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A personal loan can be a useful option when you need to borrow money to cover a medical bill, fund a home repair, or consolidate debt. This kind of loan can offer a considerable lump sum of cash at a relatively low interest rate, but the lender may charge fees. You’ll need a good credit score to qualify.

Before you decide that a personal loan is right for you, it’s important to understand the pros and cons that come along with them. Here, the information that can help you make a wise choice.

What Are Personal Loans?

What is known as a personal loan is money that you borrow from a bank, credit union, or online lender. Typically, it’s a lump sum amount you receive and, since it’s an installment loan, agree to repay the loan principal and interest at regular intervals — usually monthly.

The interest rate for a personal loan is likely to be fixed-rate, and the loan’s term is usually between two and seven years.

When you apply for a personal loan, your lender will run a hard credit check, which will help determine your interest rate. Generally speaking, borrowers with higher credit scores have a better chance of being offered lower interest rates and more favorable terms. The higher your interest rate, the more money it will cost you to borrow.

With many lenders, you will need at least a good FICO® credit score to qualify, and a higher score will probably allow you to get more favorable rates.

Recommended: 11 Types of Personal Loans

How Personal Loans Work

Before delving into the pros and cons of personal loans, it’s worthwhile to familiarize yourself with the basics of this kind of loan and how they typically function.

Loan Terms and Repayment

Personal loans are made up of the principal (the amount you are borrowing), the interest rate you will be charged, and any fees you will pay, such as origination fees. The annual percentage rate (APR) helps you evaluate the amount the loan will cost you in terms of both interest and fees. You’ll repay the loan in monthly installments over the loan’s term, which is usually between two and seven years.

Fixed vs Variable Rate

A personal loan can have either a fixed or variable interest rate. Most have a fixed rate, meaning you’ll lock in a rate when the loan begins, and that rate (and your monthly payment) will stay constant over the life of the loan.

However, you may be able to find variable rate loans, if you prefer. In this case, the interest rate will fluctuate with the market, meaning your payments may rise and fall over the loan’s term.

The Benefits of Personal Loans

Personal loans are a flexible option for borrowers looking to accomplish a variety of goals, from consolidating other debts to remodeling their home. Here’s a look at some of the advantages.

Comparatively Low Interest Rate

Personal loans offer relatively low interest rates when compared to other methods of short-term borrowing. The average personal loan interest rate is 12.25% as of October 2025.

Credit cards by comparison had average interest rates of over 20% at the same moment. A personal line of credit, which allows the borrower to withdraw funds up to a limit during the draw period, may have interest rates that vary between11% and 21%, depending on credit score and other variables.

Some forms of predatory short-term lending, such as payday loans, can charge the equivalent of many times these rates to borrow. Some even have annual percentage rates (APRs) of 400%, so it can be wise to proceed with caution and see what lower-cost sources of funding may be available.

Comparatively High Borrowing Limits

Small personal loans are usually for amounts of a couple of thousand dollars or less. (Smaller loans often come with lower interest rates.) However, $10,000 personal loans are offered by many lenders, and some will offer large personal loans of up to $100,000 to cover major expenses and life events, which may be quite a bit more than other credit options.

The average credit limit for credit cards, by comparison, is $31,165, according to credit reporting bureau Experian.

Personal lines of credit often have a range of limits from $1,000 to $50,000, which can be more than a credit card but less than a personal loan.

Personal Loans Can Be Used for Many Things

Some types of loans must be used for designated purposes. Auto loans must be used to buy a car, and a mortgage must be used to finance a home. Personal loans, on the other hand, have few restrictions on how you must use the money, and you can generally use it for any legal purpose, except business expenses and tuition.

Popular uses for personal loans can include:

•  Medical, dental, or car repair bills

•  Home improvement projects

•  Debt consolidation

•  Travel

•  Weddings or other major celebrations

•  Holiday shopping

•  Summer camp or other expenses for children

No Collateral Necessary

Unsecured personal loans are the most common type of personal loans. They are not backed by collateral, such as your car or home.

Some personal loans are secured, however, and require you to borrow against the equity in your personal assets, like a home or your savings. With a secured vs. unsecured personal loan, the lender can seize your collateral if you default, selling it to recoup their loss. As a result, secured loans present less risk for the lender and often come with lower interest rates than unsecured loans.

Simple to Manage

You can use personal loans to consolidate other higher-interest debt, for example, by paying off the balance on several high-interest credit cards. A single personal loan can offer less expensive interest, lowering the cost of your debt over time. And it may be easier to manage, since you only have one bill to pay each month. A debt consolidation calculator can help you do the math and evaluate your options.

Can Be Quick to Obtain

Policies will vary, but some lenders may offer same-day approval and funding within just a few days.

Can Help Building Credit

Your lender will likely report your personal loan and payment history to the three credit reporting bureaus — Experian®, TransUnion®, and Equifax®. In fact, 35% of your FICO® score — the most commonly used credit score — is determined by your payment history.

You can help build a strong credit history over time by avoiding late or missed payments.

Recommended: Personal Loan Calculator

The Disadvantages of Personal Loans

These loans do have some downsides, which can potentially make personal loans a bad idea for some borrowers. Here’s a closer look.

Higher Interest Rates Than Some Alternatives

Personal loans may carry higher interest rates than some alternatives. For example, if you’re looking to remodel your home, you might consider taking out a home equity loan or a home equity line of credit (HELOC). Keeping in mind the current average interest rate of 12.25% for personal loans, consider the following:

•  A home equity loan uses your home as collateral to offer you a lump sum of money to use. In October 2025, the average interest rate on a 10-year fixed home equity loan ranged from 7.24% to 8.20%.

•  A HELOC, on the other hand, is a form of revolving credit line that uses your home as collateral. You draw against your limit as needed during the draw period and, after a set number of years, enter the repayment period. As of October 2025, the average interest rate on a HELOC was 7.75 to 7.81%.

Also, your rate will likely vary depending on your credit score: The higher your score, the lower your interest rate may be.

Fees and Penalties

Some lenders may charge fees and penalties in association with personal loans. For instance, an origination fee helps pay for the processing of your loan application and is usually equal to a percentage of the loan amount. Fortunately, it’s possible to avoid origination fees.

Lenders may also charge prepayment penalties if you pay off your loan ahead of schedule, to make up for profit they are losing on interest payments.

Can Increase Debt

Take out a personal loan only if you are sure you can pay it off and if it makes financial sense. For example, a home remodel could increase the value of your home, and consolidating credit card debt could save you money in interest payments. But taking out a personal loan to fund a lavish wedding could wind up interfering with your ability to save for the down payment on a house.

