<p>Of Counsel at Simpson Thacher &amp; Bartlett LLP</p><p>Steve Cutler has extensive experience in the financial services industry. Most recently he has served in leadership positions at Simpson Thacher &amp; Bartlett LLP, including as the Global Head of the firm’s Government and Internal Investigation Practices. Prior to joining Simpson Thacher, Mr. Cutler was Vice Chairman of JPMorgan Chase &amp; Co., after serving as the company’s General Counsel for nine years, including during the 2008-2009 financial crisis. Earlier in his career, Mr. Cutler served as Director of the Securities and Exchange Commission’s Division of Enforcement.  </p><p>Mr. Cutler also serves on the board of The Metropolitan Museum of Art, and previously served on the boards of the Financial Industry Regulatory Authority (FINRA) and the National Women’s Law Center. </p><p>He received his B.A., summa cum laude, from Yale University and his J.D. from Yale Law School, where he was an editor of the Yale Law Journal.</p>

Stephen Cutler

Leadership | Stephen Cutler

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From buying gifts to traveling, entertaining, decorating, and even cultivating a holiday wardrobe, you may have a lot on your shopping list. By preparing a holiday budget ahead of time—and sticking to it—you’ll be better equipped to make it through the holiday season without breaking the bank.   

<p>Holiday spending can add up quickly. From buying gifts to traveling, entertaining, decorating, and even cultivating a holiday wardrobe, you may have a lot on your holiday shopping list. However, a holiday budget can help you avoid racking up debt that carries over into the new year—all while still being able to pay your day-to-day expenses. By preparing a holiday budget ahead of time—and sticking to it—you’ll be better equipped to make it through the holiday season without breaking the bank.   </p><h2>6 ways to build a holiday budget that will work every year  </h2><p>The holidays are often a joyful time, but they can come with steep expenses and lots of stress if you’re not financially prepared. A holiday budget can help ensure you’ve got enough money to cover your holiday expenses—as long as you stick to it. Consider these strategies to build a holiday budget that will work year after year.<sup>[1]</sup>  </p><h3>1. Consider last year’s spending </h3><p>The first step to planning your holiday budget is to understand what you spent money on last year. Take a look at your bank account or credit card statement to gauge your holiday expenses in the past. Make a list of everything you bought or spent money on for the holiday season. Don’t forget to include holiday-specific purchases you made in advance, like gifts and flights.  </p><p>Reviewing last year’s expenses can help you understand how much you spent, what you bought, and how you paid for everything. Look closely at your purchases. What payment method did you use—cash, credit cards, a special savings account? How much did last-minute purchases add up to? How much did you spend on gifts? On travel? On hosting? What about holiday pictures or cards? Are you still paying off any debt from last year? </p><h3>2. Set your spending limit </h3><p>Just like a traditional budget, your holiday budget should be limited to the cash you have available after paying all your monthly expenses. If you’re coming up short, you might consider using some of your savings, but be sure to leave extra padding for your emergency fund. It might also be a time to eliminate extras—like paying to have your groceries delivered—at least until the holiday season is over.  </p><p>The goal is to set a spending limit based on your cash flow without putting too much strain on your overall budget. Don’t forget to consider ways you can <a href="https://www.lendingclub.com/resource-center/personal-finance/best-ways-to-save-money-this-holiday-season"><b><u>stretch your holiday budget</u></b></a> like making DIY gifts, skipping travel, or upcycling decorations.  </p><h3>3. Create holiday budget categories </h3><p>To better track your spending, create categories for all your usual holiday expenses. Categories can include things like gifts, holiday cards (plus postage), decorations, entertainment, hosting, and travel. Split up your holiday budget among these categories, making sure not to exceed your spending limit.  </p><p>You can still shift the dollar amounts around to different categories if needed, as long as the total stays within your budget. For example, you may plan to spend 75% of your gift budget on family presents, leaving the remaining 25% to be spent on holiday tips, host gifts, and other types of gifting. If you decide you need more of the budget for family gifts, you can cut spending on others.   </p><h3>4. Make a gift list </h3><p>Deciding ahead of time who will be on your gift list—and assigning a dollar amount for each of them—is just as important as setting your spending limit. At first, you may feel a little stingy if you have to make some cuts. However, effective budgeting often comes down to making tough decisions.  </p><p>If you can’t cut back on the number of people you have to buy for, consider revising your budget to afford smaller items for friends, coworkers, and extended family. Or, you can choose to keep your gift lift the same, but make cuts in other areas of your budget, like skipping expensive tickets to a holiday show. Remember, it’s your budget, so you get to make the rules.  </p><h3>5. Plan ahead </h3><p>To maximize your time, reduce stress, and make the most of your budget, start preparing for holiday spending about six months in advance. Even if you’re not quite in the holiday spirit during the summer months, planning early offers many benefits. </p><p>Setting your holiday spending limit and getting your budget in order early helps minimize holiday stress and allows you to prepare financially. You’ll have more time to bulk up your holiday savings, pay off past holiday debt, and take advantage of any sales or promotions during the summer months. Good planning can also help you avoid impulse purchases and stick to your budget. </p><h3>6. Figure out how you’ll pay </h3><p>To avoid racking up debt, commit to a cash-only holiday budget from your income, savings, and any money you earn on the side. This can be especially helpful if you think you’ll overspend when using credit cards. If you do use your credit cards, try to pay off the balance by the end of the grace period to avoid interest.  </p><p>You may also consider using a <a href="https://www.lendingclub.com/resource-center/personal-loan/what-is-buy-now-pay-later"><b><u>Buy Now, Pay Later</u></b></a> (BNPL) service to split the cost of purchases over time. BNPL can be helpful for large purchases like expensive airline tickets or large gifts—especially if you’re able to secure interest-free financing. Just be sure you can make your scheduled payments on time.<sup>[2]</sup>  </p><h2>How to stick to your holiday budget </h2><p>Creating a holiday budget can help you stay organized financially and avoid overspending, but <a href="https://www.lendingclub.com/resource-center/personal-finance/sticking-to-a-budget-common-problems-and-solutions"><b><u>sticking to a budget</u></b></a> isn’t always easy. It can be tempting to just get one more thing, or to dip into your holiday savings for a vacation. Setting goals can help you stay on track with savings or early gift-giving.  </p><p>For instance, set a goal to save a certain amount each week or to hit a certain amount in your savings by a specific date. You can also set goals around when you want to have all your shopping done. Consider what works best for you. Do you want more time to save and make all your purchases during the holiday? Or will shopping early help you save, reduce last minute purchases, and give you more time to relax? Remember, you can make adjustments based on what works for you.  </p><h2>The bottom line </h2><p>Just like any other budget, a successful holiday budget comes down to planning. The sooner you start making your plan, the better. Committing to a cash-only budget, setting a spending limit you can stick to, and saving enough to cover holiday expenses can help you make the most of the giving season and avoid lingering debt. If you’re still paying off last year’s holiday credit card bills, don’t be too hard on yourself. A <a href="https://www.lendingclub.com/personal-loan/debt-consolidation"><b><u>debt consolidation loan</u></b></a> can help you get back on track.  </p><hr/><ol><li><p><a href="https://www.consumerfinance.gov/about-us/blog/budgeting-how-to-create-a-budget-and-stick-with-it/"><u>Consumer Financial Protection Bureau</u></a>. “Budgeting: How to create a budget and stick with it.” </p></li><li><p><a href="https://www.consumerfinance.gov/compliance/compliance-resources/consumer-cards-resources/buy-now-pay-later-bnpl-products/buy-now-pay-later-product-faqs/"><u>Consumer Financial Protection Bureau</u></a>. “Buy Now, Pay Later Product FAQs.” </p></li></ol><p></p>

If you’ve missed payments and creditors are calling, you may be feeling like you’re drowning and desperate for a lifeline. Even if you proactively seek solutions, finding a solution to becoming debt-free can be difficult. 

