Dec
02
2024
How Long Does It Take to Build Credit From Nothing?

How Long Does It Take to Build Credit?

By | Credit, credit card, Financial Independence | Comments Off on How Long Does It Take to Build Credit?

Building good credit (or any credit at all) doesn’t happen overnight. Instead, if you’re starting from scratch, you may need to have an open credit account for around three to six months before you first get a credit score.

From there, a good credit profile and good credit score can take a while to build. In reality, it can be much faster and easier to lower your credit score, which is why it’s vital to aim to make solid financial choices, like consistently paying your bills on time. Building and maintaining good credit isn’t always easy, but by following a few simple steps, you can improve your standing.

Key Points

•   Establishing a credit score takes three to six months after opening a credit account.

•   On-time payments are essential for a good credit score.

•   Credit scores depend on payment history, credit utilization, account types, age of accounts, and inquiries into accessing credit.

•   Opening too many accounts at once can harm credit scores.

•   Beware of scams promising quick credit improvement; building credit is gradual.

How Long It Can Take to Build Credit From Scratch?

The exact length of time it takes to build credit from scratch varies. That being said, it’s usually around three to six months from the time you first open a credit account.

Even though establishing and building credit can take time, it’s worth it as a way to improve your overall financial situation. Having good credit can make it easier to get approved for loans and secure lower interest rates.

Recommended: How to Avoid Interest on a Credit Card

4 Ways to Build Credit

If you’re hoping to begin building credit, here are some tactics you might consider.

Become An Authorized User

One way to help build your credit is by becoming an authorized user on an account of someone who already has good credit. This might be a trusted friend or family member. As they manage the account responsibly, that can have a positive impact on your credit score as well. Just know that if they miss or make late payments, that can also negatively impact your credit.

Recommended: When Are Credit Card Payments Due?

Apply For a Credit Card

If you’re getting a credit card for the first time, know that it is possible to apply for and get approved for a credit card with no existing credit history. However, you do need to be selective about which card you apply for.

You’re unlikely to get approved for, say, a rewards credit card if you don’t already have excellent credit. Still, there are credit cards that are marketed toward those who have no credit or a limited credit history. You might also consider a secured credit card, where you put down a refundable deposit that then serves as your credit limit.

If you can get approved for a credit card, and then use your credit card responsibly, such as by making on-time payments, can help you build up your credit.

Recommended: What to Know About Purchase Interest Charges on Credit Cards

Get a Cosigner

If you aren’t able to get approved for a loan on your own, you might consider applying for credit with a cosigner. Using a cosigner with good credit can help improve your chances of getting approved for a loan.

Then, your loan payments will be reported to the major credit bureaus and hopefully help you start building your credit score. Of course, that depends on your making those payments on time.

Maintain Good Credit Habits

Once you have opened a credit account like a loan or credit card, it’s important to practice good credit habits. This includes paying your statement off in full, each and every month. Demonstrating a pattern of reliably paying your bills over time shows potential lenders that you’re likely to repay your debts.

Recommended: Does Applying for a Credit Card Hurt Your Credit Score?

Factors That Affect Credit Score Calculations

There are five major factors that affect your credit score:

•   Credit utilization: Your credit utilization is the amount of the credit you’ve used compared to your total available credit. It’s recommended to keep this ratio to 30% or less.

•   Payment history: This indicates how reliably you make payments on your existing accounts.

•   Types of credit accounts: Having a good mix of different types of credit accounts has a positive impact on your credit score, as it indicates to lenders that manage multiple types of accounts.

•   Your average age of accounts: Having a lengthy credit history is a positive sign. This shows you have experience in responsibly managing accounts.

•   New credit: Opening a number of accounts or making a number of hard inquiries in quick succession can suggest to lenders that you’ve overextended yourself and are in need of funding to bail you out.

Recommended: Starting Credit Score for 18-Year-Olds

Things to Keep in Mind Before Building Credit

If you’re looking to build good credit, here are some tips on establishing credit to keep in mind.

Have a Solid Financial Plan

The first thing you’ll want to do is make a budget. Getting a new credit card should not be viewed as a way to fix your budget or dig yourself out of a financial hole. Instead, the best way to use a credit card is as a tool of convenience for money that you already have. Make sure that you have the financial ability and discipline to pay your bills in full, each and every month.

Watch Out For Scams

Usually building credit is something that you do over a period of several months or years. If someone tells you that they can build or repair your credit quickly, it could be a sign of a credit card scam. There aren’t many shortcuts to the simple rules noted above, like regularly paying your bills on time.

Don’t Open Too Many Accounts At Once

You might think that since opening a credit account can help build credit, opening many accounts will help build credit even faster. However, that is usually not the case. Many lenders view a high number of credit inquiries in a short period of time as a negative indicator. They may see it as a potential red flag that someone is in a bad financial situation.

The Takeaway

If you’re just starting out and have no credit history at all, you generally start without an actual credit score. It can take a few months after you open a credit account to start establishing a score. As you continue to show that you’re responsible for the credit you have, your score will likely increase. Building credit can take time, and you should be skeptical of any people or programs that say they can build your credit fast.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

What credit score do you start with?

There isn’t a starting credit score for those without any credit history. While you might think that you start with the lowest possible credit score (like 300) and have to build your way up, you actually don’t start with any credit score at all. As you open credit cards or other accounts, you’ll start to establish a credit history and score.

How long does it take to build a good credit score?

It usually takes anywhere from three to six months to start building a credit score after you’ve opened your first credit account. You’ll then continue to build and improve your credit by continually making on-time payments. You can always check your credit score periodically to see where you’re at on your credit journey.

