Yes, student loans can be refinanced if you’re looking to combine multiple loans into one, lower your interest rate, or lower your monthly payment. You can refinance both federal and private student loans, but refinancing federal loans with a private lender will remove access to federal protections and benefits.
Here’s a detailed look at student loan refinancing so you can decide if it’s the right decision for you.
How to Refinance Student Loans
When you refinance your student loans, you’re essentially taking out a new loan and using it to pay off your existing student loans. Refinancing may allow you to secure a lower interest rate or reduce your monthly payments.
Student loan refinancing may also allow you to change your repayment term. If you took out a private student loan to pay for your education, the repayment terms were set when you borrowed the loan.
If you borrowed federal loans, there are student loan repayment plans you can choose from, including the Standard 10-year Repayment plan or one of four income-driven repayment plans. If you refinance, you can choose a shorter or longer repayment term, but you will lose access to the federal repayment options.
A shorter repayment term will mean that your monthly payments will increase, but that you’ll most likely pay less in interest over the life of your loan. In contrast, a longer repayment term will mean that your monthly payments will decrease, but you might pay more in interest overall.
Can I Refinance Student Loans?
Yes, you can technically refinance your student loans at any time. However, while in school, federal loans (and most private loans) do not require you to make payments. Unless you’re able to start making payments and can lock in a lower rate with a refinance, it may make sense to wait until you graduate, leave school, or drop below half-time enrollment.
When you refinance student loans with a private lender, the lender is going to look at your credit profile and debt-to-income ratio to qualify you and determine your interest rate. It may make sense to build your credit and have a stable job prior to applying for a refinance. You can also choose to refinance your loans with a cosigner to secure a better interest rate.
Is It Worth It to Refinance Your Loans?
You might be wondering if it’s worth it to refinance your student loans. The answer to that will depend on your personal financial situation, but using a student loan refinance calculator can help you see if and how much you could save by refinancing.
Depending on how much you have in student debt, reducing your rate by just a few percentage points could save you thousands of dollars over the life of your loan if you keep your loan term the same. If you’re hoping to lower your monthly payment, you most likely will have to extend your loan term, which could result in paying more in interest overall.
Also note that refinancing federal student loans with a private lender removes federal student loan benefits and protections, such as income-driven repayment plans, deferment, and student loan forbearance.
What Types of Student Loans Can Be Refinanced?
Both federal and private student loans can be refinanced with a private lender. All types of loans can be refinanced, including Direct Loans, Direct PLUS Loans, Direct Consolidation Loans, and private student loans.
If you want to combine federal loans only into one loan with one monthly, you could consider a student loan consolidation. A student loan consolidation won’t save you money in interest, as it’s the weighted average of the loans you’re consolidating rounded up to the nearest one-eighth of a percent, but it could lower your payment if you extend your loan term.
Consolidating your federal loans allows you to keep access to federal benefits and protections. If you’re using them now or plan to in the future, this could be an excellent option to simplify your loan repayment.
If you don’t plan on using federal benefits and want to reduce your monthly payment or lower your interest rate, a student loan refinance could be the right choice for you.
What to Look for in a Student Loan Refinance Company
When it comes to refinancing student loans, consider finding a lender that doesn’t charge origination fees or prepayment penalties. Usually, you’ll have the choice between a fixed or variable rate loan.
Other things to look for in a student loan refinance company include excellent customer service ratings, an easy online application process, and possible member benefits, such as career coaching, financial advice, and rate discounts on loans.
Refinancing Student Loans With SoFi
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
Is it legal to refinance student loans?
Yes, it is legal to refinance student loans. You can refinance both federal and private student loans with a private lender. You may be interested in refinancing if you’re wanting to lower your monthly payment or lower your interest rate. Keep in mind that refinancing federal loans will eliminate federal protections and benefits.
What happens when you refinance a student loan?
When you refinance your student loans, you pay off one or more of your existing student loans and have a new loan with a new interest rate, new terms, and a new monthly payment. You will then make your monthly payment to your new lender until it is paid off or you refinance it again with another company.
Why would you refinance student loans?
