Nov
25
2022
personal-line-of-credit-vs-personal-loan.jpg

Can I Take Out a Personal Loan While Unemployed?

By | Debt Payoff, Financial Independence, personal_loan | Comments Off on Can I Take Out a Personal Loan While Unemployed?

From unemployment benefits to hardship programs, there are a number of options out there when it comes to managing money during difficult times. One option that people may consider during unemployment is a personal loan. But one important question is: Can you get a loan while unemployed?

While there are personal loans for the unemployed available, it’s important to carefully assess the downsides and the benefits before moving forward. You’ll need to ensure you’ll be able to pay back the loan even if money gets tighter, and you should also be prepared for a more challenging approval process.

Personal Loan Basics

At its most simple, a personal loan is when a lending institution pays out a lump sum of money to a borrower, who then pays back the amount owed plus interest over a predetermined period of time.

Unlike a mortgage or student loan, a personal loan isn’t tied to a specific expense. In other words, someone might take out a personal loan to cover the cost of paying for a dream wedding, to remodel a kitchen to get rid of that hideous linoleum, or to cover living expenses during a time with low cash flow — there are a number of common uses for personal loans.

Personal loan amounts can typically vary from $1,000 to $100,000, depending on the lender’s guidelines, the amount a borrower requests, and the borrower’s creditworthiness. While the lender pays out the amount of the loan in one lump sum to the borrower (minus any origination fee), the borrower pays back the loan over time in installments, often over a period of 12 to 60 months.

Personal loans are generally unsecured loans, which means they do not use collateral to secure the loan. Instead, lenders may look at borrowers’ creditworthiness to determine the risk in lending to them and their interest rate.

The interest rate for personal loans can vary for different borrowers depending on a borrower’s creditworthiness. Rates can range anywhere from around 5% to over 35%. Interest is paid back alongside the principal amount in monthly payments that are made over the life of the loan.

When Should You Consider Taking Out a Personal Loan While Unemployed?

Ideally, you’d avoid taking on debt while you’re unemployed and don’t have regular income coming in from a job. You might first explore any other options available to you to free up funds, whether that’s taking on a side hustle, getting a roommate, or reassessing your budget. However, there are some circumstances when taking out a personal loan while unemployed may be doable, and it can be a better option than resorting to a high-interest payday loan or expensive credit card debt.

If you’re considering a personal loan while unemployed, you should first assess whether you’ll realistically be able to make on-time payments on your loan each month. Not doing so can lead to late fees and impacts to your credit score. Think seriously about what you’d do in the worst-case scenario if you really couldn’t make a payment. You may even consider crunching the numbers using a personal loan calculator to determine if a personal loan would net you any savings over another borrowing option.

It’s also important to understand what lenders will look for when determining whether to approve you for a loan while unemployed. You’ll generally need a strong credit history and credit score to qualify. Additionally, lenders will want to see some income in order to prove you’ll be able to make monthly payments. Without a regular paycheck coming in during unemployment, this could be Social Security benefit payments, disability income, money from investments, or even your spouse’s income, among other alternatives.

Are There Downsides to Taking Out a Personal Loan While Unemployed?

Taking out a personal loan may seem appealing to someone who is temporarily out of work because it might be relatively quick to secure and can come with lower interest rates than credit cards. But as with all financial decisions, it’s important to understand the pros and cons of taking out a personal loan while unemployed before applying.

Here are the downsides of taking out a personal loan while unemployed:

•   It will likely be harder to qualify for a loan while unemployed. While you can get a personal loan without a job, it may be more difficult to qualify. Lenders look at a variety of factors when determining whether to offer a borrower a loan, like income, debt-to-income ratio, credit history, and credit score. This data helps them determine how likely it is the borrower will pay back the loan. If a borrower is unemployed, they won’t necessarily have income to show, and their debt-to-income ratio might be much lower than it would be with a stable income. Of course, different lenders have different criteria for lending, and the ultimate decision is determined by that specific lender.

•   Lenders may charge higher interest rates. Some lenders may offer higher interest rates to unemployed personal loan borrowers. This is because of the additional perceived risks of lending to someone who is unemployed.

•   Borrowers are taking a risk. The risk isn’t just for lenders when getting a loan while unemployed. When deciding whether to apply for a personal loan during unemployment, it’s important to consider your ability to pay a higher interest rate or make monthly payments. If a borrower is struggling to make ends meet, a loan payment could be impossible to pay on top of other expenses. And defaulting on a personal loan can be even more expensive: Borrowers could face late fees for missed payments and fees if the loan is sent to collections, not to mention a hit to their credit score if they’re unable to make payments.

Are There Benefits to Taking Out a Personal Loan While Unemployed?

