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What Student Loan Repayment Plan Should You Choose? Take the Quiz

Federal student loans offer a specific selection of repayment plans that borrowers can choose from. Federal student loan borrowers may be assigned a repayment plan when they begin loan repayment, but they can change their repayment plan at any time without fees.

The One Big Beautiful Bill Act (OBBA) in 2025 changed the federal student loan repayment options. There are now differences in the plans available to new and existing borrowers that it’s important to be aware of.

Choosing the right repayment plan may feel overwhelming, but understanding the repayment plans currently available to federal student loan borrowers can help. This guide will walk you through the options.

Key Points

•   Federal student loan borrowers can choose from several repayment plans and may change their plan at any time without fees, though the 2025 One Big Beautiful Bill Act created different repayment options for new borrowers.

•   Existing borrowers with loans disbursed before July 1, 2026 can choose from Standard, Extended, Graduated, and income-driven plans like IBR, PAYE, and ICR.

•   New borrowers with loans issued on or after July 1, 2026 have only two options: the Tiered Standard Plan and the Repayment Assistance Plan.

•   Income-driven plans base payments on discretionary income and family size, while RAP sets payments at 1% to 10% of adjusted gross income and remaining balances forgiven after the loan term.

•   When selecting a repayment plan, some factors for borrowers to consider include total debt, current income and expenses, future earning potential, and whether pursuing Public Service Loan Forgiveness is a goal.

Student Loan Repayment Options

Because of recent changes to the federal student loan program, the student loan repayment options covered in this article include options for new borrowers and existing borrowers.

Borrowers with existing student loans disbursed before July 1, 2026 have a number of repayment plans to choose from:

•   The Standard Repayment Plan has fixed payments for 10 years (10 to 30 years for those with consolidation loans). This plan typically has the highest monthly payments, but it allows borrowers to repay their loans in the shortest period of time.

•   The Extended Repayment Plan stretches out the repayment period so that borrowers put money toward student loans for up to 25 years. Payments can be fixed or they may increase gradually over time. To qualify, borrowers must have more than $30,000 in federal Direct Loans.

•   The Graduated Repayment Plan has a repayment period that is typically 10 years (10 to 30 years for those with consolidation loans). The monthly payments start out low and then increase every two years. This plan may be worth considering for borrowers who have a relatively low income now, but anticipate that their salary may increase substantially over time.

•   Income-driven repayment (IDR) plans tie a borrower’s discretionary income to their monthly payments. These options may be worth considering for borrowers who are struggling to make payments under the other payment plans or who are pursuing forgiveness, including Public Service Loan Forgiveness.

New borrowers with federal loans made on or after July 1, 2026 have these two repayment plans to choose from:

•   The Tiered Standard Plan ranges from 10 to 25 years based on the loan amount, and it has fixed payments. Generally, the more a borrower owes, the longer they will have to repay the loan.

•   The Repayment Assistance Plan has a term of up to 30 years and bases payments on a borrower’s adjusted gross income (AGI). After the term is up, any remaining balance will be forgiven.

Choosing a repayment plan is one of the basics of student loans. For help determining which plan may be a good choice for your situation, you can take this quiz. Or, you can go directly to the overviews of the different repayment plans below to get a better understanding of them.

Quiz: What Student Loan Repayment Plan is Right for You?

Student Loan Repayment Plan Options for Federal Student Loans

Here are the student loan repayment options, with details about each one, for borrowers with federal student loans — including loans issued before July 1, 2026, and those disbursed on or after that date.

Standard Repayment Plan

The Standard Repayment Plan ​is for borrowers with student loans that were disbursed before July 1, 2026. This plan extends repayment up to 10 years (10 to 30 years for those with consolidation loans) and monthly payments are set at a fixed amount.

One of the benefits of the Standard Repayment Plan is that it may save borrowers money in interest over the life of the loan because, generally, individuals on this plan will pay back their loan in the shortest amount of time compared to most of the other federal repayment plans.

However, a common challenge associated with the Standard Repayment Plan is that payments can be too high for some borrowers to manage.

Student Loans Eligible for the Standard Repayment Plan

The following federal loans disbursed before July 1, 2026 are eligible for the Standard Repayment Plan:

•   Direct Subsidized Loans

•   Direct Unsubsidized Loans

•   Direct PLUS Loans

•   Direct Consolidation Loans

•   Subsidized Federal Stafford Loans

•   Unsubsidized Federal Stafford Loans

•   FFEL PLUS Loans

•   FFEL Consolidation Loans

Tiered Standard Repayment Plan

The Tiered Standard Plan replaces the Standard Repayment Plan for those with loans issued on or after July 1, 2026. Monthly payments are fixed for the life of the loan, and repayment terms range from 10 to 25 years and are based on the total student loan balance. For those with less than $25,000 in federal Direct loans, the repayment term is 10 years; for loans from $25,000 to $49,999 the term is 15 years; for loans from $50,000 to $99,999, the term is 20 years; and for loans of $100,000 or more, the term is 25 years.

Student Loans Eligible for the Tiered Standard Repayment Plan

The following federal loans disbursed on or after July 1, 2026 are eligible for the Tiered Standard Repayment Plan:

•   Direct Subsidized Loans

•   Direct Unsubsidized Loans

•   Direct PLUS Loans

•   Direct Consolidation Loans

Extended Repayment Plan

If you have over $30,000 in Direct Loan debt with loans disbursed before July 1, 2026, and the payments are too high for you to manage on the Standard (10-year) Repayment Plan, you can choose the Extended Repayment Plan for your federal loans. Under this plan, the term is up to 25 years and payments are generally lower than with the Standard and Graduated Repayment Plans. You can also choose between fixed or graduated payments.

If you’re eligible, the Extended Repayment Plan may provide relief if you’re struggling to pay your monthly loan payments by lengthening your term and potentially lowering your monthly payments.

This can help keep you out of student loan default (which is important!). But it is critical to be aware that lengthening your loan term usually means you will be paying more interest over the life of the loan — because it will take you longer to pay off your loan — and it may not give you the lowest monthly payments, depending on your circumstances.

Student Loans Eligible for the Extended Repayment Plan

The following federal loans taken out before July 1, 2026 are eligible for the Extended Repayment Plan:

•   Direct Subsidized Loans

•   Direct Unsubsidized Loans

•   Direct PLUS Loans

•   Direct Consolidation Loans

•   Subsidized Federal Stafford Loans

•   Unsubsidized Federal Stafford Loans

•   FFEL PLUS Loans

•   FFEL Consolidation Loans

Graduated Repayment Plan

With this plan, if you have loans disbursed before July 1, 2026, you would pay your federal student loans back over a 10-year period (10 to 30 years for consolidation loans), with lower payments at the beginning of the term that gradually increase every two years.

The idea behind the Graduated Repayment Plan is that a borrower’s income will likely increase over time, but may not be much at the start of their career.

Of course, the income boost may not happen. With this plan, because interest keeps accruing on the outstanding principal balance over a longer period of time, even though you’re making payments, the longer you take to repay your loan(s), the more interest you’ll wind up paying in the end. (Remember, more payments with interest equals more interest paid total.)

Student Loans Eligible for the Graduated Repayment Plan

The following federal loans taken out before July 1, 2026 are eligible for the Graduated Repayment Plan:

•   Direct Subsidized Loans

•   Direct Unsubsidized Loans

•   Direct PLUS Loans

•   Direct Consolidation Loans

•   Subsidized Federal Stafford Loans

•   Unsubsidized Federal Stafford Loans

•   FFEL PLUS Loans

•   FFEL Consolidation Loans

Income-Driven Repayment Plans

With Income-Driven Repayment (IDR) Plans for loans disbursed before July 1, 2026, the student loan payment amount is based upon the borrower’s discretionary income and family size.