You may choose to refinance your student loans to lower your monthly payment, lower your interest rate, extend or shorten your loan term, and/or simplify your repayments.
SoFi Student Loan Refinance Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FOREFEIT YOUR EILIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).
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Funding your retirement is crucial—and donating money to worthy causes is a pretty great financial goal, too. When used correctly, a charitable gift annuity can help you accomplish both of those objectives at the same time.
What Is a Charitable Gift Annuity?
A charitable gift annuity allows a donor to make a contribution to a charity in exchange for a fixed monthly income for both the donor and an optional additional beneficiary later in life. This stream of payments can be a steady source of income in retirement, and is guaranteed through the annuity until all listed beneficiaries die.
However, there are important tax considerations to think through before purchasing a charitable gift annuity—or any annuity, for that matter. In this article, we’ll dive into the details on how charitable annuities work, what makes them different from other kinds of annuities, and how to determine whether or not one is right for you.
Understanding the Concept of Annuities
To fully understand charitable gift annuities, it’s important to have a background on annuities in general.
An annuity is a type of financial product used to create an income stream during retirement. It’s a contract—generally between the beneficiary and an insurance company or bank—that guarantees the buyer a set monthly payment in exchange for money the buyer pays in ahead of time.
Depending on the type of annuity, the beneficiary might pay for it over time or in a lump sum. Sometimes, payments into the annuity can be made directly from an existing retirement account like an IRA or 401(k). Then, the annuity provider invests the money and makes payments back to the buyer once the retirement period starts. Payments might last for a set amount of time, like 10 years, or for the rest of the beneficiary’s life.
For the provider, an annuity is basically a wager against the buyer’s life expectancy. If the buyer passes away before the retirement savings they’ve paid into the annuity—along with any interest it’s earned in the meantime—has been paid back to them entirely, the annuity provider gets to keep the change.
With a charitable gift annuity, however, it works a little bit differently.
How Does a Charitable Gift Annuity Work?
With a charitable gift annuity, the contract is drawn up not between the buyer and an insurance company or bank (as with a standard annuity), but between a donor and a qualified charity. The donor makes a gift to the charity, some of which is used immediately for whatever needs the organization supports. However, part of the money is set aside in a reserve account, where it’s invested and will grow. Money from the reserve account—both principal and interest—are used to pay out the monthly stipend the beneficiary or beneficiaries receive.
Charitable annuity payments are made to the donor and beneficiary until both have passed away—at which point, the extra money is kept by the charity and used for charitable purposes.
In this way, the buyer of a charitable gift annuity can make a gift to a cause they support even after they’re gone, all while helping themselves create a secure and reliable retirement income in the meantime.
What are the Benefits of Charitable Gift Annuities?
Along with helping donors support a charity of their choosing both in and after life, charitable annuities have some other features that can make them attractive retirement vehicles for some people.
Non-Cash Donations
Many charitable gift annuities allow donors to contribute non-cash donations, including fixed income securities and investments—but also tangible items like art and real estate. Having this option means that donors might save money on taxes down the line. Annuity income is generally taxed as normal income at both the federal and state levels, but by donating physical securities, buyers of charitable gift annuities might pay less in capital gains taxes. (That said, regular income tax will still apply on any and all income received through the annuity.)
Payment Flexibility
Another nice thing about charitable gift annuities is the flexibility buyers have in receiving the payments when there are more than one beneficiary. Payments can either be structured to go to both beneficiaries at once, or to only kick in for the second beneficiary after the death of the first. In any case, any leftover funds will be donated to the charity when all beneficiaries have passed away.
Alternatives to Charitable Gift Annuities
Although charitable gift annuities can be a valuable tool, they may not be the right choice for every investor for a variety of reasons, including:
• Gift annuities tend to have lower rates than most commercial annuity types, so they might not maximize your retirement income.
• If you don’t have physical assets to donate, there may be more efficient ways to invest your cash.
• Income streams from any type of annuity are usually still subject to federal and state income tax, unless they’ve been purchased using a Roth IRA or Roth 401(k), whose funds have already been taxed.
For investors who’d like more control over their investments, and fewer restrictions around when and how they can access the money, there are other places to put your retirement money.
