stock has suffered a steep drop this month. But the arguments for the selloff are wrong, according to Mizuho.
Shares of SoFi (ticker:
SOFI
) have dived 23% since the company reported first-quarter earnings on May 1. The day after the report, Wedbush downgraded the stock to Neutral from Outperform, citing meager loan sales. Wedbush analyst David Chiaverini lowered his rating on SoFi stock again on Monday to the equivalent of Sell, writing that he is concerned the market for loans has weakened. But Mizuho analyst Dan Dolev says there are reasons to stick with the finance company.
While SoFi does issue student, home, and personal loans to consumers, a key part of its business is securitizing and selling those loans to investors.
SoFi sold $78 million in the home loans segment in the first quarter, but no sales were conducted within the personal loan and student loan refinancing segments, suggesting softening demand from investors. In the previous quarter, the company did about $200 million worth of whole loan sales across segments.
The notable slowdown in loan sales during the quarter has investors worried that SoFi would need to mark down the value of its loans, which could prevent it from achieving profitability this year and possibly lead to a capital raise.
The decision to sell or hold the loans, CEO Anthony Noto said after the earnings report, is based on the company’s need for liquidity and ability to maximize returns. And SoFi has a sound liquid position, according to Noto, who said the company has “maximum optionality” with loans, given deposits of $10 billion at the end of March and other sources of funding.
SoFi’s Chief Financial Officer Christopher Lapointe said during the earnings conference call earlier this month that he’s confident that Sofi would be able to settle loans where they’re currently marked.
Mizuho’s Dan Dolev, who has stuck with his Buy rating on SoFi stock since late 2021, wrote Monday that the decision to hold off on selling loans is reasonable. Based on his calculations, he estimates that “SoFi is able to earn roughly 6.4% annualized yield on holding its personal loans, which is more attractive than selling them at ~5%,” he wrote.
“Bears are mathematically and intellectually off; buy on weakness,” Dolev wrote.
SoFi also said in its latest earnings report that if it isn’t able to hit net income profitability in 2023 as expected, “we may raise additional capital in the form of equity or debt.” Wedbush sees that as another reason to sell the stock. Raising additional capital could further hamper the stock’s valuation, and SoFi would likely get less cash from issuing new shares, as its market capitalization has fallen to $4.49 billion from above $6 billion in April.
But Dolev says SoFi’s disclosure on a possible capital raise isn’t new. “We believe SOFI included this portion to emphasize its focus on achieving GAAP profitability by the fourth quarter,” he wrote.
SoFi previously told Barron’s that the disclosure was consistent with prior quarters.
Analysts remain divided on the stock. A little over half the analysts are bullish on SoFi stock, 41% rate it as Hold, and 6% side with Wedbush analysts, recommending investors Sell the stock.
College will cost more for students borrowing during the 2023-24 academic year as federal student loan interest rates climb to heights not seen in a decade or longer.
As of July 1, undergraduates who take out new direct federal student loans will see interest rates rise to 5.50%, the Education Department’s Federal Student Aid office said Tuesday — up from 4.99% in the 2022-23 academic year and 3.73% in 2021-22.
Interest rates on graduate direct loans, available to graduate and professional students, will rise to 7.05% from 6.54% the year prior. PLUS loans, which parents and grad students can use to fill in education funding gaps, will jump to 8.05% from 7.54%. Here are the higher 2023-24 rates for each type of federal student loan, compared with the 2022-23 academic year:
2022-23 interest rate
2023-24 interest rate
Undergraduate direct loans
Graduate direct loans
PLUS loans
Undergraduate direct student loan interest rates haven’t been this high since 2013. Interest rates on direct graduate loans and PLUS loans, introduced with fixed rates in 2006, have never been this high.
Rising rates makes college pricier
Higher interest rates mean paying off loans will cost more. Each year, usually in mid- to late May, the government sets fresh federal student loan interest rates for the academic year ahead by adding the U.S. Treasury’s May 10-year note auction yield with an additional “add-on” percentage, which varies depending on loan type. The final rates apply to new loans doled out starting July 1.
Ultimately, charging more interest will make college more expensive for the millions of college students and their families who take out loans. Today, nearly 44 million people collectively owe roughly $1.6 trillion in outstanding federal student loans — and federal loans account for about 93% of the total student debt burden, according to a NerdWallet analysis of Department of Education and Federal Reserve data.
For example, if you start college this fall and borrow a total of $31,000 in unsubsidized federal direct loans (the maximum loan amount for dependent undergraduates) with a 5.50% interest rate, you’ll wind up paying back almost $50,000 under a standard 10-year repayment plan. If you’d started college in 2020-21 and taken out the same $31,000 federal loan with a record-low 2.75% interest rate, you would’ve had to repay around $39,500 including interest over 10 years.
The higher rates will apply to all students who take out new federal loans for college or graduate school in the 2023-24 academic year. It’s important to note that all federal student loans have fixed interest rates, so they won’t change during the repayment period.
Federal vs. private student loan interest rates
In recent years, federal student loans have offered lower interest rates (and fees) than private alternatives, but that may no longer be true for some borrowers. The average private fixed-rate undergrad student loan charges 5.99% to 13.78% in interest, according to a January 2023 NerdWallet analysis. As a result, private loans may start to look more attractive.
However, private student loans have drawbacks. They usually require a student to have a high credit score — or a co-signer with a high credit score — to qualify for the lowest rates. The co-signer, typically a parent, is equally responsible for the loan. Federal student loans don’t allow co-signers, and only federal PLUS loans require a credit check.
Federal loans also offer benefits like payment plans that cap monthly bills at a certain percentage of your income, temporary payment pauses if you lose your job or experience financial hardship, and loan forgiveness programs. Private loans don’t typically offer these protections.
Though federal interest rates still have room to climb, they could soon hit a ceiling. Under the Higher Education Act, rates may not exceed 8.25% for undergrad loans, 9.5% for grad loans and 10.5% for PLUS loans. Private student loan lenders have much higher maximum interest rates.
Submit the FAFSA to minimize borrowing
Minimize your total college debt — and the amount of interest you’ll pay over time — by maximizing funding sources you won’t have to repay, like scholarships, grants, work-study and other financial aid options.
You’ll need to submit the Free Application for Federal Student Aid, or FAFSA, to qualify for most federal, state and school grants. That includes the federal need-based Pell Grant, which, starting in 2023-24, can give students up to $7,395 per year in free money to pay for college. Scholarships also often require applicants to submit the FAFSA, including some offered by private organizations.
The FAFSA is open until June 30, 2024, for the 2023-24 school year, but don’t delay. Fill it out as soon as possible to increase your chances of getting more money. Some types of aid draw from limited pools and can run out.
WASHINGTON — Treasury Secretary Janet Yellen Tuesday renewed her calls for Congress to immediately raise the debt ceiling while also doubling down on regulators’ robust regulatory interventions in the banking sector in March.
Speaking at an Independent Community Bankers of America conference, Yellen reiterated her concerns that Congress is moving too slowly to avert a financial catastrophe by breaching the federal debt ceiling, which she said could happen as early as June 1. That catastrophe has already begun, she said, in the form of markets shying away from near-term Treasury securities.
“We are already seeing the impacts of brinkmanship: Investors have become more reluctant to hold government debt that matures in early June,” she said. “The impasse has already increased the debt burden to American taxpayers — as the leaders of the Treasury Borrowing Advisory Committee said last week.”
Yellen stressed that if congressional negotiators fail to reach a deal before the impending debt limit deadline of early June, the Treasury may not be able to satisfy all of the government’s obligations, triggering economic and financial catastrophe, threatening the U.S. dollar’s credibility and squandering the hard-earned progress the economy has made in the wake of the COVID pandemic.
