your filing status: For instance, you might file your taxes as single, married filing jointly, or married filing separately.

•   How many (if any) withholding allowances you claim: Typically, if you claim a higher number of allowances, your withholding will be lower. This means more cash will flow your way on each payday, but you might owe taxes when you file. If you have a lower number of allowances, more money is taken out for taxes, and you could wind up getting a refund when your tax return is processed.

•   Whether you decide to have additional money withheld: Some individuals may ask their employers to withhold, say, an extra $100 or more per pay period if they find they typically owe taxes at year’s end.

Recommended: How to Reduce Your Taxable Income

What Is State Income Tax Withholding?

If you live in a state that levies income tax, you will also see tax withholding for that type of tax on your paycheck. There are just nine states that don’t tax earned income. In other words, you will not pay state taxes if you live in:

•   Alaska

•   Florida

•   Nevada

•   New Hampshire

•   South Dakota

•   Tennessee

•   Texas

•   Washington

•   Wyoming

The concept of tax withholding works in the same way at the state level as it does at the federal: A certain portion is put toward your future state tax bill, and you may either owe or get a refund, depending on how much you paid in.

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What Is the Purpose of Tax Withholding?

As briefly mentioned above, tax withholding saves you from owing a huge bundle of taxes in April. If people were left to their own devices to set aside money for taxes, well, that might not always be a success. Every time you receive your paycheck, there are bills to pay, dinners out and movies to tempt you, and vacations to plan and take. As a result it can be hard to save money from your salary.

In addition to helping you avoid a surprise tax bill, tax withholding is also a way for the government to maintain its pay-as-you-go income tax system. If you pay too little in taxes throughout the year, you can get hit with an underpayment penalty and interest payments (on top of that surprise tax bill).

Recommended: Your Guide to Filing Taxes for the First Time

Tax and Employment Documents to Know

When you are first hired at a company, you typically fill out a W-4 form. This form is designed to help your employer estimate how much tax you’ll owe by the end of the year. To do this, the form asks you about your family, potential deductions you might claim, and any additional income you earn outside your W-2 job. Based on your answers, your employer will determine how much tax to withhold from your paychecks.

Then when tax time rolls around, you will receive IRS Form W-2. This includes information on how much income you earned in a given tax year, as well as how much you paid in federal, state, and other taxes.

You’ll use this W-2 to file your taxes, and it will determine whether you receive a tax refund, owe more taxes, or break even.

Calculating Income Tax Withholding

It can take a bit of tweaking to find that balance between overpaying in federal withholding and having to pay more when you file your taxes.

Some people like getting a tax refund because it’s a lump sum they can put toward debt or invest. But realize that overpaying is a bit like giving the government a free loan throughout the year.

While there may be fast ways to get a tax refund, perhaps you’d rather just hold onto that money in the first place. If you better balance what is taken out of your paychecks, you could take the excess you would have paid and put it in a high-yield savings account or invest it for the future.

If you’re wondering what is a withholding tax allowance that’s right for you, there’s help. The IRS has a Tax Withholding Estimator you can use based on your current situation. In general, the more allowances or exemptions you have, the less will be withheld from your pay; the fewer the exemptions, the more will be withheld.

While you aren’t asked to fill out a new W-4 each year, you may request one if you think you need to adjust the withholding amount.

Some of the times it might be wise to adjust how much income tax is withheld include:

•   Starting a new job or position

•   Having a child

•   Getting married or divorced

•   Buying a house.

Can I Be Exempt from Tax Withholding?

To be exempt from tax withholding means that no federal taxes will be withheld from your pay. You might also have no state or local taxes (if applicable) deducted. Here are the ways in which someone might qualify to be exempt from such taxes:

•   If all of your federal income tax was refunded because you have no tax liability and you expect the same thing to happen this year, then you may be exempt from withholding taxes. (But note, Social Security and some other taxes may still be withheld as part of other types of payroll deductions.)

•   Certain types of income are considered exempt. For instance, money paid to foster parents for their taking care of children in their homes may be tax-free. Payments from workers’ compensation is another example of funds that may be tax-exempt.

The Takeaway

Paying taxes may not be fun, but it’s important to remember that this money is put toward things we all enjoy, like smooth roads and education programs. And federal withholding from your paycheck keeps you from having a giant bill when you file taxes.

When it comes to tax withholding, it’s important to understand how much is being withheld from each paycheck and whether you need to modify your W-4 to find a better balance between overpaying and owing more money come Tax Day.