One likely option is to take advantage of an employer-sponsored retirement account like a 401(k) at work. And almost anyone can bolster their retirement savings by investing in an IRA. Those under set income limits can invest in a Roth IRA, which will allow them to take tax-free distributions once they reach retirement age.
Even if you choose an alternative retirement option, you can continue to make donating to charities part of your financial lifestyle. It may even be possible to set aside money for charitable giving while on a tight budget.
The Takeaway
A charitable gift annuity is an annuity in which a donor contributes money to a charity, with the promise of getting regular payments in return later in life—for themselves and an optional beneficiary. Part of the initial payment, as well as any leftover funds, are donated to the participating charity after all the beneficiaries have died, making it a good way to secure retirement income while being charitable at the same time.
While a charitable annuity may be attractive to some investors, other types of retirement savings may allow an individual more nuanced control of their investments and more flexibility in the size and frequency of their withdrawals upon retirement.
There are many ways to invest for retirement, including opening a traditional, Roth, or SEP IRA with a SoFi Invest® online investing account. Members can choose between an active or automated account, and get access to a broad range of investment options, member services, and a robust suite of planning and investment tools.
Find out how to plan for retirement with SoFi Invest.
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.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
If you’ve been watching this year’s tech stock rollercoaster with an odd sense of déjà vu, you’re not alone.
Members of the market-watching media have noted the strong parallels between today’s tech sector and what went down when the dot-com bubble burst back in 2000. And those similarities—rising stock valuations, an increase in initial public offerings (IPOs), and a focus on buzz over basics—have some experts pondering if history is repeating.
If you—or your parents, or your grandparents—were affected by the 2000 dot-com crash, you may be wondering if there’s something you can do to help protect your portfolio this time around.
Here are five lessons from the dot-com bubble and the financial crisis that followed.
What Caused the Dotcom Bubble, and Why Did It Burst?
Back in the mid-1990s, investors fell in love with all things internet-related. Dot-com and other tech stocks soared. The number of tech IPOs spiked. One company, theGlobe.com Inc., rose 606% in its first day of trading in November 1998.
Venture capitalists poured money into tech and internet start-ups. And enthusiastic investors—often drawn by the hype instead of the fundamentals—kept buying shares in companies with significant challenges, trusting they’d make it big later.
But that didn’t happen. Many of those exciting new companies with optimistically valued stocks weren’t turning a profit. And as companies ran through their money, and fresh sources of capital dried up, the buzz turned to disillusionment. Insiders and more-informed investors started selling positions. And average investors, many of whom got in later than the smart money, suffered losses.
The tech-heavy Nasdaq index had climbed from under 1,000 to above 5,000 between 1995 to 2000. The gauge however slid from a peak of 5,048.62 on March 10, 2000, to 1,139.90 on Oct. 4, 2002. Many wildly popular dotcom companies (including Kozmo.com, eToys.com, and Excite) went bust. Equities entered a bear market. And the Nasdaq didn’t return to its peak until 2015.
What Can Investors Today Learn from the Past?
Every investment carries some risk—and volatility for stocks is generally known to be higher than for other asset classes, such as bonds or CDs. But there are strategies that can help investors manage that risk. Here are some lessons:
1. Diversification Matters
One of the most established strategies for protecting a portfolio is to diversify into different market sectors and asset classes. In other words, don’t put all your eggs in one basket.
It may be tempting to go all-in on the latest hot stock, or to invest in a sector you’re intrigued by or think you know something about. But if that stock or sector tanks, as tech did in 2000, you could lose big.
Allocating across assets may reduce your vulnerability because your money is distributed across areas that aren’t likely to react in the same way to the same event.
Diversifying your portfolio won’t necessarily ensure a profit or guarantee against loss. And you might not be able to brag about your big score. Over time though, and with a steady influx of money into your account, you’ll likely have the opportunity to grow your portfolio while experiencing fewer gut-wrenching bumps along the way.
2. Ignoring Investing Basics Can Have Consequences
Even as the stock market began its meltdown in 2000, individual investors—caught up in the rush to riches—continued to dump money into equity funds. And many failed to do their homework and research the stocks they were buying.
