man on steps

How To Report Identity Theft

Identity theft can happen in many forms: bank or credit card fraud, tax-related fraud, government benefits fraud, or phone or utilities fraud, among others. Identity theft can also occur through email or social media, medical services, or online shopping.

And it can happen to anyone, regardless of how old — or young — they are, where they live, or what their occupation or salary is. There are steps that can be taken to reduce the risk of identity theft. Here’s how to report identity theft if you suspect there has been a breach.

Reporting Identity Fraud to the FTC

One facet of the Federal Trade Commission’s (FTC) mission is to protect consumers. The agency is tasked with stopping deceptive or fraudulent practices in the marketplace and developing rules to make the marketplace a safe place in which to do business. There is also an education component to what the FTC does, so that consumers and businesses have the information they need when they think they may have been wronged.

Reporting fraud to the FTC can be done online or by telephone. The official government website for reporting fraud is IdentityTheft.gov . A telephone complaint can be made by calling 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. On the website, the first step to reporting identity theft is choosing the situation that led to the suspected identity theft. From there, the consumer goes through a range of prompts related to the specific situation.

For example, one situation that can be chosen is “Someone has my information or tried to use it, and I’m worried about identity theft.” Then there are questions that follow, narrowing down the specific type of suspected identity theft and creating an FTC Identity Theft Report and a recovery plan, which is a step-by-step list of what to do based on the information that was entered.

Contacting Your Creditors

Quick action when suspected fraud occurs is key to limiting liability for unauthorized charges on a credit account. Calling the credit card issuer as soon as the fraudulent transactions are noticed is a good first step to take. There may be a phone number printed on the back of the card for this purpose. Reviewing several past card statements carefully, identifying all that are suspected fraud, and then writing a follow-up letter to the credit card issuer with these details can also be helpful.

There are federal protections provided to consumers in the case of credit card fraud. A consumer’s liability is limited to the lesser of $50 or the amount of the theft if the actual credit card was used fraudulently. If only the credit card number was used fraudulently, there is no consumer liability.

For debit card or ATM card fraud, the quicker the consumer reports the card loss, the less they are potentially liable for. A consumer is not liable for any amount if they report a missing debit or ATM card before any unauthorized charges are made. The amounts increase the longer the missing card goes unreported.

•   Maximum loss is $50 if the card is reported within two business days of the loss or theft.

•   Maximum loss is $500 if the loss or theft is reported more than two business days, but less than 60 calendar days after the account statement is sent to the account holder.

•   If the loss is reported more than 60 calendar days after the statement is sent, the account holder can be responsible for all the money taken from their account. The maximum loss can be more than the account balance, if money from linked accounts was also stolen.

If the debit or ATM card number, but not the physical card, was used to make unauthorized charges, the account holder is not liable for those charges if the fraud is reported within 60 days of the account statement being sent.

Consider Filing a Police Report

There are some circumstances in which knowing how to file a police report for identity theft might be useful. If the victim of identity theft knows who was responsible for the fraudulent activity, or they can provide evidence for an investigation, a police report might be warranted. Filing a police report might be necessary if a creditor requires the report as part of its investigation.

Disputing Errors Caused by Identity Theft

Sending a follow-up letter to a credit card issuer after a phone call reporting suspected fraudulent activity is a good way to make a formal dispute of any charges that were unauthorized. Include copies of any receipts that will back up the claim of fraudulent use of the account, keeping original receipts and a copy of the dispute letter.

This letter should be sent to the address provided for billing inquiries, which is usually different from the address payments are sent to, and should be sent so that the creditor receives it within 60 days after the first bill with the error reached the account holder. It’s a good idea to send such a letter by certified mail, asking for a return receipt providing proof of what the creditor received. The FTC provides a sample dispute letter on its website.

Notifying Credit Bureaus

Each of the three credit bureaus, Experian, TransUnion, and Equifax, can place a fraud alert on a consumer’s credit report if they are notified of the suspected fraud or identity theft. Contacting just one of the credit bureaus is fine — that bureau will contact the other two automatically.

