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The Free Application for Federal Student Aid, or FAFSA®, is a form students should fill out each school year to apply for college grants, work-study programs, federal student loans, and certain state-based aid.

Typically, the FAFSA becomes available on October 1 for the following academic year. The 2024-2025 academic year, however, is an exception. Due to form revisions and adjustments to how student aid is calculated, the latest FAFSA became available on December 31, 2023.

The three-month delay has had a domino effect, pushing out deadlines for college admissions and financial aid offers.

Try not to let this throw you off your game. If you fail to complete the form or miss the FAFSA deadline, you may not receive financial aid that could help you pay for college. In fact, you should aim to fill out your FAFSA as early as possible, since there is a limited amount of aid available.

Read on for updated federal, state, and institutional FAFSA deadlines to know.

What Is the FAFSA?

The FAFSA is the online form that you must fill out to apply for financial aid from the federal government, state governments, and most colleges and universities. The form requires students and their parents to submit information about household income and assets. That information is used to calculate financial need and determine how much aid will be made available.

If you are a dependent student, you will need to submit your parents’, as well as your own, financial information. If you are considered independent, you are not required to submit your parents’ financial information.

If you are already in school, remember that the FAFSA must be filled out every year, even if your income and tax information haven’t changed.

Federal financial aid includes student loans, grants, scholarships, and work-study jobs. In general, federal and state aid requires that students:

•   demonstrate financial need. Though there is some non-need based aid, such as unsubsidized student loans.

•   be a U.S. citizen or an eligible noncitizen.

•   be enrolled in a qualifying degree or certificate program at their college or career school.

For further details, take a look at the basic eligibility requirements on the Student Aid website .

FAFSA Open Date and Deadline

ASAP: File Your FAFSA for Next Year

Generally, it makes sense to submit the FAFSA promptly after the application release. Some aid is awarded on a first-come, first-served basis, so submitting it early can improve your chances of receiving financial help for college.

May 1 – June 1: College Decision Time

May 1 is traditionally National College Decision Day, when applicants must inform the colleges they applied to whether they’ll be attending. With the FAFSA delays, many colleges are pushing that deadline out to May 15 or even June 1. This is to ensure that students have their financial aid offer in hand before they decide which college to attend. Make sure you understand the deadlines for the colleges you applied to — they may be different.

June 30: File Your FAFSA for Last Year

You must file the FAFSA no later than June 30 for the school year you are requesting aid for. For the academic year 2023-24, you must file by June 30, 2024, at the very latest, and for the academic year 2024-25, the final federal deadline is June 30, 2025.

This FAFSA deadline comes after you’ve already attended and, likely, paid for school. You generally don’t want to wait this long. However, if you do, you can often receive grants and loans retroactively to cover what you’ve already paid for the spring and fall semester. In some cases, you may be able to apply the funds to pay for 2023 summer courses.

State and Institutional FAFSA Deadlines

Individual states and colleges have different financial aid deadlines — which may be much earlier than the federal deadline. Here’s a look at two other key FAFSA deadlines to know.

Institutional FAFSA Deadlines

While students have until the end of the school year to file the FAFSA, individual schools may have earlier deadlines. That means you need to get your FAFSA application in by the school’s date to be considered for the college’s own institutional aid. So if you are applying to several colleges, you may want to check each school’s FAFSA deadline and complete the FAFSA by the earliest one.

While filling out your FAFSA, you can include every school you’re considering, even if you haven’t been accepted to college yet.

State FAFSA Deadlines

States often have their own FAFSA deadlines. You can get information about state deadlines at
Studentaid.gov . Some states have strict cutoffs, while others are just best-practice suggestions — so you’ll want to check carefully. States may have limited funds to offer as well.

Federal FAFSA Deadline

Typically, the FAFSA becomes available on October 1, almost a full year in advance of the year that aid is awarded. For the 2024-25 academic year, the FAFSA opened a few months later than usual. However, the federal government gives you until June 30 of the year you are attending school to apply for aid.

It’s generally recommended that students fill out the FAFSA as soon as possible after it’s released for the next school year’s aid to avoid missing out on available funds. Plus, as noted above, there are often earlier school and state deadlines you’ll need to meet.

Recommended: FAFSA Delay: 5 Steps to Help Ensure Your State and College Aid Aren’t Affected

Taking the Next Steps After Submitting the FAFSA

So what happens after you hit “submit” on your FAFSA? Here’s a look at next steps:

•   Wait for your Student Aid Report (SAR) . If you submitted your FAFSA online, the U.S. Department of Education will process it within three to five days. If you submit a paper form, it will take seven to 10 days to process. The SAR summarizes the information you provided on your FAFSA form. You can find your SAR by logging in to fafsa.gov using your FSA ID and selecting the “View SAR” option on the My FAFSA page.

