If you don’t have a 20% down payment on a home, that’s OK. Most buyers don’t. But if you’re in that league and acquire a conventional mortgage, the lender will want extra assurance — insurance, if you will — that you’ll pay the loan back.Private mortgage insurance is usually the price to pay until you reach 20% equity or, as lenders say, 80% loan-to-value.
In an effort to help low- and middle-income borrowers, the Biden-Harris Administration recently reduced monthly mortgage insurance premiums for new FHA loans. Those cuts will not affect homebuyers with conventional loans and private mortgage insurance (PMI).
Can you avoid PMI? Other than coughing up 20% down, you could seek a piggyback mortgage or lender-paid mortgage insurance.
What Is PMI?
Private mortgage insurance is charged by lenders of conventional mortgages, which are loans not insured by a government agency. FHA, VA, and USDA loans are.
The 30-year conventional home loan is the most common mortgage, and 20% down is ideal. But…
You’ve seen home prices lately. Twenty percent down on a $250,000 or $400,000 or $750,000 home is just not doable for many, or most. The average down payment for all buyers has been about 13%, according to the National Association of Realtors.®
PMI is meant to protect the lender from risk. The premiums help the lender recoup its losses if a borrower can’t make the mortgage payments and goes into default.
How Much Does PMI Cost?
PMI is often 0.5% to 1.5% of the total loan amount per year but can range up to 2.25%.
The cost of PMI depends on the type of mortgage you get, how much your down payment is, your credit score, the type of property, the loan term, and the level of PMI coverage required by your lender.
If you’re shopping for a mortgage and you apply for one or more, the premium will be shown on your loan estimate. If you go forward with a home loan, the premium will be shown on the closing disclosure.
Estimate PMI Costs
Use this calculator to estimate PMI based on how much home you can afford.
How to Pay PMI
Most borrowers pay PMI monthly as a premium added to the mortgage payment.
Another option is to pay PMI with a one-time upfront premium at closing.
Yet another is to pay a portion of PMI up front and the remainder monthly.
How to Avoid PMI Without 20% Down
One way to avoid PMI is to make use of a piggyback mortgage. Another is to seek out lender-paid mortgage insurance.
Piggyback Loan
With a piggyback loan, typically an 80/10/10 mortgage, you’d take out two loans at the same time, a first mortgage for 80% of the home price and a second mortgage for 10% of the home value, and put 10% down.
The 80% loan is usually a 30-year fixed-rate mortgage, and the 10% loan is typically a home equity line of credit that “piggybacks” on the first mortgage.
A 75/15/10 piggyback loan is more commonly used for a condo purchase because mortgage rates for condos are higher when the loan-to-value ratio (LTV) exceeds 75%.
Both loans do not have to come from the same lender. Borrowers can tell their primary mortgage lender that they plan to use a piggyback loan and be referred to a second lender for the additional financing.
Because you’d be taking out two loans, your debt-to-income ratio (monthly debts / gross monthly income x 100) will fall under more scrutiny. Mortgage lenders typically want to see a DTI ratio of no more than 36%, but that is not necessarily the maximum.
Piggybackers will need to be prepared to make two mortgage payments. They will want to think about whether that secondary loan payment will be higher than PMI would be.
Lender-Paid Mortgage Insurance
In most cases with lender-paid mortgage insurance (LPMI), the lender pays the PMI on your behalf but bumps up your mortgage interest rate slightly. A 0.25% rate increase is common.
Monthly payments could be more affordable because the cost of the PMI is spread out over the whole loan term rather than bunched into the first several years. But the loan rate will never change unless you refinance.
Borrowers will want to look at how long they expect to hold the mortgage when comparing PMI and LPMI. If you need a short-term mortgage, plan to refinance in a few years, or want the lowest monthly payment possible, LPMI could be the way to go.
When PMI Is No Longer Required
Borrowers generally need to have 20% equity in their home to drop PMI.
The Homeowners Protection Act was put in place to protect consumers from paying more PMI than they are required to. Specifically for single-family principal mortgages closed on or after July 29, 1999, the law covers two scenarios: borrower-requested PMI termination and automatic PMI termination.
Once you’ve built 20% equity in your home, meaning you’re at an 80% LTV based on the home’s original value (the sales price or the original appraised value, whichever is lower), you can ask your mortgage loan servicer — in writing — to cancel your PMI if you’re current on all payments. Your monthly mortgage statement shows your loan servicer information.