Requesting to freeze or lock a credit report can be done by contacting each credit bureau and putting in a request. Putting a freeze on a credit report blocks all access to the report, making it more difficult for a bad actor to use information fraudulently. Credit freezes are regulated by state laws, and credit bureaus are required to offer credit freezes at no charge. A credit lock also acts to protect a consumer’s financial information from potential identity thieves, but is a program offered by an individual company, which may charge a monthly fee for the service. Credit locks are not regulated by state laws.

If errors show up on a credit report, the consumer can contact that credit bureau to file a dispute to their credit report. All three major credit bureaus provide information on their websites for filing a dispute. It can take up to 30 days for the results of any investigation to be available to the account holder.

Federal law allows consumers to request a credit report at no charge from each of the three credit bureaus annually. A helpful way to check a credit report more than just once a year is to request a free report every four months, alternating credit bureaus each time.

The Takeaway

Keeping credit accounts secure is a recommended practice. And using two-factor or multi-factor authentication can keep an account more secure by requiring two pieces of information that only the account holder should know. If you receive a notification from a creditor of a failed login attempt, it’s a good idea to change your password.

If you’re looking for a personal loan, but are hesitant to share your information, know that SoFi takes the privacy and security of its members’ financial and personal information very seriously. SoFi Personal Loans are handled with the same security measures as all other SoFi products. And checking your rate won’t affect your credit.*

Find your rate for a SoFi Personal Loan.


*Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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

Medical bills represent a major financial challenge for many families. You can’t always prevent or foresee medical bills, even if you have insurance. By understanding how to check your medical bills for possible errors, you may be able to avoid being overcharged and making unnecessary payments.

How Common Are Medical Billing Errors?

It’s difficult to know what a medical procedure will cost before it’s performed. So, without being sure of the cost, it’s also difficult to know if there is an error on your medical bill. It doesn’t help that the language used on medical bills is not easily understood. It can be hard to spot mistakes when you aren’t clear about what you’re looking for.

The Centers for Medicare and Medicaid Services last year found a 9.5% improper billing rate for Medicare providers last year, which accounted for $36.2 billion in overpayments. General audits of hospitals by the Department of Health and Human Services found billing error rates ranging from 7% to 48%.

With medical bills so complicated and medical errors so prevalent, it’s no wonder that the amount of medical debt in the U.S. is so high. According to the Journal of the American Medical Association, in June 2020 an estimated 17.8% of Americans had medical debt in collections. Medical debt is the largest source of debt in collections, and has increased to $140 billion since 2009.

What Are Some Common Medical Billing Errors?

When medical billing inaccuracies emerge, they can either be purposeful or genuinely accidental. Either way, there are some frequent errors you may want to keep an eye out for.

Was the Bill Sent To Your Insurance Company?

If you have insurance, making sure your provider submitted a timely claim to the insurance company can be a good first step to take. Occasionally, providers may neglect to send the bill to your insurance company at all and charge you for the entire amount.

Your claim could also be denied if the provider didn’t have the right insurance information for you — even if the ID is off by just one digit. You’re already paying an insurance premium, so paying for the entire procedure out-of-pocket could boost your overall medical costs.

Were You Charged for Services You Didn’t Receive?

You may have to ask for an itemized list of all the charges in your bill, but verifying that you are only being billed for services or treatments that you actually received may be wise.

You may also want to confirm that the quantities are also correct — so you’re not being billed for two MRI scans when you only got one. The itemized bill should include prices, so checking that no extra zeros were added by mistake may be a good step in this process.

Pay for medical costs—without
sinking into high-interest debt.


Was the Wrong Billing Code Used?

If your insurer denies coverage for a procedure or medication, you may be able to identify the correct billing code and request that the provider refile the claim. If you have questions about the codes used, checking with the medical provider and insurer may save you some research time.

One type of billing code error is known as upcoding. This is when the provider bills for a longer session than was provided (for example, being billed for a 60-minute session when you were only seen for 15 minutes). Another common error is known as unbundling, which refers to using codes for each component part of a procedure rather than a single code that covers them all.