Prices didn’t always reflect underlying business performance. Most of the new public companies weren’t profitable, but investors ignored poor fundamentals and increasing warnings about overvalued prices. In a December 1996 speech, then Federal Reserve Chairman Alan Greenspan warned that “irrational exuberance” could “unduly escalate asset values.” Still, the behavior continued for years.
When Greenspan eventually tightened up U.S. monetary policy in the spring of 2000, the reaction was swift. Without the capital they needed to continue to grow, companies began to fail. The bubble popped and a bear market followed.
From 1999 to 2000, shares of Priceline Inc., the name-your-own-price travel booking site, plunged 98%. Just a couple months after its IPO in 2000, the sassy sock puppet from Pets.com was silenced when the company folded and sold its assets. Even Amazon.com’s shares suffered, losing 90% of their value from 1999 to 2001.
And it wasn’t just day traders who were losing money. A Vanguard study showed that by the end of 2002, 70% of 401(k)s had lost at least one-fifth of their value, and 45% had lost more than one-fifth.
Valuing a Stock
There are many different ways to analyze a stock you’re interested in—with technical, quantitative, and qualitative analysis, and by asking questions about red flags. It can help in determining whether a company is undervalued or overvalued.
Even if you’re familiar with what a company does, and the products and services it offers, it can help to look deeper. If you don’t have the time to do your due diligence—to look at price-to-earnings ratios, business models, and industry trends—you may want to work with a professional who can help you understand the pros and cons of investing in certain businesses.
3. Momentum Is Tricky
Momentum trading when done correctly can be profitable in a relatively short amount of time—and successful momentum traders can turn out profits on a weekly or daily basis. But it can take discipline to get in, get your profit and get out.
Tech stocks rallied in the late 1990s because the internet was new and everybody wanted a piece of the next big thing. But when the reality set in that some of those dot-com darlings weren’t going to make it, and others would take years to turn a profit, the momentum faded. Investors who got in late or held on too long—out of greed or panic or stubbornness—came up empty-handed.
Identifying a potential bubble is tough enough, and it’s only the first step in avoiding the fallout should it eventually burst. Determining when that will happen can be far more challenging. If day-trading strategies and short-term investing are your thing, you may want to pay attention to the trends and your own gut, and get out when they tell you it’s time.
4. History May Repeat, But It Doesn’t Clone
Sure, there are similarities between what’s happening with today’s tech sector and the dot-com bubble that popped in 2000. But the situations are not exactly the same.
For one thing, investors today may have a better grip on what the Internet is, and how long it can take to develop a new idea or company. Some stock valuations today are, indeed, stretched but not as stretched as they were during the dot-com bubble.
And though a strong recovery from the Covid-19 recession could prompt the Fed to cool things down in the future, Fed Chair Jerome Powell has said the central bank is in no hurry to raise benchmark short-term interest rates or to begin reducing its $120 billion in monthly bond payments used to stimulate the economy.
So though it can be useful to look at past events for investing insight, it’s also important to look at stock prices in the context of the current economy.
5. You Can’t Always Predict a Downturn, But You Can Prepare
The dot-com stock-market crash hit some investors hard—so hard that many gave up on the stock market completely.
That’s not uncommon. Investors’ decisions are often driven by emotion over logic. But the result was that those angry and fearful investors lost out on an 11-year bull market. You don’t have to look at every asset bubble or market downturn as a signal to run for the hills. Also, if the market decline is followed by a rally, you could miss out.
One strategy—along with diversifying your portfolio—may be to keep a small percentage of cash in your investment or savings account. That way you’ll have protected at least a portion of your money, and you’ll be set up to take advantage of any new opportunities and bargains that might emerge if the stock market does go south.
Investors should also really look at a company’s fundamentals as well. Does a business make sense? Does it seem like they can grow their sales and keep costs low? Who are the competitors? Do you trust the CEO and management? After deep research into these topics, if the company is still attractive to you, then it could make sense to hang on to at least some of the shares.
If you’re a long-term investor who’s purchased shares in strong, healthy companies, those stocks could very well rebound. But this is an incredibly difficult process that even seasoned investors can get wrong.