How long does it take to recover from a hard inquiry on your credit?

Usually when you apply for a new credit card or other loan, your potential lender will pull your credit file. This is known as a hard inquiry. Since the number of recent hard inquiries is one factor in determining your credit score, applying for credit cards can lower your credit score. However, these inquiries typically only lower your score by a few points and drop off your report after a few months.

How fast can you build your credit in 3 months?

How fast you can build your credit depends on a number of factors. Generally, it takes a few months after you’ve opened a credit account to even establish any credit. Your credit score will improve as you continue to use your credit responsibly. It’s best to think about building credit as more of a marathon than a sprint.

Photo credit: iStock/YakobchukOlena

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.

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

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

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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Nov
27
2024
9 ESG Metrics Investors Should Know

9 ESG Metrics Investors Should Know

By | Growing Wealth, invest, Investing | Comments Off on 9 ESG Metrics Investors Should Know

A number of investors are choosing to invest in securities with an environmental, social, and governance (ESG) focus that may align with their values and investment goals. Many see ESG companies as being potentially more sustainable long-term. But determining whether a company’s ESG strategies are having the desired impact requires the use of ESG metrics to measure progress and enable accountability.

In addition, these days many investors also want to know how well companies are managing the risks associated with climate-related changes — which also requires metrics that can show whether a company is meeting key standards.

These concerns aren’t new, but they have driven a number of new ESG-focused regulatory efforts here and abroad. As yet, however, there isn’t a universal set of ESG metrics used by all investors or financial firms to evaluate a company’s progress toward ESG goals, or better manage ESG risks. What’s more, the regulatory landscape in this sector is evolving, which, for the near future, may make it challenging to track certain metrics over time. That said, there are a number of frameworks that companies and governments have embraced that can inform investors’ choices.

Key Points

•   With the growing appeal of ESG strategies, there is also a need for reliable ways to assess companies’ ESG performance and risk mitigation.

•   ESG metrics are necessary for accurate company disclosures, which also support transparency and accountability.

•   The use of ESG metrics and disclosures can also help investors compare companies within and across industries.

•   A number of organizations are establishing mandatory standards and/or compliance rules, although some are in flux or facing legal opposition.

•   At the moment, companies can choose from a range of ESG frameworks and standards.

What Is ESG Investing?

ESG stands for environmental, social, and governance standards that can help people assess whether companies are meeting certain criteria, as well as whether they are mitigating ESG-related risk factors that may impact performance.

•   Environmental factors capture how well a company safeguards the physical environment (e.g., reducing emissions, pollutants).

•   Social criteria refer to employee safety, fair labor practices, community investment, relationships with customers and vendors.

•   Governance factors include issues of leadership, fraud prevention, transparency in accounting and reporting, and more.

ESG investing began in the 1970s, broadly speaking, although impact investing in various forms has been around for centuries.

At first, investing with the aim of creating positive change for society and the planet seemed anchored in a kind of “do-goodism” and less focused on financial outcomes. In the last 20 or 30 years, though, investors have become interested in socially responsible investing (SRI), as many funds in this category have shown themselves to offer returns that are comparable to traditional strategies, according to a report published in 2023 by Morningstar, a fund rating and research firm.

ESG Metrics Are Key to ESG Reporting

Thus, with the growing appeal of ESG investments to some investors, there is a commensurate need for reliable ways to assess companies’ ESG performance when choosing to invest online or through a traditional brokerage.

ESG frameworks help companies, as well as investors, assess an organization’s stated aims in terms of meeting ESG standards. In theory, relying on a common set of metrics should help encourage more efficient and transparent ESG reporting.

•   ESG metrics establish a layer of transparency and accountability.

•   Reliable ESG reporting helps build trust and a positive image with investors, communities, and other stakeholders.

•   In addition, companies that adhere to ESG standards may be able to demonstrate better risk management.

Recommended: Beginner’s Guide to Sustainable Investing

What Are ESG Metrics?

Until now, ESG metrics and reporting standards have been largely proprietary or voluntary. But owing to widespread concerns about climate change and climate-related risk factors, thousands of companies around the world have adopted voluntary frameworks and metrics in recent years.

There are thousands of metrics in use, many are specific to certain industries. Common ESG metrics typically assess how well an organization is limiting pollutants and emissions, meeting renewable energy targets, upholding fair labor standards, adhering to transparency in accounting, corporate board selection, and more.

The Use of ESG Frameworks

Companies may be required to use certain metrics in their reporting and disclosures. Here too there is considerable variation.

For example, the Global Reporting Initiative (GRI), which has a voluntary governance structure, is a nonprofit organization that was established in 1999 to create a set of guidelines that help companies and governments disclose their efforts in light of climate change, human rights, and corruption.

More than three-quarters (78%) of the world’s largest corporations have adopted the GRI standards, making it the most common ESG framework at the moment.

In addition, there has been a rise in the number of organizations that are establishing mandatory standards and/or compliance rules that require standardized reporting and verifiable metrics regarding ESG performance.

For example, the Corporate Sustainability Reporting Directive (CSRD) began rolling out mandatory ESG reporting rules in January of 2024 in the European Union. The CSRD compliance rules impact non-E.U. companies, as well, about a third of which are based in the United States.

Similarly, some financial institutions have created screener tools that investors can use to evaluate certain securities, but these are typically proprietary and cannot be used to evaluate investments at a different institution.