•   Review your SAR. Check to make sure all of the information is complete and accurate. If you see any missing or inaccurate information, you’ll want to complete or correct your FAFSA form as soon as possible. The SAR will give you some basic information about your eligibility for federal student aid. However, the school(s) you listed on the FAFSA form will use your information to determine your actual eligibility for federal — and possibly non-federal — financial aid.

•   Wait for acceptance. Most college decisions come out in the spring, often March or early April. If you applied to a college early action or early decision, you can expect an earlier decision notification, often around December. Typically, students receive a financial aid award letter along with their acceptance notification. This letter contains important information about the cost of attendance and your financial aid options. However, due to the FAFSA delays, you may be waiting longer on your financial aid offer.

Understanding Your Financial Aid Award

Receiving financial aid can be a great relief when it comes to paying for higher education. Your financial aid award letter will include the annual total cost of attendance and a list of financial aid options. Your financial aid package may be a mix of gift aid (which doesn’t have to be repaid), loans (which you have to repay with interest), and federal work-study (which helps students get part-time jobs to earn money for college).

If, after accounting for gift aid and work-study, you still need money to pay for school, federal student loans might be your next consideration. As an undergraduate student, you may have the following loan options:

•   Direct Subsidized Loans Students with financial need can qualify for subsidized loans. With this type of federal loan, the government covers the interest that accrues while you’re in school, for six months after you graduate, and during periods of deferment.

•   Direct Unsubsidized Loans Undergraduates can take out direct unsubsidized loans regardless of financial need. With these loans, you’re responsible for all interest that accrues when you are in school, after you graduate, and during periods of deferment.

•   Parent PLUS Loans These loans allow parents of undergraduate students to borrow up to the total cost of attendance, minus any financial aid received. They carry higher interest rates and higher loan origination fees than Direct Subsidized and Unsubsidized Loans.

If financial aid, including federal loans, isn’t enough to cover school costs, students can also apply for private student loans, which are available through banks, credit unions, and online lenders.

Private loan limits vary by lender, but students can often get up to the total cost of attendance, which gives you more borrowing power than you have with the federal government. Each lender sets its own interest rate and you can often choose to go with a fixed or variable rate. Unlike federal loans, qualification is not need-based. However, you will need to undergo a credit check and students often need a cosigner.

Keep in mind that private loans may not offer the borrower protections — like income-based repayment plans and deferment or forbearance — that come with federal student loans.


💡 Quick Tip: Parents and sponsors with strong credit and income may find much lower rates on no-fee private parent student loans than federal parent PLUS loans. Federal PLUS loans also come with an origination fee.

The Takeaway

Completing the FAFSA application allows you to apply for federal aid (including scholarships, grants, work-study, and federal student loans). The FAFSA form is generally released on October 1 of the year before the award year and closes on July 30 of the school year you are applying for.

The 2024–25 FAFSA was delayed until December 31, 2023. That application will close on June 30, 2025. However, individual colleges and states have their own deadlines which are typically earlier than the federal FAFSA deadline. Try to submit your form as soon as possible, since some aid is awarded on a first-come, first-served basis.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

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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.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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

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You’re ready to make home improvements. When looking for a trustworthy pro, it’s a good idea to get referrals, check references, get multiple bids, and nail down your financing. Let’s drill down to the details on how to find a good contractor for remodeling and what you need to ask as you move through the process.
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💡 Quick Tip: With SoFi, it takes just minutes to view your rate for a home loan online.

Ask for Referrals

Often the easiest way to find a reputable contractor for your project is through word-of-mouth referrals, whether from a friend, neighbor, family member, or colleague. Maybe you’ve watched your friend remodel the kitchen on social media; you may want to ask for the name of the contractor behind the job. Likewise, if you see a big construction project going up in your neighborhood, you can ask the homeowner for insight on the contractor behind it.

You might also want to ask owners of local lumber yards, where con­tractors do their bulk business, who’s reliable.

Recommended: Refinance Your Mortgage and Save

Search Online for the Top-Reviewed Contractors

Before hiring a contractor to renovate or remodel your home, it’s smart to do your due diligence and collect as many references as possible. But if you’re new to a town or neighborhood, for example, you may wonder how to find a contractor who works in your area.

