Life Stages Archives

Jan

2026

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What Is a Bear Market? Definition, Causes & Investing Tips

By Laurel Tincher | Growing Wealth, invest, Investing | Comments Off

Table of Contents

What Is the Definition of a Bear Market?
Why Is It Called a Bear Market?
Characteristics of a Bear Market
History of Bear Markets
3 Examples of Bear Markets
What Causes a Bear Market?
Bear Market vs Bull Market
How to Invest and Manage Your Money During a Bear Market
FAQ

A bear market is defined as a broad market decline of 20% or more from recent highs, which lasts for at least two months. Although bear markets make for dramatic headlines, the truth is that bull markets tend to last much longer. The average bear market typically ends within a year.

While most investors might know the difference between a bull and a bear market, it’s important to know some of the characteristics of bear markets in order to understand how different market conditions may impact your portfolio and your investment choices.

Key Points

• Bear markets are defined as broad market declines of 20% or more from recent highs lasting at least two months, with average declines of 32.4% over approximately 355 days.

• Since World War II, the S&P 500 experienced 13 bear markets, with the most recent occurring from June 2022 to June 2023, resulting in a 25% market drop.

• Bear markets typically result from declining consumer and investor confidence driven by factors including interest rate changes, global events, falling housing prices, and broader economic shifts.

• Cyclical bear markets last a few months to a year, while secular bear markets persist for 10 years or more, often containing minor rallies that fail to create sustained recovery.

• Effective bear market strategies include reassessing risk tolerance, diversifying across asset classes, identifying buying opportunities during price declines, and employing dollar-cost averaging rather than panic selling.

What Is the Definition of a Bear Market?

Investors and market watchers generally define a bear market as a drop of 20% or more from market highs. So, when investors refer to a bear market, it usually means that multiple broad market indexes, such as the S&P 500 Index (S&P 500), Dow Jones Industrial Average (DJIA), and others, fell by 20% or more over at least two months.

Note, though, that 20% is a somewhat arbitrary barometer, but it’s a common enough standard throughout the financial world.

The term bear market can also be used to describe a specific security. For example, when a particular stock drops 20% in a short time, it can be said that the stock has entered a bear market. Bear markets are the opposite of bull markets, the latter of which is when the market is seeing a broad increase in asset values.

Bear markets are often associated with economic recessions, although this isn’t always the case. As economic activity slows, people lose jobs, consumer spending falls, and business earnings decline. As a result, many companies may see their share prices tumble or stagnate as investors pull back.

Why Is It Called a Bear Market?

There are a variety of explanations for why “bear” and “bull” have come to describe specific market conditions. Some say a market slump is like a bear going into hibernation, versus a bull market that keeps charging upward.

The origins of the term bear market may also have come from the so-called bearskin market in the 18th century or earlier. There was a proverb that said it is unwise to sell a bear’s skin before one has caught the bear. Over time the term bearskin, and then bear, became used to describe the selling of assets.

Characteristics of a Bear Market

There are two different types of bear markets:

• Regular bear market or cyclical bear market: The market declines and takes a few months to a year to recover.

• Secular bear market: This type of bear market lasts longer and is driven more by long-term market trends than short-term consumer sentiment. A cyclical bear market can happen within a secular bear market.

History of Bear Markets

The most recent U.S. bear market began in June 2022, largely sparked by rising interest rates and inflation. The bear market officially ended on June 8, 2023, lasting about 248 trading days, resulting in a market drop of around 25%.

Including the most recent bear market, the S&P 500 Index posted 13 declines of more than 20% since World War II. The table below shows the S&P 500’s returns from the highest point to the lowest point in a downturn. Bear markets average a decline of 32.4%, and generally last around 355 days.

Bear markets have occurred as close together as two years and as far apart as nearly 12 years. A secular bear market refers to a longer period of lower-than-average returns; this could last 10 years or more. A secular bear market may include minor rallies, but these don’t take hold.

A cyclical bear market is more likely to last a few weeks to a few months and is more a function of market volatility.

Peak (Start)	Trough (End)	Return	Length (in days)
May 29, 1946	May 17, 1947	-28.78%	353
June 15, 1948	June 13, 1949	-20.57%	363
August 2, 1956	October 22, 1957	-21.63%	446
December 12, 1961	June 26, 1962	-27.97%	196
February 9, 1966	October 7, 1966	-22.18%	240
November 29, 1968	May 26, 1970	-36.06%	543
January 11, 1973	October 3, 1974	-48.20%	630
November 28, 1980	August 12, 1982	-27.11%	622
August 25, 1987	December 4, 1987	-33.51%	101
March 27, 2000	Sept. 21, 2001	-36.77%	545
Jan. 4, 2002	Oct. 9, 2002	-33.75%	278
October 9, 2007	Nov. 10, 2008	-51.93%	408
Jan. 6, 2009	March 9, 2009	-27.62%	62
February 19, 2020	March 23, 2020	-34%	33
June 2022	June 8, 2023	-25%	248
Average		-34%	401

Source: Seeking Alpha/Dow Jones Market Data as of January 2026

https://seekingalpha.com/article/4483348-bear-market-history

3 Examples of Bear Markets

Here are a few examples of some of the more notable bear markets in history.

The Great Depression (1929)

The Great Depression started in 1929, and lasted for years. Between 1929 and when the market bottomed-out in 1932, the stock market shed roughly 90% of its value, and didn’t fully recover for decades, until 1954.

The 2008 Financial Crisis

The 2008 financial crisis, which was a part of the Great Recession, actually started in 2007, when the global economy contracted. Its origins are complicated, but in large part trace back to mortgage-related assets and a collapse of the housing market. The resulting bear market lasted for around 17 total months, with the market recovering in March 2009 after the market lost more than half of its value.

The COVID-19 Crash (2020)

Most recently, the COVID-19 pandemic in early 2020 sparked another bear market. The market plummeted starting in late February 2020, and in all, lost 37% of its value over the next month or so. It did rebound fairly fast, though, and the market regained momentum by April.

What Causes a Bear Market?

Usually bear markets are caused by a loss of consumer, investor, and business confidence. Various factors can contribute to the loss of consumer confidence, such as changes to interest rates, global events, falling housing prices, or changes in the economy.