“In 2011, we resolved the debt ceiling crisis right before the government had to stop making payments. But that eleventh-hour brinkmanship led to the first-ever downgrade of our credit rating in history,” Yellen said. “Consumer confidence fell by over 20%. The S&P 500 plummeted by about 17%. Spreads for mortgages and auto loans widened. The U.S. economy hangs in the balance. The livelihoods of millions of Americans do too. There is no time to waste.”
Yellen also defended regulators’ invocation of a systemic risk exception with the failures of Silicon Valley Bank and Signature Bank in March, and said regulators would take the same action for smaller banks if their failures pose a risk of contagion to the broader financial system. She also said community banks played a vital role in strengthening pandemic recovery efforts and remain a cornerstone of the national financial landscape, and noted that the risk of bank runs that sparked the banking crisis in March have since stabilized.
“The situation has stabilized since then. Aggregate deposit outflows have steadied, and the Fed’s Bank Term Funding Program and discount window are working as intended,” Yellen said. “Like our community banks, the U.S. banking system remains sound. There is strong liquidity and capital in the system. The decisive actions that we took in March to protect depositors and provide additional liquidity to the system mitigated the very serious risk of broader financial contagion.”
Addressing smaller bankers — who have criticized regulators for giving larger banks preferential treatment — she argued March’s regulatory actions were purely to stave off contagion, did not cost taxpayers nor did actions benefit the midsize regional banks’ management or stakeholders. She also pushed back on the assertion by some smaller banks that regulators would only take drastic measures to help larger banks, even though, she ceded, such potential interventions would still require a bank with a footprint prominent enough to pose a systemic risk.
“To be sure, there have been some aftershocks of the March developments, including the resolution of First Republic [Bank]. But I do not believe that these developments are a sign of any shift in the fundamental health of the banking system,” Yellen said. “We remain vigilant and we continue to closely monitor conditions. As I’ve said, we have a set of effective tools at our disposal. We are prepared to take further actions if needed — including if smaller institutions suffer deposit runs that pose the risk of contagion.”
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You’ve got someone moving into one of your spare bedrooms. You’re hiring a new housekeeper or nanny. You’re renting out your house. You’re dating someone and you’re curious about his or her debt and credit management skills. Or, maybe your spouse passed away and you need to see what’s on their credit report. There are many reasons why you’d be curious to see what’s on someone else’s credit reports that have nothing to do with lending them money.
Permissible Purpose
There are dozens of websites where you can buy or claim YOUR credit reports but getting someone else’s credit report isn’t quite as easy. The only way you can legally pull someone else’s credit report is if you have what’s referred to as Permissible Purpose. Permissible Purpose is a term straight from the Fair Credit Reporting Act and it defines the conditions under which a credit reporting agency may furnish a credit report. And, as you’ve probably already figured out, getting your girlfriend’s credit report simply because she’s your new girlfriend isn’t on the list.
There is, however, more than one way to skin a cat and if you’re diligent and creative then getting your hands on someone else’s credit report might not be impossible. You can certainly ask that your prospective tenant provide you with a credit report, which they can get at any number of websites. Yu can also buy their credit report from one of the many tenant screening companies but you will need to have their permission and cooperation.
Proxy Ordering
You can also proxy order their credit report from any of the credit bureau’s websites. Proxy ordering is when you are entering the other consumer’s personal information as if you were them. You’re still going to need their permission and cooperation because you’ll have to “authenticate” their identity, which means they’ll have to answer a few questions that only they know the answers to. These questions come directly from their credit report, so it’ll be something along the lines of “Your credit report shows a mortgage loan opened in 2004, who is the lender?” I’ve done this before and it’s very efficient, as long as you’ve got a cooperative consumer.
Deceased Spouse
If you need a credit report of a deceased spouse, then you’re going to have to go directly to the credit bureaus to get it. According to Rod Griffin, Director of Public Education at Experian, “You can request a copy of your deceased spouse’s credit history by mailing a letter stating you are the deceased’s spouse and that you are requesting a copy of his or her credit report.” You will need to provide the following documentation:
For the deceased: – Name (First, Middle, Last, Generation (Jr., Sr.)) – Mailing address at time of death – Social Security number – Date of birth – Previous addresses for the prior two years – Copy of the death certificate
For the living spouse: – Your name (First, Middle, Last, Generation (Jr., Sr.)) – Address the report should be mailed to – Copy of documentation verifying you are the spouse If you are not the spouse but are the executor of the estate you will need to send a copy of legal documentation naming you as the executor (signed and sealed from the court).
Mail your request to: Experian PO Box 2002 Allen, TX 75013
Clearly, this is going to be much less prevalent than requesting a credit report for a living spouse or a roommate, but I did get several questions this past year from consumers wanting to know how to get their deceased spouse’s credit reports. But, it wasn’t nearly as common as people wanting help getting their boyfriend/girlfriend/fiancé’s credit reports. That took the cake… by a long shot.
John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. The opinions expressed in his articles are his and not of Mint.com or Intuit. Follow John on Twitter
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SoFi is a nationally chartered, online-only bank that offers customers a high 4.20% on savings, an interest-earning checking account, and a host of other benefits for being a member. The bank currently has more than 5.5 million customers, which it calls members, and has an extensive rewards system in place to help your money go further and grow faster.
Find out why SoFi is a top-rated bank, as well as one of the fastest growing financial technology companies offering loans, an investment platform, and a rewards credit card.
SoFi at a Glance
SoFi became a nationally chartered online bank in early 2022, following the fintech’s acquisition of Golden Pacific Bancorp. SoFi started as a company that provided student loan refinancing, and evolved to provide personal loans and other services.
Its status as a national bank enables the fintech to help even more people. “This incredible milestone elevates our ability to help even more people get their money right and realize their ambitions,” said SoFi CEO Anthony Noto in a press release following the acquisition.
SoFi Products
Today, the online bank offers a variety of products to help American consumers meet their financial goals. The parent company, SoFi Technologies, is the parent company of SoFi Bank, Member FDIC. Products and services include:
SoFi checking and savings
SoFi personal loans
Credit card
Student loans and student loan refinancing
Mortgages
Investment and Retirement Products
Find out how these products compare to competitors in the industry in our SoFi reviews below.
SoFi Checking and Savings Account
SoFi offers a combined checking and savings account to customers. You cannot open one without the other, but this provides tremendous benefits and an incentive to save. Currently, when you open a SoFi checking and savings account, you can earn up to $250 when you set up direct deposit within the first month.
That’s in addition to all the other perks, including an account with no monthly maintenance fees, no overdraft fees (for qualifying customers), and no minimum balance requirement. Plus, deposits are FDIC-insured up to $2 million through SoFi’s network of partner banks, which exceeds the federal limit of $250,000 per account holder, per account type.
SoFi Checking
Your SoFi checking account comes with a cash back debit card that pays up to 15% cash back on debit card purchases when you shop at local businesses. Your SoFi debit card also offers fee-free access to more than 55,000 AllPoint ATMs for cash withdrawals, cash deposits, and balance transfers. You can also check account balances at any ATM with no fees.
Your SoFi checking account also has many other benefits you may not find in a traditional bank account. You can get paid two days early with early direct deposit. Plus, your SoFi checking account earns interest at a rate of 1.20% APY.
If you enable overdraft protection, SoFi will pull from your savings account to cover checks, debit card purchases, and ACH withdrawals, including online bill payments, loans, and P2P payments. It will not pull from savings you have designated in vaults for specific purposes.
SoFi Savings Account
Your SoFi checking account offers a 4.20% APY, which is one of the highest available for online savings accounts. Be aware that to earn this high rate, you’ll need a qualifying direct deposit of any amount each month. Otherwise, you’ll earn 1.20% on all account balances.