The very date of this occurrence, barring no extra payments, should have been given to you in a PMI disclosure form when you received your mortgage.
As long as you’re current on all payments, PMI will automatically terminate on the date when your principal mortgage balance reaches 78% of the original value of your home.
If that LTV ratio is not reached by the midpoint of the mortgage amortization period, PMI must end the month after that midpoint.
PMI vs MIP vs Funding Fees
The upside of PMI is that it unlocks the door to homeownership for many who otherwise would still be renting. The downside is, it adds up.
If you’re tempted to go with a mortgage backed by the Federal Housing Administration, realize that an FHA loan requires up front and annual mortgage insurance premiums (MIP) that go on for the life of the loan if the down payment was less than 10%.
Mortgages insured by the Department of Veterans Affairs come with a sizable funding fee, with a few exceptions, and loans backed by the Department of Agriculture come with up front and annual guarantee fees.
A bigger down payment not only may allow a borrower to avoid PMI but usually will afford a better loan rate and provide more equity from the get-go, which translates to less total loan interest paid.
So how to afford a down payment? You could shake down Dad or Granny (just kidding; Grandma responds better to sweet talk than coercion). For a conventional loan, gift funds from a relative or from a domestic partner or fiance count toward a down payment. There’s no limit to the gift, but you may be expected to come up with part of the down payment. You’ll also need to present a formal gift letter to validate the funds given to you.
A gift of equity is a wonderful thing indeed. When a seller gives a portion of the home’s equity to the buyer, it is shown as a credit in the transaction and may be used to fund the down payment on principal or second homes.
You could look into down payment assistance from state, county, and city governments and nonprofit organizations, which usually cater to first-time homebuyers. And home listings on Zillow now include information about down payment assistance programs that might be available to buyers searching for homes on the platform.
Even if you can’t come up with 20%, it’s all good because PMI doesn’t last forever, and real estate is one of the key ways to build generational wealth.
The Takeaway
What is PMI? Private mortgage insurance, which typically goes along for the ride when a borrower puts less than 20% down on a conventional mortgage. How to avoid PMI? Hunt for lender-paid mortgage insurance or a piggyback loan, or seek gifts or other assistance to fatten the down payment.
SoFi offers fixed-rate conventional mortgages at competitive rates. Qualifying first-time homebuyers can put just 3% down, and others can put 5% down.
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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.
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Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Most drivers know that the cost of car insurance in California varies, sometimes by hundreds of dollars. What you pay may be substantially different from what your friend pays, even if you have similar driving records and similar cars. That’s because there are dozens of data points that car insurance companies consider, from your age and Zip code to your insurance deductible and amount of coverage.
Keep reading to find out the average cost of car insurance in California, and how you can lower your premiums without sacrificing the coverage you need.
How Much Does Car Insurance Cost in California?
Drivers in California pay on average $1,940 a year — 35% higher than the national average, according to U.S. News & World Report. In a state where housing prices and the cost of living are so high, it stands to reason that car insurance is more expensive. But what exactly goes into insurance companies’ calculations?
The California Department of Insurance weighs the following information in its estimates:
• Coverage type. Liability Only vs. Standard.
• Location. Divided into cities and, in bigger cities, into regions/neighborhoods.
• Number of drivers covered. Single, couple, or family.
• Years licensed.
• Annual mileage.
• Driving record.
• Vehicle.
Average Car Insurance Cost in California per Month
Each insurance company has its own formula for calculating insurance rates. The table below shows how premiums vary among the ten largest insurance companies serving California.
These quotes are for a single driver in East Los Angeles, licensed for 8-13 years, who drives 12,000-16,000 miles annually and has one ticket.
Your location has a big influence on the cost of car insurance in California. Insurance companies actually track traffic volume, accidents, and crime in different neighborhoods across the state. Drivers in more populated areas pay more than those who live in small towns or out in the countryside.
Here are average costs for standard car insurance in ten of California’s biggest cities.
Average Car Insurance Cost in California By Age of Driver
A driver’s age (or experience level, really) also plays a role in the cost of car insurance. A teenager who has just gotten their license is considered a greater risk by insurance companies. Higher risk translates to higher premiums. This is why many teens share a policy with parents. Once a driver hits age 20 (and still has a clean driving record), premiums often decrease. To find the best deal for younger drivers, compare quotes from an online insurance marketplace.
According to the California Department of Insurance, the average cost of car insurance in Los Angeles for a couple with a teenage driver is about $8,000 annually, or $667 monthly, for standard coverage. If you’re in this predicament, our car insurance tips for first time drivers may be helpful.
