Different Types of Insurance Deductibles

Different Types of Insurance Deductibles

Buying insurance coverage helps keep you protected from the full financial fallout of an accident or injury (phew!). But (and it’s a big but) even with insurance, you’ll probably still be responsible for some costs when you file a claim.

An insurance deductible is the amount of money the insured party is responsible for at the time of loss or damage: it’s the cost you have to pay before the insurance company pays out its share.

Here’s what you need to know about the different types of insurance deductibles and other insurance-related costs you may face.

What is a Deductible?

When you buy insurance, you’ll encounter several different figures depending on the type of coverage you’re purchasing. These may include monthly premiums, copays, out-of-pocket maximums, and possibly others.

The vast majority of insurance policies, whether they’re auto, health, or homeowners, carry a deductible. So what is a deductible, and how does it work?

The deductible is a sum of money you, as the insured party, are expected to pay toward a loss. Another way to think about it: It’s the amount the insurance company deducts from the total claim and asks you to pay.

For instance, say you get into a car accident in which you sustain $8,000 worth of damage and you have a $1,000 deductible. When you file your claim, you’ll pay $1,000 toward repairs and the insurance company will cover the remaining $7,000 (or up to whatever limits are laid out in your insurance contract).

Your deductible can be a fixed dollar amount or a percentage, depending on your individual plan as well as what kind of insurance policy you’re talking about. Homeowners insurance, for instance, is commonly offered with deductibles calculated as a percentage of the property’s total insured value.

It’s important to understand that your deductible is separate from your premium, which is the amount of money you pay each month in order to keep your insurance policy active.

And it’s equally key to remember that you may also be responsible for other insurance-related expenses, like copays or coinsurance. Always be sure to read the fine print carefully!

Copay vs. Deductible

With certain types of insurance—primarily health insurance products—you may be required to pay a copay each time you go to the doctor’s office or receive a covered service. This copay is separate from your deductible, and, generally, your copay doesn’t count toward your deductible amount.

As with other types of insurance, the health insurance deductible must be paid by the insured person before the insurance company begins its coverage. However, health plans may include certain services, such as regular check-ups, that are covered even before the deductible is paid in full.

Here’s an example. Say you twist your ankle and visit your doctor, who orders an MRI. If your copay is $25, you’ll pay $25 at the office before or after you see your physician. If the total cost of the doctor’s care and imaging services is $1,000 and you have a $500 deductible, you may still be responsible for the full $500. Any copays you’ve forked over along the way won’t be subtracted from your deductible.

Some plans may carry a coinsurance cost rather than a copay: The two are similar, but not identical. Coinsurance is an amount you pay when you receive a medical service, separate from your deductible. However, copays are charged at a fixed dollar amount, whereas coinsurance is calculated as a percentage of the total cost of the service. Your plan might even include both copays and coinsurance costs.

All insurance policies are different, and your individual costs and experience may vary depending on the services you’ve received and the specific coverage you have. You can consult your own insurance paperwork or contact a customer service representative for full details on what’s covered in your plan.

Out-of-Pocket Maximums

Health insurance policies in particular are subject to federally mandated out-of-pocket maximums. This is the highest total dollar amount you’ll have to pay toward covered healthcare over the course of a single year, including both deductibles and copays.

The out-of-pocket maximum does not include the amount you pay toward your monthly premium, however. Nor does it include out-of-network services or services that your plan expressly does not cover.

For 2021, the out-of-pocket maximum for a Marketplace plan can’t be more than $8,550 for an individual or $17,100 for a family. (The maximum is allowed to be lower, however, so consult your plan paperwork for full details.)

Do You Want a High or Low Deductible?

When shopping for insurance coverage, you’ll likely have a range of options to consider, including a spectrum of deductible costs. And when it comes to figuring out whether you want a high or low deductible, the answer is: It depends.

Generally speaking, the size of the deductible is inversely proportional to the policy’s monthly premium. Typically, the lower your deductible, the higher your premium will be and vice-versa.

This makes sense, when you think about it from the insurance company’s perspective. If you have a low deductible, it’ll have to pay out a higher amount when you incur a loss. So in exchange for the promise of covering most of the costs when a claim is filed, the company expects you to pay more up front in the form of a higher premium.

While choosing a higher deductible can help you save money over time since your monthly premiums will be lower, it also means you’re assuming more risk. If something happens and costs are incurred, you’ll be responsible for a larger share of those expenses.