There may be upsides for someone who is unemployed to take out a personal loan. Benefits of personal loans for unemployed individuals can include:

•   Personal loans can be more flexible than other types of loans. Borrowers can use the money from a personal loan for almost anything. This might make it an appealing choice for borrowers who may not have their normal income coming in due to unemployment.

•   It may be less costly than other borrowing options. A personal loan may come with lower rates than a credit card, which can be a major benefit when it comes to saving money. Additionally, the fixed term of a personal loan could help borrowers save over the life of a loan. This is because unlike with a credit card, you’d pay a set amount monthly over a set term, which means payments don’t roll over and continue to accrue interest.

•   You could consolidate existing debt. Another potential benefit of taking out a personal loan during unemployment could be consolidating other debts. In fact, a common reason borrowers may choose a personal loan is to consolidate credit card debt. Sometimes called debt consolidation loans, this type of personal loan can help borrowers save money if they can secure a lower interest rate than they’re currently paying on their credit cards. Additionally, debt consolidation loans can streamline multiple payments into one monthly payment. Keep in mind, however, that continuing to use credit cards after obtaining a credit card consolidation loan can lead to debt continuing to pile up.

•   They can help you deal with unexpected expenses. Personal loans may be an option for borrowers who are facing unexpected expenses, like medical bills or moving costs. If your current financial situation or a change in jobs has necessitated a move, a personal loan may be a way to pay for those unexpected costs without relying on credit cards.

To recap, here’s a rundown of the downsides and benefits of personal loans for unemployed individuals. While you potentially can get a loan while unemployed, you’ll want to make sure you’re aware of and comfortable with both the pros and the cons:

Downsides and Benefits of Personal Loans While Unemployed
Downsides Benefits
Qualifying can be more difficult. Personal loans offer flexibility in how you use the funds.
Interest rates may be higher due to unemployment status. It could be less costly compared to other choices.
Borrowers are taking on a risk amid existing financial uncertainty. You could use a loan to consolidate debt, and potentially save money.
It could help you cover unexpected costs, like medical bills or moving.

Awarded Best Online Personal Loan by NerdWallet.
Apply Online, Same Day Funding

Does SoFi Offer Personal Loans for Unemployed People?

SoFi does offer personal loans for unemployed individuals, assuming applicants meet other conditions. If you are not currently employed, it’s necessary to meet one of the two following eligibility criteria:

•   Have sufficient income from other sources

•   Have an offer of employment to start within the next 90 days

Beyond these conditions regarding employment and income, SoFi also has a number of other requirements that borrowers must meet. Additionally, SoFi will consider an applicant’s financial history, credit score, and monthly income vs. expenses.

Improving Your Chances of Getting Approved for a Personal Loan While Unemployed

If you’re hoping to get a personal loan while unemployed, there are steps you can take to increase your odds of getting your personal loan approved.

For one, it helps to familiarize yourself with your own financial situation. Check your credit to see if it falls within a lender’s requirements, assess your current sources of income now that you’re unemployed, and take a look at how your current monthly debt payments compare to your monthly income. These are all factors that lenders will take into account when determining whether to approve the loan application, so the better they look, the better your chances that the lender’s answer will be a yes.

If you’re not confident you can get approved for a personal loan with your financial situation as is, you might consider taking some of the following actions:

•   Increase your income: While this might seem like a no-brainer if you’ve recently lost your job, there are other ways to approach adding to your sources of income while you’re on the job search. You could pick up a side hustle or get a roommate. Also take the time to review what counts as income for credit card applications — you might find you’ve forgotten to include something. (Remember, unemployment benefits count as income.)

•   Minimize your debts: If your debt-to-income ratio is way out of whack, that could lower your odds of approval. Consider ways you could cut costs, whether that’s downsizing your home, moving in with a friend or family member in the meantime, or selling off a car that’s saddling you with monthly payments.

•   Consider adding a cosigner: In this situation, another option could be to ask a friend or family member with good credit and a steady income to serve as a cosigner. Adding them to your application may make it likelier that a lender will view you favorably. Just remember that if you fail to make timely payments on your loan, you could damage your cosigner’s credit and stick them with the payments — not to mention the harm it could do to your relationship.

Choosing a Personal Loan

Borrowers interested in a personal loan might want to consider all the pros and cons before taking one on during unemployment. If a personal loan sounds like it might be the right solution, borrowers may want to do a little bit of preparation beforehand. It’s never a bad idea for a borrower to figure out exactly much they want to borrow in advance. But remember — borrowers should only borrow the amount they need.