When the market reaches a high, people may feel that certain assets are overvalued. In that instance, people are less likely to buy those assets and more likely to start selling them, which can make prices fall.

When other investors see that prices are falling, they may anticipate that the market has reached a peak and will start declining, so they may also sell off their assets to try and profit on them before the decline. In some cases panic can set in, leading to a mass sell-off and a stock market crash (but this is rare).

Bear Markets vs Recessions: What’s the Difference?

A bear market, as noted, marks a 20% or more decline in the stock market. A recession is a broader issue related to the economy. Specifically, a recession is when the economy shrinks or contracts, and we typically don’t know that it’s happening until well after it’s started contracting (and perhaps even after it’s started growing once again). In short, bear markets have to do with stock markets, while recessions refer to negative growth of the broader economy.

What Is a Bear Market Rally

Things can get tricky if there is a bear market rally. This happens when the market goes back up for a number of days or weeks, but the rise is only temporary. Investors may think that the market decline has ended and start buying, but it may in fact continue to decline after the rally. Sometimes the market does recover and go back into a bull market, but this is hard to predict.

If the bear market continues on long enough then it becomes a recession, which can go on for months or years. That said, it’s not always the case that a bear market means there will be a recession.

Once asset prices have decreased as much as they possibly can, consumer confidence begins to rise again, and people start buying. This reverses the bear market trend into a bull market, and the market starts to recover and grow again.

Bear Market vs Bull Market

A bull market is essentially the opposite of a bear market. As consumer confidence increases, money goes into the markets and they go up.

A bull market is defined as a 20% rise from the low that the market hit in a bear market. However, the parameters of a bull market are not as clearly defined as they are for a bear market. Once the bottom of the bear market has been reached, people generally feel that a bull market has started.

How to Invest and Manage Your Money During a Bear Market

There are a few different bear market investing strategies one can use to both prepare for a bear market and navigate through one.

1. Reassess Your Risk Tolerance

When preparing for a bear market, it’s a good idea to reduce higher-risk holdings such as growth stocks and speculative assets. One can move money into cash, gold, bonds, or other less risky investments to try and reduce the risk of losses if the market goes down.

These safe investments tend to perform better than stocks during a bear market. Types of stocks that tend to weather bear markets well include consumer staples and healthcare companies.

2. Diversify Your Portfolio

Another investing strategy is diversification. Rather than having all of one’s money in stocks, distribute your investments across asset classes, e.g., precious metals, bonds, real estate, or other types of investments.

This way, if one type of asset goes down a lot, the others might not go down as much. Similarly, one asset may increase a lot in value, but it’s hard to predict which one, so diversifying increases the chances that one will be exposed to the upward trend, and you’ll see a gain.

3. Look for Buying Opportunities

In a broad sense, if the market is at a high and assets are clearly overvalued, this may not be the best time to buy. And vice versa, if assets are clearly undervalued it may be a good time to buy and grow one’s portfolio.

A bear market can be a good time to identify assets that might grow in the next bull market and start investing in them.

4. Consider Dollar-Cost Averaging

Dollar-cost averaging is an investment strategy that involves making regular, relatively small investments at certain intervals regardless of what’s happening with the broader market or news cycle. In all, the various prices at which investments are purchased average out over time, so if an investor is buying at a fairly high price one week, they may be buying at a relatively low price another week. Over time, the buying prices average out.

That can help some investors lower their overall risk profile, and take some of the emotion out of investment decisions.

5. Understand Advanced Strategies (Like Short Selling)

Short selling is a very risky strategy that some investors take on in anticipation of a potential bear market. This involves borrowing shares and selling them, then hoping to buy them back at a lower price. It’s risky because there is no guarantee that the price of the shares will fall, and since the shares are borrowed, typically using a margin account, they may end up owing the broker money if their trade doesn’t work out as they hope.

Overall, it’s best to create a long-term investing strategy rather than focusing on short-term trends and making reactive decisions to market changes. It can be scary to watch one’s portfolio go down, especially if it happens fast, but selling off assets because the market is crashing generally doesn’t turn out well for investors.

The Takeaway

Bear markets can be scary times for investors, but even a prolonged drop of 20% or more isn’t likely to last more than a few months, according to historical data. In some cases, bear markets present opportunities to buy stocks at a discount (meaning, when prices are low), in the hope they might rise.

Also there are strategies you can use to reduce losses and prepare for the next bull market, including different types of asset allocation. The point is that whether the markets are considered bearish or bullish, any time can be a good time to invest.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

Take a step toward reaching your financial goals with SoFi Invest.

FAQ

How long do bear markets last?

Bear markets may last a few months to a year or more, but most bear markets end within a year’s time. If they go on longer than that they typically become recessions. And while a bear market can end in a few months, it can take longer for the market to regain lost ground.

Is a bear market good or bad?

A bear market is probably going to be considered a bad thing by some investors, as it could negatively affect their portfolio value. However, others might consider it an opportunity to utilize strategies to take advantage and potentially, generate returns.

When was the last bear market in the U.S?

The most recent bear market occurred in 2022, and lasted into 2023. During that time, the market lost roughly 25% before recovering.

What are the best assets to hold in a bear market?

Some investors prefer to hold assets that are generally less volatile during bear markets, in the hopes that they’ll hold their value better than more volatile assets. That could include certain types of stocks or funds, bonds, or even commodities such as precious metals.

What was the worst bear market?

The worst bear market in history occurred after the market crash in 1929, and lasted for several years. During that time, the economy entered the Great Depression, and the market lost almost 90% of its value.

Photo credit: iStock/Morsa Images

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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.

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

S&P 500 Index: The S&P 500 Index is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. It is not an investment product, but a measure of U.S. equity performance. Historical performance of the S&P 500 Index does not guarantee similar results in the future. The historical return of the S&P 500 Index shown does not include the reinvestment of dividends or account for investment fees, expenses, or taxes, which would reduce actual returns.
Dollar Cost Averaging (DCA): Dollar cost averaging is an investment strategy that involves regularly investing a fixed amount of money, regardless of market conditions. This approach can help reduce the impact of market volatility and lower the average cost per share over time. However, it does not guarantee a profit or protect against losses in declining markets. Investors should consider their financial goals, risk tolerance, and market conditions when deciding whether to use dollar cost averaging. Past performance is not indicative of future results. You should consult with a financial advisor to determine if this strategy is appropriate for your individual circumstances.

