Everything You Need to Know About No Credit Check Loans

Everything You Need to Know About No Credit Check Loans

Quick loans for bad credit can look mighty attractive. However, products like payday loans and auto title loans can have major drawbacks, including short repayment periods and sky-high interest rates.

In fact, short-term loans can be so expensive that borrowers often end up paying exponentially more than they would if they’d financed the purchase some other way. And many loan holders end up re-borrowing, starting a vicious cycle that can quickly spin out of control.

So when you need money now, what should you watch out for — and what are some savvier alternatives to predatory loans? In this article, we’ll lay it all out.

Key Points

•   No credit check loans can provide quick cash without assessing credit history, but they often come with extremely high interest rates and fees.

•   Payday loans and auto title loans are common types of no credit check loans, both of which can lead to significant financial burdens if not repaid promptly.

•   Many borrowers find themselves in a cycle of debt due to the high costs associated with these loans, including fees and rollover charges.

•   Alternatives to no credit check loans include negotiating with creditors, borrowing from friends or family, or obtaining loans from credit unions, which offer more favorable terms.

•   Understanding the terms and potential pitfalls of no credit check loans is essential to avoid falling into a debt trap and negatively impacting credit history.

What Are No Credit Check Loans?

No credit check loans, as their name implies, are loans that offer quick cash to borrowers without requiring a credit check. This means the lender doesn’t review your credit history or credit score when deciding whether to give you a loan. However, not requiring a credit check makes these loans risky for the lender, which is part of how they can justify high interest rates and fee schedules.

And when we say high, we mean high. It’s not hard to find payday loans with effective interest rates of about 400%, and sometimes they go much higher.

Recommended: What Is Considered a Bad Credit Score?

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No Credit Check Loans: Borrower Beware

Rather than a set interest rate, payday loans will often charge $10 to $30 for every $100 borrowed. If a payday lender charges $15 for a $100 two-week loan, that’s the equivalent of a 391% APR.

Here’s how those numbers can work out when it comes to real money. If a payday lender charges $10 for every $100 borrowed, you would owe $50 in interest for a $500 loan, and the $550 would be due on your next payday. If you are unable to repay the loan in full when it’s due, you will typically get hit with a fee, and then the cycle repeats itself. After a few months of rollovers, you can end up owing more in interest than the actual loan amount.

Another word to the wise: The fine print on short-term predatory loans can include a variety of fees, including change fees, mandatory subscription charges, and early repayment fees. These fees can quickly add up. On average, borrowers end up paying $520 in fees on a two-week payday loan for $375.

It’s clear to see how these loans, though small in size, can lead to big financial problems. Even under the best of circumstances, it can be difficult to get ahead of short repayment terms and steep interest rates and fees.

Recommended: What is Consumer Debt?

Who Offers No Credit Check Loans?

Two of the most common types of these no-credit check loans are payday loans and auto title loans.

•   Payday loans As you might have guessed, payday loans are designed to be repaid on the borrower’s next payday — generally within two to four weeks. Because payday loans do so often carry predatory interest rates and terms, some states have limited the size and interest rate of payday loans, but even small loans with lower interest rates can lead to financial trouble.

•   Auto title loans Also referred to as “title loans,” these are another common type of short-term personal loan that doesn’t require a credit check. In the case of a title loan, the borrower gives the lender the title of their car as collateral for a cash loan of up to about 50% of the value of the car. The borrower is still allowed to drive the car, but the loan principal plus interest is generally due within 30 days — again at astronomical rates. If the borrower is unable to pay the loan, they risk having their car repossessed.

Other lenders offer similar types of short-term, high-interest rate personal loans, sometimes advertising online loans with “no credit check required” or “guaranteed loan approval.”

Even if they aren’t called payday loans or title loans, borrowers would be wise to pay attention to the loan’s terms and conditions, particularly interest rates, fees, and expected repayment schedules.

Generally speaking, too-good-to-be-true financial products are often just that. Staying informed about the full implication of the loan’s terms and doing the math to work out how much you will end up paying over time can help borrowers avoid a potentially disastrous financial situation.

Recommended: Can You Get a First-Time Personal Loan With No Credit History?

Alternatives to No Credit Check Loans

As financially harmful as no check credit loans can be, there still might be instances in which borrowers need quick access to money. Fortunately, there are some alternatives worth consideration.