SEC Climate-Disclosure Rules on Hold

Another widely watched set of reporting requirements was led by the Securities and Exchange Commission (SEC) over the last few years. The SEC adopted new rules in March of 2024, which established a higher bar for companies and required them to disclose ESG-related operational risks and expenses, as well as efforts to meet sustainability targets: e.g., emissions reduction.

But those rules were quickly challenged and remain on hold at the time of publication. Likewise, similar efforts in states like California and elsewhere have been stalled.

Recommended: The Growth of Socially Responsible Investing

The Importance of ESG Metrics

Although the landscape of ESG frameworks and reporting standards is still evolving, and is largely in flux, ESG metrics are important because they help investors to gauge a firm’s impact on environmental issues, societal issues, and issues of corporate responsibility against a set of comparable peers.

Since many investors who are interested in ESG strategies are also committed to making an impact with their money, being able to benchmark outcomes is important.

The Limitations of ESG Metrics

However, it can be difficult to measure ESG policies across different industries, as no official regulations for standardized ESG reporting currently exist. For example, a financial institution might require different standards for energy efficiency vs. an agricultural company or an actual energy producer.

Finally, some of the existing standards are qualitative and may be prone to subjectivity, which can make the ESG evaluation process difficult to quantify. These can all present challenges when you’re trying to apply ESG principles to your investing strategy.

Having an awareness of some of the limitations around these metrics can help investors use the currently available criteria wisely.

9 Common ESG Metrics

Commonly employed ESG metrics consist of both qualitative and quantitative metrics across all three categories of environmental, social, and governance factors.

3 Common Environmental Metrics

Environmental metrics measure the long-term ecological sustainability of a firm’s actions. These can be related to emissions, finite natural resources, and the environment, among other things.

Many of these metrics can be tracked on an aggregate basis or relative to other operating metrics (per capita, per unit produced, etc.).

•   Emissions: Quantifies how much a firm emits in greenhouse gasses, or whether it’s working to reduce carbon emissions through its operations.

•   Waste: Measures how much waste a company generates or recycles in their operations. Can also reflect a company’s impact on its surrounding ecology: e.g., air or water pollution.

•   Resource Usage: Tracks the efficiency and extent of a firm’s operations when it comes to using energy, water, or other key resources.

3 Common Social Metrics

Social metrics evaluate how a firm’s policies impact its workforce, the community, and society at large. Attempts to quantify these metrics have largely been implemented on a per-occurrence basis, or as a rate over time.

•   Human resources: Evaluates how a company treats its employees, gender pay gaps, diversity, frequency/magnitude of any workplace litigation, and employee turnover.

•   Labor safety: Tracks a firm’s commitment to safe labor practices via metrics like frequency of workplace accidents and lost productivity.

•   Product development and safety: Examines a firm’s product quality and sustainability through metrics like number of recalls, complaints, or even frequency of litigation. Can also be linked to environmental standards when it comes to how product inputs are sourced.

3 Common Governance Metrics

Governance metrics pertain to issues relating to business ethics, mitigation of agency risks, and transparency in reporting. These can be measured in terms of how executives are compensated, board policies, and accounting choices, among others.

•   Ownership structure: Reviews how faithful a firm is to its shareholders when it comes to metrics like the number of independent directors on the board, or how voting rights are distributed between management and shareholders.

•   Executive compensation: Measures executive compensation relative to industry standards or company profitability. Can also be tied to social concerns when measuring how compensation structures vary for different genders/minorities.

•   Financial reporting: Tracks a firm’s accounting policies and how comprehensive and accurate they are. Could involve reviewing a firm’s books for key disclosures or frequency of one-off exceptions.

How Do Firms Report ESG Metrics?

To some degree, how each firm reports its ESG metrics depends on its policies regarding disclosures. But now companies do have some standardization for reporting climate-related risk factors and mitigation efforts.

Keep in mind, the adoption of ESG frameworks can vary widely by firm and disclosure of these metrics is still largely voluntary. Additionally, certain metrics may be difficult to quantify and, in some cases, management, stakeholders, or shareholders may disagree on the impact of certain ESG factors.

As a result, professional money managers sometimes may solicit the assistance of third-party ESG consultants to obtain an independent assessment of how a company actually performs on ESG metrics.

How Can Investors Use ESG Metrics?

Investors want to be discerning when investing in specific firms or funds that offer an ESG approach.

Given the range of ESG frameworks and the inconsistency in how frameworks are applied, investors should be aware that some firms may cherry-pick which ESG metrics they use. Investment funds and ETFs that offer an ESG-based approach may use their own proprietary metrics when deciding how to allocate ESG investments; which may make them difficult to compare.

When using ESG metrics, you’ll want to examine a company’s ESG-related disclosures closely to ensure that there’s consistency in the data being reported. Depending on the metric you’re examining, you may wish to avoid making comparisons across disparate industries and focus on identifying “best-in-class” investments for a single industry.

The Takeaway

Broadly speaking, ESG metrics can offer investors a useful dimension for evaluating certain types of sustainable investment choices. Although a unified set of ESG standards and metrics is a work in progress, there has been a steady push among regulatory bodies to establish ESG reporting requirements, here and worldwide.

As with any investment strategy, investors will want to manage their expectations appropriately and employ ESG metrics as part of a larger toolbox for investment analysis.

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Nov
27
2024
18 Mortgage Questions for Your Lender

18 Mortgage Questions for Your Lender

By | Financial Independence, Home Ownership, mortgage | Comments Off on 18 Mortgage Questions for Your Lender

Signing on a knowledgeable mortgage lender is one of the first steps you’ll take on your journey to homeownership. A good lender could help you make a sound decision about a major commitment.