Appealing an Insurance Denial

If you find an error during your hospital bill review, you may be able to file an appeal with your insurer if the charge was denied and you were billed for it. Appeal instructions can usually be found on the explanation of benefits received from your insurance company. Documentation to back up your appeal, such as medical records, can often help strengthen your case. The Patient Advocate Foundation offers a detailed guide to the insurance appeal process , including a sample letter.

There is usually a time limit to submit an appeal to an insurer, which can range from just 10 days to 180 days depending on the insurer. Insurers may provide a decision within 60 days. If you disagree with the decision, you can ask for an independent review — your insurer should provide you with information on how to do this.

If your appeals aren’t successful, you may wish to turn to one of several advocacy groups. For example, the Patient Advocate Foundation offers one-on-one assistance at no charge and its website also lists organizations that provide help for people with specific conditions. People with Medicare can access free counseling through the State Health Insurance Assistance Program .

If you’re still stuck, hiring a medical billing advocate to represent you may be helpful. These professionals typically charge an hourly rate or take a percentage of the money they save you.

What Are Some Options for Paying Off Medical Bills?

Even if you find errors in your medical bills and are able to resolve them, chances are this won’t eliminate what you owe entirely. Here are some ways you can approach paying off medical debt:

Negotiating a Reduced Bill or Payment Plan

Even if your bills don’t include any mistakes, they aren’t necessarily set in stone. If you’re having trouble making a payment, calling your provider’s billing department and explaining your situation may be the best first step to take.

Some may be willing to negotiate your medical bills, possibly lowering your fees if you make the payment in cash or in a lump sum.

You may be able to gain additional leverage by asserting, politely and accurately, that the provider charged an unfair rate, bolstered by research on average prices in your area and what Medicare allows
for the service
.

Even if you can’t get your payment reduced, you may be able to extend the due date. Many providers and hospitals will work with you to set up an affordable payment plan, sometimes without charging interest.

Budgeting for the Unexpected

Medical bills can pack an unexpected punch to an already tight budget. If you’ve already used some of the strategies to reduce what you owe, it might be necessary to reduce expenses or increase income while you pay medical bills.

Taking a look at current spending is a good place to start, determining whether there is nonessential spending that could be put toward what is owed.

If there is absolutely no wiggle room at all, you might consider increasing your income by taking on a side hustle or asking for a raise. Once you find a way to include medical payments into your budget, tracking your spending could be a helpful way to make sure you have the funds available each month.

Using a Credit Card

Paying medical bills with a credit card is certainly an option. It might be a quick and initially easy option, but it might not be the best. Credit cards typically charge high interest rates, which could make your medical debt larger over time. One solution might be to look for a no-interest credit card and create a plan to pay the balance in full before the promotional period ends.

Taking Out a Personal Loan

A personal loan can be a smart way to pay off medical debt. This type of loan is typically unsecured, meaning you are not putting your home or any other asset on the line.

A personal loan can be used for many purposes — including paying off medical bills — but typically comes with much lower interest rates than credit cards or payday loans. Creating a debt reduction plan is a good idea when trying to pay off a personal loan.

The Takeaway

Taking time to review medical bills and make sure there are no errors can save time and money in the long run. Understanding medical bills and the insurance appeals process — if that’s a step you have to take — can be confusing, so getting assistance is sometimes helpful.

A SoFi Personal Loan can be one way to pay for medical debt. There are no fees with unsecured personal loans from SoFi, and interest rates that can be lower than credit card rates for some applicants.

Learn more about medical loans from SoFi.


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

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

A Guide to Unsecured Personal Loans

When people look for the right loan to fit their financial needs, one of the options they’re sure to come across is a personal loan, either secured or unsecured. Among the most common uses for personal loans are paying off credit card balances to save on interest costs, funding home renovations, and debt consolidation.

Unsecured personal loans may provide an opportunity to borrow for those who cannot or do not want to use collateral to obtain a loan. However, there’s more to unsecured personal loans than just the collateral factor.

How do you know if an unsecured personal loan is the right choice for you? We’ll dive into exactly what an unsecured personal loan is, the benefits of an unsecured personal loan, and how to choose the best loan for your situation.

