Sep
28
2023
What Is a Collective Investment Trust (CIT)?

What Is a Collective Income Trust (CIT)?

By | Growing Wealth, invest, Investing | Comments Off on What Is a Collective Income Trust (CIT)?

A collective investment trust (CIT), also commonly called a commingled trust or collective trust fund, is a pooled investment fund that’s similar to a traditional mutual fund — but a CIT falls under a different regulatory path and may offer lower fees and tax advantages.

Similar to a mutual fund, a collective investment trust generally consists of assets pooled from investors — but in the case of a CIT the funds come only from qualified, employer-sponsored retirement plans, such as 401(k)s, pension plans, and government plans. They are typically not available to retail investors directly.

How a Collective Income Trust Works

CITs have grown in popularity over the years, likely due to their lower cost structures and the potential tax advantages they offer.

The goal for a collective income trust is to pool fund assets together into a single account (called a “master trust account”) and manage the investment funds in a highly diversified, low-cost manner. Although the trust is typically managed by a bank or trust company, the trustee can opt to hire an investment management firm in a sub-advisory capacity to manage the income portfolios.

The CIT investment process is fairly standard. Structurally, the bank or trust company will collect funds from various retirement-oriented investment accounts and commingle them into a single fund (i.e., the CIT), and thus become the trust’s “owner.” CIT investor participants don’t own any direct assets in the trust — instead they hold a participatory interest in the CIT fund assets (similar to the way investors hold mutual fund shares).

The trust, meanwhile, is free to invest in a wide variety of investment vehicles, including stocks, bonds, mutual funds, currencies, derivatives, or possibly alternative investments like commodities or precious metals. Strategically, the trust manager’s mandate is two-fold:

1.    Collect investment assets from participating investment plans and commingle them into a single fund.

2.    Manage the single fund like any mutual fund manager does — with a specific investment strategy, and goals and track the fund’s performance to ensure the fund is meeting its investment goals.


💡 Quick Tip: Did you know that opening a brokerage account typically doesn’t come with any setup costs? Often, the only requirement to open a brokerage account — aside from providing personal details — is making an initial deposit.

Collective Income Trusts vs Mutual Funds

CITs are often compared to mutual funds because in both cases, investors’ assets are pooled and invested in a diversified portfolio of securities. Other than that, these two investment vehicles have some stark differences.

•   Individuals can invest in a mutual fund through an online brokerage or a personal retirement account like an IRA, but investors can only access CITs through an employer-sponsored retirement plan, pension plan, or insurance plan.

•   A collective investment trust is not regulated by the SEC but overseen by the Office of the Comptroller of the Currency (OCC) for national banks, or state banking authorities for state banks and the Department of Labor (DOL). As a result, a CIT is typically less transparent about its holdings than a mutual fund.

•   Unlike a mutual fund, a collective income trust is not required to register under bylaws created in the Investment Company Act of 1940. Thus, because a collective investment trust isn’t subject to the same operational, disclosure, and reporting rules of federal and state securities laws, the cost to invest in a CIT is generally lower than a mutual fund.

•   Whereas mutual fund fees are set by the investment firm as an expense ratio and are non-negotiable, some CIT costs can be negotiated.

•   CIT earnings are considered a tax exempt investment, not merely tax deferred as mutual fund earnings within an employer-sponsored plan might be.

•   A collective investment trust is set up as a trust and offered by a bank, trust company or other financial institution, whereas a mutual fund is offered by an asset management company.

A History of Collective Investment Trusts

Collective income trusts have been around for nearly a century. The first fund rolled out in 1927 on a limited basis. When the stock market crashed in 1929, CITs fell under additional scrutiny owing to the pooled nature of these funds, their lack of transparency, and the timing of the crash. Subsequently, CITs were significantly restricted by the government, which mandated that CITs could only be offered to trust company clients and through employee-sponsored retirement plans.

About 20 years ago, though, CITs began providing daily valuation and standardized transaction processing — in other words they began to operate more like mutual funds — which greatly increased adoption by defined contribution plans.

The real turning point came in 2006, when the Pension Protection Act provided for the use of Qualified Default Investment Alternatives (QDIA) for certain 401(k) plan investors. Target date funds, many of which include CITs, were designated as QDIAs, thus giving more investors access to CITs (although banks and trusts still couldn’t, and can’t, offer CITs directly to retail investors).

Since then, the cost efficiency of collective investment trusts has drawn the attention of many fund managers, and the use of CITs over traditional mutual funds in target-date fund series has grown.

Collective Income Trusts: Things to Know

By design, collective income trusts offer several unique features — and potential drawbacks — for qualified retirement plan providers and their investors:

CITs as fiduciaries

CITs must abide by the rules and regulations laid out in the Employee Retirement Income Security Act of 1974 (ERISA). That means CITs must meet minimum standards of conduct, like requiring CIT providers to give investors critical information such as plan features and funding. As such, a CIT trustee is held to ERISA fiduciary standards for the ERISA plan assets invested in CITs.

CIT’s long-term focus

Unlike a mutual fund, a CIT doesn’t need to distribute 90% of its taxable income every year (mutual funds are regulated investment companies and are required to provide annual taxable income distributions to investors.) That allows collective income trusts to hold investment funds in the trust, allowing those investments to grow in value over time.

No FDIC coverage

Unlike bank deposits, investor deposits in a collective income trust are not insured by the Federal Deposit Insurance Corporation (FDIC). While investments in a 401(k) are not FDIC-insured either, if deposits (e.g. savings, money markets, CDs) are covered by an FDIC-insured institution, then the deposits are as well.