The savings account also helps with cash management by offering automatic savings features and savings vaults. You can designate a specific amount of each ACH direct deposit or cash deposit to go directly into your SoFi savings account or into a specific savings vault. Unlike many traditional banks, there is no limit on savings withdrawals or transfers.
SoFi Pros and Cons
Your SoFi bank account has a number of desirable features that make it one of the best online savings and checking accounts for many people.
Pros
High 4.20% APY on savings
1.20% APY on checking account balances
Early direct deposit
No ATM fees
No bank fees
Overdraft protection for qualifying customers
Cons
No CDs
No money market accounts
No branches for in-person service
SoFi Membership Features and Additional Perks
SoFi members who open a fee-free combined checking and savings account also qualify for other benefits. There is no minimum opening balance or minimum balance requirements to be considered a SoFi member.
Some of the membership benefits include:
15% off estate planning
Free access to career coaching
Free financial planning services
Member events that can help with money management
SoFi Member Rewards
A few of the SoFi member benefits stand out, including the SoFi Member Rewards program. To join, download the SoFi app. You will earn points when you take actions like:
Using your debit card
Checking your credit store
Saving money
Investing
As you earn points, you can convert those points to cash deposited into your SoFi bank account. You can then redeem points to help may loan payments, convert points into fractional stock shares through SoFi Active Invest, or even cash in points for a statement credit.
SoFi Referral Program
SoFi’s Rewards don’t stop with actions you take within your account. If you share SoFi with friends using your unique link, you’ll earn additional points you can cash in.
Currently, SoFi offers 2,000 rewards points for every person you refer who opens a SoFi checking and savings account with at least $10. You will also earn 2,000 points for friends who open a credit card, SoFi Credit Score Monitoring Account, or fund a Lending Product within 90 days of registering for SoFi using your link. Your friend will also earn 2,000 points.
Note that you can only earn points for one account per friend, so your friend may open a bank account and a credit card, but you will each only earn 2,000 points.
SoFi Stadium Perks
You might not think of SoFi as a travel or entertainment rewards card, but SoFi’s Stadium Perks program does provide unique benefits for Los Angeles residents and tourists. SoFi members earn 25% cash back on purchases at SoFi Stadium, home of the Los Angeles Rams and Los Angeles Chargers, when you use your debit or credit card.
Plus, gain access to the exclusive SoFi Member Lounge and fast and easy entry to the stadium through the SoFi Member Express Entry line. If you need to check your bag, SoFi will reimburse the fees to your checking account or credit card.
SoFi Plus: Premium Membership
SoFi Premium members earn even more perks. Unlike many premier programs, SoFi Plus does not require an additional monthly purchase or subscription fee. To qualify, just set up direct deposit with your checking and savings account. When your first direct deposit clears, you’ll gain access to all the premium benefits.
Qualifying direct deposits for SoFi Plus must reach $1,000 per month or more to gain access to all the features of SoFi Plus. This includes no-fee overdraft coverage and rate discounts on SoFi loans. Other features, including the 4.20% APY, 2X rewards points, and preferred access to IPOs through SoFi Invest, apply to all SoFi Plus members.
How to Open a SoFi Account
Opening an account online is easy. You’ll need to provide some information, including your address and Social Security number. You must be a U.S. citizen or permanent resident to qualify.
There is no minimum opening deposit, but you’ll want to fund your account to take advantage of high interest rates and access all the benefits. You can deposit cash or checks to fund your account for the first time through:
ACH direct deposit
Mobile check deposit
a GreenDot debit card
Instant Funding
To take advantage of Instant Funding, link your existing Visa or Mastercard debit card to your SoFi account. Click “Transfer Instantly” and you can transfer up to $500 into your account in minutes. To use this method, you must be a new SoFi customer and deposit a minimum of $50.
SoFi Credit Card
The SoFi credit card lets you maximize the points you can earn. The card delivers 2% cash back rewards on every purchase and has no annual fees. To qualify, you’ll need a “good” or “excellent” credit score.
The card has a standard variable Annual Percentage Rate (APR) of between 17.74% up to 29.74% based on your credit score and financial history. Cash advances carry an APR of 31.74%.
The card carries fees comparable to other top-tier rewards cards, including a late payment/returned payment fee of up to $39, and balance transfer or cash advance fees of $10 or 5% of the transaction amount, whichever is greater.
You can redeem your cash back as a statement credit, cash back into your checking or savings account, or as a deposit for investing through SoFi Invest.
SoFi Investing
SoFi is not just an online bank, but a full-fledged financial services firm that includes planning, management, and investing. The online stock trading app provides automated investing or hands-on options. You can trade:
Stocks
ETFs
Fractional stocks
Crypto
IPOs (for qualified SoFi Plus members only)
SoFi Investing at a Glance
SoFi offers active investing for stocks, ETFs and even IPOs. You can start investing in some of the highest market cap companies on the S&P 500 and other stock indexes with as a little as $5. SoFi does not charge commissions on trades. When you open an Active Investing account with at least $10, you could win a bonus of stocks valued at up to $1,000 by playing the “Claw Game” promotion.
If you prefer not to engage in active investing, you can set up an automated investing account with as little as $1. Invest a set amount one time or set up automated recurring payments to watch your investments grow.
You will need to answer some questions so that SoFi can determine your risk tolerance and choose the right portfolio for you. SoFi automatically rebalances your investments quarterly and keeps your portfolio diversified based on your goals and risk tolerance.
SoFi also gives investors access to Bitcoin, Ethereum, Cardano, Dogecoin, Solana, and 25 other popular cryptocurrencies. When you make your first crypto trade with a $10 minimum, you will earn a $100 bonus in Bitcoin within seven days. SoFi charges a mark-up of 1.25% on all crypto transactions.
SoFi Retirement Accounts
In addition to active and passive investment services through stocks, bonds, and ETFs, SoFi’s investments include Roth, SEP, and Traditional IRAs for retirement. You can choose active or automated investing. SoFi financial planners can help you create a retirement strategy that will work for you.
SoFi Investing Pros and Cons
As with all investment platforms, SoFi: Invest has many benefits and a few drawbacks.
SoFi Invest Pros
Active or automated investing
Investments in crypto, stocks, ETFs
Fractional shares permitted
Options investing
Intuitive app
SoFi Invest Cons
Options investing may require advanced knowledge
Not every investment will earn money
Odds of winning a $1,000 stock bonus are slim
SoFi Student Loans
Unlike many online banks, SoFi offers student loan refinancing with fixed interest rates as low as 4.99%. To qualify for the lowest interest rate, you will need to set up autopay for your loan payments.
SoFi can help you pay down your student loans faster with fixed APRs of 4.99% up to 9.99% or variable APRs of 5.74% to 9.99% APR. You may qualify for a SoFi student loan if you are gainfully employed, starting a job within 90 days of your loan application, or have sufficient income from various sources. You should also show a solid financial history and monthly cash flow indicating you can make the SoFi loan payments.
SoFi Mortgages
SoFi offers a broad range of mortgage products, including:
Conventional mortgages
Jumbo loans
Home equity loans
Cash-out refis
Short-term bridge financing for investment properties
With interest rates rising, SoFi’s “Lock and Look” feature lets you lock in today’s rates for up to 90 days while you shop for your dream home. Checking for your rate won’t affect your credit score.
First-time homebuyer loans may require as little as 3% down, while other home mortgages require just 5% down. Mortgages with a loan-to-value ratio greater than 80% will require private mortgage insurance.
SoFi offers conventional, fixed-rate mortgages with terms ranging from 10 to 30 years. If you take out a 30-year mortgage, you may qualify for a 0.25% pricing special or interest rate discount. To qualify for the lowest rates, you’ll want to have a strong credit history, an excellent credit score, and a low debt to income ratio.