What Is an Unsecured Loan?

An unsecured loan is a loan that is not backed by collateral. Compare this to a secured loan, which is backed by an asset such as your home, bank account balances, or vehicle, for example. To have a loan “backed” by an asset means that a bank or lender has the right to take that asset in the event of default on the loan.

Loans backed by collateral are generally considered by banks to be less risky because if the borrower defaults on the loan, they are able to recoup the balance due by seizing the collateralized property.

When loans are viewed as less risky by lenders, they tend to have low interest rates, if everything else is equal. Lenders will also generally approve greater loan amounts when a loan is backed by an asset of value than when it is not.

Unsecured loans, on the other hand, are not backed by collateral. Therefore, they are likely to have higher interest rates and lower loan amounts than secured loans.

What Are Common Uses for Unsecured Personal Loans?

Here are a few of the most common uses for an unsecured personal loan:

Credit Card Payoff

Credit cards tend to have high annual percentage rates (APRs). Currently, the average credit card interest rate is just over 16% . A credit card interest calculator can give you an estimate of how much total interest you’ll pay on the remaining balance and when you’re likely to pay off that balance, given your interest rate and monthly payment.

Some borrowers may use an unsecured personal loan to pay the balance of their credit card debt. Repaying debt with a personal loan that has a lower interest rate than they were paying on their credit card could mean substantial savings on sizable credit card balances. Using a personal loan calculator can give you an estimate of potential savings if you’re thinking of using an unsecured personal loan to pay off a credit card balance.

Debt Consolidation

Debt consolidation is the process of taking out one new loan to pay off multiple debts. The borrower could potentially save money over the life of the loan if the consolidation loan has a lower interest rate than the old loans had. If the borrower makes larger payments over a shorter term length, they could also potentially save money over the life of the loan. This strategy also could be helpful for anyone who does not want to manage multiple payments each month.

Medical Expenses

Medical expenses can put a person in a tough financial situation. Medical bills can sometimes be negotiated and/or payment plans put into place. If these options don’t provide a reasonable path toward paying for past medical services, some borrowers may opt to take out a personal medical loan to cover any remaining balance.

Home Projects

Whether it’s something big like adding a bedroom to a home or something small like replacing kitchen fixtures, homeowners might consider an unsecured personal loan, also called a home improvement loan, to obtain funding for a home project.

This could be especially useful for someone who needs cash for immediate repairs or emergencies. An unsecured personal loan can be an alternative to taking out a home equity loan or home equity line of credit for remodeling or repairs, both of which are secured loans and require equity in your home.

What Are Some Different Types of Unsecured Loans?

Many personal loans are unsecured loans. They are installment loans, paid back over a set term on a regular payment schedule with either a fixed or variable interest rate.

Federal student loans are another type of unsecured loan, and come with their own unique requirements, protections, repayment options, grace periods, and federal regulatory requirements that must be met.

A credit card is also a type of unsecured loan. Essentially, when you’re approved for a credit card, you’re being approved for a revolving line of credit. Instead of a lump sum loan, it’s a loan where you’re basically borrowing what you need when you need it — and you can borrow again and again as long as you pay it back.

Why Choose an Unsecured Personal Loan?

Ultimately, every borrower must decide what makes the most sense for themselves and their financial situation when making the secured versus unsecured loan decision. There are some common reasons for choosing an unsecured loan, though.

•  Processing ease and time. A lender will likely require fewer pieces of documentation for an unsecured personal loan than its secured counterpart. Why? With a secured loan, the lender needs to provide proof of the value of the collateral — and that can take time.

•   Consistent payments. When consolidating debt, using an unsecured personal loan that has a fixed interest rate and a specific end date may make getting out of debt an attainable financial goal.

•   Potentially low interest rates. The interest rate a loan applicant is approved for will depend on a variety of factors, but an unsecured personal loan’s interest rate will likely be lower than many credit card interest rates.

•   Flexibility. An unsecured personal loan can be used for a variety of purposes. There are some restrictions, though, so it’s important to check with the lender to make sure you’re using the funds properly.

