hands on table using smartphones

What Are P2P Transfers & How to Use Them

P2P payments, aka peer-to-peer transfers, are a great way to use digital technology to send money to other people or receive funds from them. With a money transfer app or perhaps one from your financial institution, you can send a friend your half of the dinner bill, gas money, or other payments, quickly and easily from your mobile device. Chances are, you can also buy items (say, on Instagram or a website) using one of these apps.

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

Here’s a closer look at exactly how these apps work, including:

•   What is a P2P money transfer?

•   How does a P2P payment work?

•   How long does a P2P transfer take?

•   Are P2P payments safe?

•   What are some alternatives to P2P payments?

What Is a P2P Payment?

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, 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 that payment.

Typically, a P2P account is attached to your bank account online. 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: How to Transfer Money From One Bank to Another

Get up to $300 when you bank with SoFi.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.30% APY on your cash!


Understanding How P2P Transfers Work

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, 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. In most cases you will be able to add her account as a contact or “friend” in your account.

•   Initiating a transfer. The next step in how a 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 send funds, entering a dollar amount, and then clicking submit. 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 be prompted to choose whether you are making a purchase or sending money to a friend or family member. This can impact whether fees get assessed and what kind of protection you receive for the transaction.

You may have the option to add a description or “memo” 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 the data (like your bank account number) within the transfer while it is in motion. Similarly, data encryption keeps 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. 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 traditional bank accounts at little to no cost. (You are likely to pay a fee if you 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?

The general rule of thumb for P2P transfer services is to allow one to three business days for a transfer to complete (although some seem instantaneous; timing varies). That’s because standard bank transfers use the ACH (or Automated Clearing House) system, which can take a day or two to complete.

When it comes time to move funds from the app to, say, a checking account, some apps may charge a small fee, often around 1.75% of the overall transfer amount.

Are P2P Money Transfers Safe?

Many people wonder, Are mobile payment apps 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 also 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. 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 that standard user profiles offer, business profiles 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, are using a credit card instead of a bank account, are making a transfer above a certain dollar amount, are conducting a high volume of transfers, or are 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. 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 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 money orders up to and including $1,000. Those that are for amounts up to $500 will be assessed a $1.75 fee; for ones that are $500.01 to $1,000, $2.40 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 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 access a wire transfer via your bank, its website, or its app. You’ll need to have your payee’s banking details and will likely pay a fee to wire money.

For instance, domestic wire transfers can charge a fee of anywhere from $15 to $50, and they can 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) and can take longer, typically two days.

Recommended: What Is an E-Check (Electronic Check)?

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 or credit card.

Customers with a SoFi online bank account can send money to any person, anywhere, even if that person doesn’t have a SoFi Checking and Savings account. If the person does happen to be a member of SoFi, the transfer will happen instantaneously. That’s not the only reason to open an online bank account with SoFi, though: You’ll also earn a competitive annual percentage yield (APY), pay no account fees, and, for qualifying accounts, get paycheck access up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.30% APY on SoFi Checking and Savings.

FAQ

How much time does a P2P transfer take?

P2P accounts can take just a few seconds or a couple of days to move funds. Then, if the person who has money in the P2P app wants to transfer their cash to a bank account, that can also take between hours and a few days. Often, you may be charged a fee if you want the money moved ASAP.

Is P2P digital money?

P2P, or peer-to-peer-payments, are a digital way of moving funds from one person to another. Once the transfer is complete, the recipient has money they can use to pay for purchases or transfer into a 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. Or you might send a payment to a service provider or retailer using P2P apps as well.

Do banks use P2P?

Many banks offer their own version of P2P apps. For example, you might be able to almost instantly send funds from your account to a friend, a retailer, or a service provider.


SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.


SoFi members with direct deposit activity can earn 4.30% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, 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 Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.30% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.30% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/8/2024. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.

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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How to Stop Payment On a Check_780x440

Issuing a Stop Payment on a Check

At some point in your financial life, you may need to issue a stop payment on a check to prevent it from being cashed. This might happen because a check gets lost or stolen. Or perhaps you need to cancel a check because you filled it out with the wrong information, such as an incorrect payee or amount. Or maybe you accidentally issued a duplicate payment and are worried about overdrawing your bank account. It happens!

Fortunately, if you take action quickly, you can prevent a check or an electronic payment from being processed with a stop payment order. It can be as simple to complete as contacting your bank.

