alarm clock on pastel background

What is a Delinquent Payment?

If you look up the word “delinquent” in a dictionary, you’ll see that it refers to being neglectful in fulfilling a duty. If used when discussing a payment, it usually means the payment is past due. Whenever you apply for and are granted a loan or a line of credit (including a credit card), it typically comes with a contract. A significant part of the contract involves how you’ll pay back the outstanding amount and on what timetable.

You may, for example, need to pay back $300 monthly by the 15th of each month. If the 16th arrives and you haven’t paid the amount you owe, you’re typically considered to be “delinquent” on that loan.

Typically, once someone is late in making a payment, a late fee may be assessed, and late payments may impact the person’s credit report.

If payment has not been made on most federal loans for 270 days, they can be considered in default , which can come with additional negative consequences. This post will explore the topic of delinquent payments and potential related consequences, along with ways to help prevent student loans from becoming delinquent.

Credit Score Calculations and Purposes

Typically, whenever you apply for a loan, that information is sent to the three major credit bureaus. When you obtain a loan, the same thing happens, and this information is added to your report. (This applies primarily to non-student loan debt. When you apply for a federal student loan, it doesn’t appear on your credit report until the loan is obtained.)

Now let’s say you want to apply for a new loan, whether a mortgage, car loan, or a credit card. The lending institution needs to review your application. They may approve your application or deny it, or they may offer you something different from what you requested.

This review is done because the lending institution wants to make sure you’re able to repay the loan, so they’ll typically look at things like your income to make sure you have the financial resources to make payments, as well your outstanding debts—again, to make sure you are financially able to repay the loan under the terms being offered.

If it’s a secured loan (which is a loan secured by an asset like a home, car, boat and so forth), they’ll make sure the asset being used as security for the loan has enough value. There are many other factors that come into play, of course, but those are some important ones.

And they’ll also check your credit score. Unlike when your income is checked, your credit score doesn’t summarize whether or not you can repay a loan. Instead, it provides a snapshot to a lending institution about how well you’ve upheld your financial commitments in the past.

If the lender sees that, to date, you’ve responsibly met your financial obligations, that can make you look more credible to a lender. But if your credit history isn’t as clean as it could be, this shoots up a red flag; things like late payments can impact your credit for months into the future, or even years.

As a result, the lender may deny the loan, or approve less than what you need and/or at a higher interest rate than what’s being awarded to people with excellent credit scores.

To help lenders get a look at your creditworthiness, they usually refer to your credit score. (In the past, they needed to plow through pages of credit history information to review your history.) Although there are multiple calculations that can be used to determine creditworthiness, FICO® scores are the most commonly used. This base score can range from 300 to 850; the higher the base score, the better your credit is considered to be.

Here is the general formula used by Fair Isaac Corp., the creators of the FICO Scores, to determine your base FICO score:

•  As much as 35%: payment history

•  About 30%: what you currently owe

•  Up to 15%: credit history length

•  Up to 10%: types of credit

•  Up to 10%: new credit (sometimes, FICO scores can be lower because a person is new to establishing credit)

There are three major credit reporting agencies. Besides Experian, there is TransUnion and Equifax. According to the federal Fair Credit Reporting Act (FCRA) , you are allowed to obtain a free copy of your credit report each year. To do so, you can answer a series of questions online , then choose which reports to review.

Some people initially check a report from just one of the credit bureaus, and then, a few months later, check another one. If errors are found, it’s important to correct them with the credit bureaus.

More about Delinquent Payments

If someone is late on a payment, say on a credit card, there can be fees assessed. If payments continue to be late, additional fees may be added. Delinquency may also cause your loan to switch to a penalty APR, which can cause interest owed to significantly increase and makes it harder to pay down the balance.

Late payments of 30 days or more may end up on your credit report, which can be damaging all by itself, and may negatively impact your credit score, which can make you less creditworthy in the eyes of lenders. If the amount you owe is sent to collections, that fact could appear on your credit report for seven years. If you’ve missed a loan payment and are delinquent, you can contact the lender to discuss how you can get back on track.

