SpendPL Archives

Nov

2025

CD Ladder: What It Is, Examples, and How to Build One

By Jamie Cattanach | Budgeting & Goals, Financial Independence, money | Comments Off

Table of Contents

What Is a CD Ladder?
Example of a CD Ladder
How to Build a CD Ladder
Benefits of CD Laddering
Drawbacks of CD Laddering
Alternatives to CD Ladders
The Takeaway
FAQ

A CD ladder, or certificate of deposit ladder, is a financial strategy that involves purchasing certificates of deposit with staggered maturity dates. It allows you to access the best aspects of CDs (namely, a relatively high yield at a relatively low risk rate) while avoiding the main downside of CDs (having your money locked away for a long period of time). It can help you access cash when and if needed without paying early withdrawal penalties.

Setting up a CD ladder up can require a bit of strategizing and shopping around to get the right arrangement for needs. Learn the details here.

Key Points

• A CD ladder involves multiple CDs with staggered maturity dates for balanced yield and liquidity.

• Example: Invest $3,000 in CDs with terms from one to five years, and upon maturity, reinvest into new CDs with varied terms.

• Benefits include flexibility and potentially higher interest rates, with regular access to funds and reinvestment.

• Drawbacks can include low interest rates, possibly below inflation, and penalties for early withdrawal.

• Alternatives are high-yield savings accounts for low-risk growth or stock market investments for higher returns with some risk.

🛈 SoFi does not currently offer certificates of deposit.

What Is a CD Ladder?

In order to fully understand CD ladders, first know that a certificate of deposit, or CD, is a kind of savings vehicle. You put down a lump sum — such as $500 or $5,000 — for a set amount of time (typically between six months and a few years) in exchange for a guaranteed growth rate (i.e., interest). These accounts are typically insured by the FDIC or NCUA up to $250,000 per depositor, per account ownership category, per insured institution.

Generally speaking, the highest interest rates require large deposits put down for a long period of time. Your money gets locked up, and you’ll usually pay a penalty for early withdrawal.

That’s where a CD ladder comes in. It can help you feel secure that you can access your money when needed, without having to pay a penalty. You invest your money in a variety of CDs with different maturity dates. Generally, each rung, or individual CD, will mature one year later than the previous one.

Then, as each CD matures and you’re able to access your money (plus the interest you’ve earned), you can reinvest it in another CD with the longest of the terms you’ve chosen. This means you’ll continue to earn money on your investment for double the term of the longest-term CD you took out initially.

Example of a CD Ladder

Let’s say you have $15,000 to invest. You decide to set up a CD ladder with five rungs.

Here’s what that might look like:

• $3,000 to a one-year CD

• $3,000 to a two-year CD

• $3,000 to a three-year CD

• $3,000 to a four-year CD

• $3,000 to a five-year CD

Once the one-year CD comes to fruition, you’d reinvest that $3,000, plus whatever interest it earned, into a new five-year CD — and follow the pattern for each CD as it comes due. In this way, you can continue the ladder for a grand total of 10 years, reaping and reinvesting once annually.

Of course, if rates shift or your financial situation changes and you need cash, you have a built-in backup plan. By creating a ladder, you know at least once a year, you will have the opportunity to invest your money in a different vehicle or use it for, say, an emergency or a goal you’ve been saving towards.

Keep in mind, too, that you don’t have to equally distribute your full investment among the rungs. You could invest different amounts at each level if that better suited your needs.

And you don’t need to open all of your CDs at the same bank, either. You can shop around among banks and credit unions to find the best interest rates at different levels and thereby maximize your yield.

All in all, CD ladders offer investors additional flexibility in their approach while still creating a low-risk earning strategy. Win-win!

How to Build a CD Ladder

Building a CD ladder is pretty easy. Here are the key steps:

Gather Your Funds

Save up a chunk of money that you can afford to have locked up for at least a few months or a year. If you already have the money set aside, you’re ready to move onto the next step.

Choose the Length of Time That Will Suit You

As noted above, you might decide to buy CDs with different maturity terms, or you might prefer to buy a number of ones with the same term over time, as you accrue more savings.

Research Your Options

Shop around for the best rates and terms at financial institutions you feel comfortable with. Remember, you don’t have to stick with one bank. You could buy a six-month CD from one bank offering a great rate, and a one-year one from a different bank that has a terrific APY.

Buy Your CDs

You’re now ready to distribute your savings among a series of CD ladder “rungs,” starting with a short-term maturity date and ending with a long-term maturity rate. (Many investors use five rungs, but you could use more or less if you wanted to.)

Manage Your CD Ladder

As the CDs mature, you can determine whether to withdraw the funds or invest again.

Here’s an example of what a CD ladder might look like as of October 2025:
:

Amount	Term	Interest Rate	Bank
$500	6 months	2.75%	BMO Alto
$1,500	12 months	3.76%	CIBC Bank USA
$2,000	18 months	4.00%	Hyperion Bank
$3,000	24 months	3.75%	Digital Federal Union

Recommended: Guide to Catching up on Late Payments

Benefits of CD Laddering

There are several benefits of CD ladders, including:

• They allow you to make the most of your CD investment without locking away all the money for a long term.