Read on to learn more, including:

•   What is a stop payment on a check?

•   How do I stop payment on a check?

•   What are alternatives to stop-payment orders?

What Is a Stop Payment on a Check?

A stop payment on a check is a way of requesting that a financial institution cancel a check or other payment that hasn’t been fully processed yet. It’s a way of intervening to stop a payment you initiated.

Doing so can help lessen your financial stress if you have a check that’s circulating with incorrect information on it or that could cause you to overdraft your account.

Typically, you will pay a fee for this service and it can only happen if the check or other payment has not yet been processed. If the recipient of the funds has cashed the check, you cannot reverse that.

Recommended: Ordering Checks – A Complete Guide

Get up to $300 when you bank with SoFi.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.30% APY on your cash!


Issuing a Stop Payment on a Check

If you are in a situation where you want to stop payment on a check (say, you filled the check out for the wrong amount or to the wrong person), there are steps you can follow. This can also be a method for canceling an ACH payment vs. a check; say, a recurring electronic payment you set up.

Here are the specifics on how to stop payment on a check:

1. Checking Your Bank Account to See if the Check Cleared

Before you start the process of canceling a check or payment, it’s a good idea to make sure it hasn’t already been processed.

You can do this by pulling up your account online or calling the bank’s automated phone line to see if the check or payment has already been deducted from your account.

If the amount has been processed, your opportunity to stop payment is unfortunately gone. If it hasn’t, however, you can likely stop the check or payment from being cashed or deposited.

Note: You cannot stop payment on a cashier’s check or money order as these are prepaid forms of payment.

2. Compiling the Check Info

Next, in order to contact your bank with the full story on the check in question, gather the following information:

•   Your account number and routing number

•   The recipient’s or payee’s name

•   The date you wrote the check

•   The check number

•   The amount of the check

For ACH payments, you may be asked to supply the company name, account number, ACH merchant ID, and the payment amount.

3. Contacting Your Bank

The next step in how to stop payment on a check is contacting your financial institution. You’ll want to do this as quickly as possible. Here’s how this typically works:

•   You might call your bank’s customer service number or reach out online. Some people prefer to go in person to a brick-and-mortar branch if they keep their accounts at a traditional bank.

•   It’s possible that your bank will want you to fill out a stop-payment form in order to initiate the process. You may need to complete this within 14 days to prevent the stop-payment order from expiring.

•   You may need your ID handy to prove your identity.

Once your bank authorizes your stop-payment request, the check or payment should no longer be valid.

4. Getting in Touch With the Payee

Depending on your reason for requesting a stop-payment order, you may also want to contact the payee in order to let them know about the stop payment. You can then arrange for a new payment if needed.

Recommended: What Is a Duplicate Check?

5. Extending the Stop Payment if Needed

A stop-payment order is a formal request to cancel a check or ACH payment (such as a recurring monthly bill payment) before it’s been processed.

Stop-payment orders on checks typically last for six months. This is the same amount of time as how long personal checks are good after being issued. So that should therefore be a sufficient amount of time to prevent the check from being cashed.

However, many banks allow you to renew a stop-payment order if the check is still outstanding. If your bank charges a stopped check fee, they may also charge a fee to renew the stop-payment order.

Stop-payment orders on ACH payments last indefinitely.

Recommended: Guide to Altered Checks and How to Spot One

How Much Does It Cost to Stop Payment on a Check?

Now that you know how to stop a check, here’s how much it will likely cost you. Just as with cashing a check, fees for stopping payment on a check vary from one bank to the next. The typical fee is between $15 to $33. Some banks will waive the stop-payment fee for customers with premium-tier checking accounts.

Alternatives to Stop-Payment Orders

A stop-payment order is one way to prevent a payment from being processed. With an electronic payment, another option may be to contact the business or vendor directly.

Whether it’s your electric bill or a monthly streaming service, companies can typically stop or delay billing on request. A couple of considerations:

•   If you stop a bill payment via the bank without reaching out to the service provider, the company can respond by cutting off your access to its services.

•   If you instead delay the automatic debit by working with the vendor, you may be able to avoid a disruption in service, and also avoid paying a stop-payment fee to the bank.