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Jan

2026

Does Debt Consolidation Hurt Your Credit?

By SoFi Editors | Credit, Debt Payoff, Financial Independence, personal_loan | No Comments

You may have heard that consolidating your debts can hurt your credit score. So, if you’re considering this financial strategy to free up cash flow and otherwise streamline debts, it’s natural to wonder if that’s true. And like so many questions related to finances, the answer depends upon your specific situation.

It’s important to remember that a combination of many factors can affect credit scores and to understand how those factors are considered in credit score algorithms. We’ll use FICO® as an example—according to them, the high-level breakdown of credit scores is as follows:

• Payment history (35%): This includes delinquent payments and information found in public records.

• Amount currently owed (30%): This includes money you owe on your accounts, as well as how much of your available credit on revolving accounts is currently used up.

• Credit history length (15%): This includes when you opened your accounts and the amount of time since you used each account.

• Credit types used (10%): What is your mix? For example, how much is revolving credit, like credit cards? How much is installment debt, such as car loans and personal loans?

• New credit (10%): How much new credit are you pursuing?

Now, here is information to help you make the right debt consolidation decision.

Benefits of Debt Consolidation

When you’re juggling, say, multiple credit cards, it can be easy to accidentally miss a payment. Depending on the severity of the mistake, that can have a negative impact on your credit score. This, in turn, can make it more challenging to get loans when you need them, or prevent you from getting favorable loan terms, like low interest rates. Plus, even if you don’t miss a payment, when you have numerous credit card bills to juggle, you probably worry that one will get missed.

Plus, it’s not uncommon for credit cards to have high interest rates, and when you only make the minimum payments on each of them, you very well may be paying a significant amount of money each month without seeing balances drop very much at all.

So, when you combine multiple credit cards into one loan, preferably one with a lower interest rate, it’s much more convenient, making it less likely that you’ll accidentally miss a payment. And paying less in interest will likely make it easier to pay down your debt.

How you handle your debt consolidation, though, and the way in which you manage your finances after the consolidation each play significant roles in whether this strategy will ultimately help you.

Steps to Take: Before the Debt Consolidation Loan

Debt accumulates for different reasons for different people. For some, unexpected medical bills or emergency home repairs have served as culprits. For others, being underemployed for a period of time may have caused them to start carrying a credit card debt balance. For still others, it may be about learning how to budget more effectively.

No matter why credit card debt has built up, it can help to re-envision a debt consolidation strategy as something bigger and better than just combining your bills. As part of your plan, analyze why your debt accumulated and be honest about which ones were under your control and which were true emergencies.

And if you end up using a lower-cost loan to consolidate your bills, consider using any money saved to build up an emergency savings fund to help prevent the accumulation of credit card balances in the future.

The reality is that, if you consolidate your debts in conjunction with a carefully crafted budgeting and savings plan, then debt consolidation can be a wonderful first step in your brand-new financial strategy.

Debt Consolidation: When It Can Help Your Credit Score

Based on the factors used by FICO, here are ways in which a consolidation loan can help credit scores:

Payment history (35%)

Because making payments on time is the largest factor in FICO credit scores, a debt consolidation loan can help your credit if you make all of your payments on time.

Amount currently owed (30%)

Although you may not instantly reduce the amount you owe by, say, consolidating all of your credit card balances into a personal loan, there can be a benefit to your credit score here. That’s because the credit score algorithm looks at credit limits on your cards, as well as your outstanding balances, and creates a formula that calculates your credit card utilization.

Here is more information about credit card utilization, including how to calculate and manage yours.

Credit types used (10%)

As you may know, there are several different types of credit, such as credit cards, retail accounts, installment loans, finance company accounts, and mortgage loans. According to myFICO , responsibly using a mix of these, such as credit cards and installment loans, may help your credit score.

However, it’s certainly not necessary to have one of each, and it’s not a good idea to open credit accounts you don’t intend to use.

Debt Consolidation: When It Can Hurt Your Credit Score

Now, here are ways that the same initial step—taking out a debt consolidation loan—may hurt your credit.

Payment history (35%)

As is the case with most loans, making late payments on a consolidation loan can hurt your credit score (depending on the severity of the situation). Loans in a delinquent status are mostly likely to have a negative impact on your credit, depending on the lenders’ policies.

Learn more about payment history .

Amount currently owed (30%)

Now, let’s say that you pay off all your credit cards with a personal loan and then you begin using them again to the degree that you can’t pay them off monthly. Any gain that you saw in your credit score will likely disappear as your credit utilization numbers rise again.

Another way that credit consolidation can harm your score is if you combine all of your credit card balances to just one credit card, resulting in a high utilization rate. But if you are able to keep it relatively low, it is less likely to negatively affect your score.

Learn more about amounts owed .

Credit history length (15%)

If you close credit cards that you pay off, you’ll reduce the age of your accounts, overall, and this can hurt your credit score.

Learn more about length of credit history .

Credit types used (10%)

If you combine all of your credit card balances into just one credit card, as described above, you won’t have opened an installment (personal) loan, so that won’t help with diversifying credit types.

Learn more about credit mix .

New credit (10%)

If you apply for a personal loan or a balance-transfer credit card and are rejected, this can cause your credit score to decrease. And if you apply for multiple loans or credit cards, looking for a lender that will accept your application, this can also hurt your score. Multiple requests for your credit report information (known as “inquiries”) in a short period of time can decrease your score, though not by much.

Learn more about new credit .

Concerned about building or rebuilding credit? Check out a few tips SoFi put together on how to strategically boost your credit score.

Investigating a Personal Loan for Debt Consolidation

When it’s time to apply for the personal loan, you’ll want to get a low rate. In February 2019, the average credit card interest rate was reported as 17.67%; this means that, by not consolidating your credit cards into a personal loan with a lower interest rate, you could be paying more interest than if you did.

When choosing a lender, ask about the fees associated with the loan. Some lenders charge fees; others,like SoFi, don’t. You can always use a lender’s annual percentage rates (APRs) as a way to understand the true cost of financing.

Also, you may consider calculating the shortest loan term that your budget can comfortably accommodate because, the more quickly you pay off the debt, the more money you’ll save over the life of the loan because you’re paying less in interest.