Avoid taking out a loan that is for more money than you need to avoid the risk of taking on more debt than necessary.

Potential Impact on Credit Score

Taking out a personal loan and paying your debt on time can build your credit score, as mentioned above. However, a personal loan can also negatively impact your credit score in a few ways. When a hard credit inquiry is done during the application process, your credit score is typically lowered by several points for at least a few months. The personal loan will also increase your debt load, which could hurt your credit score. And if you are late when making a payment on a personal loan or miss it altogether, that can lower your score.

Alternatives to Personal Loans

You may want to explore personal loan alternatives, described below, as you search for the best source of funding.

•  Credit cards allow users to make purchases using credit. Borrowers must make minimum payments and owe interest on any balance they carry from month to month. As noted above, the interest rates are typically high.

•  A personal line of credit (PLOC) is similar to a credit card. It allows you to tap your credit line as needed. Credit is replenished when you pay back your loan.

•  A home equity loan uses a borrower’s home as collateral. The value of the property contributes to determining the loan amount that is transferred to the borrower as a lump sum.

•  A home equity line of credit is a revolving source of credit, like credit cards and PLOCs. As with home equity loans, HELOCs use the borrower’s home as collateral.

The Takeaway

A personal loan is a type of installment loan, usually unsecured, that allows you to obtain a lump sum of money, typically at a fixed interest rate and to be repaid in up to seven years. The pros of these loans can include their flexibility (you can use the money as you like), lower interest rates than some other sources of funding, and the speed, high limits, and convenience they offer. Among the cons: the possibility of having to pay fees and penalties, and the fact that you might be able to get a lower rate with a secured loan elsewhere.

If you’ve explored your options and decide that a personal loan is right for you, it’s wise to shop around to find the right loan.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

What is a personal loan?

A personal loan is a loan you receive from a bank, credit union, or online lender, and it can be used for a variety of purposes. Borrowers pay back the principal and interest in regular installments. These loans are typically unsecured (meaning collateral is not needed) and offer a lump sum payment, usually at a fixed rate of interest, with a term of up to seven years.
 

What can you use a personal loan for?

Personal loans have few usage restrictions. Basically, you can use them for any legal purposes, though in most cases, lenders restrict business and tuition usage. They can provide funding for everything from unexpected medical bills to home improvement projects to vacations to credit card debt consolidation.

How much money can you get from a personal loan?

Personal loan amounts typically range from $1,000 to $100,000, depending on the lender and the applicant’s qualifications.

What credit score do you need to qualify for a personal loan?

Many lenders require a credit score in the good range or higher to be approved for a personal loan. However, there are lenders who offer loans to those with fair or poor credit. The interest rates tend to be higher, though, and the terms less favorable than what those with higher scores are offered.

How long does it take to get approved for a personal loan?

Policies vary, but some personal loans can be approved on a same-day basis.

Photo credit: iStock/Anchiy

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.

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You may feel proud of yourself for paying off a debt early, but doing so could trigger prepayment fees (ouch). The best way to avoid those charges is to read the fine print before you take out a loan that involves this kind of fee.

If you neglected to do that, however, it doesn’t necessarily mean you’re stuck with a prepayment penalty. Read on to learn ways to avoid paying loan prepayment penalties.

What Is a Prepayment Penalty?

A prepayment penalty is when a lender charges you a fee for paying off your loan before the end of the loan term. It can be frustrating that a lender would charge you for paying off a loan too early. After all, many people may think a lender would appreciate being repaid as quickly as possible.

While that’s true in theory, in reality, it’s not that simple. Lenders make most of their profit from interest, so if you pay off your loan early, the lender is possibly losing out on the interest payments that they were anticipating. Charging a prepayment penalty is one way a lender may recoup their financial loss if you pay off your loan early.

Lenders might calculate the prepayment fee based on the loan’s principal or how much interest remains when you pay off the loan. The penalty could also be a fixed amount as stated in the loan agreement.

Can You Pay Off a Loan Early?

Say you took out a $5,000 personal loan three years ago. You’ve been paying it off for three years, and you have two more years before the loan term ends. Recently you received a financial windfall and you want to use that money to pay off your personal loan early.

Can you pay off a personal loan early without paying a prepayment penalty? It depends on your lender. Some lenders offer personal loans without prepayment penalties, but some don’t. A mortgage prepayment penalty is more common than a personal loan prepayment penalty.

Recommended: When to Consider Paying off Your Mortgage Early

Differences in Prepayment Penalties

The best way to figure out how much a prepayment penalty would be is to check a loan’s terms before you accept them. Lenders have to be upfront about how much the prepayment penalty will be, and they’re required by law to disclose that information before you take on the loan.

Personal Loan Prepayment Penalty

If you take out a $6,000 personal loan to turn your guest room into a pet portrait studio and agree to pay your lender back $125 per month for five years, the term of that loan is five years. Although your loan term says it can’t take you more than five years to pay it off, some lenders also require that you don’t pay it off in less than five years.

The lender makes money off the monthly interest you pay on your loan, and if you pay off your loan early, the lender doesn’t make as much money. Loan prepayment penalties allow the lender to recoup the money they lose when you pay your loan off early.

Mortgage Prepayment Penalty

When it comes to different types of mortgages, things get a little trickier. For loans that originated after 2014, there are restrictions on when a lender can impose prepayment penalties. If you took out a mortgage before 2014, however, you may be subject to a mortgage prepayment penalty. If you’re not sure if your mortgage has a prepayment penalty, check your origination paperwork or call your lender.

Checking for a Prepayment Clause

Lenders disclose whether or not they charge a prepayment penalty in the loan documents. It might be in the fine print, but the prepayment clause is there. If you’re considering paying off any type of loan early, check your loan’s terms and conditions to determine whether or not you’ll have to pay a prepayment penalty.

How Are Prepayment Penalties Calculated?

The cost of a prepayment penalty can vary widely depending on the amount of the loan and how your lender calculates the penalty. Lenders have different ways to determine how much of a prepayment penalty to charge.

If your loan has a prepayment penalty, figuring out exactly what the fee will be can help you determine whether paying the penalty will outweigh the benefits of paying your loan off early. Here are three different ways the prepayment penalty fee might be calculated:

1. Interest costs. If your loan charges a prepayment penalty based on interest, the lender is basing the fee on the interest you would have paid over the full term of the loan. Using the previous example, if you have a $6,000 loan with a five-year term and want to pay the remaining balance of the loan after only four years, the lender may charge you 12 months’ worth of interest as a penalty.