The Takeaway

Mistakes and miscommunication can happen, and checks sometimes get lost or stolen. That’s when a stop-payment order can come in handy, canceling a check or electronic debit payment that’s waiting to be processed. While handy in some situations, note that stop payments often incur a fee that can typically range from $15 to $33.

If you’re looking for a bank that makes managing your money simple and convenient on a daily basis and when hiccups occur, consider opening an online bank account with SoFi. Our Checking and Savings account allows you to earn, spend, and save, all in one account. You can easily track your balances, pay bills, and send money to friends right from the SoFi app. More good news: With a SoFi checking account, you’ll earn a competitive annual percentage yield (APY) and pay no account fees, both of which can help your money grow faster.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.30% APY on SoFi Checking and Savings.

FAQ

How long does a stop payment on a check take?

The time required for a stop-payment request will depend on your financial institution. You may be able to do it very quickly in person, by phone, or electronically with your bank (especially if you have all the pertinent details handy) and have it authorized within minutes. At other banks, you may need to fill out and submit a stop payment request and wait for the bank to process it. Once in place, stop payment orders typically last six months.

Is a stop payment the same as canceling a check?

Yes, a stop payment is the same as canceling a check that has not been processed or paid yet. Note, however, that there is a more complex process of check cancellation that is sometimes available for prepaid checks such as a cashier’s check or money order.

How much does it cost to put a stop payment on a check?

Typically, a stop payment will cost between $15 and $33 when you issue this order. In some cases, a bank may waive the fee; you can check with yours to see if this is possible.


SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.


SoFi members with direct deposit activity can earn 4.30% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, 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 Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.30% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.30% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/8/2024. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.

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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Payday Loan vs. Installment Loan: What Are the Main Differences?

Payday Loan vs. Installment Loan: What Are the Main Differences?

If you need cash to cover an emergency expense, like a car repair or medical bill, a payday loan or an installment loan are two options you may consider. However, these two loans are different in key ways that are crucial to understand before making a choice between them. Namely, a payday loan tends to have a short turnaround before you need to pay it off, and typically offers extremely high interest rates.

We’ll explain more about the features of each loan type, and why people choose payday loans vs installment loans.

What Is a Payday Loan?

There is no set definition of a payday loan. Generally speaking, they are short-term loans that are due to be paid back on your next payday. Payday loans don’t charge interest per se, but they do charge high fees.

Payday loans are typically for relatively small amounts. In fact, many states limit the amount of a payday loan to $500. Borrowers usually repay the loan in a lump sum on their next payday. The specific due date is often between two and four weeks from when the loan was made.

To repay the loan, borrowers must make out a post-dated check to the lender for the full balance of the loan plus any fees. As an alternative, borrowers can give permission for the lender to electronically debit the funds from their bank account on a certain date. If the borrower doesn’t repay the loan by the due date, the lender can cash the check or debit the funds — either way, the lender gets paid.

In some states, borrowers may be able to roll over the amount of the loan, paying only the fees when it comes due, while the lender pushes out the due date.

Risks of a Payday Loan

The risks of payday loans include sky-high fees and the potential for falling into a cycle of debt. Many states set a limit on payday loan fees, but they can still run from $10 to $30 for every $100 borrowed. Consider that a $15 fee for $100 is the equivalent of nearly 400% APR. By comparison, the average personal loan interest rate is 9.41%, according to the Federal Reserve of St. Louis.

Pros and Cons of Payday Loans

Before signing on for a payday loan, carefully consider the advantages and disadvantages.

Pros of Payday Loans

Cons of Payday Loans

Provide quick access to cash, often with same-day turnarounds. Very expensive, with fees equivalent to a 400% APR.
No credit check required. To qualify, you typically need to be 18 years old, have a government I.D., bank account, and regular source of income. Lenders don’t consider your ability to repay the loan, and the loan doesn’t help you build credit. As a result, these lenders are considered “predatory.”
Unsecured: Borrowers are not required to put up property as collateral. Borrowers can get trapped in a cycle of debt. If they are unable to pay back the loan, borrowers will pay expensive fees each time they roll over or renew their loan.

What Is an Installment Loan?

When a borrower receives an installment loan, their lender will give them a lump sum upfront, which the borrower has to repay in fixed payments with interest over a set period of time. Personal loans are a good example of an installment loan.

They can range in size from a few hundred dollars to $100,000, and the money can be used for any reason, from covering unexpected expenses or consolidating debt to remodeling a home. Repayment terms may stretch from a few months to a few years.