SoFi Personal Loans at a Glance
SoFi may offer one of the top-rated online checking accounts today. But SoFi was founded as an online loan company in 2011, providing personal loans with no fees and loan amounts from $5,000 to $100,000. You can check your rates quickly with no impact to your credit score.
SoFi Personal Loans Review: Members-only Perks and Competitive Rates
A SoFi personal loan offers low fixed rates based on your credit history. Repayment terms range from two to seven years, while loan amounts run from $5,000 up to $100,000. SoFi borrowers pay no origination fee. You won’t suffer a prepayment penalty if you want to pay off your loan early. You can receive loan funds as quickly as the same day you apply.
SoFi personal loan interest rates range start at 8.99% according to the SoFi website. Secure the lowest rates with automatic payments directly from your SoFi account. SoFi Plus borrowers with qualifying monthly direct deposits may receive a rate discount as well. The higher your credit score, the lower your interest rate.
SoFi offers unemployment protection for borrowers, which can help with cash flow if you lose your job. You can modify your SoFi personal loan payments while you look for a new job. SoFi’s career coaching can even help you find new work.
Best for Fee-Free Debt Consolidation Loans
As one of the top online lenders today, SoFi can help you save money by consolidating high interest credit card debt into one, low, monthly loan payment. SoFi personal loans have no origination fee. Credit card consolidation can help you get out of debt faster and make it easier to pay your bills with one monthly payment directly from your account.
If you are planning to consolidate credit card debt through a SoFi personal loan, you can choose Direct Pay. Loan proceeds will go to your credit card companies directly, saving you time and hassle. You’ll also earn an interest rate discount with Direct Pay, making SoFi a great choice for credit card debit consolidation.
SoFi Personal Loans: Pros and Cons
SoFi personal loans have a number of benefits compared to other online lenders. Let’s look at the pros and cons of your SoFi personal loan.
Pros
No origination fees
Unemployment protection
Receive funds the same day you are approved
No prepayment fees
Loan amounts up to $100,000
Cons
Must be a U.S. citizen-permanent resident
Risk of charging up credit cards again after debt consolidation loan
Excellent credit scores required to qualify for the lowest rates
Hard credit pull to obtain a loan may reduce your credit score temporarily
What You Can Use SoFi Loans For
You can use SoFi loan money for virtually anything, including home improvements, credit card debt consolidation, family planning and IVF, or even luxuries like weddings and travel. With competitive rates, easy automatic payments, and unemployment protection, a SoFi personal loan might make sense to pay for one-time events where you might normally use a credit card.
How to Apply for a SoFi Personal Loan
Applying for a personal loan is easy. You may want to check your credit report first to ensure that all the information is accurate. A solid financial history can help you secure the best loan rates and highest loan amounts.
You will first want to open your SoFi bank account and set up direct deposit as well. SoFi Plus members can get interest rate discounts and even earn reward points for their loan. Once you are ready, visit SoFi.com, select personal loans from the drop-down menu of products, and click “View your rate.”
You’ll need to submit some information, including your name, address, Social Security number, loan amount, and income.
Bottom Line
SoFi Money encompasses all the banking, lending and investing services SoFi bank offers. SoFi ranks as one of the top online financial service companies, with excellent customer service and a wide range of products.
You can reach SoFi customer service via email, using the online virtual assistant chatbot, or by phone. Hours vary depending on the service you need. A wide range of financial products, low rates, and FDIC insurance up to $2 million for deposits set SoFi apart from competitors.
The Federal Reserve (Fed) on Wednesday raised the federal funds rate by another 75 basis points, to 3%-3.25%, bringing it back to a level last seen in March 2008.
The decision was expected by most Fed observers, and comes as mortgage lenders and real estate brokerages struggle to adjust to a Fed-driven slowdown of the housing market.
According to the Federal Open Market Committee (FOMC) statement, although recent indicators point to modest growth in spending and production, job gains have been robust in recent months and the unemployment rate has remained low.
“Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures,” the FOMC said in the Wednesday statement. “Russia’s war against Ukraine is causing tremendous human and economic hardship. The war and related events are creating additional upward pressure on inflation and are weighing on global economic activity.”
The committee anticipates that ongoing increases in the target range will be appropriate, meaning another 125 basis points in hikes still to come in 2022, with a federal funds rate topping out well above 4%. The FOMC’s Summary of Economic Projections now shows a funds rate midpoint of 4.375% at end-2022 and 4.625% at end-2023.
“No changes were made with respect to their ongoing plans to reduce the size of their balance sheet,” said Mike Fratantoni, the chief economist of the Mortgage Bankers Association. “Rate volatility is high due to both uncertainty regarding the Fed’s next moves and the lack of a steady, consistent buyer for Treasuries, and particularly mortgage-backed securities.”
How will non-QM perform for the rest of 2022?
With inflation and rising rates, non-QM lending has spent the last few months in choppy waters, with some lenders closing their doors. However, the outlook for non-QM for the rest of 2022 is relatively optimistic, according to Acra Lending CEO Keith Lind.
Presented by: Acra Lending
Since the Fed has started a tightening monetary policy to slow inflation, it has resulted in a cumulative 300 bps hike: 25 bps in March, 50 bps in May and three 75 bps increases in June, July and September.
Inflationary pressures resulted from the decision to maintain rates at 0%-0.25% between March 2020 and March 2022 to stimulate economic activity during the COVID-19 pandemic, marking a period of easy money that gave rise to the hottest mortgage market in U.S. history.
Consequently, inflation in the U.S. hit 8.3% in August, down from 8.5% in July but still higher than the 8.1% expected by observers, the Bureau of Labor Statistics reported on Sept. 13. One of the primary drivers has been housing costs, with shelter costs accounting for about 25% of inflation in August. Shelter costs rose 6.2% in August from a year before, and were up from 5.7% in July.
That inflation came in hot raised the specter that the Fed would increase the benchmark rate by 75 or even 100 bps today.
In the housing market, the tightening monetary policy has brought mortgage rates to the mid-6% level and helped bring rents to record prices, according to firms that track the rental market.
Existing-home sales declined in August for the seventh consecutive month and home prices dropped sequentially from July, evidence that the Fed’s policies have cooled the housing market in recent months.
According to the Fed’s latest Beige Book report, home sales fell across all 12 Feddistricts and the prospects for future improvement anytime soon are dim as well. “The outlook for future economic growth remained generally weak, with … expectations for further softening of demand over the next six to 12 months,” the report states.
“We’ve had a time of a red-hot housing market all over the country – famously, houses were selling to the first buyers by 10% above the asked, before they even see the house. So, it was a big imbalance between supply and demand and house prices were going up at an unsustainable fast level,” Fed Chairman Jerome Powell said during a press conference. “Builders are having a hard time to find lots, workers and materials.”
But Powell said the deceleration in prices should bring the market closer to its fundamentals, which is a good thing, according to him. “For the longer term, what we need is supply and demand to get better aligned, so house prices go up at a more reasonable pace and people can afford houses. Probably, the housing market needs to go to a correction to get to that place.”
Rate hikes also impact real estate investors. “Debt is becoming very expensive very quickly,” said Veena Jetti, founder of the Dallas-based real estate investment firm Vive Funds. “We will likely see operators that bought in the last few years without interest rate insurance finding it tough to service the debt.”
Whether the latest rate hike has already been ‘baked in’ to mortgage rates remains to be seen. “It’s possible that expectations of a rate hike are already priced into the market, as we just saw mortgage rates hit 6% last week,” said Steve Reich, chief operations officer at Finance of America Mortgage. “Interest rates hitting their highest levels since 2008 coupled with persistent inflation means some homebuyers may take a step back from the market and wait until rates come down. However, there are still opportunities in today’s market for potential homebuyers.”