2. Percentage of balance. Some lenders use a percentage of the amount left on the loan to determine the penalty fee. This is a common way to calculate a mortgage prepayment penalty fee. For example, if you bought a house for $500,000 and have already paid down half the mortgage, you might want to pay off the remaining balance in a lump sum before the full term of your loan is up. In this case, your lender might require that you pay a percentage of the remaining $250,000 as a penalty.

3. Flat fee. Some lenders simply have a flat fee as a prepayment penalty. This means that no matter how early you pay back your loan, the amount you’ll have to pay will always be the prepayment penalty amount that’s disclosed in the loan agreement.

Recommended: Debt Payoff Guide

Avoiding a Prepayment Penalty

Trying to avoid prepayment penalties can seem like an exercise in futility, but it is possible. The easiest way to avoid them is to take out a loan or mortgage without prepayment penalties. If that’s not possible, you may still have options.

•   If you already have a personal loan that has a prepayment penalty, and you want to pay your loan off early, talk to your lender. You may be offered an opportunity to pay off your loan closer to the final due date and sidestep the penalty. Or you might find that even if you pay off the loan early and incur a penalty, it might be less than the interest you would have paid over the remaining term of the loan.

•   You can also take a look at your loan origination paperwork to see if it allows for a partial payoff without penalty. If it does, you might be able to prepay a portion of your loan each year, which allows you to get out of debt sooner without requiring you to pay a penalty fee.

For example, some mortgages allow payments of up to 25% of the purchase price once a year, without charging a prepayment penalty. This means that while you might not be able to pay off your full mortgage, you could pay up to 25% of the purchase price each year without triggering a penalty.

Some lenders shift their prepayment penalty terms over the life of your loan. This means that as you get closer to the end of your original loan term, you might face lower prepayment penalty fees or no fees at all. If that’s the case, it might make sense to wait a year or two until the prepayment penalties are less or no longer apply.

When it comes to your money, you don’t want to make any assumptions. You still need to do your due diligence by asking potential lenders if they have a prepayment penalty. The Truth in Lending Act (TILA) requires lenders to provide documentation of any loan fees they charge, including a prepayment penalty. Also, under the TILA, consumers have the right to cancel a loan agreement within three days of closing on the loan without the lender taking any adverse action against them.

The Takeaway

A prepayment penalty is one fee that can be avoided by asking questions of the lender and looking at the loan documents with a discerning eye. This may hold true both when you are shopping for a loan and when you are paying your loan off.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

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.

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Altcoin season is a term used to describe a period in the cryptocurrency markets during which altcoins, or a significant percentage of them, rally and see their prices increase.

Altcoin itself is a sort of catch-all term that refers to cryptocurrencies aside from Bitcoin; they’re “alternate” coins, in other words. Since Bitcoin is the biggest and most popular crypto on the market, almost all other cryptos are seemingly in a classification of their own: Altcoins.

What Is Altcoin Season?

Altcoin season is a stretch in which altcoin appreciation outperforms Bitcoin, or a significant number of altcoins simultaneously see their prices increase. Or, put another way, altcoin season happens when there’s steady outperformance of tokens and coins that aren’t Bitcoin. They could last weeks, or even months.

How Altcoin Season Differs from Bitcoin Cycles

Cryptocurrencies tend to experience market cycles, similar to those seen in the broader economy and even in the stock market. That means that prices, productivity, or other metrics experience periods of expansion (value growth) or contraction (value decline). The same happens in the crypto markets.

Altcoin season, then, can happen when Bitcoin reaches the bottom of one of those cycles, effectively paving the way for altcoins to experience a period of expansion or growth.

However, there’s no guarantee that every runup in Bitcoin will turn into a downturn later, or that altcoins will start outperforming the original crypto. In fact, it’s not uncommon for all cryptos to rise together, as excitement about the sector grows. As such, there can be pros and cons to owning crypto.

The Role of Bitcoin Dominance in Market Trends

Bitcoin is the oldest and largest cryptocurrency. So, it tends to set the tone for the markets, and can move the currents and momentum within them, so to speak. When there is a big movement or change with Bitcoin, that is generally reflected in the markets, and that filters down to altcoins, which include different types of cryptocurrencies.

So, following a Bitcoin rally, it’s possible altcoins could also rally (though not guaranteed). They could both then see a staggered cooling period.

Why Do Altcoins Often Follow Bitcoin’s Price Movements?

There are a few different theories for why altcoin season happens, and why altcoins tend to follow Bitcoin’s price movements. Here are some of the most common.

Expectations of Future Growth

After a large runup of Bitcoin, crypto-holder’s projected growth in the price of other crypto assets might change.

The Altcoin Season Index: Your #1 Indicator

Remember this: You can’t determine altcoin season just by looking at the price of altcoins, Bitcoin, or any other cryptocurrency in isolation. Perhaps the best gauge is the Altcoin Season Index.

How This Key Indicator Works

The Altcoin Season Index is a crypto market indicator, similar to many other market-focused metrics out there, that helps market participants get a sense of whether or not altcoins are outperforming or seeing more appreciation than Bitcoin at any given time. It is, in other words, a tool to measure the prevailing winds of the crypto market.

The Index itself looks at the top altcoins on the market (with the exception of crypto’s stablecoins), measures their collective performance over a period of the previous 90 days, and produces an index score that reports the percentage of altcoins (altcoins tracked by the Index) that are or have performed better than Bitcoin during the tracking period.

How to Read the Index’s Signals

As noted, the Index produces a percentage that helps market participants gauge whether they’re witnessing an “altcoin season” play out. Depending on the percentage, or the signal, produced, the crypto market could be said to be either in a “Bitcoin season,” neutral, or in an “altcoin season.”

Specifically, here’s how those percentages break down:

•  0-25%: This means that less than a quarter of tracked altcoins are outperforming Bitcoin, putting the market in a “Bitcoin season.”

•  26-74%: A solid amount of altcoins are outperforming Bitcoin, but not an overwhelming amount. This is a “neutral” market.

•  75-100%: This indicates that the vast majority of altcoins are outperforming Bitcoin; the market is experiencing an “altcoin season.”

Where to Find the Live Index Data

Data related to the Altcoin Season Index can be found on a number of websites. A simple internet search should bring up plenty of places to access the live data.

3 Other Key Signs an Altcoin Season Might Be Starting

The Altcoin Season Index is a powerful tool to help crypto market participants gauge whether the market is, in fact, experiencing an Altcoin Season. But there are a few other key signs you can use to try and discern what’s happening.