How Installment Loans Work

During the loan application process, lenders will consider factors such as a borrower’s credit score and reports, their income, and the amount and length of the loan.

Typically, borrowers with good credit scores will receive the best terms and interest rate options. These loans may have variable interest rates or fixed, meaning they don’t change over the life of the loan.

Installment loans may be secured or unsecured. Unsecured loans, such as unsecured personal loans, do not use collateral to back the loans. Secured loans do require collateral and may offer borrowers a lower interest rate since they present less risk to the lender.

Recommended: How to Get Approved for a Personal Loan

Pros and Cons of Installment Loans

Personal installment loans tend to offer borrowers the option of borrowing at lower rates than are available through revolving credit or payday loans. However, it’s still important to consider disadvantages in addition to benefits.

Pros of Installment Loans

Cons of Installment Loans

Borrowers can finance a big purchase over a period of up to several years. . Interest rates may be higher than other alternatives, such as a home equity line of credit.
Payments typically remain fixed over the life of the loan, unless the borrower chooses a variable interest rate. May be subject to fees, such as closing costs.
Secured loans don’t require collateral, while unsecured loans may offer lower interest rates. Missed payments can damage credit scores. Defaulted loans may be sent to collections.

Payday Loans vs Installment Loans: Key Differences

By now you’ve likely got a good sense that installment loans and payday loans differ in some important ways. Here’s a side-by-side comparison.

Payday Loans

Installment Loans

Repayment terms Payment is due on the borrower’s next payday, usually two to four weeks from the date the loan was taken out. Loan is repaid in regular installments, often monthly, typically over 2 to 5 years.
Loan amounts Often limited to $500. Can range between a few hundred dollars and $100,000.
Interest rates Payday loans don’t charge interest, but they do charge costly fees that can be the equivalent of up to 400% APR. Interest rates vary, depending on a borrower’s credit history, among other factors. The average personal loan interest rate is 9.41%.
Use cases Payday loans are typically targeted to borrowers with poor credit and few other lending options. Loan money can be used for any reason. Some installment loans, such as auto loans or mortgages, are limited in how they can be used. Personal loans can be used for any purpose.
Risk Payday loans are predatory loans that can trap borrowers in a cycle of debt. Lenders don’t consider a borrower’s ability to repay the loan, and the loan won’t help build credit. Failure to repay an installment loan on time can damage credit. Defaulting on secured loans may result in loss of property.
Credit requirement None. The application process for installment loans requires a credit check.

Why You Should Avoid Payday Loans

Payday loans are usually predatory in nature and should be avoided. Fees make them an expensive form of credit. If you don’t have the money to repay it on the due date, lenders may try to cash the post-dated check, which will bounce, triggering fees. Or if you provided your bank account information, the lender may try to withdraw the funds, triggering overdraft fees with each attempt.

Payday lenders might also sell your loans to a debt collector, which can lead you to being harassed by collections calls.

Explore SoFi’s Low-Rate Personal Loan Options

Payday loans and installment loans both provide quick cash to cover emergency expenses. However, because of their astronomical fees — equivalent to a 400% APR — payday loans fall under the heading of “predatory lending.” On the other hand, installment loans vary in their terms but generally are a much better deal, provided that you meet eligibility requirements.

Considering options for borrowing? Check out personal loans from SoFi with low fixed rates on loans between $5,000 and $100,000. What’s more, personal loans from SoFi charge no fees and offer funding as quickly as the same day the loan is approved.

Compared with high-interest credit cards and payday loans, a SoFi Personal Loan is simply better debt.

FAQ

Are payday loans installment loans?

No, payday loans usually require you to pay off the loan amount in full on your next payday, usually two to four weeks from when the loan was made.

What is an installment loan?

When you take out an installment loan, you immediately receive the money you’re borrowing. You then pay it back to your lender in a series of regular fixed payments known as installments.

Are personal loans installment loans?

Personal loans are one type of installment loan. Money from the loan can be used for any purpose, such as debt consolidation or a home remodel.


Photo credit: iStock/Prostock-Studio
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.


Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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How Does a Subprime Personal Loan Work?

How Does a Subprime Personal Loan Work?

Subprime personal loans provide financing to people with poor credit who cannot qualify for a conventional prime-rate loan. Borrowers who have poor credit have a higher risk of defaulting on loans, so lenders protect themselves by adding charges to the loans. These charges come in the form of higher interest rates, longer term lengths, and higher financing fees.