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FAQ

Does the government pay for income tax withholdings?

Money that is withheld from your earnings, known as income tax withholding, goes to the government. These dollars help pay for federal programs that benefit citizens and keep our country running, from education to transportation to security.

How can someone qualify for a withholding exemption?

To qualify as tax-exempt, you would have to have had no tax liability in the previous year and expect the same status in the current tax year. Also keep in mind that some forms of income may be tax-exempt, such as payments for in-home foster care of children or for workers’ compensation.

Why has my employer withheld too much income tax?

If your employer withheld too much income tax, then you will likely get a refund at tax time. You can update your withholding on your W-4 form; the more allowances you have, the less money will be withheld to cover your tax liability.

Why has my employer withheld too little income tax?

If you wound up owing the IRS money at tax time, the issue could be that you have too many exemptions or allowances claimed on your W-4 form, meaning your employer is not withholding enough money from your paycheck. You may want to adjust your W-4, knowing that the lower your number of allowances, the more money your employer with withhold and send to the IRS on your behalf.

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2024

Delayed vs Real-Time Stock Quotes

By | Growing Wealth, invest, Investing | Comments Off on Delayed vs Real-Time Stock Quotes

Stock quotes, which may be seen on financial news networks or websites, are typically reported in real time, or with a delay. The main difference between the two is that real-time quotes are the most up-to-date, while delayed quotes lag behind real-time quotes by several minutes, in most cases.

For the average investor who isn’t making changes to their portfolio, real-time quotes may be more precise than they need. For those investors, delayed stock quotes may suffice. Here’s what you need to know about the difference between real-time stock quotes and delayed quotes.

Key Points

•   Real-time stock quotes provide immediate price information, reflecting current market conditions.

•   Delayed stock quotes are typically behind by up to 20 minutes.

•   Active traders benefit from real-time quotes for precise, up-to-the-minute data.

•   Long-term investors may find delayed quotes sufficient, as they do not focus on minute-by-minute changes.

•   Real-time data can be costly, prompting some providers to offer delayed quotes to conserve resources.

What Are Real-Time Stock Quotes?

Real-time stock quotes relay price information for various securities in real-time, or instantaneously. In other words, a real-time stock quote is the actual and immediate stock price at any given point in time. The quotes reflect demand for a stock or assets on stock markets around the world.

How Real-Time Quotes Work

Stock quotes include ticker symbols that denote the stock of a specific company or firm, and the price of a stock’s current (real-time) valuation. Those values are determined by trading activity — supply and demand, in other words. Those values also fluctuate during the trading day.

The letters and numbers comprising a quote — either real-time or delayed — reflect different types of investments or commodities and their prices — the price at which they’re currently trading. Typically the ticker symbol is similar in some way to the company name, and you can use it to look up the stock price.

For example, the ticker AAPL is Apple; XOM is the ticker for ExxonMobil; JNJ is the ticker for Johnson & Johnson; UDMY is Udemy; LULU is Lululemon.

Those symbols, when displayed on a ticker tape, are generally followed by or attached to their current trading price.

Real-time quotes are provided by many sources, including financial news networks and websites. Many online investing brokerages also offer their clients access to them as well. Real-time stock quotes provide traders and active investors with more accurate information.

What Are Delayed Quotes?

Delayed stock quotes are valuations of securities that are not in real-time — they’re delayed, as the name indicates. Depending on the source of the quote, the information relating to stock or share prices can be delayed by several minutes, or even up to 20 minutes.

For instance, it’s not unusual that you might login to your investment brokerage and see delayed stock quotes relaying information about the value of your current investments. There will likely be a note telling you how delayed the data is (15 minutes, for example), so that you know the pricing isn’t in real-time.

Most people should be able to tell if a quote is delayed, too, if the price remains static for minutes at a time. Real-time quotes, on the other hand, can fluctuate second-by-second, depending on the security and the source.

For investors engaged in day trading, delayed quotes wouldn’t be sufficient; these investors require up-to-the-minute (or to the second) price quotes in order to execute their strategies. But for the majority of buy-and-hold investors, knowing the very latest price of a security may not matter to their long-term plans.

How Delayed Quotes Work

Delayed stock quotes work the same way that real-time quotes do, in that they reflect current market conditions and data relating to security values. But the reporting is delayed for a variety of reasons.

The most common reason that you may come across a site or information source with delayed stock quotes is that fetching and reporting real-time quotes is costly and resource-consuming. As such, companies may opt to report delayed quotes instead.