Taking a look at the affordability of monthly payments may also help a borrower determine how much to borrow. Additionally, borrowers may wish to pull up their financial documents and take a peek at their current credit score and overall financial health before applying for a personal loan.

If a borrower is ready to apply, it’s important to look for one that meets their specific needs. For one, they’ll need to find a lender willing to work with unemployed borrowers, if that’s their current situation.

With SoFi, the next step in applying is to get prequalified. Prequalification with SoFi doesn’t affect your credit score and lets you see what interest rate you may qualify for. While SoFi offers easy online prequalification, it’s important to look around and determine which, if any, personal loan is the best for you.

With SoFi, you may qualify for a personal loan for between $5,000 and $100,000 with no origination fees required. Plus, if you take out an unsecured personal loan and then lose your job, you may be eligible for forbearance on your payments and assistance finding a new job in the meantime.

The bottom line: While applying for a personal loan with SoFi is possible, you should properly assess the associated risks first — especially if you’re getting a loan while unemployed.

FAQ

Can you use a personal loan as an unemployment loan?

Yes, it is possible to use a personal loan as an unemployment loan. However, in order to qualify for a personal loan while unemployed, you’ll still need to meet a lender’s eligibility requirements. This generally includes demonstrating some type of regular income.

What are the benefits of using an unemployment loan?

While risky, personal loans for unemployment do offer a number of benefits, including flexibility in how you use the funds, potentially lower costs than other borrowing options, and the choice to consolidate existing debt. A personal loan could also come in handy if unexpected expenses arrive, such as a surprise medical bill or an unanticipated move.

Are there any fees associated with unemployment loans?

Personal loans taken out during unemployment can absolutely carry fees. Whether and which fees apply will depend on the lender. Common fees you could face include origination fees, late fees, and prepayment penalties.

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

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

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

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

SOPL0922007

Read more
Nov
23
2022
What You Need to Know About the Challenges to Biden's Student Loan Forgiveness

What You Need to Know About the Challenges to Biden’s Student Loan Forgiveness

By | Student Loans, student_loan | Comments Off on What You Need to Know About the Challenges to Biden’s Student Loan Forgiveness

Challenges to Biden’s student loan forgiveness plan have created uncertainty and confusion for the more than 40 million borrowers (including college students who were enrolled before June 30, 2022) who may be eligible for debt relief through the program.

On Thursday, Nov. 11, a U.S. District judge in Fort Worth, Texas, ruled in a lawsuit that the plan is unconstitutional. As a result, the Department of Education has stopped accepting applications for student loan forgiveness and is holding the applications it has already received. The Biden administration is appealing the judgment.

To help borrowers in the meantime, on Nov. 22, the U.S. Department of Education issued a new extension of the pause on student loan repayment, interest, and collections to let the Supreme Court rule on whether the forgiveness plan can go into effect. Federal student loan payments may now be extended as long as 60 days after June 30, 2023. The pause is meant to “alleviate uncertainty for borrowers,” according to the administration.

Legal Challenges to the Student Loan Forgiveness Plan

The President’s debt relief plan calls for up to $10,000 in forgiveness for federal student loan borrowers who earn less than $125,000 a year ($250,000 for married couples) and up to $20,000 in relief for Pell Grant recipients. As mentioned earlier, current students who were enrolled before June 30, 2022, may be eligible for this one-time forgiveness. (Borrowers of private student loans are not eligible.)

The Biden administration determined that the president has the authority to wipe out this kind of student debt under the Heroes Act of 2003. Passed in the wake of the 9/11 terrorist attacks, the Higher Education Relief Opportunities for Students Act gives the Secretary of Education the authority to change federal student aid provisions in the event of a war, military operation, or national emergency.

Because the pandemic was declared a national emergency in March 2020, the administration believes that the Education Secretary has the legal authority to provide debt relief under the act. Both former President Trump and President Biden used the Heroes Act to pause student loan payments during the pandemic. The extension that was just announced on Nov. 22 extends the pause well into 2023.

Six lawsuits have been filed against the plan resulting in two blocks against it. Opponents challenging Biden’s student loan forgiveness program make three primary legal arguments against the administration’s premise:

The No-Worse-Off Clause

Some politicians and legal experts question whether using the Heroes Act is appropriate. Among other things, they point to a clause in the act that says action on student financing can only be taken to ensure people “are not placed in a worse position financially” because of the emergency. The student loan pause, for instance, is designed to make sure that borrowers are no worse off when repayment starts than they were when the pandemic began. However, opponents argue that forgiveness puts borrowers in a better position financially because they will no longer have to pay all or part of their student loans.