Late Student Loan Payment

Just as you don’t want to make a delinquent loan payment on your house or car, you don’t want to be late on your student loan payments. Specific consequences vary by lender; you can check with your loan servicer for exact details—the consequences may be different for private and federal student loans.

In addition to typically involving a late fee, a late student loan payment may appear on your credit report. If your federal student loan payment is 90 days late, it will then be reported to all three credit bureaus—but private student loan late payments are often reported to a credit bureau after 45 days.

If your late federal student loan payment snowballs into multiple ones, and you’ve missed making payments for 270 days (about nine months), your federal student loans go from delinquent to being considered in default. This means that your loans are now due in full, along with accrued interest, fees charged by collection agencies, and any other fees, fines, and penalties.

To collect this amount, the government can garnish up to 15% of your pay, and/or use your tax return to put towards the debt. They can do the same to your co-signer, if you have one. And, your loan services can even sue you .

If you know you’re going to miss a payment, you can always contact your student loan servicer. If you’re undergoing financial hardship, perhaps because of a job loss or medical emergency, you can apply for federal student loan deferment , which can postpone payments or reduce them.

If the situation is less serious, and you’ve missed a payment because of your hectic schedule, you might find it helpful to set up automatic loan payments.

Here’s a third scenario: Let’s say that you’re meeting your student loan payments, but the amount you’re paying every month is higher than you’d like. In that case, you could apply to refinance your student loans. If you qualify, you could have the option to select a more manageable monthly payment.

It is important to remember that if you refinance your loans with a private lender, you will forfeit all of your federal benefits including student loan forgiveness or deferment.

Refinancing Student Loans with SoFi

When you refinance your student loans with SoFi, you can consolidate your private and federal loans into one loan with one convenient payment. Potential benefits of refinancing include:

•  Your ability to choose between fixed rates and variable rates

•  Your ability to select new loan terms

•  No prepayment penalties or hidden fees

•  Refinancing federal and private loans into a brand-new lower-rate loan

Yes, in just two minutes, you can find out how student loan refinancing with SoFi could help you.


Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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
on credit.
SLR18248

Read more
bride and groom

How Marriage Can Affect Your Student Loan Payments

The euphoria of your wedding day is like nothing else. After months of planning, venue walkthroughs, cake and catering tastings, saying “I do” and committing to your new life is thrilling.

But after the photos have been taken, the reception dies down, and the thank you notes have been sent, you’ll probably have to make some adjustments to your new life.

And that includes your personal finances, especially if you or your partner have student loans.

Your marital status can affect everything from loan payments to potential tax breaks. Understanding how your marriage impacts the student loans you or your partner might be bringing into the marriage will help you craft a repayment plan and get ahead of your other financial goals—so you can focus on enjoying your recently married bliss.

How Marriage and Student Loans Can Affect Your Taxes

There are a number of student loan deductions you can file for on your taxes. Your eligibility for these deductions could change depending on if you are filing jointly or separately.

According to the IRS , as of the 2018 tax year, a single (or head of household, or qualifying widow/er) person with a modified adjusted gross income (MAGI) of $80,000 or lower may be able to deduct up to $2,500 of qualified student loan interest paid in a given year. (Eligible MAGI for married filing jointly for this deduction is $165,000.)

Helping One Another with Repayments

If you want to help your spouse with their student loan repayment, whether they have federal or private student loans, you can. If your spouse took out a loan before the marriage, typically that loan still belongs to the original borrower. If you’d prefer that both your names are on the loan, and you want to be equally responsible for the debt, you could consider refinancing.

This gets you a brand-new loan under both of your names. You may even be able to qualify for a lower interest rate or a better term when you refinance. However, you will forfeit your federal student loan benefits if you refinance federal loans with a private lender.

Marriage Could Complicate Your Income-Driven Repayment Plan

If you or your newly betrothed are enrolled in the Revised Pay As You Earn (REPAYE) plan—which is one of four income-driven repayment plans—you could see your monthly payments increase. REPAYE’s scheduled payments are based on income, and when you get married it is then based on your combined adjusted gross income if you now file taxes jointly with your spouse.

For the three other income-driven repayment plans—Pay As You Earn (PAYE), Income-Based Repayment and Income-Contingent Repayment —you could potentially avoid the higher payments by filing separately.