Real-Time vs Delayed Stock Quotes

Real-time streaming stock quotes change second to second, and can showcase the volatility of stock prices. When stock exchanges are open, trading is constant, and the dynamics of supply and demand for specific stocks change their prices rapidly. So, watching real-time streaming stock quotes means seeing those price fluctuations occur in real time, as the name implies. That can have implications for how traders and investors make decisions.

That can have implications for how traders and investors make decisions when online investing.

Using real-time stock quotes can be useful for active traders or investors, or high-frequency traders — professionals who are making numerous stock trades every day or week and may be managing other people’s portfolios, too. For these traders, knowing stock prices down to the minute helps inform their decision to buy or sell. That real-time price, ultimately, determines their stock trading profit (or loss).

There’s also after-hours trading to keep in mind, too. Stock markets have trading hours — the New York Stock Exchange (NYSE) and NASDAQ are open between 9:30 am and 4 pm, for example. At other times, investors may still be able to swap securities, but prices are much more volatile after-hours, and because it’s difficult to get real-time quotes after-hours, values can change dramatically before stock markets reopen.

Investors can also execute a market-on-open trade, during which a transaction completes as soon as the markets do open.

While security prices do fluctuate, they generally don’t fluctuate all that much over a relatively short interval (15 minutes, for example). And since the average investor may not be all that interested in minute-by-minute price fluctuations, using a delayed stock quote could provide all the information they need.

Think about it this way: If an investor were looking to rebalance their portfolio — something they may only do two or three times per year — a real-time stock quote isn’t going to give them much more actionable information than a delayed stock quote to help them make an informed decision.

Delayed stock quotes also don’t relay the second-by-second volatility of the market, which can be hard for some investors to digest.

Why Do Stock Quotes Get Delayed?

As mentioned, delayed stock quotes are lagging because they require resources to gather and report. The information is out there, and is collected by firms that supply quotes and pricing information to other companies. Depending on the individual security and the source of the information, a delay is likely the result of a company opting to supply delayed quotes rather than real-time quotes to consumers in order to save on costs.

As such, a small percentage of quote-providers offer consumers real-time market information — and often only to those who pay for it. That’s not to say that real-time data isn’t available for free, but the gathering and reporting can be costly, which is why some providers use delayed quotes.

How Real-Time Quotes Affect Your Investment Strategy

One big question investors may have: How do these two different types of stock quotes actually affect someone’s investment strategy? That depends largely on whether you’re into active investing, and how often they’re swapping positions in their portfolio.

Real-time stock quotes are mainly used by day traders, or active investors who are executing trades on a daily or hourly basis. In those cases, the relatively small fluctuations in price due to market volatility, which occurs in real time, can determine whether a trade is profitable or not.

Real-time stock quotes are mainly used by day traders, or active investors who are executing trades on a daily or hourly basis.

For example, if a trader was trying to time a trade to execute at a specific price, a delayed quote might be useless. The time lag could cause them to miss their window, and bobble the trade.

How Delayed Quotes Affect Your Investment Strategy

As noted, if investors are only rebalancing their portfolios every so often, real-time quotes won’t matter all that much to their investing strategies. They aren’t trying to turn a profit from day-trading, in other words, and are taking a longer-term approach to their investing.

As such, for long- or medium-term investors who may only occasionally buy or sell securities, delayed quotes will do the trick. If you’re not checking on your portfolio every day and are only considering asset allocation every few months, there isn’t much of an advantage to looking at real time quotes over delayed ones.

Real-time quotes do provide more information than delayed quotes, though, in that they’re more precise. That can help you if you’re weighing decisions regarding either short-term vs long-term investments.

Deciding Which Stock Quote is Right for You

Most investors may not give much thought to real-time versus delayed stock quotes, unless they are active traders, as discussed. Whether or not you need up-to-the-minute quotes really depends on whether you’re doing a lot of trading, and doing that trading within tight time frames in which seconds or minutes matter. So, real-time quotes can give you more insight as to when it’s time to buy, sell, or hold.

Accordingly, if you’re more of a passive investor, you can probably stick to delayed stock quotes to get a broader idea of a security’s value.

The Takeaway

Real-time stock prices are updated to the second; delayed stock prices might be updated every 15 minutes, every hour, or every day, depending on the provider and the security involved.

For investors who aren’t looking to profit from small price fluctuations, it won’t make much of a difference if the quotes they’re using are delayed or not. That said, it’s never a bad idea to use real-time trading data, if an investor has access to it.