Average Car Insurance Cost in California After an At-Fault Accident
Your driving record has a major effect on your insurance premiums. Whether you’re involved in a fender bender or a more serious crash, insurance companies just need to know whether you were at fault.
As with our insurance company breakdown above, the quotes below are for a single driver in East Los Angeles, licensed for 8-13 years, who drives 12,000-16,000 miles annually and has one ticket. In this scenario, they’re looking to insure a Honda Accord, before and after an at-fault accident.
Average Car Insurance Costs for Good and Bad Credit
In California, insurance companies can’t factor in credit scores when underwriting car insurance policies. So your credit history won’t have an affect on your ability to get or renew a car insurance policy — or how much you’ll pay.
Californians should be thankful for this. In New York state, drivers with excellent credit pay on average $3,927, while those with poor credit pay — whoa! — $10,640.
As noted above, there are dozens of data points that insurance companies can use to estimate their risk and set premiums accordingly. One is marital status. Another is your car’s make and model, as well as its safety features and overall value.
Aside from the driver and the car, the type of policy impacts premiums. The more coverage you have, the more expensive your policy will be. Your state’s minimum car insurance requirements will get you the most rock-bottom premiums.
The type of deductible you choose also influences your cost. With a higher deductible, your premiums will be lower. The trade-off is that, if you get in an accident, you’ll be responsible for a larger share of the repair bill. In short, you can pay now or pay later.
To find the most affordable car insurance for your profile and needs, it’s best to shop around and compare quotes. These days, online insurance marketplaces make that easy to do.
Once you’ve chosen one or two reputable insurers, it’s important to ask yourself how much car insurance you need. This goes back to the “pay now or pay later” dilemma mentioned above. A no-frills, liability-only policy with a higher deductible will have the lowest monthly premiums. But if you’re in an accident, you may wish you’d chosen more coverage.
Also consider bundling opportunities. Just as you pay less for Internet and TV when you combine services, you can save on car insurance if you purchase it from a company with which you have another policy, such as homeowners coverage.
And finally, ask about possible discounts through organizations and schools you’re affiliated with. Most insurers have a long list of companies they partner with to offer lower rates to customers.
The average cost of car insurance in California is $1,940, significantly more than the nationwide average. Your premiums may be higher or lower depending on factors related to your background (age, location, driving record), your vehicle (make and model, safety features), and your level of coverage (liability vs. comprehensive, low vs. high deductible). Just remember that the lowest premium may not offer all the coverage you need in case of an accident.
If you’re ready to shop for auto insurance, you can receive and compare multiple quotes from top insurers in a matter of minutes through SoFi, powered by Experian. You’ll save time and potentially money without having to go to numerous websites.
Explore your options with Experian at SoFi, your personal insurance shopper.
FAQ
How much is the average car insurance per month in California?
Numerous factors go into the calculation of a car insurance premium, including where you live in California, the length and status of your driving record, the type of vehicle you have and its mileage, and more. The average statewide is about $1,940, but the best way to find the most affordable coverage for your situation is to shop around for quotes from multiple insurers.
How much does the average person pay for car insurance in California?
Numerous factors go into the calculation of car insurance for a California resident. This post breaks it down in multiple ways and offers sample averages based on certain demographics and situations.
Is $300 a lot for car insurance?
In many cases, the average monthly cost for coverage in California is well below $300. But remember, the amount you pay depends on a number of different factors. A 17-year-old, for example, could very well pay more than $300 per month largely because of her lack of driving experience.
Photo credit: iStock/gguy44
Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
P2P payments, aka peer-to-peer transfers, are a great way to use digital technology to send money to other people or receive funds from them. With a money transfer app or perhaps one from your financial institution, you can send a friend your half of the dinner bill, gas money, or other payments, quickly and easily from your mobile device. Chances are, you can also buy items (say, on Instagram or a website) using one of these apps.
To move money via P2P, all you need to do is to download one of the transfer apps, like Venmo or PayPal, and connect your bank account, debit card, or credit card to it. Or your financial institution may offer their own app that you could enable. Either way, once you are set up, you are just a few clicks away from being able to send money.
Here’s a closer look at exactly how these apps work, including:
• What is a P2P money transfer?
• How does a P2P payment work?
• How long does a P2P transfer take?
• Are P2P payments safe?
• What are some alternatives to P2P payments?
What Is a P2P Payment?