Congress Controls the Money

Many lawmakers opposed to the program also say the Biden administration is overstepping its reach. The debt cancellation program could cost as much as $519 billion dollars over 10 years, according to some recent estimates. The Constitution states that Congress controls government funds, and the president and federal agencies may not spend money that has not been appropriated by Congress. Although Congress itself has enacted several specific student loan forgiveness programs — such as those for teachers or permanently disabled borrowers — it has not passed a broad student loan program forgiveness plan.

A Recent Supreme Court Decision

Activities of federal agencies like the Department of Education may come under more scrutiny in the wake of the recent U.S. Supreme Court decision regarding West Virginia v. Environmental Protection Agency. That decision clarified the “major questions doctrine,” which says that federal agencies are limited in making decisions that have “vast economic and political significance” without guidance from Congress. Proponents of the loan forgiveness plan worry this doctrine will be used against the program. Opponents believe they have legal precedent.

Recommended: Student Loan Forgiveness Programs

What Happens Next With the Legal Challenges?

On November 14, the 8th U.S. Circuit Court of Appeals granted an injunction request by six states to halt the debt relief plan. The Biden administration has asked the Supreme Court to put that decision on hold as well as the November 11th Texas District Court ruling. The U.S. Justice Department also suggested that the Supreme Court separately take up the case of student debt relief during its current term.

Whether Biden’s student loan forgiveness plan will happen is still up in the air. As the legal challenges play out, borrowers can sign up for updates at the DOE’s Student Aid site.

Recommended: Will My Federal Student Loan Payment Change in 2023?

Logistical Challenges to the Student Loan Forgiveness Plan

In addition to the lawsuits, there are other challenges to overcome in implementing the program. Dealing with millions of dollars of canceled debt at numerous different loan servicing companies may be difficult if the plan proceeds. Right after the August announcement of the student loan forgiveness plan, the Department of Education’s financial aid website crashed, as did the sites of many loan servicers. That raises questions about how prepared the government and the private loan servicers are to handle the onslaught of forgiveness activity.

Recommended: Types of Federal Student Loans

The Takeaway

The Biden administration’s plan to forgive a large chunk of federal student debt was welcome news to borrowers. But it came with significant legal challenges, resulting in six lawsuits (so far). The Biden administration has asked the Supreme Court to rule on whether the plan can go into effect. To help borrowers, the pause of student loan repayment has been extended again. SoFi will continue to keep you updated on developments with the student loan forgiveness program.

In the meantime, you may want to consider how best to handle your student loan debt. Even if you are eligible to have a portion of it forgiven, you will still need to pay off the remainder of your loans. Or perhaps you have private loans, which don’t qualify under the forgiveness program. Refinancing your student loans might lead to lower monthly payments. And that’s especially important to think about now, as interest rates continue to rise. Explore student loan refinancing with SoFi to see what your options are.

FAQ

Will Biden student loan forgiveness stand in court?

It’s uncertain whether the student loan forgiveness plan can stand in court. Currently, six lawsuits have been filed against the plan, and the administration has asked the Supreme Court to rule on whether the plan can go into effect.

Who would challenge Biden’s student loan forgiveness?

Many Republican lawmakers, some Democratic lawmakers, and some economists and education experts are against the plan. Six lawsuits have currently been filed against it.

What are the possible delays to Biden’s student loan forgiveness?

Legal challenges have put the plan on hold. The Department of Education has stopped accepting applications for student loan forgiveness and is holding the applications it has already received.

Photo credit: iStock/Inside Creative House

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


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

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.

SOSL0922009

Read more
Nov
23
2022

What Parents and Grandparents Really Want This Holiday Season

By | Credit, credit card, Family Finances | Comments Off on What Parents and Grandparents Really Want This Holiday Season

Your mom wants something surprising for the holidays this year. And so does your dad. In our holiday gift survey, we asked parents and grandparents to reveal the number-one present they hope to find under the tree this season. What they told us is going to make your holiday shopping very merry and bright.

In past years, you probably spent a lot of time searching online and in stores for the perfect Christmas gift ideas for parents and Christmas gift ideas for grandparents. This year, there’s no need to stress out about it because you’ll know exactly what to buy.

So what do mom and dad want you to get them? And what do grandparents want for Christmas? In our survey, we asked 1,000 of them (250 of each — moms, dads, grandmothers, and grandfathers) to share the holiday present they really want this season — and what they don’t want. Here’s what they told us; consider these survey findings our gift to you.

Source: Based on a What People Actually Want This Holiday Season survey of 1,000 U.S. adults from October 26, 2022 to October 27, 2022.

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

Gift Cards Are the Favorite Gift by Far

Parents and Grandparents Want Gift Cards More Than Anything This Holiday Season

The number-one gift requested by moms, dads, grandmothers, and grandfathers is … a gift card! And it wasn’t even close. Gift cards were the most-requested gift across the board.