•   No collateral. An unsecured personal loan does not require collateral to be put up as a loan guarantee. Some people may not want to risk an asset when seeking financing.

Applying for an Unsecured Personal Loan

First, and as with any financial commitment, make sure your finances are in order. Checking your credit
report
regularly is a good way to catch any possible errors and correct them, minimizing any negative affect on your credit score.

Unsecured personal loans typically require a higher level of creditworthiness than a secured personal loan does. If you’re planning to apply for an unsecured personal loan in the future, you can start by doing things like making timely credit card payments to help responsibly build up your credit.

Recommended: How to Pay Tax on Personal Loans

If you have a weaker credit score, however, all is not lost. Many lenders will consider loaning money to borrowers with a weaker credit score or not enough credit history if they have a cosigner or coborrower with a more favorable credit history, consistent income, and other positive financial attributes.

Next, find a reputable lender that offers unsecured personal loans. Some things to look for include potential interest rates you might qualify for, terms that work for you, and any extra fees (origination fees or prepayment penalties, for example) so that you understand the true cost of the loan.

The Takeaway

For some of life’s many curveballs — or opportunities — the occasional need for an unsecured personal loan might arise. With no fees and competitive fixed rates, a SoFi Personal Loan may be the right option for your financial needs.

See what SoFi has to offer and get pre-qualified in one minute.


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

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
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.
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Personal Loan vs. Credit Card

What are the main differences between personal loans and credit cards?

For a lot of people, using credit cards is the go-to method to build their credit history or when paying for just about anything. From groceries and gas to plane tickets and large electronics, using a credit card can be a hassle-free way to manage expenses. Plus, many cards offer rewards and perks. As long as the borrower is able to pay the balance in full each month to avoid paying high interest rates, credit cards can be convenient.

Personal loans can be another option for acquiring cash up front for big purchases that a person may not have the cash on hand to pay for. Personal loans are closed-end installment loans, versus the revolving, open-end nature of credit card debt, and repaying them is a different process.

Here’s a closer look at personal loans and credit cards.

Personal Loans, Defined

Personal loans are, generally, unsecured loans that can be used for nearly any purpose. The borrower receives the loan amount in a lump sum and is then required to make fixed monthly payments, typically for a term of two to five years — sometimes longer.

Whatever length the loan term is, the borrower makes regular monthly payments on the loan with the intent of paying it off by the end of the loan term. However, the balance may be paid off early, hopefully without paying a penalty. It’s a good idea to check with the lender to make sure the loan doesn’t have a prepayment penalty.

Unsecured personal loans often offer fixed interest rates over the life of the loan. Variable rate personal loans are also an option, their interest rates changing based on market fluctuations. People paying off a personal loan over a longer term may not want to risk a variable rate loan because it’s hard to predict whether or not the interest rate will rise.

Reputable lenders can be found online or in person. The applicant will likely have to provide personal and employment information, possibly including proof of income such as a Form W-2 from an employer, among other requirements that will vary from lender to lender.

After the application is complete, the lender reviews the application and decides whether or not to grant the loan.

If the applicant is approved and agrees to the terms of the loan, they may sign a promissory note, and receive the lump sum loan amount. After that point, they’ll be required to make payments on the loan.

Recommended: Secured vs. Unsecured Loans: How Do They Differ?

Key Differences: Credit Card Vs. Personal Loan

While both credit cards and personal loans offer a borrower access to funds that they promise to pay back later, there are some key differences that may have major financial ramifications for borrowers down the line.

A borrower requests a set amount of money with an unsecured personal loan, and chooses a set term to pay it back, whereas a credit card gives borrowers access to a line of credit that can be borrowed from as needed (up to the credit limit). This may seem like a positive, flexible benefit, but it can lead to a debt spiral if not managed responsibly.

Credit card debt is revolving debt, meaning the borrower can continuously borrow up to their credit limit without paying the full balance back before borrowing again. When carrying a balance on a credit card each month, a borrower could become stuck paying a high interest rate on the revolving debt.