For starters, borrowers might turn their attention to why they need the money in the first place. Short-term loans are often taken out to repay existing debt, an approach that might result in the borrower going even further into debt to try to scramble out of the hole.

In this scenario, attempting to negotiate the existing debt with current lenders might be a better tactic. Sometimes, credit card issuers and other lenders might offer repayment options to ease the immediate financial burden. It’s a tactic that’s worth asking a creditor about.

Another option: borrowing from friends and family. While this can come with its own set of pitfalls, family loans are unlikely to create the same kind of debt spiral short-term cash loans might.

In order to keep things friendly, you’ll want to set out a formalized loan agreement with interest rates and terms, similar to what you’d expect to sign for a traditional loan from a financial institution. This avoids any confusion and helps keep the transaction as objective as possible.

Credit unions are another source of small-dollar, payday loan alternatives — and importantly, credit unions are subject to a federal interest rate cap and other limits that keep these loans from becoming exorbitantly expensive.

And although they’re generally not an ideal solution, credit cards may carry lower interest rates than short-term cash loans. Some borrowers might also be able to utilize a promotional 0% interest rate period in order to aggressively pay off debt during the promotional period without paying interest.

Another alternative is a traditional personal loan from an online lender. While these loans usually do require a credit check and specific approval requirements, some online lenders will extend loans to applicants with imperfect credit histories. Rates are typically higher. However, they likely won’t be nearly as high as payday loans. You may be able to get a better rate by applying for a secured personal loan (which requires using an asset as collateral) or including a co-applicant on the loan agreement.

The Takeaway

While no credit check loans can certainly be attractive, their high interest rates and associated fees can make them costly over time. Borrowers may not be able to repay the loans plus interest in the short repayment term required, which could lead to a debt treadmill scenario and, possibly, negative credit history consequences.

If you’re interested in exploring other personal loan options, SoFi could help. SoFi’s unsecured personal loans come with competitive, fixed interest rates and there are no fees required. Checking your rate will not affect your credit score.

See if a personal loan from SoFi is right for you.


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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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How and When to Combine Federal Student Loans & Private Loans

One of the biggest student loan myths out there is that borrowers can’t combine federal student loans and private student loans into one refinanced loan.

It’s understandable why people may think that, since this wasn’t always an option. And consolidation through the Department of Education is only available for federal student loans.

But now you can choose to combine federal and private loans. So it’s important to understand whether combining federal student loans and private student loans is right for you.

Key Points

•   Borrowers can now combine federal and private student loans through refinancing, which simplifies payments and may result in lower interest rates.

•   Refinancing federal loans with a private lender results in the loss of federal benefits, such as forgiveness programs and income-driven repayment plans.

•   Interest rates for federal student loans are fixed and determined annually, while private loans may offer lower rates based on creditworthiness and income.

•   Federal student loans offer various benefits, including deferment and forbearance options, which are not available once loans are refinanced as private loans.

•   Evaluating financial goals and loan details is essential before deciding to refinance, as it can impact payment terms and overall debt costs.

Can I Consolidate Federal and Private Student Loans?

Yes, you can combine private and federal student loans by refinancing them with a private lender.

Through this process, you actually apply for a new loan (which is used to pay off your original loans) and obtain one with a new — ideally lower — interest rate.

Why would you want to do this? In addition to the advantages of loan consolidation (like having one, simplified monthly payment), refinancing student loans at a lower interest rate may lead to lower monthly payments. Note: You may pay more interest over the life of the loan if you refinance with an extended term.

Before you refinance federal student loans, there are a couple of things to think about. Here’s an easy decision tree to help you understand whether private student loan consolidation and refinancing federal loans is right for you:

Federal-Loans-Decisions--Tree-853x500

Federal Student Loan Interest Rates

Some people assume that federal loans always offer the best rates, but this isn’t necessarily true.

Depending on loan type and disbursement date, new federal student loan interest rates are reassessed annually, every July. For the 2023-2024 school year, interest rates on new federal student loans range from 5.50% to 8.05% . Interest rates on federal student loans are determined by Congress and are fixed for the life of the loan.

