student in graduation cap and gown

When Do Student Loans Start Accruing Interest?

Student loans — federal or private — begin accruing interest when they’re disbursed, and the borrower is responsible for paying the interest on all but subsidized federal student loans during grace periods or deferment.

The grace periods for each kind of student loan repayment are good to know. So are the various loan interest rates and what happens during any period of deferment or forbearance.

The Basics of Student Loan Interest

A student who takes out a student loan (or a parent who takes out a parent-student loan in their own name) signs a promissory note outlining all the terms of the loan, which include the loan amount, interest rate, disbursement date, and payment schedule.

Federal student loans issued after July 1, 2006, have a fixed rate. The repayment default is the standard 10-year plan, but there are options, such as income-based repayment or a Direct Consolidation Loan, that can draw out repayment to double that or more.

Private student loan interest rates may be fixed or variable, and are based on your — or your cosigner’s — financial history. The repayment term can be anywhere from five to 20 years.

With federal student loans and most private student loans, payments are deferred until after you graduate. Interest will have accrued, and in almost all cases you’re responsible for paying it.

Interest and Grace Periods by Loan

With the exception of subsidized federal student loans, any unpaid loan interest during grace periods will be capitalized, or added to the loan balance, when repayment begins. Capitalized interest on student loans can significantly increase how much a borrower owes.

Here are details about different kinds of student loans. Congress approves interest rates for Department of Education loans that span July 1 to June 30 the following year. These are the rates and loan fees (deducted from each disbursement) as of this writing.

Recommended: Types of Federal Student Loans

Unsubsidized Student Loans

Federal Direct Unsubsidized Loans are available to undergraduate and graduate students with no regard to financial need.

Rate and loan fee: 3.73% for undergraduates and 5.28% for graduate students, with a loan fee of 1.057%.

Grace period: While you’re in school at least half-time and for six months after graduation.

Subsidized Student Loans

Federal Direct Subsidized Loans are available to undergraduates with financial needs.

Rate and fee: 3.73%, with a loan fee of 1.057%.

Grace period: While you’re in school at least half-time and for six months after you leave school. The government pays the interest during those grace periods and during any deferment.

Direct PLUS Loans

Taken Out by a Parent

A Parent PLUS Loan acquired to help a dependent undergraduate is unsubsidized.

Rate and fee: 6.28%, with a loan fee of 4.228%. In the past decade, the rate for Direct PLUS Loans has been as high as 7.90%.

Some private lenders refinance Parent PLUS loans at what could be a lower rate.

Grace period: First payment is due within 60 days of final disbursement, but a parent can apply to defer payments while their child is in school at least half-time and for six months after.

Taken Out by a Graduate Student or Professional Student

Grad PLUS Loans are available to students through schools participating in the Direct Loan Program.

Rate and fee: 6.28%, with a loan fee of 4.228%.

Grace period: Automatic deferment while in school and for six months after graduating or dropping below half-time enrollment.

Student loan refinancing could potentially
lower the interest your loans accrue.


Private Student Loans

Some banks, credit unions, state agencies, and online lenders offer private student loans.

Rate and fee: Rates can be fixed or variable, and rates and fees vary by lender

Grace period: Interest begins when a private student loan is disbursed, but payments may be deferred while a borrower is in school.

How Is Interest on Student Loans Calculated?

Student loans generate interest every day. Your annual percentage rate is divided by 365 days to determine a daily interest rate, and you are then charged interest each day on the total amount you owe.

That interest is added to your total balance, and you’re then charged interest on the new balance — paying interest on interest until the loans are paid off.

If you don’t know what your monthly payments will be, a student loan payment calculator can help. This one estimates how much you’ll be paying each month so you can better prepare for your upcoming bills.

The amount you pay each month will be the same, but the money first goes toward paying off interest and any fees you’ve been charged (like late fees); the remainder goes to pay down the principal of the loan.