If you want to know what questions to ask a mortgage lender, these can help you feel more confident choosing a lender to navigate the complex homebuying process with you.

Key Points

•   Lenders offer down payments as low as 3% for first-time homebuyers, but a 20% down payment avoids mortgage insurance.

•   Interest rates and APRs differ; APR includes additional fees and is usually higher.

•   Fixed-rate mortgages have stable payments, while adjustable-rate mortgages may start lower but can increase.

•   Preapproval is more thorough than prequalification and helps show sellers you’re a qualified buyer.

•   Closing costs typically range from 2% to 5% of the purchase price and include various fees.

1. How Much Can You Borrow?

How much you can borrow is the question most buyers have on their minds when they start dreaming about real estate listings online. You may have come across a mortgage calculator tool that estimates how much a mortgage is going to cost.

But that’s just a starting point. A mortgage lender will evaluate the entire spectrum of a homebuyer’s financial situation and find the true amount they’ll be able to borrow. The lender may also make recommendations for programs or loans for each buyer’s unique situation.

When you get a loan, you’ll receive a mortgage note, a legal contract between the lender and you that provides all the details about the loan, including the amount you were approved to borrow.

2. How Much of a Down Payment Do You Need?

Another key question your lender can help answer for you is how much are down payments? You’ve probably heard about the ideal 20% down, but a lender may be able to help homebuyers get into a home with a much lower down payment, such as 3% or 5%. The lowest down payment option is often available only to first-time homebuyers. But anyone who hasn’t owned a primary residence in the last three years is often considered a first-timer.

A 20% down payment will enable you to forgo mortgage insurance on a conventional loan (one not insured by the federal government), but lower down payment amounts can help homebuyers obtain housing sooner. There are plenty of options to explore with your lender.

3. What Is the Interest Rate and APR?

Your mortgage lender may explain the difference between the interest rate and annual percentage rate.

•   Interest rate. The interest rate is the cost to borrow money each year. It does not include any fees or mortgage insurance premiums.

•   APR. The APR is a more comprehensive reflection of what you’ll pay for the mortgage, which will include the interest rate, points paid, mortgage lender fees, and other fees needed to acquire the mortgage. It’s usually higher than the interest rate.

The interest rate and APR must be disclosed to you in a loan estimate with the other terms and conditions the lender is offering. Pay particular attention to how the APR changes from loan to loan. When you’re looking at APR vs. interest rates for an FHA loan and a conventional mortgage, for instance, you’ll notice the numbers come out very different. (This is just a recent example.)

30-year term

 Interest rate

 APR
FHA 6.750% 7.660%
Conventional 6.875% 7.031%

In this case, the interest rate on a 30-year FHA loan is lower than on a conventional loan; however, when accounting an upfront mortgage premium for the FHA loan and other fees, the APR is higher on the FHA loan than on the conventional loan.

4. What Are the Differences Between Fixed- and Adjustable-Rate Mortgages?

The main difference between a fixed-rate mortgage and an adjustable-rate mortgage (ARM) is whether or not the monthly payment will change over the life of the loan.

•   Fixed-rate mortgages start with a little higher monthly payment than an ARM, but the rate is secure for the term.

•   An adjustable-rate mortgage will start with a lower interest rate that may increase as the index of interest rates increases. This type of loan may be more appropriate for buyers who know they will not be keeping the mortgage for long.

Fixed-Rate Mortgages

 ARMs
Interest rate is locked in for the term Interest rate is variable
Monthly payment stays the same Monthly payment is variable
Typically a longer-term mortgage, such as 15 or 30 years Typically a shorter-term mortgage, such as five or seven years
Interest rate is determined when the rate is locked before closing the mortgage When the index of interest rates goes up, the payment goes up

The key to an ARM is to know how it adjusts. How frequently will your rate adjust? How much could your interest and monthly payments increase with each adjustment? Is there a cap on how high your interest rate could go? A good mortgage lender will help you consider all these variables when selecting a fixed-rate or adjustable-rate mortgage.

5. How Many Points Does the Rate Include?

What are points on a mortgage? Mortgage points are fees paid to a lender for a lower interest rate. Asking your lender how many points are included in the rate can help you compare loan products accurately.

6. When Can the Interest Rate Be Locked In?

Rate lock policies differ from lender to lender. Check at the top of the first page of your loan estimate to see if your rate is locked, and for how long.

You’ll want to ensure that any rate lock agreement gives you enough time to close on your loan. Many lenders have fees for extending a rate lock.

7. How Much Are Estimated Closing Costs?

One of the most important documents you’ll receive from your lender is called a loan estimate. The loan estimate gives a detailed breakdown of the interest rate, monthly payment, fees, and closing costs on the loan you’re applying for. When you ask about closing costs, your lender can provide this document to you.

Common closing costs include:

•   Appraisal fee

•   Loan origination fee

•   Title insurance

•   Prepaid expenses such as homeowners insurance, property taxes, and interest until your first payment is due

Expect to see 2% to 5% of the purchase price in closing costs.

8. Are There Any Other Fees?

Lenders are required to disclose all costs in the loan estimate. They’re also required to use the same standard form so you can compare costs and fees among different lenders accurately. Be sure to ask lenders about other fees and watch for them on your loan estimate.

9. When Will the Closing Happen?

The time to close on a house will depend on your individual circumstances, but the national average is 43 days.

An experienced lender with a digitized process may be able to close a loan more quickly. The time it takes a lender to approve and process the loan are also factors to consider.