This is where online reviews come in handy. There are many websites out there that offer lists of licensed contractors with accompanying reviews.

Look at Credentials and Portfolio

As you begin speaking with each potential contractor, ask to see a copy of their contractor’s license and insurance policy, and ask about any specialty certifications or membership to any professional organizations like the National Association of Home Builders, the National Association of the Remodeling Industry, or the National Kitchen & Bath Association.

Be aware that some states require contractor licensing; others, certification or registration. Registration doesn’t guarantee expertise; it’s merely a written record of who is performing the work. Many but not all states have websites where you can verify your pro’s license number. If your property is governed by a homeowners association or condo association, remember that the association may require proof of licensing.

Most reputable builders or contractors should have a website or basic social media presence, but if you can’t find one, request an email link to the contractor’s portfolio to see examples of past projects, from countertop replacement to closet remodels, as well as before and after photos.

Interview Candidates

Once you have a list of potential contractors narrowed down to your three top picks, it’s a good move to interview each of them before you go a step further. Maybe you won’t jibe with one of them, or perhaps another won’t seem as knowledgeable about certain components of construction or remodeling as you’d like for your particular project.

Treat hiring any contractor or handyman just like you would hiring an employee for your work, and if you don’t get a good feeling about the candidate, trust your gut. Communication is key for any successful project, and if the communication feels lacking in the interview process, it’s likely you’ll get frustrated down the line when all the moving parts of a remodeling project are also thrown into the mix.

Check References

After you’ve compiled a list of contractors and interviewed your top candidates, you’ll want to check references. Professionals should be able to provide a list of contacts from past jobs, and if they can’t do so right on the spot, that’s probably a red flag.

When checking references, you might want to ask past customers if the contractor completed the job on time and within budget, if there were any problematic interactions, and how the work has held up since.

Review the Cost Estimate

You could find the perfect contractor for the job, only to learn that the pro is far out of your budget.

It’s smart to get at least three competitive quotes from contractors before you move forward. A cost estimate should include labor, materials, change-order language, and a timeline, at minimum. Many contractors also have payment schedules so you will know when you’ll need to have your finances in order.

One positive if you have second thoughts about the expense: While the cost to remodel a house may not be cheap, if you keep your property modern and up to date, it’s possible you’ll recoup those dollars in resale value down the line.


💡 Quick Tip: Compared to credit cards and other unsecured loans, you can usually get a lower interest rate with a cash-out refinance loan.

Consider the Red Flags

If it’s your first time hiring a contractor, you may not know what to look for — or what’s a red flag. To save yourself headaches down the road, if the contractor checks any of the below boxes, the person’s professionalism might be in question and it’s probably wise to move on to the next candidate.

•   No “before” remodeling pictures

•   No website, social media presence, or reviews

•   No license or certification

•   No references

•   Slow communication

Recommended: The Cost of Living By State

The Takeaway

How to find a contractor for home renovations? Hiring a contractor is a process that you’d be smart to treat like a job interview. It’s a good idea to check references and credentials, get bids, look for red flags, and have financing lined up, whether you take out a personal loan or opt for a home equity line of credit (HELOC).

SoFi now offers flexible HELOCs. Our HELOC options allow you to access up to 95% of your home’s value, or $500,000, at competitively low rates. And the application process is quick and convenient.

Unlock your home’s value with a home equity line of credit brokered by SoFi.

FAQ

Before you sign on the dotted line for your remodeling job, there are some things about working with a contractor you need to know before locking one in.

What should a remodel contract include?

You’ll want to make sure the contract lays out the overall project budget and scope of work, when payments are due, and how to handle the inevitable changes that will arise.You’ll also want to have a dispute resolution and waiver of the lien clause so that a subcontractor cannot put a lien on your home, and a warranty for the work that is an acceptable time frame for the amount you’ve invested.

What questions should I ask a contractor?

When you’re meeting with each potential contractor, ask about past projects and if they have specific experience doing the type of renovation work that you’d like done. It’s also helpful to ask how they would approach the project and how much of an impact it’ll have on your ability to live in the home while work is taking place.

You’ll also want to inquire about insurance. Ask for proof that the contractor carries an insurance policy that protects you, the homeowner, as well. All of these are things a professional contractor should have and easily be able to produce.

What should you know before hiring a contractor?

Know that there are always bad actors who can take advantage of the huge sums of money that Americans pouring into real estate investment — and that no reputable contractor should be offended if you ask for references, proof of insurance, and all promises in writing.