<p>Finding a solution to <a href="https://www.lendingclub.com/resource-center/personal-finance/best-creative-ways-to-pay-off-de"><b><u>becoming debt-free</u></b></a> can be difficult and stressful—especially if you’ve  missed credit card payments and have creditors calling. A debt management plan (DMP) can help you become debt-free in just three to five years, often paying less out-of-pocket than you would if you paid your creditors directly. Debt management plans don’t cover secured debt, like auto loans and mortgages and can sometimes cost a fee, so it’s important to weigh<u> </u>the pros and cons carefully before signing up.<sup>[1]</sup>  </p><p>Here’s a closer look at what you need to know.  </p><h2>What is a debt management plan and how do they work? </h2><p>A DMP is managed by a credit counseling agency that work<u>s</u> on your behalf to help you negotiate more favorable terms and combine all your monthly payments into a single payment.<sup>[1]</sup>  </p><p>Qualified counselors work with you to make sure the new payment plan fits into your budget. You make monthly payments to the agency, which distributes the funds to your creditors until your debts are paid in full. Some credit counseling agencies may charge you a small fee for the service, but you’ll likely have smaller monthly payments, lower interest rates, or a waived penalty—which can save you money in the long run.<sup>[1]</sup>    </p><p>Here are some other things to keep in mind about how DMPs work:  </p><ul><li><p><b>Only for certain types of unsecured debt.</b> Debt management plans are primarily designed for credit card debt. If you’re struggling with other types of unsecured debt such as student loans or tax debt, you may have to look elsewhere. Secured debt, like your mortgage or auto loan, also can’t be included in a DMP.<sup>[2]</sup>   </p></li><li><p><b>No guarantees.</b> While credit counselors may try to negotiate with creditors on your behalf, credit card companies and other creditors aren’t required to agree to new terms and concessions or participate in a DMP. So, you may still be responsible for managing accounts that don’t end up being part of your DMP.<sup>[1]</sup>  </p></li><li><p><b>Less access to credit.</b> As part of your DMP agreement, you might not be allowed to open any new credit cards or use your existing cards until your DMP is completed. However, depending on the situation, your credit counseling agency may allow you to keep one card for emergencies.<sup>[2]</sup>   </p></li><li><p><b>DMPs take a long time. </b>A DMP may take three to five years to complete. If you drop out early, you’ll still owe the included debts, but your creditors might end concessions the credit counselor was able to secure.<sup>[2]</sup>   </p></li><li><p><b>Your credit might take an initial hit. </b>DMPs often require you to close your credit cards, which could hurt your credit score temporarily. However, if you follow through and make your payments on time, you may see your credit score rise as your debts are paid off.<sup>[2]</sup>    </p></li></ul><h2>Pros and cons of debt management plans </h2><p>Borrowers who are struggling with their bills may find DMPs a practical solution that offers relief from unaffordable debt payments. If you’re feeling overwhelmed or your monthly payments aren’t making a dent in your debt balance, a DMP can put you on a path to paying off debts, but they’re not for everyone.<sup>[3]</sup>   </p><p>Here are some advantages and disadvantages to consider before signing up.  </p><h3>Benefits of debt management plans </h3><ul><li><p>Single monthly payment that’s likely lower than your current total payments<sup>[1]</sup>   </p></li><li><p>Potential to save money if your counselor negotiates lower interest rates and fees<sup>[1]</sup>   </p></li><li><p>Collection calls will stop while you’re enrolled<sup>[1]</sup>   </p></li><li><p>Less impact on your credit than debt settlement or bankruptcy<sup>[3]</sup>  </p></li><li><p>You’ll have an exact end date for when your debt will be paid off<sup>[2]</sup>   </p></li></ul><h3>Downsides of debt management plans </h3><ul><li><p>Not available for secured debts, like a car or house<sup>[2]</sup>   </p></li><li><p>Creditors may not be willing to negotiate with your counselor<sup>[1]</sup>   </p></li><li><p>You will likely lose access to credit cards for a few years<sup>[2]</sup>   </p></li><li><p>Your credit score may take an initial dip<sup>[2]</sup>   </p></li><li><p>Doesn’t address issues with money management<sup>[2]</sup>   </p></li><li><p>You typically have to pay an upfront fee and monthly fees<sup>[3]</sup>  </p></li></ul><h2>How debt management plans may impact your credit score</h2><p>Signing up for a DMP doesn’t directly impact your credit score, but your credit might take a hit while you work on your debt management plan. For instance, you may need to close your credit card accounts—which could hurt your credit score by shortening the average age of your accounts, increasing your credit utilization, and altering your credit mix.<sup>[2]</sup>    </p><p>When you sign up for a DMP, your credit report may also show that you’re working with a financial counselor. Lenders reviewing your credit report will see this information, but it won’t impact your score.  </p><h2>Types of debt management plans </h2><p>Debt management plans are offered by two types of credit counseling agencies—nonprofits and for-profits. Before signing up for a DMP, be sure to compare different agencies. Whether you decide to work with a nonprofit or a for-profit credit counseling agency, research reviews and complaints from trusted sites, like the Better Business Bureau and Consumer Affairs.<sup>[1]</sup>   </p><p>It’s also important to compare fees (monthly and startup costs), plan terms, the types of debts you can include, and how long the DMP will take to complete. It may also make sense to narrow your search to agencies that have certified credit counselors and are part of an accredited association, such as the <a href="https://www.nfcc.org/"><u>National Foundation for Credit Counseling</u></a> (NFCC).<sup>[1]</sup>  </p><h3>Nonprofit credit counseling agencies </h3><p>According to the Federal Trade Commission, the most reputable credit counseling agencies for DMPs are typically nonprofits that offer services for no cost or at a lower cost than for-profit agencies. In addition to helping with your debt repayment, the agency may also provide access to credit education and budgeting tools. However, the FTC warns that not all nonprofits are legitimate, and some may disguise high fees or ask for contributions that add to your debt.<sup>[1]</sup> </p><h3>For-profit credit counseling agencies </h3><p>DMPs offered by for-profit agencies offer the same services as nonprofit agencies, but might come with higher fees. Watch out for agencies offering DMPs that seem like a “quick fix” or too good to be true. Remember, it takes about three to five years to pay off debt under a DMP.<sup>[1],[2]</sup> </p><h3>Debt management plan alternatives </h3><p>If you’re struggling with debt, a debt management plan isn’t your only option. A qualified credit counselor can discuss the pros and cons of different options that may make sense with your goals and financial situation.<sup>[1]</sup>  </p><p>For example, you may be able to revise your budget to afford your monthly payments without having to close your accounts or set up a DMP. You might also consider using the <a href="https://www.lendingclub.com/resource-center/personal-finance/steps-to-decimate-debt-the-debt-snowball-method"><b><u>debt avalanche method or debt snowball method</u></b></a> to tackle your debt.<sup>[4]</sup>   </p><p>Or, you might find it makes more sense to combine your debts and lower your interest rate with a <a href="https://www.lendingclub.com/personal-loan/debt-consolidation"><b><u>debt consolidation loan</u></b></a>. In some last-resort cases, bankruptcy could be worth considering.  </p><p><b>The bottom line</b> </p><p>If you’re struggling with paying your credit card bills or other unsecured debt, a debt management plan might offer you the help you need to get back on track. DMPs lump your payments into a single payment and can help cut your interest rates while providing you a structured path toward financial freedom.<sup>[1]</sup>  </p><p>However, it’s not for everyone. If you enroll in a debt management plan, you may have less access to credit, and your credit score might take an initial hit. Debt management plans also come at a cost, as most credit counselors charge a fee for their services.<sup>[1]</sup>  </p><h2>Debt management plan FAQ </h2><p>Still have questions about debt management plans? Some of these commonly asked questions may provide the answer. </p><h3>Do debt management plans hurt your credit? </h3><p>Signing up for a DMP doesn’t directly impact your credit score, but your credit might take a hit while you work on your debt management plan. You may need to close your credit card accounts, which could hurt your credit score by affecting your credit utilization, age of accounts, and credit mix.<sup>[3]</sup> </p><h3>Is a debt management plan a good idea?</h3><p>Debt management plans can be a good idea if you’re consistently paying down your priority loans (like a mortgage), but are struggling to keep up with your credit card debt. Using a DMP allows you to make smaller monthly payments to improve your cash flow while lowering your interest rate so debt stops mounting up so fast.<sup>[3]</sup> </p><h3>What are the disadvantages of a debt management plan? </h3><p>Debt management plans may require an upfront and monthly fee, they won’t help you with secured debts, and they may require you to close your credit cards. There’s also no guarantee that creditors will agree to participate and you’ll have to trust that the credit counselor will pay your creditors on time.<sup>[3]</sup>  </p><h3>How long do debt management plans last? </h3><p>Most DMPs are intended to pay off the included debts within three to five years. You may have a fixed monthly payment during the repayment period. As you pay off one account, the counseling agency will take that money and apply it to the other outstanding accounts.<sup>[2]</sup> </p><h3>What’s the best way to manage debt? </h3><p>Everyone’s situation and debt are different. If you want to pay off debt quickly, consider listing your debts and making a plan for which ones to tackle first. Sometimes using another resource, such as a DMP or debt consolidation loan, can be helpful.<sup>[4]</sup> </p><h3>What does a debt management program do? </h3><p>Debt management programs may offer different approaches to paying off debts. Some are guidelines or strategies, such as the debt avalanche and debt snowball methods. Others require working with a third party, such as a credit counselor, or with a new creditor to consolidate and refinance your debt.<sup>[3]</sup> </p><h3>What is the best way to manage debt? </h3><p>The best debt management program may depend on your financial circumstances and credit. Bankruptcy might be the best option for some, while others may benefit from a DMP or even from debt settlement. Or, if you’re able to qualify, a debt consolidation loan may be a good choice to consolidate high-interest credit card debt with one monthly payment—often at a lower interest rate.<sup>[3]</sup> </p><h3>What’s the difference between a debt management plan and debt settlement program? </h3><p>Debt management plans are sometimes confused with debt settlement programs. DMPs are offered by credit counseling agencies and intended to give you breathing room while you pay back your debt. Debt settlement programs negotiate debt forgiveness—usually about 50% to 80%—and are often costly. Settlement often takes years while your accounts continue to accrue interest and fees and can even leave you at risk for creditor lawsuits and wage garnishment.<sup>[3]</sup>    </p><hr/><ol><li><p><a href="https://www.consumerfinance.gov/ask-cfpb/what-is-credit-counseling-en-1451/"><u>Consumer Financial Protection Bureau</u></a>. “What is credit counseling?” </p></li><li><p><a href="https://www.ncoa.org/article/what-is-a-debt-management-plan"><u>National Counsel On Aging</u></a>. “What Is a Debt Management Plan?” </p></li><li><p><a href="https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-credit-counseling-and-debt-settlement-debt-consolidation-or-credit-repair-en-1449/"><u>Consumer Financial Protection Bureau</u></a>. “What is the difference between credit counseling and debt settlement, debt consolidation, or credit repair?” </p></li><li><p><a href="https://www.consumerfinance.gov/about-us/blog/how-reduce-your-debt/"><u>Consumer Financial Protection Bureau</u></a>. “How to reduce your debt” </p></li></ol><p></p>

Taxes may not be the most exciting thing you'll ever do, but if you have a personal loan, knowing the potential tax implications can help when it comes time to file your return. 