On the other hand, choosing a lower deductible means you’ll spend more each month. But you’ll also have less to worry about if you do need to file a claim, since the insurance company will cover more of the costs (assuming that all the damages and expenses are ones that are covered under your policy).

As with so many other financial matters, what’s right for you comes down to your own risk tolerance and aversion, as well as how much you can afford to spend upfront or if there’s an accident. Specific lifestyle factors might also affect your decision. If you participate in extreme sports, for instance, and you’re at risk for catastrophic injuries, you might want to pick a health insurance policy with a lower deductible and higher premiums. And you may decide to choose higher deductibles on certain types of insurance policies and lower deductibles on others, depending on which types of damage you feel you’re more likely to incur.

Zero-Deductible Insurance: Is It a Thing?

You may see zero-deductible insurance policies advertised and wonder if they’re too good to be true. While zero-deductible insurance policies do exist, they usually carry higher premiums than policies that do carry deductibles, and you may also be responsible for a one-time no-deductible fee or waiver.

Furthermore, some insurance coverages are required by state law to carry a minimum deductible, particularly when it comes to auto insurance.

So, once again: always be sure to read the insurance contract in full and ensure you understand exactly what costs you’re responsible for before signing up for any kind of insurance coverage.

Types of Deductibles

While there are many, many different types of insurance policies with deductibles on the market, common insurance deductibles include:

•  Health insurance deductibles
•  Auto insurance deductibles
•  Homeowners insurance deductibles
•  Renters insurance deductibles
•  Life insurance deductibles

The amount of these deductibles varies by type of insurance, company, and plan, among other factors.

The Takeaway

Purchasing insurance is an important—and sometimes legally mandated—step toward protecting yourself from the high costs of personal accidents and property damages. However, with most insurance policies, the insured party is still responsible for a portion of the cost of a claim. That portion is known as the deductible (which is separate from any copays or coinsurances). Understanding deductibles and how they relate to other aspects of your insurance policy can help you opt for the choice that will make the most sense for your life and finances.

SoFi has partnered with a number of highly regarded insurance providers to help our members find the protection they need at the lowest possible prices.

Looking for a new life, homeowners, renters, or auto insurance policy? Check out the reliable and affordable insurance policies we’re offering our members.

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.


Read more
New Parent's Guide to Setting Up a Will

New Parent’s Guide to Setting Up a Will

Starting a family comes with an entirely new set of responsibilities. There’s a lot to think about, from choosing the best car seat to figuring out work and childcare schedules.

One of the most important, yet frequently overlooked, necessities is setting up a will. This crucial document outlines tons of important details should you pass away, including what happens to your child.

Estate planning for parents can be broken down into just a few digestible steps. Here’s everything you need to think about, plus tips on how to organize all of your documents for the ultimate peace of mind.

Estate Planning for New Parents

1. Draft a Will

About 60% of Americans don’t have a will. Setting up one can be simpler than it seems. A will is a document that outlines how you want things handled after you pass away, including distribution of assets and how any minor children to be cared for.

While some people with complex investments and multiple properties may want to hire a lawyer for help, younger, healthy individuals can seek out online services that can walk them through the steps to make a will and sometimes have no initial cost. SoFi, for instance, has partnered with the life-insurance firm Ladder to help customers apply for life insurance.

Recommended: Estate Planning 101

Then, you can follow the execution instructions, which typically include signing your will in front of eligible witnesses. Check your state’s individual requirements. Sometimes, you must have your will notarized in order to become valid. Many banks and public libraries offer this service for free.

If you’re married, consider drafting a joint will with your spouse. This gives you the ability to plan for different scenarios, like what happens when one spouse passes away versus both passing away at the same time. Remember to regularly update your will whenever a major life change occurs, like having another child or adding new major assets.

2. Choose an Executor

When you’re setting up a will, you’ll need to choose an executor. This is the person responsible for handling the legal and logistical aspects of disbursing your assets. They are also responsible for filing any remaining taxes and settling your debts.

Consequently, your executor should be someone you trust and who has the ability to handle the tasks involved. This is especially important when you have young children because the executor’s ability to tie up your finances will impact your kids’ inheritance.

Once you choose an executor, let them know that you’ve chosen them. Give them a quick rundown of what to expect, and also let them know where to find your will and other relevant documents.

3. Name a Guardian

When you start having kids, you also need to name a guardian to care for them if you pass away before they reach legal adulthood. There are a lot of things to consider when making this important decision.

First, think about the potential guardian’s ability to care for children. Are their grandparents too old to take care of them? Does the guardian live far away from other friends and family who could serve as a support system?