As you pay down your loan, because the principal is decreasing, the amount of interest you’re accruing decreases. And so, over the life of your loan, less of your monthly payment will go toward interest and more will go toward the principal. This is known as amortization.

Interest Accrual During Deferment or Forbearance

If you can’t afford payments on federal student loans once they begin, deferment and forbearance may allow you to hit pause.

The big difference is that interest always accrues during forbearance (except in the case of Perkins Loans), while during deferment, interest on some types of loans usually does not accrue.

They are:

•   Direct Subsidized Loans

•   Perkins Loans

•   The subsidized portion of Direct Consolidation Loans

•   The subsidized portion of Federal Family Education Loan Consolidation Loans

Some private student loan issuers offer deferment or forbearance for specific reasons. Any unpaid interest will likely accrue and be added to the principal after the payment pause.

How You Could Save on Interest

Because interest can add up so quickly, it’s important to pay attention to the interest rates you’re paying on your student loans.

Refinancing — taking out a brand-new loan that pays off your current loans — can lower the amount of interest your loans accrue if you qualify for a lower interest rate or a shorter term. To see how refinancing might save you money, take a look at this student loan refinance calculator.

Even a small difference in interest rates could help you save a substantial amount of money paid in total interest over the life of the loan, depending on the term you select.

It’s important to know, though, that refinancing federal student loans will make them ineligible for federal benefits like income-driven repayment plans and Public Service Loan Forgiveness.

The Takeaway

When does student loan interest start accruing? The minute the loan is disbursed, and you’re usually responsible for paying it. It’s important for borrowers to understand and pay attention to capitalized interest.

Interested in seeing if you could get a lower rate or different term by refinancing? If so, look into SoFi refinancing.

There are no fees.

Check your rate and check out the perks of refinancing with SoFi.


SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF JANUARY 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SLR18235

Read more
What is DAO? How it Works

DAOs and How They Work

One of the strongest trends in technology has long been decentralization — from the creation of the internet connecting academics across the world, to the world wide web providing a platform for strangers to connect with one another. The advent of cryptocurrency has spurred another round of decentralization, the decentralized autonomous organization, or DAO.

What Is a DAO?

Decentralized autonomous organizations (DOAs) are innovative and potentially promising models for bringing blockchain technology to new areas of organization, beyond issuing and transferring value across the blockchain (aka currency). For example, DAOs could be used to develop blockchain in insurance or blockchain in real estate.

The goal of DAOs is to remove expensive and time-consuming processes and democratize how organizations are conceived and run, by doing everything in code. DAO stands for:

•   Decentralized: This means no one person or group is in charge of the organization by virtue of a title. Instead, decisions are made by the members of an organization by virtue of how big a stake they have in it.

•   Autonomous: The DAO is run entirely according to its smart contracts and the decisions of its members.

•   Organization: DAOs can still act as a single entity, producing things and acting on behalf of all its members.

While DAO typically refers to projects using Ethereum (aka Ethereum DAOs), some scholars have suggested that Bitcoin itself is a DAO.

It’s important when discussing Ethereum DAOs or DAOs in general not to get them confused with “The DAO,” a group that raised money to invest in cryptocurrency projects. The organization was hacked and more than $50 million of about $160 million worth of Ethereum raised was stolen.

How Do DAOs Work?

While there have been procedures for more open and democratic organizations for as long as people have been gathering to make decisions, DAOs are an innovation that specifically hinges on blockchain technology.

DAOs are typically built on top of the Ethereum blockchain, which supports the second-most popular and valuable cryptocurrency in the world and is designed specifically to support “smart contracts” or agreements that execute automatically and don’t require third parties to enforce.

Imagine a traditional organization as a bundle of contracts and agreements between the members: an employment agreement specifies what an employee is supposed to do in exchange for pay, contracts with suppliers, loan terms with banks, and so on. These contracts all need to be specified on paper and their execution can be up to third parties and legal systems to oversee. For the DAOs, these are problems to be solved with code.