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.

Opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.¹

FAQ

What is a delayed stock quote?

A delayed stock quote is a quote that does not relay real-time value information regarding stock or security values. Instead, the information is delayed by around 15 or 20 minutes, in many cases.

What are real-time stock quotes?

Real-time stock quotes reflect the current market value of a security in real time — meaning up-to-the-minute, or second. Real-time quotes fluctuate constantly based on supply and demand for a security on the market.

Are real-time quotes better than delayed quotes?

Real-time quotes aren’t necessarily better than delayed quotes, but they do reflect more current information which can be better for active investors or day traders.

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.

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.


¹Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Probability percentage is subject to decrease. See full terms and conditions.

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Overview: The History of the Federal Reserve

By | mortgage, Terminology | No Comments

You may give little thought to the Federal Reserve, but the Fed looms large over your life as you borrow, save, spend, and invest.

The Fed’s mission is to control inflation and maintain maximum employment. The goals can be at odds with each other.

Let’s look at the Federal Reserve’s origin story and what the central banking system is currently up to.

Key Points

•   Established to control inflation and maintain employment, the Federal Reserve was founded in 1913.

•   The Fed influences personal finances by setting the federal funds rate, which can affect borrowing costs, among other things.

•   Historical events like the Great Depression and Great Inflation underscore the Fed’s role in managing economic crises.

•   Recent actions include rate hikes from 2022 to 2023 to combat inflation, followed by rate cuts in 2024.

•   The Fed’s dual mandate aims for maximum employment and price stability, impacting decisions on interest rates and economic policies.

How It All Began

A secret meeting in 1910 on an island off Georgia laid the foundation for the Federal Reserve. After a series of financial panics and recessions in the Gilded Age, six men gathered at the Jekyll Island Club to write a plan to reform the nation’s banking system.

At that time, U.S. banks held large reserves of cash, but they were scattered. During a crisis, the reserves would be frozen. In addition, the supply of currency was inelastic and supplies of gold limited. And U.S. banks could not operate overseas.

The Panic of 1907 — a worldwide financial crisis surpassed only by the Great Depression — galvanized Congress, and particularly Senate Finance Committee Chairman Nelson Aldrich. In the fall of 1910, Aldrich and his Jekyll Island colleagues developed a plan for a central bank with 15 branches. The national body would set discount rates for the system and buy and sell securities.

Political wrangling ensued, but Congress passed, and President Woodrow Wilson signed the Federal Reserve Act in 1913. The bill resembled the Aldrich plan.

The law called for a central banking system with a governing board and multiple reserve banks. The hybrid structure endures.

A golden factoid: Banking panics before 1913 tested the mettle of Manhattan banks, but what is now the most influential of the 12 reserve banks, the Federal Reserve Bank of New York, is home to the world’s largest gold storage reserve, with about 500,000 gold bars owned by the U.S. government, foreign governments, other central banks, and international organizations.

The First Century of the Federal Reserve

Before the Fed was born, financial panics caused by speculation and rumors led to the call for a central banking authority that would support a healthier banking system.

World War I, 1914 to 1918

The Federal Reserve Board and the 12 reserve banks were just getting organized as war broke out in Europe. But once the nation entered World War I, the Fed quickly became a major player by supporting the U.S. Treasury’s war bond effort and offering lower interest rates to member banks when the proceeds were used to buy bonds.

The Fed also gave better interest rates to banks purchasing Treasury certificates. Lower rates led to increased borrowing by businesses and households, which stimulated economic growth. But the increased money supply eventually led to rising prices. When the war ended, the Fed took action to control that inflation.

Stock Market Crash of 1929

On Oct. 28, 1929, now known as “Black Monday,” the Roaring Twenties ended with a thud when the Dow Jones Industrial Average dropped nearly 13%. The market collapsed the next day. It was the most devastating stock market crash in U.S. history.

Many economists and historians blame the Fed for the crash because of its decision to raise interest rates in 1928 and 1929 to control over speculation (what today might be called “irrational exuberance”) in the stock market.

Leaders decreased the money supply starting in 1928 and pressured member banks in 1929 to rein in their loans to brokers and charge a higher rate on broker loans.

The Great Depression, 1929 to 1941

The deepest downturn in U.S. history lasted from 1929 to 1941. The contraction began in the United States and reverberated around the globe.