Sign 1: Bitcoin’s Price Stabilizes After a Major Rally

One sign that may indicate an Altcoin Season is nigh is that Bitcoin starts to see a period of price stabilization, particularly after it rallies a bit. In the wake of the rally, Bitcoin prices may appreciate more slowly, or even fall or remain relatively stagnant. Altcoins, following the rally, could see a rally of their own, marking the beginning of an altcoin season.

Sign 2: New Narratives and Hype Cycles Emerge (e.g., DeFi, AI, GameFi)

Certain altcoins may see a period of appreciation that outperforms Bitcoin, too, if the market and news cycle is suddenly saturated with new, emerging narratives or hype cycles. These can take many forms, but may center around expanding or emerging AI or DeFI projects, among other things. Many of those projects may have their own related altcoins, which see value appreciation as a part of the hype cycle.

That enthusiasm may also spill over into other altcoins, sparking a rally.

Sign 3: Retail Interest and Social Media Buzz Explode

Similarly, there may be times when altcoin interest or hype takes flight among the general market or on social media. That can create hype cycles, and market participants may want to get in on the action as altcoins see price appreciation. Hype cycles can happen at any time, and seemingly for any reason, or sometimes no reason at all. And it can be difficult to tell if these will be brief hype bursts, or sustained, broad altcoin seasons.

What Happened in Past Altcoin Seasons?

There are examples of previous altcoin seasons, such as those that occurred during 2017, and again in 2021. Here’s a brief rundown of what happened.

2017

During 2017, there was a rapid and broad altcoin rally that was largely driven by speculative market participants, a slew of project launches, and piles of money entering the crypto markets.^[1]

Specifically, regulatory changes in Japan helped fuel the frenzy, and Ethereum took off as what looked like the next Bitcoin, becoming the second-largest crypto on the market. There were also many ICOs, or initial coin offerings that year, and Bitcoin’s price also reached a high point (which it would eclipse in later years).

Ethereum, Ripple, Litecoin, and Bitcoin Cash were some of the top-performing altcoins that year, too.

2021

Similarly, 2021^[2] saw another altcoin season and huge swell in interest in the crypto markets. There were several things happening, including a boom in NFTs and meme coins, much of which redirected capital and resources away from Bitcoin and into altcoins or other crypto-related projects.

This was all occurring during the pandemic, as well, which drove lots of speculative buying and selling all while the crypto ecosystem itself was becoming more sophisticated and entering the mainstream.

Some top performing altcoins in 2021 included Shiba Inu, Dogecoin, Solana, and Polygon.^[3]

Lessons Learned from Historical Rallies

What sorts of takeaways are to be had from previous altcoin seasons? There can be a lot to digest, and the history of Bitcoin prices — which in of themselves have been volatile — play a role. But perhaps the overriding lessons are that the crypto markets can be and often are driven by hype and intense speculation. There can be outside events that also play a factor (such as global health emergencies and softening government stances toward crypto), but by and large, the markets can be difficult to predict and make sense of.

With all of this in mind, it can be good to keep risk in mind. Over short time periods, assets, be they crypto holdings, stocks, or precious metals, can lose value. The market is volatile, and things are always changing.

How to Approach Altcoin Season

With all of this in mind, how can crypto market participants best approach altcoin seasons, assuming they feel that one is waiting in the wings? Here are a few things to help keep you grounded.

Avoiding the FOMO (Fear of Missing Out) Trap

While altcoins may be used as a tool for transactions, or as a store of value, or even as a means of generating passive crypto income, it’s dangerous to get lured into the assumption that they could continue to appreciate. That can lead to making poor decisions due to FOMO, or the fear of missing out. Cryptocurrencies prices are historically highly volatile, and that should be taken into account during altcoin seasons, as well.

Perhaps the best thing to do in these cases is to keep your head on your shoulders, remember that you have a financial plan (or may want to create one), and that any altcoins you may be considering holding are merely one element of that.

Separating Market Hype From a Project’s Real Utility

Similarly, you may be hearing or seeing a lot of crypto hype about altcoin seasons or related to a specific crypto project. It may be helpful to try and understand where it’s coming from. You may want to ask whether there’s really a “there” there, and do some research before deciding to buy, sell, or hold altcoins whose potential promise could be unfounded or that could even turn out to be a crypto scam or rug-pull.

Volatility

The crypto market is volatile, and that volatility can occur during any “season,” not just “altcoin season.” It can be a good idea to try and keep that in mind when navigating the crypto space.

The Takeaway

Altcoin season describes a time period when altcoins steadily outperform Bitcoin. There are a few ways to try to determine altcoin season, but it remains impossible to predict. Basically, you’ll usually know it when you’re in it. And when an altcoin season does occur, it’s important to navigate it carefully. Always researching options carefully can help ensure they align with your financial goals and risk tolerance.

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FAQ

How can you tell if altcoin season has started?

There may not be a good or surefire way to determine if an altcoin season has started, at least not until some time has passed and there’s data to digest to help determine that. However, you can look for certain signs, such as a cooling Bitcoin rally, as a precursor or indicator that the altcoin market could rally.

How long do altcoin seasons usually last?

There’s really no telling for sure how long an altcoin season will last, but historically, they’ve lasted for one or two months, and perhaps a little longer.

Are all altcoins likely to rise during an altseason?

Depending on several factors, some altcoins are probably more likely to see value appreciation during an altcoin season than others.

What role does institutional investment play in altcoin seasons?

If institutional investors plow a project with a bunch of capital or make a huge investment in a particular altcoin, that could spark an altcoin season as interest rises in that altcoin, and also related ones. But there’s no guarantee that would necessarily happen.

Which indicators signal the end of an altcoin season?

One indicator that an altcoin season is near or at its end is a rally in Bitcoin prices, signalling Bitcoin may be returning to its dominant position.

Photo credit: iStock/Prostock-Studio

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Crypto and stocks may seem similar at first, but they are fundamentally different types of assets. There are key differences in terms of how they’re structured (one is digital, one has real-world value), how volatile they are (crypto’s swings can be more dramatic), how they’re stored, and more.

Crypto and stocks both have their pros and cons, and certain risks to consider. Here’s what you need to know.

Understanding What You Own

Before getting too granular in the differences between crypto and stocks, you may to solidify your understanding of what, exactly, each is.

Stocks

In the simplest terms, a stock is a share of ownership in a publicly-traded company. As a stockholder, you own part of the company.

So, when thinking about the difference between crypto and stocks, the first point to remember is that a share of stock may represent a percentage of ownership in a tangible business.