Almost 33% of respondents picked gift cards as their most-wanted holiday gift. Here’s how it breaks down across the generations:

•   Moms: 39%

•   Dads: 31%

•   Grandmothers: 34%

•   Grandfathers: 27%

The Type of Gift Card You Give Makes a Difference

There are all kinds of gift cards to choose from, including gift cards for restaurants, stores, and airlines, to name just a few. So, as you get ready to shop and celebrate the holidays without blowing your budget, which type should you get for your parents and grandparents?

A gift card that can be used anywhere, like a Visa gift card, was the top choice, selected by:

•   45% of moms

•   44% of grandmothers

•   40% of grandfathers

•   38% of dads

The one group that wants a different kind of gift card? Moms ages 35 and up. They preferred a gift card to a retailer like Target, Amazon, or Walmart.

The way gift cards function is similar to how credit cards work, since your parents and grandparents can use them to buy whatever they like. Perhaps that’s why they were so popular in our survey: Your relatives can pick out exactly what they want.

Skip the Fancy Jewelry

What Do Parents and Grandparents Want the Least for the Holidays? Fine Jewelry.

You might think mom would be thrilled with luxury goods like an expensive necklace, bracelet, or earrings, but jewelry is actually at the very bottom of her list. When asked the gift they wanted least, most moms (22%) said fine jewelry. Dads agreed — 21 percent chose fine jewelry, such as a watch, as their least favorite holiday gift.

Grandparents also said no thanks to fine jewelry:

•   26% of grandmothers picked it as their least favorite gift

•   21% grandfathers chose at gift they wanted least

Recommended: Secrets to Not Paying Full Price

Holiday Gift Ideas for Mom

What moms Want Most for the Holidays

Here’s what Mom wants most:

•   A gift card: 39%

•   No gift at all — she just wants to spend time with family: 14%

•   An experience (like a concert or vacation): 10%

•   Clothes or shoes: 9%

•   A homemade gift like a photo collage: 7%

•   Electronics: 6%

•   Jewelry: 6%

•   Home goods: 5%

•   Donation to a charitable organization: 3%

•   Beauty/Health products: 2%

Holiday Gift Ideas for Dad

What Dads Want most for the Holidays

Here’s what dad wants most:

•   A gift card: 31%

•   Electronics: 14%

•   No gift at all — he just wants to spend time with family: 12%

•   An experience (like a concert or vacation): 12%

•   Clothes or shoes: 10%

•   Jewelry: 9%

•   A homemade gift like artwork: 5%

•   Donation to a charitable organization: 4%

•   Home goods: 2%

•   Beauty/Health products: 2%

If you’re thinking about getting dad the electronics he wants, but you don’t have the cash to pay for the gift upfront, applying for a credit card, and charging the electronics to it, is an option you may want to consider.

Holiday Gift Ideas for Grandmothers

What Grandmothers Want Most for the Holidays

•   A gift card: 34%

•   No gift at all — she just wants to spend time with family: 22%

•   An experience (like a concert or vacation): 12%

•   Clothes or shoes: 8%

•   A homemade gift like artwork: 6%

•   Electronics: 5%

•   Jewelry: 4%

•   Donation to a charitable organization: 3%

•   Home goods: 3%

•   Beauty/Health products: 2%

Holiday Gift Ideas for Grandfathers

What Grandfathers Want Most for the Holidays

•   A gift card: 27%

•   No gift at all — he just wants to spend time with family:14%

•   Electronics: 12%

•   An experience (like a concert or vacation): 10%

•   A homemade gift like artwork: 10%

•   Clothes or shoes: 8%

•   Donation to a charitable organization: 8%

•   Home goods: 5%

•   Jewelry: 4%

•   Beauty/Health products: 2%

Recommended: 41 Charities to Support This Year

Who Buys the Best Gifts?

Who Gives the Best Gifts?

It’s unanimous: Moms, dads, grandmothers, and grandfathers all agree that their spouse or partner is tops when it comes to choosing holidays gifts. No other person even comes close.

Who Gives the Best Gifts?

•   Spouse/partner: 37%

•   Parents: 18%

•   Friends: 10%

•   Siblings: 9%

•   Other relatives: 9%

Whose Gifts Rate the Worst?

Ranking at the bottom of the best gift-giver list: In laws and bosses. Only 4% of respondents said their mother-in-law and father-in-law give good gifts, and just 1% said their boss does.

Regifting is Real — and It Can Be Pretty Awkward

How Many People Have Regifted a Gift?