The banking panics in 1930 and early 1931 were regional, but in late 1931 the commercial banking crisis spread throughout the nation. The Fed’s efforts to contain the collapse were not enough, and the situation reached rock bottom by March 1933.

On March 6, 1933, President Franklin Roosevelt — who’d been inaugurated just two days before — announced a weeklong suspension of all banking transactions. Legislative intervention soon followed.

In 1933 the Glass-Steagall Act separated commercial and investment banking and gave the federal government and Federal Reserve enhanced powers to deal with the economic crisis, which led to the creation of the Federal Deposit Insurance Corp. and regulation of deposit interest rates. (At an FDIC-insured bank today, deposits are insured up to $250,000 per depositor, per institution, and per ownership category.)

The Banking Act of 1935 gave the Fed more independence from the executive branch; shifted power from the regional reserve banks to the Board of Governors, based in Washington, D.C.; and led to the modern form of the Federal Open Market Committee (FOMC), the Fed’s main monetary policymaking committee, which consists of the Fed governors in Washington and the presidents of the 12 regional banks.

World War II, 1941 to 1945

The Fed’s role during World War II was similar to its role in World War I. Its main mission became financing the war, and it helped the Treasury Department market war bonds in cooperation with commercial banks and businesses.

The reserve banks also reduced their discount rate to 1% and set a rate of half a percentage point for loans secured by short-term government obligations. During the war years, the Fed kept its eye on inflation by regulating consumer credit. It required large down payments and shorter terms on loans used to buy a variety of consumer goods.

Korean War, 1950 to 1953

At the start of the Korean War, inflation was a growing concern. But the Fed was once again under pressure — this time from the Truman administration — to help finance the war effort.

In February 1951, the Fed declared its independence in fiscal matters, and in March, the Treasury and the Fed announced that they had reached an accord on how they would handle “debt management and monetary policies” going forward.

The Great Inflation, 1970s and ’80s

Keeping inflation under control has always been an important role for the Fed, but in the 1970s, when the stock market slumped and the country found itself in an inflation crisis so deep it was known as the “Great Inflation,” it became a special challenge.

Check the history books and you’ll find plenty of finger-pointing. It was President Richard Nixon’s fault for disengaging from the gold standard. Or maybe it was the Fed’s fault for employing a confusing stop-go monetary policy that had interest rates going up, then down, then back up.

Then new Fed chairman, Paul Volcker, took over in 1979 and switched the Fed’s goal from targeting interest rates to targeting the money supply. It was painful. The prime lending rate (the rate banks offer their most creditworthy customers when they’re looking to take out a line of credit or a loan) skyrocketed to over 21% at one point.

Unemployment reached double digits in some months. The country went through two recessions. But eventually, prices stabilized.

And the federal funds rate hasn’t been in the double digits since the mid-1980s.

The Great Recession, 2007 to 2009

When a period in U.S. history is labeled “great,” it’s often anything but. During the Great Recession, home prices fell. Unemployment rose. Gross domestic product fell. And in 2008, the market crashed.

Home prices had peaked at the beginning of 2007, and the subprime mortgage market had been busy.

This recession was, for many Americans, the worst of times; they lost their jobs, their homes, and their confidence in the economy.

Enter the Fed, which started by tackling the slump with a traditional response: From September 2007 to December 2008, the Fed lowered the federal funds rate from 5.25% to zero to 0.25%, and FOMC policy statements noted that it would be keeping the rate at exceptionally low levels for a while. But it didn’t stop there.

In 2008 it also began its first round of quantitative easing, buying $600 million in mortgage-backed securities, and continued that effort in 2009. Also in 2008, President George W. Bush signed the $700 million Troubled Asset Relief Program into law. Two more rounds of quantitative easing started in 2010 and 2012 under President Barack Obama.

Recommended: Common Recession Fears and How to Cope

The Covid Crisis, the Fed, and Inflation

At the onset of the Covid-19 pandemic and resulting recession in 2020, making sure the U.S. economy did not fall into a prolonged recession became a higher priority than maintaining inflation at the Federal Reserve’s 2% target rate.

The Fed seeks to control inflation by influencing interest rates. When inflation is too high, the Fed typically raises its benchmark interest rate to slow the economy and tame inflation. When inflation is low, the Fed often lowers the federal funds rate — the interest rate that banks use when they lend money to one another overnight — to stimulate the economy.