Read on to learn how subprime personal loans work, the different types of loans, some alternatives to these high-interest loans, and whether they might be an option for you.

What Is a Subprime Personal Loan?

A subprime personal loan is a loan that caters to borrowers with subprime credit, who are considered to be at a high risk of default. A subprime lender will charge a higher interest rate and set longer loan terms to cover the cost of their risk.

There are fairly rigid credit score requirements for a personal loan. The Consumer Financial Protection Bureau lists five credit score levels; the first column shows what type of loan someone will qualify for.

Credit Level

Credit Score

Deep subprime Below 580
Subprime 580–619
Near-prime 620–659
Prime 660–719
Super-prime 720 and above

A borrower with a FICO score below 620 will find it difficult to secure a loan from a traditional lender. Many online lending platforms allow consumers to search a network of subprime personal loan lenders to find the best deal. Borrowers submit a loan application online to pre-qualify.

Subprime loans have certain characteristics. They may require a larger down payment. Someone with a fair credit score who takes out a car loan may have to pay 5% down, whereas someone with poor credit might have to put 10% down. A subprime loan may come with an adjustable interest rate or a fixed interest rate.

Types of Subprime Loans

There are four main types of subprime loans: interest-only, fixed-rate, adjustable-rate, and dignity loans.

Recommended: Personal Loan Interest Rates Now

Interest-Only Subprime Loan

Sometimes called exotic loans, an example of an interest-only loan is an adjustable-rate mortgage where the borrower pays only the interest for the first few years before beginning to cover some of the principal. If interest rates have gone up, the payments can become huge.

Pros of Interest-Only Subprime Loan

Cons of Interest-Only Subprime Loan

Initial monthly payments are lower The borrower is often not aware that interest rates could skyrocket in the future
An interest-only loan can be paid off faster than a traditional loan Borrowers may rely on having more income in the future to meet the higher payments
Flexibility: Borrowers can use extra cash to pay off the principal earlier In the case of a mortgage, if housing prices fall, the mortgage debt may exceed the value of the home

Fixed-Rate Subprime Loan

Fixed-rate subprime loans allow the borrower to lock into a fixed interest rate for the life of the loan. The monthly payments don’t change, so there are no surprises for the borrower. However, the terms of these loans are longer, and borrowers pay more interest over the life of the loan.

Pros of Fixed-Rate Subprime Loan

Cons of Fixed-Rate Subprime Loan

Interest rates are the same for the life of the loan Long repayment period (30 years or more), so the borrower pays more for the loan
Monthly payments don’t change No flexibility

Adjustable-Rate Subprime Loan

Interest rates on an adjustable-rate subprime loan are fixed for an initial period. After that, the interest rate will become variable, and your monthly payments will go up and down with market interest rates.

Pros of Adjustable-Rate Subprime Loan

Cons of Adjustable-Rate Subprime Loan

Interest rate is fixed for an initial period Once the initial period is over, the interest rate will increase
Interest rates can be low initially, so the borrower has cash that can be invested elsewhere Budgeting for the future is difficult because future payments are uncertain

Dignity Subprime Loan

For a dignity subprime loan, borrowers put down 10% of the loan amount to qualify. The interest rate is higher initially. Then the rate changes to the prime rate if the borrower has kept up with the payments.

Pros of Dignity Subprime Loan

Cons of Dignity Subprime Loan

If you keep up with the payments, the interest rate will drop to the prime rate A 10% down payment is required. The initial interest rate is high
Interest rates can be low initially, so the borrower has cash to invest elsewhere Budgeting for the future is difficult because future payments are uncertain

Pros and Cons of Subprime Personal Loan

The advantages and disadvantages of subprime personal loans center around the interest rates and fees. How disciplined the borrower is in their money management is also a factor.

Pros of Subprime Personal Loan

The pros of a subprime personal loan can be summed up as “perceived affordability.”

Adjustable Interest Rate

Adjustable interest rates are a double-edged sword. On the one hand, subprime loans with an adjustable rate are attractive because the initial rate is low. This frees up cash that savvy borrowers can use to earn money elsewhere or pay off the loan principal sooner. However, once the initial period is over, the rate can skyrocket with market rates.