There’s a lot of regifting going on: 41% of our respondents admitted they’ve done it. But when the tables are turned on them, things can get a little uncomfortable. Fortunately, many have a sense of humor about it.

Almost 1/3 of Moms Have Been Regifted a Gift They Gave First

•   68% thought it was funny

•   32% were hurt, annoyed, or mad

Yet this didn’t deter them from doing it themselves: 38% of moms have regifted what they didn’t want. Most of these unwanted gifts were from friends.

Almost Half of Dads Have Been Regifted a Gift They Gave

•   71% thought it was funny

•   28% were hurt, annoyed, or mad

Dads are even more likely than moms to regift: 47% of them have done it — mainly with presents from distant relatives.

Lots of Unwanted Gifts Are Sitting in a Closet Someplace

When they get a Christmas present they don’t want or need, the overwhelming majority of respondents said they hang onto them, rather than exchange them. This was the answer chosen by:

•   80% of grandmothers

•   79% of moms

•   74% of grandfathers

•   70% of dads

So Whose Gifts Do They Take Back?

Of those parents and grandparents who return or exchange gifts:

•   Moms are most likely to return gifts from friends

•   Dads are most likely to return gifts from parents or other relatives

•   Grandmothers are most likely return gifts from distant relatives

•   Grandfathers are most likely to do return gifts from distant relatives or coworkers

Recommended: Tips for Using a Credit Card Responsibly

Plenty of Moms and Dads Are Wishing for a Vacation

If you splurge and get your parents a trip as their holiday gift, expect them to waste no time in packing their bags. Of the moms and dads who chose an experience as the gift they most want for the holidays, a vacation was at the very top of the list.

While paying for a vacation can be expensive, you might want to think about splitting the cost with your siblings or putting it on your credit card to help cover the cost. This is one reason why getting a credit card can be helpful when you’re buying holiday gifts.

Time Together Might Be the Greatest Gift of All

You may not need to get your parents a lot of presents (besides a gift card, that is!). A number of moms and dads who took our survey said they wanted family time over the holidays more than anything. In fact, for moms, spending time with family is their second most-wanted gift.

For dads, family time came in third. Electronics like gaming systems edged it out slightly.

Grandmothers and grandfathers want to spend time with family most of all. Each of them chose it as their second favorite gift option.

The Takeaway

One specific holiday gift will please your parents and your grandparents this year: a gift card. Not only does this make your shopping easier, but it gives your loved ones exactly what they want. A gift card that can be used anywhere, like a Visa gift card, is what the respondents to our survey wanted most.

If you’re looking for other gift options, dads are partial to electronics, like gaming equipment, and both moms and dads would be happy to find airline tickets for a vacation in their stocking.

As you’re doing holiday shopping for your family, you can get a gift for yourself at the same time. With a credit card from SoFi, you can earn generous cash-back rewards on all purchases.

The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.1



Take advantage of this offer by applying for a SoFi credit card today.

Photo credit: iStock/seb_ra

1Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

1See Rewards Details at SoFi.com/card/rewards.

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.

The SoFi Credit Card is issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOCC1122015

Read more
Nov
22
2022
Credit Card Utilization: Everything You Need To Know

Credit Card Utilization: Everything You Need To Know

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

Imagine you have four credit cards, each with a $5,000 limit, for a total of $20,000. You have a balance of $2,000 on Credit Card A from vacation travel, $1,000 on Credit Card B from buying new car tires, $2,000 on Credit Card C from last holiday season, and $1,000 on Credit Card D from regular monthly bills. Altogether, you owe $6,000. If we calculate that as a percentage, we have your credit card utilization rate: 30%.

In this guide, we’ll focus on credit utilization, determine how much of your credit you should use, and show how credit card utilization affects your credit score and overall financial standing.

What Is a Credit Utilization Ratio?

Your credit utilization ratio is a fancy way of referring to how much of your credit you’re using. Lenders and credit reporting agencies use it as an indicator of how well someone is managing their finances.

A low credit utilization ratio says you live within your means, use credit cards responsibly, and therefore probably manage the rest of your finances well. A high credit utilization hints that your expenses are outpacing your income, a sign that you’re misusing credit cards, and possibly mismanaging the rest of your finances.

The reality of the situation may be different. Perhaps you have temporary cash flow problems due to a job loss. Or you happen to have a pileup of pricey expenses within a short time, such as medical bills, car repairs, and a destination wedding. It happens. That’s why credit utilization is just one factor that goes into calculating your credit score.

Recommended: Types of Personal Loans

How Do You Calculate Your Credit Card Utilization Rate?