<p>In most cases, you cannot get a tax deductible interest on personal loans. You may not deduct interest expenses from an unsecured personal loan unless the loan is for business expenses, qualified education expenses, or eligible taxable investments. </p><p>Taxes may not be the most exciting thing you&#39;ll ever do, but if you have a personal loan, knowing the potential tax implications can help when it comes time to file your return. </p><p>The good news: There is no set personal loan tax. However, knowing when and how a personal loan might impact your taxes can help ensure you don’t miss out on any potential deductions. Here is what you need to know: </p><h2><b>Are personal loans tax deductible?</b> </h2><p>In most cases, no, however, there are a few exceptions to the rule. You <i>can</i> get tax-deductible interest on personal loans if you use the loan proceeds for business expenses, qualified education expenses, or eligible taxable investments. If you do not use the loan for one of these reasons, then a personal loan won’t affect your taxes. </p><h2><b>Why don’t personal loans affect your taxes?</b> </h2><p>A <a href="https://www.lendingclub.com/personal-loan">personal loan</a> could help you save money by consolidating high-interest debt, or provide the funds you need to pay for an emergency or unexpected expense. While there are exceptions, generally, personal loans don’t affect your taxes.  </p><h3><b>1. It&#39;s not income</b> </h3><p>The money you receive from a personal loan isn’t added to your taxable income, which means that the borrower does not have to pay taxes. </p><h3><b>2. It&#39;s for personal use</b> </h3><p>Personal loans are often for personal use, and you generally don’t get to deduct personal expenses. </p><h3><b>3. Even when allowed, only interest is tax deductible</b> </h3><p>Some types of loans can qualify for a tax deduction. Generally, you can deduct only the interest portion you pay on the loan (and sometimes origination fees in the case of <a href="https://www.irs.gov/publications/p970%22%20/l%20%22en_US_2019_publink1000178257">student loans</a>, for example), not the loan amount. </p><h2><b>When can you get tax deductible interest on loans?</b> </h2><p>Depending on how you use the funds, there are a few circumstances when you can get tax deductable interest on personal loans. </p><p>For example, if you take out a loan solely to pay for qualified education expenses or to refinance a student loan, you may be able to claim the <a href="https://www.irs.gov/publications/p970%22%20/l%20%22en_US_2019_publink1000178257">student loan interest deduction</a>. </p><p>Similarly, you may also be able to take an investment interest expense or business expense deduction if you used a personal loan for these purposes. However, some lenders and lending marketplaces (like LendingClub) may not allow you to take out a personal loan for these types of purchases. </p><p>Additionally, an unsecured personal loan won’t qualify for mortgage-related deductions because the loan isn’t <a href="https://www.irs.gov/taxtopics/tc505">secured by your home</a>. This is true even if you take out the loan for home improvements. </p><h2><b>4 types of loans with tax-deductible interest</b> </h2><p>You can get a tax deductible interest on certain types of loans if you meet all the criteria. According to the IRS, you can get a tax deductible interest on the following loans: </p><ul><li><p>Interest on outstanding student loans </p></li><li><p>Interest on mortgages &amp; second mortgages </p></li><li><p>Investment interest expenses </p></li><li><p>Interest on business loans </p></li></ul><h3><b>1. Student loans</b> </h3><p>If you took out student loans for qualified higher education expenses, you may be able to deduct up to $2,500 in interest payments each year. For the interest deduction, <a href="https://www.irs.gov/publications/p970%22%20/l%20%22en_US_2019_publink1000178257">qualified expenses</a> may include tuition, fees, lodging, textbooks, and other necessary expenses. The definition varies for certain higher education tax credits. You can take this deduction even if you don’t itemize. However, you can’t take the deduction if you use the married filing separately status or if someone can claim you or your spouse as a dependent. The deduction also phases out based on your modified adjusted gross income. </p><h3><b>2. Mortgages</b> </h3><p>While the <a href="https://www.irs.gov/publications/p936">Tax Cuts and Jobs Act of 2017</a> created new rules for deducting mortgage interest payments, it didn’t get rid of the deduction altogether. Individuals can still deduct interest on mortgages when they use the money to buy, build, or improve a home. For example, if you paid mortgage interest points, those payments can also be deductible. In both cases, if you qualify, you must itemize your deductions to benefit. The law limits how much interest you may be able to deduct. Now, you can deduct interest on up to $375,000 worth of mortgage debt (or, $750,000 if you’re married and file jointly). Higher limits of $500,000 and $1,000,000 apply if you took out the mortgage before December 16, 2016. </p><h3><b>3. Second mortgages</b> </h3><p><a href="https://www.irs.gov/newsroom/interest-on-home-equity-loans-often-still-deductible-under-new-law">Interest payments on second mortgages</a>, such as a home equity loan (HEL) or home equity line of credit (HELOC) may also be deductible. However, the mortgage value limit applies to the combined balance of your first and second mortgages. To qualify, you need to use the proceeds from the loan to substantially improve the home by increasing its value or extending its life. In other words, building an addition might qualify, but making purely cosmetic changes that don’t increase its value wouldn’t. </p><h3><b>4. Investment interest expenses</b> </h3><p>The <a href="https://turbotax.intuit.com/tax-tips/investments-and-taxes/what-is-form-4952-investment-interest-expense-deduction/L9BaPovJ4">investment interest deduction</a> is an itemized deduction for the interest you pay if you borrow money to buy an eligible taxable investment. For example, you may be able to claim the deduction if you have a brokerage account and took out a margin loan to buy stocks. Buying tax-advantaged municipal bonds won’t count. </p><p>If you qualify, the deduction is limited to the net investment income you earned at your ordinary income tax rate. You may be able to carry over interest expenses if you can’t claim the full deduction this year. </p><h3><b>5. Business loans</b> </h3><p>If you run a business or are self-employed, you may be able to deduct the interest you pay on a business loan (or the portion of a personal loan) you use for business purposes. To qualify, you must: </p><ul><li><p>Be liable for the debt </p></li><li><p>Intend to repay the debt, and the credit must be expected to be repaid </p></li><li><p>Have a true debtor-creditor relationship </p></li></ul><p>For example, if a family member offers to give you money to start a business and you later decide to repay the gift plus interest that won’t count. If you take out a personal loan to buy supplies and equipment for your business, then you may be able to deduct your interest payment. Or, for example, you take out an auto refinance loan for a vehicle that you use for business half the time. You may be able to deduct half of the interest on the loan. </p><h2><b>How does canceled personal loan debt affect your taxes?</b> </h2><p>If a creditor cancels, discharges, or forgives part of your debt, the portion of the loan that you didn’t repay may be considered <a href="https://www.irs.gov/taxtopics/tc431">taxable income</a>. Often, this occurs if you fall behind on payments and agree to a settlement with the creditor. The creditor will send you a Form 1099-C, Cancellation of Debt, which shows how much debt was canceled. You may need to include the canceled debt in your income and pay taxes on the amount. However, there are exceptions, and you may be able to exclude the amount from your income if you’re insolvent (i.e., your liabilities exceed your assets). </p><h2><b>The bottom line</b> </h2><p>With the potential tax consequences in mind, you can be more strategic about when and why you take out a loan. In particular, small-business owners can benefit, as some loans may qualify them for a deduction even if they use only a portion of the proceeds for business expenses. Remember, tax planning is a year-round process and an important part of managing your personal finances. Many individuals often think about using a tax refund to pay down debt. However, a better approach might be to use a more reliable source of funds—such as a personal loan. </p><h2><b>FAQs</b>  </h2><h3><b>Are loan repayments tax deductible?</b> </h3><p>No, loan repayments on personal loans, auto loans, and credit card debt are not tax-deductible. </p><h3><b>What kind of personal expenses are tax deductible?</b> </h3><p>The top personal expenses that remain tax deductible for individuals include mortgage interest, student loan interest, charitable donations, medical expenses, 401(k) and IRA contributions, and certain education expenses. Most of these can only be taken if you file an itemized tax return.  </p><p></p>

If you’re in the market for a new car, you might be wondering if your current credit score will help you get a good deal or hold you back. Your credit score is an important part of the process, but it’s not the only factor. Though good and excellent credit scores help when taking out any line of credit, it is possible to buy a car with a less-than-ideal score.