CITs and rollovers

Collective income trusts don’t offer the same investment portability of mutual funds. Trust customers have to liquidate their positions in the CIT into a cash account before they can roll over funds adding an extra step to the account rollover process. Thus, CIT investors should work closely with their plan sponsors when rolling plan funds over to another retirement plan.

The Takeaway

Although a collective investment trust is often compared to a mutual fund, the only two similarities of these vehicles is that they are both pooled investment portfolios, with funds from many investors commingled — and both are used in retirement plans. For now, though, a CIT is only available to investors through certain qualified plans.

Collective income trusts are becoming more common in the employment retirement plan universe, as more target date funds opt to include CITs. CITs are also quite different from mutual funds. They follow a different regulatory flow and are not overseen by the SEC. With more room to operate in a regulatory sense than traditional mutual funds, CITs can offer clients a unique long-term investment option tailored to their investment management needs, and in a cost-effective manner — all managed in a single investment account.

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 is a collective investment trust valued?

A collective investment trust (CIT) is usually valued daily, and its valuation is a summation of the assets that it holds, like many other investment vehicles.

How do you start a CIT?

Starting a CIT is an intricate process, and is by no means simple. It would involve putting together several governing documents, assuring that the CIT is operating within the confines of state and federal laws, working with regulators, and then pooling investments — no easy feat.

Are CITs recommended to diversify a portfolio?

CITs may be recommended by a financial professional as a way to diversify an investment portfolio, as they comprise many different individual investments under one fund or trust.

Photo credit: iStock/izusek

SoFi Invest®

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

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.

Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

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Sep
27
2023

10 Tips for Investing Long Term

By | Growing Wealth, invest, Investing | Comments Off on 10 Tips for Investing Long Term

While short-term investing can be highly risky, investing for the long term is a time-honored way to manage certain market risks so you can reach important financial goals, like saving for college tuition and retirement.

That’s because when it comes to building a nest egg for these bigger life expenses, saving alone won’t necessarily get you where you need to go. You need the boost of investment returns over time to help your savings grow. That’s where long-term investing, also called buy-and-hold, comes in.

The chief advantage of a long-term investing strategy is that “time in the market beats timing the market,” as the saying goes. In other words, by sticking to an investment plan for the long term, your portfolio is more likely to weather its ups and downs, and fluctuations in different securities.

That said, long-term investing isn’t a risk-free endeavor, and there are also tax implications for holding investments long term. Knowing the ins and outs can make all the difference to your portfolio over time.

10 Tips for Long-Term Investing

So how do you go about establishing a long-term investment plan? These tips should help.

1. Set Goals and a Time Horizon

Your financial goals will largely determine whether or not long-term investing is the right choice for you. Spend time outlining what you want to achieve and how much money you’ll need to achieve it, whether that’s paying for college, retirement, or another big goal.

Once you’ve done that, you can think about your time horizon — when you’ll need the cash — which can help you determine what types of investments are suited to your goals.

For example, if you are saving to buy a car in a couple of years — generally a shorter-term goal — you may consider setting aside money in a savings account, CDs, or money market accounts, which are stable and can provide relatively quick access to your cash.

Stock market investing can be more appropriate for big goals in the distant future, such as saving for a child’s education or your own retirement, which could be 20 or 30 years down the line. This relatively long time horizon not only gives your investments a chance to grow, but it means that you also have the time to ride out market downturns that may occur along the way — which may translate to a better ROI (i.e. a higher return on investment), although there are no guarantees.

2. Determine Your Risk Tolerance

Your risk tolerance is essentially a measure of your ability to stomach volatile markets. It can help you determine the mix of investments that you will hold in your investment accounts — but your risk tolerance also depends on (or interacts with) your goals and time horizon.

Longer time horizons may allow you to take on more risk in some cases, because you’re not focused on quick gains. Which in turn means you might be more inclined to hold a greater proportion of stocks inside your portfolio.

How long should you hold stocks? Generally, holding stocks longer can be beneficial from a tax perspective, and from a risk perspective. The longer you stay invested, the longer you have to recover should markets take a dive.

Setting your risk tolerance also means knowing yourself. If you’re somebody who will be kept up at night when the market takes a downward turn, even if your goal is still 20 years away, then you may not want a portfolio that’s aggressively allocated to stocks. While there are no safe investments per se, it’s possible to have a more conservative allocation.

On the other hand, if short-term market volatility doesn’t bother you, an aggressive allocation may be the best fit to help you achieve your long-term goals.

3. Set an Appropriate Asset Allocation

Understanding your goals, time horizon, and risk tolerance can help give you an idea of the mix of assets — generally stocks, bonds, and cash equivalents — you may want to hold in your portfolio. For example, a portfolio might hold 70% stocks, 30% bonds, and no cash equivalents, depending on the investment opportunities you want to explore.

As a general rule of thumb, the longer your time horizon, the more stocks you may want to hold. That’s because stocks tend to be drivers of long-term growth (although they also come with higher levels of risk).

As you approach your goal, you’ll likely begin to shift some of your assets into fixed-income investments like bonds. The reason for this shift? As you approach your goal — the time when you’ll need your money — you’ll be more vulnerable to market downturns, and you won’t want to risk losing any of your cash.

For example, if the market experiences a big drop, you may be left without enough money to meet your goal. By gradually shifting your money to bonds, cash, or cash equivalents, you can help protect it from stock market swings, so by the time you need your cash, you have a more stable source of income to draw upon.