In the example above, we saw that if you have $20,000 of credit available to you, and you owe $6,000, your credit utilization rate is 30%. How did we get there? To find out your credit card utilization rate, simply divide your total credit card balances by your total credit line, like this:

Total Balance / Total Credit Line = Utilization Rate

With the numbers from our example, it looks like this:

6,000 / 20,000 = .3 or 30%

Simple, right? You’ve got this.

Recommended: Getting Your Personal Loan Approved

What Counts as “Good” Credit Card Utilization?

As it turns out, just because you’ve been approved for a $10,000 credit card doesn’t mean it makes financial sense to charge $10,000 worth of rosé and seltzer — even if you know you can pay it off over a couple of months. In fact, you might be shocked to learn how little of your available credit you’re supposed to use.

The general rule is that you should not exceed a 30% credit card utilization rate. That means that in our example, you would not want to use more than $6,000 of your available $20,000 credit. Even though 30% might seem like a small percentage, keeping below that threshold can ensure that your credit score isn’t being dinged for over-utilization.

Is credit utilization affecting your credit
score? See a breakdown in the SoFi app.

How Can You Lower Your Credit Card Utilization Ratio?

You can lower your credit utilization ratio by paying down your credit card balances. Ideally, you should pay off your credit card balances in full every billing cycle to avoid paying interest. When that’s not possible, pay off as much of the bill as you can.

Whatever you do, don’t make a habit of paying only the credit card minimum payment suggested on your bill.

When trying to pay down your credit cards, focus on the one with the highest interest rate. That way, you’ll save the most money on interest. Or you can pay off your cards with a personal loan. In fact, debt consolidation is one of those most common uses for personal loans.

Another way to lower your utilization rate is to increase your available credit. Ask your bank to raise your credit card limit. If they agree, your utilization will quickly drop. Also, keep open any cards you don’t use rather than closing the accounts. They’re serving a valuable purpose by contributing to your credit limit, even if you’ve cut up the actual cards.

As you can tell, credit utilization is a nuanced topic. Learn all the ins and outs in our Guide to Lowering Your Credit Card Utilization.

How Does Credit Card Utilization Affect Your Credit Score?

Credit card utilization plays a big role in how companies compute your credit score. In fact, about 30% of your credit score is determined by your credit card utilization rate. That means a high credit card utilization rate can adversely affect your credit score. For a deep dive into the topic, check out How Does Credit Utilization Affect Your Credit Score?

How Do You Monitor Your Credit Card Utilization?

Your credit utilization might seem difficult to keep track of. But we live in the 21st century, so it’s actually quite easy to set up account reminders to alert you when you are approaching that 30% credit card utilization mark.

In addition to watching your utilization rate, make your best effort to pay your credit card bills on-time each month. Checking your credit score regularly will also help you keep your financial health in check. Although you don’t want to check your score too often, it’s good to keep tabs to make sure the data being reported is accurate.

The Takeaway

Your credit card utilization ratio is the sum of all your credit card balances divided by the sum of your credit limits. Credit reporting agencies recommend keeping your ratio at 30% or below. Higher ratios can hurt your credit, since credit utilization accounts for 30% of your credit score. To lower your utilization rate, simply pay down your credit card balances. And think twice before closing a credit card you no longer use. You might also consider consolidating your credit card debt with a personal loan; a personal loan calculator can show you how much you could save on interest.

Have high credit card utilization across multiple cards? Consolidating credit card debt with a low interest personal loan will reduce your utilization rate, which can positively affect your credit score. With SoFi Personal Loans, you can borrow $5K to $100K, with low fixed rates and no fees required.

Compared with high-interest credit cards, a SoFi personal loan is simply better debt.

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

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

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.

SOPL1022003

Read more
Nov
22
2022
Four colorful credit cards

Credit Card Refinancing vs Consolidation

By | Credit, Financial Independence, personal_loan | No Comments

There are many reasons people end up in debt. Medical bills, emergency home or car repairs, a job layoff. And some of us just didn’t know that it’s best to pay off credit cards in full every month. Either way, no judgment here. If you have high-interest credit card debt and are ready to put together a plan to pay it back, you might be considering one of two popular methods: Credit card refinancing vs. debt consolidation.

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

What Is Credit Card Refinancing?

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

Borrowers may accomplish this by paying off their existing credit cards with a brand-new balance transfer card. This type of credit card offers a low or 0% interest rate for a promotional period of up to 21 months.

For example, say a borrower has $10,000 on a credit card that charges 20% interest. By switching to a 0% interest card (and making payments on time), they can save around $2,000 in the first year alone, provided there are no fees or penalties. Alternatively, if the borrower switches to a card that charges 10% interest in the first year, they can save around $1,000.

Recommended: The Risks of Payday Loans

What Are the Pros and Cons of Credit Card Refinancing?