Longer Repayment Period

A longer repayment period means that the borrower will have lower payments. However, they will end up paying more in interest over the life of the loan. Still, lower payments can be beneficial, particularly if the loan has a fixed interest rate, and the borrower knows exactly how much they must pay each month.

Cons of Subprime Personal Loans

The perceived affordability of subprime personal loans comes with trade-offs.

Higher Interest Rate

Subprime loans have significantly higher interest rates than prime loans. That means a subprime borrower can pay much more in interest over the life of their loan. For example, the median personal loan rate for a borrower with a credit score of 700 is 10.93%, whereas the median rate for a borrower with a 600 score is 15.91%.

An adjustable rate loan may have a low initial interest rate, but higher rates will eventually increase your monthly payments substantially.

Higher Fees

Subprime personal loan lenders charge higher fees to subprime borrowers to cover the cost of potential default.

Pros of Subprime Personal Loan

Cons of Subprime Personal Loan

Flexibility from adjustable interest rates Higher interest rates
Longer repayment periods Higher fees

What Credit Score Is Required for a Subprime Personal Loan?

According to the Consumer Financial Protection Bureau, credit scores of 620 and below qualify for a subprime personal loan.

The Impact a Subprime Personal Loan Has on Your Credit

Taking out a subprime loan will not affect your credit score. When a lender runs a credit check on a potential borrower, it affects the credit score a few points, but that is the same regardless of the type of loan.

On the other hand, how you manage the payments can affect your score. Making regular payments can boost your credit because your payment history improves. You may then be able to qualify for a prime-rate loan once you have paid down your debt.

Top 3 Subprime Loans

Here are the top three subprime lending platforms based on a Google search at the time of writing. Lending platforms allow borrowers to search a network of subprime lenders for the best loan terms.

CashUSA.com

Loans are available from $500 to $10,000. The subprime personal loans can be used for any purpose, and funds are deposited into the borrower’s bank account. There are no initiation fees.

For subprime personal loans, direct lenders offer APRs between 5.99% and 35.99% and loan durations from 90 days to 72 months. The site gives the following example: A two-year loan of $1,500 with an APR of 7.9% requires 24 monthly payments of $67.77, for a total amount payable of $1,626.54.

BadCreditLoans.com

Loans are available from $500 to $10,000. Funds are deposited into the borrower’s bank account the next business day. This lender charges no initiation fees.

Lenders from the site’s network offer APRs between 5.99% and 35.99%, with loan durations from 90 days to 72 months. The site gives the following example: A 12-month loan of $2,000 with an APR of 19.9% requires 12 monthly payments of $183.63, for a total amount payable of $2,203.56.

PersonalLoans.com

Loans are available from $500 to $35,000. Funds are deposited into the borrower’s bank account within one business day.

Lenders from the site’s network offer APRs between 5.99% to 35.99% and loan durations from 90 days to 72 months. The site gives the following example: A two-year loan of $8,500 with an APR of 6.99% requires 24 monthly payments of $380.53, for a total amount paid of $9,132.68.

Getting a Subprime Loan

Subprime personal loan lenders list few requirements. But the process for a subprime loan is generally the same as the steps to get any personal loan.

1.    Check your credit score. Look for any errors on your report that could be erased to boost your score. (Checking your own score doesn’t affect your rating.)

2.    Compare multiple lenders. Shop around for the best rate and term. Your current bank or credit union might offer good subprime terms to existing account holders.

3.    Select a lender. Make sure you understand the interest rate, repayment terms, and fees.

4.    Gather your documentation. Scan them ahead of time for quick uploading. Applicants are typically required to show:

a.    Proof of identity. Such as a driver’s license or passport.

b.    Proof of address. You can use a utility bill, rental agreement, voter registration card, or insurance card for your home or car.

c.    Proof of income. Choose from a paycheck, W2 or 1099, tax return, or bank statement showing paycheck deposits.

d.    Current monthly expenses. Use a bank statement, and highlight your major monthly bills.

5.    Complete the application. Once approved, you’ll need to sign for the loan to receive the funding.

Alternatives to Subprime Personal Loans

Subprime personal loans are not ideal. If you find yourself in the bad credit score range, consider alternatives like borrowing from friends or family, getting a cosigner to help you get a loan or credit card, or selling some of your assets to provide immediate cash.

For the future, try to improve your credit by paying debts on time, and check your credit report for errors.

