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Paying Off $10,000 of Credit Card Debt

If you’re like many Americans, you may carry thousands of dollars of credit card debt. While getting out from under that debt may seem daunting, there are ways to make it manageable. Here’s a look at different strategies for paying off a large chunk of debt.

Why Paying off Credit Card Debt is Important

In an ideal world, you would pay off your credit card every month in full. If you’re able to do that, using a credit card (responsibly) can be a good thing. It’s actually a pretty useful way to pay build credit and gain credit card rewards.

However, according to the Federal Reserve, 48% of Americans carry a credit card balance from month to month. For many, that balance is pretty high, coming in at $6,354 for the average American, as of 2017. When you start to carry monthly credit card debt, things can get a bit dicey, because you’ll start to pay interest.

When you signed up for your credit card, you probably noticed that it came with an annual percentage rate (APR). The APR includes not only the approximate percentage of interest that you’ll likely pay on your credit card balance, but also fees associated with your credit card, such as origination fees or balance transfer fees.

Even if you make minimum payments, interest will still accrue on the balance you owe. The more money you owe, the quicker your interest payments can add up and the harder your debt can be to pay off.

So strategies that help you pay down debt as fast as you can also might help you control your interest rates—and that can help keep your debt from getting ahead of you.

To illustrate some of the debt-demolishing tips in this article, we’re using a nice round number ($10,000). But that’s just a number we chose at random as an example. Everyone’s debt totals will be different, and the right ways to pay down debt will be different for everyone as well. Here, we’re just providing an overview of a few different possible ways to help conquer your credit card debt.

Avoiding Adding to Your Debt

If tackling $10,000 in credit card debt, or really any amount of credit card debt, the very first step might be to stop using credit cards altogether. This can be tough, especially if you’re used to using them all the time. But if you keep spending on your card, you’ll be adding to your debt, and it may feel a bit like you’re walking in sand, taking one step forward and then backsliding. While you get your debt under control, you could consider switching over to only using cash or your debit card.

Building a Budget

A proper budget may help you find extra cash to help you pay down your credit cards. You can start by making a list of all your necessary expenses, including housing, utilities, transportation, insurance, and groceries.

It might be a good idea to include minimum credit card payments in this category as well, since making minimum payments can at least keep you from having to pay additional penalties and fees on top of your credit card balance and interest payments.

You can tally up the cost of your necessary expenses and subtract the total from your income. What’s left is the money available for discretionary spending, or in other words, the money you’d use for savings, eating out, entertainment, etc. Look for discretionary expenses you can cut—you might forgo a vacation or start cooking in more—so you can direct extra money to paying down your credit card.

Consider using any extra windfalls—such as a bonus at work, a tax return, or a cash birthday gift—to help you pay down your debt as well.

Though it may seem frustrating to cut out activities you enjoy doing, it can be helpful to remember that these cuts are likely temporary. As soon as you pay off your cards, you can add reasonable discretionary expenditures back into your budget.

The Debt Avalanche Method

Once you’ve identified the money you’ll use to pay off your cards, there are a couple of strategies that may be worth considering to help organize your payments. If you have multiple credit cards that each carry a balance, you could consider the debt avalanche method. The first step when using this strategy is to order your credit card debts from the highest interest rate to the lowest.

From there, you’d make minimum payments on all of your cards to avoid additional penalties and fees. Then, you could direct extra payments to the card with the highest interest rates first. When that card is paid off, you’d focus on the next highest card and so on until you’d paid off all of you debt. The idea here is that higher interest rates end up costing you more money over the long run, so clearing the highest rates saves you cash and accelerates your ability to pay off your other debts.

The Snowball Method

Another strategy potentially worth considering if you have multiple credit cards is the snowball method. With this method, you’d order your debts from smallest to largest balance. You would then would make minimum payments on all of your cards here as well, but direct any extra payments to paying off the smallest balance first.

Once that’s done, you’d move on to the card with the next lowest balance, continuing this process until you have all of your cards paid off. By paying off your smallest debt you get an immediate win. Ideally, this small win would help you build momentum and stay motivated to keep going.

The drawback of this method is you continue making interest payments on your highest rate loans. So you may actually end up spending more money on interest using this method than you would using the avalanche method.

Only you know what type of motivation works best for you. If the sense of accomplishment you feel from paying off your small balances will motivate you to actually pay your debt off, then this method may be the right choice for you.