Also consider their financial capabilities and their ability to manage any assets you leave to help pay for your kids’ expenses.

Finally, think about your values and who would raise your children in a way that’s similar to your own parenting style. Also realize that your kids will be going through a tough time, so their guardian would ideally be someone whom they trust and would provide emotional comfort.

If you have more than one child, make sure you name a guardian for each one, even if it’s the same person. That means you need to update your will every time you have a new baby. Be as explicit as possible when naming a guardian; for instance, if you pick a sibling and their spouse, name both individuals as coguardians.

Recommended: From One Child to Two: How to Financially Plan

4. Set Up the Right Accounts

Some types of accounts may help you pass on your assets without having to pay as much in taxes. It’s an important part of the estate planning process and can help you maximize the amount of money you’re able to pass onto your kids. A trust fund can protect the money from being spent too quickly, either by the guardian or your children themselves.

Recommended: What Is a Trust Fund?

You can implement safeguards as to how much money can be taken out and when. Even if your kids are of legal age, you can put annual withdrawal limits on the trust to prevent a young adult from overspending. Alternatively, even if you pick a guardian to oversee the emotional wellbeing of your children, that same person may not be the best at handling money. Choosing a trust can limit their spending on behalf of your children as well.

There are many different types of trusts, so you may consider consulting an estate planning attorney to choose the best one for your family’s needs.

5. Designate Beneficiaries

The final step of estate planning for parents is to designate a beneficiary for every account and insurance policy you have. Include bank accounts, retirement and other investment accounts, and life insurance policies.

When choosing beneficiaries, find out how each type of account is taxed for the recipient. Also create a list of all of your account numbers and other pertinent details and include them with your will. This makes it easy for your executor to locate all of your assets. Include debt information as well, like your mortgage and/or auto loan servicer.

You can also update beneficiaries as life changes. For instance, you might initially name your spouse as your life insurance beneficiary. But if they pass away before you, it’s time to update that designation to someone else.

6. Safely Store Your Documents

Once you’ve drafted your will and signed it in accordance with your state’s laws, it’s time to store all of the appropriate documents to make it easy for your executor and beneficiaries to access.

Lots of documents are now stored online, but you’ll still need to keep your original, signed will in physical form. You can keep it in a fire-proof box at home, or in a safety deposit box at your local bank. Be sure your executor knows where and how to access your documents.

7. Outline Access to Financial Accounts

Remember to keep an up-to-date list of all your financial accounts that need to be taken care of. Bank statements should include the account numbers to make it easy for your executor to find. Also include the location of any valuable items, like art or jewelry.

Finally, it’s helpful to include the contact information for any professionals you work with, like an accountant, financial advisor, and estate attorney. Include insurance policy numbers, loan and credit card details, and any other financial accounts that would need to be closed.

The Takeaway

Estate planning for parents isn’t a one-time event. Get started when you have your first child, but also review your intentions and make changes at least once a year. That way, you always have an up-to-date and comprehensive will that reflects your current financials and family structure.

Need some help setting up your will? It’s easy with SoFi and Trust & Will’s partnership. The leading online estate planning platform in the U.S. offers trust, will and guardianship estate plans, and SoFi Members can receive a 10% discount on services.

Learn more about SoFi Protect today.

Ladder policies are issued in New York by Allianz Life Insurance Company of New York, New York, NY (Policy form # MN-26) and in all other states and DC by Allianz Life Insurance Company of North America, Minneapolis, MN (Policy form # ICC20P-AZ100 and # P-AZ100). Only Allianz Life Insurance Company of New York is authorized to offer life insurance in the state of New York. Coverage and pricing is subject to eligibility and underwriting criteria. SoFi Agency and its affiliates do not guarantee the services of any insurance company. The California license number for SoFi Agency is 0L13077 and for Ladder is OK22568. Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other. Social Finance, Inc. (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under LadderLifeTM policies. SoFi is compensated by Ladder for each issued term life policy. SoFi offers customers the opportunity to reach Ladder Insurance Services, LLC to obtain information about estate planning documents such as wills. Social Finance, Inc. (“SoFi”) will be paid a marketing fee by Ladder when customers make a purchase through this link. All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal 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.

Read more

What Credit Score Is Needed to Buy a House?

What’s your number? That’s not a pickup line; it’s what a lender will want to know. The number will range from 300 to 850, and it will weigh heavily in whether you qualify for a conventional or government-backed loan and at what interest rate.