After keeping the rate near zero, in March 2022, the Fed approved its first rate increase in more than three years. Between March 2022 and July 2023, the Fed raised rates eleven times, the fastest tightening campaign since the 1980s. The Fed held rates at 5.25% to 5.50% from July 2023 to September 2024. Then as the cuts seemed to achieve their goal, inflation slowed. Inflation, as evidenced by the Consumer Price Index (CPI), peaked in June 2022 and has improved since then. The most recent CPI data, for the 12 months ending in September 2024, showed inflation at 2.4%, close to the Fed’s 2% goal. Given this, in September 2024, the Fed decided it was time to begin cutting the rate. Some economists anticipate further cuts in 2025.

How the Federal Reserve Affects Your Finances

So how do the Fed’s decisions have an impact on you as an individual consumer? For one, banks base their prime rate on the federal funds rate; the prime rate is generally 3 percentage points higher. This rate in turn helps determine the rates that lenders offer their customers.

Fed rate hikes increase the cost of borrowing money for a mortgage or to pay for a car, or for carrying a credit card balance. Rate increases also create a more volatile stock market that could hurt 401(k) plans, increase the amount you earn on a CD, or affect what you might pay for a bond. (Fortunately there are some way to protect your money from inflation next time it rears its head. For example, if you can swing it, buying a house vs. being a renter may help protect you from inflation because you can lock in a fixed monthly payment long term. You can also read up on how to invest during a time of inflation.)

You may be scratching your head at why Fed rate cuts in the fall of 2024 didn’t immediately result in reduced interest rates on home mortgage loans. The short answer is that lenders look at multiple economic data points when they set rates, and the Fed’s action, while important, is not the only factor.

Prospective homebuyers may be wondering, is this a good time to buy a house? The answer is a very personal one, and chances are it won’t be found in scrutinizing the Fed’s movements. Emotions are also involved: Owning a home not only gives you a place where you enjoy living, but homeownership can help build generational wealth and some people may want to begin building that equity immediately, especially when future mortgage rates, like Fed rate cuts, are not within their control.

Recommended: What to Learn From Historical Mortgage Rate Fluctuations

The Takeaway

If you’re planning a vacation, you might not want to tuck away a book on the history of the Federal Reserve. (Or maybe you will. No judgment.) The Fed has a dual mandate to aim for maximum employment and price stability, and it has historically raised interest rates as the antidote for rising inflation.

If you find yourself musing about buying a home soon, it’s important to look at the history of mortgage rates to put the current conditions into context, and it helps to read up on the benefits of homeownership.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

What is the prime rate?

The prime interest rate is the interest rate that banks charge the customers they consider to be the lowest risk — those who have a good credit history and are deemed least likely to default on a loan or miss payments.

What does the Federal Reserve do?

The Federal Reserve has several roles. It sets monetary policy, with a goal of maximum employment and stable inflation. It also regulates banks and other financial institutions. Its overall objective is to control risks to the economy and financial markets.

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


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


*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
This content is provided for informational and educational purposes only and should not be construed as financial advice.

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11
2024

Home Equity Loans vs HELOCs vs Home Improvement Loans

By | Family Finances, Home Ownership, personal_loan | No Comments

Maybe you’ve spent a serious amount of time watching HGTV and now have visions of turning your kitchen into a chef’s paradise. Or perhaps you have an entire Pinterest board full of super-deep soaking tubs that you’re dreaming about.

Either way, the home improvement bug has bitten you, and you’re hardly alone. In the U.S. $827 billion was spent on home improvement from 2021 to 2023, according to the U.S. Census Bureau American Housing Survey. For a bit more context, consider that the average American spent more than $9,542 on home improvement projects in 2023 — with spending up 12% over 2022. That’s a lot more than just buying a new bathroom sink.

While your home might be begging for some updates and improvements, not all of us have close to $10,000 stashed away in a savings account. For many people, realizing their home improvement goals means borrowing money. But how exactly?

Read on to learn about some of your options, including a home equity loan, a home equity line of credit (HELOC), and a home improvement loan. We’ll share the situations in which home equity loans, HELOCs, and home improvement loans work best so you can figure out which home improvement loan option is right for you.

Key Points

•   Home equity loans, HELOCs, and personal home improvement loans offer different benefits for financing renovations.

•   Home equity loans provide a lump sum with fixed interest rates, using home equity as collateral.

•   HELOCs offer flexible access to funds up to a certain limit during a set period, with variable interest rates.

•   Personal home improvement loans are unsecured, typically quicker to obtain, and may have higher interest rates.

•   Choosing the right financing option depends on the borrower’s equity, the amount needed, and preferred repayment terms.