To be eligible for one of the three available income-driven repayment plans — Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Income-Contingent Repayment (ICR) — you’ll need to go through a recertification process each year, and your monthly payment could change (increase or decrease) annually based upon your current income and family size.

Maximum payments are set at 10% or 15% of what’s considered your discretionary income (the difference between 150% of the poverty guideline and your adjusted gross income), depending on the loan and the plan.

An advantage of using income-driven repayment plans is that your payment can be adjusted to accommodate a lower income. And on the IBR plan, any remaining balance after 20 or 25 years may be forgiven if repayment has been satisfactorily made.

Note that the ICR and PAYE plans will close down completely and borrowers on these plans have the option to switch to IBR before July 1, 2028.

Repayment Assistance Plan

The new Repayment Assistance Plan (RAP) was created under the One Big Beautiful Bill Act. RAP is the only IDR plan available to student loan borrowers whose loans are issued on or after July 1, 2026. Existing borrowers (with loans issued before July 1, 2026) can choose RAP or IBR.

On RAP, your payment will be 1% to 10% of your adjusted gross income (AGI). The loan term on RAP is up to 30 years. Any remaining balance will be forgiven at the end of the loan term. If your monthly payment doesn’t cover the interest owed, the interest will be canceled. All borrowers are required to pay at least $10 per month on RAP.

Another Option to Consider: Student Loan Refinancing

Refinancing student loans with a private lender allows borrowers to replace their existing loans with a new loan from a private lender. This could help make repayment convenient because there will be just one monthly payment.

One of the other possible advantages of refinancing student loans is that borrowers who qualify for a lower interest rate may be able to reduce the amount of money they pay in interest over the life of the loan.

Borrowers typically need a certain credit score (or a cosigner) to qualify for student loan refinancing, along with other lending qualifications (like income and employment verification, among other factors).

And know this: Once federal student loans are refinanced with a private lender, they will become ineligible for federal benefits, including income-driven repayment plans, programs like Public Service Loan Forgiveness, and other borrower protections like deferment or forbearance.

Repayment Plans for Private Student Loans

The repayment plans for private student loans are set by the lender. If you have private student loans, you can review the loan terms or contact the lender directly to discuss the payment options available to you.

The Takeaway

Borrowers repaying federal student loans borrowed before July 1, 2026, have three traditional repayment plans to choose from (Standard, Extended, and Graduated) and several income-driven repayment plans. Borrowers with loans taken out on or after July 1, 2026 have just two plans — the Tiered Standard and the Repayment Assistance Plan.

When selecting a repayment plan, consider factors like your student loan debt, current income and expenses, and potential future income. For example, borrowers pursuing Public Service Loan Forgiveness will need to be in an income-driven repayment plan like the IBR or RAP plans. And borrowers who may qualify for a lower interest rate and don’t need federal benefits, may want to explore refinancing.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

What student loan repayment plan is best?

There is no one “best” repayment plan — the best option for you depends on your specific financial situation and goals. Generally speaking, the 10-year Standard Repayment Plan (or the new Tiered Standard Plan, with terms ranging from 10 to 25 years, depending on the amount you borrowed), could help you spend less on interest over the life of the loan and pay off your loans faster. However, if your goal is lower monthly payments, an income-driven plan that bases payments on your income, like Income-Based Repayment plan or the Repayment Assistance Plan, may be a better option. Explore the different repayment plans to see which one is the right fit for your priorities.

What is the new Repayment Assistance Plan, and who should consider it?

On the Repayment Assistance Plan (RAP), which was introduced on July 1, 2026, payments are 1% to 10% of your adjusted gross income (AGI). The loan term on RAP is up to 30 years, and any remaining balance will be forgiven at the end of the loan term. If your monthly payment doesn’t cover the interest owed, the interest will be canceled. RAP is the only income-driven repayment plan available to student loan borrowers whose loans were issued on or after July 1, 2026. (Existing borrowers with loans issued before July 1, 2026 can choose RAP or the Income-Based Repayment Plan.) RAP is a qualifying plan for those pursuing Public Service Loan Forgiveness.

How do I pick the right repayment plan for my budget?

In general, if you can afford higher monthly payments and you want to pay off your loans faster and pay less in interest overall, the Standard Plan (or the Tiered Standard Plan for new borrowers) may be right for you. If you have a tight budget and you’re looking for smaller monthly loan payments, you can explore the income-driven repayment plan options that base payments on your income. You can use the repayment calculator at StudentAid.gov to compare the different federal student loan repayment plans and costs.

What are the repayment plan options if I have private student loans?

Private student loans don’t qualify for federal programs like income-driven repayment or Public Service Loan Forgiveness. If you’re struggling with payments on your private loans, contact your lender to explore options such as extended repayment terms or temporary payment reductions. Refinancing may also be an option if you have strong credit, but be aware that refinancing federal loans into private ones forfeits federal protections.


SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers.
Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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.


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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A Guide to Large Personal Loans

Large Personal Loans: How to Qualify for $50,000-$100,000

Large personal loans are typically defined as those in the range of $50,000-$100,000. Like personal loans of all denominations, the lump sum received for a personal loan can be used however you like: to pay off medical debt, say, or finance a major home renovation. They typically do so at a lower interest rate than would be charged if you used a credit card.

To understand whether this kind of loan is right for you, whether you would qualify for one, and how to apply, read on.

Key Points

•   Large personal loans typically range from $50,000-$100,000 and are used for medical debt, home renovations, and debt consolidation.

•   A strong credit score, typically 750 or higher, can improve approval chances and secure better loan terms.

•   Stable employment ensures a consistent income, increasing the likelihood of loan approval and favorable terms.

•   A low debt-to-income ratio, under 35%, is preferred, reducing the risk of default and enhancing loan terms.

•   Benefits of a large personal loan can include manageable monthly payments and potential positive impact on a credit score, but risks involve negative credit impact and prepayment penalties.

What Is a Large Personal Loan?

A large personal loan is exactly what it sounds like — a loan for a lot of money. There is no specific figure that makes a personal loan cross over into “large” territory. To one person, $50,000 might be a large personal loan. To another, it might be $100,000. But typically, it’s a number that’s well into the five-figures realm. Typically, lenders don’t offer more than $100K for a personal loan.

A large personal loan is a form of credit that can be used to make large purchases or consolidate other high-interest debts. Personal loans generally have lower interest rates than credit cards and are sometimes used to consolidate high-interest debt.

To start with the basics, a personal loan is defined as a set amount of money borrowed from a lending institution. Unlike a mortgage loan or auto loan, which is used for a specific purpose, funds from a personal loan can be used to pay for a variety of expenses such as medical bills, K-12 private education costs, or to consolidate multiple debts. Typically, however, you can’t use a personal loan for business expenses, and using personal loans for higher education tuition is usually prohibited.

How Do Large Personal Loans Differ From Other Personal Loans?

Personal loans function in the same way no matter their size because they are borrowed sums of money that are paid back with interest. This is true regardless of the amount of money borrowed.

However, there are some differences between larger personal loans and their smaller counterparts, depending on the lender you choose.

Small Personal Loans

Large Personal Loans

Loan amounts approximately $1,000-$5,000 Loan amounts approximately $50,000-$100,000
Including fees, may not be cost effective compared to larger loans With good to excellent credit scores, applicants may qualify for low interest rates
Typically have shorter repayment terms Repayment terms are typically longer

Interest Rate Considerations

You’ll likely want to compare personal loan interest rates. Different lenders may specialize in different sizes of loans, and their rates may vary depending on what they consider their sweet spot, so it can pay to shop around.