10. What Could Delay the Closing?

In the August 2024 National Association of Realtors® Confidence Index survey, 14% of real estate transactions had a delayed settlement. Previous surveys have shown that the main reasons for a delay included appraisal issues, financing issues, home inspection or environmental issues, deed or title issues, or contingencies stated in the contract.
An experienced lender may know how to bring a home to the closing table despite the challenges with financing and appraisals. Be sure to ask upfront how these challenges would be addressed.

11. What Will Fees and Payments Be?

The neat part about obtaining a mortgage since 2015 is that the information is included in a standard form, the loan estimate. The form is used by all lenders and allows borrowers the opportunity to compare costs among lenders quickly and accurately. All fees and payments are required to be clearly outlined in this form.

Recommended: Guide to Mortgage Statements

12. How Good Does Your Credit Need to Be?

You’ll typically need a FICO® credit score of at least 620 to get a conventional mortgage, but lenders consider a credit score just one slice of the qualification pie.

With a lower credit score, a lender may steer you in the direction of an FHA loan, which requires a score of 580 or higher to qualify for a 3.5% down payment. Credit scores lower than 580 require a 10% down payment for an FHA loan.

Borrowers with credit scores above 740 may qualify for the best rates and terms a lender can offer.

13. Do You Need an Escrow Account?

Your lender can set up an escrow account to pay for expenses related to the property you’re purchasing. These may include homeowners insurance and taxes. An escrow account can take monthly deposits from the borrower, hold them, and then disburse them to the proper entities when yearly payments are due. In some locations and with certain lenders, escrow accounts are required.

14. Do You Offer Preapproval or Prequalification?

Lenders have different processes for qualifying mortgage applicants so it’s important to understand prequalification vs. preapproval. Preapproval is a much more in-depth analysis of a buyer’s finances than prequalification.

A preapproval letter provided by the lender specifies how much financing the lender is willing to extend to you, and helps to show sellers you’re a qualified buyer. Getting preapproved early in the homebuying process can also help you spot and remedy any potential problems in your credit report.

15. Is There a Prepayment Penalty?

A prepayment penalty is a fee for paying off all or part of your mortgage early. Avoiding prepayment penalties is easy if you choose a mortgage that doesn’t have any. Ask lenders if your desired loan carries a prepayment penalty. It will also be noted in the loan estimate.

16. When Is the First Payment Due?

A lender will be able to help you get your first payment in, which is typically on the first day of the month after a 30-day period after you close. For example, if you closed on Aug. 15, the first mortgage payment would be due on the 1st of the next month following a 30-day period (Oct. 1).

Each mortgage statement sent every billing cycle includes current information about the loan, including the payment breakdown, payment amount due, and principal balance.

17. Do You Need Mortgage Insurance?

Your mortgage lender will guide you through the process of acquiring private mortgage insurance, commonly called PMI, if you need it. Mortgage insurance is required for most conventional mortgages made with a down payment of less than 20%, as well as for FHA and USDA loans.

It’s not insurance for the buyer; instead, it protects the lender from risk. A good mortgage lender can also help advise borrowers on dropping PMI as soon as possible. A home loan help center can help you learn more about PMI or any mortgage question.

Recommended: What is PMI & How to Avoid It?

18. How Much Is the Lender Making Off of You?

Lenders are required to be clear and accurate when it comes to the costs of the loan. These should be fully disclosed on your loan estimate and closing documents. If you want to know how much the lender is charging for its services, you’ll find it under “origination fee.”

The Takeaway

If you’re shopping for a home loan or thinking about it, you might have mortgage questions — about down payments, APR, points, PMI, and more. Don’t worry about asking a lender too many, because many buyers need a guide throughout the homebuying journey. Asking questions is a great way to get to the lender and loan terms that make the most sense for your financial situation.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

What should you not say to a mortgage lender?

The most important thing to remember when communicating with a prospective lender is that you should be truthful — about everything, but especially your finances.

What questions can a mortgage lender not ask?

Generally speaking, most of the topics that are off limits in a job interview are also off limits in a mortgage negotiation. A lender should not ask you about race, ethnicity, religion, or sexual orientation, for example. You also shouldn’t be asked your age (unless you are applying for an age-based loan), or about your family status (married vs. divorced, whether you are planning to have kids, etc.), or about your health.

Photo credit: iStock/Ridofranz

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.


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



*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
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.

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 .

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

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

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

SOHL-Q424-121

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Nov
27
2024
What Minimum Credit Score Do You Need to Refinance Your Student Loan?

What Credit Score Is Needed to Refinance Student Loans?

By | Fresh Out of School, Student Loans, student_loan | Comments Off on What Credit Score Is Needed to Refinance Student Loans?

Student loan borrowers with a good credit score generally have a better chance of qualifying for student loan refinancing. FICO®, the credit scoring model, considers a score of 670 to 739 to be good. Yet according to the most recent report by the Federal Reserve Bank of New York, the average credit score of student loan borrowers was 656, which falls short.

The higher your credit score, the more likely you are to be approved for refinancing, and also to get a lower interest rate and favorable loan terms. Here’s what you need to know about your credit score and student loan refinancing.

Key Points

•   Most lenders require a good credit score, typically between 670 and 739, to refinance student loans.

•   Some lenders may accept credit scores as low as 580 for refinancing.

•   Checking with various lenders is important as credit score requirements can vary.

•   In addition to making a borrower eligible for student loan refinancing, a higher credit score may also help secure better interest rates and terms.

•   It’s beneficial to review and compare offers from different lenders before choosing a refinancing option.