The national average credit score has inched up in the past few years, all within the range considered “good.” But applicants with “fair” and even “poor” credit scores can and do secure mortgages.

Below, we’ll cover the minimum credit score for a mortgage and how you can improve your credit score if needed.

First, Why Does a Credit Score Matter So Much?

Lenders look at a credit score to help determine whether a potential borrower is trustworthy. Considering that the recent median home sale price was over $350,000 and that financial institutions hold about $10 trillion in mortgage debt, lenders want to know that a borrower is solid and that repayment will be made.

Credit scores were created by the Fair Isaac Corp. to put a simple numerical representation on a person’s history of obtaining and repaying debt.

There are now other institutions that also calculate credit scores, but FICO® scores are the most commonly used. Experian, Transunion, and Equifax are the three credit reporting agencies that collect information on your history of borrowing, and then FICO® or another company amalgamates the information into a score between 300 and 850.

In general, those with a strong history of making on-time payments on their debts will have higher credit scores. Here’s what goes into calculating a credit score:

•  Payment history (35%): Considers whether the applicant has made payments on time.
•  Credit utilization (30%): The ratio of how much you could borrow from all accounts vs. how much you are borrowing. The lower your credit utilization, the better.
•  Length of credit history (15%): Histories with accounts that have been open for longer are seen more favorably than those that have been open for less time.
•  Types of credit (10%): Having multiple types of debt is preferable. Installment credit, such as an auto loan, personal loan, student loan or mortgage loan, and revolving credit, like a credit card, are both considered.
•  New inquiries (10%): Each time a new inquiry on credit is made, there can be a negative effect on a credit score. Credit inquiries happen when opening credit cards and taking out loans, and even when a lender does a “hard pull” on your credit history.

A Look at the Numbers

Here’s how credit scores are generally classified:

•  Exceptional: 800-850
•  Very good: 740-799
•  Good: 670-739
•  Fair: 580-669
•  Very poor: 300-579

In general, lenders consider applicants with “bad” or “poor” credit score subprime borrowers. Depending on what type of mortgage loan an applicant is trying to acquire, it may be hard to obtain a loan with a credit score lower than around 600.

If you are trying to acquire a conventional loan, you’ll likely need a credit score of at least 620.

With an FHA loan, 580 is the minimum credit score to qualify for the 3.5% down payment advantage. Applicants with a score as low as 500 will have to put down 10%.

The FHA program was created to get applicants with lower credit scores into homes. The loans are insured by the Federal Housing Administration, so lenders are more lenient.

A VA loan usually requires a minimum score of 580 to 620; and a USDA loan, 640.

Credit Scores Are Just Part of the Pie

Credit scores aren’t the only factor that lenders consider when reviewing a mortgage application. They will also require information on your employment, income, and bank accounts. A lender facing someone with a low credit score may increase expectations in other areas like size of the down payment or income requirements.

The lowest credit scores that lenders are willing to accept change with the economic environment. During the housing crisis of 2008 and the years after, it was very difficult for borrowers with credit scores lower than 700 to obtain loans.

During better economic times, credit score requirements for borrowers may loosen. Therefore, it is a bit of a moving target to nail down the precise average or the lowest possible credit score one must have to receive a mortgage loan.

How to Bump Up a Credit Score

Working to improve a credit score before applying for a home loan could save a borrower a lot of money in interest over time. Lower rates will keep monthly payments lower or even provide the ability to pay back the loan faster.

Let’s look at an example using a mortgage calculator: If you were take out a mortgage on a $400,000 home after putting 10% down with a 4.5% interest rate on a 30-year fixed rate mortgage, your monthly payment would be $1,824 and you would pay $296,663 total in interest over the life of the loan.

If you were to take out that same loan with a 5.5% rate of interest, your monthly payment would be $2,044 and you’d pay $375,854 total in interest. The difference of 1% in interest results in almost $80,000 paid over time.

Improving your credit score will take a bit of time, but it can be done. Here’s how:

1. Check for errors on your credit report. Reporting errors are quite common, so be certain that your credit history doesn’t mistake a missed payment or report a debt that’s not yours. You can get a free credit report once a year from each of the three reporting agencies: Transunion, Experian, and Equifax.

2. Pay all of your bills on time. If you haven’t been doing so, it could take up to six months of on-time payments to see a significant improvement.