One key point: Don’t just look at the interest rate on a loan. The APR, or annual percentage rate, will give you a truer sense of what you will pay over the life of the loan. The APR includes fees (such as origination fees) and other factors, rolled in with the interest rate.

Term Length Options

The length of the loan term will impact your payments in a couple of ways. First, a longer loan period typically means you will have a lower monthly payment, which can be helpful in terms of your budget and cash flow.

However, a longer loan term also usually means you are paying more in interest over the life of the loan. Consider your options carefully to make sure you are getting the right deal for your situation.

How long do you usually have to pay off a personal loan? Two to seven years is common for personal loans in general, and, for larger loans, you may find terms of 10 or even 12 years.

When Is a Large Personal Loan a Bad Idea?

A large personal loan may be a bad idea if you already struggle with your current debts or monthly expenses.

When considering financing, it’s important to know both the pros and cons of a personal loan. Whether a loan may be beneficial for you depends on your unique financial situation. Here are some of the risks to consider:

•   If you fall behind on payments, your credit score could be negatively affected.

•   If you miss enough loan payments, your large personal loan may go to a collection agency. Some lenders will charge off a debt, meaning they have given up on being repaid, but you’re still legally responsible for the debt.

In the right situation, however, a large personal loan can be helpful. If you’re approved for the loan, you’ll have the funds to make a big purchase and can repay it over time. Those smaller, monthly installments mean that the burden is more manageable.

Top Uses for Large Personal Loans

One of the most useful features of personal loans is that they can be used for almost any purpose. Among the common uses of personal loans that are considered large are:

•   Medical debt

•   Home renovation projects

•   Debt consolidation

•   Wedding expenses

•   Vacations

•   Fertility financing

Recommended: $50,000 Personal Loan

What Are Common $100,000 Loan Qualification Requirements?

Typically, lenders have stricter requirements to qualify for a larger loan than one with a smaller limit.

Credit Score

Generally, you need a minimum credit score of 670 to qualify for a $50,000 loan and at least 720 to qualify for a $100,000 loan. Depending on your score, your lender may offer you varying loan terms, with borrowers with scores of 700-750 or higher typically qualifying for more favorable interest rates.

Checking your credit report before applying for any loan is a good idea. You will be able to find any errors or discrepancies and have an opportunity to correct them before you begin applying for a loan.

Checking your credit score counts as a soft inquiry and doesn’t negatively impact your credit score. The Fair Credit Reporting Act guarantees you the right to request one free copy of your credit report each year from each of the three major credit bureaus. You can find yours at AnnualCreditReport.com, which currently offers free weekly access to your reports.

Recommended: Does Checking Your Credit Score Lower Your Rating?

Employment Status

One of the factors your lender will consider is your employment status. They want to see how much income you earn and if you have the resources to repay the loan. In addition, the lender wants to be assured of your job stability. It may be a good idea to avoid making any sudden career changes while you’re applying for a loan.

Debt-to-Income Ratio

Your debt-to-income ratio (DTI) is a number that compares the total amount of debt you owe per month to your monthly earnings. You can find yours by taking your total recurring monthly debt and dividing it by your gross monthly income. Your recurring debt includes your mortgage, student loans, and other loans, and your gross income is everything you earn before taxes or other withholding.

Lenders use this number to help them predict a borrower’s ability to repay current and future debt. In general, lenders look for a DTI under 35%, but borrowers with a higher DTI may be approved if they are well qualified in other areas.

Assets and Collateral

As your application is reviewed, you may need to show assets in addition to a strong income and credit history. Assets include such things as real estate, cash in the bank, investments, vehicles, art, antiques, and jewelry.

Having these assets could help qualify you for a secured loan, which is one that involves putting up collateral that can be claimed by the lender if you default.

What Is the Application Process for a Large Personal Loan?

Applying for a personal loan is a multi-step process. Different lenders may have different processes, but typical steps are as follows.

Compare Rates

Some lenders may offer loan prequalification. This allows you to see, based on a soft credit check, potential average personal loan interest rates and terms you might qualify for. It can be a good way to compare your lending options and find the most favorable offer.

Gather Documents

As you move ahead with your personal loan application, collect all the paperwork you need.

Approaching this step proactively will help you streamline your application process, saving you time. It will also make it easier for your lender to review your eligibility and creditworthiness.

Personal loans usually require similar documents, no matter the lender, though. A few you should include are:

•   Proof of identity such as a driver’s license or passport

•   Proof of current address such as a current lease agreement, utility bill, or proof of insurance

•   Verification of stable income and employment such as W-2s, bank statements, pay stubs, or tax returns

Waiting for Approval

Once you submit all the necessary paperwork, the last thing to do is wait. Approval times vary between lenders, depending on how complicated the application is. Some approvals happen within a day, while others may take up to a week.

After your lender approves your large personal loan, you’ll receive it in the form of a lump sum. Lenders may deduct any fees, such as origination fees, before disbursing the loan proceeds. A personal loan calculator can help you estimate your loan payments.

💡 Quick Tip: Just as there are no free lunches, there are no guaranteed loans. So beware lenders who advertise them. If they are legitimate, they need to know your creditworthiness before offering you a loan.

What Can You Expect When Repaying Your Loan?

Regular installment payments begin once your large personal loan is approved and you receive the funds. The loan agreement will state the loan terms, interest rate, and what each payment will be, in addition to other details about the loan.

Monthly Payment Examples

Here are a few numbers to note that help you see how your loan payment might vary:

•   For a $50K loan at 7% APR and a 5-year term, your monthly payment would be $990

•   For a $50K loan at 9% APR and a 5-year term, your monthly payment would be $1,038

•   For a $50K loan at 9% APR and a 7-year term, your monthly payment would be $804

•   For a $100K loan at 7% APR and a 5-year term, your monthly payment would be $1,980

•   For a $100K loan at 9% APR and a 5-year term, your monthly payment would be $2,076

•   For a $100K loan at 9% APR and a 7-year term, your monthly payment would be $1,609

Early Repayment Options

Paying off a large personal loan early can help you save a bundle on interest. You might do this with a lump sum payment (say you have a windfall such as an inheritance) or you could adopt a biweekly payment schedule to speed up your paying off the debt.

While uncommon, some large personal loans may have prepayment penalties. Check the fine print or contact your lender to learn more.

Can You Borrow $100,000 if You Have Bad Credit?

While it might not be impossible, borrowing a large loan with bad credit won’t be easy. Lenders tend to favor low-risk borrowers who are more likely to repay their loans on time and in full. A strong credit history provides some assurance that a borrower will do that. But poor credit or no credit at all may look to lenders like a likelihood to default.

Lenders willing to loan to borrowers with bad credit typically require different data to evaluate their application. For example, they might ask the borrower to show a history of utility payments or information from their bank account. Lenders may also limit borrowing amounts and charge higher interest rates to applicants with bad credit.

Borrowers with poor credit can improve their chances by opting for a secured personal loan, one for which they pledge collateral to guarantee the loan, as noted above. This may work well for someone who struggles with credit but has assets and sufficient income to make loan payments. If the borrower defaults on the loan, the lender has the right to seize the asset pledged as collateral.

Are There Alternatives to Large Personal Loans?