<p>If you’re in the market for a new car, you might be wondering if your current credit score will help you get a good deal or hold you back.  </p><p>To buy a car, a credit score of around 660 or higher is typically needed to secure favorable loan terms, though higher scores can lead to better interest rates and more financing options. Lower scores may still qualify for loans but often come with higher interest rates. </p><h2><b>What credit score do you need to buy a car?</b> </h2><p>According to Experian’s Q1 2024 <a href="https://www.experian.com/content/dam/noindex/na/us/automotive/finance-trends/2024/experian-safm-q1-2024.pdf">State of the Automotive Finance Market</a> report, the typical car buyer needs a credit score of 755 for new car loans and 686 for used car loans. However, don’t be alarmed if your score isn’t there yet—these are just averages, and qualifying for an auto loan can be subjective. A higher credit score doesn’t guarantee approval and a below-average credit score won’t necessarily prevent you from qualifying either.  </p><h3><b>Minimum credit score to buy a car</b> </h3><p>There’s no universal minimum credit score to buy a car—<a href="https://www.experian.com/blogs/ask-experian/what-is-the-lowest-credit-score-to-buy-a-car/">credit score minimums</a> vary from lender to lender. With that said, Experian’s State of the Automotive Finance Market report found that 69% of vehicles financed were for borrowers with a credit score of 661 or higher.  </p><h2><b>Benefits of a higher credit score</b> </h2><p>Of course, having a good credit score (670-739<sup>[1]</sup>) is always better—and it increases your chances of qualifying for a car loan. </p><p>It makes sense. Think about the process from a lender’s perspective. Imagine you’re trying to decide whether or not to lend a stranger money, with the promise they’d return the funds. Would you lend money to someone with a history of missed payments? Or would you prefer to lend money to someone who has historically made their payments on time? That’s why lenders prefer applicants with good credit scores. </p><h3><b>It can save you money</b> </h3><p>A good credit score can also keep money in your wallet. If you have a higher credit score, auto lenders are more likely to offer you loans with favorable terms, like a lower interest rate, longer-term (e.g., a five-year loan versus a three-year loan), or larger loan amount.  </p><p>How much you save may vary by lender. For example, if you have a $20,000 new car loan with a 36-month term, here’s how your credit score could impact your monthly payment and total interest. </p><table><tr><td><p>FICO score </p></td><td><p>720-850 </p></td><td><p>690-719 </p></td><td><p>660-689 </p></td><td><p>620-659 </p></td><td><p>590-619 </p></td><td><p>500-589 </p></td></tr><tr><td><p>Annual percentage rate (APR) </p></td><td><p>7.40% </p></td><td><p>8.55% </p></td><td><p>10.30% </p></td><td><p>12.42% </p></td><td><p>16.76% </p></td><td><p>17.65% </p></td></tr><tr><td><p>Monthly payment </p></td><td><p>$621 </p></td><td><p>$632 </p></td><td><p>$648 </p></td><td><p>$668 </p></td><td><p>$711 </p></td><td><p>$720 </p></td></tr><tr><td><p>Total interest paid </p></td><td><p>$2,365 </p></td><td><p>$2,746 </p></td><td><p>$3,334 </p></td><td><p>$4,059 </p></td><td><p>$5,584 </p></td><td><p>$5,902 </p></td></tr></table><p><i>Source: </i><a href="https://www.myfico.com/credit-education/calculators/loan-savings-calculator/"><i>myFICO.com</i></a><i> as of 8/8/2024</i> </p><h3><b>You have a higher chance of approval</b> </h3><p>If you have a good credit score, you have a better chance of qualifying for a loan through a traditional lender, such as a bank or credit union. These lenders may offer better rates unlike dealership financing which can sometimes be more expensive with less favorable terms—such as prepayment penalties.  </p><h3><b>You can score better interest rates</b> </h3><p>A better credit score can help you score lower interest rates. As you can see from the table above, the interest savings are significant from tier to tier. A credit score in the top tier only pays $2,365 of interest over the life of the loan. Conversely, a score between 500 and 589 leads to $5,902 of interest—an extra $3,537. </p><h3><b>You may have lower monthly payments</b> </h3><p>Owning or leasing a car can be expensive. And auto loan payments plus the cost of car insurance can be a steep line item in your monthly budget. But the higher your credit score, the more likely you are to secure a lower monthly payment for your car loan. That’s less money going out the door and more in your bank account.  </p><h2><b>How to get a car loan with no credit</b> </h2><p>If you have a less than ideal credit history—or no credit history at all—you aren’t relegated to bicycles and public transportation until the end of time. You may still be able to get a car loan. You can improve your strength as an auto loan applicant through a few strategic moves, even if you have minimal or poor credit.  </p><h3><b>Make a bigger down payment</b> </h3><p>When you purchase a car, you’ll have the option to make a down payment. This reduces the size of your loan and helps build positive equity in your vehicle. Lenders like that.  </p><p>More specifically, lenders prefer a lower loan-to-value ratio (LTV). So, if you make a bigger down payment, you decrease your LTV.  </p><p>Keep in mind depreciation waits for no one. Your car&#39;s value takes a hit as soon as you drive off the lot. A down payment can help offset that inevitable drop. </p><h3><b>Find a co-borrower</b> </h3><p>There’s nothing wrong with leaning on the financial shoulder of a partner or relative. If you have lower credit scores (or no credit whatsoever), you can apply for an auto loan with a co-borrower or cosigner that has better credit. That said, it’s worth mentioning that your cosigner effectively promises to cover the loan if you stop making payments.  </p><h3><b>Build credit first</b> </h3><p>Even if you don’t have credit, it’s possible to find a less conventional lender that’s willing to give you an auto loan. However, your loan offer might include higher interest rates, prepayment penalties, or other less-than-desirable terms. If you can manage without a car, it might be a wiser personal finance decision to build credit first and avoid high interest rates.  </p><h2><b>3 Ways to build credit and save money when buying a car</b> </h2><p>Building credit helps you qualify for an auto loan and secure the best terms, such as a lower interest rate. This translates to lower monthly loan payments and more money in your pocket. Fortunately, building credit’s not as complicated as you might think. </p><h3><b>Avoid late payments</b> </h3><p>Your payment history accounts for 35% of your FICO credit score. If you want to increase your score, make your payments on time, every time. This is low-hanging fruit for all wannabe credit-builders out there.  </p><h3><b>Lower your credit utilization</b> </h3><p>Behind payment history, your credit utilization significantly impacts your credit score. By lowering this metric (e.g., paying down credit card debt), you can improve your score and rake in savings on your auto loan. </p><h3><b>Check your credit report</b> </h3><p>Have you checked your credit report recently? If not, you might be selling yourself short to auto lenders. Credit reports aren’t impervious to errors—it’s more common than you’d think.  </p><p>As part of a <a href="https://www.consumerreports.org/credit-scores-reports/consumers-found-errors-in-their-credit-reports-a6996937910/">ConsumerReports study</a>, 5,858 volunteers checked their credit reports for mistakes, and 34% of participants found at least one error.  </p><p>Did you know you’re entitled to free credit reporting each year? You can get a copy of your report from the major credit bureaus: Equifax, Transunion, and Experian.  </p><hr/><p> </p><h2><b>Auto loan credit score FAQs</b> </h2><h3><b>Can an auto loan help me build credit?</b> </h3><p>When you take out your loan, your credit score might take a dip. This is normal because you’re increasing your total debt. But as you make on-time payments and repay your loan, your credit score could increase.1 </p><h3><b>What credit score do I need to buy a car with no money down?</b> </h3><p>Minimum credit score requirements vary from lender to lender—regardless of your down payment. That said, a down payment is still worth considering, especially if you want a lower monthly car payment.  </p><h3><b>How will my credit score affect my car loan?</b> </h3><p>The better your credit score, the better your odds at getting a car loan with favorable terms. A higher score could translate to better rates and the option of a longer term. However, your credit score alone doesn’t guarantee approval or denial (or even access to the best rates).  </p><h3><b>Does my credit score matter when buying a new vs. used car?</b> </h3><p>Your credit score always matters when taking out a loan. So it will still be taken into account regardless if the car is old or new. But if you’re paying cash, the dealer may not need to see your credit report or credit score.  </p>

Chances are, you’re managing money differently today than you were a few years ago. If your shopping, spending, and money management have moved online and onto your phone, you might want to consider whether an online-only bank is a fit for you.