While stocks and whole sectors go in and out of fashion with investors, the stock itself still corresponds to a portion of a functioning company, with a price that’s tied to the underlying, fundamental value of that company. By contrast, cryptocurrencies are wholly digital, and that impacts their value, their real-world viability, and how they are traded.

Cryptocurrency

Cryptocurrencies are a speculative asset class that are created and stored digitally, using decentralized blockchain technology.

The main difference between crypto vs. stocks is that stocks are a share of ownership, while cryptocurrencies don’t have any intrinsic value – their value is largely determined by market sentiment, and supply and demand, which is one reason cryptocurrencies can be highly volatile.

It’s also important to know that most cryptocurrencies are not valued the way fiat currencies are. Fiat currency, like the U.S. dollar, is money that’s issued and backed by a central bank or government. Cryptocurrencies are wholly digital, and are not issued or overseen by a government, bank, or any other central authority.

And because they’re volatile, most types of cryptocurrencies aren’t currencies in the traditional sense. Their real-world value as a means of purchasing goods and services is often limited, although this is expanding as payment systems and retailers begin to accept certain cryptocurrencies, such as Bitcoin.

The value of a cryptocurrency reflects a variety of factors, including, as mentioned above, current supply and demand for that currency. In some cases, it also reflects a faith in the underlying technology that powers the currency, or a particular innovation that a certain crypto stands for.

7 Key Differences Between Crypto and Stocks

Knowing that both crypto and stocks are two different things, there are some further, more detailed differences that are important to parse out.

Regulation

In terms of regulation, the key difference between stocks and crypto is that stocks have an established oversight apparatus, while crypto regulation is still emerging and formulating.

For stocks, there are national agencies in the United States, such as the Securities and Exchanges Commission (SEC), which oversee stocks and stock markets, and the Financial Industry Regulatory Authority (FINRA), which regulates broker-dealers. The regulation provided by these groups helps create a certain level of transparency into publicly traded companies.

By contrast, cryptocurrencies have only begun being regulated by the federal government. Though there have been some regulatory frameworks introduced recently (The GENIUS Act, for example), the regulatory apparatus isn’t as robust as it is for stocks or other securities.

In the current U.S. market, cryptocurrency regulation is a collection of rules from multiple federal agencies and state-level laws, impacting buying, selling, and holding of the crypto assets, depending on the nature and use of the crypto asset. Current regulations may not apply directly to an individual’s personal use of their self-custody wallet, but they heavily govern the exchanges, platforms, and services an individual uses to buy, sell, or custody their assets in the U.S. financial system.

Volatility and Market Risk

Both crypto and stocks are or can be volatile and are subject to market risk. But stocks are, traditionally, subject to more moderate volatility, often driven by fundamental or economic factors, whereas crypto can experience extreme swings and volatility, driven by shifts in market sentiment perhaps more than anything.

Make no mistake: There is volatility and risk involved in buying both crypto and stocks. Both assets can go up or down in value, and it’s nearly impossible to time the market to know exactly the best time to buy or sell.

While the stock market has a well-earned reputation for volatility, the broader market has tended to go up over the course of decades. Since past performance is no guarantee of future returns, and public stocks must publicly report on their finances, investors have access to several sources of information to make decisions about purchasing those securities.

On the other hand, cryptocurrency is, or traditionally has been, more likely to undergo sudden, drastic changes in value, sometimes without warning.

Those swings can lead to potentially big wins for crypto users, but it can also create large losses, including total loss, in a very short period of time. While it is possible for public companies to go bankrupt and their shares to become worthless, they’re far less likely to lose all of their value than most cryptocurrencies are.

Trading Hours and Market Access

The stock markets are usually only open during business hours in their home country, Monday through Friday, and closed on holidays on weekends. By contrast, the crypto market runs around the clock, every day of the year.

The 24/7 availability of the crypto markets may be one reason why crypto is so volatile. As decades of research on the stock market has shown, some investors often succumb to emotional impulses that can drive their behavior. Time off may help restore a sense of control and order, giving participants a chance to cool down.

What Drives Their Value

Crypto and stock values may be driven by different factors, too. Stock values may increase after a strong earnings report, for instance, while crypto values may increase due to scarcity, speculation, or adoption trends, along with other variables.

There can also be associated costs to contend with, which may also hurt demand for one or the other.

For example, every time an investor buys or sells stocks, they may need to pay transaction fees, such as commissions, that eat into their returns. Even investors who purchase assets like low-fee index mutual funds, which are essentially baskets of stocks, have to pay fees that cover the costs of running the fund.

The costs of actively managed funds, and for trading through a brokerage account, may be higher.

Note that crypto exchanges also charge fees. And there are “gas fees,” which are the costs extracted by a network for various transactions on the blockchain. These fees vary widely from one form of crypto to another.

While costs are not the end-all-be-all that affect demand, it is something that’s in the mix, and that should be taken into account when considering any stock or crypto transaction.

Market Age and History

As noted, the concept of stocks and stock-trading has a long, established history going back centuries. The rules are solidified, oversight and regulation is in place, and investors or traders generally have a good idea of how the markets work.

Crypto markets, on the other hand, are very young, having been around for only around a decade-and-a-half. Until recently, they were largely unregulated, too, and the whole crypto space has had a “wild west” feel to it. That’s quickly changing, but its short history could also mean that there’s more risk involved, which some may not be comfortable with or have the capacity to take.

Liquidity (How Easily They Are Bought and Sold)

Stocks are liquid, meaning they’re fairly easy to buy and sell. Crypto, depending on the specific crypto at hand, can have variable levels of liquidity.

For more background: Smaller markets also affect the ability to trade in and out of your investments, whether they’re stocks or cryptocurrencies. That ability to trade an asset at will without substantially affecting its price is called liquidity. Investors typically consider stocks highly liquid, since there are so many active traders in the stock market.

With cryptocurrency, on the other hand, liquidity varies quite a bit from one form of crypto to another. Bitcoin is a more liquid asset than most cryptocurrency. That means there are more buyers and sellers who want to trade if you want to get in or out of that particular cryptocurrency.

Custody: Who Holds Your Assets?

The concept of custody is also important, and differs between cryptocurrencies and stocks.

In effect, brokerages hold stocks or other types of securities, acting as a custodian for investors. Additionally, to purchase and own stock, you typically need a brokerage account to handle the transaction. That account is verified by information like your address, Social Security number, signature, and more. This offers some protection in the event of identity theft or fraud.