• They increase investor flexibility since you get to decide what amount you put in each CD and how long each term along the ladder is.

• You may be able to take advantage of better interest rates since you’ll be reinvesting on a yearly basis, as opposed to having your money locked away at a certain rate for the long term.

• Overall, CDs are a safe, FDIC-insured investment strategy, though their earning potential is also relatively low.

Drawbacks of CD Laddering

On the other hand, there are some downsides to CD laddering that are worth mentioning:

• Even the best CDs have relatively low interest rates — so low that they may not even keep up with inflation.

• You may be missing out on an opportunity to invest your money into the stock market, where it could stand to earn exponentially more than it would in a CD — though, of course, the stock market is a much riskier investment strategy.

• If rates fall during the course of your CD ladder, you might wind up reinvesting your money into a CD with an even lower rate.

Alternatives to CD Ladders

Is CD laddering not sounding quite right for your needs? Here are some alternatives that might better suit your needs.

• Putting your money into a high-yield savings account, which may offer a similar (though potentially slightly less lucrative) low-risk growth potential. The upside here: It doesn’t keep your money locked up for a long period of time.

• Investing your money in the stock market, which is considerably riskier but may offer higher returns than CDs over the long run.

Recommended: Savings Account Calculator

The Takeaway

CD laddering is one useful strategy for investing your money over time, allowing you to take advantage of the best parts of CDs while avoiding some of their biggest downsides (like locking away your money for years). The laddering effect, which involves staggering the CDs’ maturity dates, can give you access to some of your money every year and allow you to possibly reap a higher interest rate if the market is rising.

That said, CD ladders aren’t for everyone. High-yield bank accounts are another option to consider.

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

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.60% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

Is laddering CDs worth it?

As with any financial decision, only you can decide if laddering CDs is the right approach for your needs. If you have a lower risk tolerance and a decent amount of money to invest, it may be a strategy worth considering to earn steady interest and have regularly scheduled access to your funds.

Can you lose money in a CD?

CDs are a very low-risk investment vehicle. The funds in them are FDIC-insured up to the standard $250,000 per depositor, per account ownership category, per insured institution, which means the FDIC will refund your money up to that amount should the bank you opened the CD with fail. That said, there are some kinds of CDs which are not FDIC-insured, so you’ll want to make sure to double-check before you sign any paperwork.

When would you use a CD ladder?

A CD ladder can be a good investment strategy when you have a nice sum of money available (say, $500 to a few thousand or more), have a low risk tolerance, and can afford to lock up your money for a period of time, from six months to several years. It is best used when rates are relatively high, especially since you can shop around for the best rate at each “rung” on your ladder.

Photo credit: iStock/Antonbr Anton

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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 the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, 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 the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

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

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.

SOBNK-Q425-018

Oct

2025

A graduation cap and tassel are shown to illustrate the concept of a student loan payoff letter.

When Would You Need a Student Loan Payoff Letter?

By SoFi Editors | Debt Payoff, Student Loans, student_loan | Comments Off

Table of Contents

What Is a Student Loan Payoff Letter?
Getting a Student Loan Payoff Letter
Managing Student Loans
Selecting the Right Repayment Plan
FAQ

A student loan payoff letter may be needed to get a mortgage, refinance your student loans, or acquire other forms of debt. While the name implies you’ve paid off the loan, a student loan payoff letter actually just shows the details of your student loan — including the payoff amount and monthly amount due.

Some people may want or need to take out more than one loan at the same time. For those who took out student loans for college, a student loan payoff letter may come into play. In this guide, we’ll run through what these letters are and some of the commonly navigated steps in understanding their use in managing loans.

Key Points

• A student loan payoff letter provides the current loan balance, monthly payment amounts, and total payoff amount.

• This letter can be necessary for mortgage applications, refinancing, or securing other loans.

• The letter includes a forecast of future interest costs on the loan based on when it is due to be repaid.

• Managing and paying off student loans may involve earning extra income, using an employer’s student loan repayment assistance program, or refinancing.

• Selecting the right repayment plan is also an important way to pay off student loans.

What Is a Student Loan Payoff Letter?

Despite what it sounds like, a student loan payoff letter is not a document proving a student loan has been paid in full. Rather, it’s a document generated by the loan servicer stating the current loan balance, monthly payments, and other account information.

Note that a loan payoff letter is not the same thing as a monthly statement. It’s a tool for other lending institutions to weigh how a borrower manages debt on an existing loan that also forecasts future interest costs based on when the loan is due to be repaid.

There is generally a time limit placed on payoff letters — a “good-through date” — after which the amount of interest due on the loan would change.

A student loan payoff letter may be needed when the borrower is still paying off student debt and also applying for a mortgage, refinancing an existing loan, or when they’re planning to pay off the loan.

The payoff letter will play a part in determining an applicant’s debt-to-income (DTI) ratio, which many lenders look at to determine whether the applicant can afford potential future payments on a loan.