<p>Chances are, you’re managing money differently today than you were a few years ago. If your shopping, spending, and money management have moved online and onto your phone, you might want to consider whether an online-only bank is a fit for you. At a traditional bank, fees and interest charges support retail branches and other services you may no longer want or need. </p><p>Online banks don’t have retail locations. Instead, they hone in on providing online loans and deposit accounts with great rates, low fees, and digital features that make managing money easier now.</p><p>Would an online bank work for you? Read on to learn more about the benefits of online banking.</p><h2>How managing money went digital</h2><p>Managing money online is now a primary way to transact. How many of these digital money moves do you recognize?</p><ul><li><p>Using your phone to deposit checks</p></li><li><p>Shopping and paying bills online</p></li><li><p>Using an app to pay or reimburse friends and family</p></li><li><p>Opening a bank, investment, or cryptocurrency account online</p></li><li><p>Paying a contractor through a payment app</p></li><li><p>Using a digital wallet</p></li><li><p>Adding multi-factor authentication (single-use passcodes) to your accounts for security</p></li><li><p>Monitoring your credit online</p></li></ul><p>You may check your real-time account balance before making a big purchase. You receive text alerts that remind you to pay bills. You use an app to pay a babysitter or split a check.</p><p>Now that your relationship with money has gone mostly digital, how well does your bank support that relationship? If you’re not sure how to answer, you might want to look into an online bank.</p><h2>What is online banking?</h2><p>Online banking is what you do whenever you use a bank’s website or mobile app, but it also refers to a type of bank that focuses on digital banking. These banks don’t rely on retail locations to serve their customers (or members). </p><h2>How does online banking work? </h2><p>Just about everything happens online or by <a href="/mobile-app">mobile app</a>. You can:</p><ul><li><p><b>Use a banking website </b>to open and access your accounts;</p></li><li><p><b>Download an app </b>to get an instant read on transactions, transfer money between accounts, or send money to friends and family;</p></li><li><p><b>Pay bills </b>and receive security alerts on your phone; and</p></li><li><p><b>Use any ATM </b>to access cash (you may receive a refund for out-of-network fees).</p></li></ul><p>Online banking isn’t new: People have been using their bank’s websites to view accounts since the 1990s and mobile banking apps have been around for more than a decade. Online banks are taking digital banking to a new level by changing the economics of financial services.</p><p>Branch locations cost money to operate along with other trappings of traditional banking, like paper statements and paper checks. By focusing on the key digital banking features consumers want, and ditching legacy features that drive up overhead, online banks can provide a great digital experience while keeping costs low.</p><p>These savings translate to competitive rates on loans and savings, or <a href="/personal-checking/rewards-checking">rewards checking accounts</a> without maintenance fees—to name a few. You won’t get a nicely decorated branch to visit, but you will get the convenience of a bank that never requires you to visit a branch. And with less overhead, you may pay less and receive more on the loans, checking, and savings accounts you want.</p><h2>Traditional banks vs. Credit unions vs. Online banks</h2><p>When you shop for a bank online, you’ll find a wealth of options. Not every bank you find online is an online bank. Some, like credit unions, aren’t banks at all. Here’s a quick rundown on three common types of financial institutions:</p><h3>Traditional banks</h3><p>Traditional banks deliver a familiar mix of checking, savings, credit, and loans. Expect to find a network of national or regional retail branch locations, branded ATMs, online banking, mobile apps, and telephone-based customer service. Although banks can range from small community banks to nationwide megabanks, banks on the whole are full-service operations - a good place to look when you need a cashier’s check or safe deposit box. They’re also for-profit companies with profit margins to manage and shareholders to answer to.</p><h3>Credit unions</h3><p>Credit unions offer many of the same products and services as banks, but with a member-based business model that is not-for-profit. Rates and fees are typically competitive, and personalized service is a hallmark. Credit union membership is often based on where you live or work. </p><p>You can go to <a href="https://www.mycreditunion.gov/about-credit-unions/find-join-start">mycreditunion.gov</a> to find credit unions you are eligible to join. Expect a range when it comes to digital experience: Some credit unions are tech-forward while others are a few steps behind.</p><h3>Online banks</h3><p>Online banks center on digital experience instead of maintaining branch locations or their own network of ATMs. Online banks typically offer lower rates and fees on loans and higher interest on checking and savings and have strong mobile apps and customer service features. </p><p>As an example, <a href="/personal-checking/rewards-checking">Rewards Checking</a> at LendingClub Bank pays cash back rewards on Qualified Purchases using a debit card tied to Eligible Accounts, no maintenance fees, and no minimum balance requirements (aside from $25 to open the account).<sup>1</sup> Like traditional banks, online banks are regulated, for-profit companies with profit margins and shareholders to manage.</p><h2>Pros and cons of banking online</h2><p>If you’re comfortable managing your money digitally, an online bank may give you a better deal on basics like checking, savings, and loans. Because online banks are built to function virtually, they’re invested in offering technology that works. Of course, you should check out any bank you’re considering individually, to make sure they have the accounts, features, and competitive rates you want.</p><h3>Do you need a branch?</h3><p>Some people prefer banking face-to-face. You might use in-branch services frequently - for example, if you own a small business and make regular large cash deposits. Maybe you’ve developed personal relationships with the people at your bank branch, and that gives you a sense of security and belonging.</p><p>On the other hand, maybe you haven’t seen the inside of a bank branch in years. Maybe you only go grudgingly, when you can’t accomplish what you need online or at an ATM. Maybe your branch is now populated with automated tellers that handle tasks efficiently but can’t deliver a personal touch. Only you know whether you really need a branch to manage your money comfortably and effectively.</p><h3>Is an online bank safe?</h3><p><a href="/">Online banks</a> that are insured by the Federal Deposit Insurance Corporation (FDIC) offer the same protections as traditional banks. The FDIC insures up to $250,000 per depositor, per bank, for each ownership category including single accounts, joint accounts, trust accounts, and so on. Credit unions have similar insurance through the National Credit Union Association (NCUA).</p><p>Wherever you bank, online security is a serious concern. Card-not-present (online) fraud is rising; security features that protect your account data and identity are a must. Look for security tools like single-use passcodes and biometric (face ID or fingerprint) identification that works with your phone. Online banks are constantly improving security technology to stay ahead of fraud. Avoid public Wi-Fi when you’re banking or shopping. Seek out and use your bank’s security features to keep your data as safe as possible.</p><h2>9 features you may find at an online bank</h2><p>One of the best reasons to consider an online bank is their range of convenient, money-saving products and features. Here are nine useful items you might find at an online bank:</p><ol><li><p><a href="/personal-checking/rewards-checking">Fee-free rewards checking with no minimum balance requirement</a></p></li><li><p><a href="/personal-savings/high-yield-savings">High-yield savings accounts</a> and CDs that pay top interest rates</p></li><li><p>A <a href="/mobile-app">mobile banking app</a> that covers all your basic banking</p></li><li><p>Nationwide <a href="/help/checking-accounts-faq/how-do-i-earn-atm-rebates-on-my-checking">ATM access with rebates</a> on out-of-network fees</p></li><li><p>Faster direct deposits that let you access your paycheck sooner</p></li><li><p><a href="/personal-loan">Loans with competitive rates</a> and fast online application, approval, and funding</p></li><li><p>24/7 customer service by chat or phone</p></li><li><p>Security features like multi-factor authentication and alerts that keep you connected to your accounts in real time</p></li><li><p>FDIC insurance (Member FDIC)</p></li></ol><h2>The bottom line</h2><p>In a digital-first world, an online bank can provide you with the loans, checking, and savings you want, with lower costs and a higher upside. If you already manage your finances in the digital realm, choosing a bank that does everything online and by app might not require much adjustment. Choose the right banking partner (or partners), plug in, and enjoy the benefits of banking online.</p><p></p><hr/><p><i><b>Terms and Conditions</b></i></p><p><b>1. Rewards Checking Cash Back Rewards: </b>The Debit Card Rewards Program (“Cash Back Rewards”) provides 1.00% cash-back on all Qualified Purchases using a debit card tied to Eligible Accounts. Eligible Accounts are: Rewards Checking accounts that meet the following requirements for the calendar month in review: (1) Maintain an average monthly balance of at least $2,500.00; or (2) Receives at least $2,500.00 in Qualifying Direct Deposits.</p><p><b>Qualifying Direct Deposits </b><u>are defined as</u>: Recurring Automated Clearing House (ACH) credits, including payroll, pension or government payments (such as Social Security) made by your employer, or an outside agency. We may require documentation to verify that credits are Qualifying Direct Deposits. Qualifying Direct Deposits <u>do not include </u>peer to peer payments or ACH transfers (funds transfers) from your external accounts.</br></br><b>Qualified Purchases </b><u>are defined as</u>: Signature-based purchases made using the debit card tied to an Eligible Account. These are “credit” purchases that can be made in stores and online. To make a signature-based purchase, select “credit” rather than debit at point-of-sale kiosks. The “credit” option is most often pre-selected when making purchases online using a debit card. Online subscription payments may not be considered signature-based purchases. The payment transaction type (signature-based or other) is ultimately decided by the merchant and is based on how the transaction is transmitted at the time of processing. Qualified Purchases <u>do not include</u>: (1) any goods or services purchased that are returned or otherwise credited to your Eligible Account; (2) unlawful purchases; or (3) purchases of currency, cash or cash equivalents (including, without limitation, currency from the U.S. Mint, Travelers Checks, gift cards, cryptocurrency, casino chips, peer to peer payments, prepaid debit cards, account openings, loan payments, or other cash equivalents). Any earned Cash Back Rewards will be credited to your account on or before the 10th calendar day of the next calendar month. The Eligible Account must be open and active at the time the Cash Back Reward is credited.</p><p></p>

From groceries and diapers to Halloween costumes for pets, nearly 60% of American consumers prefer to shop online for everyday items that make life more convenient, comfortable, and enjoyable. And with rising prices showing no signs of stopping anytime soon, we’re pleased to introduce StackitTM from LendingClub Bank—a new browser extension that automatically finds and rewards eligible members with coupons and cash back for extra savings at more than 15,000 favorite online retailers.

<p>From groceries and diapers to Halloween costumes for pets, nearly 60% of American consumers prefer to shop online for everyday items that make life more convenient, comfortable, and enjoyable. And with rising prices showing no signs of stopping anytime soon, we’re pleased to introduce Stackit<sup>TM</sup> from LendingClub Bank—a <a href="/member-benefits/stackit/install?utm_source=Internal&utm_medium=Blog&utm_campaignid=stackit_launch">new browser extension</a> that automatically finds and rewards eligible members with coupons and cash back for extra savings at more than 15,000 favorite online retailers.</p><h2>Limited Time Offer to Double Your Cash Back Through 12/31/22</h2><p>Stackit is a free, new cash back and rewards program available to personal loan members that’s easy to download and install. Eligible members can activate their favorite offers with one click to start saving while stacking cash back offers with existing loyalty program rewards at eligible stores.</p><p>“We’re relentless when it comes to giving customers more, and Stackit is a perfect example of this,” said Amber Carroll, SVP of Membership and Lifecycle Marketing. “Stackit appears as you shop so it’s easier to activate. You can redeem your cash back for gift cards from hundreds of online stores. And you can continue accumulating loyalty points from merchants and rewards from credit cards while we stack coupon savings and cash back earnings on top of all of it,” she said. “Stackit demonstrates our promise to help members make smart money moves that are both easy and rewarding.”</p><p>To celebrate the new Stackit rewards program, LendingClub is offering its personal loan members double the cash back on eligible purchases made now through the end of the year. To start earning and stacking rewards, eligible members can simply <a href="/member-benefits/stackit/install?utm_source=Internal&utm_medium=Blog&utm_campaignid=stackit_launch">add the new Stackit Extension</a> to their browsers—<b>doubling their earnings for a limited time through 12/31/22.</b>* Cash back can be redeemed for e-gift cards through the Earnings Dashboard.</p><h2>New Name, Better Rewards</h2><p>Earlier this year, LendingClub soft-launched its exclusive member rewards program as a separate Chrome browser extension test that was made available to a small subset of customers. Drawing from these learnings,Stackit is LendingClub Bank’s new and improved rewards program featuring a new extension, expanded browser availability, and enhanced account integration that is rolling out to a wider member audience beginning in November.</p><p>Currently, any LendingClub personal loan member can download and start using the new Stackit browser extension. (Users of the old LendingClub Chrome Extension can continue earning cash back through 11/30/22; any amount remaining in users’ accounts after 11/30 will automatically be paid out via PayPal. Members are advised to add the new Stackit Extension to continue earning cash back and rewards, including double cash back, on future purchases.) In addition to Chrome,Stackit expands browser availability to Safari and Edge, and enables members to view recent transactions and cash back earnings inside their LendingClub account instead of a third-party site. Planned rollouts to LendingClub members with Auto, Deposit, and other accounts beyond personal loans are expected, however, timing is still under consideration.</p><p><i>*Double Cash Back Offer on eligible transactions expires 12/31/22. See </i><a href="/legal/terms-of-use"><i>Terms of Use</i></a><i> for full details. Offer is subject to change without notice.</i></p><p>Stackit is a non-deposit product offered by LendingClub Bank.</p>

Even in today’s low-yield, high-inflation environment, it’s essential to keep a certain amount of money in an easy-to-access checking or savings account for things like daily household and emergency expenses, or to meet short-term financial goals. 