After some research, you might decide a personal loan isn’t right for you. Or you may struggle to get the level of financing you want. In that case, there are alternatives to a personal loan. For example, you could consider these choices if you have equity in your home or other real estate:

•   Cash-out refinancing: A cash-out refinance allows you to replace your existing mortgage with a new, larger loan. After the original mortgage is paid off, you can use the difference as you like. This option works best if you have a significant amount of equity built up in your home and have a high credit score.

•   Home equity loan: Like a cash-out refinance, a home equity loan depends on your built-up home equity. However, it is an additional mortgage, rather than one new mortgage. By borrowing against your equity, the loan has collateral behind it, making it a secured loan.

•   Home equity line of credit (HELOC): Like a home equity loan, you use your home equity to access a HELOC. It acts as a line of credit you can tap into when you need it, and you only pay interest when you borrow. This works best for a homeowner who needs smaller amounts of money over a longer term, rather than just one lump sum.

•   401(k) loans: If you have a 401(k) plan, you may be able to borrow money from your retirement account. Depending on your plan’s specifics, you might be able to borrow up to 50% of your account’s vested balance or $50,000, whichever is less. If your balance is less than $10,000, you may borrow up to the full amount. Then, you pay the funds back with interest within a period (usually five years).

•   Securities-based loans: Another option could be a securities-based loan, often called a securities-backed line of credit (SBLOC). In this case, a lender allows you to borrow up to a certain percentage (typically 50%-95%) of the value of stocks, bonds, or other non-retirement assets in your investment account. The assets pledged as collateral are held in a separate account, and you are charged interest as you use your line of credit. Fees are generally quite low.

The Takeaway

A large personal loan is one that is typically in the range of $50,000-$100,000. It can allow you to pay off debts or make significant purchases. However, to qualify for a large personal loan, you may need to have a high credit score, a solid employment history, and other factors to qualify, and they come with their own set of pros and cons.

Finding the right large personal loan for your financial needs and situation may take some time, but comparing lenders is a good way to get started.

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

SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

FAQ

What’s the highest personal loan amount I can get?

Typically, the highest personal loan amount is $50,000-$100,000. Some lenders may offer up to $250,000 for some borrowers.

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

The time it takes to get approved for a large personal loan can vary. In some cases, it could happen within a day. In others, it might take a week.

Do all lenders offer $100,000 personal loans?

Some lenders offer $100,000 personal loans. Some offer large loans in the $20,000-$50,000 range, and others only offer loans up to around $5,000.

What happens if I default on a large personal loan?

If you default on a large personal loan, your debt can be turned over to collections. Your credit score can also be negatively affected.

Can I get a large personal loan with a cosigner?

Yes, you can get a large personal loan with a cosigner from some lenders. In some cases, a cosigner with a strong income and/or credit history could help you qualify.


About the author

Ashley Kilroy

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.


Photo credit: iStock/vladans


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


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

²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, 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 a minimum loan amount. 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. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.


This article is not intended to be legal advice. Please consult an attorney for advice.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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hands on table using smartphones

What Does P2P Mean in Banking? How P2P Payments Work

P2P payments, or peer-to-peer transfers, are a popular digital way to send money to and receive money from other people. With P2P, you can send a friend your half of the dinner bill, gas money, or other payments, quickly and easily from your mobile device.

To move money via P2P, all you need to do is to download a P2P app, like Venmo or PayPal, and connect your bank account, debit card, or credit card to it. Or your financial institution may offer app options you can enable. Either way, once you are set up, you are just a few clicks away from being able to send money.

Read on to learn what P2P is and how P2P payment works.

Key Points

•   P2P (or peer-to-peer) payments are a popular way to send money to and receive money from others.

•   These apps allow for transfers to say, split a dinner bill with a friend or pay a dogsitter or hairstylist.

•   These apps may transfer money instantly or take a few days to move money into a bank account.

•   Depending on the specific transaction, fees may be assessed.

•   Alternatives to P2P apps include cash, checks, money orders, and wire transfers and other transfer services offered by banks.

What Is a P2P Payment?

What P2P means is peer-to-peer, and it’s a quick and easy way to send money to someone. With a P2P payment, you can send money to a friend with just a few clicks on your mobile device. This replaces the need to get cash at an ATM or write out a personal check, options that aren’t always quick or convenient.

For traditional P2P apps like Venmo or PayPal, both parties need to have an account with the transfer service in order to make the transaction. For example, if you want to use Venmo to repay a friend for the salad they bought you at lunchtime, that person would also need to have a Venmo account to receive the payment.

Typically, a P2P account is attached to your online bank account. Some P2P platforms, however, allow customers to link their P2P accounts to a debit card or even a credit card, though it may involve additional fees.

Recommended: Guide to Direct Deposit

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*Earn up to 4.00% Annual Percentage Yield (APY) on one SoFi Savings account with a 0.90% APY Boost (added to the 3.10% APY as of 5/28/26) for up to 6 months. Open your first SoFi Checking and Savings account and receive eligible direct deposits OR qualifying deposits of $5,000 every 31 days by 12/31/26. Rates are variable, subject to change. Terms apply at https://www.sofi.com/banking/#4. SoFi Bank, N.A. Member FDIC.

How Does a P2P Payment Work

Here’s a closer look at what goes on when you use a P2P payment app.

Overview of the P2P Transfer Process

Say that you want to send money P2P to your sister for your mother’s birthday present. Depending on the type of P2P service you use, you’ll follow some variation of these basic steps.

•   Creating a P2P account. You will need to download a P2P app and then sign up for an account. In order to send money to your sister, you’ll both need to have an account with the same money transfer service.

•   Linking your bank account to your P2P account. Some P2P services have the ability to hold funds, but they generally must be linked to a primary bank account (such as your checking account), credit card, or debit card in order to be fully operational. This is how the account will pull any funds needed to make a payment.

To link your checking account, you may need your checking and routing number (which appear at the bottom of a check). Some P2P transfer services may only need your bank log-in information. Others may allow you to set up extra verification measures.

•   Searching for a user to transfer funds to. To send money to your sister, you’ll need to find her on the P2P platform. You can typically search by username, email address, or a phone number.

•   Initiating a transfer. The next step in how P2P payment works is getting the money moving. Your sister can request a payment from you, or you can initiate the payment yourself. This requires choosing the option to pay, entering a dollar amount, and confirming the transfer. If you’ve enabled additional security measures on your account, you may need to enter a PIN that gets texted to you as well.

You may have the option to add a description or note to your transaction. Some P2P services may require this information so that they can charge a fee for business-related transactions. Others offer the option to act as a personal ledger should you need it in the future.

•   Waiting for the transfer to complete. Now the funds are in motion via a P2P bank transfer. When money is sent from one customer to another, it moves in the form of an electronic package safeguarded with multiple layers of data encryption. This makes it hard for hackers to access data (like your bank account number) within the transfer while it is in motion. Similarly, data encryption is designed to keep your money and account information safe. Once the data set reaches its destination, it is decoded and deposited as currency.

•   Transferring the funds into the payee’s bank account. When a P2P transfer is completed, the funds may be deposited directly into your sister’s bank account, such as a savings account. Or they may go into an account created for her by the P2P service. Funds received into P2P user accounts can then be transferred into a person’s bank accounts at little to no cost. (Recipients are likely to pay a fee if they want the funds transferred ASAP versus in a couple of days.)

Your sister will likely receive some combination of email, text, and/or in-app notifications that the funds have arrived. If she decides to leave the money in her P2P account, she can use that account balance the next time she needs to pay someone or purchase something from a business that accepts P2P transactions.

How Long Do P2P Transfers Take?

Money transferred via P2P is usually available instantly for use within the app. However, if you choose to transfer the money into your bank account, the amount of time it takes depends on whether you opt for a standard transfer or an instant transfer.