You can find more information about saving money as you consolidate your debts, and you can also calculate payments using our personal loan calculator.

Consolidate Your Debt with a SoFi Personal Loan

If you’re ready to say goodbye to high-interest credit cards and to juggling multiple payments each month, a SoFi personal loan may be a good option.

Benefits of our personal loans include:

• Fast, easy, and convenient online application process

• Low interest rates

• No origination fees required

• No prepayment fees required

• Fixed rate loan

You deserve peace of mind. And by taking out a personal loan to consolidate debt, the stress of juggling multiple credit card payments can be history. Ready for your fresh start?

Learn more about how using a SoFi personal loan to consolidate high-interest credit card debt could help you meet your goals.

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 .

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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Jan

2026

A woman sits in front of a laptop taking notes from the information on the screen.

Student Loan Refinancing: What Happens If There’s Overpayment?

By Rebecca Safier | Fresh Out of School, Going to College, Student Loans, student_loan | Comments Off

If there’s an overpayment on your student loan, the money might be returned to you or go toward your next loan payment. Another possibility is that you may have to request a student loan overpayment refund.

Student loan overpayment can happen on your federal or private student loans or during student loan refinancing. Fortunately, it can be resolved without too much effort. Here’s a closer look at what happens when you overpay your student loans and how you can get your money back.

Table of Contents

Student Loan Overpayment Explained
What Happens When a Student Loan Is Overpaid?
What Should I Do With My Refund?
How to Avoid Future Overpayments
FAQ

Key Points

• Student loan overpayment occurs when borrowers pay more than the amount owed, and the excess funds may be returned or applied to future payments.

• Loan servicers typically apply overpayments to interest rather than principal unless borrowers specify otherwise.

• Borrowers can contact lenders to request that overpayments be directed toward the principal balance, helping to pay off loans faster and save on interest.

• Refunds from overpayments can be used to cover living expenses, pay down high-interest debt, or make additional principal payments on student loans, including refinanced loans.

• Overpaying student loans strategically toward principal can shorten loan terms and significantly reduce total interest paid, potentially saving hundreds of dollars over time.

Student Loan Overpayment Explained

Student loan overpayment occurs when you pay off more than the amount you owe to your loan servicer. If you owe $700 on your student loan and make a $850 payment, you’ve overpaid by $150.

This might happen for a couple of reasons.

• You might send an extra payment before your loan servicer has processed your previous one. It may take some time for your payments to be reflected in your account. If you send the extra payment before the servicer has applied your last payment, you could end up overpaying your loan balance.

• Overpaying loans can also happen when you refinance student loans. When you refinance, your new loan provider will pay back your old loan balances. Specifically, it will send the amount that’s agreed upon when you sign the Truth in Lending (TIL) Disclosure, which is one of the documents you must sign to finalize your loan refinance.

If you make a payment on your old loans after you’ve signed the TIL Disclosure but before your new refinancing provider has disbursed the payment, the amount sent to your old servicer will exceed your balance. Your new lender will have paid off your old loan and then some, resulting in a student loan overpayment.

That’s not to say that you shouldn’t keep paying back your student loans while you’re waiting for refinancing to go through. In fact, it’s important to keep up with repayment so you don’t miss any due dates when it’s time to pay back student loans. Otherwise, you could end up with a negative mark on your credit report. Wait until your new refinanced student loan is up and running before you stop paying your old student loans. Any overpayment that may have been made can be resolved after that time.

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What Happens When a Student Loan Is Overpaid?

There are a few things that can happen when there are overpaid student loans. For one, a loan servicer might send the extra payment back to you via check or direct deposit.

If a refinancing provider overpaid your account, your old servicer might send the payment back to them. Then, the refinancing lender could send you back the payment or apply it toward your new, refinanced student loan.

Refund Process and Timelines

Let’s say, for instance, after using a student loan refinancing calculator, you’ve decided to refinance your federal student loans with a private lender. You understand that your new refinanced loan means you forfeit federal benefits and protections, and you know that if you refinance for an extended term, you may pay more interest over the life of the loan. If the new private lender sends an overpayment to your existing loan servicers, those servicers will generally return the extra amount to the private lender. The lender will then typically apply that overpayment retroactively to the principal balance on your new refinance loan, a process that may take about six to eight weeks.

In some cases, your old servicer will send the payment back to you. For example, a lender might send a refund to the borrower directly if the overpaid amount is less than $500. In this case, the amount might be sent back to you via check using the address the loan servicer has on file.

You can also receive the refund as a direct deposit, but you may need to request it specifically. Reach out to your loan servicer to find out how it deals with excess payments and any steps you need to take to receive your student loan refund.

How Overpayment Affects Loan Balance and Interest

Unless you’ve specified otherwise, a student loan overpayment that is not returned to you may be applied toward the interest on the student loan rather than the principal balance. However, applying more money toward the loan balance is what reduces the amount of interest that accrues and helps you end up paying less total interest on the loan overall.

An overpayment could also be applied to your next loan payment, which typically goes toward the future interest on the loan rather than the principal.

You can contact your lender to instruct them that you want any overpayments to be applied to the principal of your loan.

Recommended: Student Loan Consolidation

What Should I Do With My Refund?

Finding out you overpaid your student loans can result in a windfall of cash. You may be wondering what to do with your student loan overpayment refund once you receive it. Here are a few options to consider.

Put Toward Next Payment

You could put the refund toward the next payment of your loan to help pay it down faster. After all, you’ve already designated that cash for a student loan payment anyway, so you may not miss having it in your bank account.

Use For Personal Expenses

Another option is to use the refund to cover personal expenses such as rent, groceries, transportation, or other daily living expenses, or for paying down high-interest debt, like credit card debt. Covering costs like these might be a priority over prepaying your student loans.

Reapply Toward Loan Principal

Putting the overpayment toward the principal balance of your loan could help you pay your student loan off early and save on interest charges. Let’s say, for example, that you owe $5,000 at a 7.00% interest rate with a five-year repayment term. If you make an extra payment of $500, you’ll get out of debt eight months sooner and save $292 in interest.

You can calculate your student loan payments and then see how much you might save by making extra payments. If you choose this route, instruct your loan servicer to apply the extra payment to your principal balance, rather than saving it for a future payment.