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Photo credit: iStock/BOX39studio

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.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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

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

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To obtain a home equity loan, SoFi Bank (NMLS #696891) may assist you obtaining a loan from Spring EQ (NMLS #1464945).

All loan terms, fees, and rates may vary based upon individual financial and personal circumstances and state.

You may discuss with your loan officer whether a SoFi Mortgage or a home equity loan from Spring EQ is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit brokered through SoFi. Terms and conditions will apply. Before you apply for a SoFi Mortgage, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and loan amount. Minimum loan amount is $75,000. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria.

SoFi Mortgages originated through SoFi Bank, N.A., NMLS #696891 (Member FDIC), (www.nmlsconsumeraccess.org). Equal Housing Lender. SoFi Bank, N.A. is currently NOT able to accept applications for refinance loans in NY.

In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

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As demand for home improvement work has kept up at a steady pace, so has the rate of home improvement fraud. Bringing a stranger into your home can be a leap of faith, especially if you haven’t done all your homework. Knowing the signs of home improvement fraud may keep you from becoming the next victim of a home repair scam.

What Is a Home Improvement Scam?

A home improvement scam occurs when a company or contractor — or a con artist posing as one — tries to swindle a homeowner out of money in exchange for a renovation or remodel that goes unfinished or is botched.

Many times home improvement scammers go door to door in search of their next victims. With the average cost of a home remodel in the upper tens of thousands of dollars, there is a lot of money at stake. A rule of thumb: If an offer sounds too good to be true, it probably is.


💡 Quick Tip: You never know when you might need funds for an unexpected repair or other big bill. So apply for a HELOC (a home equity line of credit) brokered by SoFi today: You’ll help ensure the money will be there when you need it, and at lower interest rates than with most credit cards.

Examples of Home Improvement Scams

There are many kinds of home improvement scams out there. Seniors have been the most targeted group, but people of all ages need to stay alert to these common frauds.

The ‘Free’ Inspection

“There’s no such thing as a free lunch” holds true when it comes to someone showing up on your doorstep and offering a free inspection. What’s their end game?

The Better Business Bureau reports that scammers and con artists will talk their way into a home to, say, inspect a roof, then cause damage like tearing off shingles to create a situation that actually then does require repairs.

Advertising by Flyer

Handymen often blanket communities with flyers in the hopes that a small percentage of people will call. It’s a good idea to treat such random distributions in your neighborhood as a sign to double-check credentials and legitimacy.

You may also find this a common occurrence after a storm if you live in a location prone to hurricanes or tornadoes. It would be smart to do your research before signing over your insurance check to someone who drops off a flyer.

Door-to-Door Contractors

If a contractor knocks on your door claiming to have leftover supplies from another project and offers you services for a steal, that’s a red flag. While the door-to-door salesman might be a real contractor, anyone going door to door to solicit business is likely not a professional who is in demand.

The Handshake Deal

No contract? No job. Homeowners should always have an ironclad contract in place before any money is exchanged. And if a contractor asks for cash, that’s a potential sign of a scammer (or at least someone looking to avoid the IRS).

Likewise, the contractor should not ask for more money than was decided on in the initial contract and scope of work. Claiming unexpected problems is a sign of a potential scam or an inexperienced contractor.

If there are potential variables in the project, you might want to spell out in the contract that extra work will require a change order, that is, both parties will agree to the additional work and an added fee.

If you’ve arranged for a home improvement loan or other financing, predictability comes in handy.

No-Credential Contractors

Many states don’t require a credential from a contractor if the amount of their annual work is below a certain dollar figure. While it’s unusual for a home improvement company or individual to not have credentials, it’s not unprecedented.

In general, it’s wise to treat non-credentialed contractors with a healthy awareness that they potentially aren’t serious businesspeople.


💡 Quick Tip: Lowering your monthly payments with a mortgage refinance from SoFi can help you find money to pay down other debt, build your rainy-day fund, or put more into your 401(k).

How to Avoid a Home Improvement Scam

While home repair scams are good to know about — especially if you’ve bought a fixer-upper — it’s also important to realize that not every contractor falls into that category, of course. If you take these tips into account, you’ll help yourself avoid a home improvement scam down the road.

Consider Only Contractors Who Are Licensed and Insured

It’s always smart to work with only licensed professionals who are insured, but in this case especially, a contractor who has their own license and insurance is likely not to be a scammer.

One way to get a background check on a contractor candidate is by calling the Better Business Bureau and requesting their rating, as well as asking if there are any complaints against them.