For a standard transfer, the general rule of thumb is to allow one to three business days to complete and the money to land in your bank account. That’s because standard bank transfers use the ACH (or Automated Clearing House) system.

If you choose an instant transfer of the money from the app into your bank account, some apps may not charge a fee; others may assess a charge of 0.5% to 1.75% of the overall transfer amount.

Are P2P Money Transfers Safe?

You may wonder if mobile payment apps are safe. Any time your bank account, credit, or debit card information is online, there is a chance that someone can get a hold of it, and P2Ps are no different. While all major money transfer companies encrypt your financial information, no P2P system can say it’s totally impervious to hacks and scams.

There are additional measures you can take to make sure that your account remains secure. For example, you may be able to set up two-factor authentication, which might involve typing in a unique pin number that is texted to your phone for each transaction. Or you might elect to receive notifications each time there’s a transaction posted on your account, enabling you to spot financial fraud right away if it were to happen.

You may also want to take care when you type in a recipient’s email address, phone number, or name. A typo could lead to the money going to the wrong person.

How Do Peer-to-Peer Transfer Companies Make Money?

P2P transactions are largely offered for free to consumers, which may beg the question of how the companies that offer these services stay in business. Here are two major ways that P2P money transfer apps may generate income.

Account Fees

Typically, you can make P2P payments from a linked bank account or straight from the P2P account for free. But if you want an instant transfer or you are transferring money using a credit card or from depositing checks into your P2P account, there may be a fee involved.

Business Fees

P2P platforms aren’t just for consumers — they are used by businesses as well. Compared to the free transactions offered to standard users, businesses are generally subject to a seller transaction fee for each customer purchase made with a P2P money transfer app. Venmo, for instance, charges a fee of 1.9%, plus 10 cents for each transaction.

What Are the Benefits of P2P Money Transfers?

There are three main benefits to using online money transfer services.

•   They’re fast. Depending on the service, P2P money transfers can happen very quickly. They can take anywhere from just a few seconds to a couple of business days.

•   They’re cheap. When exchanging money between friends and family, P2P money transfers are often free. There may be a small fee, however, if you want an instant bank transfer, or if you’re using a credit card instead of a bank account, making a transfer above a certain dollar amount, conducting a high volume of transfers, or using the service for a business transaction.

•   They’re easy. P2P transfers eliminate the need to make trips to the ATM or a local bank branch to get cash, which can make money management more convenient. They also eliminate the need to get out your checkbook, write a check, and then mail it to someone. For a P2P transfer, all you likely need is a mobile device, the app, and cell service or wifi.

Alternatives to P2P Money Transfers

What if a P2P money transfer isn’t available or doesn’t suit your needs? Try these options instead to move money.

Sending a Check

You can go old-school and write a paper check. You fill out the necessary details and hand or mail the check to the person you are paying. Typically, no fee is involved, although you may sometimes have to pay for a new checkbook when you run low and order more checks.

Money Orders

Money orders are in some ways similar to a check, but you don’t write them from a bank account. Instead, you purchase them (essentially pre-paying for the amount you are sending) at the post office, businesses like Western Union or Moneygram, or from certain retailers.

Typically, you will pay a small fee. For example, the United States Post Office will issue domestic money orders up to and including $1,000. Those that are for amounts up to $500 will be assessed a $2.65 fee; for ones that are $500.01 to $1,000, $3.75 will be charged. Once you have a money order, you can either give it to the recipient in person or mail it. You can also typically track a money order to see when it’s cashed.

Using Online Bill Payment Services

Many financial institutions offer ways for their customers to pay bills electronically. A key feature of mobile banking, this bill payment service can be a simple way to send funds from your checking account, regardless of where you are or what time it is. You may be able to set up recurring payments as well for bills you receive regularly.

Wire Transfers

Wire transfers are another way to send funds electronically using a network of financial institutions and transfer agencies that operate globally. Typically, you will make a wire transfer via your bank, its website, or its app.

The process for how to wire transfer is fairly simple. You’ll need to have your payee’s banking details and will likely pay a fee to wire money.

For instance, domestic wire transfer fees can be anywhere from $0 to $30 (depending on whether they are incoming or outgoing), and they can often be processed in a few hours or within a day. International wire transfers can cost more (with both the sender and recipient possibly paying fees, typically $35 to $50 for the sender) and can take longer, typically two days. Certain banks may offer free wire transfers, perhaps only for certain types of accounts (such as premium ones), so if this is an important feature for you, it can be worthwhile to do your research.

You can also use wire transfers to transfer money between bank accounts you may have.

Recommended: Wire Transfer vs. Direct Deposit

The Takeaway

Peer-to-peer (or P2P) payment apps facilitate mobile money transactions. You can use them in place of cash or writing a check when you want to give friends or family money, whether it’s to cover your portion of a dinner bill or split the cost of a vacation rental. Some businesses also accept this form of payment.

All you need to make a P2P transfer is a mobile device, an internet connection, and your P2P app, which you must link to your bank account, debit card, or credit card.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, named the #1 Bank in the U.S. for the fourth year in a row by Forbes (2026).* Enjoy up to 3.10% APY on SoFi Checking and Savings.

FAQ

Can you cancel a P2P payment?

You cannot typically cancel a P2P payment once the recipient has accepted it. Be sure to check the recipient’s username, email, or phone number to make sure the information is correct before sending a P2P payment.

Is P2P digital money?

P2P itself isn’t a form of money — instead P2P is a digital way of moving money from one person to another. Once a P2P transfer is complete, the recipient has money they can use to pay for purchases or transfer into their bank account.

What’s an example of a P2P payment?

An example of a P2P payment would be to use a P2P app such as PayPal or Venmo to send funds to a friend you owe money. You could also use a P2P app to send a payment to a service provider, like a hair stylist for a haircut, or a retailer when you buy an item.

Do banks use P2P?

Many banks offer their own version of P2P apps. For example, you might be able to send funds from your account to a friend, a retailer, or a service provider by using a bank’s app.

Are there tax implications for using P2P payments?

If you are using P2P to send money to friends or pay for personal goods or services you received, there are no tax implications involved. However, if you use P2P payments for business, there are potential tax considerations. If a business uses P2P to accept payments from customers, those payments need to be reported as income.


SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2026 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.

^Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 5/28/26. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.

We do not charge any account, service, or maintenance fees for SoFi Checking and Savings. We do charge transaction fees for outgoing wire transfers, Instant Transfers, and global remittance transfers. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
*Awards or rankings from Forbes are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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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Certificate of Deposit vs. Savings Account: What You Should Know

CD vs Savings Account: Which Is Right For You?

Both savings accounts and certificates of deposit (CDs) can be a safe place to keep money, but there are key differences between them. A savings account can be more accessible, meaning you can typically withdraw funds when you need them, while with a CD, you agree to keep your money on deposit for an agreed-upon period of time.

Also, interest rates of CDs and savings accounts may vary. CDs typically offer higher rates than traditional savings accounts do. However, high-yield savings accounts (HYSAs) may offer rates close to (or possibly even exceeding) those of CDs.

Depending on your needs and preferences, you may discover that one option is a better fit for you. Read on for details on what savings accounts and CDs offer, how they are different, and their pros and cons.

Key Points

•   High-yield savings accounts can offer more flexibility than CDs, allowing account holders to make withdrawals without penalties.

•   CDs typically provide higher interest rates than traditional savings accounts, but high-yield accounts may offer rates that are more competitive.

•   High-yield savings accounts are ideal for emergency funds or short-term goals due to their accessibility.