What’s the Difference Between Home Equity Loans, HELOCs, and Home Improvement Loans?

If you’ve figured out how much a home renovation will cost and now need to fund the project, the options can sound a bit confusing because they all involve the word “home.”

What’s more, you may hear the term “home equity loan” loosely applied to any funds borrowed to do home improvement work. However, there are actually different kinds of home equity loans to know about, plus one that doesn’t involve home equity at all.

So, before digging into home improvement loans vs. home improvement loans vs. HELOCs, consider the basics for each:

•   A home equity loan is a lump-sum payment that a lender gives you using the equity in your home to secure the loan. These loans often have a higher limit, lower interest rate, and longer repayment term than a home improvement loan.

•   A home equity line of credit, or HELOC, is a revolving line of credit that is backed by your equity in your home. It operates similarly to a credit card in that the amount you access is not set, though you will have a limit on how much you can access.

•   A home improvement loan is a kind of lump-sum personal loan, and it is not backed by the equity you have in your home. It may have a higher interest rate and shorter repayment term than a home equity loan. What’s more, it may have a lower limit, making it well suited for smaller projects.

Worth noting: If you use your home as collateral to borrow funds, you could lose your property if you don’t make payments on time. That’s a significant risk to your financial security and one to take seriously.

Next, here’s a look at how key loan features line up for these options.

How Much Can I Borrow?

The sky isn’t the limit when borrowing funds. This is how much you will likely be able to access:

•   For a home equity loan, you can typically borrow up to 85% of your home’s value, minus what’s owed on your mortgage. So if your home’s value is $300,000, 85% of that is $255,000. If you have a mortgage for $200,000, then $255,000 minus $200,000 leaves you with a potential loan of $55,000. You can do the math quickly with a home equity loan calculator.

•   For a HELOC, you can often access up to 90% of the equity you have in your home, though some lenders may go even higher. In that case, you are likely to pay a higher interest rate. In the scenario above, with a home valued at $300,000 and a mortgage of $200,000, that means you have $100,000 equity in your home. A loan for 90% of $100,000 would be $90,000. As with other lines of credit, your credit score and employment history will likely factor into the approval decision. To figure out what payments might be on a HELOC, you can use a HELOC repayment calculator.

•   For a home improvement loan, the amount you can borrow will depend on a variety of factors, including your credit score, but the typical range is between $3,000 and $50,000 or sometimes even more.

What Can the Funds Be Used for?

Interestingly, some of these funds can be used for purposes other than home improvement costs. Here’s how they stack up:

•   For a home equity loan, you can certainly use the funds for an amazing new kitchen with a professional-grade range, but you can also use the money for, say, debt consolidation or college tuition.

•   For a HELOC, as with a home equity loan, you can use the money as you see fit. Redoing your patio? Sure. But you can also apply the cash to open a business, pay for grad school, or knock out credit card debt.

•   For a home improvement loan, there is often the requirement that you use the funds for, as the name suggests, a home improvement project, such as adding a hot tub to your property. In some cases, you may be able to use the funds for non-home purposes. Your lender can tell you more.

Recommended: How to Find a Contractor for Home Renovations & Remodeling

How Will I Receive the Funds? How Long Will It Take to Get the Money?

Consider the different ways and timing you may encounter when getting money from these loan options:

•   With a home equity loan, you receive a lump sum payment of the funds borrowed. The timeline for getting your funds can be anywhere from two weeks to two months, depending on a variety of factors, including the lender’s pace.

•   With a HELOC, you open a line of credit, similar to a credit card. For what is known as the draw period (typically 10 years), you can withdraw funds via a special credit card or checkbook up to your limit. It typically takes between two and six weeks to get the initial approval, but some lenders may be faster.

•   With a home improvement personal loan, you receive a lump sum of cash. These tend to be the quickest way to get cash: It may only take a day or so after approval to have the funds available.

How Much Interest Will I Pay?

How much you pay to access funds for your project will vary. Take a closer look:

•   For a home equity loan, you typically get a lower interest rate than some other loan types, since you are using your home equity as collateral. These are typically fixed-rate loans, so you’ll know how much you are paying every month. At the end of 2024, the average rate of a fixed, 15-year home equity loan was 8.49%.

•   For a HELOC, the line of credit will typically have a rate that varies with the prime rate, though some lenders offer fixed-rate options. HELOCs may have lower interest rates than personal and home equity loans, but you will need a high credit score to snag the lowest possible rate.