Build or Replenish Emergency Savings

It’s useful to have an emergency fund on hand with at least three to six months’ worth of living expenses that you can draw on if you lose your job or encounter unexpected costs. Funneling that student loan refund into an existing emergency fund, or starting a fund if you don’t yet have one, could help save the day if you run into financial hardship.

How to Avoid Future Overpayments

Rather than dealing with student loan overpayment after the fact, you can take steps to avoid it moving forward. These strategies can help.

Monitor Loan Servicer Activity

Log into your account on your loan servicer’s platform regularly to make sure your payments are being applied correctly. Open and read all communications from your servicer, including emails and those sent via snail mail, and carefully review all your loan statements each month. If you spot an overpayment, make sure it was applied to the balance. If it wasn’t, contact your loan servicer to remedy the situation.

Set Up Automated Payment Controls

Log into your online account on your servicer’s website and set up automated payment for your student loans. (As a bonus, doing this may also give you a small discount on your loan’s interest rate.) Along with the payment date and amount, specify how you want your payments to be applied, including any overpayments that are made. And again, review your statements and check your account to make sure the payments are being applied the way you want them to be.

The Takeaway

Overpaying student loans may be an inconvenience, but don’t worry about losing that money — you’ll typically get it back in the form of a refund or a payment toward your student loan. The exact process may vary by lender, so reach out to yours to find out what will happen next and whether there are any steps you must take to get your refund. Ensure that your loan servicers have your current address on hand, too, in case they need to mail you a check.

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

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

FAQ

What happens if you overpay a student loan?

If you overpay a student loan, your servicer will generally issue a refund. That refund may go to you or, in the case of refinancing, to the third-party servicer that issued the payment. The exact process may vary by lender, so get in touch with yours to find out where it will send your refund.

What happens to excess student loan money?

When you borrow a student loan, the lender usually sends the amount directly to your financial aid office, which then applies it to required expenses like tuition and fees. It then sends any excess funds to you so you can use the money on books, supplies, living expenses, and other education-related costs. If you find you borrowed more than you need, you could consider returning the amount to your lender. If you return part of a federal student loan within 120 days of disbursement, you won’t have to pay any fees or interest on the amount.

Does refinancing affect student loan forgiveness?

Refinancing student loans can affect your eligibility for loan forgiveness. Most loan forgiveness programs are federal, and when you refinance federal loans with a private lender, you lose access to federal programs, such as Public Service Loan Forgiveness and Teacher Loan Forgiveness.

Can I request a refund of my student loan overpayment?

Yes, you can request a refund of a student loan overpayment. Reach out to your loan servicer and ask to have the overpayment amount refunded to you. Be sure to specify how you would like the refund — via direct deposit or a check that’s mailed to you.

Does overpaying help pay off loans faster or reduce interest?

Overpaying your student loans may help you repay your loans faster and reduce the interest rate as long as the overpayment is directed to the principal balance of the loan. Reducing the principal will reduce the amount of interest you owe. It can also help shorten your loan term.

Photo credit: iStock/stefanamer

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 Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private 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.

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.

SOSLR-Q126-009

Jan

2026

A man wearing a blue denim shirt and glasses sits at a table in a living room, looking at a phone while a computer is open by his side.

Is It Possible to Use Personal Loans for Rent Payments?

By Alene Laney | Financial Independence, personal_loan | Comments Off

If you’re in a bind and there aren’t many other options available to you, it is possible to get a personal loan for paying rent. However, you’ll need a solid credit score and credit history to get a good interest rate on a rental assistance loan.

Before you’d get a loan for rent, you may want to evaluate the costs involved and the pros and cons. Read on to learn more about getting a loan for rent payment.

Table of Contents

What Types of Loans Can You Use for Rent Payments?
Reasons Why You May Need to Use Loans for Rent
What Happens If You Do Not Pay Your Rent?
Is It a Good Idea to Use Personal Loans for Rent Payments?
Pros of Using Loans for Rent Payments
Cons of Using Loans for Rent Payments
FAQ

Key Points

• It is possible to use a personal loan for paying rent, but it’s generally advised against unless you can’t find another way to cover costs.

• Secured and unsecured personal loans, as well as high-cost payday loans, can be used for rent payments.

• Personal loans can offer competitive terms, versatility, and may help build credit if managed responsibly.

• Downsides include accruing interest and fees, increasing debt, and the risk of harming your credit score if payments are missed.

• Alternatives to loans for rent include negotiating with your landlord or seeking assistance through resources like 211.

What Types of Loans Can You Use for Rent Payments?

There are several different types of personal loans that you can obtain for paying rent. These include secured and unsecured personal loans for rent assistance, as well as payday loans.

Secured Personal Loans

Secured loans require putting up collateral, which is an item of value used to back up the loan. If the payments on the loan are not made, the lender can seize the collateral and sell it to make up for their losses. Some types of collateral that may be used include cash savings, stocks, a car, a boat, a home, jewelry, fine art, and future paychecks.

Securing a loan with collateral may result in a lower interest rate, but all conditions are dependent on what the lender is willing to take and what terms they’re willing to offer on a personal loan. Given that if you use a secured loan to pay rent and can’t repay it, you could lose your collateral, this may not be the best solution if you are already struggling financially.

Unsecured Personal Loans

Unsecured personal loans do not require collateral. Since the lender has fewer options for recovering the funds should the borrower default, these types of loans often come with higher interest rates and shorter repayment terms.

Payday Loans or Cash Advances

A payday loan, or cash advance loan, is a small, expensive loan you repay all at once, typically on your next payday. Interest rates and fees can be exorbitant. As a result, this type of loan should generally only be a last resort for covering rent payments.

Reasons Why You May Need to Use Loans for Rent

Using a personal loan for rent isn’t something you’d want to do routinely. Before you signed your lease you undoubtedly gave thought to how much rent you can afford. But you may come across certain scenarios where it may make sense, such as when:

• You have a short-term financial setback.

• You’ll soon have the funds to pay the loan back.

• You have a good to excellent credit score.

• Your only other option to cover bills is a payday loan.

Keep in mind that while there’s a lot you can use a personal loan for, taking one out still involves assuming debt. If you’re not confident you can repay a rent loan, then it’s worth considering if you have any other options available to cover your rental costs for the month.

What Happens If You Do Not Pay Your Rent?