<p>Even in today’s low-yield, high-inflation environment, it’s essential to keep a certain amount of money in an easy-to-access checking or savings account for things like daily household and emergency expenses, or to meet short-term financial goals. However, recent <a href="https://www.fdic.gov/analysis/household-survey/">FDIC research</a> shows approximately 7.1 million Americans are “unbanked,” meaning they do not have a basic checking or <a href="/personal-savings">savings account</a>.</p><h2>Being Unbanked Increases Costs for Families</h2><p>Reasons for being unbanked (and underbanked) vary from not having enough money to meet a minimum balance and high or unpredictable fees, to having a history of credit, ID, or banking problems, and/or a general distrust of financial institutions.As a result, this drives unbanked individuals to expensive, alternative financial outlets—such as check cashers, payday lenders, and pawn shops that charge high fees for financial products and services—to manage their money. </p><p>Such fringe financial “solutions” hold people back from making meaningful financial progress, many of whom are living on low incomes and, likely, already struggling to make ends meet. Without a <a href="/personal-checking/rewards-checking">checking account</a>, these families wind up overpaying for basic financial transactions, making it difficult for them to build savings and assets over time.</p><h2>More Rewarding Banking for More People</h2><p>In light of this, we’re proud to share that recent improvements to LendingClub Bank’s <a href="/personal-checking/rewards-checking">award-winning Rewards Checking</a> has earned us official certification by the national Cities for Financial Empowerment Fund as meeting the BankOn National Standards for trust and affordability for consumer transactional accounts.Key features of our award-winning Rewards Checking account include:</p><h3>Low Minimum Opening Balance</h3><ul><li><p>Access Rewards Checking with an opening deposit of only $25</p></li><li><p>Freedom from Fees Save more of your hard-earned money with no overdraft, monthly maintenance, and incoming wire transfer fees<sup>1</sup></p></li></ul><h3>Unlimited Cash Back</h3><ul><li><p>Earn <a href="/personal-checking/rewards-checking">unlimited 1% cash back</a> on Qualified (signature-based) Purchases when using your Rewards Checking debit card<sup>2</sup></p></li></ul><h3>Free ATM Access</h3><ul><li><p>Enjoy <a href="/help/checking-accounts-faq/how-do-i-earn-atm-rebates-on-my-checking">ATM access with no LendingClub ATM fees</a>, plus get unlimited ATM fee rebates on fees charged by other banks<sup>3</sup></p></li></ul><h3>Get Your Paycheck Early</h3><ul><li><p>Set up direct deposit into your account and you could be eligible to receive your money up to 2 days earlier<sup>4</sup></p></li></ul><h3>Earn Interest</h3><ul><li><p>Earn an APY that’s more than the national average with account balances of at least $2,500<sup>5</sup></p></li></ul><h3>FDIC Insurance</h3><ul><li><p>Rest easy knowing your deposits are FDIC-insured up to the maximum amount allowed—$250,000 per depositor for each ownership category</p></li></ul><h3>Best Online Experience</h3><ul><li><p>Based on our easy-to-use mobile app and award-winning <a href="/personal-checking/rewards-checking">online checking account</a>, NerdWallet named us <i>Best Bank or Credit Union for Online Experience</i></p></li></ul><h2>What Our Members Say</h2><p>It’s important knowing we’re offering products and services that are helping to improve the financial lives and stability of all Americans, including unbanked and underbanked individuals and families, in every community across the United States.Here’s what some of our members have to say about their Rewards Checking experience with LendingCLub Bank:<i>“I never knew how much money I was losing with my old bank whenever I used an ATM. [LendingClub Bank] reimburses fees from ATM’s and now I look forward to getting the cash back every month.”</i></p><p><b>Robin</b>, a LendingClub Bank Member<i>“The rewards checking account with cash back every month has helped me ditch my credit card and debt.”</i></p><p><b>Lauren</b>, a LendingClub Bank Member</p><p>Read more member reviews.</p><h2>Your Financial Well-Being Matters to Us</h2><p>At LendingClub Bank, making <a href="/personal-checking/rewards-checking">checking accounts</a> more rewarding for more people is an example of our belief that financial well-being should be attainable for everyone—not just for those who can afford it. Everything we do is centered around empowering our members to meet their personal financial goals by enabling access to a broad range of financial  products, services, and educational resources, all designed to help them pay less when borrowing and earn more when saving. </p><p><i>Testimonials reflect the real-life experiences of individuals who used our products; however, individual results may vary.</i></p><p><i></i></p><hr/><h4><i>Terms and Conditions</i></h4><p><i>Accounts subject to approval. $25 minimum opening deposit required. See Product Terms &amp; Conditions for additional details.</i></p><p><i>1. Miscellaneous fees may apply. View Product Terms &amp; Conditions for complete details.</i></p><p><i>2. The Debit Card Rewards Program (“Cash Back Rewards”) provides 1.00% </br>cash-back on all Qualified Purchases using a debit card tied to an Eligible Account.</i></p><p><i>Eligible Accounts are: Rewards Checking accounts that meet the following requirements for the calendar month in review:</i></p><p><i>1). Maintain an average monthly balance of at least $2,500.00; or 2). Receives at least $2,500.00 in Qualifying Direct Deposits.</i></p><p><i>Qualifying Direct Deposits are defined as: Recurring Automated Clearing House (ACH) credits, including payroll, pension or government payments (such as Social Security) made by your employer, or an outside agency. We may require documentation to verify that credits are Qualifying Direct Deposits. Qualifying Direct Deposits do not include peer to peer payments or ACH transfers (funds transfers) from your external accounts.</i></p><p><i>Qualified Purchases are defined as: Signature-based purchases made using the debit card </br>tied to an Eligible Account. These are “credit” purchases that can be made in stores and online. To make a signature-based purchase, select “credit” rather than debit at point-of-sale kiosks. The “credit” option is most often pre-selected when making purchases online using a debit card. Online subscription payments may not be considered signature-based purchases. The payment transaction type (signature-based or other) is ultimately decided by the merchant and is based on how the transaction is transmitted at the time of processing. Qualified Purchases do not include: (1) any goods or services purchased that are returned or otherwise credited to your Eligible Account; (2) unlawful purchases; or (3) purchases of currency, cash or cash equivalents (including, without limitation, currency from the U.S. Mint, Travelers Checks, gift cards, cryptocurrency, casino chips, peer to peer payments, prepaid debit cards, account openings, loan payments, or other cash equivalents).</br> </br>We may report the value of Cash Back Rewards to the IRS as required by law. Any client whose tax status would require us to impose tax withholding of any sort will not be eligible for Cash Back Rewards.</br> </br>Accounts are reviewed after the end of each month. Any earned Cash Back Rewards will be credited to your account on or before the 10th calendar day of the next calendar month. The Eligible Account must be open and active at the time the Cash Back Reward is credited.</i></p><p><i>3. LendingClub does not charge a fee for using another bank’s ATM. Plus, get unlimited automatic ATM surcharge rebates for ATM fees other banks charge you. ATM surcharge rebates apply to cash withdrawals from a Rewards Checking account. ATM fees will be rebated at the end of each statement cycle. Excludes international exchange fees. LendingClub makes its best effort to identify those ATM fees eligible for rebate. In the event that you have not received a rebate for a fee you believe is eligible, please contact Customer Service at 800.242.0272. LendingClub reserves the right to modify or discontinue the ATM surcharge rebate program at any time. Out-of-network ATM fees cost $2.50 on average — source: CNBC as of 01/26/2022. If someone were to use an out-of-network ATM 6 times per month at an average fee of $2.50 per withdrawal, they would spend $180 in ATM fees in 12 months.</i></p><p><i>4. Any account features that enable you to receive direct deposits, or that enable direct deposit funds to be made available to you early, are contingent upon and subject to the payor’s support of such features. </i></p><p><i>5. Annual Percentage Yield (APY) accurate as of 8/1/2022. Rate tiers are as follows: 0.00% APY applies to balances of $0.00–$2,499.99, 0.10% APY applies to the entire balance on balances of $2,500.00–$99,999.99, and 0.15% APY applies to the entire balance of $100,000.00 or more. Rates are variable and are subject to change, at the discretion of the bank and without notice, at any time after an account is opened. Fees may reduce earnings.</i></p>

Since 2007, LendingClub has been on a mission to deliver a world-class experience to all our members. This month we took a moment to reflect on the more than four million members who have chosen LendingClub as their partner to help them reach their financial goals.

<p>Since 2007, LendingClub has been on a mission to deliver a world-class experience to all our members. This month we took a moment to reflect on the more than four million members who have chosen LendingClub as their partner to help them reach their financial goals.</p><p>As the leading digital marketplace bank in the U.S. built on the belief that innovative, creative solutions deliver more value and a better experience, we’re always looking for new ways to provide more. In early 2021, LendingClub became a bank holding company operating a national bank, allowing us to expand our products and level the playing field for everyone.  </p><p>“Every day we help members leverage their money so they can earn more when saving and pay less when borrowing,” said Amber Carroll, Senior Vice President of Membership &amp; Lifecycle Marketing at LendingClub. “We&#39;re working to redefine banking, which means ensuring our interests are well aligned with those of our members and introducing new ways to better serve their needs.” </p><p>Since the beginning of the pandemic, how we work, live, and manage our finances has evolved in ways most of us would never have imagined. Increasingly, more Americans across varying credit profiles are struggling to stretch their dollars between paychecks. According to a recent survey from LendingClub and PYMNTS, even among workers earning more than $100,000 per year nearly half are living paycheck to paycheck.  </p><p>At LendingClub, we’re inspired every day by our members who continue to strive for financial well-being during these unprecedented times—such as by consolidating their credit card debt into a single, more manageable payment, refinancing their auto loan to free up room in their budget, or taking advantage of a CD or high-yield savings account to invest in their future. The Club is working hard to help members reach their goals and we’re incredibly proud to help simplify their path. As one of member recently shared: </p><p>“This is the third time I have utilized LendingClub&#39;s great rates and lending plans to assist with home repairs and debt consolidation. Their application and payment processes are quick and simple to use. I have saved so much time and money using this funding!” — Christine, a member from Texas </p><p>We believe everyone deserves a better financial future. If you’re ready to improve your financial well-being and are not already a member of the Club, we can help. From banking smarter with your <a href="/personal-deposits/online-banking">personal checking and savings</a>, to working toward larger financial goals—like <a href="/personal-loan">consolidating debt</a>, <a href="/auto-refinancing">refinancing an auto loan</a>, or making home improvements—you can easily check your rate for a personal loan in minutes, with no impact to your credit score. </p><p>Thanks again to all of our members for helping us achieve this incredible milestone.  </p>

In March 2022, we hosted our first quarterly webinar where we celebrated our one-year anniversary as a digital marketplace bank. 