How Are DAOs Funded?

Typically DAO contracts are also set up for the sale of a token, as a way of raising money for the DAO and for establishing who gets to be involved in the decision-making. Token holders vote based on a process specified and executed in the smart contracts themselves. The idea is that token holders will want to maximize the value of their tokens, thus ensuring the DAO does not work to the advantage of any one employee or group, but instead to the token holders as a whole.

DAOs: Pros and Cons

Pros

Cons

Change always happens by vote Can be hard to turn around in a crisis
Transparency through open-source Organizational discretion is difficult
Smart contracts avoid after-the-fact tinkering with agreements If contracts and code are poorly written, can be hard to change without consensus
Organizational roles specified in code Makes taking on responsibilities beyond what’s specified in code difficult
Decentralization means everyone in the organization is responsible for the organization’s decisions Lack of accountability for any one individual, like a central leader or chief executive
Open source means more eyes on critical functions and the best ideas rise to the top Legal ambiguity could make decision-making difficult or force DAOs to engage in more centralized, traditional behavior
Everyone involved in decision-making has a stake Token-based decision-making can make consideration of other stakeholders’ interests more difficult

Examples of DAOs

There are a variety of DAOs in operation right now. These are some of the well known ones.

MakerDAO

MakerDAO is one of the most prominent uses of the DAO structure and one of the most popular DeFi (or decentralized finance) projects that could serve as an example of how to use blockchain in the finance industry. MakerDAO produces a token, known as Dai, that has a steady $1 U.S. value and is used for financial products like loans. There’s also the MKR token, which is for governance of the overall project. This means that holders of MKR can “vote on changes to the protocol, like the addition of new collateral assets and protocol updates.”

Recommended: What is DeFi? Guide to Decentralized Finance

Augur

Augur is an Ethereum-based prediction market, meaning it allows people to place bets on events in the future. The platform is a bundle of smart contracts and OracleDAO was created to assist with its development.

Uniswap

Uniswap is a decentralized cryptocurrency exchange specifically for “ERC-20” tokens with a governance token called UNI. ERC-20 is a standard on the Ethereum blockchain that is used for applications and services built on top of Ethereum. In the ongoing dispute between centralized vs decentralized exchanges, Uniswap is decidedly on the side of the latter.

How to Invest in a DAO

Investing in a DAO isn’t that different from buying any other form of cryptocurrency. Here are the simple steps to do it.

1.    Have a wallet. A crypto wallet is a software program or hardware and software system that allows an investor to safely and effectively store and trade cryptocurrencies including tokens issued by DAOs.

2.    Do your research. There are new crypto projects starting every day. It’s important to have a detailed understanding of what the developers of the one you’re interested in are attempting to do, and that you are well aware of whatever rights you gain by investing in a DAO and purchasing a governance token.

3.    Find an exchange. Some exchanges host tokens, including MKR, which can be bought and sold using their tools. Uniswap, for example, hosts token exchange.

4.    Be an active participant. Study how governance works in the DAO you’ve invested in and be a conscientious and energetic participant.

The Takeaway

DAO stands for decentralized autonomous organization. In such organizations, there is no one person or small group of executives making decisions — instead, anyone holding tokens issued by that DAO has a say in policy and other organizational matters.

For investors ready to jump into the crypto world, or those looking to expand their crypto holdings, SoFi Invest® offers cryptocurrency trading in dozens of crypto like Bitcoin, Litecoin, Cardano, Dogecoin, Solana, Enjin Coin, and Ethereum, whose blockchain is the basis of smart contracts and DAOs.

Find out how to get started with SoFi Invest.

Photo credit: iStock/Pekic


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SOIN0421180

Read more
How to Cancel Subscriptions on an iPhone, iPad, or Mac

How to Cancel Subscriptions on an iPhone, iPad, or Mac

Maybe you signed up for an app planning to cancel it before the free or discounted trial ends. Then a month or more goes by and you completely forget about it. That is until you see a charge from Apple on your bank statement and find yourself paying for a monthly subscription you don’t want.