If you do not pay your rent, your landlord can start eviction proceedings against you. Laws vary from state to state and city to city, but it’s important to pay your rent on time.

If you know you’re going to have trouble paying rent, dig out your lease agreement and find out if you have a grace period, what the late fees are going to be, and who to contact if you need to pay late. If you reach out to your landlord before you miss a due date and explain your situation, they may be willing to give you a grace period and delay eviction proceedings or negotiate your rent in some other way.

Recommended: How Much to Spend on Rent

Is It a Good Idea to Use Personal Loans for Rent Payments?

Generally, experts advise against using a personal loan for paying rent. Ideally, you should have started an emergency fund that can cover these essential costs if something unexpected arises. Once you’re on your feet again, you can budget for future upsets. “If it works with your income, the 50/30/20 budget is one simple method for people starting to organize their finances. This budget allocates 50% of your income for essentials, like rent and bills; 30% to personal day-to-day spending; and 20% for savings or financial goals,” says Brian Walsh, CFP® and Head of Advice & Planning at SoFi.

However, if you’ve decided that a personal loan is your best course of action, there are some positive aspects to obtaining loans for rent over other potential options. Of course, there are downsides to take into account as well.

Pros of Using Loans for Rent Payments

Personal loans are known for their flexibility and versatility. Typical personal loan requirements needed for approval make these loans available to a wide variety of people. Here are some of the upsides of turning to a personal loan for paying rent.

Potentially Competitive Loan Terms

A personal loan can come with competitive terms. If you’ve kept your credit in good shape, you may be able to qualify for a low interest rate with low fees and a reasonable repayment term. Your credit score doesn’t have to be perfect to be approved for a personal loan. The minimum required credit score for a personal loan can start at 580. But to get the best terms and rates, you usually need a credit score of at least 640.

Versatility and Accessibility

Personal loans are known for being flexible. Borrowers can use them for a wide variety of purposes. For instance, you can use a personal loan for debt consolidation or to cover home renovations, an upcoming vacation, or even rent, among other things. Plus, personal loans offer quick access to funds — sometimes even the same day you apply.

Could Help You Build Credit

If you make all of your payments on time, having a personal loan could improve your credit profile. Adding an installment loan can also improve your credit mix, which is factored into your score.

Affordability

Interest rates on personal loans are generally lower than interest rates for credit cards. Your landlord may not even be able to take a credit card payment.

Cons of Using Loans for Rent Payments

Using a personal loan to pay rent generally isn’t recommended unless it’s a last resort. There are a number of drawbacks to consider.

Additional Fees

Personal loans aren’t free. You may have to pay an upfront fee to take out the loan, not to mention late fees if you miss a payment or even prepayment penalties if you pay in advance. Look around for lenders that have competitive rates and few or no fees — they are out there.

Possible Harm to Credit Score

If you run into trouble making your loan payments on time, it could have a negative impact on your credit. This could make it harder to qualify for other types of loans, such as auto loans and mortgages, with favorable interest rates in the future.

Interest Rates

If you’re having trouble making your rent payment, other areas of your financial life may have taken a hit. This could mean the interest rate you’re given for a personal loan will be less than ideal. Even if you’ve been able to maintain great credit, you’ll still need to pay interest on a loan for rent.

Increased Debt

Personal loans add debt to your bottom line. You’ll pay more over time by financing your rent payment into a loan. If you’re experiencing financial woes, adding a loan payment on top of what you’re going through may not be a good option.

The Takeaway

It’s possible to obtain a personal loan for a wide range of purposes, including paying rent. However, it’s important to weigh the pros and cons of getting a loan for rent before you do so. You’ll owe interest (and possible fees), and you could do harm to your credit if you’re not timely about repayment. But if it’s your last resort, a loan for rent is an available option.

If you do decide to get a personal loan — whether for covering rent or another purpose — it’s important to shop around to find the best possible offer for you.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

FAQ

Are you able to use loans for rent payments?

Yes, you can use rent loans for payments. You may want to examine all your options before you do, though. Personal loans carry fees and interest, and if you miss payments, you can drag down your credit score.

Is it hard to get a loan for rent payments?

It can be hard to get a loan if you have poor or thin credit or a low income. A lender will analyze your credit score, credit history, and income to determine what amount you can afford to borrow and on what terms.

What type of loan is good for rent payments?

Personal loans are a flexible means to pay for a number of things, including rent. Payday loans and credit card cash advances are high-cost ways to make rent payments, and generally should be avoided.

What are the risks of using a personal loan to pay rent?

If you use a personal loan to pay rent and are not able to repay what you have borrowed and still keep up with future rent payments, you could find yourself in a financial hole that is difficult to dig your way out of. Defaulting on your personal loan payments will have a negative impact on your credit score, which is one thing a landlord might be looking at before agreeing to rent to you in the future.

Are there alternatives to using a loan if I cannot afford my rent?

If you cannot pay your rent and have attempted to negotiate a reduction or other rent relief with your landlord, other options besides a loan might be available depending on where you live. Call 211, a national nonprofit line for those struggling with rent and utility bills. The organization also maintains information about eviction regulations in local markets. Of course, defraying your costs by finding someone to share your home or breaking your lease and changing your living arrangement are also options.

Photo credit: iStock/nortonrsx

SOPL-Q126-003

Jan

2026

Four credit cards, each in a different bright color — orange, blue, green, and yellow — stand out against a yellow and blue background.

Credit Card Refinancing vs Consolidation

By SoFi Editors | Credit, Financial Independence, personal_loan | No Comments

If you have high-interest credit card debt and are ready to put together a plan to pay it back, you might be considering one of two popular methods: credit card refinancing vs. debt consolidation.

Both involve paying off your debt with another credit card or loan, ideally at a lower interest rate. Still, the two methods are not the same, and both options require careful consideration. Below, we’ll discuss the pros and cons of each debt payback method, so you can make an informed decision.

Table of Contents

What Is Credit Card Refinancing and How Does it Work?
What are the Benefits of Credit Card Refinancing?
Who Should Consider Credit Card Refinancing?
What Is Credit Card Debt Consolidation?
Credit Card Refinancing vs. Debt Consolidation
FAQ

Key Points

• Credit card refinancing transfers high-interest debt to a lower-interest card, often with a 0% APR promotional period, to save on interest.

• Debt consolidation combines multiple debts into one loan, simplifying payments and potentially reducing interest.