That is not always the case with crypto, where crypto users themselves may be the custodians, and need to handle and store their assets accordingly. Some crypto users also keep their cryptocurrencies in their own personal (non-custodial) crypto wallets vs. a crypto exchange, which can be fully virtual or exist offline on a USB drive. That may create unique risks, such as forgetting your password and losing access to your account. Or you could misplace your USB drive, and lose all your crypto.

But there are instances in which exchanges may act as custodians, similar to brokerages. Crypto exchanges and certain other financial crypto platforms are subject to certain laws, meaning they must verify customers’ identities, as required by Know Your Customer (KYC) laws designed to help prevent illegal activities.

It’s also important to know that cryptocurrencies are not insured in the event of a financial institution’s failure as traditional brokerage assets are by the Securities Investor Protection Corporation (SPIC) and traditional bank deposits are by the Federal Deposit Insurance Corporation (FDIC).

The Takeaway

Stocks and cryptocurrency seem similar, but have some stark differences. Stocks offer investors a tangible piece of ownership in a company (even if it’s a tiny fraction of that company), whereas crypto assets don’t have intrinsic value. That said, both can offer different things for holders.

SoFi Crypto is back. SoFi members can now buy, sell, and hold cryptocurrencies on a platform with the safeguards of a bank. Access 25+ cryptocurrencies, such as Bitcoin, Ethereum, and Solana, with the first national chartered bank to offer crypto trading. Now you can manage your banking, investing, borrowing, and crypto all in one place, giving you more control over your money.

FAQ

Is crypto harder than stocks?

In some sense, crypto may be a bit more difficult to comprehend than stocks. Cryptocurrencies are bought and sold on crypto exchanges; the fees are unpredictable; and many types of crypto are so new they don’t have a track record, and it’s hard to establish their value. Exchange-traded stocks are well established and highly regulated securities that can be bought and sold via a traditional brokerage or app, in a variety of forms — including index funds and exchange-traded funds, and more.

Is crypto taxed more than stocks?

Crypto is treated as property by the IRS, the same as stocks, so the two are more or less taxed in the same way. Further, crypto could be taxed as ordinary income if it’s acquired through staking, mining, or received as payment.

What are the main differences in regulation between crypto and stocks?

Stocks are regulated under a well-established federal framework overseen by agencies like the SEC, and have been for a long time. Crypto regulation, conversely, is new and evolving, and until recently, almost non-existent in the U.S.

Can buying and selling crypto impact the stock market?

There isn’t a huge sample size at this time, but it seems that what happens in the crypto markets is at least somewhat correlated with what happens in the stock markets. Meaning, investors in each market seem to be behaving similarly.

Photo credit: iStock/ljubaphoto

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For first-time buyers — or anyone facing financial hurdles — getting an FHA loan can help make homeownership a reality. With insurance from the Federal Housing Administration, lenders can afford to offer loans with a lower down payment, lower closing costs, and less restrictive qualifying credit requirements.

But can you refinance an FHA loan? Yes, FHA loans are available for those looking to refinance an existing mortgage rather than take out a new one — whether or not that existing mortgage is itself an FHA loan. However, there are a variety of different ways to go about refinancing an FHA loan, and which is right for you will depend on your circumstances. Here’s what you need to know.

Understanding FHA Refinancing

Like any FHA loan, FHA refinancing loans are insured by the FHA — and therefore available with easier qualifying requirements and lower costs than other types of conventional loans may be. Refinancing your mortgage with an FHA refinance loan could help you save money on interest over time by scoring a lower rate, lowering your monthly payments, or even accessing cash by leveraging your home’s equity. And yes, you can refinance an FHA loan, or another type of existing home loan with an FHA refinancing loan. However, the specific FHA refinance requirements vary depending on your circumstances.

Why Homeowners Choose to Refinance FHA Loans

Homeowners may choose to refinance for one or more reasons. One common goal for refinancing is to obtain a lower interest rate (and thus lower your monthly payments). Some homeowners might want to change their loan term in a refinance, perhaps getting a lower rate and a shorter term so they can finish paying off their loan faster. “It’s important to understand that not every mortgage refinance will save you money on interest. For example, if you extend the repayment term, you may have smaller monthly payments, but you’ll end up paying more money over the course of the loan,” says Brian Walsh, CFP® and Head of Advice & Planning at SoFi.

It’s also common to refinance an FHA loan to get rid of the mortgage insurance that is required of FHA borrowers for the duration of their loan. And some homeowners do a refinance to pull equity from their home to use for renovations or other expenses. The type of refinance you choose depends largely on these goals.

Types of FHA Loan Refinancing

There are four main options when it comes to FHA loan refinancing: Simple refinancing, Streamline refinancing, cash-out refinancing, and 203(k) refinancing. Some people also refinance out of an FHA loan and into a conventional one. Which is right for you will depend on what kind of loan you have — and why you’re refinancing in the first place.

FHA Simple Refinance

FHA Simple refinancing is for those whose original home loan is an FHA loan. With an FHA Simple refinance, you’ll simply — as the name implies — refinance your home, using a new FHA loan to pay off the existing one, ideally with a lower monthly payment or interest rate to make it worth your while. You may also be able to switch between fixed and adjustable interest rates.

Unlike some other types of FHA refinancing, you won’t be able to access any cash using this type of refinance, so it’s not a viable option for homeowners attempting to leverage home equity to pay for other expenses. In addition, it has slightly stricter qualification requirements than FHA Streamline refinancing, which requires less credit documentation and underwriting. Although credit score requirements vary by lender, most FHA Simple refinance programs require a minimum credit score of 580.

FHA Streamline Refinance

The FHA Streamline refinance option also follows the logic of its name: The underwriting and qualification process is less intense than other types of FHA refinancing. In addition, unlike the FHA Simple refinance option, a home appraisal is not required. You can also take out up to $500 in cash against your home equity with an FHA Streamline refinance loan.

To qualify for FHA Streamline refinancing, your original home loan will also need to be an FHA loan, and payments must not be delinquent. The FHA also requires that the new loan result in a financial benefit for the borrower. Of course, you wouldn’t be going through the process and expense of refinancing if you had nothing to gain in the bargain.

FHA Cash-Out Refinance

FHA cash-out refinancing allows borrowers to leverage their home equity to take out cash that can be used for any purpose. To make this work, a new, larger loan is taken out, which is used to refinance the existing home loan — which need not be FHA insured — as well as to provide cash value.

Using an FHA cash-out refinance loan, homeowners may be able to lower their payments or interest rates while also accessing lump-sum cash that can be used for just about any purpose under the sun. Again, however, the underwriting and qualification process for FHA cash-out refinance loans may be more intense than Streamline loans — though a cash-out refi is still accessible to most borrowers with a credit score of 580 or higher and a debt-to-income ratio (DTI) of 43% or less.