Understanding the Credit Score Requirement

Your credit score is important because it gives lenders a synopsis of your borrowing and repayment habits. It’s based on information from your credit report, which is a highly detailed record of activity on all of your credit accounts. A credit score tells lenders how well you’ve managed your credit and repayments thus far.

With student loan refinancing, many lenders are looking for a good credit score. That’s because a higher score generally indicates that you’re likely to repay your debts on time. FICO calls a credit score of 670 to 739 a good score, while VantageScore®, another commonly used credit scoring model, designates a good credit range as 661 to 780.

Some lenders have more flexible credit score requirements than others, and they may set what’s called a minimum credit score requirement. This is the lowest eligible credit score for which they’re willing to approve a borrower for student loan refinancing.
However, higher is usually better when it comes to a credit score for refinancing, regardless of the scoring model that’s used. If your credit score exceeds the good range, and is considered “very good” or “excellent,” you may be more likely to qualify for student loan refinancing. This also improves your chances of getting a lower interest rate and favorable terms, which are important when you’re refinancing student loans to save money.

Recommended: Guide to Refinancing Private Student Loans

Additional Requirements for Refinancing

In addition to your credit score for a student loan, lenders have other requirements you’ll need to meet, whether you’re refinancing private student loans or federal loans. These eligibility requirements include:

Income

Lenders look for borrowers with a stable income. This indicates that you consistently have enough money coming in to pay your bills. You will likely have to provide lenders with proof of your employment and income, such as pay stubs.

If you’re a contract worker or freelancer whose income is more sporadic, you may need to show a lender your tax returns or bank account statements to show that you have enough funds in your bank account.
Debt-to-Income Ratio

Your debt-to-income (DTI) ratio is a percentage that shows how much of your income is going to bills and other debts versus how much income is coming in each month. The lower your DTI, the better, because it indicates that you have enough money to pay your debts, making you less of a risk to lenders.

To calculate your DTI, add together your monthly debts and divide that number by your gross monthly income (your income before taxes). Multiply the resulting figure by 100 to get a percentage, and that’s your DTI.

Aim to get your DTI to below 50%, and pay off as much debt as you can before you apply for student loan refinancing.

Credit History

In addition to your credit score, lenders will also look at your credit history, which is the age of your credit accounts. Having some active older credit accounts shows that you have a solid pattern of borrowing money and repaying it on time.

Minimum Refinancing Amount

Lenders typically have minimum refinancing amounts. This is the outstanding balance on your loans that you want to refinance. For some lenders, the minimum refinancing amount is between $5,000 and $10,000. For others, it may be higher or lower. Lenders set minimums to ensure that they will earn enough interest on the loan.

Recommended: Student Loan Refinancing Calculator

Strengthen Your Credit Score for Refinancing

If your credit score isn’t high enough to meet a lender’s minimum score requirement, you can work on strengthening your score and apply for refinancing at a later date. The following strategies may help you build credit over time.

Make Timely Payments

Making full, on-time payments on your existing credit accounts is the most impactful way to improve your credit. This factor accounts for 35% of your FICO credit score calculation and is at the forefront of what lenders look at when evaluating your eligibility.

Lower Your Credit Utilization Ratio

This is the ratio of how much outstanding debt you owe, compared to your available credit. Credit utilization ratio accounts for 30% of your FICO score. Keeping your credit utilization low can be an indicator that, while you have access to credit, you’re not overspending.

Maintain Your Credit History

A factor that’s moderately important when it comes to your FICO score calculation is the age of your active accounts. Keeping older accounts active and in good standing shows that you’re a steady borrower who makes their payments.

Keep a Balanced Credit Mix

As you’re establishing credit, having revolving accounts such as credit cards, as well as installment credit like student loans or a car loan, shows you can handle different types of credit. This factor affects 10% of your credit score calculation.

Alternatives to Refinancing

If your credit isn’t strong enough for you to qualify for student loan refinancing, you have a few other options to help you manage your student loan payments. Some ideas to explore include:

•  Loan forgiveness programs. There are federal and state student loan forgiveness programs. For instance, the Public Service Loan Forgiveness (PSLF) program is for borrowers who work in public service for a qualifying employer such as a not-for-profit organization or the government. For those who are eligible, PSLF forgives the remaining balance on Direct loans after 120 qualifying payments are made under an IDR plan or the standard 10-year repayment plan.

  Individual states may offer their own forgiveness programs. Check with your state to find out what’s available where you live.

•  Income-driven repayment plans. You may be able to reduce your federal loan monthly payment with an income-driven repayment (IDR) plan, which bases your monthly student loan payments on your income and family size. Your monthly payments are typically a percentage of your discretionary income, which usually means you’ll have lower payments. At the end of the repayment period, which is 20 or 25 years, depending on the IDR plan, your remaining loan balance is forgiven.

•  Consolidation vs. refinancing: Which is right for you? Whether consolidation or refinancing is right for you depends on the type of student loans you have. If you have federal student loans, a federal Direct Consolidation loan loan allows you to combine all your loans into one new loan, which can lower your monthly payments by lengthening your loan term. The interest rate on the loan will not be lower — it will be a weighted average of the combined interest rates of all of your consolidated loans. Consolidation can simplify and streamline your loan payments, and your loans remain federal loans with access to federal benefits and protections. However, a longer loan term means you’ll pay more in interest over the life of the loan.

  If you have private student loans, or a combination of federal and private loans, student loan refinancing lets you combine them into one private loan with a new interest rate and loan terms. Ideally, depending on your financial situation, you might be able to secure a new loan with a lower rate and more favorable terms. If you’re looking for smaller monthly payments, you may be able to get a longer loan term. However, this means that you will likely pay more in interest overall since you are extending the life of the loan. On the other hand, if your goal is to refinance student loans to save money, you might be able to get a shorter term and pay off the loan faster, helping to save on interest payments.