However, remember, when you do this you lose the ability to use the student loan interest deduction.

And filing separately also means you’ll no longer be able to qualify for the Earned Income Tax Credit, the American Opportunity Credit, and Lifetime Learning Credit. There is no one blanket answer for every married couple. Given the complexity of tax law, and that we are not accountants or tax attorneys, you’ll likely want to ask a tax professional to determine which option is best for you both.

Tips for Tackling Student Loan Debt Together

So what’s the best strategy for taking down student loans without letting them clobber your marriage? Here are five tips for proactively – and collaboratively – running a play that could help lead to the big pay-off: a debt-free happily ever after.

Tip #1: Create Your Big Financial Picture

Preparing to take on a big financial goal usually requires some conversation and preparation upfront. Before making any decisions, sit down and talk about your short- and long-term financial objectives, and make sure you’re both on the same page (or as close to it as possible). This can be an overwhelming topic, so see if you can break it down into chunks.

Have you established a household budget? How do student loans (and paying them off) fit into your long-term and short-term goals? Should you start aggressively paying off debt, or might it be better for you to ramp up over time? What other factors (e.g., buying a home, changing careers, having children, etc.) could affect your decisions?

Not only can this exercise help give you more clarity to create an action plan, it can also actually be kind of fun – after all, planning a life together is part of the reason you got married in the first place. The key is to listen to each other and remember that you’re both on the same team.

Tip #2: Take Advantage of Technology

Once you’re clear on the big picture, it’s time to get into the weeds. Many people have more than one student loan, often with multiple lenders, so a good place to start can be to gather all of your loan info in one place. You can use an online student loan management tool to collect this information, compare student loan repayment options, and even analyze prepayment strategies.

After crunching the numbers, your debt payoff strategy may include putting extra money toward your loans each month, which means creating and sticking to a budget that supports that goal. Using a debt payoff planner can help you keep track of your debt payments, maintain spending within a budget, and show how close you are to paying off your debt in full.

Note: tracking your spending so precisely may feel like ripping off a bandage at first, but over time, this kind of discipline can help you better see where your money goes and help you make conscious choices about your spending. And once you have your budget in place, these apps can be set up to alert you both when spending is getting off track.

Tip #3: Define The Who, What, When

Whether your finances are separate or combined, you’ll probably want to come to an agreement on how to collectively pay all of your financial obligations. Many couples address this based on each person’s share of the total household income.

For example, if one person makes 40% and the other makes 60%, the former might pay 40% of the shared bills and the latter might pay 60%. Others find it simpler and more cohesive to have one household checking account and pay all bills from there.

However you decide to split things up, it could make things much easier to agree upon a plan that accounts for everything, because missed student loan payments can potentially impact your credit (and/or your spouse’s), making your future financial objectives that much tougher to achieve.

Tip #4: Look For Opportunities to Optimize

Okay, so now you’ve established a plan and a budget, and you know who’s on point for each bill. You’re on the path to getting student loan debt off your plate. Is there anything else you can do to speed up the process?

Short of winning the lottery, the most common ways to accelerate student loan payoff are prepayment (meaning, paying more than the minimum) or lowering the interest rate, the latter of which is most commonly accomplished through refinancing.

If you qualify to refinance your student loans, you have a few possibilities: you can lower your monthly payments (by choosing a longer term) or lower your interest rate (which could also lower your monthly payments) – or you could shorten the payment term, and that means you could save money on interest over the life of the loan – money that could come in handy for those other financial goals you’ve both agreed to pursue.

Tip #5: Be on the Same Team

Living with debt is stressful for any couple, but being part of a relationship has its advantages, too. There’s a reason that weight loss experts often recommend finding a “buddy” to help cheer you on and keep you honest in your diet and exercise journey – and the same applies for achieving a big goal like paying off student loan debt.

Keep it positive and keep the lines of communication open, and you may even find that the journey to being debt-free makes your marriage even stronger – so you can take the hits that come your way as easily as your favorite team does.

How You Both Could Potentially Save on Student Loans

If you and your new spouse decide you want to do more things with your money—like have a child, buy a home, or invest more into your retirement savings—it may be time to look into student loan refinancing.