Some borrowers — particularly those with established credit and a strong, stable income or who can find a cosigner with similar qualities — may be able to qualify for a private student loan with a rate lower than a federal loan. For example, grad school borrowers who have higher-interest-rate unsubsidized federal Direct Loans and borrowers with federal Direct PLUS loans may also be able to qualify for a private loan with a lower interest rate than those federal loans. Undergraduates are likely to find lower rates with federal student loans — without a cosigner or credit check.

When you apply to refinance, private lenders evaluate things like your credit history and credit score, in addition to other personal financial factors, in order to determine the interest rate and terms you may qualify for. This applies when you consolidate private student loans as well.

This means if you’ve been able to build credit during your time as a student, or your income has significantly improved, you may be able to qualify for a more competitive interest rate with a private lender when you refinance. (If you aren’t interested in or don’t qualify for student loan refinancing, a Direct Consolidation
Loan
from the Department of Education might be worth a look — but you can’t combine federal and private loans into a Direct Consolidation Loan.) Private student loan consolidation is a different matter.

To get an idea of how much refinancing could potentially reduce the cost of interest on your loans, take a look at SoFi’s student loan refinancing calculator.

Federal Student Loan Benefits

When you refinance a federal student loan with a private lender, it becomes a private student loan. This means that the loan will no longer be eligible for federal benefits and protections.

Before you contemplate the idea of refinancing, consider taking a look at your loans to see if any of these federal loan benefits and programs apply to you — or whether you might want to take advantage of them in the future. Here are some to consider:

Student Loan Forgiveness

There are a few forgiveness programs available for borrowers with federal student loans. For example, under the Public Service Loan Forgiveness Program (PSLF), your Direct Loan balance may be eligible for forgiveness after 120 qualifying, on-time payments if you’ve worked for an eligible public sector entity that entire time.

Pursuing PSLF can require close attention to detail to ensure your loan payments and employer qualify for the program. The qualification requirements are clearly stated on the PSLF section of the Federal Student Aid website .

Similarly, the Teacher Loan Forgiveness Program is available for teachers who work in eligible schools that serve low-income families full time for five consecutive years. The total amount forgiven will depend on factors like the eligible borrower’s role and the subject they teach. The Federal Student Aid website has all the details of this program.

These forgiveness programs can be beneficial for people who choose careers in public service or education.

Income-Driven Repayment Plans

There are also a number of federal loan repayment plans that can ease the burden for eligible borrowers who feel their loan payments are higher than they can afford.

Under the student loan repayment plans and the other income-driven repayment options, monthly payments are calculated based on a certain percentage of the borrower’s discretionary income.

President Joe Biden’s Save on a Valuable Education (SAVE) Plan provides the lowest monthly payments of any IDR plan available to nearly all student borrowers.

But if your income is over a certain threshold, you likely won’t benefit from these programs.

And if you do qualify but you’re at the high end of the spectrum, your slightly lowered payments may come at a disproportionate price in the form of accumulating interest. Although the Department of Education says that if you make your monthly payment under the SAVE plan, your loan balance won’t grow due to unpaid interest.

Deferment or Forbearance

Life can be unpredictable — sometimes that means borrowers might have difficulty making payments on their student loans. When this happens, borrowers with federal student loans may qualify for deferment or forbearance.

President Biden proposed a federal student loan debt canceling of up to $20,000 for qualified loan holders but it was struck down by the Supreme Court in a ruling released in late June 2023.

The three-year-long pause on federal student loan payments due to Covid-19 lockdowns ends in the Fall of 2023. Student loan interest will resume starting on Sept. 1, 2023, and payments will be due starting in October.

For borrowers who can’t make payments, the DOE created a temporary on-ramp period through Sept. 30, 2024. This on-ramp period protects borrowers from having a delinquency reported to credit reporting agencies. And it prevents the worst consequences of missed, late, or partial payments.However, payments are still due, and interest will continue to accrue.

Also, there are ongoing deferment and forbearance options that allow borrowers to temporarily pause payments on their federal student loans in the event of economic hardship.

The biggest difference between the two is that with forbearance, the borrower is responsible for paying the interest that accrues on the loan during this time. Forbearance can have a major financial impact on a borrower, as any unpaid interest will be added to the original loan balance. With deferment, the borrower may or may not be responsible for paying the interest that accrues.