A high student loan balance, in relation to income, could limit a person’s loan options. So it pays to pay your debt down as much as you can.

Getting a Student Loan Payoff Letter

A loan payoff letter can be requested from the lender at any stage of a loan’s term, whether the borrower hasn’t yet made an initial payment or they’re close to making their last. Obtaining a loan payoff letter can be done by contacting the lender and simply requesting it.

Lenders’ websites may have an option for requesting these letters via an online form. If that option isn’t available, the borrower may need to call the lender’s customer service line to request the letter.

There may be a fee charged for requesting a payoff letter. If there is one, it should be explained in the loan agreement. The lender’s customer service representative should also be able to verify whether there is a fee for the letter.

Recommended: Student Loan Payoff Calculator

Managing Student Loans

An important factor in determining a student loan payoff strategy is figuring out when the first payment is due, information that the loan servicer will provide.

For most federal student loans, there is a period of time after you graduate, leave school, or drop below half-time enrollment before you need to begin making student loan payments. This period of time is known as a grace period.

The grace period is typically six months, but could be as long as nine months depending on which type of federal student loan a borrower has. It may help to think ahead about how best to take advantage of the grace period.

While it might be tempting to view the grace period as a time to sink extra money into things you want or need, borrowers may want to consider instead saving up for when student loan payments will start coming due.

Interest on Direct Subsidized Loans is paid by the U.S. Department of Education while the borrower is in school at least half-time, during the grace period, or in a deferment period. This might make paying the loan off, in the long run, a little less burdensome.

Borrowers of Direct Unsubsidized Loans are responsible for paying interest during the entire term of the loan. Interest accrues from the time the loan is disbursed to the borrower.

Strategies for paying off student loans quickly may include looking into ways to make money outside your day job, asking if there is a student loan repayment assistance program at your company, and paying down other debt during the grace period.

Borrowers might also want to consider student loan refinancing. With refinancing, you replace your existing loans with a new loan that ideally has a lower interest rate, which could help lower your monthly payment. Just be aware that refinancing federal student loans makes them ineligible for federal programs and protections such as deferment and forgiveness.

Selecting the Right Repayment Plan

There are currently several student loan repayment options for eligible borrowers of federal student loans, depending on the type of loan. However, as a result of the big domestic policy bill recently signed into law, as of July 1, 2026, there will be just two student loan repayment plans for new borrowers.

Here are the plans borrowers can consider until then.

Standard Repayment Plan

For Federal Direct Loans and Federal Family Education Loans (FFEL), loan servicers will automatically place borrowers on the Standard Repayment Plan unless they choose a different repayment plan.

The Standard Repayment Plan gives the borrower up to 10 years (between 10 and 30 years for consolidation loans) to repay, with fixed monthly payments of at least $50 during that time. This repayment plan may not be the best option for borrowers who are considering seeking Public Service Loan Forgiveness (PSLF).

Graduated Repayment Plan

Eligible Direct Loan and FFEL borrowers who expect their income to increase gradually over time may opt for a Graduated Repayment Plan. This plan has the same 10-year term (between 10 and 30 years for consolidation loans) that the Standard Repayment Plan does, but the payment amount differs.

Monthly payments start low and increase generally every two years, will always be at least the amount of accrued interest since the last payment, and will be limited to no more than three times the amount of any previous payment.

Extended Repayment Plan

Borrowers who need to make lower monthly payments over an extended time may want to consider the Extended Repayment Plan, which allows for a 25-year repayment term. This plan is for eligible Direct or FFEL borrowers who have outstanding loan balances of $30,000 or more on each loan.

Monthly payments on this plan can be either fixed or graduated and are generally lower than those made under the Standard or Graduated plans. However, you should expect to pay more in interest over the life of the loan.

Income-Driven Repayment Plans

There are currently a few options for borrowers who might be having trouble making their payments: Income-Based Repayment, Income-Contingent Repayment, and Pay As You Earn (PAYE). Income-driven repayment (IDR) plans allow eligible borrowers to responsibly manage their debt while remaining on track to pay it off.

The plans take into account a borrower’s income, discretionary income, family size, and/or eligible federal student loan balance. Borrowers under an IDR must recertify their income and family size each year or risk losing their eligibility for the plan.

The Takeaway

A student loan payoff letter details the specifics of your student loan, including the amount you owe, your monthly payments, and the payoff amount. A student loan payoff letter may be needed to secure a mortgage, refinance your student loans, or acquire another form of debt, such as a personal loan.

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

Do you need a student loan payoff letter?

You typically need a student loan payoff letter if you are applying for a mortgage, refinancing your student loans, or taking out another type of loan such as a personal loan. A payoff letter states your current student loan balance, monthly payments, and other account information.

Where do I get a payoff letter?

You can get a payoff letter from your loan servicer. You may be able to request a letter through a form on the servicer’s website. If not, you can call the loan servicer’s customer service number to ask for one.

Do I get a letter when I finish paying off my student loans?