Consolidating Your Debt

Interest rates on credit cards can be hefty to say the least. Personal loans can help you rein in your credit card debt by consolidating it with a potentially lower interest rate. With a personal loan, you can consolidate all of your credit cards into one loan, instead of managing multiple credit card payments.

Once you’ve used your personal loan to consolidate your credit card debt, you’ll still be responsible for paying off the loan. However, you’ll no longer have to juggle multiple debts. And hopefully, with a lower interest rate and shorter term, you’ll actually be able to pay your debt off faster.

Could consolidating your credit card debt be right for you? Learn more about SoFi personal loans.


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

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Affordable Wedding Venue Ideas

If you’ve already begun to plan your wedding ceremony and reception, you might be suffering from sticker shock as you tally it all up. And you very well might be asking yourself, “Is it all worth it?”

The reality is that, in 2018, the average couple polled in a study of nearly 13,000 couples paid $33,391 for their wedding. Nearly half of the entire wedding budget (an average of almost $15,200) went toward the reception venue, plus $2,300 toward the ceremony site.

So, you might figure, it you could eliminate or greatly reduce the venue costs for the wedding ceremony and reception, then you’ve taken care of the largest costs in one fell swoop.

Fortunately, there are indeed plenty of free wedding venues, as well as relatively inexpensive wedding venues to consider. We’ll share four affordable places for you to consider for your own wedding. Mix, match, and make this day truly your own!

Plus, if you discover that you could use help financing your wedding, we have suggestions for that, too. Congratulations and best wishes!

At-Home Wedding

This can literally mean at your own home, or that of a parent, friend, or other loved one, which will likely be one of the most affordable wedding venues around. Benefits of this choice (besides the lack of rental fees) include the flexibility to have your ceremony on just about any day of the year, plus you have a ready-made shelter if the weather isn’t ideal. Want a pet-friendly ceremony? It doesn’t get any better than a home wedding for having your beloved dog be your ring bearer.

Also, any home upgrades made for the ceremony can be enjoyed for a long time afterward. You might want to decide how much of the event will be held outdoors, what rooms of the house should be made available to wedding guests, how to ensure enough seating—and, in case of bright, sunny weather, how to provide enough shade for those guests.

You might want to be sure your officiant of choice is able to perform the ceremony, plan the parking logistics, check out how to comply with any noise ordinances, talk to pest control professionals, if that seems necessary, and so forth. This could be a perfect time to invest in permanent outdoor landscaping that will beautify your special day and your home for years to come.

City Hall Wedding

You aren’t restricted to the city hall or courthouse by where you currently live. Brides.com suggests that you choose one that has special significance to your relationship, perhaps where you first fell in love.

Or, you can get married in the city hall where you’ll enjoy your honeymoon or your family vacation. As another strategy, you can choose the city hall based on its beauty, with Brides.com recommending the one in San Francisco, with its stunning white column and gold-capped roof.

The article also notes that city hall weddings typically take place on a weekday morning, so think about how that would work in conjunction with your post-wedding celebration. As far as ceremony costs, a wedding at the San Francisco courthouse, for example, will cost you $86 .

Park Wedding

Perhaps there are beautiful parks in your town or city full of unique flowers, landscaping, and more—or maybe there is one with special meaning to you, maybe near where the two of you attended college.

If that’s the case, you could contact the relevant parks department and find out any details about fees and permits . How accessible is the location for guests? If it’s a small park in the center of town, it’s likely to be fairly accessible. If it’s deep in the heart of a national park system, you may need to decide how to make it practical for guests to find and attend.

Other considerations for a park wedding include shelter in case of rain, having enough public restrooms (are they readily available or do you need to rent portable options?), and how comfortable you are getting married in an open space.

You might also need to find out what the park’s policy is on receptions. Can you set up tables and have food brought in? Or are you imagining a picnic complete with champagne? Dream it up, brainstorm details, and get confirmation from park officials.

One bride who got married in Glacier National Park wore her grandmother’s dress. In and of itself, that might not be unique—but this dress had been made out of the silk parachute her grandfather used in World War II! What unique touches can you bring to your own special park wedding?

Beach Wedding

You might also consider a beach wedding, one rife with possibilities for incredible, one-of-a-kind photography, soft breezes, and tropical drinks. As practical considerations , do you plan to have a ceremony along the ocean on a public beach or will you locate a private beach alongside a natural spring? The permits you’ll need will likely be quite different if you plan to have just your ceremony there versus if you also plan to have a beachside reception complete with food, drink, and music.