• Refinancing is ideal for smaller debts that can be paid off quickly, while consolidation suits larger debts needing structured payments.

• Consider credit score, debt amount, and your financial situation when choosing between refinancing and consolidation.

• Refinancing may incur fees and affect credit scores, while consolidation offers fixed payments but may not significantly lower interest.

What Is Credit Card Refinancing and How Does it Work?

Credit card refinancing is the process of moving your credit card balance(s) from one card or lender to another with a lower interest rate. The main purpose of refinancing is to reduce the amount of interest you’re paying with a lower rate while you pay off the balance.

Common Ways to Refinance Credit Card Debt

A common way to accomplish a credit card refinance is to pay off your existing credit cards with a brand-new balance-transfer credit card. This type of card offers a low or 0% interest rate for a promotional period that may last from a few months to 18 months or more. Can you refinance a credit card that you already have? Perhaps. You can always try to approach your existing credit card issuer and ask for a lower interest rate, possibly by doing a balance transfer to a lower-rate card issued by the same company.

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What are the Benefits of Credit Card Refinancing?

We’ve discussed what is credit card refinancing and its goal: to lower your interest rate. Now let’s explore some of the benefits (and drawbacks) of refinancing.

Pros

• You may qualify for a promotional 0% annual percentage rate (APR) during your card’s introductory period. If you can pay down your debt during this time, you could potentially get out of debt faster.

• Depending on the interest rate you’re offered, you could save money in interest charges.

• Bill paying would be streamlined if you decide to refinance multiple credit cards into one new credit card.

• If monthly payments are reasonable, it may be easier to consistently pay them on time. This can help build your credit score.

Cons

• The introductory 0% interest period is short-term, and after it ends, the interest rate can skyrocket to as high as 25%.

• There may be a balance transfer fee of 3%-5%, which can add to your debt.

• 0% interest balance transfer cards often require a good or excellent credit score to qualify.

• Your credit score may temporarily dip a few points when you apply for a new credit card or loan. That’s because the lender will likely run a hard credit check.

Who Should Consider Credit Card Refinancing?

Credit card refinancing isn’t right for everyone. That said, a balance transfer to a 0% APR card could be a good move if you have a smaller debt to manage or are carrying a balance on more than one credit card. Plus, transferring multiple balances into one card can streamline bills. All of the usual credit card rules apply when you transfer a balance, so you’ll want to make every payment on time with your new card.

Refinancing may make sense if you’re looking for better terms on your credit card debt, qualify for a 0% APR, and can pay off the balance before the promotional period ends.
So, as you’re weighing your options, you’ll want to consider a number of factors, including:

• Your credit score and credit history

• How much debt you have

• Your personal finances and whether or not you can eliminate the debt fairly quickly

Recommended: The Risks of Payday Loans

What Is Credit Card Debt Consolidation?

Credit card debt consolidation is an alternative to credit card refinancing. The term “debt consolidation” refers to the process of paying off multiple credit cards or other types of debt (such as medical debt) with a single loan, referred to as a debt consolidation loan. The main purpose of consolidation is to simplify bills by combining multiple payments into one fixed loan payment, while ideally also saving on interest.

Types of Debt Consolidation

There are two primary types of debt consolidation loans: a personal loan and a loan secured by your home equity. The latter could be either a home equity loan or a home equity line of credit (HELOC). Not everyone owns a home or has enough equity to qualify for home equity lending, so let’s focus on what a personal loan is and how you might use it to consolidate debt.

A personal loan (sometimes referred to as a debt consolidation loan) will often have a lower interest rate than most credit cards (with the exception of the 0% APR period on a credit card, of course). However in order to qualify for a lower rate on a personal loan, you’ll need to have a strong credit score, which will largely determine your personal loan interest rate. Depending on your financial profile, you might be able to borrow anywhere from $5,000 to $100,000.

There are pros and cons to paying off multiple credit cards with a single short-term loan. Let’s take a look:

Pros

• Personal loans often have lower interest rates than credit cards and can save you money on monthly payments as well as on interest charges over the life of your debt repayment.

• You can pay off multiple debts with one loan, which can take the hassle out of bill paying.

• The structured nature of a personal loan means you can make equal payments toward the debt at a fixed rate until it is eliminated.

• With most personal loans, you can opt for a fixed interest rate, which ensures payments won’t change over time. (Variable interest rate loans are available, but their lower initial rate can go up as market rates rise.)

Cons

• The terms of a loan will almost always be based on your credit history and holistic financial picture (another reminder to keep an eye on personal finance basics like making timely payments). Not every borrower will qualify for a low interest rate or get approved for a personal loan at all.

• Some lenders may charge fees, including personal loan origination fees.

💡 Quick Tip: Wherever you stand on the proposed Trump credit card interest cap, one of the best strategies to pay down high-interest credit card debt is to secure a lower interest rate. A SoFi personal loan for credit card debt can provide a cheaper, faster, and predictable way to pay off debt.

Credit Card Refinancing vs. Debt Consolidation

To recap, the difference between debt consolidation and a credit card refinance is first a matter of goals.

With credit card refinancing — as with other forms of debt refinancing — the aim is to save money by lowering your interest rate. Debt consolidation may or may not save you money on interest, but will certainly simplify bills by replacing multiple credit card obligations with a single monthly payment and a structured payback schedule. This structure and simplification can be just what it takes to help some borrowers who are struggling with credit to get their debt paid off.

The other difference is that credit card refinancing typically utilizes a balance transfer credit card that has a 0% or low interest rate for a short time. This limits the amount you can transfer to what you can comfortably pay off in a year or so. Debt consolidation utilizes a personal loan, which allows for higher balances to be paid off over a longer payback period.

Which strategy is right for you? That depends on a number of factors, including the amount of debt you have, your current interest rates, and whether you’re able to stick to a structured repayment schedule. Of course, it’s important to regulate your use of credit cards in either scenario. The last thing you want is to be paying off a personal loan or facing the expiration of a 0% interest rate when you’ve racked up more credit card debt.

The chart below sums up the credit card refinancing vs. debt consolidation story.