Personal loans, on the other hand, offer the borrower a lump sum amount and they agree to make regular installment payments of the same amount each month over a set period of time. That means the borrower knows exactly how much they owe — both on a monthly basis and in total—when the loan is signed. The loan principal can’t be increased by swiping a card; a second loan would need to be taken out to have additional funds. For this reason, a personal loan debt may be easier to manage than credit card debt for some people.

One of the ways in which personal loans and credit cards are similar is that both financing options are actually unsecured, and as such tend to come with higher interest rates than secured loans, like a HELOC.

Like mortgages, home equity lines of credit (HELOC), or auto loans, secured personal loans tend to have a lower interest rate because they’re tied to an asset that the lender can repossess should the borrower be unable to repay the loan. Still, depending on their financial profile, a prospective borrower may be able to find an unsecured personal loan with a lower interest rate than a credit card.

Line of Credit vs. Loan

There are also differences between a line of credit and a loan.

A line of credit is an ongoing agreement with a bank allowing a borrower to access funds up to a certain dollar limit at any time during a draw period. A personal line of credit is similar to a credit card, though it’s usually not attached to a little piece of plastic. The borrower can use the funds, repay the amount used, and then borrow them again. Typically, the borrower writes checks directly from the line of credit or has the funds transferred to another account, rather than swiping a card.

This differs from a loan in both amount borrowed and the loan term. While funds accessible via a line of credit can essentially be borrowed up to the credit limit, paid down, and borrowed again back up to the credit limit, the funds available through a loan are only available one time, as a lump sum. The term of a personal loan is also different from that of a line of credit in that it has a definite end date. The term of a personal line of credit is open-ended, but can be closed by the lender or at the request of the borrower.

Consolidating Debt? Personal Loan vs. Credit Card

Although it may seem counterintuitive to take on additional debt when already contending with existing debt, sometimes it can actually be a smart money move. Debt consolidation is a common reason borrowers take out personal loans, and it’s also possible to consolidate debt with a credit card balance transfer.

Again, these two approaches have some basic commonalities, but work pretty differently when looked at closely — and those differences can have a major impact on a person’s financial wellness over time.

Using a Credit Card to Consolidate Debt

Credit card refinancing generally works by opening a new credit card with a high enough limit to cover whatever balance you already have. Some credit cards offer a 0% interest rate on a temporary, promotional basis — perhaps for the first year or two of holding the card.

This can be a great opportunity to save money on interest by paying off the debt before the promotional time period ends. However, if the balance is not paid in full before the promotional period ends, the borrower will be charged the card’s set interest rate for regular purchases, which is currently averaging more than 16% APR, on any remaining balance.

Additionally, these types of balance transfers often come with an associated balance transfer fee that could be up to 5% of the total being transferred, which could lower the total potential savings.

Using a Personal Loan to Consolidate Debt

Taking out a personal loan for debt consolidation works a little differently. A loan is taken out for an amount that will cover the borrower’s existing debts, likely simplifying their repayment strategy (repaying just one debt instead of multiple credit card balances) while also potentially costing less in interest, depending on the borrower’s existing credit card rates and the rate of the new loan.

When consolidating debt with a fixed-rate personal loan, the borrower will know exactly how much they’ll owe each month, which can make it much easier to keep up with their monthly payments. Instead of keeping track of multiple due dates, multiple monthly amounts due, and multiple total balances due, there is just one monthly due date, one fixed monthly payment, and one total balance to keep track of.

Both of these approaches have benefits and drawbacks, though credit cards can be riskier than personal loans over the long term — even when they have a 0% promotional interest rate.

Recommended: See how much extra you may be paying with our Credit Card Interest Rate Calculator

Is a Credit Card Ever a Good Option?

If someone only needs access to a few hundred or a few thousand dollars, and if they plan to be able to pay down the balance of the debt completely over the course of just a few months, a credit card might be a good choice.

Personal loans may charge an origination fee which is a one-time fee due at closing (or when you receive the lump sum). The origination fee can be anywhere from 1% to 8% of the total amount of the loan, which can really add up with large amounts borrowed.