4. Diversifying Your Investment Portfolio

A key factor of any investing is that portfolio diversification matters. The idea is that holding many different types of assets reduces risk inside your portfolio in the long and short term. Imagine briefly that your portfolio consists of stock from only one company.

If that stock drops, your whole portfolio drops. However, if your portfolio contains stocks from 100 different companies, if one company does poorly, the effect on the rest of your portfolio will be relatively small.

A diverse portfolio contains many different asset classes, such as stocks, bonds, and cash equivalents as mentioned above. And within those asset classes a diverse portfolio holds many different types of assets across size, geographies and sectors, for example.

Different types of stocks

The basic principle behind diversification is that assets in a diverse portfolio are not perfectly correlated. In other words, they react differently to different market conditions.

Domestic stocks for example, might react differently than European stocks should U.S. markets start to struggle. Or investing in energy stocks will be different than tech-stock investing. So, if oil prices drop, energy sector stocks might take a hit, while tech might be less affected.

Many investors may choose to add diversification to their portfolios by using mutual funds, index funds, and exchange-traded funds, which themselves hold diverse baskets of assets.

Recommended: What Is an ETF?

5. Starting Investing Early

This tip may seem like a no-brainer, but increasing your time horizon gives you the opportunity to invest in riskier investments, like stocks, for longer. Though risky, stocks typically offer higher earning potential than other types of investments, such as bonds. Consider that the average stock market return annually is about 10%.

Second, the sooner you start investing, the sooner you are able to take advantage of compound growth, one of the most powerful tools in your investing toolkit. The idea here is that as your money grows, and you reinvest your returns, you steadily keep increasing the amount of money on which you earn returns.

As a result, your returns keep getting bigger and your investments can start to grow exponentially. This phenomenon can also help mitigate inevitable losses.

💡 Quick Tip: If you’re opening a brokerage account for the first time, consider starting with an amount of money you’re prepared to lose. Investing always includes the risk of loss, and until you’ve gained some experience, it’s probably wise to start small.

6. Leaving Emotions Out of It

Investing is just numbers and math, so it’s totally rational, right? Well…not exactly. Humans are emotional creatures and sometimes those emotions can get the better of us, leading us to make decisions that aren’t always in our best interest. Letting emotions dictate our investing behavior can result in costly mistakes, as behavioral finance studies have shown.

For example, if you’re investing in a recession and the stock market starts to drop, you may panic and be tempted to sell your stocks. However, doing so can actually lock in your losses and means that you miss the subsequent rally.

On the other end of the spectrum, when the stock market is roaring, you may be tempted to jump on the bandwagon and overbuy stocks. Yet, doing so opens you up to the risk that you are jumping on a bubble that may soon burst.

There are a number of strategies that can help these mistakes be avoided. First, fight the urge to check how your investments are doing all the time. There are natural cycles of ups and downs that can happen even on a daily basis. These can cause anxiety if you pay attention too closely. You might want to avoid constant checking in and instead keep your eye on the big picture — achieving your long-term goals.

Trust your asset allocation. Remember that your asset mix has already taken your goals, time horizon, and your risk tolerance into consideration. Tinkering with it based on spur-of-the-moment decisions can throw off your allocation and make it difficult to achieve your goals.

7. Reducing Fees and Taxes

Be wary of taxes and fees as these can take a hefty bite out of your potential earnings over time. Also, many investment fees are expressed as a small percentage (e.g. less than 1% of the money you have invested) that may seem negligible — but it’s not.

Also, many investment costs can be hard to find, and thus hard to track. Meanwhile, various expenses can add up over time, reducing your overall gains.

Expense ratios

To cover the cost of management, mutual funds and exchange-traded funds charge an expense ratio — a percentage of the total assets invested in the fund each year. An actively managed mutual fund might charge 1.0% or more. A passively managed ETF or index fund may charge 0.50% or less. So you may want to choose mutual funds with the lowest expense ratios, or you may consider passive ETFs or index funds that charge very low fees.

The expense ratio is deducted directly from your returns. You may also encounter annual fees, custodian fees, and other expenses.

Advisory fees

You can also be charged fees for buying and selling assets as well as commissions that are paid to brokers and/or financial advisors for their services. It’s important to manage these costs as well. One of the best lines of defense is doing your research to understand what fees you will be charged and what your alternatives are.

8. Taking Advantage of Tax-Advantaged Accounts

There are a few long-term goals that the government wants you to save for, including higher education and retirement. As a result, the government offers special tax-advantaged accounts to help you achieve these goals.

Saving for Education

A 529 savings plan can help you save for your child’s — or anyone’s — college or grad school tuition. Contributions can be made to these accounts with after-tax dollars. This money can be invested inside the account where it grows tax-free. You can then make tax-free withdrawals to cover your child’s qualified education expenses.

Saving for Retirement

Your employer may offer you a 401(k) retirement account through your job. These accounts allow pre-tax dollars to be contributed, which lower your taxable income and can grow tax-deferred inside the account. If your employer offers matching funds, you could try to contribute enough to receive the maximum match. When you withdraw money from your 401(k) at age 59 ½, it is subject to income tax.

You may also take advantage of traditional IRAs and Roth IRAs. Traditional IRAs use pre-tax dollars and allow tax-deferred growth inside your account. Withdrawals at age 59 ½ are subject to income tax.