The Takeaway

Subprime personal loans are typically offered by online lenders that cater to customers with a low credit rating who cannot qualify for loans with conventional financial institutions. Subprime lenders charge high-interest rates and financing fees to cover the risk of default. You can choose a fixed or adjustable interest rate.

3 Personal Loan Tips

  1. Since lenders will do what’s called a hard pull on an applicant’s credit, and too many hard pulls in a short period can affect your application, it’s a good idea to know what interest rate a lender will offer you before applying for a personal loan. Viewing your rate with SoFi involves only a soft pull on your credit — and takes one minute.
  2. Generally, the larger the personal loan, the bigger the risk for the lender — and the higher the interest rate. So one way to lower your interest rate is to try downsizing your loan amount.
  3. In a climate where interest rates are rising, you’re likely better off with a fixed interest rate than a variable rate, even though the variable rate is initially lower. On the flip side, if rates are falling, you may be better off with a variable interest rate.

FAQ

What credit score do you need to get a subprime personal loan?

According to the Consumer Financial Protection Bureau, credit scores of 620 and below qualify for a subprime personal loan.

What are subprime personal loans?

A subprime personal loan caters to borrowers with subprime credit. That means they are considered at a high risk of default, so a lender will charge them a higher interest rate and set longer loan terms to cover the cost of their risk.

What are the requirements for subprime personal loans?

To obtain a loan, borrowers must submit a loan application online and provide financial documents to show they can manage the payments.


Photo credit: iStock/shapecharge

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.

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

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

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9 Tips For Buying A Used Car_780x440

9 Tips for Buying a Used Car

Opting to buy a used vehicle rather than the newest model on the lot can be a great way to save some money.

Used cars often cost significantly less than new cars. In addition, older cars are generally cheaper to insure (since they are worth less than new cars).

The process of shopping for, and financing, a used car, however, can feel intimidating. To demystify the process, we’ve got nine simple strategies that can help you find a reliable used car that fits your lifestyle and budget.

1. Setting a Budget for a Used Car

Before you start researching used cars, you may want to first think about how much you can afford to spend on a car and how you will pay for it.

If you will be paying cash, you may want to consider how much of your savings you can realistically put towards a car. If you don’t have quite enough, or the purchase would completely gouge your savings, you may want to spend a few more months saving up for a car.

If you will be getting a loan for the car, you’ll want to think about what would be a comfortable monthly payment.

One rule of thumb is to put at least 10% down and finance the car for three years. You may also want to try to keep your total monthly auto expenses no higher than 20% of your monthly take home pay.

You can use an online auto loan calculator to get a rough idea of how much you might need to spend each month on financing.

2. Getting Financing Before You Start Shopping

If you plan to get a loan to buy the car, it can be a good idea to get a pre-approved car loan from a bank, credit union, or another lender before you start shopping.

While you may opt to go with financing offered by a car dealership, having a pre-approved car loan offer in your back pocket can give you a great negotiating tool.

Dealers tend to mark up the interest rate to make a profit, but if you already have a deal in place, they will know they need to beat it in order to get your business.

Even if you’re going to buy a car through a private sale, having a pre-approved loan in place will allow you to jump on a great deal as soon as you find it.

Recommended: Buying a Car with a Personal Loan

3. Choosing Your Ideal Car

Now that you have a car buying budget in mind, you may want to look into what types of cars you can get for that money.

Do you need a truck, SUV, or sedan? You can save money outright by buying a smaller car and also down the line if it’s good on gas mileage.

If safety is a top priority, you may want to check out the Insurance Institute for Highway Safety Ratings to see which cars perform the best in crash tests.

You can also narrow the field by making a list of must-have features, and then searching for cars that have them using a search tool like Edmunds Car Finder .

Once, you’ve narrowed your list to three target models that you can research in more detail. You may also want to read reviews about the cars you’re interested in on sites like Kelley Blue Book and J.D. Power. .

Recommended: How to Save Up for a Car

4. Shopping for a Used Car

Once you know how much you can spend and what kind of car is going to be a good fit for you, you can actually begin shopping for a used car. There’s no need to start driving to car lots all over town–you can browse through tons of vehicles online.

Good places to look include: used car superstores like Carmax or Carvana, used car dealerships, as well as new car dealerships (which often also sell used cars, though not always at the lowest prices).