You might need to take into account any noises made by waves and create a Plan B or otherwise have shelter available if the weather doesn’t cooperate. And, where you plan to have this ceremony, geographically speaking, may help to dictate what time of year your wedding should be scheduled.

Do you plan to have alcohol at your reception? That often isn’t permitted on beaches, but there are some that do allow guests to imbibe . Do you want to rope off a section of the beach? Build a bonfire? Again, you might want to ask what the rules and regulations are for the beach you have in mind and be flexible about finding a different location or modifying plans to help make it all come together.

Budgeting for Your Wedding

Even when you choose a free or inexpensive wedding venue, you still might want to figure out your budget and start saving for the engagement and wedding rings, your wedding and reception attire, food, music, drinks, flowers, photography, video, and more.

During a discussion with your partner, you could both try to determine who will pay for what, and how much you’re willing to spend. It could help to discuss priorities so you’re in agreement about where to splurge and where you’re willing to compromise.

If, for example, you know that having lush and beautiful flowers is important to both of you, that could rise to the must-have category. And, maybe you want to spend more on photography and less on videography—or vice versa. What’s important is that you mutually create and agree upon a plan that’s unique to you and your special day.

Rather than staying local, another option might be to have a destination wedding in a place where you’ll also honeymoon. Costs for destination weddings can vary significantly based upon location. Some of the more expensive include:

New York City , with its metropolitan charm
Paris, France , with its legendary romantic appeal
Hamilton Island, Australia , with its sandy white beaches

If you’re looking for more affordable wedding venues but still want a destination wedding, here are a few that could be more budget friendly:

Cozumel, Mexico , by its crystal clear waters
Lahaina, Hawaii (seriously!)
Ambergris Caye, Belize , for an off-the-beaten path dream wedding

Financing Your Wedding

Wedding loans are just what they sound like: unsecured personal loans to cover wedding costs. Rates on personal loans tend to be lower than credit card rates, and they can offer more flexibility on the term of your loan and the amount you can borrow. You can also choose a fixed rate, which can help make it easier to budget for, and you won’t have to worry about the rate jumping up on you.

A personal loan from SoFi can be a fast, simple way to get extra cash for your wedding. You can apply online and, if you qualify, get the money in just a few days.

Explore a personal loan at SoFi—check your rate in just minutes!


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

The average student loan borrower has roughly $37,000 in student debt. Paying that amount over the 10-year federal Standard Repayment Plan can cost you hundreds of dollars a month.

And depending on where you ended up after graduation, you may not be able to afford it. There are also other circumstances that may make repayment difficult, including going back to school, going into active duty, or losing a job.

As such, it’s important to know how to pause student loan payments when you can’t afford them. Depending on who your lender is, though, the options can vary.

Two Ways You Can Pause Student Loan Payments

Depending on your situation and need, you may be able to pause student loan payments through student loan deferment or forbearance. Each of these options has different requirements and outcomes, so it’s essential to understand how they work.

1. Student Loan Deferment

Deferring your student loan payments means that you don’t have to make payments for a set period of time.
In the meantime, the loan will continue to accrue interest . But if you have subsidized federal loans or Perkins Loans, you won’t be responsible for paying it.

If you are responsible for paying the interest that accrues at all times—for example, if you have an unsubsidized loan or a PLUS loan—and don’t make interest-only payments during the deferment, the interest will capitalize at the end of the deferment period.

This means that you’ll have a new, higher balance that includes the principal amount at the beginning of the deferment period plus the unpaid interest that accrued during deferment.

2. Student Loan Forbearance?

Another potential option is putting loans in forbearance . Like deferment, forbearance allows qualified applicants to delay payments for a set period of time.

The primary difference is that you’re responsible for paying any interest that accrues during the forbearance period, regardless of which type of loan you have.

Again, it is possible to make interest-only payments during the forbearance period. If none are made, the interest will capitalize, and the loan balance will be higher when the forbearance period is over.

While these general definitions apply to both federal and private student loans, some details differ between the two.

Federal Student Loans

The U.S. Department Education offers both deferment and forbearance on all of its student loans. Keep in mind that neither comes automatically ; both need to be applied for through your student loan servicer. Here’s what you need to know about both options.