When you apply to refinance your student loans, lenders typically evaluate your credit score and financial fitness to determine your eligibility for a new interest rate and terms—which could be lower than the interest rate on your existing loans.

With a lower interest rate, you could reduce the amount of money you and your partner spend over the life of the loan. And with only one monthly student loan payment to worry about, your payments could be easier to manage.

If you are enrolled in an income-based repayment plan or are taking advantage of any of the federal repayment protections, refinancing with a private lender may not be the best solution for you since you will lose eligibility for these federal programs.

But for others, a lower interest rate can mean more flexibility and a more manageable repayment plan. To see how refinancing could impact your (or your partner’s) student loans, take a look at SoFi’s student loan refinance calculator.

Thinking about refinancing your student loans? Check your rate today!


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

SoFi 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.

SOSL18203

Read more
Woman on couch with laptop

How to Choose Your First Stock

Buying your first stock can be a rewarding and fun way to learn more about investing and find out whether it’s something you want to do more of. It’s the perfect way to dip your toe into the water of stock investing. So let’s talk about the steps you’ll need to take to become a stockholder.

If you’re considering buying your first stock, hopefully you’ve already cut your teeth on completing other personal finance tasks, like:

•  Reducing debt: It can be good to get rid of all high-interest debt if you’re able, so you’re freed up to start investing.

•  Building a safety net: Generally, everyone should build an emergency fund of at least three to six months of your salary, for the unexpected expenses that may come your way.

•  Contributing to a retirement fund: That’s where many of us begin to learn about investing, usually in mutual funds through our 401(k) or IRA.

Once you’ve done all that, a next great step can be to start wading into the investing waters of stock trading.

Step 1: Understand How Stocks Work

When you’re ready to settle on your first stock to buy, you’re really talking about buying a piece of a company.

You become a part-owner and might have certain rights, such as voting on a board of directors or other corporate matters.

You’re also share in the company’s performance, reflected in the stock price. When the company does well, you should be rewarded. When it’s in a funk, well, your stock will be too.

Stocks come in two general varieties:

Common stock. This is what people generally mean when they refer to stock trading. When you buy one or more shares, you become a common shareholder, which gives you certain voting rights, but these stocks may also offer dividends and potentially a gain in value, so one day, you can hopefully sell for a profit. Dividends might be declared by the company, say on a quarterly basis. It’s a way of distributing earnings and keeping shareholders happy. Common shareholders have little protection in a bankruptcy and liquidation of a company. In fact, you’d be last in line behind creditors and another class of stock. But don’t let that concern you too much. If you pick solid companies with good track records, you can attempt to minimize this risk.

Preferred stock. As the name implies, these stockholders get preferential treatment in the case of a corporate collapse. While they may or may not have voting rights, they are usually just behind creditors when it comes to getting back some of their original investment in liquidation.

Preferred shareholders also share more fully in a company’s profits because their dividends can be set in perpetuity. Corporations can cut dividends of common shareholders, but not preferred shareholders. However, companies can “call” their preferred stock, which means they can buy back your preferred shares according to the defined terms, but likely at a premium. So, not bad.

Step 2: Open an Online Brokerage Account

Gone are the days when you walked into a broker’s office and she placed a purchase order for your stock with the New York Stock Exchange—you know, the market pits where shouting traders haggled with each other to buy or sell stocks until the final bell rang.

Now, almost all of trading is done electronically, and for the average investor, from their laptop or mobile phone. With the arrival of online brokerage accounts, trading stocks became cheaper and much more hands-on for investors. Today, opening up an account is about as easy as opening a savings account on your bank’s website.

In choosing an online brokerage for picking your first stock to buy, don’t just select the one with the lowest trading fees. It may be worth paying a little more for great customer service or additional perks.

Some questions to ask yourself: How often do I intend to buy or sell stocks? How much support and additional educational services do I want? How much money do I want to spend? Typically, online trades will run you between $5 to $7, but fees have been falling over time and some online firms don’t charge any commissions to trade – like SoFi Invest®.

Win up to $1,000 in free
stock today.