The type of loan you hold will determine whether or not you qualify for deferment or forbearance. Both options can be potentially helpful tools to borrowers going through a short period of financial difficulty, but both have important considerations .

Refinancing Your Student Loans

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.


With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.


SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.


SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.


External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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.

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


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

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Ways to Achieve Financial Discipline

7 Ways to Achieve Financial Discipline

If you feel as if you aren’t clear about where your money goes or why you aren’t saving as much as you’d like (or why your credit card debt isn’t going away), you might benefit from some financial discipline. While the word “discipline” can sound harsh, it’s really just a way of saying that you have found money-management habits that lead to success. It’s not about saying you can never buy concert tickets or new shoes again.

Having financial discipline can help you take control of your money, gain independence, and save for your big-picture as well as short-term goals.

This guide shares seven essential ways to achieve financial discipline and enjoy its rewards.

What Is the Meaning of Financial Discipline?

Financial discipline is the act of setting specific monetary (spending and saving) goals and measuring oneself against how well they are achieved. Once that financial discipline is established, a person can take further steps to becoming financially independent.

Financial independence means having enough money to pay one’s living expenses without being dependent on people or a particular employer. It provides a financial runway that’s flexible enough for a person to make decisions based on short- and long-term needs instead of the immediate state of their finances.

💡 Quick Tip: Want to save more, spend smarter? Let your bank manage the basics. It’s surprisingly easy, and secure, when you open an online bank account.

How Can Financial Problems Be Improved?

Financial problems can bring about a level of stress that might be difficult to shake. Sitting and worrying won’t necessarily change the state of a person’s finances, but putting together a financial plan is a tangible step in the right direction.

By confronting their current financial realities and committing to practicing money discipline, a person who’s struggling with stressful financial problems can improve their overall outlook and make progress toward a more stable financial future.

7 Steps For Achieving Financial Discipline

There are many paths to financial discipline, but these seven steps can help you create the habits that help you take control of your money and your financial destiny.

1. Getting Clear About Financial Goals

It could be difficult to get disciplined about money without embarking on a vital first step: setting financial goals. Writing down specific short-term, mid-term and long-term financial goals can help whittle things down even further and illuminate a plan for how to proceed.

Here are some common examples of financial goals (though real goals will vary depending on a person’s individual priorities and plans). They range from short-term money goals to longer-term ones:

Short-term Financial Goals

•   Paying off credit cards and charge cards

•   Paying off student loan debt

•   Setting a spending limit for the month

•   Setting up an emergency fund

•   Saving a certain amount each month

Mid-term Financial Goals

•   Saving money for a trip abroad

•   Setting aside funds for a major gift

•   Putting away money to buy a big ticket item like a boat or car

•   Saving up for an important home renovation

Long-term Financial Goals

•   Setting aside money for retirement

•   Saving for a dependent’s future college tuition

•   Putting away money for a down payment on a house

•   Investing in stocks and bonds for future returns

💡 Quick Tip: If you’re saving for a short-term goal — whether it’s a vacation, a wedding, or the down payment on a house — consider opening a high-yield savings account. The higher APY that you’ll earn will help your money grow faster, but the funds stay liquid, so they are easy to access when you reach your goal.

2. Creating a Convenient Budget

Building a monthly budget isn’t necessarily at the top of everyone’s bucket list, but seeing spending habits and current expenses in black and white can make it easier to get a handle on overall finances. Whether it’s written out by hand, using an online spreadsheet, or finding software that helps turn financial data into a trackable budget, there are many ways to build a budget.

Once someone finds a system that works, they can better understand how much money they’re making versus how much they’re spending, saving, and possibly investing. The transparency that comes with creating a budget can bring them closer to becoming financially disciplined.

3. Paying Down Existing Debt

Debt comes in many forms — from student loan debt to car loans, medical payments, mortgages and credit card debt. It might seem fairly obvious, but paying down debt as a step toward financial discipline can make it easier to start the subsequent steps like saving money, making investments and planning for a brighter financial future. Adding the debt paydown directly into the budget ensures it’s consistently covered each month.

4. Opening a High-Yield Savings Account

There’s no specific answer to “How much money should I have in savings?” However, it is important to get started and contribute regularly. Even if it’s as little as $20 a month, setting something aside for savings in spite of one’s current debt-to-income ratio ensures some funds will start to add up. By opening up a savings account and setting up a recurring deposit, a pivotal piece of financial discipline can practically go on autopilot.