•   For home improvement loans, which are a kind of personal loan, rates vary widely. Currently, you might find anything from 6.99% to 36% depending on the lender and your qualifications, such as your credit score. These loans are typically fixed rate.

How Long Will I Have to Repay the Funds?

Repayment terms differ among these three options:

•   For home equity loans, you will agree to a term with your lender. Terms typically range from five to 20 years, but 30 years may be available as well.

•   With a HELOC, you usually have a draw period of 10 years, during which you may pay interest only. Then, you may no longer withdraw funds, and move into the principal-plus-interest repayment period, which is often 20 years.

•   With a home improvement personal loan, your repayment terms are typically shorter than with the other options and will vary with the lender. You may find terms of anywhere from one to seven years or possibly longer.

Here’s how these features compare in chart form:

Feature

 Home Equity Loan

 HELOC

 Home Improvement Personal Loan
Type of collateral Secured via your home Secured via your home Unsecured
Borrowing limit Typically up to 85% of home value, minus mortgage Typically up to 90% or more of your home equity Typically from $3,000 up to $50,000 or more
How funds can be used For a variety of purposes For a variety of purposes Often strictly for home improvement
How funds are dispersed Lump sum Line of credit Lump sum
How long to receive funds Typically two weeks to two months Typically two to six weeks Often within days
Type of interest rate Typically fixed rate and may be lower than other loans Typically variable but some lenders offer fixed rate; rates vary Typically fixed rate; rates vary widely
Repayment term Typically 20 to 30 years Typically 20 years after the 10-year draw period Typically 1 to 7 years

Which Home Improvement Loan Option Is Better?

Now that you’ve learned about the features of these loan options, here’s some guidance on which one is likely to be best for your needs.

When Home Equity Loans Make Sense

Here are some scenarios in which a home equity loan may be a good choice:

•   If you have significant home equity and are looking to borrow a large amount, a home equity loan could be the right move to access a lump sum of cash.

•   If you want to have a long repayment period, the possibility of a 30-year term could be a good fit.

•   When you are seeking to keep costs as low as possible, these loans may offer lower interest rates.

•   A home equity loan can be a wise move when you need cash for other purposes, such as debt consolidation or educational expenses.

•   Some interest payments may be tax-deductible, depending on how you use the funds, which could be a benefit of this kind of loan.

When HELOCs Make Sense

A HELOC may be your best bet in the following situations:

•   You aren’t sure how much money you need and like the flexibility of a line of credit.

•   You want to keep your payments as low as possible in the near future. HELOCs can usually be an interest-only loan during the first 10-year draw period of the arrangement.

•   A HELOC can be a good fit for people who are doing a renovation in stages, and want to draw funds as needed versus all upfront.

•   You need cash for something other than just home renovation, such as to pay down credit card debt or fund tuition.

•   Depending on what you put the money toward, interest payments may be tax-deductible to a degree.

When Home Improvement Personal Loans Make Sense

Consider these upsides:

•   These personal loans tend to have a straightforward, fast application process, and often have fewer fees, such as no origination fees.

•   Home improvement loans are usually approved more quickly than other kinds of home loans.

•   These loans can be a good way to borrow a small sum, such as $3,000 or $5,000 for a project you need to complete quickly (say, a bathroom without a functional shower).

•   Home improvement loans can be a good option for new homeowners, who haven’t yet built up much equity in their home but need funds for renovation.

•   For those who are uncomfortable using their home as collateral, this kind of loan can be a smart move.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

The Takeaway

Home improvement is a popular pursuit and can not only make daily life more enjoyable, it can also boost the value of what is likely your biggest asset. If you are ready to take on a renovation (or need to pay off the bills for the reno you already did), you’ll have options in terms of how to access funds.

Depending on your needs and personal situation, you might prefer a home equity loan, a home equity line of credit (HELOC), or a home improvement personal loan. Why not start by looking into a HELOC? A line of credit is a super-flexible way to borrow.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

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

FAQ

Can a HELOC only be used for repairs or renovations?

You can use the funds you draw from a home equity line of credit (HELOC) for pretty much anything you can think of. But if you are hoping to take advantage of a tax deduction for the interest you pay on your HELOC, it will need to be used to buy, build, or substantially improve a home.

Is a HELOC a second mortgage?

Yes, if you are still paying off the mortgage on your home, a home equity line of credit (HELOC) that is secured by that property would be considered a second mortgage. The same is true of a home equity loan.

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


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



*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.


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.

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

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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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