Qualifying for Federal Loan Deferment

If you have federal loans, you may be able to defer your student loan payments for up to three years. Here’s how to know if you may be eligible:

•  You have any federal student loan, subsidized or unsubsidized.

•  You’re enrolled at least half-time at an eligible school, and you received a Direct PLUS Loan or FFEL PLUS Loan as a graduate or professional student. In this case, your loans will be deferred while you’re in school at least half-time plus six months after you leave.

•  You’re a parent who took out a Direct PLUS Loan or FFEL PLUS Loan on behalf of your child student, and they’re enrolled at least half-time at an eligible school. In this case, your loans will be deferred while your child remains in school plus six months after they leave.

•  You’re enrolled in an approved graduate fellowship program.

•  You’re enrolled in an approved rehabilitation training program for the disabled.

•  You’re unemployed and unable to find employment.

•  You’re experiencing economic hardship.

•  You’re serving in the Peace Corps.

•  You’re on active duty military service in connection with a war, military operation or national emergency. In this case, your loans will be deferred while you’re on active duty plus 13 months afterward.

You can read more about eligibility here .

Qualifying for Federal Loan Forbearance

The federal government has two types of forbearance: general and mandatory . Both can last for up to 12 months at a time. But if you still qualify once that period is up, you can request for a renewal.
General forbearance is also sometimes called discretionary forbearance because your loan servicer gets to choose whether or not to approve your request.
You can request general forbearance if you’re unable to make your monthly payments due to:

•  Financial difficulties

•  Medical expenses

•  Change in employment

•  Other reasons your loan servicer will accept

Mandatory forbearance is not at the discretion of your loan servicer, and can be granted if you meet any of the following requirements:

•  You’re serving in a medical or dental internship or residency program and meet specific requirements.

•  The total amount you owe on all of your loans is 20% or more of your gross monthly income.

•  You’re serving in an AmeriCorps position for which you’ve received a national service award.

•  You’re a teacher and qualify for teacher loan forgiveness.

•  You qualify for partial payments on your loans through the U.S. Department of Defense Student Loan Repayment Program.

•  You’re a member of the National Guard and have been activated by a governor, but don’t qualify for the military deferment.

You can read more details about eligibility requirements for forbearance here .

Private Student Loans

While the options and requirements for these programs are clear on federal student loans, they can be a little trickier with private loans.

That’s because there are so many different private student lenders , and each has its own policy and criteria for determining eligibility.

Unfortunately, there’s no mandatory forbearance option like there is with federal loans. Instead, it’s typically at the lender’s discretion to determine whether you qualify.

Also, the deferment and forbearance periods can vary by lender. For example, you may need to apply every few months, and you may be limited on how often you can apply.

Since there’s no real consistency among private student lenders, if you borrowed a private loan it’s important to check with your lender directly to find out what their policy is.

How Deferment and Forbearance Can Affect You

When you request a deferment or forbearance on your federal loans, it will be noted on your credit report . However, neither option will have a negative impact on your credit score.

That said, if you miss a payment while you’re waiting for your deferment or forbearance request to get approved, it may hurt your credit. At 90 days overdue , your lender can report the missed payment(s) to the credit bureaus.

Because of this, it may be wise to continue making payments as usual until you receive the official approval for your deferment or forbearance with an effective date.

Also, since interest accrued during a deferment or forbearance can capitalize at the end of the period, you could end up with a higher balance and monthly payment than when you started. (Though, P.S., interest doesn’t capitalize on all loan types! Interest on Perkins Loans does not capitalize on the principal, for example.)

If you originally wanted to pause student loan payments because you couldn’t afford them, a higher payment could make things more difficult. Take interest into account while considering these options.

What if You Don’t Qualify to Pause Student Loan Payments?

Depending on your lender and situation, you may not be eligible for deferment or forbearance. If this happens, there are a couple of options to consider.

Income-Driven Repayment Plans

If you have federal student loans, it may be possible to reduce your monthly payment by getting on an income-driven repayment plan.

If you qualify, you can decrease your monthly payment to a percentage of your discretionary income. It won’t stop your loan payments altogether, but it can help make them more affordable.

Refinancing Your Student Loans

Whether you have federal or private loans, you can opt to refinance your student loans with a lender that offers the deferment or forbearance policies that you need. And depending on your current payment and interest rate, refinancing could help you save money by reducing one or both.