Get Recommendations From People You Trust

One way to avoid getting scammed is by working with contractors who come highly recommended by your friends, family, colleagues, or acquaintances. It’s always a gamble hiring a worker you find via online sources, so the more personal ties you have to contractors — like connections to those who have actually hired them in the past — the less likely it is that you’ll fall victim to a scam.

Get Multiple Estimates

For any construction or remodel project, you’ll want to solicit bids. Usually a minimum of three bids will give you an idea of the price range for your home improvement ideas.

By getting estimates from various professional contractors, you’re less likely to get scammed by someone trying to take advantage of you because, say, you live in a high-dollar neighborhood or drive a nice car. You can also use a home improvement cost calculator to help you estimate what the cost of your project should be.

Read the Contract Carefully

One of the easiest ways to be taken advantage of in any project is by not reading the contract in detail. If the contract is only one page long and doesn’t spell out the basics like budget, deposit, timing, or how to handle change orders, you’re setting yourself up for potential issues as money starts changing hands and construction begins.

And if there are areas of concern in the contract the contractor gives you, you might consider hiring a lawyer to review it and make any necessary revisions for you.

The Takeaway

Stay alert to home repair scams by getting referrals, asking contractors for references, reading all contracts meticulously, and only hiring professionals who provide you with proof that they are licensed and insured.

SoFi now offers flexible HELOCs. Our HELOC options allow you to access up to 95% of your home’s value, or $500,000, at competitively low rates. And the application process is quick and convenient.

Unlock your home’s value with a home equity line of credit brokered by SoFi.

FAQ

What to do if you get scammed by a contractor?

If you do find yourself the victim of a home repair scam, there are many organizations you could call for help. You might want to start with your local branch of the FBI, then submit a scam tip to the National Consumers League fraud website. Additionally, you can lodge a complaint with the Better Business Bureau and consult Call for Action, a nonprofit that advocates for consumers by investigating fraudulent contractors.

What should you not say to a contractor?

Agreeing to a large deposit without a commitment to start work is a common mistake. It’s also important to let the contractor know that you’ll be expecting certain benchmarks to be met as the project continues.

Can I withhold payment from a contractor?

If a contractor does not uphold their side of the contract, you can often legally withhold payment until the full scope of work is completed as outlined in the signed agreement.

How much of a deposit should you give a contractor?

A deposit of 10% to 25% is common for a construction project. Certain states may have home improvement laws that, for example, prohibit a contractor from taking more than one-third of the job payment as a deposit upfront.

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Photo credit: iStock/SeventyFour

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.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

^²

To obtain a home equity loan, SoFi Bank (NMLS #696891) may assist you obtaining a loan from Spring EQ (NMLS #1464945).

All loan terms, fees, and rates may vary based upon individual financial and personal circumstances and state.

You may discuss with your loan officer whether a SoFi Mortgage or a home equity loan from Spring EQ is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit brokered through SoFi. Terms and conditions will apply. Before you apply for a SoFi Mortgage, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and loan amount. Minimum loan amount is $75,000. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria.

SoFi Mortgages originated through SoFi Bank, N.A., NMLS #696891 (Member FDIC), (www.nmlsconsumeraccess.org). Equal Housing Lender. SoFi Bank, N.A. is currently NOT able to accept applications for refinance loans in NY.

In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

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

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

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Knowing when to sell a stock is a complex enterprise, even for the most sophisticated investors. In a perfect world you’d sell a stock when you’d made a profit and wanted to capture the gains. But even that scenario raises questions of your target amount (have you made enough?) and timing (would it be better to hold the stock longer?).

Similar questions arise when the stock is losing value. Is it a true loser or is the company just underperforming? Should you sell and cut your losses — or would you be locking in losses just before a rebound?

Adding to the above there are questions of personal need, opportunity costs, tax considerations, and more that investors must keep in mind as they decide when to sell their stocks. Fortunately there is a fairly finite list of considerations, as well as different order types like market sell, stop-loss, stop-limit, and others that give investors some control over the decision of when to sell a stock.

When Is a Good Time to Sell Stocks?

There are a few ways to approach the question of when to sell stocks. Risk, style, investing goals, and how much time you have are all critical variables. Perhaps the most relevant answer is “when you need to,” as that criterion alone requires specific calculations that depend on your overall plan, the type of investor you are, your risk tolerance, market conditions (i.e. stock market fluctuations), and of course the stock itself.