My mother was quadriplegic by the time I was in high school. My dad was a real estate agent who worked on commission, so he worked long hours to make ends meet. As a result, I took on a lot of responsibility at a young age.
I cooked and cleaned and did all the grocery shopping. I did the laundry and paid the bills (in the “balancing the checkbook and writing the checks” sense, not the earning money sense). I took my mother to the bathroom, fed her, and tracked her pill regimen. And most importantly, I believed that a college education was a good value.
I knew my parents couldn’t afford to send me to college, and I wasn’t allowed to have a job because of my responsibilities at home. So in lieu of saving for college, I threw myself into everything school had to offer.
I was salutatorian. I was on the dance team and the academic team. I was secretary of the service club and president of the math club. And it worked: not only did I get out, I graduated from college with a 4.0. Then I went on to get an MA and a PhD. Unfortunately, I got $100K in debt to go along with it.
I mention this only because it begs the question: what leads a (relatively) smart person to make almost ten years’ worth of poor financial decisions? As immoral as universities may be, there’s more to any individual’s decisions than external influence.
Undergrad: An Auspicious Beginning?
When she was young and healthy, my mother had a full ride to Boston University. She dropped out because she wasn’t doing well in her pre-med classes; what she really enjoyed was writing. I remember asking her, “Why didn’t you just change your major?” She said it never occurred to her.
She eventually did get an Associate’s degree from the local community college. However, she always regretted not completing a Bachelor’s degree. Her experience led her to believe that the best degree was the one that you finished. She also believed that if you picked something you enjoyed, you were more likely to do well and be happy.
When I started thinking about college, my dad said “smart people major in business.” He suggested, “not that I’m telling you to follow in my footsteps, but female real estate agents make a lot of money.” My mom would nod sagely at his advice. Then after he left the room, she would stage-whisper, “do whatever makes you happy!”
I attended a state school, since the Florida Bright Futures lottery scholarship paid for 100% of my tuition and a book allowance. I was a National Merit Finalist. I received Pell grants and a variety of other scholarships. Since my education was paid for regardless of major, I followed my mom’s advice and did what made me happy. I was a creative writing major and a psychology minor. I worked as a server and a tutor at the writing center. As a result, I graduated with no debt.
Grad School: The Downward Spiral Begins
I was intimidated by the thought of graduating and getting a “real job.” Instead, I decided to keep doing what I had always been successful at: school. I started an MA in creative writing. I also worked on campus 35 hours a week, teaching and tutoring. However, graduate tuition was expensive. Luckily, Stafford was there to fill the hole. I knew it was a loan, but I’d never borrowed any money before. I didn’t have a concept of what borrowing really meant in terms of paying it back.
During this time I loved my job so much that I decided I wanted to run a writing center. My boss had a PhD in rhetoric and composition. I researched programs, applied to three, and accepted an offer from a top five program. It entailed moving across the country, which I couldn’t afford; I wouldn’t get financial aid until fall. Enter credit card debt.
The cost of living in my new city was also much higher. Again, Stafford and Visa filled the hole (though there were still a couple of weeks between moving and financial aid kicking in where I didn’t wash my hair because I couldn’t afford shampoo).
Yes, I was taking out more loans. But I was only making $14,000 a year and my paychecks were $750 apiece. The average starting salary of $50,000 was three and a half times what I was making. That could only mean my paychecks would be three and a half times bigger. Right?
Somehow the fact that this $14,000 was spread over nine months instead of twelve didn’t seem significant. Taxes and payroll deductions for things like health insurance weren’t even on my radar. I also don’t recall a single time when I saw a total of how much I’d borrowed until my degree was almost complete.
Graduation Approaches: I’m in Over My Head
Even when I saw my total of about $100,000, it was poor math all the way. I thought, Okay, I was in grad school for eight years. That means I borrowed an average of $12,500 per year. I was also making $14,000 per year during that time, so my average income was $26,500 per year. But soon I’ll be making $50,000. That’s twice as much! This is no problem.
My program also claimed it had a 100% tenure-track job placement rate. It didn’t occur to me that this couldn’t be possible until after I was advanced to candidacy and took a job search class. Then, this statistic was amended to “100% of students who wanted to be on the tenure track ended up with tenure-track jobs.” Who doesn’t want tenure?! I thought. This won’t be me. This is no problem.
I did know, of course, that getting a PhD in the humanities wasn’t going to make me rich (although the professors in my program all had 3000+ square foot homes in the nicest area of town). But it was more important to be happy than to be rich. Besides, I grew up poor. I was familiar with it. It didn’t sound scary.
Then I went on the job market. My hottest lead turned out to be in Punxsutawney, Pennsylvania, and I had a few realizations. I didn’t want to live 200 miles from the nearest urban center. Not only that, I couldn’t even if I wanted to: Jake and I had been dating for over a year. Our relationship was getting serious enough that he needed to be a factor in my plans.
By this time he’d graduated from law school and had a job making $90,000 per year. He was traumatized from the bar exam. The thought of taking another one only a year later gave him cold sweats. Even if he was willing to do it, he couldn’t afford to make much less. A salary of $90,000 a year would be impossible to come by in a tiny rural town. Now my job search was what they called Geographically Restricted. That’s academic speak for “it’s your own fault if you don’t end up on the tenure track.”
Suddenly, Unexpectedly
So I moved to Jake’s city and geared up for another year on the job market. I got a full-time administrative position in summer 2008, right before the economy tanked. The week after they hired me, my institution implemented a hiring freeze. Six months later, they instituted furlough.
I combed the national job lists in my field, but I was Geographically Restricted. Even if I wasn’t, it was one of the worst job markets in memory (and memory didn’t have a lot of good years anyway). And then, there was the unexpected — though, given that I think I’m psychologically predisposed to happiness, maybe I should have expected it.
It turns out I LOVE my job. I love the work I do and the people I work with. I love the city I live in (even if it’s 109 degrees outside right now). I have family in the area. Jake grew up here. At this point, he has over five years of business connections here, and I have four.
At some point, the the life I was living “for now” had become The Life I Want to Live. I have a ten minute commute. I leave work at 5 p.m. every day and don’t need to think about it until the next morning. I don’t check email during my off hours. I don’t work in the evenings. I have pets, I am a hobby chef, I read novels. I think I would have enjoyed the tenure track, but I don’t need it to be happy.
I just need to get our financial situation under control so I can keep living this life.
What About You?
This is my story. This is only my story. I cannot speak for others with student loan debt. But I know many, many people with high student loan debt (including lots of folks with totals higher than mine). So I know you’re out there, fellow student loan debtors!
Let’s build on last week’s discussion (go check out the comments there as well!). What’s your situation? How is it different than mine? How is it similar? I am especially interested in:
Your total student loan debt
What degree(s) you have
When you went to school
Whether anyone talked to you about student debt or the job prospects in your field
Whether the information you received about student loan debt or the job prospects in your field was accurate
What you wish you had done differently/advice for others
How you’re dealing with your debt
There are obviously many decisions I could have made differently. It’s undeniable. But since I can’t go back in time and make different decisions, I’m declaring a statute of limitations on regret. Plus, I’m taking responsibility for my errors in judgment and paying the loans back. I have to, since you can’t discharge student debt in bankruptcy.
However, as Robert Brokamp pointed out, there are systemic problems with student debt in this country (check out this paper for some facts on six-figure student loan debt). Those of you who have been through the system, how would you change it?
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
52k salary is a solid hourly wage when you think about it.
When you get your first job and you are making just above minimum wage making over $52,000 a year seems like it would provide amazing opportunities for you. Right?
The median household income is $68,703 in 2019 and increased by 6.8% from the previous year (source). Think of it as a bell curve with $68K at the top; the median means half of the population makes less than that and half makes more money.