You fund Roth IRAs, on the other hand, with after-tax dollars, so money in your account grows tax-free, and withdrawals are not subject to income tax.

There are other tax-advantaged accounts that can work favorably for long-term investors, including SEP IRAs for self-employed people, and health savings accounts (or HSAs), in addition to other options.

9. Making Saving Automatic

One way to continually add to your investments is by making saving a regular activity. One easy way to do this is through automation. If you have a workplace retirement account, you can usually automate contributions through your employer.

Or if you’re saving in a brokerage account you can arrange with your broker for a fixed amount of money to be transferred to your brokerage account each month and invested according to your predetermined allocation.

Recommended: What Is a Brokerage Account? How Does it Work?

Automation can take the burden off of you to remember to invest. And with the money automatically flowing from your bank account to your investments accounts, you probably won’t be as tempted to spend it on other things.

10. Checking In on Your Investments

You may want to periodically check in on your portfolio to make sure your asset allocation is still on track. If it’s not, it may be time to rebalance your portfolio. You may want to rebalance when the proportion of any particular asset shifts by 5% or more.

This could occur, for example, if the stock market does really well over a given period, upping the portion of your portfolio taken up by stocks.

If this is the case, you might consider selling some stocks and purchasing bonds to bring your portfolio back in line with your goals. Periodic check-ins can also provide opportunities to examine fees and other costs (like taxes) and their impact on your portfolio.

What Is Long-Term Investing?

A long-term investment is an asset that’s expected to generate income or appreciate in value over a longer time period, typically five years or more. Long-term investments often gain value slowly, weathering short- to medium-term fluctuations in the market, and (ideally) coming out ahead over time.

Short-term investments are those that can be converted to cash in a few weeks or months — but they’re generally held for less than five years. Many investors trade these assets in short periods, like days, weeks, and months, to profit from short-term price movements.

However, a short-term investing strategy can be risky and volatile, resulting in losses in a short period.

💡 Quick Tip: How to manage potential risk factors in a self-directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.

Long-term Investments and Taxes

It’s also worth noting that for tax purposes the Internal Revenue Service (IRS) considers long-term investments to be investments held for more than a year. This is another important consideration when developing a longer-term strategy.

Investments sold after more than a year are subject to the long-term capital gains rate, which is equal to 0%, 15%, or 20%, depending on an investor’s income and the type of investment. The long-term capital gains rate is typically much lower than their income tax rate, which can help incentivize investors to hang on to their investments over the long run.

Recommended: Everything You Need to Know About Taxes on Investment Income

Why Is Long-Term Investing Important?

Long-term investing can be beneficial for the three reasons noted above:

•   Holding investments long term can allow certain securities to weather market fluctuations and, ideally, still see some gains over time. While there are no guarantees, and being a long-term investor doesn’t mean you’re immune to all risks, this strategy may help your portfolio recover from periods of volatility and continue to gain value.

•   In the case of bigger financial goals, e.g. saving for retirement or for college tuition, embracing a long-term investment plan may help your savings to grow and better enable you to reach those larger goals.

•   Last, there may be tax benefits to holding onto your investments for a longer period of time.

Recommended: Short- vs. Long-Term Investments

Investing With SoFi

The most important tips for long-term investing involve setting financial goals; understanding your time horizon and risk tolerance; diversifying your holdings; minimizing taxes and fees; and starting early so your portfolio can benefit from compounding; and understanding how tax-advantaged accounts can be part of a long-term plan.

When you’re ready to invest, whether through retirement accounts, brokerage accounts, by yourself, or with help, these strategies can help you build an investment plan to match your financial situation.

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).


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

FAQ

What is a realistic long-term investment return?

The average historical return of the U.S. stock market is about 10%, but that’s an average over about a century. Different years had higher or lower returns. So asking what a realistic long-term investment return is hard to gauge, and it will ultimately depend on the investments you choose, how long you hold them, as well as the fees and taxes you pay.

Where is the safest place to invest long-term?

All investments come with some degree of risk, but a more secure way to invest for the long term might be with fixed-income securities like bonds, which pay a set return over a period of time. Money market accounts and certificates of deposit (CDs) generally also have fixed rates. But remember that the lower the risk, the lower the return.

What is the biggest threat to long-term investments

Long-term investments, like all investments, are vulnerable to market changes. Even when investing for the long haul, it’s possible to lose money. Another threat is the risk of inflation. As inflation rises, your money doesn’t go as far. So even if you save and invest for decades, inflation is also rising at the same time, and your money may have less purchasing power than you expected.

Photo credit: iStock/Pekic

SoFi Invest®

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

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.

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at https://sofi.app.link/investchat. Please read the prospectus carefully prior to investing.
Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

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

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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Sep
27
2023
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Can You Refinance a Personal Loan?

By | Debt Payoff, personal_loan | No Comments

Consolidating credit card debt is a common use of personal loans. And it makes sense, given that personal loans typically have lower interest rates than credit cards (which currently average 24.58%).

But what about saving money on an existing personal loan? Can you refinance a personal loan, ultimately saving money on interest or lowering your monthly payment? The answer is, yes. However, it may not make sense for every person or every type of personal loan.

Read on to learn why you might refinance a personal loan, how the process works, plus the pros and cons of a personal loan refinance.

Key Points

•   Refinancing a personal loan can lead to savings on interest or lower monthly payments, depending on the terms of the new loan.

•   Lowering the overall interest rate and reducing monthly payments are common reasons for refinancing personal loans.

•   Potential advantages of refinancing include paying less interest over time and consolidating multiple debts into one payment.