When deciding when to sell a stock, you might weigh:

•   How the stock fits into your goals

•   Company fundamentals

•   Economic trends

•   Your hoped-for profit

•   Volatility and/or losses

•   Taxes

In addition, whether you sell your stocks will boil down to your investment style — are you day trading or employing a buy-and-hold strategy? — how much risk you’re willing to assume, and your overall time horizon and other goals (i.e. tax considerations).

Many investors who are simply investing for retirement may rarely sell stocks. After all, over time the average stock market return has been about 10% (not taking inflation into account).

And while there are no guarantees, in general the old saying that “time in the market is better than timing the market” tends to hold true.

Others, who are looking to turn a profit on a weekly or monthly basis, may sell much more frequently. It’s more a matter of looking at what you’re hoping to generate from your investments, and how fast you’re hoping to generate it.

💡 Quick Tip: If you’re opening a brokerage account for the first time, consider starting with an amount of money you’re prepared to lose. Investing always includes the risk of loss, and until you’ve gained some experience, it’s probably wise to start small.

8 Reasons You Might Sell a Stock

There are several reasons that could prompt you to think about selling your stock.

1. When You No Longer Believe in the Company

When you bought shares of a certain company, you presumably did so because you believed that the company was promising and you wanted to invest in its stock, and/or that the share price was reasonable. But if you start to believe that the underlying fundamentals of the business are in decline, it might be time to sell the stock and reinvest those funds in a company with a better outlook.

There are many reasons you may lose faith in a stock’s underlying fundamentals. For example, the company may have declining profit margins or decreasing revenue, increased competition, new leadership taking the company in a different direction, or legal problems.

Part of the task here is differentiating what might be a short-term blip in the stock price due to a bad quarter or even a bad year, and what feels like it could be the start of a more sustained change within the business.

Recommended: Tips on Evaluating Stock Performance

2. Due to Opportunity Cost

Every investment decision you make comes at the cost of some other decision you can’t make. When you invest your money in one thing, the tradeoff is that you cannot invest that money in something else.

So, for each stock you buy you are doing so at the cost of not buying some other asset.

Given the performance of the stock you’re currently holding, it might be worth evaluating it to see if there could be a more profitable way to deploy those same dollars. Exchange-traded funds (ETFs) that provide easy access to other asset classes — like bonds or commodities — have also created competition to simply holding company stocks.

This is easier said than done, however, because we are often emotionally invested in the stocks that we’ve already purchased. Nonetheless, it’s important to include an evaluation of opportunity costs as part of your overall decision about when to sell a stock.

3. Because the Valuation Is High

Often, stocks are evaluated in terms of their price-to-earnings (P/E) ratios. The market price per share is on the top of the equation, and on the bottom of the equation is the earnings per share. This ratio allows investors to make an apples-to-apples comparison of the relative earnings at different companies.

The higher the number, the higher the price as compared to the earnings of that company. A P/E ratio alone might not tell you whether a stock is going to do well or poorly in the future. But when paired with other data, such as historical ratios for that same stock, or the earnings multiples of their competitors or a benchmark market, like the S&P 500 Index, it may be an indicator that the stock is currently overpriced and that it may be time to sell the stock.

A P/E ratio could increase due to one of two reasons: Because the price has increased without a corresponding increase in the expected earnings for that company, or because the earnings expectations have been lowered without a corresponding decrease in the price of the stock. Either of these scenarios tells us that there could be trouble for the stock on the horizon, though nothing’s a sure bet.

4. For Personal Reasons

It’s also possible that you may need to sell a stock for personal reasons, such as:

•   You need the cash (owing to a job loss, emergency, etc.)

•   You no longer believe in the mission of the company

•   Your risk tolerance has changed and you’re moving away from equities

•   You want to try another strategy other than active investing, for example automated investing, where your investment choices are largely guided by the input of a sophisticated algorithm.

Since personal reasons may also have emotions attached to them, it’s wise to balance out your personal feelings with an evaluation of other reasons to sell the stock.

5. Because of Taxes

Employing a tax-efficient investing strategy shouldn’t outweigh making decisions based on other priorities. Still, it’s important to take taxes into account when making decisions about which stocks to keep and which stocks to sell.

When purchased outside of a retirement account, gains on the sale of an investment are subject to capital gains tax rules. It may be possible to offset some capital gains with capital losses, which are triggered by selling stocks at a loss.

This strategy is known as tax-loss harvesting.

For example, if an investor sells a security for a $25,000 gain, and sells another security at a $10,000 loss, the loss could be applied so that the investor would only see a capital gain of $15,000 ($25,000 – $10,000).