With a P2P payment, you can send money to a friend with just a few clicks on your mobile device. This replaces the need to get cash at an ATM or write out a personal check, options that aren’t always quick or convenient.
For traditional P2P apps, both parties need to have an account with the transfer service in order to make the transaction. For example, if you want to use Venmo to repay a friend for the salad they bought you at lunchtime, that person would also need to have a Venmo account to receive that payment.
Typically, a P2P account is attached to your bank account online. Some P2P platforms, however, allow customers to link their P2P accounts to a debit card or even a credit card, though it may involve additional fees.
How does a P2P payment work? Here’s a closer look at what goes on when you use a P2P payment app.
Overview of the P2P Transfer Process
Say that you want to send money P2P to your sister for your mother’s birthday present. Depending on the type of P2P service you use, you’ll follow some variation of these basic steps.
• Creating a P2P Account. You will need to download a P2P app and then sign up for an account. In order to send money to your sister, you’ll both need to have an account with the same money transfer service.
• Linking your bank account to your P2P account. Some P2P services have the ability to hold funds, but they generally must be linked to a primary bank account, credit card, or debit card in order to be fully operational. This is how the account will pull any funds needed to make a payment.
To link your checking account, you may need your checking and routing number (which appear at the bottom of a check). Some P2P transfer services may only need your bank log-in information. Others may allow you to set up extra verification measures.
• Searching for a user to transfer funds to. To send money to your sister, you’ll need to find her on the P2P platform. You can typically search by username, email address, or a phone number. In most cases you will be able to add her account as a contact or “friend” in your account.
• Initiating a transfer. The next step in how a P2P payment works is getting the money moving. Your sister can request a payment from you, or you can initiate the payment yourself. This requires choosing the option to send funds, entering a dollar amount, and then clicking submit. If you’ve enabled additional security measures on your account, you may need to enter a PIN that gets texted to you as well.
You may be prompted to choose whether you are making a purchase or sending money to a friend or family member. This can impact whether fees get assessed and what kind of protection you receive for the transaction.
You may have the option to add a description or “memo” to your transaction. Some P2P services may require this information so that they can charge a fee for business-related transactions. Others offer the option to act as a personal ledger should you need it in the future.
• Waiting for the transfer to complete. Now the funds are in motion via a P2P bank transfer. When money is sent from one customer to another, it moves in the form of an electronic package safeguarded with multiple layers of data encryption. This makes it hard for hackers to access the data (like your bank account number) within the transfer while it is in motion. Similarly, data encryption keeps your money and account information safe. Once the data set reaches its destination, it is decoded and deposited as currency.
• Transferring the funds into the payee’s bank account. When a P2P transfer is completed, the funds may be deposited directly into your sister’s bank account. Or they may go into an account created for her by the P2P service. Funds received into P2P user accounts can then be transferred into traditional bank accounts at little to no cost. (You are likely to pay a fee if you want the funds transferred ASAP versus in a couple of days.)
Your sister will likely receive some combination of email, text, and/or in-app notifications that the funds have arrived. If she decides to leave the money in her P2P account, she can use that account balance the next time she needs to pay someone or purchase something from a business that accepts P2P transactions.
How Long Do P2P Transfers Take?
The general rule of thumb for P2P transfer services is to allow one to three business days for a transfer to complete (although some seem instantaneous; timing varies). That’s because standard bank transfers use the ACH (or Automated Clearing House) system, which can take a day or two to complete.
When it comes time to move funds from the app to, say, a checking account, some apps may charge a small fee, often around 1.75% of the overall transfer amount.
Are P2P Money Transfers Safe?
Many people wonder, Are mobile payment apps safe? Any time your bank account, credit, or debit card information is online, there is a chance that someone can get a hold of it, and P2Ps are no different. While all major money transfer companies encrypt your financial information, no P2P system can say it’s totally impervious to hacks and scams.
There are also additional measures you can take to make sure that your account remains secure. For example, you may be able to set up two-factor authentication, which might involve typing in a unique pin number that is texted to your phone for each transaction. Or you might elect to receive notifications each time there’s a transaction posted on your account, enabling you to spot financial fraud right away if it were to happen.
You may also want to take care when you type in a recipient’s email address, phone number, or name. A typo could lead to the money going to the wrong person.
How Do Peer-to-Peer Transfer Companies Make Money?
P2P transactions are largely offered for free to consumers, which may beg the question of how the companies that offer these services stay in business. Here are two major ways that P2P money transfer apps may generate income.