Step 3: Choose a Company and Research It

Buying your first stock inherently carries risk. How much depends on the specific company purchased and the volatility of the market. Some investors have their portfolios weighted across as many as 40-50 stocks to help create a diversified portfolio. When you have diversification, it can lower and level out the risk to some extent, so when one stock falls in price, others rising in price have the potential to balance it out.

So what should be your first stock to buy? One strategy could be to go with a company for which you have an affinity or with which you are pretty familiar. Think of the brands that are household names. If you’re buying just one share to try out stock trading, keep it simple and cheap.

Around $100 or $200 can be a good range to start with. Remember, this is for learning, first of all, so if you have a lot more money to invest, it may make good sense to chat with one of SoFi’s financial Planners before diving into the market on your own.

Once you have a few companies in mind, it’s time to find out more about them. Are they profitable? How do they perform against others in their industry? Has there been bad news recently on one or two of them? Here are some resources to discover more.

Company filings. The US government requires most companies to file financial data on their performance and notable changes in the corporation. Look for the company’s quarterly and annual balance sheet, income statement, and the cash-flow statement. It’s also a good idea to look at each company’s retained-earnings statement and its shareholders’ equity.

You can find these on the company’s website under the Investor Relations section, or you can go to the Securities and Exchange Commission website to find any required filing. You’ll need to get acquainted with financial ratios . They will help you contrast and compare different companies so you can make a final decision. You’ll find them invaluable for selecting your first stock to buy.

Market news sites. Plenty of sites devote pages and pages of content on what companies are doing, where sectors are heading, and how the market is reacting. Get in the habit of browsing a few every day. You can even set up alerts. That way, when you learn how to buy your first stock, you can keep up with all the news.

Almost all of the better sites have mobile apps, making it a snap to find out what’s going on. Some of the more widely respected financial news sources include MarketWatch, The Wall Street Journal, CNBC, and Bloomberg. But there are many more, so find the ones you enjoy reading.

Deep analysis sites. Many companies offer stock-market research and make the task of evaluating stocks easier. Some offer information at no cost, others charge a subscription. Zacks Stock Screener, Finviz.com and Seeking Alpha are examples of sites that do not charge. The sites that offer even deeper analysis, like Morningstar, may charge a fee. Many online brokerages also offer analysis content you can use.

Step 4: Consider Other Investments, Too

If you’re new to investing, and especially if you’ve never ventured beyond savings accounts, consider two other investment vehicles that can offer a bit more diversity: Exchange-traded funds (ETFs) and mutual funds.

Whether you’ve settled on buying your first stock or opted for one of these alternatives depends on your risk tolerance. These other options provide slightly less risky ways to invest than buying individual stocks, and have the potential to be just as rewarding.

Mutual funds. You’re probably already familiar with mutual funds. They’re diversified portfolios of individual stocks and are managed by an investment professional and may seek to track a certain market. They allow you to benefit from diversification, helping to lower your risk.

You can invest in mutual funds that mainly hold blue-chip companies, or ones that hold companies with high growth potential. You can even invest in index mutual funds, which hold stocks that mirror the major market indexes like the S&P 500 and the Dow Jones Industrial Average.

If you’re already enrolled in your company’s 401(k), you probably own shares in several mutual funds already. Many of these investments are appropriate for long-term investors, so they make sense in retirement accounts.

Unlike ETFs, however, mutual funds may not be as tax-efficient. In other words, every time a stock is sold for a gain within your mutual fund, it has the potential to create a tax liability. With ETFs, a potential tax liability is created when you sell the ETF and not often when individual stocks are sold for a profit within the fund.

ETFs. Exchange-traded funds have the diversification of a mutual fund with the convenience of stock trading. They essentially act like a basket of investments, whether that’s stocks, bonds, or commodities, and they trade on the open market, so their value fluctuates throughout the day. They offer a convenient way to own a portion of many stocks in one investment that can be traded easily on a market exchange.

Instead of managing a portfolio with hundreds of individuals stocks, many investors prefer the simplicity of owning a handful of diversified ETFs. Investors who want to invest in certain sectors also look to ETFs so they can own a broad spectrum of companies in one particular industry. In that scenario, they can be more effective than trying to pick the right stocks in a sector and hoping they match the overall industry’s performance.