If you’re considering this as part of a self-directed trading strategy, you may want to consult a tax professional, as the rules can be complicated in terms of short-term vs. long-term gains, replacing a stock you sell with one that’s substantially different, as well as how to carryover losses.

•   Understanding how a tax loss can be carried forward

The difference between capital gains and capital losses is called a net capital gain. If losses exceed gains, that’s a net capital loss.

•   If an investor has an overall net capital loss for the year, they can deduct up to $3,000 against other kinds of income — including their salary and interest income.

•   Any excess net capital loss can be carried over to subsequent years (known as a tax-loss carryover or carry forward) and deducted against capital gains and up to $3,000 of other kinds of income — depending on the circumstances.

•   For those who are married filing separately, the annual net capital loss deduction limit is only $1,500.

Recommended: Unrealized Gains and Losses Explained

6. To Rebalance a Portfolio

If you’re looking to make some tweaks to your investment strategy for one reason or another, you may want to sell some stocks as a part of a strategy to rebalance your portfolio. The reason for rebalancing is to keep your portfolio anchored on the asset allocation that you prefer.

As some investments rise and fall over time, your asset allocation naturally shifts. Some asset classes might exceed the percentage you originally chose, based on your risk tolerance.

Investors are encouraged to rebalance their portfolios regularly — but not too often — as market and economic conditions can and do change. An annual rebalancing strategy is common.

This typically involves taking a look at your desired asset allocation, thinking about your risk tolerance (and how it may have changed), and deciding how you may want to change the different asset classes that comprise your portfolio, if at all.

7. Because You Made a Mistake

You may want to sell stocks if you simply made a mistake. Perhaps the company or sector is not a priority for you, or not a good bet in your eye. Maybe a stock is too risk or volatile. Maybe you bought into a company because it was in the news, or friends were raving about it (a.k.a. FOMO trading).

All of these conditions can happen to investors, and knowing when to sell a stock sometimes means owning up to a mistake.

Recommended: Guide to Financially Preparing for Retirement

8. You’ve Met Your Goals

In the best case, of course, you might want to sell a stock once you’ve met your goals. Perhaps the price is right, or you’re ready to retire, or you’ve crossed some other threshold where you no longer need to hold onto the stock.
In that case, the decision to sell will likely come down to timing and taxes. Or, if you’re preparing to retire, you may also want to consider whether you’re holding the stock in a tax-deferred account or not.

💡 Quick Tip: When you’re actively investing in stocks it’s important to ask what types of fees you might have to pay. For example, brokers may charge a flat fee for trading stocks, or require some commission for every trade. Taking the time to manage investment costs can be beneficial over the long term.

4 Reasons You Might Not Want to Sell a Stock

In addition to weighing possible reasons for selling a stock, there are counter arguments for holding onto your shares.

1. Because a Stock Went Up

As mentioned, most stock prices will go up at some point, and you may want to hold onto your stock in the hope that it will continue to grow. That’s a valid reason, especially if you’re thinking long term.

Just bear in mind that there are no guarantees, and past performance is no guarantee of future results, as the industry mantra goes. So even if a stock’s price is rising, you may want to have a few other reasons for not selling the stock.

2. Because a Stock Went Down

Just as a stock may go up, the price will also go down at some point. At those moments it may be tempting to cut your losses before you accrue even bigger ones — especially if you believe that the stock’s value will continue to drop.

But, again, it may be helpful to think longer term rather than what’s happening today. The stock price might rebound, and you may only lock your losses in by selling. Analyzing the company fundamentals as well as the economic climate can help you make this decision.

Recommended: What Happens If a Stock Goes to Zero?

3. Because of an Economic Forecast

Economic forecasting uses a range of economic indicators — such as interest rates, consumer confidence, the rate of inflation, unemployment rates — to predict or anticipate economic growth. But economic forecasting is not an exact science, and it’s wise to consider other factors.

In addition, economic forecasts come and go. This is especially the case in the short term. Therefore, changes in stock prices may have as much to do with investor sentiment or outside forces (such as political or economic events or announcements) as they do with the health of the underlying company.

4. Because Everyone Else Is Selling

Understanding the impact of other investors on your own decisions is equally important. While you may think you’re capable of remaining calm in the face of media hype and headlines, as numerous behavioral finance studies have shown it’s surprisingly easy to get caught up in what other investors are doing.

If you find yourself questioning your own investment plan or your own logic, think twice to make sure the impulse to sell isn’t brought on by strong emotions or by the opinions of others.