You may also be paying for subscription apps you rarely use anymore, like a streaming service you hardly ever watch or a digital magazine you haven’t read in months.

While each subscription fee may be relatively small, they can add up and make it harder to stay within your monthly spending budget.

The good news: It’s easy to cancel subscriptions you’ve set up through the App Store and are connected to your Apple ID account, whether they’re Apple’s own services, like Apple Music, or streaming service from another provider, such as Hulu or Spotify.

When you cancel a paid subscription, you can keep using the subscription until the next billing date. If you cancel an app subscription during a free trial period, you may lose access to the subscription immediately.

Here’s how to cancel app subscriptions on Apple devices.

Recommended: Budgeting for Basic Living Expenses

How to Cancel App Subscriptions on an iPhone or iPad

Here are the steps for cancelling a subscription on your mobile ios device.

Step 1. Open the Settings app.

Step 2. Tap your name at the top of the page.

Step 3. Tap Subscriptions.

Step 4: Tap the subscription that you want to cancel.

Step 5. Tap Cancel Subscription. If you don’t see Cancel as an option, the subscription has already been cancelled and won’t renew.

Another option:

Step 1. Go to the App Store.

Step 2. Tap your profile image.

Step 3. Scroll down to Subscriptions and tap. You will then see any active subscriptions.

Step 4. Tap the subscription you want to cancel.

Step 5. Confirm by tapping Cancel Subscription.

How to Cancel Subscriptions on a Mac

Follow these instructions to cancel app subscriptions on a Mac laptop or desktop computer.

Step 1. Open the App Store (you can locate this in Finder under Applications, or at the bottom of your home screen).

Step 2. Click the sign-in button or your name at the bottom of the sidebar.

Step 3. Click View Information at the top right of the window. You may be prompted to sign in.

Step 4. On the page that appears, scroll until you see Subscriptions, then click Manage.

Step 5. Click Cancel Subscription. If you don’t see Cancel Subscription, then the subscription is already cancelled and will not renew.

You can also cancel an app subscription on a Mac using iTunes. Here’s how:

Step 1. Open iTunes

Step 2. Click Account > View My Account

Step 3. Enter your Apple ID password to see your account information.

Step 4. Scroll to the bottom of your Account page and click Manage next to the setting for Subscriptions.

Step 5. Click Edit next to the subscription you want to cancel.

Step 6. Click Cancel Subscription. A message will pop up asking you to confirm that you want to cancel.

Step 7. Click Confirm and the App subscription will be cancelled.

Accidentally Cancelled a Subscription? Here’s How to Restart

If you got a little trigger happy and cancelled the wrong subscription, or you have a change of heart after cancelling an app and want to get it back, you can easily reactivate a subscription. It’s easiest to do this on your iPhone or iPad. Here’s how.

Step 1. Open the Settings app.

Step 2. Tap your name at the top of the page.

Step 3. Tap Subscriptions.

Step 4. Look for the list of expired subscriptions at the bottom of the screen. Tap the one you would like to reactivate.

Step 5. On the subscription page, tap the subscription option you want and then confirm your choice. You’ll now be resubscribed.

How-to Tip: Setting Reminders to Avoid Unwanted Subscriptions

The next time you sign up for a new app that has a trial period promotion going on, you may want to set a Reminder on your mobile device to cancel your app subscription. This will make you avoid unexpected monthly expenses.

You could use your phone to ask Siri to set a Reminder to cancel a subscription a few days before fees will kick in. Or, you could use the Reminders app on your phone or iPad.

Another option is to use Calendar to create a New Event for the date and time you want to cancel an app. To get a notification on that day, you’ll want to make sure the Alert section is set to “at time of event.”