The average income in the U.S. is $48,672 for a 40-hour workweek; that is an increase of 4% from the previous year (source). That means if you take everyone’s income and divided the money out evenly between all of the people.
But, the question remains can you truly live off 52,000 per year in today’s society since it is barely above the average income and yet still below household incomes. The question you want to ask all of your friends is $52000 per year a good salary.
In this post, we are going to dive into everything that you need to know about a $52000 salary including hourly pay and a sample budget on how to spend and save your money.
These key facts will help you with money management and learn how much per hour $52k is as well as what you make per month, weekly, and biweekly.
Just like with any paycheck, it seems like money quickly goes out of your account to cover all of your bills and expenses, and you are left with a very small amount remaining. You may be disappointed that you were not able to reach your financial goals and you are left wondering…
Can I make a living on this salary?
$52000 a year is How Much an Hour?
When jumping from an hourly job to a salary for the first time, it is helpful to know how much is 52k a year hourly. That way you can decide whether or not the job is worthwhile for you.
For our calculations to figure out how much is 52K salary hourly, we used the average five working days of 40 hours a week.
52000 salary / 2080 hours = $25.00 per hour
$52000 a year is $25.00 per hour
Let’s breakdown how that 52000 salary to hourly number is calculated.
Typically, the average workweek is 40 hours and you can work 52 weeks a year. Take 40 hours times 52 weeks and that equals 2,080 working hours. Then, divide the yearly salary of $52000 by 2,080 working hours and the result is $25.00 per hour.
Exactly $25 an hour.
That number is the gross hourly income before taxes, insurance, 401K, or anything else is taken out. Net income is how much you deposit into your bank account.
You must check with your employer on how they plan to pay you. For those on salary, typically companies pay on a monthly, semi-monthly, biweekly, or weekly basis.
What If I Increased My Salary?
Just an interesting note… if you were to increase your annual salary by $3K, it would increase your hourly wage to over $26 an hour – a difference of $1.44 per hour.
To break it down – 55k a year is how much an hour = $26.44
That difference will help you fund your savings account; just remember every dollar adds up.
How Much is $52K salary Per Month?
On average, the monthly amount would be $4,333.
Annual Salary of $52,000 ÷ 12 months = $4333.33 per month
This is how much you make a month if you get paid 52000 a year.
$52k a year is how much a week?
This is a great number to know! How much do I make each week? When I roll out of bed and do my job of $52k salary a year, how much can I expect to make at the end of the week for my effort?
Once again, the assumption is 40 hours worked.
Annual Salary of$52000/52 weeks = $1000 per week.
$52000 a year is how much biweekly?
For this calculation, take the average weekly pay of $1000 and double it.
This depends on how many hours you work in a day. For this example, we are going to use an eight-hour workday.
8 hours x 52 weeks = 260 working days
Annual Salary of$52000 / 260 working days = $200 per day
If you work a 10 hour day on 208 days throughout the year, you make $250 per day.
$52000 Salary is…
$52000 – Full Time
Total Income
Yearly Salary (52 weeks)
$52,000
Monthly Wage
$4333
Weekly Salary(40 Hours)
$1000
Bi-Weekly Wage (80 Hours)
$2000
Daily Wage (8 Hours)
$200
Daily Wage (10 Hours)
$250
Hourly Wage
$25.00
Net Estimated Monthly Income
$3308.50
Net Estimated Hourly Income
$19.09
**These are assumptions based on simple scenarios.
52k a year is how much an hour after taxes
Income taxes is one of the biggest culprits of reducing your take-home pay as well as FICA and Social Security. This is a true fact across the board with an all salary range up to $142,800.
When you make below the average household income, the amount of taxes taken out hurts your hourly wage.
Every single tax situation is different.
On the basic level, let’s assume a 12% federal tax rate and a 4% state rate. Plus a percentage is taken out for Social Security and Medicare (FICA) of 7.65%.
So, how much an hour is 52000 a year after taxes?
Gross Annual Salary: $52,000
Federal Taxes of 12%: $6,240
State Taxes of 4%: $2,080
Social Security and Medicare of 7.65%: $3,978
$52k Per Year After Taxes is $39702
This would be your net annual salary after taxes.
To turn that back into an hourly wage, the assumption is working 2,080 hours.
$39702 ÷ 2,080 hours = $19.09 per hour
After estimated taxes and FICA, you are netting $39,702 per year, which is $12,298 per year less than what you expect.
***This is a very high-level example and can vary greatly depending on your personal situation and potential deductions. Therefore, here is a great tool to help you figure out how much your net paycheck would be.***
Taxes Based on Your State
In addition, if you live in a heavily taxed state like California or New York, then you have to pay way more money than somebody that lives in a no tax state like Texas or Florida. This is the debate of HCOL vs LCOL.
Thus, your yearly gross $52000 income can range from $35,542 to $41,782 depending on your state income taxes.
That is why it is important to realize the impact income taxes can have on your take home pay. It is one of those things that you should acknowledge and obviously you need to pay taxes. But, it can also put a huge dent in your ability to live the lifestyle you want on a $52,000 income.
My 52k Salary Hourly Calculator
More than likely, your salary is not a flat 52k, here is a tool to convert salary to hourly calculator.
Many of the starting freight broker salaries are in this range (and before commission)!
Many teachers are hovering in this range, which may make you wonder do teachers get paid in the summer?
52k salary lifestyle
Every person reading this post has a different upbringing and a different belief system about money. Therefore, what would be a lavish lifestyle to one person, maybe a frugal lifestyle to another person. And there’s no wrong or right, it is what works best for you.
One of the biggest factors to consider is your cost of living.
In another post, we detailed the differences between living in an HCOL vs LCOL vs MCOL area. When you live in big cities, trying to maintain your lifestyle of $52000 a year is going to be much more difficult because your basic expenses, housing, transportation, food, and clothing are going to be much more expensive than you would find in a lower cost area.
To stretch your dollar further in the high cost of living area, you would have to probably live a very frugal lifestyle and prioritize where you want to spend money and where you do not. Whereas, if you live in a low cost of living area, you can live a much more lavish lifestyle because the cost of living is less. Thus, you have more fun spending left in your account each month.
For many, this is when they are looking at upgrading their car to something nicer, but you must be aware of is a car an asset or liability.
As we noted earlier in the post, $52,000 a year is slightly below the average income that you would find in the United States. Thus, you still have to be wise with how you spend your money.
What a $52000 lifestyle will buy you:
If you are debt free and utilize smart money management skills, then you are able to enjoy the lifestyle you want.
You are able to rent in a decent neighborhood in LCOL and even MCOL city.
You should be able to meet your expenses each and every month.
Ability to make sure that saving money is a priority, and very possibly save $5000 in 52 weeks.
When A $52000 Salary Will Hold you Back:
However, if you are riddled with debt or unable to break the paycheck to paycheck cycle, then living off of 52k a year will be pretty darn difficult.
There are two factors that will keep holding you back:
You must pay off debt and cut all fun spending and extra expenses.
Break the paycheck to paycheck cycle.
Not using one of the millionaire quotes for motivation.
It is possible to get ahead with money!
It just comes with proper money management skills and a desire to have less stress around money. That is a winning combination regardless of your income level.
Find low-stress jobs that pay well without a degree now.
$52K a year Budget – Example
As always, here at Money Bliss, we focus on covering our basic expenses plus saving and giving first, and then our goal is to eliminate debt. The rest of the money leftover is left for fun spending.
This is how zero based budgeting works.
If you want to know how to manage 52k salary the best, then this is a prime example for you to compare your spending.