Account Fees
Typically, you can make P2P payments from a linked bank account or straight from the P2P account for free. If you want an instant transfer or you are transferring money using a credit card or from depositing checks into your P2P account, there may be a fee involved.
Business Fees
P2P platforms aren’t just for consumers — they are used by businesses as well. Compared to the free transactions that standard user profiles offer, business profiles are generally subject to a seller transaction fee for each customer purchase made with a P2P money transfer app. Venmo, for instance, charges a fee of 1.9%, plus 10 cents for each transaction.
What Are the Benefits of P2P Money Transfers?
There are three main benefits to using online money transfer services.
• They’re fast. Depending on the service, P2P money transfers can happen very quickly. They can take anywhere from just a few seconds to a couple of business days.
• They’re cheap. When exchanging money between friends and family, P2P money transfers are often free. There may be a small fee, however, if you want an instant bank transfer, are using a credit card instead of a bank account, are making a transfer above a certain dollar amount, are conducting a high volume of transfers, or are using the service for a business transaction.
• They’re easy. P2P transfers eliminate the need to make trips to the ATM or a local bank branch to get cash. They also eliminate the need to get out your checkbook, write a check, and then mail it to someone. For a P2P transfer, all you likely need is a mobile device, the app, and cell service or WiFi.
Alternatives to P2P Money Transfers
What if a P2P money transfer isn’t available or doesn’t suit your needs? Try these options instead to move money.
Sending a Check
You can go old-school and write a paper check. You fill out the necessary details and hand or mail the check to the person you are paying. Typically, no fee is involved, although you may have to pay for a new checkbook when you run low and order more checks.
Money Orders
Money orders are in some ways similar to a check, but you don’t write them from a bank account. Instead, you purchase them (essentially pre-paying for the amount you are sending) at the post office, businesses like Western Union or Moneygram, or from certain retailers.
Typically, you will pay a small fee. For example, the United States Post Office will issue money orders up to and including $1,000. Those that are for amounts up to $500 will be assessed a $1.75 fee; for ones that are $500.01 to $1,000, $2.40 will be charged. Once you have a money order, you can either give it to the recipient in person or mail it. You can also typically track a money order to see when it’s cashed.
Using Online Bill Payment Services
Many financial institutions offer ways for their customers to pay bills electronically. A key feature of mobile banking, this service can be a simple way to send funds from your checking account, regardless of where you are or what time it is. You may be able to set up recurring payments as well for bills you receive regularly.
Wire Transfers
Wire transfers are another way to send funds electronically using a network of financial institutions and transfer agencies that operate globally. Typically, you will access a wire transfer via your bank, its website, or its app. You’ll need to have your payee’s banking details and will likely pay a fee to wire money.
For instance, domestic wire transfers can charge a fee of anywhere from $15 to $50, and they can be processed in a few hours or within a day. International wire transfers can cost more (with both the sender and recipient possibly paying fees) and can take longer, typically two days.
Peer-to-Peer (or P2P) payment apps facilitate mobile money transactions. You can use them in place of cash or writing a check when you want to give friends or family money, whether it’s to cover your portion of a dinner bill or split the cost of a vacation rental. Some businesses also accept this form of payment.
All you need to make a P2P transfer is a mobile device, an internet connection, and your P2P app, which you must link to your bank account or credit card.
Customers with a SoFi online bank account can send money to any person, anywhere, even if that person doesn’t have a SoFi Checking and Savings account. If the person does happen to be a member of SoFi, the transfer will happen instantaneously. That’s not the only reason to open an online bank account with SoFi, though: You’ll also earn a competitive annual percentage yield (APY), pay no account fees, and, for qualifying accounts, get paycheck access up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.
FAQ
How much time does a P2P transfer take?
P2P accounts can take just a few seconds or a couple of days to move funds. Then, if the person who has money in the P2P app wants to transfer their cash to a bank account, that can also take between hours and a few days. Often, you may be charged a fee if you want the money moved ASAP.
Is P2P digital money?
P2P, or peer-to-peer-payments, are a digital way of moving funds from one person to another. Once the transfer is complete, the recipient has money they can use to pay for purchases or transfer into a bank account.
What’s an example of a P2P payment?
An example of a P2P payment would be to use a P2P app such as PayPal or Venmo to send funds to a friend you owe money. Or you might send a payment to a service provider or retailer using P2P apps as well.
Do banks use P2P?
Many banks offer their own version of P2P apps. For example, you might be able to almost instantly send funds from your account to a friend, a retailer, or a service provider.
SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
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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An apprenticeship program pairs paid on-the-job training with classroom instruction to produce skilled workers, who get a foot in the door of their preferred field without going to college for four or more years.
Nearly 600,000 apprentices were taking part in 27,300 registered apprenticeship programs in 2022, according to the U.S. Department of Labor’s Office of Apprenticeship.
Here are details about finding an apprenticeship, how much you might earn, the commitment required, and more.
Apprenticeship 101
An apprenticeship is a way to acquire hands-on training, work experience, classroom instruction, and mentorship in a particular trade. Not only is an apprenticeship paid, but it’s also a doorway to a stable and in-demand job.
Most apprentices are promoted or receive a raise during their apprenticeship. The average salary is $77,000, the Department of Labor says.
Apprentices receive a nationally recognized credential in their industry upon completion of the program, and may even earn academic credit toward a college degree. Ninety-three percent who cross the finish line retain employment, according to the Labor Department.
There are several places to look for an apprenticeship. You can use the federal agency’s Apprenticeship Finder to search by keyword and location, contact your state’s apprenticeship agency, check out trade or labor unions in your area, or use traditional job search engines. If you need more guidance, find an American Job Center near you.
The majority of apprenticeships are registered either with the Department of Labor or a state apprenticeship agency. Upon entering a program, apprentices receive training under the guidance of an experienced mentor. Many are also required to take academic courses related to that career.
The eligible starting age is 16, but some occupations require apprentices to be at least 18. Some apprentices may also have the option to enter a pre-apprenticeship program, which aims to better prepare workers for the apprenticeship program.
Upon completion of the program, a nationally recognized credential, certificate, or degree is awarded.
How Long Does an Apprenticeship Last?
An apprenticeship program usually lasts four years. Some take as little as one year, and some, as many as six. Whatever the length, apprentices must complete at least 2,000 hours of on-the-job learning plus 144 hours of classroom work.
How Much Do Apprentices Make?
During training, apprentices earn about $17 to $21 per hour, but pay varies by location. Raises are given when new skills are learned.
Do You Have to Pay for an Apprenticeship?
Apprenticeship training is typically offered by the employer at no cost to the apprentice, but apprentices may need to cover certain expenses, such as tools or educational materials.
Employers may pay for the instruction but specify that if an apprentice leaves the program before completion, related costs must be paid back to the employer.
What Types of Careers Offer Apprenticeships?
If construction jobs come to mind when you think of apprenticeships, that’s logical. Many apprenticeships are in the construction trades, but not all are.
Here’s a sample of jobs and the number of active, registered apprentices in 2022.
Occupation
Active apprentices in 2022
Median annual wage*
Electrical power line installers and repairers
15,249
$78,310
Heavy truck and tractor-trailer truck drivers
9,944
$48,310
Heating, AC, and refrigeration mechanics and installers
8,535
$48,630
Nursing assistants
4,033
$30,310
Firefighters
2,306
$50,700
Registered nurses
2,281
$77,600
Food service managers
1,820
$59,440
Barbers and hairstylists
1,751
$29,680
Software developers
1,219
$120,730
*2021 Bureau of Labor Statistics wage data for the occupation as a whole
What About College or Trade School?
Alternatives to apprenticeships include attending a four-year college or a trade school. There, you’ll be provided with a broader set of knowledge along with the key skills required for your area of study.
Trade school costs less than college but still can cost thousands of dollars a semester. As an apprentice you can learn to do something you enjoy while getting paid. What’s the catch? Trade school degrees often take about two years to complete. Many apprenticeships last longer, and even getting one can be tough.
Then there’s the traditional college route. But is college worth it?
More than half of college students take out student loans, usually federal student loans but in some cases private student loans. The average borrower leaves school owing nearly $29,000.
Yet the return on investment may appear only after 10 or more years. The ROI for a bachelor’s degree is 38% after 20 years on average, according to the Education Data Initiative.
Major U.S. companies have vowed to change their hiring habits by offering career paths to people without four-year college degrees. Almost two-thirds of U.S. workers do not have a bachelor’s degree, and job screening by college degree hits minorities especially hard. But change has been slow in coming. A bachelor’s degree remains the standard in many cases.
Beyond the cost of college tuition, whether you choose an apprenticeship or a degree, you’ll need to evaluate salary and career potential using either path to find the one that’s right for you.
Student Loans, Grants, and Scholarships
Whether you choose trade school, college, or an apprenticeship with a community college component, you might need financial aid in the form of grants, or scholarships (try this scholarship search tool), federal student loans, federal work-study, or private student loans.