Recommended: Are Monthly Subscriptions Ruining Your Budget?

The Takeaway

Most subscriptions automatically renew unless you cancel them. If you sign up for a free trial and don’t cancel in time, you will end up paying a monthly fee that you likely won’t be able to get refunded.

A good way to make sure you aren’t paying for subscriptions you don’t want is to track your monthly spending and then set up a basic budget. Having a budget can help ensure that your spending is in line with your priorities and short term financial goals.

With a SoFi Money® cash management account, it’s easy to track your monthly spending using the SoFi Relay app. The app allows you to connect all of your financial accounts in one dashboard, and keep an eye on charges and balances on the go.

Learn how SoFi Money can help you keep better track of your monthly spending.

Photo credit: iStock/Suwaree Tangbovornpichet


SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
SoFi’s Relay tool offers users the ability to connect both in-house accounts and external accounts using Plaid, Inc’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score provided to you is a Vantage Score® based on TransUnion™ (the “Processing Agent”) data.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
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.
SOMN0821072

Read more
Partial Payments For Debts

Partial Payments for Debts

Whether you’re paying for college, buying a house, or starting a business, it’s common to take on debt at some point in your life. Repaying that debt typically involves making a fixed or minimum monthly payment by a certain day each month.

But what happens if money is tight and you don’t have enough to make that monthly payment?

It might seem like making a partial payment is better than paying nothing at all. However, that’s not necessarily the case. Depending on the lender or creditor, a partial payment may be looked at the exact same way as a late or missed payment.

Though partial payments might help lower your balance and reduce the interest that accrues on your debt, lenders and creditors generally don’t see them as on-time payments and may still consider your account as in default.

If you’re thinking about making partial payments, here’s what you can expect to happen — and what you can do instead.

Recommended: Prepayment Penalties: Why They Exist and How to Avoid Them

What is a Partial Payment?

A partial payment on a debt is any payment smaller than the minimum amount due, as specified by the creditor.

Credit cards have minimum payment amounts, which can vary depending on your balance and annual percentage rate (APR). Other types of debt, such as car loans and mortgages, typically have set monthly payments that don’t vary as much.

Partial payments typically do not typically satisfy a creditor’s payment requirements for loans, credit cards, and other debt. And, not paying the full amount could be treated the same as a missed payment.

Why Do Customers Make Partial Payments?

Generally, customers make partial payments if they’re dealing with financial hardship or other money issues that make them unable to cover all their monthly expenses.

Even a sound budget can go off the rails when emergency expenses, such as medical bills or car repairs, arise. When bills are due, paying for necessities, like food, housing, and utilities, are usually a higher priority than long-term debt.

People who are out of work due to the pandemic (or other reasons) and collecting unemployment benefits may also consider making partial payments on debt for a period of time.

Recommended: How to Start an Emergency Fund (and Why You Should)

Does a Partial Payment Affect Your Credit Score?

It could. If you pay less than the minimum amount due on a credit card or loan, it likely won’t satisfy your creditors and they will still consider it a missed payment. In addition to hitting you with a late fee, they may also report to the credit bureaus that your payment is late.

By law, creditors can’t notify credit bureaus of a late payment until it’s 30 days past the due date. Paying the remainder of what you owe for that month prior to the 30-day mark can keep a late payment from showing up on a credit score, though you could still be liable for fees and penalties set by the creditor for making a late payment.

Because your payment history makes up 35% of your FICO® Score, having a late payment on your record can cause your score to drop.

Lenders consider a borrower’s repayment track record as a primary indicator of their ability to pay back future debt, which is why payment history is the largest component of most credit scores.

The impact of late and partial payments on your credit score will vary based on your existing credit history and how far behind you are on payments. Accounts that go unpaid for several months will do more harm to a credit score than a single late payment.

Over time, the impact of a late payment on your score will diminish and, after seven years, it will be removed from your credit report.