3. If you do not have credit established, an easy way to do so is by opening a credit card. But only do this if you are prepared to use the credit card responsibly. This means paying back the card, in full, each month. Do not simply pay the minimum payments. If you are having trouble qualifying for a card, look into a secured credit card. With a secured card, you put a cash payment down that works as your line of credit, proving you can manage a credit card.

4. Request to increase the credit limit on one or all of your credit cards. This will increase your credit utilization ratio by showing that you have lots of available credit that you don’t use. It is best to keep the credit utilization ratio below 30%, meaning you’re only using 30% of your available credit at any time.

Understand that this number can be assessed at any time during the month, not just on the day that you pay your bills. Even if you pay your cards in full every month, if you’re consistently using more than 30% of your available limit, you could get dinged.

5. If you are working to pay off credit cards, don’t close them once you’ve paid them off. Keep them open by charging a few items to the cards every month (and paying them back). Remember, sources of debt that have been in use for longer are preferable to ones that are new. For example, if you have two credit cards, each has a credit limit of $5,000, and you have a $2,000 balance on each, you currently have a 40% credit utilization ratio. If you were to pay one of the two cards off and keep it open, your credit utilization would drop to 20%.

6. Consider obtaining a personal loan. If you have multiple credit cards and are struggling to manage them and pay them off, this might be a good solution. A personal loan may have a lower rate.

Another option for those with lower credit scores is to have a co-signer on a mortgage loan. If this person has a better credit score and financial situation than the main applicant, it could greatly improve the rate that a lender will offer. Only go down this route if this is a relationship that you can trust completely.

Once you feel that your credit score is ready, be sure to shop around for a home loan at several lenders. You want to be sure that you’re getting the best rate given your personal financial situation, and not every lender has the same criteria.

Know that even with credit scores that aren’t perfect, there are options for people who want to be homeowners; it’s just a matter of seeking out those options.

The Takeaway

What credit score is needed to buy a house? The numbers hinge on the economic climate, lender and type of loan, but those with imperfect credit often manage to secure home loans. First, know your credit score, take time to improve it if needed, and compare lender offers.

Find out your rate on a SoFi mortgage loan in just two minutes.

SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

SoFi Home Loans
Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See SoFi.com/eligibility for more information.


Read more
hands passing cash

The Fastest Ways to Get Your Tax Refund

Learning that you are eligible for a tax refund can be a welcome surprise.

And, if you have any pressing expenses–maybe you’re behind on a few bills or have been putting off going to the dentist because of the cost–you may be wondering how you might be able to get that money into your hands quickly.

Fortunately, there are a few simple things any taxpayer can do to help ensure that their refund comes as fast as possible.

This includes e-filing with the IRS (rather than physically mailing in your return), and also setting up direct deposit, so there’s no waiting for that refund check to come through the mail.

How Can I Get My Tax Refund Faster?

Here are some key steps you may want to take (starting well before April 15th) to help ensure that you get your tax refund ASAP.

Starting Planning in January

In general, the fastest way to get your tax refund is to file your taxes early, and certainly by the tax deadline (typically April 15th, though May 17th in 2021).

This means that, starting in January, you may want to begin collecting all the necessary information for filling out your tax forms, and decide whether you are going to file on your own, or hire a tax preparation service or accountant to help.

Choosing Electronic Filing Instead of Mail

To get your refund faster, it’s a good idea to choose electronic filing instead of sending in your return by mail.

That way, your refund can begin moving through the system immediately, rather than having to wend its way through snail mail and hands-on refund processing.

A paper tax return can take about six to eight weeks to process, but with electronic filing, or e-filing, taxpayers can typically expect to receive their refund within 21 days.

The Internal Revenue Service (IRS) offers a few options for e-filing .

If taxpayers make an adjusted gross income (AGI) of $72,000 or less per year, then they can use IRS Free File to turn in their tax forms.

For taxpayers whose AGI is greater than $72,000, they can use the IRS’s Free File Fillable Forms service, which lets you simply input your data onto your tax forms so you can e-file (if you choose this option, you’ll need to know how to prepare your own tax return).

The IRS Volunteer Income Tax Assistance (VITA) and the Tax Counseling for the Elderly (TCE) programs also provide help and e-file for taxpayers who qualify.

Most states also offer free e-filing options for state returns.

Taxpayers can also use tax preparation software such as TurboTax, TaxSlayer, TaxAct, or H&R Block. You can use these program to file your taxes yourself, or
go to a professional who knows how to use this type of software.

The IRS has a helpful tool on their website where taxpayers can find an authorized IRS e-file Provider Locator . All taxpayers have to do is input their zip code and choose what kind of provider they need.