Just be aware that if you refinance federal loans, they will no longer be eligible for federal benefits like federal forgiveness programs.

Understanding the Impact of Refinancing on Your Credit Score

Just as your credit score affects whether you qualify for refinancing, refinancing has an impact on your credit score.
When you fill out an application for refinancing, lenders do what’s called a hard credit check that usually affects your credit score temporarily. The impact is likely to be about five points of reduction to your score, which lasts up to 12 months, according to the credit bureau Experian.

After refinancing is complete, however, as long as you make on-time payments every month, your credit score might go up. Conversely, if you miss payments, or if you’re late with them, your score could be negatively affected.

It’s wise to keep your credit score as strong as possible before, during, and after refinancing. And watch out for common misconceptions about credit scores and student loan refinancing.

For instance, be sure to shop around for the best loan rates and terms. Checking to see what rate you can get on a student loan refinance, unlike filling out a formal loan application, typically involves a soft credit pull that won’t affect your credit score.

Also, if you choose to fill out refinancing applications with more than one lender, some credit scoring models may count those multiple applications as just one, as long as you apply during a short window of time, such as 14 to 45 days, which can lessen the impact to your credit.

Finally, keep paying off your existing student loans during the refinancing process. If you stop repaying them before refinancing is complete, your credit score may be negatively affected.

Making Informed Decisions About Student Loan Refinancing

As you’re considering refinancing, weigh the pros and cons of refinancing your student loans. Advantages of student loan refinancing include possibly getting a lower interest rate on your loan, adjusting the length of your payment term, and streamlining multiple loans and payments into one loan that’s easier to manage.

But remember: If you’re refinancing federal student loans, you will lose access to federal protections and programs like income-driven repayment plans. And refinancing may be difficult to qualify for on your own if you don’t have a good credit score and solid credit history, so you may need a student loan cosigner. Make the decision that’s best for your financial circumstances.

If you decide to move ahead with refinancing, be sure that your credit score is as strong as it can be. Then, shop around to compare lenders and find the best rates and terms. Once you’ve chosen a lender or two, submit an application. You’ll need to provide documentation of your income and employment, so be sure to have that paperwork on hand.

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.

FAQS

Can I refinance with a 580 credit score?

You may be able to refinance student loans with a credit score of 580, depending on the requirements of the lender. While most lenders look for borrowers with a good credit score, which FICO® defines as 670 to 739, some lenders set a minimum credit score as low as 580. If you meet other eligibility requirements, such as having a steady income and a low debt-to-income ratio, a lender may consider you with a 580 credit score.

What is the minimum credit score for a refinance?

Each lender has its own specific requirements, including the credit score needed to refinance. While most lenders look for applicants with a good score, which starts at 670, according to FICO, some lenders set a minimum credit score, which may be as low as 580. Check with different lenders to see what their requirements are.

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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


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 .

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.

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

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

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.

SOSLR-Q424-004

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Nov
27
2024
Different Types of Mortgage Lenders

What Are the Different Types of Mortgage Lenders?

By | Family Finances, Home Ownership, mortgage | Comments Off on What Are the Different Types of Mortgage Lenders?

If you’re financing your home purchase, choosing the right lender could streamline the process. But there are many types of mortgage lenders: retail lenders, direct lenders, online lenders, and others.

Although many steps of the mortgage process are consistent across lenders, there are key differences that could affect the all-in cost. To help narrow your search, this guide will cover what mortgage lenders do and explore common mortgage lenders.

Key Points

•   Mortgage lenders include direct, retail, wholesale, portfolio, warehouse, online, and hard money lenders, each with unique roles.

•   Direct lenders manage the loan process internally, offering their own products.

•   Mortgage brokers help borrowers find suitable home loans, managing paperwork and communication.

•   Retail lenders issue mortgages directly to consumers, while wholesale lenders work through third parties.

•   Hard money lenders focus on property value for loans, suitable for quick financing needs like property flipping.

Mortgage Lender, Defined

A mortgage lender is a bank, credit union, mortgage company, or individual that grants home loans to borrowers. Mortgage lenders evaluate an applicant’s creditworthiness and ability to repay the loan. Based on the buyer’s qualifications, the lender sets the interest rate and mortgage term.

After closing, the loan may be managed by a mortgage servicer. The mortgage servicer vs. lender difference is that the mortgage servicer is responsible for sending statements, collecting monthly payments, and allocating funds between the loan principal, interest, and escrow account, while the lender is loaning you money.

It’s possible that financial institutions act as both the mortgage lender and mortgage servicer.

Mortgage Lender vs. Mortgage Broker

Both lenders and mortgage brokers can assist with the purchase of a home. But there are key differences to understand when comparing a mortgage broker vs. direct lender.

Mortgage brokers do not originate or approve loans; rather, they help borrowers find a home loan that best fits their financial situation. They often have connections with many lenders and find solutions for less-qualified borrowers. A mortgage broker also helps organize required paperwork and manages communication between the borrower and lender.

A mortgage broker earns a commission for these services from either the borrower or lender after the loan closes. Licensing is required to be a mortgage broker, and the Nationwide Mortgage Licensing System & Registry maintains a database of licensed professionals by state. Search for NMLS consumer access.

You can always obtain loan quotes from at least one broker and one direct lender when you shop for a mortgage.

Online Mortgage Lender vs. Bank

Borrowers can work with a bank or mortgage lender to fund their home purchase.