Recommended: How to Build Credit Over Time

Other Downsides of Making a Partial Payment

Falling short of what you owe can create other issues besides putting a dent in your credit score. Creditors may impose fees and take additional measures to secure repayment.

Here’s a closer look at what could happen if you only make partial payments on these common types of debt.

Auto Loans

What happens to your auto loan will depend on your agreement and history with the lender. If you’ve never missed a payment before, they may be willing to accept a partial payment for now.

Depending on the state, defaulting on your car loan can mean vehicle repossession, which can involve selling the car at public auction or electronic disabling the car to prevent it from being used. It can be a good idea to check the contract terms to learn what the lender is authorized to do and when.

Credit Cards

Unless you’ve come to a prior agreement with the credit card company, partial payments likely won’t satisfy your account’s minimum payment requirements.

Even if you pay something towards the bill, your account will likely still become delinquent, and the credit card company may report the late payments to the credit bureaus.

Failing to pay the minimum amount on a credit card bill also typically comes with late fees. Delaying payment further can result with additional consequences, such as freezing your credit card and sending your debt to a collection agency.

Recommended: How Do Credit Card Payments Work?

Mortgages

Making partial payments on a mortgage can be considered defaulting on the loan and even trigger the foreclosure process.

Prior to foreclosure, borrowers will likely incur late fees and receive a notice of default when the mortgage payment is a few months past due.

In general, a foreclosure can’t begin until 120 days after the first missed mortgage payment. That means you have some time to pay the amount that’s past due before the lender starts the foreclosure process.

Student Loans

Partial payments on student loans could cause them to become delinquent one day after the payment due date unless alternative arrangements are made with lenders.

With federal student loans, your loans typically enter default when you miss or only make partial payments for 270 days. The lender can then report the default to the credit bureaus. In addition, the government can garnish your wages, and even keep your tax refund.

A possible exception: If you have an income-driven federal student loan repayment plan, your monthly payment could be as low as $0 if your income dips low enough.

With private student loans, the rules will depend on the lender. If you remain delinquent for 90 days or more, the delinquency may be reported to the credit bureaus. If the account continues to be delinquent, you could fall into default, at which point private lenders can take legal action.

Recommended: How to Get Out of Student Loan Debt: 6 Options

Alternatives to Making Partial Payments

Before making a partial payment, you may want to consider some alternatives:

Reaching Out to Your Creditor

It can be a good idea to contact the creditor or lender before the payment is due to explain your situation and what you can afford to pay that month.

You may also want to ask about a “hardship repayment plan.” This type of plan could potentially allow you the option of minimal or no payment, a temporary reduction or suspension in account interest, or interest-only payments. You may want to keep in mind, however, that interest-only payments won’t decrease your principle — or the size of your loan. Some programs last a month, and others up to six months or so.

Contacting a Nonprofit Credit Counseling Agency

These agencies can help by negotiating lower interest rates with your current creditors. This can often result in lower monthly payments. If you are able to work out a plan, the payment you make may no longer be considered a “partial payment,” but instead an agreed-upon amount.

Considering Debt Consolidation

If you have multiple credit cards with high-interest rates and you’re having trouble paying the minimum on each, you may want to look into whether a debt consolidation program might help. The process involves taking out a personal loan at a bank or other reputable lender and then using it to pay off your credit cards.

You then end up with one loan to pay back, ideally at a lower interest rate. Typically, a closed-end loan like a personal loan means higher monthly payments, since personal loans have fixed terms. This is great news for borrowers who want to pay down their debt sooner, but it might not be the right choice for everyone.

Recommended: 6 Strategies for Becoming Debt Free

The Takeaway

If cash flow is tight, you might consider making a partial payment on a debt, hoping that paying something will prevent a late fee or a late payment from showing up on your credit report.

However, borrowers don’t typically get any extra credit for making a partial effort. If the monthly minimum or fixed payment hasn’t been paid in full, the lender will likely mark the payment as missed.