You may also want to look at listings from local private party sellers, which you can find on Craigslist, eBay Motors, Facebook Marketplace, and Nextdoor.com.

5. Researching the Car

Once you’ve pinpointed a vehicle you might want to buy, it can be a good idea to find out as much as you can about the vehicle’s history.

You can get a vehicle history report from a company like Carfax or Autocheck , which can tell you if the car has any red flags, such reported accidents or flood damage, as well as information on the car’s maintenance and service history.

To get a report, you’ll need to get the car’s vehicle identification number (VIN) or license plate number from the seller. There is typically a fee for running a report (around $25) but many dealers will provide the report for free.

You may also want to run the VIN number through the United States Department of Transportation Recalls site to check for any safety recalls. If there have been any recalls, it’s a good idea to make sure that the issue has been fixed.

6. Going for a Test Drive

It can often be helpful to try before you buy, especially when it comes to buying a car. A car dealership will typically let you take a few cars for a drive so you can get a sense of how they feel.

You may want to call ahead before visiting a dealership to make sure they have the car on the lot that you’re interested in so you can see it that day.

A private seller will also likely allow you to take the car for a brief spin to see how you like it.

Some things to consider when going for a test drive:

•   How well the car accelerates and corners.
•   If the breaks are responsive.
•   If there are any unusual noises or vibrations that could indicate a mechanical issue.
•   How well the car fits you–is there enough leg room? Can you comfortably reach all of the controls?

7. Inspecting a Used Car

Even if you’re far from a car expert, it can be a good idea to do a visual inspection of the car. Is the car’s body and paint in good shape? Are the lights all working? Are there signs of cracks or water inside the lights?

You may also want to turn on the air conditioning and heating, radio, and navigation system and make sure they are all working properly.

When examining the interior, you’ll want to make sure it is in decent condition and there aren’t any unpleasant smells–a moldy smell can indicate flood damage and cigarette smells can be hard to get rid of.

8. Getting a Mechanic to Inspect the Car

Unless you are buying a certified used car with factory warranty coverage from a dealership, you may want to consider getting a car you are close to buying inspected by an independent auto mechanic.

While this does involve an investment of some cash (typically $100 to $200), it can potentially save you from dealing with a costly repair soon after you buy the car.

The inspection report may also give you some bargaining power when haggling over the price of the car.

9. Negotiating the Price of a Used Car

It’s rare that you’re going to come across a used car price where the seller is unwilling to budge, even a little.

Before you negotiate a car deal, however, you’ll want to have all your research ready, including how much the average make and model car for a particular year goes for, and any concerns or issues that came up during your personal and professional inspection.

If you’re negotiating with a dealer, it can be a good idea to keep the focus on total cost of the car, rather than bring a trade-in or financing into the mix.

Dealers may want to merge all of the numbers into one deal, which can be confusing–and also make a not-so-good deal look better.

When discussing price at a dealership, you may also want to make sure you are talking about the out-the-door price, including all fees (so there aren’t any surprises).

Discover real-time vehicle values with Auto Tracker.¹

Now you can instantly monitor vehicle prices in this unprecedented market—to help you make smart money moves.


The Takeaway

Buying a used car can be a smart buying decision. To make sure you get a car that suits your needs and budget, however, you’ll want to research your options, come up with a target price range, and line up financing before you shop.

When shopping for used cars, it’s a good idea to learn a car’s history, test drive the car, and also have it professionally inspected.

Knowing the value of the car in the open marketplace can help you negotiate a good price. If you don’t like the deal, there’s nothing wrong with walking away.

Saving up for a new (to you) set of wheels? You may want to consider opening a bank account online with SoFi.

SoFi Checking and Savings allows you to separate your savings from your spending, while still earning competitive interest on all your money.

And with SoFi Checking and Savings’s “vaults” feature, you can create different vaults for different goals, including a “car savings” vault.

Start saving for your next sweet ride with SoFi Checking and Savings.



SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

¹SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc’s service. Vehicle Identification Number is confirmed by LexisNexis and car values are provided by J.D. Power. Auto Tracker is provided on an “as-is, as-available” basis with all faults and defects, with no warranty, express or implied. The values shown on this page are a rough estimate based on your car’s year, make, and model, but don’t take into account things such as your mileage, accident history, or car condition.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
SoFi Money® is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member
FINRA / SIPC .
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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