SoFi offers Unemployment Protection for its members. If you lose your job through no fault of your own, you could qualify for loan forbearance for up to 12 months in three-month increments. What’s more, SoFi’s Career Coaching team can help you find a new job.

Keep in mind that refinancing federal loans with a private lender will cause you to lose certain benefits, including income-driven repayment options and access to federal loan forgiveness programs.

Determine If Pausing Student Loan Payments Is Right for You

As you’re considering your options and whether you qualify, take a step back and think about whether deferment or forbearance are right for you in the long run.

And if you find that your current lender’s options aren’t enough, consider refinancing your student loans with a lender that provides what you need.

Ready to see how refinancing with SoFi can help make your monthly payments more manageable? Get a quote in two minutes or less.


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 Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.

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.


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

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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What Can Be Used as Collateral for a Personal Loan?

Running low on money can make one feel helpless and insecure. And procuring quick cash—whether to address an emergency situation, consolidate credit card debt into a lower interest rate, make home repairs, or something else—is not always easy. One option that comes to mind is a personal loan.

In general, loans come in two broad types: secured and unsecured. Here are succinct definitions of each of the two types:

Secured loan: This loan is backed by “collateral,” which is an asset, such as a house or car.
Unsecured loan: This loan is not backed by collateral, which means that you don’t need to present an asset to qualify for financing. Most personal loans are unsecured.

Ultimately, of course, it’s up to you to choose the loan that best fits your specific needs and financial situation. That takes research—but to help get you started, we’ll provide an overview of both secured and unsecured personal loans.

Secured Loans

Requiring collateral for a personal loan is uncommon, but not unheard of. Generally, secured loans have more competitive interest rates, larger loan amounts, and more favorable terms.

Collateral can include a house, car, boat, and so forth, whatever a lender is willing to hold as collateral. You may also be able to use investment accounts, cash accounts, or CDs as collateral to get the cash you need. Some general examples of collateral include:

•  Your home: Real estate can be the biggest source of equity for many people. So even if you have a mortgage on a property, there still may be equity available to tap. If so, you could take out a home equity loan , which is basically a second mortgage. With this type of loan as collateral, you typically get a lump sum from the lender to spend as needed. You could also consider a home equity line of credit (HELOC). In this case, your lender approves you to use a certain dollar amount based on the equity you have in your home, but you don’t get a lump sum payment. Instead, you can use the money, as needed, within the approved parameters , perhaps through the use of a special checkbook or debit card. You only pay interest on the money you’ve withdrawn from the available loan amount. There are downsides to either of these choices, including a possible variable rate (which can rise and fall in accordance with market fluctuations) and that, if you don’t make payments, the lender can seize your home.

•  Your vehicle: A vehicle can be used as collateral when buying a car or truck, but some lenders allow you to use the equity in the car, truck, or other vehicle to get funds. This may be a better choice than, say, a payday loan—but you risk losing that vehicle if you can’t make the payments.

•  Investment accounts: You might be able to use a certificate of deposit (CD) or other investment account as collateral. However, using these accounts as collateral might prevent you from accessing the funds in the accounts, which is a downside to consider.

Recommended: CD Loans, Explained

Finder.com goes even further in depth, listing numerous other items that could be used as collateral for a secured personal loan, including paychecks, savings accounts, paper investments, fine art, jewelry, collectibles, and more.

For fun, Fundera.com lists some of the most unusual items ever used as collateral for loans throughout history, including wheels of Parmigiano Reggiano cheese, designer handbags, rubber, thoroughbred horses, winning lottery tickets, wine—and even soccer players themselves. (To be clear, while we have serious respect for anyone using a wheel of cheese as collateral, these examples are fanciful and hilarious but not examples of collateral the average consumer might use.)

Generally, if a borrower fails to repay their secured loan, they will receive a notice or call letting them that he or she is in default (giving the borrower an opportunity to become current on payments); by their very nature, secured personal loans can lead to loss of the collateral asset if there is a failure to repay.

Potential Plusses of Secured Loans

If you need to borrow a larger sum of cash, then you might find more success if you put up collateral. You might also receive more favorable rates and/or terms, because the lender has the security of knowing that collateral can be possessed (often called “repossessed”) if the loan is not paid back. Plus, a lender might approve a secured personal loan for a borrower whose credit score isn’t as high as one that might be required for a riskier, unsecured personal loan.