Yes, you should receive a letter when you finish paying off your student loans, stating that the loans have been paid in full. Most loan servicers send out such a letter within a month to 45 days of your final payment. If you don’t receive a final payoff letter, call the servicer to ask for one. It’s a good idea to keep this letter for your records.

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 FORFEIT YOUR ELIGIBILITY 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).

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

SOSLR-Q425-005

Oct

2025

Implied Volatility: What It Is & What It’s Used for

By Colin Dodds | Growing Wealth, invest, Investing | Comments Off

Editor's Note: Options are not suitable for all investors. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Please see the Characteristics and Risks of Standardized Options.

Table of Contents

What Is Volatility?
What Is Implied Volatility?
How Implied Volatility Affects Options
Implied Volatility and Other Financial Products
How Is Implied Volatility Calculated?
What Affects Implied Volatility?
Implied Volatility Pros and Cons
FAQ

Implied volatility (IV) is a metric that describes the market’s expectation of future movement in the price of a security. Implied volatility, also known by the symbol σ (sigma), employs a set of predictive factors to forecast how volatile a security’s price may be.

Some investors may use implied volatility as a way to understand the level of market risk they may face. Implied volatility is often calculated using either the Black-Scholes model or the Binomial model.

Key Points

• Implied volatility measures expected future price movement, reflecting market sentiment.

• High implied volatility suggests larger price swings, which can significantly impact options premiums.

• Implied volatility may be calculated using the Black-Scholes and Binomial models, each with specific applications.

• Elevated market risk can be signaled through implied volatility, though it doesn’t indicate which direction prices may move.

• Limitations include the inability to predict future direction, account for unexpected events, and reflect fundamental value.

What Is Volatility?

Volatility, as it relates to investments, is the pace and extent that the market price of a security may move up or down during a given period. During times of high volatility, prices experience frequent, large swings, while periods of low volatility see fewer and smaller price changes.

What Is Implied Volatility?

Implied volatility is, in essence, a metric used in options trading that reflects the market’s anticipation of a security’s future price movements, rather than its historical performance. While it informs the price of an option, it does not guarantee that the price activity of the underlying security will be as volatile, or as stable, as the expectation embedded in its implied volatility. While implied volatility isn’t a window onto the future, it can often correlate with the broader opinion that the market holds regarding a given security.

To express implied volatility, investors typically use a percentage that shows the rate of standard deviation over a particular time period. As a measure of market risk, investors typically see the highest implied volatility during downward-trending or bearish markets, when they may expect equity prices to go down.

During bull markets on the other hand, implied volatility tends to go down as more investors may believe equity prices will rise. That said, as a metric, implied volatility doesn’t predict the direction of the price swings, only that the prices are likely to swing.

How Implied Volatility Affects Options

So how does implied volatility affect options? When determining the value of an options contract, implied volatility is a major factor. Implied volatility can help options traders evaluate an option’s price and also evaluate whether the option may be a good fit for their strategy.

An investor buying options contracts has the right, but not the obligation, to buy or sell a particular asset at an agreed-upon price during a specified time period. Because IV helps estimate the extent of the price change investors may expect a security to experience in a specific time span, it directly affects the price an investor pays for an option. It would not help them determine whether they want a call or a put option.

It may also be used by some traders to help them determine whether they want to charge or pay an options premium for a security. Options on underlying securities that have high implied volatility tend to come with higher premiums, while options on securities with lower implied volatility typically command lower premiums.

Implied Volatility and Other Financial Products

Implied volatility can also impact the prices of financial instruments other than options. One such instrument is the interest rate cap, a product aimed at limiting the increases in interest charged by variable-rate credit products.

For example, homeowners might purchase an interest rate cap to limit the risks associated with their variable-rate mortgages and adjustable-rate mortgage (ARM) loans. Implied volatility may be a consideration in the prices that borrowers may pay for those interest rate caps.

How Is Implied Volatility Calculated?

There are two implied volatility formulas that some investors typically use to estimate fair option pricing based on market conditions.

Black-Scholes Model

One of the most widely used methods of calculating implied volatility is the Black-Scholes Model. Sometimes known as the Black-Scholes-Merton model, the Black-Scholes model is named for three economists who published the model in a journal in 1973.

It can be a complex mathematical equation investors use to project potential price changes over time for financial instruments, including stocks, futures contracts, and options contracts. Investors use the Black-Scholes Model to estimate the value of different securities and financial derivatives. When used to price options, it uses the following factors:

• Current stock price

• Options contract strike price

• Amount of time remaining until the option expires

• Risk-free interest rates

The Black-Scholes formula takes those known factors and effectively back-solves for the value of implied volatility.

The Black-Scholes Model offers a quick way to calculate European-style options, which can only be exercised at their expiration date, but the formula is less useful for accurately pricing American options, since it only considers the price at an option’s expiration date. With American options, the owner may exercise at any time up to and including the expiration date.