Setting Up Direct Deposit

The fastest way to get your tax refund is to have it electronically deposited into your financial account. This is known as direct deposit, and the service is free.

It’s also possible to break up your refund and have it deposited into one, two or even three accounts.

You can set up direct deposit simply by selecting it as your refund method through your tax software, and then inputting your account number and routing number (which you can find on your personal checks, or through your financial institution).

Or, you can tell your tax preparer that you want direct deposit.

It’s also possible to select direct deposit if you’re filing by paper and sending your return through the mail (you may want to double check to make sure you didn’t make any errors inputting your financial account information).

What Is the Fastest Tax Refund Time?

As long as taxpayers have e-filed by the deadline and chosen direct deposit, then the refund should hit their account within 21 days. According to the IRS , nine out of 10 refunds arrive in less than 21 days.

Finding Out Where Your Refund Is

Once everything is filed, taxpayers can check their tax refund status on the IRS’s Where’s My Refund? page.

This requires inputting your Social Security number or ITIN, filing status, and the exact amount of the refund, which can be found on the tax forms that were submitted.

Taxpayers can check Where’s My Refund? Starting 24 hours after e-filing.

The site is updated daily, usually at night. The IRS cautions that you may experience delays in getting your refund if you file by mail, or you are responding to a notice from the IRS.

If it’s been more than 21 days and you still haven’t received your refund, you can call up the IRS at (800) 829-1040 for help. You may also want to contact the IRS if Where’s My Refund? instructs you to do so.

Can You Get Your Tax Return Back the Same Day?

Unfortunately, there is currently no way to get a tax refund back the same day.

However, if taxpayers are in a bind, some tax preparation services offer 0% interest tax refund loans.

Tax refund loans, also called “refund advances,” allow you to access your refund early, but you may want to keep in mind that tax preparers typically charge fees for filing tax returns.

If you are paying a tax preparer just to get the advance, you’ll essentially be paying a company in order to access your refund. In addition, some providers may charge an additional fee for the advance service.

These short-term loans range from $200 to $4,000. In some cases, there may be a minimum amount your refund must meet in order to qualify for a refund advance (how much can vary from one company to another). Also, you may only get part of your expected refund in advance.

Some companies may offer to give you a prepaid card with the loan amount on it within 24 hours.

Once your tax refund is issued, the tax preparer will typically deduce the loan amount from your refund.

If you’d rather not pay any fees, however, you may also want to look into other options.

For instance, if you have bills that are due, it may be worth calling up your providers or credit card companies to see if they can extend their due date while you are waiting for your refund.

Or, if you have a 0% interest credit card, you might want to charge an urgent expense on that card, and then pay it off as soon as the refund comes in.

What’s the Best Way to Spend Your Tax Refund?

If you are carrying any high interest debt, one smart move might be to put your tax refund towards minimizing that debt, or, if possible, wiping it out all together.

Doing this can help you avoid spending more money just on interest charges, and may also help boost your credit score (which may help you qualify for loans and credit cards with lower interest rates in the future).

Or, you might consider using your tax refund to jump-start one of your current savings goals, such as building up an emergency fund, a downpayment on a home, or buying a new car.

For an emergency fund or savings goals you hope to accomplish within the next few years, you may want to put your refund in a high-yield savings account or cash management account.

These options typically offer a higher return than a traditional savings account, but allow you access your money when you need it.

Your tax refund can also help you start saving for the longer term, such as retirement or paying for a child’s education. Using a tax refund to buy investments can help you create additional wealth over time.

The Takeaway

To get your tax refund as quickly as possible, it’s a good idea to file early, and, if possible, avoid the mail.

That means filing electronically (using the IRS’s free service or tax software, or hiring a tax pro), and signing up for direct deposit when you file.

It’s also wise to keep track of your refund on the IRS site, and reach out to the agency if you haven’t received your refund within three weeks.

Getting a refund and looking for a good place to put it? Consider opening a SoFi Money® account.

SoFi Money is a cash management account that allows you to earn a competitive interest rate, save, as well as spend, all in one place. And you’ll pay zero account fees to do it.

You can have your tax refund directly deposited into your SoFi account, and also set up direct deposit for your paycheck (all you need to do is fill out a form, sign it, and submit it to your employer’s payroll department).

Sign up now and start reaping the benefits of a SoFi Money account today.

SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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.

Read more
TLS 1.2 Encrypted
Equal Housing Lender