•   Disadvantages may include paying more in interest due to a longer repayment term and possible fees such as origination or prepayment penalties.

•   The process involves checking credit scores, shopping around for the best loan options, and applying for a new loan to pay off the existing one.

Why Refinance a Personal Loan?

While there may be a variety of reasons to refinance a loan, it mainly comes down to two.

1.    To lower the overall interest rate and total interest paid.

2.    To lower the monthly payment.

These two might seem like the same thing, but they’re not.

When you refinance any type of loan, you are essentially replacing your old loan with a new loan that has a different rate and/or repayment term. If the new loan has a lower annual percentage rate (APR), you can save money on interest. If the APR is the same but the repayment term is longer, you can lower your monthly payments, making them easier to manage, but won’t save any money. (In fact, a longer repayment term generally means paying more in interest over the life of the loan.)

Another reason why you might consider refinancing a personal loan is to consolidate your debts (so you just have one payment) or to add or remove a cosigner.

Possible Advantages of Refinancing a Personal Loan

Here’s a look at some of the benefits of refinancing a personal loan.

Pay Less in Interest

If you are able to qualify for a personal loan with a lower APR, it may be possible to save a significant amount of money over time, provided you don’t extend your loan term. You can also save on interest by shortening your existing loan term, since this allows you to pay off the loan sooner.

Lower Your Monthly Payment

Refinancing to a lower APR and/or extending the length of the loan can lower your monthly payment. A lower monthly bill could help you get back on track, especially if you’ve been struggling to make your monthly payments.

Consolidate Multiple Debts

If you have a personal loan as well as other debts (such as credit card debt), you can use a new personal loan to consolidate those debts into one loan and a single monthly payment. If your new loan has a lower APR than the average of your combined debts, you may also be able to save money.

Possible Disadvantages of Refinancing a Personal Loan

Refinancing a personal loan might not be the right move for everybody. Here are some disadvantages to consider.

You May Pay More in Interest

If you refinance a personal loan using a loan that has a longer repayment term, you could end up paying much more in interest over the life of the loan.

You May Have to Pay an Origination Fee

Many personal loan lenders charge origination fees to cover the cost of processing and closing the loan. This is a one-time fee charged at the time the loan closes and, in some cases, can be as high as 10% of the loan. Since the fee is deducted before the loan is disbursed to you, it reduces the amount of money you actually get.

You Might Get Hit with a Prepayment Penalty

Some lenders charge a fee if you pay off the loan before the agreed-upon term, which is known as a prepayment penalty. If your original lender charges you a prepayment penalty, it could cut into your potential refinancing savings.

Refinancing a Personal Loan

If you are thinking about refinancing a personal loan, here are some steps you’ll want to take.

Check Your Credit Report and Score

To benefit from personal loan refinancing, you typically need to have better credit than you had when you got your original personal loan. With a stronger credit profile, you might qualify for a lower APR on the new personal loan.

You can access your credit report for free from each of the three major credit bureaus — Equifax, TransUnion, and Experian — through Annualcreditreport.com. It’s a good idea to scan your reports for any errors and, if you find one, report it to the appropriate bureau.

You can typically access your credit score for free through your credit card company (it may be listed on your monthly statement or found by logging in to your online account).

Shop Around for Loans

Every bank has different parameters for determining who they’ll offer loans to and at what rate, so it’s always worth it to shop around. This could mean looking at traditional banks, credit unions, and online-only lenders.

Many lenders will give you a free quote through a prequalification process. This typically takes only a few minutes and does not result in a hard inquiry, which means it won’t impact your credit score. Prequalifying for a personal loan refinance can help compare rates and terms from different lenders and find the best deal.

Awarded Best Personal Loan by NerdWallet.
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Applying for a Loan

Once you’ve decided on a lender who can help you refinance to a new loan, it’s time to formally apply. You’ll likely need to submit several documents, including pay stubs, recent tax returns, and a loan payoff statement from your original lender (which will show how much is still owed).

Paying Off the Old Loan

Once you have your new loan funds, you can pay off your original loan. You’ll want to contact your original lender to find out what the process is and follow their instructions. It’s also a good idea to ask your original lender for documentation showing the loan has been paid off.

Making Payments on the New Loan

Be sure to confirm your first payment due date and minimum payment amount with your new lender and make your first payment on time. You may want to enroll in autopay to ensure you never miss a payment. Some lenders even offer a discount on your rate if you sign up for autopay.

The Takeaway

Can you refinance a personal loan? Yes, and doing so may allow you to get a better rate and/or more affordable payments. However, you’ll want to factor in any fees (such as origination fee on the new loan and/or a prepayment penalty on the old loan) to make sure the refinance will save you money. Also keep in mind that extending the term of your loan can increase the cost of the loan over time.

If you’re interested in exploring your personal loan refinance options, SoFi could help. SoFi personal loans offer competitive, fixed rates and a variety of terms. Checking your rate won’t affect your credit score, and it takes just one minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

Can you refinance a personal loan?

Yes, it is possible to refinance a personal loan. Refinancing involves taking out a new loan to pay off the existing personal loan, ideally with more favorable rates and terms. However, whether you can refinance your personal loan will depend on factors such as your creditworthiness, the terms of the original loan, and the policies of the new lender.

Does refinancing a loan hurt your credit?

Refinancing a loan can have both positive and negative impacts on your credit. Initially, the process of refinancing may result in a hard inquiry on your credit report, which can cause a temporary decrease in your credit score. However, if you use the refinanced loan to pay off the existing loan and make timely payments on that loan, it can positively impact your credit over time.