Binomial Model

Many investors consider the binomial option pricing model more intuitive than the Black-Scholes model. It also represents a more effective way of calculating the implied volatility of U.S. options, which may be exercised at any point before (and on) their expiration date.

Invented in 1979, the binomial model uses the assumption that at any moment, the price of a security will either go up or down.

As a method for calculating the implied volatility of an options contract, the binomial pricing model uses the same basic data inputs as Black-Scholes, along with the ability to update the equation as market conditions change or new information becomes available. In comparison with other models, the binomial option pricing model is very simple at first. It can become extremely complex, however, as it accounts for many time periods and supports early exercise for pricing American-style options.

By using the binomial model with multiple periods of time, a trader can use an implied volatility chart to visualize potential changes in implied volatility of the underlying asset over time, and evaluate the option at each point in time. It also allows the trader to update those multi-period equations based on each day’s price movements and emerging market news.

The calculations involved in the binomial model can take a long time to complete, which may make it difficult for short-term traders to use.

💡 Quick Tip: Are self-directed brokerage accounts cost efficient? They can be, because they offer the convenience of being able to buy stocks online without using a traditional full-service broker (and the typical broker fees).

What Affects Implied Volatility?

The markets fluctuate, and so does the implied volatility of any security. As the price of a security rises, that can change its implied volatility, which can influence changes in the premium it costs to buy an option.

Another factor that changes the implied volatility priced into an option is the time left until the option expires. An option with a relatively near expiration date tends to have lower implied volatility than one with a longer duration. As an options contract grows closer to its expiration, the implied volatility of that option tends to fall.

Implied Volatility Pros and Cons

There are both benefits and drawbacks to be aware of when using implied volatility to evaluate a security.

Pros

• Implied volatility can help an investor quantify the market sentiment around a given security.

• Implied volatility can help investors estimate the size of the price movement that a particular asset may experience.

• During periods of high volatility, implied volatility can help investors identify potentially lower-risk sectors or products.

Cons

• Implied volatility cannot predict the future.

• Implied volatility does not indicate the direction of the price movement a security is likely to experience.

• Implied volatility does not factor in or reflect the fundamentals of the underlying security, but is based primarily on the security’s price.

• Implied volatility does not account for unexpected adverse events that could affect the price of the security and its implied volatility in the future.

The Takeaway

Some investors use implied volatility to assess expected price movement and evaluate option value. It can be a useful indicator, but it has limitations. Investors may want to use it in connection with other types of analysis to better contextualize risk and potential price behavior.

That said, having a basic understanding of implied volatility can be a helpful foundation for nearly all investors.

SoFi’s options trading platform offers qualified investors the flexibility to pursue income generation, manage risk, and use advanced trading strategies. Investors may buy put and call options or sell covered calls and cash-secured puts to speculate on the price movements of stocks, all through a simple, intuitive interface.

With SoFi Invest® online options trading, there are no contract fees and no commissions. Plus, SoFi offers educational support — including in-app coaching resources, real-time pricing, and other tools to help you make informed decisions, based on your tolerance for risk.

Explore SoFi’s user-friendly options trading platform.

FAQ

What is implied volatility?

Implied volatility measures the extent and frequency that the market expects a security’s price to move. Options traders may use it to evaluate whether premiums are relatively expensive or inexpensive, and to help them gauge strategy timing.

Is high IV good for options?

High implied volatility can work in favor of option sellers, since they may collect a higher premium for those options. Option buyers typically pay more upfront for an option with high implied volatility, but the potential for bigger price swings may increase the likelihood that the option will move into the money, though this comes with higher risk, as well.

How can I try to profit from implied volatility?

Traders may try to profit by buying options ahead of events that are likely to trigger sharp price moves, hoping the option’s value rises. Others may sell options when IV is high to collect larger premiums, expecting volatility may drop. Both strategies hinge on timing and carry risk.

What is the function of implied volatility?

Implied volatility reflects how much price movement the market anticipates for a given security. It helps determine options pricing and offers a snapshot of perceived risk, but it doesn’t predict the direction that the security’s price may move.

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For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

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.

SOIN-Q325-019

Oct

2025

A happy woman wearing sunglasses and a hat is driving a red, vintage-style car down a tree-lined road, making one wonder how much is my car really worth.

How Much Is My Car Worth Really?

By Austin Kilham | relay | Comments Off

Table of Contents

Understanding the Different Estimated Values
Common Car Value Estimate Resources
Who Gives the Most Accurate Car Value Estimate?
Car Brands With the Highest Resale Value
The Takeaway
FAQ

The value of a car depends on many factors, from the make and model to age, condition, and mileage. How quickly you want to sell and where you live can also play a big part in how much money you get for your car.

It’s important to understand these factors as you appraise your vehicle. Here’s a closer look at resources you can consult as you determine how much your car is worth.

Key Points

• The value of your car is determined by factors like make, model, year, condition, and mileage.

• Websites and like Kelley Blue Book and Edmunds can provide accurate estimates of your car’s value.

• The physical and mechanical condition of your car significantly impacts its worth.

• Car values can vary by location due to differences in demand and local market conditions.