The Takeaway
Asset bubbles like the dot-com bubble can have different causes, but the thing they tend to have in common is that investors’ extreme enthusiasm leads them to throw caution to the wind.
In the late-‘90s and early-2000s, that “irrational exuberance” led investors to buy overpriced shares in internet companies with the expectation that they couldn’t lose. And when they did lose, the dot-com craze turned into a dot-com crash. Investors who thought they had a piece of the next big thing lost money instead.
Could it happen again? Unfortunately, there’s really no way to know when an asset bubble will burst or how severe the fallout might be. But a diversified portfolio can offer some protection. So can paying attention to investing basics and doing your homework before putting money into a certain stock. And it never hurts to ask for help.
With a SoFi Invest online brokerage account, investors can diversify their portfolio by putting money into stocks, ETFs or partial stocks called Fractional Shares. Do-it-yourself investors can trade on the Active Investing platform. Investors who prefer a more hands-off approach can have their portfolio managed for them with Automated Investing. And members can rely on SoFi’s educational resources and professional advisors for help.
Check out SoFi Invest today.
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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.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.
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.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
Stock Bits
Stock Bits is a brand name of the fractional trading program offered by SoFi Securities LLC. When making a fractional trade, you are granting SoFi Securities discretion to determine the time and price of the trade. Fractional trades will be executed in our next trading window, which may be several hours or days after placing an order. The execution price may be higher or lower than it was at the time the order was placed.
A clearinghouse is a financial institution that acts as a middleman between buyers and sellers in a market, ensuring that transactions take place even if one side defaults.
If one side of a deal fails, a clearinghouse can step in to fill the gap, thus reducing the risk that a failure will ripple across financial markets. In order to do this, clearinghouses ask their members for “margin”–collateral that is held to keep them safe from their own actions and the actions of other members.
While often described as the “plumbing” behind financial transactions, clearinghouses became high profile after the 2008 financial crisis, when the collapse of Lehman Brothers Holdings Inc. exposed the need for steady intermediaries in many markets.
Regulations introduced by the Dodd-Frank Act demanded greater clearing requirements, turning the handful of clearinghouses in the country into some of the most systemically important entities in today’s financial system.
Here’s a closer look at them.
How Clearinghouses Work
Clearinghouses handle the clearing and settlement for member trades. Clearing is the handling of trades after they’re agreed upon, while settlement is the actual transfer of ownership–delivering an asset to its buyer and the funds to its seller.
Other responsibilities include recording trade data and collecting margin payments. The margin requirements are usually based on formulas that take into account factors like market volatility, the balance of buy-versus-sell orders, as well as value-at-risk, or the risk of losses from investments.
Because they handle investing risk from both parties in a trade, clearinghouses typically have a “waterfall” of potential actions in case a member defaults. Here are the layers of protection a clearinghouse has for such events:
1. Margin requirements by the member itself. If market volatility spikes or trades start to head south, clearinghouses can put in a margin call and demand more money from a member. In most cases, this response tends to cover any losses.
2. The next buffer would be the clearinghouse’s own operator capital.
3. If these aren’t enough to staunch the losses, the clearinghouse could dip into the mutual default fund made up from contributions by members. Such an action however could, in turn, cause the clearinghouse to ask members for more money, in order to replenish the collective fund.
4. Lastly, a resolution could be to try to find more capital from the clearinghouse itself again–such as from a parent company.
Are Clearinghouses Too Big to Fail?
Some industry observers have argued that regulations have made clearinghouses too systemically important, turning them into big concentrations of financial risk themselves.
These critics argue that because of their membership structure, the risk of default in a clearinghouse is spread across a group of market participants. And one weak member could be bad news for everyone, especially if a clearinghouse has to ask for additional money to refill the mutual default fund. Such a move could trigger a cascade of selling across markets as members try to meet the call.
Other critics have said the margin requirements and default funds at clearinghouses are too shallow, raising the risk that clearinghouses burn through their buffers and need to be bailed out by a government entity or go bankrupt–a series of events that could meanwhile throw financial markets into disarray.