Taking a First Step Before You Buy a Stock

When you’re ready to start choosing your first stock to buy, you’ll need an account from which to begin trading. Investors sometimes save up money to use for investments in an interest-bearing checking or savings account.

That allows your parked funds to continue to grow while you wait for your next stock-buying opportunity. Similarly, a money-market account, which reinvests dividends from money-market funds, can be a good way to hold your money. Both are highly liquid, which means fast access to your money.

Another option is a wealth management account, where you can combine several accounts into one and even get access to certain investment vehicles, such as ETFs. A SoFi Invest account also offers complimentary access to financial advisors when you become a SoFi member. Plus, SoFi’s automated investment account automatically balances your investments for you, so you don’t have to do all the heavy lifting.

Going from “how to buy my first stock,” to “there are so many great stocks to choose from,” means a lot of good learning has transpired. And you’ll soon find out that stock trading and investing can be a rewarding way to learn about companies and business while (hopefully) growing your savings. Take your time, keep on learning, and you’ll likely be set for many years of investing enjoyment.

Is it time to get serious about online stock trading? Set up a SoFi Invest account today and start expanding your financial possibilities.


Choose how you want to invest.

Ready to
do-it-yourself?

Learn more →

Want to take a
hands-off role?

Learn more →



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.
The information provided is not meant to provide investment, tax or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. Advisory and automated services offered through SoFi Wealth LLC. An SEC registered investment advisor. SoFi Securities LLC, member FINRA / SIPC .
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.

SOIN18107

Read more
hand holding bitcoin

What You Should Know as a Novice Crypto Investor

We’re reading a lot about cryptocurrency being here to stay, but for many of us, it’s still not a regular part of our everyday financial lives. Why is that? Could be lack of education among investors, and the general lack of current, regular commercial use of cryptocurrency. However, if acquiring the right financial knowledge is a roadblock, let’s move that out of the way right now and do some schooling on cryptocurrency trading for beginners.

The Basics of Cryptocurrency

Cryptocurrency is digital currency (used exclusively online) that acts as a direct financial exchange between users without the involvement of a bank or other third parties. Think of it as an alternative currency to traditional forms of payment, like cash, checks, and credit cards.

The information used within the system is kept safe through the use of encryption techniques . These methods scramble the info to make the activity secret and difficult for outsiders to access.

When you and others use a cryptocurrency system, everyone and everything remain anonymous. Each exchange that takes place is woven into a group called “blocks” (hence the term blockchain), which again is coded (encrypted) in order to keep it private and secure.

The basic unit of value of cryptocurrency is expressed as a “token,” which is used exclusively by members of the group involved in the blockchain. Every time a transaction happens, a “miner” updates the blockchain (more about this later).

Cryptocurrency is not created by any bank system or government agency, which means it’s in a universe of its own. Also, it isn’t regulated to the same degree as other financial products, like banking and investments. At least not yet.

Many people find this freedom to be a very cool vehicle to ride. Its popularity is growing in an organic way too; this makes it hard to predict where it’s going and where it will end up.

Cryptocurrency can be bought and sold on special exchanges ; the most commonly known cryptocurrency is bitcoin. SoFi also allows users to buy and sell cryptocurrency.

Recommended: A Beginner’s Guide to Cryptocurrency

The Future of Cryptocurrency

Of course, not everybody is on board with cryptocurrency being a given for the future. Although there are have been more than 2,000 cryptocurrencies on the market, more than 800 of them are now no longer operational.

Another fact to note: the U.S. Securities and Exchange Commission (SEC) has denied more than a dozen applications for permission to list bitcoin exchange-traded funds (EFFs). The reason, though, could be to your benefit as an investor: the need to minimize risks of fraud and manipulation, and to increase investor protection.

“We’ve seen some thefts around digital assets that make you scratch your head,” SEC Chairman Jay Clayton said at CoinDesk’s Consensus Invest conference. “We care that the assets underlying that ETF have good custody and that they’re not going to disappear.”

That said, are you a believer? Are you thinking about taking a leap, or at least getting in on the ground floor, before the anticipated mad mainstream rush?