• Checking recent sales of similar vehicles in your area can give you a realistic idea of your car’s market value.

What Is a Good Price for My Used Car?

In Q2 2025, the average used car price hovered around $31,000. Whether you’re able to sell your car for above or below that price will depend on many factors. First of all, mileage has a big impact on price. The more you’ve driven your car, the less it will be worth.

A car’s condition is also important. Are there repairs that have to be made or parts that need replacing? Does the car have an accident history? If so, the value of the car may be negatively impacted.

The older a car is, the more wear and tear it’s likely to have experienced. As a result, older cars usually cost less than newer counterparts.

Some factors that can impact car price are more surprising, such as where you live and how quickly you need to sell it. The weather in your area can take its toll on your vehicle. Harsh New England winters and salted roads, for example, can cause metal components to rust. Sunny climes have their own issues, too; too much sun can cause paint and other finishes to lose their luster.

💡 Quick Tip: When you have questions about what you can and can’t afford, a spending tracker app can show you the answer. With no guilt trip or hourly fee.

Understanding the Different Estimated Values

There are a few different ways to calculate estimated car value. Here’s a look the most common terms:

Market Value

The market value of a used car is a reflection of how much buyers are usually willing to pay for a given vehicle. It will depend on factors such as location, make and model, mileage, and condition. See below for resources to determine market value.

Recommended: How to Save Up for a Car

Trade-In Value

Trade-in value comes into play when you’re considering buying a used car or a new vehicle. It’s the amount of money a dealer is willing to give you for your old car that you can then put toward the purchase price of another vehicle.

The trade-in value is often lower than top market value. That’s because the dealer needs to turn a profit when they resell the vehicle.

If you’re trading in your car for a new or new-to-you model, your credit score will impact the interest rate you receive on your auto loan. There is generally no baseline credit score required to qualify for auto financing, but lower scores will pay significantly higher interest rates.

Track your credit score with SoFi

Check your credit score for free. Sign up and get $10.*

Private Party Value

You may encounter the phrase “private party value” as you research how much your car is worth. This usually means the fair market value when selling your vehicle to an individual rather than a dealership.

Instant Trade-In Dealer Quotes

Brick-and-mortar dealerships and websites, such as Kelley Blue Book, Vroom, TrueCar, and Carvana, may offer instant cash or instant dealer trade-in quotes.

The process is similar to looking up the value of your vehicle online. You often need to share only a few details about your car, such as the vehicle identification number (VIN) or your license plate number, and the company will come back to you with an offer of cash for your car.

Once you receive an offer, there will likely be an in-person follow-up to review your vehicle before you receive any money.

Common Car Value Estimate Resources

There are a variety of resources available where you can research car prices and estimate the value of your vehicle.

Kelley Blue Book

Kelley Blue Book, or KBB, is an online resource for finding the value of new and used vehicles. It dates back to the 1920s, when the company published an actual blue book dealers would look at to establish pricing information and car values.

To research your car’s value, you can provide your vehicle identification number (VIN), license plate number, or year, make, model, mileage, and zip code. You can also input the equipment that is included on your vehicle and the color of your car to further narrow down the value.

Black Book

Similar to KBB, Black Book offers VIN-specific valuations. However, it also integrates vehicle history report data from Autocheck, such as reported damage to the vehicle. The company then offers an adjusted valuation based on this information.

National Automobile Dealers Association

The National Automobile Dealers Association (NADA) provides resources for shoppers looking for new and used vehicles. Use the website to compare prices on similar vehicles to your own to help determine what the going market rates are. The company also provides shopping guides that can help you learn more about the car buying and selling process, and glean tips for what buyers are looking for in a used vehicle.

Edmunds

Edmunds offers a car appraisal tool that also allows you to search vehicle values by VIN, license plate number, and year, make, and model. The California-based company was founded in 1966 “for the purpose of publishing new and used automotive pricing guides to assist automobile buyers.”

Who Gives the Most Accurate Car Value Estimate?

Kelley Blue Book and Edmunds are two of the most widely used and trusted general reference sites when it comes to valuations of particular makes and models of used cars and trucks.

Each site may show different values for the same vehicle, but no site consistently provides higher or lower estimates than the other.

Car Brands With the Highest Resale Value

The brand of a car, also known as its make, can have a big impact on resale value. Some makes are more popular than others, often due to a reputation for safety, fuel economy, or durability.

According to research by iSeeCars, the following 10 cars had the lowest depreciation in 2025.

	Make and Model	Average 5-Year Depreciation
1.	Porsche 911	19.5%
2.	Porsche 718 Cayman	21.8%
3.	Toyota Tacoma	26.0%
4.	Chevrolet Corvette	27.2%
5.	Honda Civic	28.0%
6.	Chevrolet Camaro	28.0%
7.	Toyota Tundra	29.1%
8.	Ford Mustang	29.2%
9.	Porsche 718 Boxster	29.6%
10.	Toyota Corolla Hatchback	30.1%

💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.