Banks can offer mortgages along with other financial products, including checking accounts and commercial loans. A borrower may receive benefits, like a lower rate and lower closing costs, when applying for a bank mortgage if they’re an existing customer. As larger financial institutions, banks tend to use a mortgage servicer for their mortgage loans after closing.

As larger financial institutions, banks tend to service their mortgage loans after closing.

On the other hand, banks may have stricter lending requirements than mortgage companies, thanks to federal regulation and compliance. Borrowers may also have fewer loan options to choose from with a bank, as a mortgage lender specializes in mortgage products.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Common Mortgage Lender Options

If you’re in the market for a home loan, there are several types of mortgage lenders and terms to become familiar with. Here are the most common.

Direct Lenders

Direct lenders like mortgage lenders, banks, credit unions, and portfolio lenders fund, originate, underwrite, process, and close the loans on their own. They work directly with buyers and refinancers; there is no broker involved.

They work directly with buyers and refinancers; there is no broker involved.

Retail Lenders

Banks, credit unions, and mortgage companies can also be categorized as retail lenders. Retail lenders issue mortgages directly to consumers.

Homebuyers may receive more personalized assistance from a mortgage loan originator to find a home loan that fits their situation. But because retail lenders handle loans in-house, they generally only offer their own loan products.

Besides mortgages, retail lenders provide other credit products, including savings accounts, personal loans, and credit cards.

Wholesale Lenders

Wholesale lenders offer home loans through third parties, such as retail lenders or mortgage brokers, instead of directly to consumers. They fund the mortgage and set the loan terms, while the third party facilitates the application process and communicates with the borrower. After closing, wholesale lenders typically sell their home loans on the secondary mortgage market.

Portfolio Lenders

A portfolio lender, such as a community bank, uses its own money to originate nonconforming mortgages — those that do not meet Fannie and Freddie standards for purchase, such as jumbo loans. A portfolio lender has more flexible lending standards than a conventional direct lender because it holds its own home loans in a portfolio. But portfolio loans may come with higher interest rates and closing costs.

Warehouse Lenders

Warehouse lending provides short-term funding to mortgage lenders to finance a home loan. The mortgage serves as collateral until the lender — often a small or midsize bank — repays the warehouse lender. With warehouse lending, the mortgage lender is responsible for the loan application and approval process. After closing, the mortgage lender sells the loan on the secondary market and uses the proceeds to repay the wholesale lender. Mortgage lenders profit from this practice through origination fees and mortgage points.

A mortgage financed through a warehouse lender may provide faster funding and more flexibility than a conventional loan. For instance, borrowers could apply for construction financing with warehouse lending.

Online Lenders

With an online lender, the mortgage application process, processing, underwriting, and closing can all be completed virtually. Opting for a digital borrowing experience can get you to the closing table faster. No overhead means online lenders can offer lower rates and fees. On the other hand, borrowers may find it more difficult to build a working relationship with a loan officer when completing the process online.

Recommended: Prequalification vs. Preapproval: What’s the Difference?

Hard Money Lenders

Hard money lenders — individuals or private companies — offer hard money personal loans based on the value of the property rather than the borrower’s creditworthiness. The property serves as collateral, and borrowers must repay the loan in just a few years.

While hard money lenders can offer faster financing, these loans usually come with higher down payment requirements and interest rates because of their risk. Borrowers may benefit from a hard money lender if they plan to flip a property.

How to Find the Right Mortgage Lender for You

While there’s no shortage of lenders, finding the right mortgage lender takes some shopping around.

When browsing options, it’s useful to consider your financial situation and needs. For instance, can you afford a down payment on your own or with help from a family member or friend? Is your credit score high enough to buy a house?

Checking the fees and interest rate are important to determine how much you’ll have to pay upfront and over the life of the loan.

Applying to several lenders and/or working with a mortgage broker can let you compare rates and fees to negotiate better terms. Apply to all within a 14-day window to minimize damage to your credit score.

There are first-time homebuyer programs, too. The definition of first-time homebuyer is broader than it seems. It includes anyone who has not owned a principal residence in the past three years.

Recommended: Mortgage Loan Help Center

The Takeaway

There are many types of mortgage lenders to choose from. Your financial situation and goals will help you pick the mortgage lender that offers terms that fit your budget.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

What does a mortgage lender do?

A mortgage lender offers home loans to borrowers with the expectation that the loans will be repaid with interest. They set the loan terms, including the interest rate and repayment schedule.

Are mortgage underwriters the same as the lender?

Underwriters assess a borrower’s income, assets, and debt to determine whether they are approved for a mortgage. Most lenders manage the underwriting process in-house.

Photo credit: iStock/luismmolina

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


SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.



*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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

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

SOHL-Q424-146

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Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or other eligible status, be residing in the U.S., and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates reserved for the most creditworthy borrowers. If approved, your actual rate will be within the range of rates at the time of application and will depend on a variety of factors, including term of loan, evaluation of your creditworthiness, income, and other factors. If SoFi is unable to offer you a loan but matches you for a loan with a participating bank, then your rate may be outside the range of rates listed above. Rates and Terms are subject to change at any time without notice. SoFi Personal Loans can be used for any lawful personal, family, or household purposes and may not be used for post-secondary education expenses. Minimum loan amount is $5,000. The average of SoFi Personal Loans funded in 2023 was around $33K. Information current as of 2/26/24. SoFi Personal Loans originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org). See SoFi.com/legal for state-specific license details. See SoFi.com/eligibility for details and state restrictions.

✝ To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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