Let’s break down the details of cryptocurrency trading for beginners:

SoFi Invest offers a new way
to trade crypto.


It’s in the Wallet?

Offline, cryptocurrencies are stored in “wallets.” A wallet is a software program that stores both private and public keys that allow you to send and receive digital currencies and keep an eye on your coin.

Hot wallets give you easier access, but they can also more easily be hacked. Cold wallets are harder to open. If you plan on holding on to your investment for a long time, you may want to opt for the cold wallet. If you need to dip into your coin more than occasionally, consider the hot wallet.

There are a number of wallet providers , and you’ll want to do some due diligence before choosing one.

Learn to Chill

Cryptocurrency is still a relatively new technology, which means it can act like a newborn: crying jags, not understanding how things work, crawling and stumbling, and behaving irrationally.

You’ll need to get used to huge price swings, instability when least expected, rollercoaster performance reports, and general anxiety on your part. Be sure you can take it.

Tune Out The Naysayers

Cryptocurrency trading for beginners means getting involved in a new idea. When that happens, get ready for the know-it-alls and Negative Nellies to tell you what’s what. You’re going to hear that cryptocurrency is overhyped, just a fad, or a wicked scam.

Of course, you’re going to do your due diligence and make up your own mind with educated decisions, so let don’t let them rattle you. Also, what may be true and unfortunate for one cryptocurrency may not be the same for another.

Get Professional Insights

Here’s the thing: Maybe cryptocurrency isn’t for you right now. The fact is, cryptocurrencies aren’t endorsed or guaranteed by any government—and they are volatile and involve a high degree of risk.

Not only that, but consumer protection and securities laws don’t regulate cryptocurrencies in the same way that they regulate traditional investment products. If you instead want to learn more about traditional investment products, now’s the time to check out SoFi Invest®.

With SoFi Invest, you’ll get access to financial planning and personalized advice, all based on how you want to invest and what your future goals are. All you need to do is make an appointment to chat with one of our SoFi Invest Advisors.—there is no obligation and no cost.

We’ll work with you to make sense of an investment strategy and help you map out a plan (and stick with it).

With an automated investing account with SoFi, we’ll invest in thousands of assets, actively managing them, which can help you get a clearer vision of your future path. To avoid veering off the road, we’ll automatically rebalance your investments as needed, so that they stay on track.

Make an appointment with a SoFi financial planner and start your path to a more healthy financial future. And whatever the future brings, you don’t have to take that path alone.


Choose how you want to invest.

Ready to
do-it-yourself?

Learn more →

Want to take a
hands-off role?

Learn more →



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.
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.
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. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member
FINRA / SIPC .
SOIN19015

Read more
yellow watering cans on orange background

Investing vs. Saving: Finding a Balance

People sometimes use the terms “saving” and “investing” as if they mean the same thing. And, because both have the same general goal—to create financial stability for you and your family—there are similarities.

But there are also important differences. Saving is when you incrementally add money into a bank account. Goals can include creating a fund for emergencies, saving for a down payment on a house, buying a car, going on a dream vacation, and so forth. This strategy is often intended to reach shorter-term financial goals.

Investing is when you take a portion of your money and buy assets with the funds. You might buy stocks and bonds, invest in mutual funds and so forth, with the goal being to grow your wealth. This strategy is typically used to reach long-term goals.

In this post, we’ll explore more distinctions of saving vs. investing, and share strategies to consider. No one strategy works for everyone, because financial situations differ, as do financial goals and comfort with risk levels. The real question isn’t whether you should save or invest—often good financial strategies include a combination of both.

More About Savings

When saving, money is commonly stored in a savings account. This means the money is readily available when you need it (although your bank may put limits on daily withdrawals).

With a savings account, there is limited risk because the Federal Deposit Insurance Corporation (FDIC) insures each person’s money to at least $250,000; or if you have a savings account at a credit union, the National Credit Union Share Insurance Fund (NCUSIF) insures to at least the same amount.

The major downside to traditional savings accounts is the interest rates may be lower than the rate of inflation. The current inflation rate is about 1.9%, and the most common interest rate for savings accounts is 0.01%. Ultimately, accruing less interest than the rate inflation may actually mean you’re losing money.