Importance of Add-On Options

Pricey add-ons, such as splash guards, alarm systems, and tinted windows, don’t always add value to used cars. In fact, once a car is two or three years old, they may have little effect on value at all.

Recommended: Trading in a Car in 5 Easy Steps

The Takeaway

The value of your car will change from year to year as it ages, and supply and demand shift. Staying on top of your car’s value can help you make informed decisions about your net worth, as well as decisions about when to sell or trade in your vehicle for a new car.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

How do you estimate the value of a car?

You can estimate a car’s value by considering its make, model, year, condition, and mileage. Use online tools like Kelley Blue Book and Edmunds, check recent sales of similar vehicles in your area, and factor in local market conditions.

How do I find the fair market value of my car?

To find the fair market value of your car, use online tools like Kelley Blue Book and Edmunds, check recent sales of similar vehicles in your area, and consider factors such as make, model, year, condition, and mileage.

What is the difference between market value and fair market value?

Fair market value is an estimate of what a potential pool of buyers might pay, while the market value is what they are actually willing to pay.

Photo credit: iStock/DjordjeDjurdjevic

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SORL-Q425-004

Oct

2025

A white ceramic piggy bank with two pink cross-shaped band-aids on its side, against a light turquoise background, symbolizing types of debt or financial trouble.

What Are the Different Types of Debt?

By Lauren Ward | Credit, Debt Payoff, relay | Comments Off

Table of Contents

Secured vs Unsecured Debt
Installment vs Revolving Debt
Debt Payoff Strategies
The Takeaway
FAQ

Debt may seem like something you want to avoid. However, having some debt can actually be a good thing, provided you can comfortably afford to make your payments each month.

A good payment history shows lenders that you can be responsible with borrowed money, and it will make them feel better about lending to you when the time comes for you to make a big purchase, like a home.

But not all debt is created equal. Consumer debt can generally be broken down into two main categories: secured and unsecured. Those two categories can then be subdivided into installment and revolving debt. Each type of debt is structured differently and can affect your credit score in a different way.

Here are some helpful things to know about the different types of debt, plus how you may want to prioritize paying down various balances you may already have accumulated.

Key Points

• Debt comes in various forms, each with its own characteristics and purposes, including secured, unsecured, revolving, and installment debts.

• Secured debt is backed by collateral, such as a car or home, which can be repossessed if the borrower fails to make payments.

• Unsecured debt, like credit card balances and personal loans, does not require collateral and typically has higher interest rates due to the increased risk for lenders.

• Revolving debt, such as credit cards, allows borrowers to use a line of credit up to a certain limit, pay it down, and borrow again as needed.

• Installment debt involves fixed payments over a set period, such as mortgages and auto loans, and often has lower interest rates compared to revolving debt.

Track your credit score with SoFi

Check your credit score for free. Sign up and get $10.*

Secured vs Unsecured Debt

The first distinction between types of debt is whether it’s secured or unsecured. This indicates your level of liability in the event you fall behind on payments and go into default on the loan or credit card.

Secured Debt

Secured debt means you’ve offered some type of collateral or asset to the lender or creditor in exchange for the ability to borrow funds. There are many types of secured debt. Auto loans and mortgages are common examples.

The benefit is that you improve your odds for approval by offering collateral, and you may also receive a better interest rate compared to unsecured debt. But if you go into default on the loan, the lender is typically allowed to seize the asset that’s securing the debt and sell it to offset the loan balance.

If that happens, not only is your property repossessed, your credit score can also be severely damaged. This could make it difficult to qualify for any type of financing in the near future.

A foreclosure, for instance, generally stays on your credit report for seven years, beginning with the first mortgage payment you skipped.

Unsecured Debt

Unsecured debt comes with much less personal risk than secured debt since you don’t have to use any property or assets as collateral.

Common types of unsecured debt include credit cards, student loans, some personal loans, and medical debt. Since you don’t have to put up any type of collateral, there may be stricter requirements in order to qualify. Your lender will likely check your credit score and potentially verify your income.

With unsecured debt, you are bound by a contractual agreement to repay the funds, and if there is a default, the lender can go to court to reclaim any money owed. However, doing so comes at a great cost to the lender. For this reason, unsecured debt generally comes with a higher interest rate than secured debt, which can pile up quickly if you’re not careful.

💡 Quick Tip: We love a good spreadsheet, but not everyone feels the same. An online budget planner can give you the same insight into your budgeting and spending at a glance, without the extra effort.

Installment vs Revolving Debt

The difference between secured and unsecured debt is one way to classify financing options, but it’s not the only way.

Both secured and unsecured debt can be broken down further into two additional categories: installment debt and revolving debt.

Installment Debt

Installment debt is usually a type of loan that gives you a lump sum payment at the beginning of the agreement. You then pay it back over time, or in installments,before a certain date. Examples of this type of debt include a car loan, student loan, or mortgage.

Once you’ve paid the loan off, it’s gone, and you don’t get any more funds to spend. Examples of this type of debt include a car loan, student loan, or mortgage.