Can I refinance a personal loan with another bank?

Yes, it is possible to refinance a personal loan with another bank. Many banks, credit unions, and online lenders offer loan refinancing options. This allows you to transfer your personal loan balance to a new loan with a new lender. However, eligibility criteria, terms, and interest rates will vary by lender. It’s a good idea to shop around, compare offers, and consider factors such as interest rates, fees, and repayment terms before deciding to refinance with another bank.

What are the pros and cons of refinancing a personal loan?

The pros of refinancing a personal loan include the potential to:

•   Secure a lower interest rate

•   Reduce monthly payments

•   Consolidate multiple debts into a single loan

•   Switch to a more favorable lender

This can result in savings on interest costs and improved cash flow. However, there are also potential downsides to consider, which include:

•   Paying an origination fee for the new loan

•   Getting hit with a prepayment fee from your original lender

•   Extending your loan term can increase the total cost of the loan

It’s important to weigh the pros and cons before you pursue a personal loan refinance.

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.

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.

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.

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

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Pros and Cons of Using Personal Loans to Pay Off Student Debt

Is it Smart to Use a Personal Loan to Pay Off Student Debt?

By | Debt Payoff, Fresh Out of School, Student Loans, student_loan | No Comments

Personal loans hold appeal with their capacity to wipe out debts in a single stroke. With student loan debt hovering at, it may appear at first glance that a personal debt is the answer to the problem.

However, using a personal loan to pay off student debt is widely seen as not the best idea. We will break down the process of taking out personal loans to pay off student loans and explain the serious drawbacks.

Can You Use a Personal Loan to Pay Off Student Loans?

While it may sound possible to use a personal loan to pay off your student loans, either federal or private, many lenders may not approve your application if they know you will be using the loan for this purpose.

A personal loan is a loan for which the borrower receives a one-time, lump sum amount of money and repays it, with interest, over a set amount of time in equal installments, typically monthly. Some common uses of personal loans are for debt management, home repairs and maintenance, vacation expenses, and wedding expenses.

Personal loan lenders dictate terms on the uses for the money. Many of these lenders prohibit the use of a personal loan for paying off student loan debt. And you are required to sign a loan agreement that says you will abide by the lender’s terms and forbidden uses.

If you use the money for a prohibited purpose and the lender learns this, you could be held responsible for paying back the full amount immediately. Also, knowingly providing false information on a loan application is considered fraud and is a crime.

For many people looking to replace their federal student loan with another type of repayment, student loan refinancing presents more attractive options than getting a personal loan. Using other loans to pay off student loans requires careful consideration.

Why Refinancing Your Student Loans Might Be a Better Plan

When it comes to either reducing your monthly payment on your loans or paying less in interest, you may want to consider refinancing your student loans with private student loans. (Note: You may pay more interest over the life of the loan if you refinance with an extended term.)

Refinancing your student loans means that you take out a new private student loan to pay off your existing student debt. When you do this, you might be able to save money if you qualify for a lower interest rate on your private student loan than on a personal loan. Interest rates vary but the average private student loan interest rate ranges from 4% to almost 15%. The national average on a personal loan was 11.48% in Q2 2023, according to the Federal Reserve.

You might also consider getting a longer-term private student loan with lower monthly payments. This will likely mean that you’ll pay more in interest over the life of your loan, but that could give your budget some breathing room. A student loan refinancing calculator can help show how much you may be able to save each month by refinancing your existing student loans.

While refinancing student loans may help students save money, refinancing federal student loans means forfeiting benefits that you might otherwise qualify for, such as deferment, forbearance, and income-driven repayment plans.

While private student loans don’t offer the same protections and benefits as federal student loans, some do offer deferment or forbearance in certain circumstances. Personal loans do not typically offer these benefits.



💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

Pros of Using Personal Loans to Pay off Student Debt

Let’s say you have found a lender who doesn’t prohibit using a personal loan to pay off student debt and you want to go forward.

There are a few possible benefits in certain circumstances.

•  A potential reduction in the amount of interest that you’re paying if you manage to qualify for a lower rate on your personal loan than what you’re paying for the student loan.

•  You might qualify for a different loan term — or length — potentially reducing your monthly payments by spreading them out over a longer period of time.

•  It is difficult (though not impossible) to discharge a student loan in a bankruptcy. In some cases, it is easier to discharge a personal loan.

Cons of Using Personal Loans to Pay off Student Debt

There are some large drawbacks to consider. It doesn’t make much sense to trade in one loan for another with higher interest. The interest rate on a federal student loan is currently 5.5% for an undergraduate degree and 7% for a graduate degree. As stated above, the national average on a personal loan was 11.48% in Q2 2023, according to the Federal Reserve.

Here are other cons:

•  You’ll forfeit protections and benefits of federal student loans such as the six-month grace period after graduation and the ability to defer or forbear your loans.

•  If you have federal student loans, you also lose the opportunity to use income-driven repayment plans to repay your loans and to take part in any student loan forgiveness programs.

•  If you pursue a personal loan to pay for student loans even though the lender prohibits that use and it is discovered, the loan will be canceled if not yet disbursed, you may have to repay the full amount immediately, and you are open to criminal prosecution for fraud.

•  The lender will assess your creditworthiness, which typically includes checking your credit, during the approval process. A “hard check” usually deducts several points from your credit rating temporarily. Most federal student loans don’t require a hard credit check.