Of the different types of savings accounts, the specific kind you choose can make a big difference. According to the FDIC, the national average interest rate on savings accounts was 0.45% APY as of October 21, 2024. In the case of certain high-yield accounts, however, interest rates can reach 3.00% APY or higher (these are typically found at online banks).

By putting money into a high-yield savings account, it’s simple to earn even more money just by setting funds aside in the first place.

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No account or overdraft fees. No minimum balance.

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5. Establishing an Emergency Fund

More than one in five Americans have no emergency savings; about 30% of people do have some money set aside for a rainy day, but not enough to cover three months’ worth of basic expenses. That means these individuals would likely have to take on credit card debt, a personal loan, or ask family or friends for financial help if they, say, lost their job or had unexpected bills to pay.

Establishing an emergency fund isn’t just a step along the path to financial independence, it’s a way to weather unforeseen expenses without having to worry about day-to-day expenses being paid for or financial goals being met.

Most money experts advise socking away enough to cover three to six months’ worth of living expenses. You might want to automate your savings to help you reach this goal.

6. Cutting Back on Spending

Despite the best of intentions, overspending happens. Whether it’s a pileup of holiday gift purchases, a particularly eventful summer, or a lavish trip overseas, spending more than what you earn is bound to occur from time to time. If it happens constantly, that’s another story.

Cutting down on spending is a tangible way to practice sound money discipline. There’s no one-size-fits-all approach to doing so, but by building a budget, hunting for bargains, creating ironclad shopping lists, using promo codes and coupons, and thoroughly tracking spending, it can be easier to cut back and get one step further to financial independence.

7. Seeking Sound Investment Strategies

If you’re searching for a head start to financial independence, familiarizing yourself with a wide variety of investment accounts and strategies can help get you on the map. Depending on your individual financial situation, weighing the risks and benefits of certain account types, penalties, fees, and the ability to access funds can help you select the right investment strategy.

By researching different markets and understanding your personal risk tolerance, you can select an approach to investing that directly aligns with your current and future financial goals.

Focusing on Financial Planning

The term “financial planning” might feel more like a unicorn you only get to meet when you’re floating high on a cloud of financial independence, but it’s actually another sound step along the way. These days, financial planning isn’t designated for the already-wealthy, it’s becoming accessible and essential for people at every stage of life. In fact, in the age of digital transformation, financial planning can even be automated.

The Takeaway

Financial discipline or money discipline is the act of setting specific financial goals and tracking their achievement. By practicing financial discipline, you can create a budget, build up savings and an emergency fund, hit your money goals, and make progress toward a more stable financial future.

Finding the right financial institution to suit your needs can be another important step. Doing so can help you track your saving and spending and budget better, as well earn interest on the money you keep stashed away.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck 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.

Photo credit: iStock/shih-wei


SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.


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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Understanding Funds Availability Rules

Understanding Funds Availability Rules

When you deposit money into your bank account, you can’t always use the money right away. Your financial institution may put a hold on a portion of your funds as they process them and make sure they clear. Whether or not all your cash is available can depend on a variety of factors, such as the form of the deposit (say, electronic or a check); the amount of money involved; and when and where the deposit was made (in person? After business hours?). Your money might be ready to use almost immediately, or it could take a few days or even longer.

Federal regulations determine how long banks can take to make deposits available to their clients. And banks and credit unions may have their own internal guidelines as well about processing deposits. It can be a good move to check with your financial institution about their guidelines for clearing deposits so you don’t wind up accidentally overdrawing your account.

That said, here are some important guidelines about when banks typically make funds available to help you manage your money even better.

Why Do Banks Put a Hold on Deposits?

Banks hold deposits to protect themselves, as well as their customers, from losing money. If a check you deposit bounces or some other complication arises, the bank will have an opportunity to fix the problem before you have the opportunity to spend the funds.

While a delay in being able to access your own money may seem like a nuisance, holds can actually help protect you from fraud and fees.

If your bank allows you to spend funds from a check that later bounces, you would have to repay the bank the amount that they gave you, and likely also get hit with a hefty overdraft fee. This is the case regardless of who is at fault.

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How Long Can a Bank Hold a Deposit?