Different lenders offer different types of secured loans and have different underwriting criteria. So, to discover what a specific lender requires for a secured loan, you could just ask them, “What can I use as collateral for a personal loan?”

Unsecured Personal Loans

Because these types of loans aren’t backed by collateral and just need your written signature promising you’ll pay back funds (as well as a review of your credit history and other financial fitness indicators, of course), you may hear unsecured personal loans called “signature loans .” You might also hear the term “good faith loan” or “character loan.”

In general, an unsecured personal loan is an installment loan where you pay back the amount borrowed at a certain interest rate over a predetermined term, perhaps between three and seven years.

Student loans are a type of unsecured loan, though they have their own unique terms and repayment options. So are most credit cards, though rates can be higher than what’s typically considered on an unsecured personal loan.

Potential Plusses of Unsecured Loans

Unsecured personal loans typically can be obtained on short notice and, if the borrower has sufficient income, a good credit score and history (among other factors), rates can be competitive compared to secured loans. In a sense, these loans are backed by the borrower’s creditworthiness.

These loans can be easier to find than in the past, thanks to online lenders (such as SoFi) offering them. Rates are typically fixed on unsecured personal loans, and funds can be used for numerous purposes, including:

•  consolidation of credit card debt

•  debt consolidation, which can include credit card balances (or not)

•  medical expenses

•  home renovation or repair projects

•  career training

And, of course, with an unsecured personal loan, you wouldn’t be tying up any asset or putting them at any risk.

Cons of Unsecured Loans

Because unsecured loans are riskier for the lender, rates are typically higher than secured loans, while the amounts available to borrow are usually smaller. And, while it’s true that, with unsecured loans, there isn’t an asset that can be repossessed for nonpayment, lenders can send the account to debt collectors or take the borrower to court for nonpayment. This can significantly affect a person’s credit score, damage that can last for years.

Building or Repairing Credit

If your credit score or credit history is preventing you from getting an unsecured loan, it might make sense to build or repair your credit. This won’t happen instantly, so it won’t be the magic solution if you need a loan now. But it could be a smart move for today and for your financial future.

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


Making a Choice: Secured or Unsecured

What’s best for you depends upon your specific need, your financial situation, your credit history, and so forth.

What people typically want is the ease of an unsecured personal loan with the lower interest rates and higher borrowing limits of a secured loan. If that sounds like you, then we invite you to explore what’s available at SoFi for qualified borrowers.

Unsecured Personal Loan at SoFi

At SoFi, personal loans are made easy, with low rates and no fees. No origination fees, no pre-payment fees, no late fees. And, if you sign up for autopay, you could save even more.

Plus, at SoFi, unsecured personal loans are available up to $100,000. You could use funds for credit card consolidation, home improvements, relocation assistance, unexpected medical expenses, major personal purchases, and more.

Check out an unsecured personal loan from SoFi today.


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

If you’re facing student loan debt, adding those monthly payments into your budget can be overwhelming—and for some, it can be a serious struggle to meet the monthly minimum on loan payments.

Of course, to simply stop making payments is pretty much the worst thing you can do. Before you go that route, there are several other options to consider—and the sooner you move to get back on track, the better.

One of the more popular alternatives for federal student loans—chosen by thousands of borrowers each year—is to just press pause by requesting deferment or forbearance . But that postponement isn’t necessarily the best choice for everyone.

The appeal is obvious—both deferment and forbearance offer a chance to catch your breath and protect your credit when you feel as though you’re drowning in debt. A recent Brookings Institution analysis found that nearly 40% of borrowers could be in default on their student loans by 2023.

The main difference is that with a student loan deferment, you may not have to pay the interest that accrues on certain types of federal loans during the deferment period. With a forbearance, no matter what type of loan you have, eventually you’ll be responsible for paying the interest that accrues.

Either way, the relief is only temporary: Unless you’re deferring your student loans because you are going back to school, enrolled at least half-time, there are limits on how long you can postpone paying your federal student loans. And in the meantime, there could be consequences to your current and future finances.

For example, when the loan is in deferment or forbearance, interest may accumulate on your loan balance and capitalize on the principal at the end of the deferment or forbearance period. This could ultimately mean paying more in interest over the life of the loan, which could take away from money you’d rather put toward a car or house.