Pros of Using Personal Loans to Pay off Student Debt

 Cons of Using Personal Loans to Pay off Student Debt
You may possibly qualify for a lower interest rate on a personal loan than you have on your student loan. Loss of some protections that typically come with federal student loans, such as deferment and forbearance.
If you manage to qualify for a longer loan term, your monthly payments could decrease by stretching them out over a longer period of time. You won’t be able to use an income-driven repayment plan if you replace federal student loans with a personal loan.
Personal loans may be able to be discharged in bankruptcy, unlike student loans, which typically cannot be. Your creditworthiness is a factor in personal loan approval, unlike federal student loans, most of which don’t require a credit check.

Starting to Repay Your Student Loan Debt

When you graduate from college, you don’t have to start repaying your federal student loans right away.

Some federal student loans have a student loan grace period of 6 months, but with some it can last as long as 9 months. Interest may accrue while your loans are in the grace period, so some people make interest-only payments so that the total loan balance does not increase.

If you’re unable to pay your federal student loans after the grace period ends, you may be able to defer your loans for a number of reasons including if you’re returning to school, are unemployed, or have recently been on active duty service in the military.

But what happens if you can’t afford your payments but don’t fit any of those criteria and don’t have any other help paying for school?

As your salary increases, you will likely be better financially able to pay your loans but, in the first few years after graduation your salary may not cover much more than basic expenses.

There are other ways you can lower your payments.

Recommended: Examining How Student Loan Deferment Works

Basing Student Loan Payments Off Your Monthly Income

After a three-year pause due to Covid-19 hardship, the Debt Ceiling Bill required federal student loan payments to resume, with interest accrual restarting on Sept. 1, 2023 and payments due starting in October.

If you’re struggling to cover your basic monthly living expenses, you might want to look into the “On-Ramp” created by President Joe Biden earlier this year. Running from October 1, 2023 to September 30, 2024, the plan specifies that financially vulnerable borrowers who miss monthly payments during this period are not considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies.

Another option is enrolling in an income-driven repayment program.

There are various repayment plans to choose from that allow you to limit your monthly payments to a percentage of your monthly discretionary income. That will often reduce your monthly payments to a more manageable level.

President Biden’s Saving on a Valuable Education (SAVE) Plan is replacing other IDR programs as the main offering of the Department of Education. Like other plans, it calculates your monthly payment amount based on your income and family size. The SAVE Plan provides the lowest monthly payments of any IDR plan available to nearly all student borrowers, says the DOE.

After 20 to 25 years of on-time student loan payments — or 10 years if you’re enrolled in the Public Service Loan Forgiveness Program — your loans may qualify to be forgiven under these repayment plans. If you’re interested in enrolling in one of these plans, contact your student loan servicer for information on how to do so.

Recommended: The SAVE Plan: What Student Loan Borrowers Need to Know About the New Repayment Plan

The Takeaway

When deciding whether to use a personal loan or student loan refinancing to pay off existing student debt, there are many options to choose from. A good way to begin is to consider your current budget (how much money do you have to allocate toward student loan payments), what your goal is (e.g., lowering your interest rate, lowering your monthly payment, paying off the debt as soon as possible), and other overall financial goals.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.


SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

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.


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.

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.

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.

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Can a Parent PLUS Loan Be Transferred to a Student?

By | Debt Payoff, Student Loans, student_loan | No Comments

If you’ve taken out a Parent PLUS loan to help your child through college, you may be wondering if it’s possible to transfer the loan into your child’s name now that they have an income. While there are no federal loan programs that allow for this, there are other options that allow your child to take over the debt.

How to Transfer a Parent PLUS Loan to a Student

In order to transfer a Parent PLUS loan to a child or student, the student can apply for student loan refinancing through a private lender. With a student loan refinance, the child takes out a refinanced student loan and uses it to pay off the Parent PLUS loan. The student is then responsible for making the monthly payments and paying off the loan.

To get a student loan refinance and use the funds to pay off a Parent PLUS loan, simply have your child fill out a student loan refinancing application. Make sure to include the Parent PLUS loan information in the application.
If approved, the student can pay off the Parent PLUS loan with their new loan and begin making payments on the new loan.

Key Points

•   Transferring a Parent PLUS loan to a student involves refinancing through a private lender.

•   The student must apply for a new loan to pay off the Parent PLUS loan.

•   Once refinanced, the student becomes responsible for the new loan’s repayments.

•   Refinancing can potentially lower the interest rate and monthly payments.

•   The process is irreversible, making the student solely responsible for the debt.

Advantages of Refinancing a Parent PLUS Loan

The main advantage of refinancing a Parent PLUS loan is to get the loan out of the parent’s name and into the student’s. However, there are other potential advantages to refinancing student loans, including:

•   Lowering your interest rate

•   Reducing your monthly payments

•   Paying off your loan quicker

•   Allowing the student to build a credit history

💡 Quick Tip: Ready to refinance your student loan? With SoFi’s no-fee loans, you could save thousands.

Disadvantages of Refinancing a Parent PLUS Loan

While it may be beneficial to get the loan out of the parent’s name and into the student’s, there are some disadvantages that should be considered, such as:

•   Losing federal student loan benefits, including income-driven repayment, deferment options, and Public Service Loan Forgiveness

•   Possibly getting a higher interest rate, especially if the student has poor credit

•   The student is now responsible for the monthly payment, which might become a hardship if their income is low

If you do choose to refinance your Parent PLUS loan by means of a student loan refinance, you should note that this process is not reversible. Once your child signs on the dotted line and pays off the Parent PLUS loan, the debt is now theirs.