The amount of time it takes for funds to become available can depend on a number of factors, including how long you’ve held your account, your financial history, the type of deposit (e.g., cash, check, direct deposit), and the amount of the deposit.

•   Generally, a bank or credit union has until at least the next business day (a business day is a weekday that is not a holiday) to make most deposits available.

•   Electronic deposits are typically available on the same day. So, one way to make sure your paycheck is available to you quickly is to sign up for direct deposit.

•   Cash deposits may clear immediately or the next business day.

•   The longest a bank can hold funds is usually five business days for money deposited at an ATM of a different bank.

•   While each bank or credit union has its own rules as to when it will let you access the money you deposit, federal law establishes the maximum length of time a bank or credit union can make you wait.

The amount of money deposited can also matter. Here are the rules set by the Federal Reserve.

• Direct Deposit: Day of Deposit

Wire Transfer: Next Business Day

• First $225 of any non-”next-day” check deposited: Next Business Day

• Cash*: Next Business Day

• U.S. Treasury Check: Next Business Day

• U.S. Postal Service Money Order*: Next Business Day

• State or Local Government Check*: Next Business Day

• Casher’s, Certified, or Teller’s Check*: Next Business Day

• Checks and Money Orders Drawn on Another Account at the Same Financial Institution: Next Business Day

• Federal Reserve Bank and Federal Home Loan Bank Checks*: Next Business Day

• Any Other Checks or Non-U.S. Postal Service Money Orders: Second Business Day After the Day of Deposit

• Deposits of Items Noted by “*” at an ATM Owned by the Customer’s Financial Institutions: Second Business Day After the Day of Deposit

• Deposits Made at an ATM Not Owned by the Customer’s Financial Institution: Fifth Business Day After the Day of Deposit

* Deposited in person

You may want to keep in mind that the hold times listed above are the maximum allowed. It’s possible that your funds will be available sooner.

You can typically find specifics about your bank’s funds availability policy in the account agreement you received when you opened your account, or you can ask the bank for a copy of their holding policies.

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Understanding Cut-Off Times

When you deposit a check, you may think you did it “today.” However, you may have missed the cut-off for starting the deposit process on that calendar day.

If you make a deposit after the cut-off time, your financial institution can treat your deposit as if it was made on the next business day. If the deposit was made late in the day on a Friday, it could actually take three or more days for the money to show up in your account.

By law, a bank or credit union’s cut-off time for receiving deposits is generally no earlier than 2:00 p.m. at physical locations and no earlier than noon at an ATM or elsewhere. Sometimes banks have later deposit times for mobile deposits (made via the bank’s phone app), such as 5 pm.

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Deposits That May Take Longer to Become Available

There are certain circumstances under which banks are allowed to hold deposited funds for longer than the times listed above.

When these exceptions apply, there isn’t always a clearly defined limit to the amount of time the bank can hold funds. The bank can generally hold funds for a “reasonable” amount of time.

Exceptions to standard holding times include:

Large Deposits

If a customer deposits more than $5,000, the bank will typically need to make the first $5,000 of the funds available on the second business day, but they are allowed to put a longer hold on the remaining amount.

Redeposited Checks

If a check bounces and then is redeposited, banks may hold the funds for longer than one business day. (You may want to be cautious about accepting future checks from a person or business that has already bounced a check.)

Accounts That Have Been Repeatedly Overdrawn

If a customer has a history of overdrawing their account, the bank may go beyond charging overdraft fees and also hold funds for more time before making them available for use.

Repeatedly overdrawn means that the account has had a negative balance on at least six business days within the past six months, or the account was $5,000 overdrawn more than twice within the past six months. (One note: If you are in this situation, you may want to consider the pros and cons of overdraft protection.)

Reasonable Doubt

If a customer deposits a check that seems suspicious, the bank may hold funds for a longer period of time. A check may seem suspicious if it’s postdated or it’s more than 60 days old. (Typically, how long a check is good for is about 6 months, but it may cause concern after two months has passed.)

New Bank Accounts

If you recently opened a bank account and your account is less than 30 days old, you may experience hold times of up to nine days. Official checks and electronic payments, however, may be partially available the next day.

Emergency Conditions

If there is a communications outage, a natural disaster, or another circumstance that impedes normal bank functions, banks can hold funds until they are able to provide the funds.