<p>In March 2022, we hosted our first quarterly webinar where we celebrated our one-year anniversary as a digital marketplace bank. </p><p>During the webinar, Anuj Nayar, our Financial Health Officer, discussed:</p><ul><li><p>Our journey to get to where we are today </p></li><li><p>Lessons learned from our 15-year history as a fintech pioneer</p></li><li><p>How we’re leveraging our digital marketplace bank to further our mission to help Americans on their path towards financial health</p></li><li><p>We recently reported Q4 2021 and year-end earnings</p></li><li><p>New data on the financial health of U.S. consumers from our latest Paycheck-to-Paycheck report</p></li></ul><p>A historic milestone, as one of the first fintech company to acquire a national bank we’ve paved the way for other fintechs to follow suit. With 15 years under our belt, more than 3.9 million members, and over $70 billion in loan originations, the marriage of LendingClub’s marketplace fintech business with all the benefits of being a bank is fundamentally changing the nature of our business and influencing change across the banking industry as a whole. We’re also creating something new for our members -- a bank that puts the customer at the center of what we do. </p><p><a href="https://vimeo.com/686043451">Check out the video below to learn more.</a></p>

LendingClub completed the acquisition of Radius Bank in February 2021. At that time, in addition to the direct-to-consumer deposit business, we inherited a fintech partner program, and several lending businesses. As we reach the one-year anniversary of the acquisition, and in conjunction with the conclusion of a strategic review of our business operations, we have made the decision to discontinue certain businesses that don’t fit our mission.  

<p>LendingClub completed the acquisition of Radius Bank in February 2021. At that time, in addition to the direct-to-consumer deposit business, we inherited a fintech partner program, and several lending businesses. As we reach the one-year anniversary of the acquisition, and in conjunction with the conclusion of a strategic review of our business operations, we have made the decision to discontinue certain businesses that don’t fit our mission.  </p><p>This includes our yacht loan business. Yacht loans are simply not in line with our mission to help <i>everyday </i>Americans on their path to financial health and we plan to grow our auto refinance business to take its place.  </p><p>During the review, we also thoroughly examined relationships and operating activities for the fintech partners. As a result of our review, we are asking certain partners to modify their activities and/or operations to match expectations and contractual commitments, and we have begun exiting certain partners. As part of the ongoing dialogue with these partners, we have discussed transition plans or operational changes that could impact the services available to these partners and their customers.   </p><p>As a pioneer in this space, we have a unique perspective. We operated for 15 years as a fintech with a partner bank model and now we operate as a fintech, a bank, and a partner bank. We work hard at LendingClub to maintain and build a robust, secure, compliant and scalable enterprise. We are guided by our core values, our extensive experience, our deep data set and technology investments, and governed by strong controls, to deliver on behalf of our members, communities, shareholders, partners, and team members.  </p><p><b>These business model changes will have no material effects on our business operations </b>and we plan to report more details when we issue our Full Year 2021 and Q4 earnings in a few weeks. </p><p><i>Scott Sanborn CEO </i> </p><p>LendingClub</p><hr/><p><i><b>Safe Harbor Statement</b></i></p><p><i>Some of the statements above, including statements regarding  the effect on our business operations as a result of the business model changes, are &quot;forward-looking statements.&quot; The words &quot;anticipate,&quot; &quot;believe,&quot; &quot;estimate,&quot; &quot;expect,&quot; &quot;intend,&quot; &quot;may,&quot; &quot;outlook,&quot; &quot;plan,&quot; &quot;predict,&quot; &quot;project,&quot; &quot;will,&quot; &quot;would&quot; and similar expressions may identify forward-looking statements, although not all forward-looking statements contain these identifying words. Factors that could cause actual results to differ materially from those contemplated by these forward-looking statements include those factors set forth in the section titled &quot;Risk Factors&quot; in LendingClub&#39;s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, each as filed with the Securities and Exchange Commission, as well as in LendingClub&#39;s future filings made with the Securities and Exchange Commission. LendingClub may not actually achieve the plans, intentions or expectations disclosed in forward-looking statements, and you should not place undue reliance on forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in forward-looking statements. LendingClub does not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. </i></p>

Related Impact

{noun} A type of credit that allows the borrower to make charges and payments against a set borrowing limit, paying interest only on outstanding balances.

<p>A type of credit that allows the borrower to make charges and payments against a set borrowing limit, paying interest only on outstanding balances.</p><h2>What is Revolving Credit?</h2><p>Revolving credit is a type of credit that lets you borrow money as needed up to an amount called your credit limit. Borrowing reduces your available credit, and repayment replenishes your credit limit (minus the interest and fees charged). Revolving credit does not have a fixed number of payments. This differs from installment credit which lets you borrow a lump sum and pay it back over a set number of fixed monthly payments.</p><h2>How Does a Revolving Line of Credit Work?</h2><p>It helps to think of a revolving line of credit as a renewable source of funds within a set credit limit. The lender sets the credit limit upon application approval. You can use as much of your credit limit as you need, paying interest only on the money you borrow. As you repay what you’ve borrowed (plus interest and fees), your available credit replenishes, and you can continue borrowing against your revolving line up to the credit limit.</p><h3>Types of Revolving Credit</h3><p>The most common revolving credit products are lines of credit and credit cards.</p><p><b>Lines of credit </b>come in different forms, including home equity lines of credit (HELOCs), personal lines of credit, and business lines of credit. Credit lines are typically issued by banks and credit unions, and generally you can draw on your line using special checks, ATM, telephone, and online banking. You’ll only pay interest on the money borrowed from your line of credit. </p><p>Some lines of credit may be limited in how the funds can be used, such as only for balance transfers from credit cards.</p><p><b>Credit cards</b> are revolving credit accounts that, unlike lines of credit, require you make a purchase or cash advance to access your credit line. While card issuers reserve the right to change your credit limit, you can access your available credit as long as your account is in good standing. When you make purchases on a credit card, you can repay the balance in full by the end of your billing cycle to avoid interest charges and fees. If you don’t pay your outstanding balance in full,the balance “revolves,” or rolls over, to the next month and will accrue interest until paid in full. </p><p>Note: Both lines of credit and credit cards can be secured or unsecured. Secured accounts require collateral; unsecured accounts do not. For example, a HELOC uses your home as collateral. Credit cards are typically unsecured, but some secured cards require cash deposits as collateral.</p><h3>Why is Revolving Credit Important?</h3><p>Revolving credit offers greater borrowing flexibility than installment credit. For instance, if you get a $10,000 installment loan for a home remodeling project, you typically receive all the money at once and must start repaying on the entire loan balance immediately plus interest on that amount—even if you don’t use the funds right away. If you need more money, you’ll have to apply for a new loan.</p><p>On the other hand, if you get a line of credit or credit card with a $10,000 limit, you can draw on it as needed—say, $1,000 in January, $2,000 in April and $1,500 in June­—and interest will accrue only on the amounts you borrow. As you pay back what you’ve borrowed, your available credit is restored up to your credit limit, so you can make future purchases without needing to apply for additional credit.</p><p>Since it doesn’t require fixed monthly payments, revolving credit can also offer greater payment flexibility than installment loans. If money is tight in a particular month, you have the option of only making the minimum payment on a revolving account, potentially making it easier to meet other financial obligations.</p><p>Revolving credit can also serve as a financial cushion. Even if you never use it, it’s there in case you need quick access to small amounts of cash in an emergency.</p><h3>What Are the Risks of Revolving Credit?</h3><p>Revolving credit has some drawbacks you should be aware of.</p><p><b>Collateral risk:</b> If you fail to make payments on a secured revolving credit account, you could lose your collateral. With a secured credit card, that loss could be a few hundred dollars. With a HELOC, you stand to lose your home.</p><p><b>High interest rates:</b> Revolving credit typically has higher interest rates than installment credit. Interest rates for most credit cards and many lines of credit are also <i>variable</i>, meaning they can change over time based on economic conditions.</p><p><b>Excessive debt: </b>If you only make the minimum payment on a credit card, you could accumulate a large balance. Credit card interest is typically <i>compounded</i>, meaning interest accrues on both the balance of your purchases and on previously applied interest. Compound interest can cause your balance to snowball until it’s difficult to pay down.</p><h3>How Does Revolving Credit Affect Your Credit Score?</h3><p>Revolving credit could help your credit score in several ways.</p><ul><li><p><b>On-time payments:</b> Making revolving credit payments on time could boost your credit, since timely payments are a major factor in your FICO®  Score.</p></li><li><p><b>Responsible credit utilization:</b> Keeping your revolving credit balance below 30% of your credit limit could increase your credit score.  Ideally, you would pay your credit card balances in full each month.</p></li><li><p><b>Diverse credit mix:</b> A variety of accounts, including installment credit and revolving credit, could show lenders you can successfully manage different types of debt.</p></li></ul><p>Revolving credit could also have negative impacts on your credit score when not managed responsibly. </p><p><b>Late payments: </b>Missing payments could have a significant negative impact on your credit score. Setting up auto-payments on your revolving credit accounts can help ensure you never miss a due date.</p><p><b>Excessive credit utilization:</b> Consistently carrying balances that exceed 30% of your available credit limit can reduce your credit score. </p><p><b>Hard inquiry:</b> When you apply for revolving credit, creditors perform a credit check called a <i>hard inquiry</i>, which could cause a small, temporary dip in your credit score.</p>

{noun} The total annual cost to borrow money, including fees, expressed as a percentage.