Private student loans can be helpful, but because they lack the benefits and borrower protections available with federal student loans, they are intended to fill in gaps after other funding sources have been spoken for.
Apprentices in a credit-bearing college program who qualify can receive federal Pell Grants.
Here’s a snapshot of the upsides and potential downsides of apprenticeships.
Pros
Cons
Apprentices can earn a salary while avoiding big student debt.
An apprentice will typically start with a relatively low salary.
Apprentices build new skills through hands-on experience and classroom instruction, and may even earn credit toward a college degree.
The competition to get an apprenticeship can be fierce, especially in high-paying fields.
It can open the door to a well-paid career.
Many occupations still require at least a bachelor’s degree, particularly in the medical and science fields.
Apprenticeship vs Internship
Both apprenticeships and internships aim to help you gain expertise with hands-on training in a certain industry, but several differences should be noted. Here are some of the most common ones.
• Duration: Internships typically last only one to three months, while an apprenticeship can last up to six years.
• Pay: Apprentices receive at least the minimum wage specified by the Fair Labor Standards Act for hours on the job. Wage increases are earned as the apprentice gains and uses skills while working for the employer. Internships are usually unpaid, temporary positions.
• Structure: Apprenticeships have a structured training plan and prepare an apprentice to fill an occupation within the organization. Internships aren’t always structured and only prepare interns through entry-level work.
• Mentorship: Apprentices work with an experienced mentor. Internships don’t always include mentorship.
• Credential: After completing an apprenticeship program, nationally accredited certification is awarded. Interns generally don’t receive any type of credential.
• Job opportunities: Interns are usually in college and get an opportunity for career exploration and skill development. An apprenticeship provides in-depth training, and apprentices can potentially transition into the same role after completing the program and earn a higher salary.
The Takeaway
An apprenticeship can be an excellent way to gain access to a company or a field you wish to work in without going the traditional college route. They aren’t for everyone, though; nor are they available in every field.
If you decide to pursue a bachelor’s or graduate degree and find that you could use some extra help, a SoFi Private Student Loan could be a lifeline. The loans come with no fees and can cover up to 100% of school-certified costs.
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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.
Opting to buy a used vehicle rather than the newest model on the lot can be a great way to save some money.
Used cars often cost significantly less than new cars. In addition, older cars are generally cheaper to insure (since they are worth less than new cars).
The process of shopping for, and financing, a used car, however, can feel intimidating. To demystify the process, we’ve got nine simple strategies that can help you find a reliable used car that fits your lifestyle and budget.
1. Setting a Budget for a Used Car
Before you start researching used cars, you may want to first think about how much you can afford to spend on a car and how you will pay for it.
If you will be paying cash, you may want to consider how much of your savings you can realistically put towards a car. If you don’t have quite enough, or the purchase would completely gouge your savings, you may want to spend a few more months saving up for a car.
If you will be getting a loan for the car, you’ll want to think about what would be a comfortable monthly payment.
One rule of thumb is to put at least 10% down and finance the car for three years. You may also want to try to keep your total monthly auto expenses no higher than 20% of your monthly take home pay.
You can use an online auto loan calculator to get a rough idea of how much you might need to spend each month on financing.
2. Getting Financing Before You Start Shopping
If you plan to get a loan to buy the car, it can be a good idea to get a pre-approved car loan from a bank, credit union, or another lender before you start shopping.
While you may opt to go with financing offered by a car dealership, having a pre-approved car loan offer in your back pocket can give you a great negotiating tool.
Dealers tend to mark up the interest rate to make a profit, but if you already have a deal in place, they will know they need to beat it in order to get your business.
Even if you’re going to buy a car through a private sale, having a pre-approved loan in place will allow you to jump on a great deal as soon as you find it.
Now that you have a car buying budget in mind, you may want to look into what types of cars you can get for that money.
Do you need a truck, SUV, or sedan? You can save money outright by buying a smaller car and also down the line if it’s good on gas mileage.
If safety is a top priority, you may want to check out the Insurance Institute for Highway Safety Ratings to see which cars perform the best in crash tests.
You can also narrow the field by making a list of must-have features, and then searching for cars that have them using a search tool like Edmunds Car Finder .
Once, you’ve narrowed your list to three target models that you can research in more detail. You may also want to read reviews about the cars you’re interested in on sites like Kelley Blue Book and J.D. Power. .