•   Interest rates for high-yield savings can fluctuate, unlike fixed-rate CDs.

•   Choosing between a high-yield savings account and a CD may depend on accessibility needs, interest rates, and financial goals.

🛈 While SoFi does not offer Certificates of Deposit (CDs), we do offer alternative savings vehicles such as high-yield savings accounts.

Certificate of Deposit (CD) vs HYSA Savings Accounts

A certificate of deposit and a savings account are both vehicles that can help you build your savings thanks to interest earned. A key difference, however, is that a savings account is more accessible. With a CD, you agree to keep the funds on deposit for a certain period of time, but you may earn a higher interest rate.

That said, high-yield savings accounts may offer competitive interest rates and provide more flexibility. You can withdraw funds as needed, without being hit with penalties.

To understand more about the difference between savings accounts and CDs, it’s helpful to know how each type of account works.

Increase your savings
with a limited-time APY boost.*


*Earn up to 4.00% Annual Percentage Yield (APY) on one SoFi Savings account with a 0.90% APY Boost (added to the 3.10% APY as of 5/28/26) for up to 6 months. Open your first SoFi Checking and Savings account and receive eligible direct deposits OR qualifying deposits of $5,000 every 31 days by 12/31/26. Rates are variable, subject to change. Terms apply at https://www.sofi.com/banking/#4. SoFi Bank, N.A. Member FDIC.

What Is a Certificate of Deposit (CD)?

A certificate of deposit is a type of savings account that pays interest. An account holder agrees to keep the money on deposit for a specific term, which can range from a few months to several years, for a specific interest rate (usually, but not always, a fixed rate). CDs are also known as time deposits. A couple of points about CDs to be aware of:

•   Generally, the longer the term you choose, the higher the deposit interest rate may be. You may also find a promotional CD with a higher than usual rate.

•   You may find some variable-rate CDs offered. With these, the interest can fluctuate with the market.

•   Typically, you will pay a penalty if you withdraw funds before the end of the term. There are some no penalty CDs on the market that don’t involve a penalty for pulling money out early. They may, however, offer lower interest rates.

CDs are considered to be a safe savings option, provided they are held at a bank with Federal Deposit Insurance Corporation (FDIC) insurance. If so, you will be covered up to $250,000 per depositor, per account category, per insured institution. That means even in the rare instance of the bank failing, your funds would be covered up to that amount. If you open a CD at a credit union, you would likely be insured by the National Credit Union Administration, or NCUA, in a similar way.

How Does a CD Work?

When you open a CD, you typically commit to leaving the money in the account for a set period of time such as six months or three years. In exchange for locking up your funds in this way, the bank issuing the CD will pay out a certain amount of interest.

Many financial institutions give account holders the option to collect interest at intervals during the term of the CD or at the end of the term.

However, if you withdraw funds from the CD before its term is over (also known as its maturation date), you will likely be charged a penalty.

When the agreed upon period of time is over, you can get your original deposit back, along with the interest earned and not yet paid out, or you can roll it over into a new CD.

Pros and Cons of a CD

CDs have benefits but they also have drawbacks to consider. These are some of the pros and cons:

Pros

•   Typically have higher interest rates than many savings accounts.

•   They offer a fixed interest rate that doesn’t change over the term of the CD.

•   May be helpful for longer-term savings goals.

•   FDIC-insured

Cons

•   Money in a CD is locked in for a specific period of time.

•   Potential to miss out on a rise in interest rates after the rate is locked in

•   Early withdrawals typically incur a penalty.

•   Requires having other savings that are easy to access in case of emergencies

What Is a High-Yield Savings Account (HYSA)?

A savings account, which you can open at a bank, credit union, or other financial institution, is a place where you can save money without locking it in for an extended period of time. A high-yield savings account may help your money grow even faster.

•   A high-yield savings account is a place to keep money while still being able to access it — say, for an emergency fund or a down payment for a car you plan to buy in the coming months.

•   The funds in a HYSA account are accessible without a penalty, though some financial institutions do limit the number of transactions per month.

•   Similar to CDs, high-yield savings accounts generate interest, typically at higher rates than traditional savings accounts. For example, as of August 2026, the interest rate for an HYSA was about 4.00% while the interest rate for traditional savings accounts was 0.38%.

Most high-yield savings accounts at major banks offer FDIC insurance. If the savings account is held at a credit union instead of a bank, then the NCUA vs FDIC typically insures the money with similar guidelines.

How Does a High-Yield Savings Account Work?

With a high-yield savings account, which are often offered by online banks, money deposited in the account earns interest. Funds can generally be withdrawn as needed (though some financial institutions may put a limit on how many transactions they allow per month). The interest rate on a high-yield savings account is significantly more robust than the interest rate on a traditional savings account. However, the interest rate is usually variable, which means it can change based on market conditions.

An individual might put money in a high-yield savings account to:

•   Earn interest and grow

•   Save money for a short-term financial goal

•   Create an emergency fund

•   Keep money safe vs. having cash at home

•   Separate the money they want to save from the money they want to spend

Recommended: APY Calculator

Pros and Cons of a High-Yield Savings Account

High-yield savings accounts have advantages and disadvantages to be aware of, such as:

Pros

•   Higher interest rates than traditional savings account

•   Easy access to funds

•   FDIC insured

•   May be useful for saving for short-term goals

Cons

•   Interest rates are typically variable and can change over time.

•   Withdrawals may be limited at some institutions.

•   Because they are often offered by online banks, there may be no in-person assistance

•   Making cash deposits may require using specific ATMs or retail partners

Similarities Between CDs and Savings Accounts

CDs and savings accounts do share some similarities, including:

FDIC Insurance Protection

Typically, a CD or savings account is insured by either the FDIC or the NCUA, which help protect the money in these savings vehicles.

Guaranteed Interest and APY

Both CDs and savings accounts earn interest on the money deposited into them. While CDs may earn a higher interest rate than traditional savings accounts, a HYSA may offer a competitive interest rate to a CD.

Key Differences: CD vs Savings Account

Of course, there are some important differences between these two types of accounts that are worth understanding.

Liquidity and Fund Access

With a CD, you can’t remove your money until the date of maturity without being penalized. With a savings account, you can usually make either up to six withdrawals a month or unlimited withdrawals. (Check with your financial institution for specifics.)

Interest Rates and Fixed Terms

Traditional savings accounts generally earn less interest than CDs. However, a high-yield savings account may offer a rate that’s competitive to a CD. Comparison-shop to see what’s offered.

While CDs have fixed interest rates, savings accounts typically have variable rates that can change based on market conditions.

Early Withdrawal Penalties

If you withdraw money early from a CD you will be charged an early withdrawal penalty. With a savings account, your funds are easily accessible.

Recommended: APR vs. APY

When to Choose a CD Over a Savings Account

Here’s some guidance on when an individual might opt for a CD vs. a savings account.

•   A CD may be a good fit if you don’t need to access your money in the near future. If you can leave the money untouched in the CD for the specified number of months or years, you could earn a higher interest rate than you would with a savings account.

•   Another scenario in which a CD may be a wise move is if interest rates are expected to fall. Locking in your rate with a CD before that happens could potentially help your money grow.

When to Choose a Savings Account Over a CD

A savings account may be a better option in certain situations.

•   A savings account can be a good place to store money you need to be easily accessible in the near future, such as when you’re building an emergency fund or saving up for a short-term financial goal.

•   Putting money in a savings account may be a wise move if interest rates are expected to rise. That way, you can enjoy higher earnings as rates climb. That wouldn’t be the case if you locked in to a fixed-rate CD.