We’ve discussed the goal of credit card refinancing — to lower your interest rate — and how to accomplish it. Now let’s explore some of the pros and cons of refinancing.

Pros of Refinancing

The primary benefit is the chance to pay off credit card debt while paying little to no interest for the first 12 or more months. For a relatively small credit card balance — one that can comfortably be paid off within a year — this can be an effective strategy.

Cons of Refinancing

Balance transfer cards come with major catches: The low or 0% interest period is short-term (6-21 months), and there may be a balance transfer fee of 3%-5%. For a borrower with $10,000 in credit card debt, a 5% balance transfer fee comes out to $500.

For some borrowers, the amount they’re saving in interest might not be worth the transfer fee. This is especially true if the borrower ends up unable to pay off their balance within the introductory period. After the promotion ends, the interest rate can skyrocket to as high as 25%.

This brings up yet another consideration: Balance transfer cards don’t put any structure into place for the borrower to follow in order to fully pay off the credit card debt. A borrower can just as easily continue making only the minimum payments and even add to the balance of the debt. This is the risk we run with what is called revolving credit.

Finally, 0% interest balance transfer cards often require a high credit score to qualify. However, borrowers hoping to qualify in the future can build their credit by making all payments on time and reviewing their credit report for errors.

Recommended: Loans With No Credit Check

Awarded Best Online Personal Loan by NerdWallet.
Apply Online, Same Day Funding

What Is Credit Card Debt Consolidation?

Credit card consolidation refers to the process of paying off multiple credit cards with a single loan, referred to as a debt consolidation loan or personal loan. Unlike refinancing, the main purpose of consolidation is to simplify bills by combining multiple credit card payments into one fixed loan payment.

A borrower may also pay less in interest, but the difference may not be as great as with refinancing. An applicant’s credit score and other financial data points will determine their personal loan interest rate.

What Are the Pros and Cons of Credit Card Debt Consolidation?

As we mentioned, credit card debt consolidation serves to pay off multiple credit cards with a single short-term loan. But as with credit card refinancing, there are advantages and disadvantages.

Pros of Debt Consolidation

Consolidation allows borrowers to pay off multiple debts and replace them with one monthly payment and a set repayment term of their choosing. Borrowers benefit from the structured nature of a personal loan: They make equal payments toward the debt at a fixed rate until it is completely eliminated.

With most personal loans, the borrower is able to opt for a fixed interest rate, which ensures payments won’t change over time. (Variable interest rate loans are available, but their lower initial rate can go up as market rates rise.) You might have a $10,000 loan, for instance, with a repayment term of five years at 8% interest — a rate that will not change for the duration of the loan.

Secured personal loans that require collateral sometimes offer lower interest rates. However, the savings is usually not worth the risk of losing your car or home. For that reason, unsecured personal loans are preferable.

Cons of Debt Consolidation

The terms of a personal loan will almost always be based on the borrower’s credit history and their holistic financial picture. That means that not every borrower will qualify for a low interest rate, or get approved for a personal loan at all.

Another hazard is the potential for a borrower to run up their credit card debt again, once their cards are paid off. Canceling all but one card can help prevent that. However, borrowers should research how canceling their credit cards might affect their credit scores.

Credit Card Refinancing vs Debt Consolidation

To recap, the difference between debt consolidation and credit card refinance is first a matter of goals. With credit card refinancing — as with other forms of debt refinancing — the borrower’s aim is to save money by lowering their interest rate. Debt consolidation may or may not save the borrower money on interest, but will certainly simplify bills by replacing multiple credit card obligations with a single monthly payment and a structured payback schedule.

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

Credit Card Refinancing vs Balance Transfer Cards

These two terms are not mutually exclusive. Instead, a balance transfer credit card is one way to refinance credit card debt.

The Takeaway

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

If you have a relatively small balance that can be paid off in a year or so, refinancing with a balance transfer credit card may be right for you. If you have a larger balance or need more time to fully pay it off, personal loans are available for terms of up to 7 years.

Tired of juggling logins and payment schedules with a bunch of other lenders? SoFi Personal Loans can help you save money, take control of your finances, and simplify your life by consolidating everything at a single, low rate. It only takes minutes to apply.

Don’t let high interest interfere with your interests.

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

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

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.

SOPL0722002

Read more

CATEGORIES

  • All
  • No categories
Close modal

See what SoFi can do for you and your finances.

Select a product below and get your rate in just minutes.

Student Loan
Refinancing

Personal
Loans

Online
Investments

Other

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

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

©2024 Social Finance, LLC All rights reserved.
TLS 1.2 Encrypted
Equal Housing Lender