Parent PLUS Loan Overview

The Department of Education provides Parent PLUS loans that can be taken out by a parent to fund their child’s education. Before applying, the student and parent must fill out the Free Application for Federal Student Aid (FAFSA®). Then the parent can apply directly for a Parent PLUS loan, also known as a Direct PLUS Loan.

The purpose of a Parent PLUS loan is to fund the education of the borrower’s child. The loan is made in the parent’s name, and the parent is ultimately responsible for repaying the loan. Parent PLUS loans come with higher interest rates and origination fees than federal student loans made to students. Further, these loans are not subsidized, which means interest accrues on the principal balance from day one of fund disbursement.

Parents are eligible to take out a maximum of the cost of attendance for their child’s school, minus any financial aid the student is receiving. Payments are due immediately from the time the loan is disbursed, unless you request a deferment to delay payment. You can also opt to make interest-only payments on the loan until your child has graduated.


💡 Quick Tip: Federal parent PLUS loans might be a good candidate for refinancing to a lower rate.

Pros and Cons of Parent PLUS Loans

Parent PLUS loans allow you to help your child attend college without their accruing debt.

Pros of Parent PLUS loans include:

You can pay for college in its entirety. Parent PLUS loans can cover the full cost of attendance, including tuition, books, room and board, and other fees. Any money left over after expenses is paid to you, unless you request the funds be given directly to your child.

Multiple repayment plans available. As a parent borrower, you can choose from three types of repayment plans: standard, graduated, or extended. With all three, interest will start accruing immediately.

Interest rates are fixed. Interest rates on Parent PLUS loans are fixed for the life of the loan. This allows you to plan your budget and monthly expenses around this additional debt.

They are relatively easy to get. To qualify for a Parent PLUS loan, you must be the biological or adoptive parent of the child, meet the general requirements for receiving financial aid, and not have an adverse credit history. If you do have an adverse credit history, you may still be able to qualify by applying with an endorser or proving that you have extenuating circumstances, as well as undergoing credit counseling. Your debt-to-income ratio and credit score are not factored into approval.

Cons of Parent PLUS loans include:

Large borrowing amounts. Because there isn’t a limit on the amount that can be borrowed as long as it doesn’t exceed college attendance costs, it can be easy to take on significant amounts of debt.

Interest accrues immediately. You may be able to defer payments until after your child has graduated, but interest starts accruing from the moment you take out the loan. Subsidized loans, which are available to students with financial need, do not accrue interest until the first loan payment is due.

Can a Child Make the Parent PLUS Loan Payments?

Yes, your child can make the monthly payments on your Parent PLUS loan. If you want to avoid having your child apply for student loan refinance, you can simply have them make the Parent PLUS loan payment each month. However, it’s important to note that the loan will still be in your name. If your child misses a payment, it will affect your credit score, not theirs. Your child also will not be building their own credit history since the debt is not in their name.

Parent PLUS Loan Refinancing

As a parent, you may also be interested in refinancing your Parent PLUS loan. Refinancing results in the Parent PLUS loan being transferred to another lender. By transferring your loan, you may be able to qualify for a lower interest rate. Securing a lower interest rate allows you to pay less interest over the life of the loan — and if you also shorten your loan term, you can pay off the loan more quickly.

When you refinance Parent PLUS loans, you do lose borrower protections provided by the federal government. These include income-driven repayment plans, forbearance, deferment, and federal loan forgiveness programs. If you are currently taking advantage of one of these opportunities, it may not be in your best interest to refinance.

At SoFi, you can refinance federal Parent PLUS loans and qualified private student loans into one new loan with one convenient payment. You can do this on your own and keep the Parent PLUS loan in your name, or you can have your child apply for student loan refinancing and use that money to pay off your Parent PLUS loan. With SoFi, there are no application fees, no origination fees, and no prepayment fees.

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.

FAQ

What if I can’t pay my Parent PLUS loans?

If you are struggling to pay your Parent PLUS loan, we recommend getting in touch with your lender and asking for a deferment or forbearance to temporarily suspend your payments. Keep in mind, though, that interest will continue to accrue on your loan even if payments are postponed. You could also consider switching the repayment plan you are enrolled in to an extended repayment plan, or refinancing your loan in order to get a lower interest rate. If you’re able to consolidate your Parent PLUS loan with a federal Direct Consolidation loan, you can also make it eligible for the Income-Contingent Repayment plan. This plan adjusts your monthly payment to 20% of your discretionary income while extending your repayment terms to 25 years.

Can you refinance a Parent PLUS loan?

Yes, it is possible to refinance a Parent PLUS loan through a private lender. Doing so will make the loan ineligible for any federal borrower protections, but it might allow you to secure a more competitive interest rate or have the refinanced loan taken out in your child’s name instead of your own.

Is there loan forgiveness for parents PLUS loans?

It is possible to pursue Public Service Loan Forgiveness (PSLF) with a Parent PLUS loan. To do so, the loan will first need to be consolidated into a Direct Consolidation loan and then enrolled in an income-driven repayment plan. Then, you’ll have to meet the requirements for PSLF, including 120 qualifying payments while working for an eligible employer (such as a qualifying not-for-profit or government organization). Note that eligibility for PSLF depends on your job as the parent borrower, not your child’s job.

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

SoFi 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.


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.

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.

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.

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