Selling a Stock 101

These are the basic steps required to cash out and sell stocks:

1.    Whether by phone or via an online brokerage account platform, let your broker know which of your stock holdings you’d like to sell.

2.    Specify which order type (more on that below). This can determine at what price level your stock is sold.

3.    Fill out any other information your broker requires in order to initiate the sale. For instance, some accounts may have a “time in force” option, or when the order expires. Keep in mind, the trade date is different from the settlement date. It usually takes a couple of days for a trade to settle.

4.    Click “Sell” or “Submit Order.”

Different Sell Order Types

There are several different stock order types that can be useful in different situations.

Market Sell Order

This order type involves selling a stock immediately. The order will be executed without the investor specifying any price level to sell at. It’s important for investors to know however that because share prices are constantly shifting, they might not get the exact price they see on their stock-data feed. There may also be a difference due to delayed versus real-time stock quotes to consider as well.

Generally speaking, the advantage of using a market order is that your trade is likely to be executed quickly. That’s especially true for bigger or more popular stocks, which tend to be more liquid. But again: the biggest potential drawback is that you might not get the exact price you thought you were due to market volatility.

Limit Sell Order

Limit orders involve selling a stock at a specific price. For example, if you’re buying stocks, you can specify a price that you’re willing to pay — the trade will then be executed at that price, or lower.

If you’re selling stocks, the inverse is true — your stock will be sold at the specified price, or higher.

The upside to using limit orders is that they give investors some semblance of control by allowing them to name their price. The investor can then walk away, and let their brokerage handle the execution for them.

The downsides, though, include the fact that the trade may never execute if the specified price isn’t reached, and that using limit orders may take some practice and experience to properly execute.

Stop-Loss Sell Order

A stop-loss order is a level at which an automatic sell order kicks in. In other words, an investor specifies a price at which the broker should start selling, should the stock hit that level. This can also be referred to as a “sell-stop order.” But note that there are other types of stop-loss orders, such as buy-stop orders, and trailing stop-loss orders.

Stop-loss orders can be useful in that they can prevent investors from losing more than they’re comfortable with, or that they can afford to lose. They, as the name implies, are a very useful tool to prevent losses. But depending on overall market conditions, they can also work against an investor. If there’s a short-term drop in share prices, for instance, it’s possible that an investor could miss out on gains if share prices rebound in the medium or long term.

Stop-Limit Sell Order

A stop-limit sell order is an order that’s executed if your stock’s price drops to a certain price, but only if the shares can be sold at or above the limit price specified. They are, in effect, a sort of bridge between stop and limit orders. These types of orders can help investors dodge the risk that a stop order executed at an unexpected price, giving them more control over the price at which a sell order will execute.

Different Ways to Sell Stocks

There are desktop platforms and mobile phone apps that offer brokerage services. These are likely the most common platforms individual or retail investors use to currently buy or sell stocks. However, another option is through a financial advisor.

Financial advisors are professionals who have been entrusted to handle certain financial responsibilities and you can send them a stock sale order to execute. They can do a number of other things for you, too, including proffer advice and help you formulate an investing strategy. But there are costs to using financial advisors, so it may not be worth it, depending on how involved in the markets you are.

The Takeaway

There are times when it may be a good idea to sell your stocks, and others when it’s not. For example, if you’ve lost faith in a company, need a cash infusion, or are doing some portfolio rebalancing, it may be a good time to sell shares of a certain stock.

On the other hand, if you’re unnerved that your stock’s price fell after a bad earnings report, you may want to hold on and let things play out. It’s difficult, and is a true test of your risk tolerance. But over time, it should become easier and more natural as you gain experience as an investor.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Invest with as little as $5 with a SoFi Active Investing account.

FAQ

How can you tell when to sell a stock?

There’s no exact science, and determining whether it’s a good time to sell a stock will come down to the individual investor’s strategy, risk tolerance, and time horizon. However, you can also keep an eye on a stock’s valuation, consider your opportunity costs, and weigh other factors in order to make the decision.

Should you ever sell stocks when they’re down?

You can sell stocks when they lose value for any number of reasons, but it’s wise to make sure you’re doing so as a part of an overall investing strategy, e.g. tax-loss harvesting, and not simply because you’re making an emotional or impulsive decision based on current market conditions.

How much profit do I need before I sell a stock?

There’s no exact science or answer to determine how much of a return you’d need to see before you sell a stock. That’s up to the specific investor, and there may be times when selling a stock at a loss is preferable for tax purposes or other reasons.

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