Once you know how much you can spend and what kind of car is going to be a good fit for you, you can actually begin shopping for a used car. There’s no need to start driving to car lots all over town–you can browse through tons of vehicles online.
Good places to look include: used car superstores like Carmax or Carvana, used car dealerships, as well as new car dealerships (which often also sell used cars, though not always at the lowest prices).
You may also want to look at listings from local private party sellers, which you can find on Craigslist, eBay Motors, Facebook Marketplace, and Nextdoor.com.
5. Researching the Car
Once you’ve pinpointed a vehicle you might want to buy, it can be a good idea to find out as much as you can about the vehicle’s history.
You can get a vehicle history report from a company like Carfax or Autocheck , which can tell you if the car has any red flags, such reported accidents or flood damage, as well as information on the car’s maintenance and service history.
To get a report, you’ll need to get the car’s vehicle identification number (VIN) or license plate number from the seller. There is typically a fee for running a report (around $25) but many dealers will provide the report for free.
You may also want to run the VIN number through the United States Department of Transportation Recalls site to check for any safety recalls. If there have been any recalls, it’s a good idea to make sure that the issue has been fixed.
6. Going for a Test Drive
It can often be helpful to try before you buy, especially when it comes to buying a car. A car dealership will typically let you take a few cars for a drive so you can get a sense of how they feel.
You may want to call ahead before visiting a dealership to make sure they have the car on the lot that you’re interested in so you can see it that day.
A private seller will also likely allow you to take the car for a brief spin to see how you like it.
Some things to consider when going for a test drive:
• How well the car accelerates and corners.
• If the breaks are responsive.
• If there are any unusual noises or vibrations that could indicate a mechanical issue.
• How well the car fits you–is there enough leg room? Can you comfortably reach all of the controls?
7. Inspecting a Used Car
Even if you’re far from a car expert, it can be a good idea to do a visual inspection of the car. Is the car’s body and paint in good shape? Are the lights all working? Are there signs of cracks or water inside the lights?
You may also want to turn on the air conditioning and heating, radio, and navigation system and make sure they are all working properly.
When examining the interior, you’ll want to make sure it is in decent condition and there aren’t any unpleasant smells–a moldy smell can indicate flood damage and cigarette smells can be hard to get rid of.
8. Getting a Mechanic to Inspect the Car
Unless you are buying a certified used car with factory warranty coverage from a dealership, you may want to consider getting a car you are close to buying inspected by an independent auto mechanic.
While this does involve an investment of some cash (typically $100 to $200), it can potentially save you from dealing with a costly repair soon after you buy the car.
The inspection report may also give you some bargaining power when haggling over the price of the car.
9. Negotiating the Price of a Used Car
It’s rare that you’re going to come across a used car price where the seller is unwilling to budge, even a little.
Before you negotiate a car deal, however, you’ll want to have all your research ready, including how much the average make and model car for a particular year goes for, and any concerns or issues that came up during your personal and professional inspection.
If you’re negotiating with a dealer, it can be a good idea to keep the focus on total cost of the car, rather than bring a trade-in or financing into the mix.
Dealers may want to merge all of the numbers into one deal, which can be confusing–and also make a not-so-good deal look better.
When discussing price at a dealership, you may also want to make sure you are talking about the out-the-door price, including all fees (so there aren’t any surprises).
Discover real-time vehicle values with Auto Tracker.¹
Now you can instantly monitor vehicle prices in this unprecedented market—to help you make smart money moves.
The Takeaway
Buying a used car can be a smart buying decision. To make sure you get a car that suits your needs and budget, however, you’ll want to research your options, come up with a target price range, and line up financing before you shop.
When shopping for used cars, it’s a good idea to learn a car’s history, test drive the car, and also have it professionally inspected.
Knowing the value of the car in the open marketplace can help you negotiate a good price. If you don’t like the deal, there’s nothing wrong with walking away.
SoFi Checking and Savings allows you to separate your savings from your spending, while still earning competitive interest on all your money.
And with SoFi Checking and Savings’s “vaults” feature, you can create different vaults for different goals, including a “car savings” vault.
Start saving for your next sweet ride with SoFi Checking and Savings.
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¹SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc’s service. Vehicle Identification Number is confirmed by LexisNexis and car values are provided by J.D. Power. Auto Tracker is provided on an “as-is, as-available” basis with all faults and defects, with no warranty, express or implied. The values shown on this page are a rough estimate based on your car’s year, make, and model, but don’t take into account things such as your mileage, accident history, or car condition.
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Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.