FHA 203(k) Refinance

Finally, the FHA 203(k) loan, also known as a rehabilitation loan, allows homeowners to take out money for the purpose of restoring, rehabilitating, or repairing their home along with purchasing it. FHA 203(k) loans can be used for an original purchase or a refinance, and homeowners with a non-FHA loan can apply for 203(k) refinancing, and may find FHA-insured rates are lower than those of other home improvement loans.

FHA-to-Conventional Refinance

Some people with FHA loans prefer to refinance into a conventional loan. If you have more than 20% equity in your home, you can refinance into a conventional loan and you likely won’t have to pay a mortgage insurance premium (MIP) on top of your conventional loan payment. In the process, you’ll get rid of your FHA mortgage insurance. To obtain a conventional loan, you’ll likely need a credit score of at least 620.

Comparing FHA Refinance vs. Conventional Loan Refinance

Why choose to refinance with an FHA loan rather than a conventional one? Or vice versa? There are pros and cons to consider either way you go. For instance, although FHA refinance loans tend to come with more accessible qualification requirements, some types are only available for those with existing FHA loans — and all of them require an FHA mortgage insurance premium (MIP). The important thing is to consider all your options so you can make an informed decision. Let’s take a closer look.

Pros and Cons of Refinancing with an FHA Loan

While there are many benefits to mortgage refinancing with an FHA loan, there are some drawbacks to consider, too.

Differences in Requirements and Benefits

In addition to the pros and cons of FHA loan refinancing, there are also differences in the requirements and benefits for FHA versus conventional home refinancing loans. For instance, in most cases, FHA loans require a minimum credit score of just 580, whereas conventional loans might have a minimum credit score starting at 620 or higher.

And while FHA loans often come with lower interest rates, they always come with a mortgage insurance requirement — whereas conventional loans may not require private mortgage insurance (PMI) if you already own at least 20% of your home’s equity.

Finally, FHA refinancing loan options may be somewhat limited, depending on your existing home loan and your motivations for refinancing. Some types of FHA refinancing loans are only available to homeowners who already have an FHA-insured mortgage, which may make them inaccessible to other borrowers.

When to Consider Switching from FHA to Conventional

It might be worth refinancing from an FHA loan into a conventional loan if you have at least 20% equity in your home and can therefore avoid mortgage insurance with a conventional loan. But ideally you would also be in a position to lower your interest rate on your loan by undergoing a refinance. Another thing to consider is your credit score. If you have improved your score and are now over 620 — or have an even higher score — it could be time to run the numbers on a refinance to a conventional loan. Much will depend on current interest rates.

Eligibility and FHA Refinance Requirements

So, what does it take to secure an FHA home loan? While requirements vary by lender, here are some basic rules of thumb:

Qualifying Factors for Refinancing an FHA Loan

As mentioned above, certain types of FHA refinance loans are only available to those who already have an FHA-insured mortgage loan. In addition, only FHA loans that are not delinquent — i.e., you’re up to date on your payments — may qualify for refinancing.

Credit Score Guidelines

While FHA-insured loans tend to have lower minimum credit scores than conventional refinance loans, lenders do still have a minimum. In most cases, it’s 580—though specifics may vary by lender.

Loan-to-Value Ratio (LTV)

A home’s loan-to-value (LTV) ratio refers to what percentage of the home’s current market value you’re taking out a loan for. Ideally, those who are refinancing their homes have a lower loan-to-value ratio — meaning they owe less of their home’s total value than they did when it was first purchased. Still, the LTV is one factor lenders look at when qualifying borrowers for an FHA refinance loan; the lower your LTV, the better.

Employment and Income Verification

Lenders have a vested interest in making sure you’ll be able to repay your loan, so a lender will verify your employment situation and income before qualifying you for a new loan, whether you’re taking out an original mortgage or refinancing.

Debt-to-Income Ratio (DTI)

Your debt-to-income, or DTI, ratio refers to the proportion of your available income each month that goes toward existing debts. While FHA loans have a higher maximum DTI than other types — borrowers with DTIs as high as 57% may still qualify — some lenders may choose not to qualify borrowers with a DTI of 43% or more.

💡 Quick Tip: Your parents or grandparents probably got mortgages for 30 years. But these days, you can get them for 20, 15, or 10 years — and pay less interest over the life of the loan.

Specific Requirements for Streamline Refinance

For the FHA’s Streamline refinance program, certain specific requirements apply, including:

•   The existing mortgage must also be FHA-insured.

•   The refinance must result in a “net tangible benefit” to the borrower.

•   Only up to $500 may be taken out of the loan in cash.

•   In most cases, investment properties are ineligible.

Criteria for Cash-Out Refinance

In order to qualify for an FHA cash-out refinance, you’ll need:

•   To have lived in your home for at least 12 months

•   To own at least 20% of your home’s equity

•   A minimum credit score of 580

•   A debt-to-income (DTI) ratio of 43% or lower

FHA Seasoning Requirements for Refinancing

One other consideration you’ll have if you are thinking about refinancing an FHA loan is the seasoning requirement. “Seasoning” refers to the length of time that must pass between your obtaining the loan and your taking action to change it.

Seasoning time varies according to your loan type and the action you wish to take. For example, if you are refinancing to eliminate PMI, you may need to wait two years from your initial loan date. To do a Streamline refinance, borrowers must have made at least six payments on the FHA-insured mortgage that is being refinanced. At least six months must have passed since the first payment due date of the mortgage, and at least 210 days must have passed from the closing date of the mortgage being refinanced.

Benefits of Refinancing an FHA Loan

What are the specific benefits of refinancing with an FHA loan? Here are just a few of the reasons people choose to take this route when refinancing a mortgage.

Lower Interest Rate and Monthly Payment

For most homeowners, the primary motivator for an FHA mortgage refinance is to save money — either over the long term, by scoring a lower interest rate, or on a monthly basis by choosing a loan with a lower minimum monthly payment. In some instances, you may be able to achieve both goals with the same refinancing loan, particularly if your credit history has appreciably improved since you originally took out your mortgage.

New Loan Terms

Some borrowers refinance to give themselves more time to pay off their home loan with a longer term — or to accelerate their repayment process with a shorter term.

Equity Access with a Cash-Out Refinance

For most consumers, a home is the single most valuable asset they’ll ever purchase. Being able to access the value of that equity with a cash-out refinance option is another important motivator for those seeking to refinance, and FHA refinance loans can make that goal a reality whether or not your original loan is FHA-insured.