You can compare your budget to the ideal household budget percentages.
recommended budget percentages based on $52000 a year salary:
Category
Ideal Percentages
Sample Monthly Budget
Giving
10%
$202
Savings
15-25%
$780
Housing
20-30%
$1190
Utilities
4-7%
$152
Groceries
5-12%
$325
Clothing
1-4%
$26
Transportation
4-10%
$173
Medical
5-12%
$217
Life Insurance
1%
$11
Education
1-4%
$11
Personal
2-7%
$35
Recreation / Entertainment
3-8%
$87
Debts
0% – Goal
$0
Government Tax (including Income Tatumx, Social Security & Medicare)
15-25%
$1025
Total Gross Monthly Income
$4333
**In this budget, prioritization was given to basic expenses and no debt.
Is $52k a year a Good Salary?
As we stated earlier if you are able to make $52000 a year, that is a decent salary. You are making more money than the minimum wage and almost double in many cities.
While 52000 is a good salary starting out in your working years. It is a salary that you want to increase before your expenses go up or the people you provide for increase.
However, too many times people get stuck in the lifestyle trap of trying to keep up with the Joneses, and their lifestyle desires get out of hand compared to their salary. And what they thought used to be a great salary actually is not making ends meet at this time.
This $52k salary would be considered a lower middle class salary. This salary is something that you can live on if you are wise with money.
Check: Are you in the middle class?
In fact, this income level in the United States has enough buying power to put you in the top 95 percentile globally for per person income (source).
The question you need to ask yourself with your 52k salary is:
Am I maxed at the top of my career?
Is there more income potential?
What obstacles do I face if I want to try to increase my income?
In the future years and with possible inflation, in many modest cities 52,000 a year will not be a good salary because the cost of living is so high, whereas these are some of the cities where you can make a comfortable living at 52,000 per year.
If you are looking for a career change, you want to find jobs paying at least $60000 a year.
Is 52k a good salary for a Single Person?
Simply put, yes.
You can stretch your salary much further because you are only worried about your own expenses. A single person will spend much less than if you need to provide for someone else.
Your living expenses and ideal budget are much less. Thus, you can live extremely comfortably on $52000 per year.
And… most of us probably regret how much money wasted when we were single. Oh well, lesson learned.
Deep Dive: What Is A Good Salary For A Single Person in Today’s Society?
Is 52k a good salary for a family?
Many of the same principles apply above on whether $52000 is a good salary. The main difference with a family, you have more people to provide for than when you are single or have just one other person in your household.
The costs of raising children are high and will steeply cut into your income. As you can tell this is a huge dent in your income, specifically $12,980 annually per child.
That means that amount of money is coming out of the income that you earned.
So, the question really remains can you provide a good life for your family making $52,000 a year? This is the hardest part because each family has different choices, priorities, and values.
More or less, it comes down to two things:
The location where you live in.
Your lifestyle choices.
You can live comfortably as a family on this salary, but you will not be able to afford everything.
Many times when raising a family, it is helpful to have a dual-income household. That way you are able to provide the necessary expenses if both parties were making 52,000 per year, then the combined income for the household would be $104,000. Thus making your combined salary a very good income.
Learn how much money a family of 4 needs in each state.
Can you Live on $52000 Per Year?
As we outlined earlier in the post, $52,000 a year:
$25.00 Per Hour
$200-250 Per Day (depending on length of day worked)
$1000 Per Week
$1000 Per Biweekly
$4333 Per Month
Next up is making $55000 a year.
Like anything else in life, you get to decide how to spend, save and give your money.
That is the difference for each person on whether or not you can live a middle-class lifestyle depends on many potential factors. If you live in California or New Jersey you are gonna have a tougher time than in Oklahoma or even Texas.
In addition, if you are early in your career, starting out around 43,000 a year, that is a great place to be getting your career. However, if you have been in your career for over 20 years and still making under $45K, then you probably need to look at asking for pay increases, pick up a second job, or find a different career path.
In fact, this might be a good time to learn how to trade stocks with the best Travel and Travel course.
Regardless of the wage that you make, if you are not able to live the lifestyle that you want, then you have to find ways to make it work for you. Everybody has choices to make.
But one of the things that can help you the most is to stick to our ideal household budget percentages to make sure you stay on track.
Learn exactly how much do I make per year…
One of the best ways to improve your personal finance situation is to increase your income. Here are a variety of side hustles that are very lucrative. With time and effort, you can start enjoying the lifestyle you want.
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Save more, spend smarter, and make your money go further
Want to pay off high-interest debt in one fell swoop? Searching for ways to pay for a basement renovation, a bathroom upgrade, or a new tile roof? Since you probably don’t have that kind of money stuffed under your mattress, a natural place to look for more funds is in your single biggest asset: your home.
But before you tap into those funds, you need to know exactly what you’re getting into. Putting your home at risk isn’t for the uninformed or undisciplined.
Home equity loan vs. home equity line of credit
The first step to tapping into your home equity involves understanding your options. There are two major ones: a home equity loan (HEL) or a home equity line of credit (HELOC). Here’s a handy guide to the basic differences between the two, including pros and cons.
Helpful tips on the HEL
A home equity loan is, at heart, a second mortgage. You receive a lump sum at a fixed rate of interest that’s locked in when you procure the loan. You’re expected to pay it back in fixed monthly payments for a fixed amount of time — typically 10 to 15 years.
Pros:
Your interest rate is fixed, which means no shocking increases later.
Because payments are due monthly, this can be a good option if you have a hard time exercising the discipline needed to pay off a loan a little at a time on your own.
The interest rate on a HEL, though higher than that on your primary mortgage, will still be lower than the rates available on credit cards.
If you’re using your HEL to pay off credit cards, in addition to lower interest rates, you’ll have the benefit of consolidating all your debts into one payment.
The interest on your home equity loan may be tax-deductible, but you’ll want to thoroughly read Publication No. 936, the IRS’s guidelines on the home mortgage interest deduction, to ensure the degree to which you’re eligible. If your loan is for home-improvement purposes, rather than, say, college tuition, you’re allowed even greater leeway in deducting the interest.
Cons:
You borrow (and owe interest on) the whole amount, rather than being able to simply borrow what you need.
If you’re using the equity to fund something that will involve multiple payments over time — say, for example, a phased home-improvement project or quarterly payments on college tuition — you’ll have to be sure not to spend the money on other things in the interim.
If you use your HEL to fund something that immediately depreciates, such as a car or new furniture, you may hurt your net worth in the long term. Boosting the value of your home has a better chance of enhancing your overall financial picture over the long haul.
You may be prohibited from renting out your home, according to your loan terms.
You risk losing your home if you can’t make the payments.
Hello, HELOC
A home equity line of credit, by contrast, functions more like a credit card — using your home as collateral. You ask for a line of credit, and the lender assigns a maximum amount you can borrow — a credit limit. Lenders typically determine this amount by taking a percentage of your home’s appraised value and subtracting the amount you still owe on the mortgage; then they factor in things such as your credit history, debt load, and income. The lender then gives you a set of blank checks or a credit card that you can use to withdraw funds.
Unlike a HEL, the line of credit allows you to borrow what you need, when you need it, up to the full amount approved. So why wouldn’t everyone want to apply for a HELOC in case an emergency strikes? Take a look at the pros and cons to see for yourself.
Pros:
You don’t have to borrow in a lump sum; you can withdraw the funds when you need them.
HELOCs can be used as emergency funds in the event of a crisis, like losing your job, since you can access funds on an ongoing basis as needed.
Some lenders may allow you to convert to a fixed rate of interest, or to a fixed-term installment loan, for part or all of your balance.
The rates of interest, though variable, may still be lower than other forms of consumer credit, since they are secured with collateral — your home.
The interest on your HELOC may be tax-deductible, just as it is for the HEL, but consult IRS Publication No. 936 for confirmation of what applies to your particular circumstance.