The Takeaway

When you deposit a check, you naturally expect the money to show up in your bank account. But there may be a delay between the time you deposit money and the time that those funds are actually available for you to spend.

Banks generally make funds available on the business day after you make a deposit, but there are exceptions.

Direct deposits are typically available sooner, and some checks, such as those larger than $5,000 or older than 60 days, can take longer to clear.

Knowing your financial institution’s policies about holding times can help ensure that you’re able to pay your bills on time, have access to cash when you need it, and don’t get hit with overdraft fees.

Leveraging Technology

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck 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.


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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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What Is Asset Turnover Ratio?

Asset turnover ratio is a calculation used to measure the value of a company’s assets relative to its sales or revenue. It’s used to evaluate how well a company is doing at using its assets to generate revenue.

Similar to cash flow, the asset turnover ratio compares the company’s total assets over the course of a year to its sales. In simpler terms, it shows the dollar amount the company is earning in sales compared to the dollar amount of its assets. It can be calculated annually or over a shorter or longer period of time.

Why Is Asset Turnover Ratio Important?

Although having cash on hand is important for growing and maintaining a business, other types of business assets are also important, as is how a company chooses to use them. Liquid assets can include cash, stock, and anything else the company owns that could be easily liquidated into cash. Fixed assets are things the company owns that are not as easily turned into cash. This could include real estate, copyrights, equipment, etc.

For business owners, asset turnover ratio can be important when applying for loans and learning about their company’s cash flow. A higher asset turnover ratio indicates that a company is efficiently generating sales from its assets, while a low ratio indicates that it isn’t. A higher asset turnover ratio also shows that a company’s assets don’t need to be replaced or discarded, that they are still in good condition.

A higher ratio is preferable for investors, as well. Investors can look at the asset turnover ratio when evaluating the risk of investing in a company, or when comparing similar companies to one another. Each industry has different norms for asset turnover ratios, so it’s best to only compare companies within the same sector. For instance, a utility company or construction company is more likely to have a higher number of assets than a retail company.

Know, too, that asset turnover ratio is only one of many calculations that comprise the list of financial ratios that investors can employ.


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Formula for Calculating Asset Turnover Ratio

It’s fairly simple to calculate asset turnover ratio, which is one reason it’s such a useful tool for investors. Asset turnover ratio can be calculated using the following formula, which divides total (net) sales or revenue by average total assets:

Asset turnover = Net Sales / Average Total Assets

Which can also be shown as:

Asset turnover = Net Sales / ((Beginning Assets + Ending Assets) / 2 )

Where:

Net Sales = Gross annual sales minus returns, allowances, and discounts. Total sales can be found on a company’s income statement (typically part of an earnings report).

Beginning Assets = Assets at the beginning of the year

Ending Assets = Assets at the end of the year

Total Assets = Generally a company will include calculated average total assets on their balance sheet. However, sometimes additional calculations will need to be made.

Calculating Total Assets

The value of a company’s total assets includes the value of its fixed assets, current assets, accounts receivable, and liquid assets (cash).

•   Accounts receivable are accounts that hold expected revenues that come from when customers use credit to buy goods and services.

•   Fixed assets are generally physical items such as equipment or real estate.

•   Current assets are things that the company predicts will be converted into cash within the next year, such as inventory or accounts receivable that will be liquidated.

The formula for calculating total assets is:

Total Assets = Cash + Accounts Receivable + Fixed Assets + Current Assets

Example of Calculating Asset Turnover Ratio

To give an example of the ratio calculation, if a company has $2,000,000 in average assets and $500,000 in sales over the course of a year, the calculation of its asset turnover would be:

500,000 / 2,000,000 = 0.25 = 25% asset turnover ratio

Interpreting Asset Turnover

Sticking with the example above, we’ve calculated a 25% asset turnover ratio. What that means, exactly, is that the company’s assets generated 25% of net sales over the course of the year. In other words, every $1 in assets that the company owns generated $0.25 in net sales revenue. Again, this can be helpful when using various business valuation methods and trying to determine whether an investment fits your overall strategy.

Factors that can Cause Low Asset Turnover

There are several reasons why a company might have a low asset turnover. These include:

•   More production capacity than is needed

•   Inadequate inventory management

•   Poor methods of customer money transaction

•   Poor use of fixed assets

The ratio can also change significantly from year to year, so just because it’s low one year doesn’t mean it will remain low over time.