Side-by-Side Comparison of Key Features

	Credit Card Refinancing	Debt Consolidation Loan
Account Type	New credit card with introductory balance-transfer interest rate offer	Lump-sum personal loan
Maximum Amount	Will vary based on lender rules and borrower qualifications	$5,000-$100,000
Upfront Fees	3%-5%	Some lenders have no fees upfront
Interest Rate	Typically has 0% interest for first 12-18 months, followed by market rates, which could be as high as 25% or in some cases more	Fixed interest rate ensures steady payments over the life of the loan
Repayment Term	The low interest rate is typically only available for 18 months at most, making this most suited to smaller debts that can be repaid before the interest rate escalates	Up to seven years

The Takeaway

Credit card refinancing is when a borrower pays off their credit card(s) by moving the balance to another card with a lower interest rate. A popular way to do this is with 0% interest balance transfer credit cards. However, borrowers typically need a high credit score to qualify for the best rates on these cards. Debt consolidation, on the other hand, is when a borrower simplifies multiple debts by paying them off with a personal loan. Personal loans with a fixed low interest rate and a structured payback schedule are a smart option for consolidating debts.

If you have a relatively small balance that can be paid off in a year or so, refinancing with a balance transfer credit card may be right for you. If you have a larger balance or need more time to fully pay it off, personal loans are available.

Credit cards have an average APR of 20%–25%, and your balance can sit for years with almost no principal reduction. Personal loan interest rates average 12%, with a guaranteed payoff date in 2 to 7 years. If you’re carrying a balance of $5,000 or more on a high-interest credit card, consider a SoFi Personal Loan instead. See your rate in minutes.

SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

FAQ

Which is better: credit card refinancing or debt consolidation?

There are advantages and drawbacks to both strategies. Credit card refinancing can help you lower your interest rate, which can save you money. Debt consolidation might save you money on interest, but it will definitely simplify bill paying by replacing multiple cards with one monthly bill.

Is refinancing a credit card worth it?

Refinancing a credit card may be worth the effort because it can lower your interest rate, potentially save you money, and make payments more manageable.

Is refinancing the same as consolidation?

Though refinancing and consolidation can both help you manage your debt, they serve different purposes. Refinancing involves moving credit card debt from one card or lender to another, ideally with a lower interest rate. Paying less in interest while you pay off your debt is the main goal of refinancing. When you consolidate, you settle multiple debts with one loan. Simplifying bills into one fixed loan payment is the main reason to consider this strategy.

How do credit card refinancing and consolidation affect my credit score?

Credit card refinancing and debt consolidation might temporarily reduce your credit score because your lender will likely do a hard credit check to qualify you for the account. But with time and consistent, on-time payments, your credit score should rebound. Consolidating several credit cards into one personal loan might also help improve your credit utilization ratio, which in turn should nudge your score upward. Opening new credit accounts, however, can reduce the overall age of your credit accounts, as can closing old accounts. Both of these can ding your credit score. If you aren’t applying for other forms of financing, such as a mortgage, none of this should be a huge concern so long as you are using the credit card refinance or consolidation to reduce debt and better manage your finances.

What should I consider before refinancing or consolidating?

The most important thing to consider when thinking about credit card refinancing or debt consolidation is whether you will save money when interest and fees are factored in. It’s also important to have a good look at your credit habits. If you think having a new credit card with 0% introductory financing might result in you charging even more and falling more deeply into debt, you might want to consider a personal loan and/or explore credit counseling, in which you will work with a professional to help change unhealthy habits and develop a strategy to reduce debt.

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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.

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SOPL-Q126-002

What Is a Bear Market? Definition, Causes & Investing Tips

What Is the Definition of a Bear Market?

Why Is It Called a Bear Market?

Characteristics of a Bear Market

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History of Bear Markets

3 Examples of Bear Markets

The Great Depression (1929)

The 2008 Financial Crisis

The COVID-19 Crash (2020)

What Causes a Bear Market?

Bear Markets vs Recessions: What’s the Difference?

What Is a Bear Market Rally

Bear Market vs Bull Market

How to Invest and Manage Your Money During a Bear Market

1. Reassess Your Risk Tolerance

2. Diversify Your Portfolio

3. Look for Buying Opportunities

4. Consider Dollar-Cost Averaging

5. Understand Advanced Strategies (Like Short Selling)

The Takeaway

FAQ

How long do bear markets last?

Is a bear market good or bad?

When was the last bear market in the U.S?

What are the best assets to hold in a bear market?

What was the worst bear market?

Does Debt Consolidation Hurt Your Credit?

Benefits of Debt Consolidation

Steps to Take: Before the Debt Consolidation Loan

Debt Consolidation: When It Can Help Your Credit Score

Payment history (35%)

Amount currently owed (30%)

Credit types used (10%)

Debt Consolidation: When It Can Hurt Your Credit Score

Payment history (35%)

Amount currently owed (30%)

Credit history length (15%)

Credit types used (10%)

New credit (10%)

Investigating a Personal Loan for Debt Consolidation

Consolidate Your Debt with a SoFi Personal Loan

Student Loan Refinancing: What Happens If There’s Overpayment?

Student Loan Overpayment Explained

Take control of your student loans. Ditch student loan debt for good.

What Happens When a Student Loan Is Overpaid?

Refund Process and Timelines

How Overpayment Affects Loan Balance and Interest

What Should I Do With My Refund?

Put Toward Next Payment

Use For Personal Expenses

Reapply Toward Loan Principal

Build or Replenish Emergency Savings

How to Avoid Future Overpayments

Monitor Loan Servicer Activity

Set Up Automated Payment Controls

The Takeaway

FAQ

What happens if you overpay a student loan?

What happens to excess student loan money?

Does refinancing affect student loan forgiveness?

Can I request a refund of my student loan overpayment?

Does overpaying help pay off loans faster or reduce interest?

Is It Possible to Use Personal Loans for Rent Payments?

What Types of Loans Can You Use for Rent Payments?

Secured Personal Loans

Unsecured Personal Loans

Payday Loans or Cash Advances

Reasons Why You May Need to Use Loans for Rent

What Happens If You Do Not Pay Your Rent?

Is It a Good Idea to Use Personal Loans for Rent Payments?

Pros of Using Loans for Rent Payments

Potentially Competitive Loan Terms

Versatility and Accessibility

Could Help You Build Credit

Affordability

Cons of Using Loans for Rent Payments

Additional Fees

Possible Harm to Credit Score

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