Cons:
HELOCs typically have variable interest rates tied to the prime rate, so you could end up owing a much higher balance than you had anticipated.
The terms of a HELOC may dictate that you must begin withdrawing funds within a certain time period, and that you withdraw a minimum each time.
The costs of securing a HELOC aren’t pocket change. Expect to pay for a current property appraisal, an application fee, closing costs, and other possible charges, including points on your loan. You may also be subject to transaction fees every time you withdraw money.
Though the HELOC offers flexibility in terms of when you withdraw funds, there is no flexibility in terms of the end date. When the term of your loan expires, the balance of the loan is due in full. If you procrastinate or have difficulty making regular payments over the long haul, you may be hit with an excessively large bill at the end.
Lenders make it very easy to access the funds; you have to be disciplined enough to resist unless there’s an emergency or a planned expenditure that’s worthy of risking your home.
You may be prohibited from renting out your home, according to your loan terms.
You can damage your credit and lose your home if you’re unable to repay on schedule.
Conclusion
Before you rush to apply for a home equity loan or line of credit, first give serious consideration to whether you really need the funds. The terms can sound enticing, and the money seems relatively easy to get, but it all may be too easy. If you’ve ratcheted up high-interest debt and now see your home equity as a way to deal with the problem, you need to recognize that the loan is just a temporary fix. Clearing the decks so you can start spending again will be destructive to your financial health.
Whether it’s a HEL or a HELOC, consider yourself a good candidate only if you have the discipline to use the funds for a dedicated purpose, you’re spending the money on something of vital importance, and you can repay on time. If that’s you, tapping into home equity can be a useful strategy for accomplishing your goals.
Save more, spend smarter, and make your money go further
If you’re nearing the end of the initial term on your adjustable-rate mortgage (ARM), you might be wondering if now is a good time to refinance, and whether you should switch to a fixed rate.
In general, fixed-rate loans are good when rates are low or on the rise, because they lock in your payment and help you avoid constant rate increases. If rates are dropping, then an ARM lets you benefit from those decreases.
“The idea of trading away the uncertainty of an adjustable-rate mortgage for the certainty of a fixed-rate mortgage is appealing, especially if you’re expecting an adjustment in the next year or two,” says Greg McBride, CFA, chief financial analyst for Bankrate.
How to refinance an ARM
Like many types of loans, you can refinance an ARM. When you refinance an ARM, you replace your existing loan with a brand new one.
Lenders typically offer specific mortgage refinancing loans, so you’ll use their refinance application form to apply. Beyond that, the process is similar to your initial mortgage application, except that you already own the home. That can make some things, like inspections and appraisals a bit easier to schedule.
Keep in mind that you can choose the lender for your refinance. it could be your current lender or a different one.
To give yourself a good chance of qualifying for a refinancing loans, try to meet these requirements:
Own the home for at least six months
Have at least 20 percent equity
Have a credit score of at least 620 (for a conventional loan)
Have a debt-to-income ratio under 50 percent
Also keep in mind that you have to pay closing costs on the new loan, so you’ll want to make sure that you can afford to pay them. Also make sure that refinancing saves you more than it costs.
Benefits of switching to a fixed-rate mortgage
If you’ve never had a fixed-rate mortgage, here are the key upsides of this type of loan:
Your payments are always the same: A fixed-rate mortgage gives you the certainty of predictable payments. Rather than wondering how the market will impact your payments on an ARM, a fixed-rate option never changes for the entire loan term.
You can budget more easily: With a fixed-rate loan, you can plan for a stable housing payment.
You still have options: If a 30-year mortgage sounds like a lifetime, you can also look at a 15-year fixed-rate mortgage. The rates on this type of loan are even lower, but the tradeoff is that you’ll have higher monthly payments due to the accelerated timeline.
Is now a good time to refinance an ARM?
Mortgage rates rose significantly in 2022 and are much higher than they were in previous years. That means refinancing to a fixed-rate loan will lock in these high rates.
On the other hand, if your introductory rate is about to end, refinancing might still make sense, especially if you can secure a lower rate on a fixed-rate loan than the rate your ARM is about to adjust to. Another perk is that it gives you predictability despite today’s unpredictable rate environment.
Credit score: Do you have a strong enough credit score to obtain a competitive interest rate?
Financial goals: Would rather prioritize another goal such as paying off high-interest debt?
Longer-term plans: Will you stay in the home long enough for you to exceed the break-even point on your closing costs?
Ability to afford closing costs: Will the burden of paying closing costs outweigh the benefits of a lower monthly payment?
How is your credit?
Refinancing isn’t an automatic money-saver. You need to have strong credit to qualify for the lowest rate and the biggest savings opportunity. If you’ve been making timely payments on your ARM, that should be helping elevate your credit score.
“Someone coming up on the end of an ARM presumably has five or more years of timely mortgage payments on their credit history,” says Austin Kilgore, director of corporate communications at mortgage firm Achieve. “There’s a good chance their credit score is better now and they may qualify for something better.”
If your credit could use some work, however, it’s best to wait to refinance until you’ve improved your score. Check your credit report for any errors, such as incorrect contact information — and if something’s amiss, contact the credit reporting agency as soon as possible to get it fixed. If you can, pay down or pay off other debt, and continue to make credit card and other loan payments on time each month.
What are your financial goals?
Think about the financial goals refinancing can help you achieve, such as paying off your mortgage sooner, doing a cash-out refinance or consolidating debt. While a cash-out refinance increases the amount you owe, you’ll be able to use the funds for home improvements or other expenses or goals.
How long do you plan to stay in the home?
If you have no intention of moving or selling your home anytime soon, refinancing into a fixed-rate mortgage can be a smart decision. If a move is on your near-term horizon, however, it’s likely not worth the cost to refinance.
For example, if you’d save $100 on your monthly mortgage payment by refinancing, and the closing costs are $2,000, it’d take you 20 months, or close to two years, before you really start to see savings. Bankrate’s mortgage refinance break-even calculator can help you run the numbers for your situation.
“If you’re only looking at being at home for three or four more years and you have four years before it resets, and a new loan is not at least three-eighths of a basis point lower than your current rate, you might as well stay in your ARM,” advises Ralph DiBugnara, founder of Home Qualified, a digital resource for homebuyers and sellers. “There’s no financial benefit to move forward into a fixed rate.”
Should I refinance to a fixed rate mortgage?
At the very least, you should think about refinancing your ARM to a fixed rate if current mortgage rates are lower than the rate you’re paying or you’re nearing the end of the initial term on your ARM. The rate isn’t the only piece of the puzzle, however. Consider the following:
How much could you pay when your ARM resets? Make sure you have a clear understanding of the annual cap and the lifetime cap on your ARM. The annual cap will give you an idea of how much the rate could increase when it resets, and the lifetime cap is the maximum allowed for the entire duration of the loan.
Are you paying off an interest-only ARM? If your ARM included an interest-only introductory period, you’ve only needed to pay the interest, not the principal. Your payments will rise significantly when you have to pay down the actual loan, so it may be smart to refinance to a fixed-rate option.
Another thing to think about is refinancing your ARM to another ARM. This means getting another introductory rate period and kicking the can on truly adjustable rates down the road by a year or two – or five. Compare rates for new ARMs and fixed-rate loans to see if this makes sense.
Bottom line
Refinancing an ARM to a fixed-rate mortgage can be a wise investment in your financial future, potentially saving you thousands in lower monthly mortgage payments over the life of the loan. Not only that, you’ll be spared the uncertainty and stress that may accompany a fluctuating mortgage rate. Before you make your decision, take a holistic look at your financial situation and consider factors like your credit score, financial goals, and ability to afford closing costs.