More About Investing

Unlike savings, when you invest, you typically have longer-term goals in mind (say, at least five years away)—it could be paying for your children’s college expenses or planning your retirement.

When you invest, there is potential for greater rewards through a higher return on investment. But when you invest, there is not a guaranteed return on your investment, and you can lose part or all of the funds.

Overall, your goal should be to position yourself well financially through debt reduction and savings, and then move into investments, leveraging the potential for greater rewards as a vehicle for growing wealth.

How Much Money Should You Save Before Investing?

If you owe money on high-interest credit cards or loans, it typically makes sense to first focus on paying that down—or, ideally, paying it off. You may consider consolidating this debt into a low-interest personal loan, which will allow you to pay off the balance more quickly, freeing up more cash for savings and investing.

Next, it’s typically recommended that you save three to six months’ worth of living expenses before you begin to invest. This will create a safety net in case of emergencies. As the next step, it usually makes sense to invest in your 401(k) and/or IRA to the maximum allowable amounts. (And, yes! You can invest in both a company-sponsored 401(k) and an IRA.)

How You Can Make Money Through Investing

SoFi has created an investment guide to help you understand the various ways you can invest your money, along with three ways that investments may create earnings for investors:

•  Income: This is when your investments earn interest and/or pay dividends.

•  Capital appreciation: This can occur when you invest in stocks, real estate, or gold, as three examples; if they go up in value, this is capital appreciation.

•  Pass through profits: If you invest in private businesses or real estate, you may earn what’s called pass through profits when their operations are profitable.

Invest in the future–not fees.




Distributor, Foreside Fund Services, LLC

Investing in Stocks

Broadly speaking, companies are privately or publicly owned, and public companies trade shares of their companies through the stock exchanges. So, when you buy one single stock, you’ve bought one single ownership share in a publicly-traded company, and therefore own a tiny piece of that company.

Investing in Bonds

Sometimes companies need an influx of cash. Sometimes, the government does. So, to get that cash, they might issue bonds. A bond is essentially a loan—and you’re the one lending the money. You loan money to the government or a company, and they pay you back in full—with interest. Four commonly-available types of bonds include:

•  Treasury bonds by the U.S. government

•  Corporate bonds by a corporation

•  Municipal bonds by a state or local government or agency

•  Mortgage-backed or asset-backed bonds

Investing in Mutual Funds

Investing in mutual funds is a way to invest in stocks, bonds, and more and can be ideal when you’re first investing. Mutual funds contain a variety of different types of assets.

When you invest in mutual funds, you benefit from instant portfolio diversification, which is good in case, as just one example, the value of an individual stock within the fund plunges. There are more than 20,000 mutual funds available to choose from, and this strategy can be simple and inexpensive as you begin investing.

Alternative Investments

Once your portfolio grows, you might want to diversify into alternative investments, such as real estate trusts, directly investing in businesses, entering into limited partnerships, investing in gold and other precious metals and more.

SoFi Invest® for Your Investment Strategies

We believe that everyone should have access to quality investment management. That’s why we’ve created SoFi Invest where you only need $1 to start investing.

At SoFi, you benefit from a combination of today’s technology, through the use of automated investing, and professional human advisors. And our planners don’t get paid on commission, which means their focus stays on you to create a personalized plan that is tailored to your unique financial goals.

You have the ability to adjust risk tolerance (something not all companies using automated advisors allow). And our human advisors work to help keep your investment strategies on target.

There are no application fees and no brokerage commission fees. Make an appointment online to learn more about SoFi Invest.


Choose how you want to invest.

Ready to
do-it-yourself?

Learn more →

Want to take a
hands-off role?

Learn more →



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.
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. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member
FINRA / SIPC .
SoFi can’t guarantee future financial performance.
This information isn’t financial advice. Investment decisions should be based on specific financial needs, goals and risk appetite.
Neither SoFi nor its affiliates is a bank.
SoFi MoneyTM is offered through SoFi Securities, LLC, member FINRA SIPC . Advisory services offered through SoFi Wealth, LLC, a registered investment advisor.
SOIN18133

Read more
TLS 1.2 Encrypted
Equal Housing Lender