Clearinghouses in Stock Trading
Stock investors have already probably learned the difference between a trade versus settlement date. Trades in the stock market aren’t immediate. Known as “T+2,” settlement happens two days after the trade happens, so the money and shares actually change hands two days later.
In the U.S., the Depository Trust & Clearing Corp. handles the majority of clearing and settling in equity trades. Owned by a financial consortium, the DTCC clears on average more than $1 trillion in stock trades each day.
Clearinghouses in Derivatives Trading
Clearinghouses play a much more central and pivotal role in the derivatives market, since with derivatives products are typically leveraged, so money is borrowed in order to make bigger bets. With leverage, the risk among counterparties in trading becomes magnified, increasing the need for an intermediary between buyers and sellers.
Prior to Dodd-Frank, the vast majority of derivatives were traded over the counter. The Act required that the world of derivatives needed to be made safer and required that most contracts be centrally cleared. With U.S. stock options trades, the Options Clearing Corp. is the biggest clearinghouse, while CME Clearing and ICE Clear U.S. are the two largest in other derivatives markets.
The Takeaway
Clearinghouses are financial intermediaries that handle the mechanics behind trades, helping to back and finalize transactions by members.
But since the 2008 financial crisis, the ultimate goal of clearinghouses has been to be a stabilizing force in the marketplace. They sit in between buyers and sellers since it’s hard for one party to know exactly the risk profile and creditworthiness of the other.
For beginner investors, it can be helpful to understand this “plumbing” that allows trades to take place and helps ensure financial markets stay stable.
Want to start investing but don’t know where to start? SoFi Invest® has financial planners ready to answer any questions. Investors can also choose between the Active Investing or Automated Investing platforms, depending on how hands-on or hands-off they want to be.
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.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.
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Please note: SoFi does not endorse or take official positions on any candidates and the bills they may be sponsoring or proposing. We may occasionally support legislation that we believe would be beneficial to our members, and will make sure to call it out when we do. Our reporting otherwise is for informational purposes only, and shouldn’t be construed as an endorsement.
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Your credit report is an important document: It contains an in-depth record of how you’ve used credit in the past, and it can have a big impact on your life.
For example, when you apply for a loan, lenders usually check your credit report. That information contributes to their decision whether to lend to you, as well as what interest rate to charge.
You might also have your credit checked by potential employers or when you are applying to get a mobile phone, rent a home, or perhaps connect some utilities.
Since credit reports can be so critical to many aspects of your life, it’s quite important that they be accurate. Unfortunately, these reports can have more errors than you may realize. According to the Consumer Financial Protection Bureau (CFPB), one in five people have an error on at least one of their credit reports. Even minor issues could impact your score and have a ripple effect on your financial life.
So, with that in mind, read on to learn how you can check your report and work to correct any errors you might find.
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Getting a Credit Report
Like going in for a check-up once a year can benefit your physical health, regular credit report check-ups can benefit your financial health.
Everyone is entitled to see their credit reports for free once a year at the government-mandated AnnualCreditReport.com site.
It’s a good idea to take full advantage of this service, and to look over your reports from the three major credit reporting bureaus annually.
Checking your credit report regularly can also make it easier to notice when the numbers look off or if something’s amiss. This could help you catch fraudulent activity.
The best way to find an error in a credit report is to read through it thoroughly.
The CFPB recommends making sure that the following information is accurate:
• Name
• Social Security number
• Current address
• Current phone number
• Previous addresses
• Employment history (names, dates, locations)
• Current bank accounts open
• Bank account balances
• Joint accounts
• Accounts closed.
If any of the above is incorrect, the report has an error that you may want to dispute.
Common Credit Report Errors
While there are any number of errors that could crop up on a credit report, some are more likely than others. According to the CFPB, these are among the most common:
• Typos or wrong information. In the personal information section, names could be misspelled, or addresses could just be plain wrong.
• A similar name is assigned to your report. Instead of a typo, the credit report might be pulling in accounts and information of a person with a similar name to yours.
• Wrong accounts. If an account is in your name but unfamiliar to you, this could be proof of identity theft.
• Closed accounts are still open. You may have closed a savings account or credit card recently, but the report shows it as still open.