CD vs Savings Account vs Money Market Account

Another option for saving money and earning interest is a money market account, which is another type of deposit account. Money market accounts have similarities to and differences from CDs and savings accounts. These include such factors as:

•   Like CDs, money market accounts generally offer higher interest rates than traditional savings accounts (although CDs typically offer higher rates than money market accounts).

•   Like savings accounts and CDs, money market accounts are FDIC (or NCUA) insured.

•   When it comes to money market accounts vs. certificates of deposit, money market accounts don’t limit access to your money for months or years the way CDs do.

•   Unlike some savings accounts, money market funds may have restrictions on the number of deposits and withdrawals account holders can make.

•   Unlike savings accounts or CDS, money market accounts generally allow account holders to write checks or process debit transactions against the funds in their account.

•   Money market accounts may require higher minimum balances to avoid monthly fees.

How to Open a CD

To open a CD, you can choose a financial institution, and pick the type and term of CD you want. You’ll also determine how often you want to collect your interest payments (say, monthly or when the CD matures, meaning when it reaches the end of its term).

Typically, you can open a CD in person or online. The process generally involves providing your personal details (name, address, Social Security number, and so forth), and other credentials.

The final step will be to fund the CD. That usually happens by transferring the money online, handing over cash if you’re at a branch, or by using a check.

How to Open a High-Yield Savings Account

The first step for opening a savings account, including a high-yield savings account, is generally to compare financial institutions and account options.

Things to consider include minimum opening deposits and minimum balances; the interest rates (these will vary between standard and high-yield accounts). You may also find a variety of fees relating to some savings accounts, so consider how those might impact your savings.

Next, you will likely have to provide personal information (such as name, address, and SSN), and other details to complete the process.

Then, you’ll need to add cash to open the account, whether by handing over money in person or transferring funds. A typical deposit requirement for a basic savings account might be $25 to $100; you might find some that don’t need any deposit. For a HYSA, you could see minimums ranging from similar levels to thousands of dollars in some cases.

The Takeaway

Both CDs and savings accounts are secure, low-risk places to keep money and earn interest. With a CD, you may earn higher interest than with a traditional savings account, but you’ll need to keep your money on deposit for a specific term or else be penalized for an early withdrawal. With a savings account, your funds are easily accessible without that kind of penalty. With a high-yield savings account, you might earn an interest rate that’s competitive to the interest rate on a CD. Which financial product is the right choice will depend on your particular needs and goals.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, named the #1 Bank in the U.S. for the fourth year in a row by Forbes (2026).* Enjoy up to 3.10% APY on SoFi Checking and Savings.

🛈 While SoFi does not offer Certificates of Deposit (CDs), we do offer alternative savings vehicles such as high-yield savings accounts.

FAQ

Is a CD better than a high-yield savings account?

Whether a CD or high-yield savings account is better depends on your unique financial needs. If you have money you don’t need to access any time soon and you can find a higher interest rate for a CD vs. a savings account, then a CD may be a better fit. If, however, you need to be able to access your money and make withdrawals, a savings account may probably better suit you. And you might find a high-yield savings account that has a rate that’s competitive to a CD’s.

Can you lose money in a CD or savings account?

Generally speaking, no. Most major banks and credit unions are insured by either the FDIC or NCUA for up to $250,000 per depositor, per account type, per insured institution, which protects consumers with CDS or savings accounts in the unlikely event that the financial institution should fail.

Do CDs always offer higher interest rates than savings accounts?

In general, a CD can provide a higher interest rate than a traditional savings account, but it pays to research exactly what is being offered. It’s possible that a CD’s interest rate might not be high enough to outweigh the downside of not being able to access your funds the way you can with a savings account. Or you might find that a high-yield savings account offers an interest rate competitive to that of a CD, plus greater accessibility to your money.

How much does it cost to withdraw from a CD early?

Penalty amounts for early withdrawal from a CD vary by financial institution and the terms of the CD. Penalties are generally calculated as a certain number of days or months of interest. Typically, early withdrawals from a CD cost 60 to 365 days of interest, and longer CD terms tend to have steeper penalties. To calculate a penalty, divide the CD’s annual interest rate by 365 to get the daily interest, then multiply that number by the number of penalty days charged by your financial institution.

Can I transfer money from a CD to a savings account?

You can transfer money from a CD to a savings account once the CD has reached its maturity date without paying penalties. However, if you take money out of a CD early to transfer it to a savings account, you will typically need to pay an early withdrawal penalty.


About the author

Jacqueline DeMarco

Jacqueline DeMarco

Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.


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A shape showing two irregular market trend lines, one above a central horizontal line (in blue) and one below (in purple).

Bull vs Bear Market: What’s the Difference?

In the financial world, you’ll often hear the terms “bull market” and “bear market” in reference to market conditions. These terms refer to extended periods of ups and downs in the financial markets. Because market conditions may directly affect investors’ portfolios, it’s important to understand the differences between them.

Knowing the basics of bull and bear markets — and potentially maintaining or adjusting your investment strategy accordingly — can help you make informed investing decisions.

Key Points

•   A bull market is a period in which asset prices are rising, often reflected in a rise of 20% or more in major market indexes over two or more months.

•   A bear market is a period in which prices have dropped from market highs, often reflected in falls of 20% or more in major market indexes over two or more months.

•   Bull markets have historically lasted longer (about five years, on average) than bear markets (closer to a year, on average) and have tended to see greater average cumulative gains (around 150%) than the average bear market’s cumulative losses (about 30%).

•   Markets are often unpredictable, and investors react to market shifts in many ways.

•   It’s important to consider your investment goals and risk tolerance when making decisions in any market. Diversifying investments may also help manage risk during market shifts.

What Is a Bull Market?

A bull market is a period in the financial markets where asset prices are rising, and optimism tends to be high. A bull market is generally seen as a good thing for most investors because stock prices are on the upswing and it may indicate that the broader economy is growing.

It isn’t always easy to identify a bull market at first, and what qualifies as a bull market is often debated. However, a widely accepted benchmark is a 20% or greater rise in major market indexes over a period of two or more months.

The term “bull market” was coined in response to its predecessor, bear market. “Bears” became associated with speculators who sold investments in anticipation of prices falling. In the 1700s, “bull” was used to describe speculators purchasing assets with the anticipation that prices would rise, and the bull became the mascot for upward-trending markets.

Recommended: Bullish vs Bearish: What’s the Difference?

What Is a Bear Market?

Investors and market watchers generally define a bear market as a drop of 20% or more from market highs. When investors refer to a bear market, they usually mean that broad market indexes, such as the S&P 500 Index or the Dow Jones Industrial Average (DJIA), fell by 20% or more over at least two months.

The term “bear” has a long history. It can be traced back to an old proverb, warning that it isn’t wise to “sell the bear’s skin before one has caught the bear.” In time, “bear’s skin” became simply “bear,” and people started to use the term to describe speculators in the markets. Those speculators would sell investments with the belief that prices would soon fall, with the goal of buying them back at a lower price. From there, “bears” became associated with downward-trending markets.

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Bull vs Bear: Main Differences

The most obvious difference between bull and bear markets is that one is associated with a downward-trending market, and the other, with an upward-trending market. But there are other differences, as well.

For instance, bull markets tend to last longer than bear markets, although there’s no guarantee that any bull market will last longer than any particular bear market. According to historical market data, the average bull market lasts approximately five years, while the average bear market lasts closer to one year.

Typical gains and losses also tend to be lopsided between the two. The average cumulative gain over the course of a bull market is about 150%, while the average cumulative loss during a bear market is about 30% (though historical market patterns are not a guarantee of future performance).