While partial payments may help chip away at your account balance, you can still end up facing fees, a reduced credit score, and potentially loan default.

If you’re unable to make full payments on your debt, it can be a good idea to contact your creditor as soon as possible to let them know about your financial situation first. In some cases, they may be able to offer alternative payment plans, forbearance, or postponement.

Setting up — and sticking to — a monthly spending budget can help you avoid having to make partial payments.

Looking to keep better tabs on your money, so you always have enough to pay your bills? With a SoFi Money® cash management account, you can spend, save, and earn competitive interest all in one account. And, you can easily track your weekly spending (and make sure you’re not overdoing it) right in the dashboard of the SoFi app.

Learn how SoFi Money can help you stay on top of your personal finances.

Photo credit: iStock/mapodile


SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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
.

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

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.
SOMN0621054

Read more
Easy Ways to Improve Your Gas Mileage

7 Easy Ways to Improve Your Gas Mileage

The average price of a gallon of regular gas in August 2021 was more than a dollar higher than a year ago. The average annual cost of fuel for new, fuel-efficient cars was $1,600 in 2020, but with that one-dollar increase in price, it’s not surprising if plenty of people look for ways to save money by improving gas mileage. Here’s help!

How to Improve Gas Mileage

Gas mileage is measured in miles per gallon (mpg). If a vehicle gets 25 mpg, this means that, on average, it can be driven for 25 miles for every gallon of gas pumped into it. Overall, miles per gallon is typically higher for a vehicle during highway driving than on city streets where speeds are slower and vehicles idle at stop signs and traffic lights. Vehicles can, in fact, typically get five more mpg with highway driving than with city driving.

Fortunately, there are ways to improve gas mileage no matter where you’re driving, many of them reasonably simple. To help, here are seven money-saving ideas for better gas mileage and two busted myths.

1. Reduce the Weight

Get rid of excess weight in the vehicle by removing unnecessary items in the trunk and backseat to lower fuel consumption. Every 100 pounds added to a car boosts fuel consumption by 1% to 2%. So, if someone lugs around a set of golf clubs in a bag, this could add up to 35 pounds, according to GolfCartReport.com . Think carefully about what to remove, though. Taking out a toolbox and tools might reduce the weight being carried, but those items might be sorely missed in an emergency.

2. Watch Your Speed

In general, the mileage a driver gets from a gallon of gas decreases pretty quickly when traveling more than 50 miles per hour, according to the U.S. Department of Energy (DOE). Higher speeds decrease fuel economy because of two factors: air resistance and tire rolling resistance. Although drivers will usually need to drive more than 50 miles per hour on highways, using cruise control is a way to use less gas at higher speeds. This keeps the vehicle moving at a constant speed, which is beneficial because vehicles use the most fuel during acceleration.

3. Keep Tires at Optimal Pressure

Consumer Reports shares test-based tips to get better gas mileage, including the role played by tire pressure in connection with miles per gallon. When looking at mid-sized sedans and highway driving, a vehicle can lose 1.3 mpg when tires are underinflated (down by 10 pounds per square inch). The report notes, though, that this is a modest drop in miles per gallon for a sizable reduction in tire pressure, and suggests that keeping tires properly inflated may do more to keep drivers safe than help them to pay less at the pump.

4. Monitor Your Driving

Using a trip computer, drivers can receive immediate feedback about the impact that an action, such as the rapid acceleration of a vehicle, has on gas usage. These real-time, personalized insights into how to improve fuel economy, fuel consumption, maintenance reminders, and more.

5. Plan Your Gas Stops

Using a combination of strategies for how to improve gas mileage can help to reduce fuel costs. Having to fill up at a pricey pump, though, can negate all of that hard work. So, when out on the road, especially when away from home in unfamiliar territory, consider using apps like Gas Guru or GasBuddy. They can help you to find the most affordable gasoline in town, wherever you are when it’s time to fill up.