Avoid Private Mortgage Insurance (PMI)

For borrowers looking to avoid private mortgage insurance (PMI), take heed: Although FHA loans don’t require PMI, they do require mortgage insurance. The FHA-loan version is called MIP (mortgage insurance premium), and is required on all FHA loans.

Improve Financial Stability

For some borrowers, refinancing can improve overall financial stability by achieving any of the goals listed above — for example, freeing up more discretionary income each month with a lower monthly payment.

Ability to Consolidate Debt

Borrowers who do a cash-out refinance might use the cash provided by their refinance to pay off higher-interest debt, such as debt from a personal loan or credit card. Instead of making payments to multiple lines of credit each month, they essentially roll their debt payment into their mortgage payment, simplifying their finances.

Steps to Refinance an FHA Loan

Seriously considering an FHA refinance loan? Here are the steps it takes to turn your ideation into reality.

1. Review Your Current FHA Loan

1.    The first step in shopping for a new loan should always be to review your existing mortgage. After all, that’s the best way to understand what factors would make a new mortgage more favorable for your finances. If your original loan is not FHA-insured, note that you may not qualify for certain types of FHA refinancing loans.

2. Shop for Lenders and Offers

2.    Next up: The actual shopping part. In order to ensure you get the best deal available, it’s worth asking several lenders for refinancing quotes, including a full amortization schedule. That way, you’ll understand exactly how much money you stand to save — or not — by choosing a specific lender.

3. Submit an Application and Required Documentation

3.    Once you’ve settled on a lender, you’ll submit your application, including any required documentation (such as ID and income verification, including bank statements and tax forms). In most cases, this process can be done entirely online.

4. Go Through the Appraisal and Underwriting Process

4.    As part of most refinancing processes, you’ll need to have your home appraised so the lender understands its current market value — and can use that value to calculate important aspects of your application, like the LTV. An underwriter will assess your holistic financial profile to determine whether or not you qualify for the refinance loan.

5. Close the Refinance

5.    Finally, if the terms are favorable and you are approved, you’ll close the refinance loan. The new lender will repay your existing loan, and your new payments will be directed toward this new lender, using the new terms you’ve agreed to.

Tips and Considerations for FHA Loan Refinancing

Want to get the very best out of your FHA loan refinancing process? Here are some tips to help you get the most bang for your buck.

Evaluate Your Financial Situation

Refinancing isn’t right for everyone. In fact, in most cases, the FHA won’t even allow you to refinance with one of its loans unless it results in a net financial benefit for you, the borrower. You can take a few first steps to determine whether or not it will help before you ever get a lender involved.

Using a mortgage calculator, you can determine how much a lower interest rate would save you over time or how much a longer loan term would reduce your monthly payment. Keep in mind that refinancing isn’t free, so unless the savings are substantial enough to eclipse your closing costs, it may make more financial sense to keep your original loan.

Understand Closing Costs and Fees

Loans come with a variety of closing costs and fees, such as application fees, the cost of the appraisal, attorney fees, and more. These costs can add up to about 6% of your overall loan value, and though some of them may be able to be financed as part of your loan, they still have the potential to eat into any savings your refinancing loan might offer.

Time Your Refinance Strategically

When it comes to refinancing your mortgage, timing matters. For example, if interest rates are higher than when you took out your original loan, the timing might not be right. The same could be said if you’re planning on moving out of your home in the near future, in which case, you may not have enough time in the home left to break even on your closing costs.

Consider Your Break-Even Point

A key piece of advice when you’re refinancing any home loan is to compute the break-even point on the refinance. A refinance comes with closing costs, and you’ll want to divide the closing costs by the monthly savings from your new mortgage payment to get to your personal break-even point.

For example, imagine that refinancing causes a payment to decrease by $100 a month. If closing costs will be $2,500, it would take 25 months to recoup the costs and start to see savings. If you plan to sell the house in 18 months, refinancing may not be the right strategy. If you intend to stay long term, it may be an idea to explore.

Common Mistakes in FHA Loan Refinancing

Here are some common errors borrowers make when undergoing the FHA loan refinancing process.

Misunderstanding the Eligibility Criteria

Although FHA loans come with more accessible eligibility criteria than many conventional loans, they do still have standards. If your credit score is less than 580 or your payments are delinquent, you’re unlikely to qualify for an FHA refinancing loan.

Ignoring Closing Costs and Fees

As mentioned, closing costs and fees can really add up — so if you don’t take them into account when you’re considering a refinance, you may wind up with an unpleasant case of sticker shock.

Not Considering Long-Term Financial Goals

Refinancing your home, when done best, is all about saving money over time, which means having enough time for those savings to accrue. If you’re planning on selling your house and moving in three to five years, refinancing may actually end up being more expensive than staying with a higher-rate original loan. Additionally, if you’re refinancing primarily to lower your monthly payment and make ends easier to meet, don’t forget to keep your long-term finances in mind. It may not be worth the extra monthly money to pay thousands more in interest overall.

The Takeaway

FHA refinance loans are available for homeowners whose original loans are FHA-insured — as well as for those who have a conventional original mortgage. FHA loan requirements vary depending on which type of loan you’re considering, and may not be right for everyone. But if you can meet the qualifications and derive a solid financial benefit from an FHA refinance, it may be worthwhile to embark on the process.

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

FAQ

Can you refinance an FHA loan without an appraisal?

Yes — but only if you qualify for an FHA Streamline loan, which requires your original loan also be an FHA-insured loan.

What happens if your home’s value has decreased?

Even if your home’s value has decreased, you may still be eligible for a refinance loan through the FHA Streamline program. It all depends on how much you owe on your home and your other qualifying factors. (Keep in mind, too, that this program requires that your original home loan also be an FHA one.)

Can you refinance an FHA loan if you’re behind on payments?

No. All FHA loan refinance programs require borrowers to be up-to-date on their loan payments, with most including provisions that there must not have been any payments more than 30 days late within the last six months.

How soon can you refinance an FHA loan?

How soon you can refinance your FHA loan will depend on what kind of refinance you’re planning. If you are doing an FHA Streamline refinance, at least 210 days must have passed from the closing date of the mortgage you’re refinancing, and certain other loan “seasoning” requirements may also apply. Moving from an FHA loan into a conventional loan usually requires at least six months of on-time payments since the loan’s closing.

What credit score is needed to refinance an FHA loan?

If you are refinancing from an FHA loan into another FHA loan, you will likely need a credit score of at least 580. Going from an FHA loan into a conventional loan will require a minimum score of 620.

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