In the end, it comes down to a borrower’s personal preferences and diligence. So long as a credit card is used responsibly — paying the balance off in full each and every month — credit cards are a common way to build credit history and have a resource for funds should an urgent need arise (plus, some like that they can get perks like cash-back rewards, too).

When is a Personal Loan a Good Option?

Since personal loans can take a little bit more paperwork and sometimes include an origination fee, they may be a more suitable option for when a borrower needs access to a larger amount of money — several thousand dollars or more. If expenses will put the borrower near the top of their credit card limit, for instance, a personal loan might be worth considering.

Personal loans also may be a more cost-effective option if it will take over a year to repay the amount needed to borrow. Lenders typically offer personal loans at a minimum of $1,000 and up to a maximum of $100,000, depending on a borrower’s credit and financial profile.

Another benefit of a personal loan is fixed terms. When there are concerns about over-spending on a credit card, a personal loan may offer the structure of fixed limits, both on the amount borrowed and repayment time. This can be particularly useful when borrowing money for a project in which there’s a risk of easy over-spending such as furnishing a new house or remodeling.

The Takeaway

Different options work for different people and different financial situations. When deciding whether to use a credit card or personal loan, learning the differences between the two is a good place to start.

SoFi Personal Loans are unsecured, have no origination fees, and offer fixed rates with terms to fit a variety of budgets.

Thinking about taking out a personal loan? SoFi personal loans can help you get out of debt sooner — and potentially save you money along the way compared to high-interest credit card debt.


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

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.
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11 Types of Personal Loans & Their Differences

Even with the strictest budgeting and savviest spending, there may come a time when you face an expense that you just can’t cover with cash. It might be tempting to put the expense on a credit card. While that can be one solution, there are other options.

A personal loan is a type of loan that is offered by many banks, credit unions, and online lenders like SoFi. Unlike a mortgage loan or car loan which specifies what the money should be spent on, a personal loan doesn’t have as many restrictions and can typically be used to pay for a variety of expenses.

A variety of factors will influence which type of personal loan is right for you, like how much money you plan to borrow, your credit and income, and how much debt you already have. Read on for a few different types of personal loans explained.

Unsecured or Secured

A common type of personal loan is an unsecured personal loan. This means that there is no collateral backing up the loan. This can make them riskier for lenders. Approval and interest rates for unsecured personal loans are generally based on a person’s income and credit score, but other factors may apply.

Unlike an unsecured loan, there is some sort of collateral backing up a secured personal loan. For example, think of a home mortgage: if the borrower does not make payments, the bank or lender can seize the asset — the home — used to secure the loan as collateral.

Since secured loans involve collateral, lenders often view them as less risky than their unsecured counterparts. This can mean that secured personal loans might offer a lower interest rate than a comparable unsecured loan.

Here’s a comparison of some of the features of unsecured and secured personal loans:

Unsecured Personal Loan

Secured Personal Loan

No collateral needed Requires an asset to be used as collateral
Higher interest rates compared to secured personal loan May have lower interest rate than unsecured personal loan
Approval based on applicant’s income, credit score, and other factors Approval based on value of collateral being used, in addition to applicant’s creditworthiness
Funds may be available in as little as a few days Processing time can be longer due to need for collateral valuation

Recommended: Choosing Between a Secured and Unsecured Personal Loan

Variable or Fixed Interest Rate

A personal loan with a fixed interest rate will have the same interest rate for the life of the loan. This also means you’ll have the same fixed monthly payment and, based on scheduled payments, know upfront how much interest you’ll pay over the life of the loan.

The interest rate on a variable rate loan may change over the life of the loan, fluctuating based on the prevailing short term interest rates. Typically, the starting interest rate on a variable rate loan will be lower than on a fixed rate loan, but the interest rate is likely to change as time passes. Variable rate loans are generally tied to well-known indexes, such as the 1-month LIBOR .