There are a number of ways an installment loan can be structured. In many cases, your regular payments are made each month, with money going towards both principal and interest.

Less frequently, an installment loan could be structured to only include interest payments throughout the term, then end with a large payment due at the end. This is called a balloon payment. Balloon payments are more frequently found with interest-only mortgages. Rather than actually making that large payment at the end of the loan term, borrowers typically refinance the loan to a more traditional mortgage.

Installment loans can have either a fixed or adjustable interest rate. If your loan has a fixed rate, your payments should stay the same over your entire term, as long as you pay your bill on time.

A loan with an adjustable rate will change based on the index rate it’s attached to. Your loan terms tell you how frequently your interest rate will adjust.

Provided you make your payments on time, having a mortgage, student loan, or auto loan can often help your credit scores because it shows you’re a responsible borrower. In addition, having some installment debt can help diversify your credit portfolio, which can also help your scores.

Revolving Debt

Unlike installment debt, revolving debt is an open line of credit. It gives you an amount of available credit that you can draw on and repay continually.

Both credit cards and lines of credit are common examples of revolving credit. Instead of getting a lump sum at one time (as you would with installment debt), you only use what you need — and you only pay interest on the amount you’ve drawn.

Your available credit decreases as you borrow funds, but it’s replenished once you pay off your balance.

Revolving debt can be unsecured, as in the instance of a credit card, or it can be secured, such as on a home equity line of credit.

One downside of revolving credit is that there’s no fixed payment schedule. You typically only have to make minimum payments on your revolving credit, but your interest continues to accrue.

That can result in a much higher balance than the original purchases you made with the funds. And if you miss a payment, you’ll likely owe late fees on top of everything else.

Because it’s easier to get caught in a cycle of debt, having large revolving debt balances can hurt your credit score. A balance of both revolving and installment debt can give you a healthier credit mix, and potentially a better credit score.

💡 Quick Tip: Check your credit report at least once a year to ensure there are no errors that can damage your credit score.

Debt Payoff Strategies

Whatever kind of debt you carry, the key to avoiding a negative debt spiral — and maintaining good credit — is to pay installment debt (such as your student loan and mortgage) on time, and try to avoid carrying high balances on your revolving debt.

While everyone’s financial circumstances are different, here are some debt payoff strategies that can help you prioritize your payments.

Paying off the Highest Interest Debt First

If your primary goal is to save money over the life of your loans, you may want to start by paying off your highest interest rate loan first, while making just the minimum payments on everything else.

You can then move on to the next highest and next highest until your debts are paid off. This payoff approach is often referred to as the debt avalanche method.

Paying off the Debt with the Smallest Balance First

Paying down debt can feel neverending, so it can be nice to feel like you’re making progress. By focusing on your smallest debts first (and paying the minimum on everything else), you can cross individual loans off your balance sheet, while quickly eliminating monthly payments from your budget.

Once paid off, you can then reroute those payments to make extra payments on larger loans, an approach often referred to as the debt snowball method.

Considering Debt Consolidation

If you don’t see a clear strategy for paying off your debt, you might consider debt consolidation. This involves taking out a single personal loan to consolidate your other balances. If your credit score has increased, this may be a good way to decrease your overall interest rate. But at a minimum, this move can help streamline your payments.

Being Wary of Debt Settlement Companies

If you’re feeling overwhelmed by debt, you may look for a shortcut with a debt settlement company.

Debt settlement is a service typically offered by third-party companies that allows you to pay a lump sum that’s typically less than the amount you owe to resolve, or “settle,” your debt. These companies claim to reduce your debt by negotiating a settlement with your creditor.

Paying off a debt for less than you owe may sound great at first, but debt settlement can be risky.

For one reason, there is no guarantee that the debt settlement company will be able to successfully reach a settlement for all your debts. And you may be charged fees even if your whole debt isn’t settled.

Also, if you stop making payments on a debt, you can end up paying late fees or interest, and even face collection efforts or a lawsuit filed by a creditor or debt collector.

The Takeaway

At some point in your life you may be juggling one or more of these different kinds of debt. Understanding the various types of debts and maintaining a varied mix of loans (including secured, unsecured, installment, and revolving) can help you increase your creditworthiness.

You can also improve your credit by making all of your debt payments on time, and keeping balances on revolving credit (like credit cards) low.

See exactly how your money comes and goes at a glance.

FAQ

What are the different types of debt?

Debt types include secured (backed by collateral), unsecured (no collateral, higher interest), revolving (flexible credit limit, like credit cards), and installment (fixed payments over a set period, such as mortgages and auto loans). Each type has unique characteristics and purposes.

What is secured debt and how does it work?

Secured debt is a type of debt that is backed by collateral, such as a car or home. If the borrower fails to make payments, the lender can repossess the collateral to recover the loss.

How does revolving debt differ from other types of debt?

Revolving debt, like credit cards, allows borrowers to use a line of credit up to a certain limit, pay it down, and borrow again as needed. This flexibility can be useful but also risky if not managed properly.

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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 .

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

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SORL-Q425-003