Bull vs Bear Market: Key Differences
Bull Market Bear Market
Upward-trending market Downward-trending market
Average duration of about five years Average duration of about one year
Average cumulative gains of ~150% Average cumulative losses of ~30%

How Is Investing Different During a Bull Market vs a Bear Market?

Depending on the individual investor, investing can be different during rising bull markets vs. declining bear markets. For some people, their investing habits may not change at all, but for others, their entire strategy may shift. A lot of it has to do with an investor’s personal risk tolerance, strategy, and investing timeline.

Some investors may adjust their portfolio allocations based on the level of risk they’re comfortable with and the amount of time they may have to absorb shorter-term market volatility. Other investors may maintain a consistent strategy regardless of market activity, and not change their investing habits at all.

Sticking to investing strategy can sometimes be a challenge for investors in bear markets, in particular, when the value of individual portfolios may decline. However, it’s also important to remember that bear markets and bull markets are cyclical. Bear markets tend to appear, on average, about every five years, typically followed by a longer bull market.

Whether market sentiment is optimistic or cautious, the psychological weight of market movements can lead to reactive decision-making. Staying anchored to a disciplined, well-structured financial plan can help investors manage emotional responses across every phase of the market cycle.

Investing During a Bull Market

Investors may choose to adopt different investment strategies during a bull market depending on their circumstances and goals.

Some investors may find it psychologically easier to invest during a bull market, when assets are (more broadly) appreciating, and they may see a more immediate unrealized return in their portfolio. However, this also comes with the risk of buying assets with potentially inflated values that may decline again in the future.

Other investors may choose to sell securities that have risen in value for profit or to reinvest gains in new investment opportunities. Some may wait to sell in a bull market in anticipation of market prices rising higher. However, no one knows when a peak will arrive, and attempting to time the stock market is challenging even for professional investors.

Many investors stick with a buy-and-hold strategy, where they maintain a long-term asset allocation strategy regardless of short-term price swings. While there are never guarantees in investing, this strategy gives them the chance to benefit from potential long-term market growth while avoiding emotional decision-making. Diversification can be an important part of this strategy to avoid taking on too much risk for individual circumstances. Diversification can’t guarantee profits, however, or fully protect investments in a declining market.

Investing During a Bear Market

Investing during a bear market requires balancing emotional discipline with a clear understanding of your overall financial goals. Bear markets can be particularly nerve-wracking since it can sometimes be difficult to see them coming. Some signs that a bear market may be looming include a slowing economy, increasing unemployment, declining profits for corporations, and decreasing consumer confidence, among other things.

Evaluating the potential risks of and opportunities for buying, selling, or holding assets in a bear market may help investors stick with their core strategy through volatile market cycles.

Buying

Buying stock during a bear market may allow an investor to secure a lower price, since the stock may rise in value over time as the market recovers. This is known as buying the dip.

However, this can be a form of timing the market, and there can be significant risks associated with trying to predict when certain stocks will hit bottom and buying them with the expectation of future gains. No one knows what the future holds, so there’s always a chance the price will keep falling.

Another tactic investors might be able to use is dollar-cost averaging (DCA), which is investing a fixed amount of money over time, so that chances of buying at high or low points are spread out over time. This allows investors to avoid emotional decision-making and attempting to time the market.

Dollar cost averaging comes with the risk of missing out on potential gains during rising markets, however, since a larger sum invested all at once earlier in a specified time period may yield a higher return. Dollar cost averaging also does not guarantee a profit or protect against losses in declining markets.

Recommended: The Pros and Cons of a Defensive Investment Strategy

Selling

When a bear market starts to set in, some investors may adjust their portfolio allocations — selling some types of assets and purchasing others — to align their portfolio with the level of risk they’re comfortable with.

Some investors may begin to sell their stocks to avoid further losses in a bear market. However, doing so could potentially lock in losses. An investor with a long-term strategy may choose to hold their investments and remain positioned to capture potential upside if the market rebounds. Broad market indexes have historically recovered from downturns over time, though individual portfolio recovery can vary.

Holding

If investors are investing for the long haul and comfortable with their portfolio mix, they may opt to hold their investment and/or maintain their predetermined strategy, no matter what’s happening in the markets in the short term. For example, investors might continue investing a set amount through their online brokerage in a robo or active investing account using a dollar cost averaging strategy. It’s worth remembering that market cycles are normal, and the same dynamism responsible for downturns may allow investors to experience gains at other times.

Overall, one way to prepare for a bear market is to try and remember that the market will likely, at some point, see a downturn. And, accordingly, to try and be prepared for it.

One way to do so could be to make sure your assets aren’t allocated in a way that’s riskier than you’re comfortable with — for example, by being overly invested in stocks in one company, industry, or region. In other words, make sure the diversification of your portfolio is in line with your risk tolerance and goals.

Examples of Bull and Bear Markets

From a historical perspective, bear markets are fairly common, occurring approximately every five years. In fact, dating back to 1929, the S&P 500 has experienced a decline of 20% or more at least 25 times, though these have been less frequent since 1945.

Most recently, the S&P 500 dropped roughly 20% in early April 2025 during the U.S. announcement of global tariffs in what was nearly a bear market. Prior to that, the most recent bear market was during 2022, amid the start of the current Ukraine conflict, and lasted approximately 280 days, with a market decline close to 30%.

Before that, there was a bear market in February and March 2020, when the pandemic initially hit the U.S., which saw the markets fall by more than 33%, but the bear market itself lasted only 33 days.

Going back even further, there was a relatively severe bear market in the early 1970s that lasted 630 days and saw the market decline by 48%. That makes more recent downturns look fairly tame in comparison.

The Takeaway

Bull and bear markets refer to rising and declining markets, respectively, with bear markets particularly notable as they represent declines of at least 20% in the market. Both bull and bear markets can have psychological as well as financial effects, and it’s important to understand what they are so you can try to adjust (or stick to) your strategy accordingly.

If you’re investing for decades down the road, one option may be to maintain a long-term investing strategy, regardless of what the market is doing, once you have an investment mix that is diversified and matches your comfort with risk. It may also be a good idea to speak with a financial professional for guidance.

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FAQ

What’s the difference between a bull market and a bear market?

A bull market is a period in which asset prices are rising, the economy may be expanding, and investors are generally feeling optimistic. A bear market is a period in which prices have fallen, usually by 20% or more (according to major market indexes) over two or more months.

How long do bull and bear markets last?

Bull markets tend to last longer, reaching an average of about five years, according to historical market cycles. The average bear market lasts closer to a year, though some bear markets are longer than others.

What should investors do in a bull market?

How an investor reacts to a bull market can vary depending on their strategy, risk tolerance, and goals. Investors focused on a long-term, buy-and-hold strategy may simply maintain their current investment plan. Some investors may wish to sell when stock prices are rising, though this could potentially mean missing out on future, longer-term gains.

Some investors are tempted to take on more risk when prices are rising. However, it may be a good idea to keep confidence in check during a bull market since it’s hard to know when a downswing may arrive.

What should investors do in a bear market?

Navigating a bear market can involve maintaining financial discipline, evaluating your personal goals and timeline, and avoiding panic-driven decisions. While market downturns can be uncomfortable, many investors focus on a few key strategies to help manage risk.

These may include maintaining an investment strategy focused on potential long-term growth, rather than shorter-term market volatility, and allocating assets in a portfolio to align with risk tolerance. Some investors may purchase stocks while prices are lower; however, keep in mind there’s no guarantee that a given stock will recover from a downturn.



This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.
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