• Being labeled “owner” instead of a user on a joint account. If you’re simply an authorized user on a joint account or credit card, your credit report should reflect that.
• False late payment. A credit report might show a late or delinquent payment when the account was paid on time.
• Duplicate debts or accounts. Listing an account twice could make it look like more debt is owed, resulting in an incorrect credit report.
• Incorrect balances. Account balances might show incorrect amounts.
• Wrong credit limits. Misreported limits on credit card accounts can impact a credit score, even if they’re only off by a few hundred dollars.
How to Report an Error
Errors on credit reports don’t typically fix themselves. Account owners often have to be the ones to bring the error to the credit bureau’s attention.
Here are steps to take if you find an error in one of your reports.
1. Confirming the error is present on other credit reports. Credit scores may vary across credit reporting bureaus, but all the core information should be the same. That means if there’s an error on one, it’s best to check that it’s on the other two. You can order free reports from all three bureaus–Experian, Equifax, and TransUnion–from the free Annual Report Site , and check each report against the others.
2. Gathering evidence. To prove an element of the credit report is wrong, there needs to be evidence to the contrary. That means you’ll want to collect supporting documentation that shows the report has an error, whether that’s a recent bank statement, ID, or a loan document. Having this documentation on hand can make the process move faster.
3. Reporting the error to the credit reporting company. To resolve the error, you’ll want to file a formal dispute with the credit reporting company. You can contact them by mail, phone, or online. The CFPB offers more details on how to file a dispute.
It’s important to make sure to include all documentation of the error, in addition to proper identification.
Here’s how to contact each credit reporting company:
TransUnion LLC Consumer Dispute Center PO Box 2000 Chester, PA 19016
Phone: (800) 916-8800
4. Contacting the furnisher (if applicable). A furnisher is a company that gave the credit reporting bureau information for the report. If the report’s mistake is an error from a bank or credit card company, you can also reach out to the furnisher to amend its mistake. You can contact the company through the mail (the address can be found on the credit report), or reach out to customer service by phone or online.
If the furnisher corrects the mistake, it could, in turn, update the credit report. But, to play it safe, reach out to both parties.
5. Reaching out to the FTC to report identity theft (if applicable). If you notice an error that suggests identity theft (such as unknown accounts or unfamiliar debt), it’s a good idea to sign up with the Federal Trade Commission’s (FTC’s) IdentityTheft.gov site in addition to alerting the credit bureaus. The FTC’s tool can help users create a recovery plan and figure out the next steps.
6. Sitting tight and waiting for a response. Once someone sends a credit dispute to a bureau or furnisher, they can expect to hear back within 30 days, typically by mail.
When a credit bureau receives a dispute, they have one of two choices: agree or disagree. If the bureau agrees, they will correct the error and send a new credit report.
If the bureau disagrees and doesn’t believe there’s an error, they won’t remove it from the report. In some cases, they may not agree there’s an error because there’s a delay in information getting to them.For example, a recently canceled credit card might not show up as canceled in their records yet. Changes like that might take some time.
However, if you’re confident of the error and a credit bureau doesn’t agree, that’s not your last stop.
You can also reach out to the CFPB to file an official complaint . The complaint should include all documentation of the dispute. Once the CFPB receives the complaint, you can keep track of its progress on the organization’s website.
The Takeaway
Checking your credit reports can help you ensure that the information is used to calculate your credit scores is accurate and up to date. It can also tip you off to fraud or identity theft
It’s easy and free to gain access to your credit reports from the three major bureaus once a year. Taking advantage of this service (and reporting any errors you may come across) can be key to maintaining good credit, and good overall financial health.
Another way to maintain good financial health is to pay your bills on time (which can boost your credit score), and to keep track of your spending. Signing up for SoFi Checking and Savings® Account can help with both.
A SoFi Checking and Savings Account lets you track your weekly spending right in the app, as well as set up individual or recurring bill payments to make sure they’re on time. You’ll also earn a competitive annual percentage yield (APY) to help your money grow.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.
SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below).
Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.
Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.
As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% 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 Eligible 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 an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% 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 Eligible 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 Eligible 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 Eligible 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 Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.
Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.
Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
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