How Does Student Loan Deferment or Forbearance Affect Your Credit

A number of factors determine your FICO® credit score , including payment history, how much you owe, how long you’ve had your debts, what your credit mix looks like and how much new credit you’ve asked for lately. Each factor is weighted differently, with payment history being the most important, making up about 35% of your FICO Score.

Though your loan status will be noted on a credit report , putting your federal student loan into deferment or forbearance shouldn’t directly affect your credit score, unless you miss a payment before your deferral or forbearance is granted.

But your total debt load likely will be reflected on your credit report—and if you aren’t paying it down, it could keep your score lower than you’d like. Just as defaulting can crash your credit, making monthly payments can help you build a positive credit history.

And your credit score isn’t the only thing new lenders look at when they’re deciding if you pass muster. Though education debt may be viewed more favorably than, say, credit card debt, because it can be regarded as an “investment” in your overall earning potential and comes with a lower interest rate that credit card debt, it still affects your debt-to-income ratio (DTI).

And that might determine if a lender will approve your application for a car loan or mortgage, if the jewelry store will sell you that engagement ring on an installment plan, or if a management company will rent you your dream apartment. A lender wants to see that you’re bringing in enough cash to cover your debt payments—hence, looking at your DTI for a sense of how much you’re earning versus paying out to existing debt.

Has your student loan debt affected
your credit? Monitor your credit
score in the SoFi app.


What Are Some Other Alternatives?

Deferment is better than defaulting on your student debt—by a wide margin. But it’s a short-term solution.

Are you certain you’ll be better prepared to make the same payments in six months or a year—even three years? If you expect your economic prospects to improve in a relatively short period, a temporary delay could be the way to go.

A better option may be to check on your eligibility for one of several federal loan repayment programs, such as income-driven repayment . Income-driven repayment plans allow you to pay 10%, 15%, or 20% of your discretionary income to your loans—depending on which specific plan you chose. While this generally means extending your loan term and therefore paying more interest over the life of the loan, it also can lower your monthly payments and make them more manageable.

You also might be able to improve your interest rate—and, therefore, your long-term cost—by consolidating and refinancing all your federal and private student loans into one loan with one payment.

If you haven’t yet missed a beat as a borrower—if you’ve graduated, have a job and still have a solid credit and financial background—you may be able to qualify for a new student loan at a lower rate. Depending on how you restructure your debt, refinancing could help you pay off your student loans at an even faster pace than you planned.

Can Refinancing Affect Your Credit Report?

Every person’s credit story is different, so it’s hard to say exactly how any change might affect it. On the one hand, refinancing your student loans might help get you out of debt sooner, which could lower your overall debt, thus helping your credit score.

Similarly, if you’re currently struggling to make student loan payments on time (which could hinder your score), and refinancing allows you to make on-time payments each month, that could also help your score.

Ultimately, refinancing could have a different impact on every financial situation and credit history. And there are few better recipes for credit report improvement than diligently making your debt repayments on time.

That being said, here are a few other things that may help if you’re considering refinancing:

•  Not waiting until you’re in default to shop for a refinancing loan. If you’re in default when you apply to refinance, it will likely make it more difficult for you to get a refinanced loan with a competitive interest rate

•  Reviewing your credit report for errors—and speaking up if there is any misinformation on your report

•  When looking into pre-qualify, you may want to be sure the lender will only do a soft credit inquiry to determine if you prequalify (which won’t affect your score)

•  Making payments on your current loans until your new loan is in place. And once you start paying your refinanced loan, it’s just as important that you stay up to date on your payments. Some lenders offer hardship assistance in certain circumstances—if you lose your job, for example.

Every lender has its own criteria for determining which borrowers it will do business with. If you opt to check your rates, SoFi will conduct a soft credit pull* to determine the rates and terms for which you qualify and show those to you upfront. The process is done online and takes just a couple of minutes.

If you decide to refinance with SoFi, in addition to potentially getting a lower interest rate, you can take advantage of other perks, including complimentary career counseling.

And if you should hit hard times financially while you’re paying back your SoFi student loan, you may qualify for the Unemployment Protection Program. If approved, SoFi can put your loans into forbearance, suspending your monthly payments for up to a year over the life of the loan.

But remember: The goal of refinancing is to get back on track and then stay on track. That’s a key way you can help build a solid credit record that will make borrowing easier and less expensive in the future.

When you’re ready to take control of your student loans, refinancing with SoFi may help you manage your debt.



*To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.

SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.

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.


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
.

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