What Is a Good Asset Turnover Ratio?

Investors can use the asset turnover ratio as part of comparing and evaluating stocks. But what is considered a good number for asset turnover?

In general, the higher the number the better — and a number higher than 1 is ideal. This is because a value greater than 1 means the dollar value generated by assets is greater than the dollar amount that the assets cost. A higher number means a company is generating sales efficiently and not wasting assets.

Conversely, a number less than 1 means that assets are generating less than the amount of their dollar value. If a company isn’t effective at generating sales with its assets, it most likely wouldn’t be a great investment — which, again, is important to know if you’re building an investment portfolio.

Since each industry has its own standards for a “good” asset turnover ratio, there isn’t one specific number to look for. For companies in the utilities industry, ratios are generally lower than companies in retail.

Companies can work on improving their asset turnover ratio by increasing sales, decreasing manufacturing costs, and improving their inventory management. Other ways they can improve include adding new products and services that don’t require the use of assets, and selling any unsold inventory still on hand.

What Does a High Ratio Imply About a Company?

If you’re using technical analysis techniques to get some clarity around a company as a possible investment target, you’ll want to get down to brass tacks: What, exactly, is a high ratio telling you?

The answer is that a high ratio implies that a company is in good standing. It’s generating value with its assets, which can signal that it may be a solid investment. But, again, there are no guarantees.

Limitations of Using Asset Turnover Ratio

While asset turnover ratio is a useful tool for evaluating companies, like any calculation, it has its limitations. It is useful for comparing similar companies, but isn’t a sufficient tool for doing a complete stock analysis of any particular company.

Also, a company’s asset turnover ratio could vary widely from year to year, making it an unreliable measure for potential long-term investments. Even if the ratio has been similar in years past, this doesn’t mean it will continue to remain consistent. However, investors can look at the long term trendline of the ratio to get a general indication of whether it’s improving or not.

Since asset turnover is typically calculated once a year, if a company made even a few large purchases this could skew their ratio. This is fairly common, as companies might have certain monthly expenses but occasionally need to invest large sums of money into equipment, office renovations, or other common business needs.


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Drawbacks of Asset Turnover Ratio in Stock Analysis

The limitations outlined above play into some of the potential drawbacks of the asset turnover ratio when analyzing stocks, too. Mostly, it comes down to the fact that as a single ratio, which doesn’t reveal the total health or financial picture for a single company. For that reason, it’s probably a good idea to use the ratio in tandem with other analysis tools and methods.

For instance, other ratios that can be used to gain an understanding of a company’s financials are the debt-to-equity ratio, its P/E ratio, and even looking at its net asset value.

The Difference Between Asset Turnover and Fixed Asset Turnover

Fixed asset turnover and asset turnover are two different ratios that can tell you about a company, and for investors, it’s important to understand the difference between the two.

In short, and to recap, asset turnover ratio looks at average total assets of a company — “total,” in this case, being the important qualifier. On the other hand, fixed asset turnover ratio looks at a company’s fixed assets to measure performance.

Investing With SoFi

Knowing how to calculate asset turnover ratio can be useful for investors who are evaluating companies as they start building an investment portfolio. While the formula is simple — Asset turnover = Net Sales / Average Total Assets — it’s important to remember that the calculations work best when comparing companies within one industry, rather than across various industries.

Additionally, there are other metrics by which to evaluate a company or value its stock. The asset turnover ratio can be helpful, but it has its limitations. As always, speak with a financial professional if you feel like you’d benefit from more guidance.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

FAQ

How can you improve asset turnover ratio?

Some ways that a company can improve its asset turnover ratio include increasing its revenues, selling some of its assets, renting or leasing assets rather than purchasing them, and optimizing its inventory and ordering systems.

Is an asset turnover of 1.5 good?

Yes, an asset turnover ratio of 1.5 is a sign that a company is on solid financial footing. It indicates that a company’s total assets are generating enough revenue from its current assets.

Can asset turnover ratio be negative?

Yes, and a negative asset turnover ratio would be a signal that a company lost money during the year, rather than earned it. A negative number represents that its liabilities or expenditures exceeded its assets.


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SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

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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