Recommended: 25 Ways to Cut Costs on a Road Trip

6. Road Trip Wisely

If you’re planning a trip and have a choice of cars to drive, some factors to consider are the car’s size (you want enough room to be comfortable as you travel as well as any luggage you bring) and its gas mileage. Using a trip calculator can estimate fuel consumption for each car so you can pick the one that will cost the least in gasoline.

7. Cold Weather Strategies

When thinking about how to get better gas mileage, take a look at the thermometer. FuelEconomy.gov states that the miles per gallon obtained is 15% lower, more or less, at 20°F than at 77°F. Since most of us can’t hibernate all winter long, money-saving suggestions include warming up your car for 30 seconds only and then driving gently to allow the vehicle to warm up in a more cost-efficient way. Also, combine trips whenever possible — especially in the winter.

Some strategies to improve gas mileage are tried and true, but there are still some myths that continue to be perpetuated. Here are a couple of common myths that don’t prove to be true.

1. Refueling When Cool

Some people buy gasoline in the morning when temperatures are cooler, believing that this will help them get better gas mileage. The theory behind this idea is that cooler gas is denser, so you’ll get more bang for your buck in the mornings. Consumer Reports says that this won’t make any practical difference though, especially since most gas stations store the gasoline underground where temperatures are pretty stable.

2. Changing the Air Filter

Traditional wisdom says that dirty air filters reduce fuel economy because of lowered air intake. Consumer Report also tested this notion and determined that, although the vehicle’s acceleration was lessened when an air filter change was overdue, changing it probably won’t boost fuel economy in a modern car. Wondering what changed? Today’s engine computer has the ability to compensate for the reduced airflow to maintain the right ratio between air and fuel.

Budgeting for Gasoline and More

How much can you afford to pay for gasoline each month? If you aren’t really clear about that, making a monthly budget can help. Basic steps of creating a budget include:

•   Gathering all of your financial documents together.

•   Figuring out your monthly take-home pay.

•   Adding up monthly expenses.

•   Using this information to create a workable budget.

While creating your budget, consider how much gas is used for needs (such as getting to work) and how much for wants (driving around town while trying to decide what restaurant to pick). One popular personal budgeting method involves dividing expenses into needs and wants and then also having a category for savings. Called the 50/30/20 rule, this method divides after-tax income in this way:

•   50% towards needs.

•   30% towards wants.

•   20% towards savings.

This isn’t the only way to create a personal budget, though. There are plenty of budgeting resources to help you find the method that works best to manage your money.

The Takeaway

Gas prices can take a chunk out of the budget with prices significantly higher now than just a year ago. Tips provided in this post can help improve gas mileage as well as guide people through creating a personal budget that works for them.

SoFi Relay allows you to track your money, all in one place, providing spending breakdowns and other financial insights — while SoFi Money® is a cash management account that you can use to save, spend, and work towards personal financial goals.

Learn how SoFi’s financial tools can help you build smart financial goals and work towards meeting them.

Photo credit: iStock/FG Trade


SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
As of 6/9/2020, accounts with recurring monthly deposits of $500 or more each month, will earn interest at 0.25%. All other accounts will earn interest at 0.01%. Interest rates are variable and subject to change at our discretion at any time. Accounts opened prior to June 8, 2020, will continue to earn interest at 0.25% irrespective of deposit activity. SoFi’s Securities reserves the right to change this policy at our discretion at any time. Accounts which are eligible to earn interest at 0.25% (including accounts opened prior to June 8, 2020) will also be eligible to participate in the SoFi Money Cashback Rewards Program.
SoFi’s Relay tool offers users the ability to connect both in-house accounts and external accounts using Plaid, Inc’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score provided to you is a Vantage Score® based on TransUnion™ (the “Processing Agent”) data.
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 or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
SOMN0821073

Read more
TLS 1.2 Encrypted
Equal Housing Lender