If you’re trying to decide on a variable or fixed-rate personal loan, this summary might be helpful:

Variable Interest Rate

Fixed Interest Rate

May have lower starting interest rate than a fixed-rate personal loan Interest rate remains the same for the life of the loan
Payment amount may vary from month to month Monthly payment will not change
Might be desirable for a short-term loan if current interest rate is low If predictable payments are desired, a long-term loan with a fixed rate might be the way to go
Maximum interest rate may be capped Potential to cost more in interest payments over the life of the loan

Debt Consolidation Loan

This type of personal loan refinances existing debts into one new loan. Ideally, the interest rate on this new debt consolidation loan is lower than the interest rate on credit card debt, which may mean you spend less money in interest over the life of the loan. With a debt consolidation loan, you may only have to manage one single monthly payment.

Cosigned

If you’re struggling to get approved for a personal loan on your own, there are circumstances in which you can apply for a loan with a cosigner. A cosigner is someone who helps you qualify for the loan but does not have ownership over the loan. In the event that you are unable to make payments on the loan, your cosigner would be responsible.

Coborrowers and co-applicants are other terms you might hear if you’re interested in borrowing a personal loan with the assistance of a friend or family member. A coborrower essentially takes out the loan with you.

Your coborrower’s name will also be on the loan so they’ll be equally responsible for making sure payments are made on time. A co-applicant is the person applying for a loan with you. When the loan application is approved, the co-applicant becomes the coborrower.

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Personal Lines of Credit

Slightly different from a personal loan, a personal line of credit functions similarly to a credit card. It’s revolving credit which typically means there is a maximum credit limit, a required monthly minimum payment, and when the debt is paid off, money can be withdrawn again.

The funds in a personal line of credit are generally accessed by writing checks or using a card, or making transfers into another account.

Interest rates on a personal line of credit may be lower than the interest rates on a credit card. Like personal loans, there are both unsecured and secured personal lines of credit.

Credit Card Cash Advances

Some credit cards offer the option to borrow cash against the total cash advance limit. This is called a credit card cash advance. The available cash advance amount may be different than the total available credit for purchases — the information is typically included on each credit card statement. Depending on the credit card company’s policy, there are a few options to secure a cash advance: you can use your credit card at an ATM to withdraw money, borrow a cash advance from a credit union or bank, or request a cash advance from the credit card company directly.

Cash advances typically have some of the highest rates around. There are often additional credit card fees associated with a cash advance transaction. Check your credit card disclosure terms for full details before making a cash advance.

Different Types of Personal Loan Uses

Personal loans can be used for nearly any personal expense. Here are a few reasons people consider borrowing money with a personal loan.

Planning a Wedding

The dress, flowers, catering, photographer, venue fees — the list of wedding expenses can go on and on. While Covid-19 put a halt on many weddings and, therefore, wedding spending, wedding experts expect that celebrations, along with spending, will resume as long as it’s safe to do so. A personal loan for weddings is one option that can be used to cover all or part of costs.

Moving Expenses

Whether you’re moving across the country or just across town or, the cost of moving can add up quickly. A personal loan could potentially help you make ends meet as you’re relocating.

If you want to do a few renovations or upgrades on your new place, a personal loan could help with that too.

Consolidating Debt

Another reason people use personal loans is to consolidate debt. Debt consolidation could allow you to simplify your repayment since you may only have one single payment to keep track of every month.

Depending on the rate and terms you qualify for, consolidating your debt could potentially help you save money on interest payments while you pay down your debt.

Taking a Vacation

Planning a vacation? Maybe your niece is getting married in Greece or you and your partner are planning a honeymoon. If budgeting and saving aren’t enough to get you to your vacation goal, a vacation loan could be one option to help you fill in the gaps.

Making a Large Purchase

Whether it’s a new TV, new patio furniture, or an engagement ring, if the cost of your dream item is a little out of your budget, a personal loan could help you afford the option you really want.

The Takeaway

Armed with some knowledge about types of personal loans, you may be ready to make an educated decision about whether or not a personal loan is right for you. As you consider your options, take a look at SoFi.

There are absolutely no fees when you borrow a personal loan with SoFi and as a SoFi member, you’ll be eligible for additional benefits like career coaching.

Want to find out if a personal loan makes sense for you? You can find out if you pre-qualify, and at what rates, in just a few minutes.


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

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