<h2>What is Annual Percentage Rate (APR)?</h2><p>Annual percentage rate (APR) is the cost of borrowing money on an annual basis. APR is expressed as a percentage, to make it easier to compare the cost of credit. </p><p>APR and interest rate are sometimes used interchangeably, however, APR and interest rate are different. APR includes both interest plus fees applied over the course of a loan. Because APR is a more complete measure of the cost of credit, it is usually higher than the interest rate.</p><h2>How is Annual Percentage Rate Calculated?</h2><p>To calculate APR on a loan, you’ll need to know a few other numbers first:</p><p><b>Interest:</b> The total interest charges paid over the life of the loan, also known as the cost of borrowing money.</br><b>Fees:</b> Review the terms and conditions of the loan to find the fees that apply to your loan. Fees vary by loan type and lender. </br><b>Principal:</b> The original loan amount.</p><p><b>Days in the Loan Term (n):</b> Since APR measures the annual cost of borrowing money, multiply 365 (days) by the number of years in the loan term. For loan terms under one year, use the number of days.</br></br>The formula to calculate APR is: </p><img src="//images.ctfassets.net/orqped9h4wgz/6cJEgR4ftSGoIaSuKLlek6/a3ce252e07839182be4e7550cd09e08a/Formula-Calculate-APR.png" alt=""/><p>The steps to calculate APR are:</p><ol><li><p>Find the interest charges</p></li><li><p>Add the fees</p></li><li><p>Divide the sum by the principal balance</p></li><li><p>Divide by the number of days in the loan’s term</p></li><li><p>Multiply by 365</p></li><li><p>Multiply by 100</p></li></ol><h3>Credit Card APRs</h3><p>Credit card APRs do not reflect fees and since a credit card has no set loan amount or fixed repayment term, its APR is simply its interest rate.</p><p>Under the Truth in Lending Act, passed in 1968, lenders and other financial institutions must disclose APR when offering credit. </p><h2>Why is Annual Percentage Rate Important?</h2><p>Knowing the annual percentage rate helps you understand the true cost of borrowing. </p><p>For example, all lenders are required to disclose APR, which makes it easier to compare loans from different banks and make a more informed borrowing decision.</p><h2>Are There Different Types of APRs?</h2><p>There are different categories of APRs depending on the type of financial product.</p><h3>Credit Card APRs</h3><p>Credit cards have several APRs that may apply to different transactions or account activities.</p><ul><li><p><b>Purchase APR: </b>The rate you pay for purchases. </p></li><li><p><b>Balance transfer APR: </b>The rate applied if you use a card to pay down balances on other credit cards or loans. </p></li><li><p><b>Cash advance APR:</b> The rate charged on ATM withdrawals or cash-equivalent transactions, like money-order purchases. </p></li><li><p><b>Introductory APR: </b> A promotional interest rate for a limited period of time that is lower than the card&#39;s regular APR, sometimes as low as 0 percent APR.</p></li><li><p><b>Penalty APR</b>:  A higher-than-normal rate that results from violating a card’s terms of service. </p></li></ul><h2>What’s the Difference Between Fixed and Variable APRs?</h2><p>APRs can be fixed or variable. A fixed APR remains unchanged for the life of your loan. A variable APR fluctuates in sync with a published market index, like the U.S. Prime Rate.<b>   </b></p><h3>Adjustable-Rate Mortgages</h3><p>Home loans with variable interest rates are called adjustable-rate mortgages (ARMs). With an ARM, your APR is fixed for an initial term (typically one, three, or five years, but sometimes as long as 10 years), then resets every six or 12 months, based on market rates. </p><h2>What Affects APR?</h2><p>The APR you&#39;re offered depends on a few factors: </p><ul><li><p>Whether a loan or line of credit is secured or unsecured</p></li><li><p>Current economic conditions</p></li><li><p>Your credit history</p></li></ul><p>Lenders may also consider your income and assets, down payment, and where you live when determining your APR.</p><h2>How Do You Get a Good APR?</h2><p>Getting the best APR on a loan or credit card typically requires shopping around. </br></br>Start by prequalifying with multiple lenders. Prequalifying is a quick process where you provide some basic information about your income and borrowing goal. Then, lenders respond with a preliminary, non-binding estimate of the loan amount and APR. This is typically done through a soft credit check, which doesn’t impact your credit.</p><p>Then, compare the preliminary offers and submit a full application to your lender of choice. With your detailed financial information and a hard credit inquiry, which will impact your credit, lenders can make a formal loan offer that includes your APR, fees, and repayment terms. </br></br>If you’re unhappy with the terms you’re offered (or if lenders decline your applications), your credit history might be the culprit. If this is the case, you can work to pay down your existing debts and bring late payments current, which can improve your credit score and chances for approval over time.</p>

{noun} The amount of unpaid interest that has accumulated as of a specific date, either on a loan or an interest-bearing account or investment. 

<h2>What Is Accrued Interest? </h2><p>Accrued interest is the amount of unpaid interest that has accumulated as of a specific date, either on a loan or credit card you’re repaying or on an interest-bearing account or investment.  </br> </br>Accrued interest can be owed or earned. For example, with a loan or credit card, it’s the amount of interest (payment you owe) that has been incurred since you made your last payment. With an interest-bearing account or an investment, such as a bond, it&#39;s the interest (income you earned) that has accumulated since the last time you received a payment from the financial institution or bond issuer. </p><h2>How Does Accrued Interest Work? </h2><p>The way accrued interest works depends on several factors, including the type of account, the balance or principal, the interest rate, timing, and whether you are borrowing money (such as with credit cards, auto loans, and personal loans), or earning money (such as with interest-bearing checking or savings accounts).  </p><h2>Accrued Interest on Loans </h2><p>Personal loans, auto loans, and other types of debt charge interest to their borrowers. Most lenders use the simple interest method of accounting, which means that interest that accrues each day is based only on the principal balance of the loan and doesn&#39;t compound on previously accrued interest. </p><p>For example, on a personal loan, the interest on your debt accumulates daily based on your current loan balance and interest rate.  When you make a loan payment, a portion of your total payment amount goes toward the interest that has accrued since your last payment and the remainder goes toward paying down the principal balance of your loan. </p><p>If you have a fixed interest rate, the daily interest amount will go down over time as your principal amount owed decreases with on time payments. With variable rate loans, the amount of interest that accumulates can fluctuate along with the loan&#39;s interest rate, however there&#39;s generally a downward trend with timely payments.  </p><p> </p><h2>Accrued Interest on Bank Accounts </h2><p>Generally, with interest-bearing deposit accounts, such as a high-yield checking or savings account, interest typically accumulates daily and is paid out monthly. The amount of interest that accrues is based on your balance and the account&#39;s annual percentage yield or APY (which may adjust higher or lower as rates rise or fall) and compounding interest. The higher the APY and your balance, the more you&#39;ll earn. </p><p>Also, most banks and savings institutions will compound the interest you earn, usually daily. This means that the interest that accrues each day is based not only on your principal account balance but also on the interest that has accumulated since the last payment.  </p><p>For example, let&#39;s say you have a $10,000 balance in a savings account with an interest rate of 5%. On the first day, your balance earns $1.37 in interest, and that gets added to your interest-earning principal—compounded—at the end of the day. That happens every day. </p><p>By the end of the year, your principal will have grown to $10,512.67—$500 in interest on your principal balance, and $12.67 from the interest earned on your interest.  </p><p> Calculation for daily interest rate: </p><p>0.05 / 365 = 0.000136986 </p><p> Calculation for first day’s interest: </p><p>0.000136986 x 10000 = 1.36986 </p><p> While your interest rate is 5% compounded daily; your total return including compounding, or <a href="https://blog.lendingclub.com/apr-vs-apy-whats-the-difference"><u>annual percentage yield</u></a>,  is 5.1267%. </p><p>Compounding interest increases your savings over time, especially in a rising interest rate environment. </p><h2>Accrued Interest on Bonds </h2><p>If you&#39;re investing in bonds, interest is typically paid out every six months, and the amount that accrues between payments depends on the face value of the bond and its interest rate. This calculation is known as yield to maturity. </p><p>Interest on bonds does not compound; that is, you don’t earn interest on your interest. </p><h2>How Accrued Interest Affects Borrowers </h2><p>If you borrow money, understanding accrued interest gives you an idea of how your loan&#39;s costs are incurred. As you make your regular monthly payments, for instance, the amount of interest that accumulates over time decreases. And if you make additional principal payments on top of your regular payments, you can reduce how much interest accrues even more.   </p><p>Keep in mind that, if you make an extra payment on a loan the lender may use some of that money to pay off the interest that has accrued since your last regular payment unless you specify otherwise. You can request that the lender put the full amount of your additional payment toward the principal balance, saving you more money on interest in the long run. </p><p>Understanding how accrued interest works is particularly important if you have student loans. While college students aren&#39;t typically required to make monthly payments while they&#39;re still in school, interest accrues from the moment the loans are disbursed.  </p><p>For borrowers with federal subsidized loans, the federal government will typically pay interest that accrues while they&#39;re in school and during future deferment periods. If you have unsubsidized loans or private student loans, all the interest that accumulates while you&#39;re in school (and during periods of deferment or forbearance) is added to your balance once repayment begins.  </p><p>If you want to avoid a growing balance, consider making interest-only payments while you&#39;re still in school. </p><h2>How Accrued Interest Benefits Savers </h2><p>If you have an interest-bearing deposit account, look into how often (daily, weekly, monthly, quarterly, semi-annually, annually) your financial institution compounds the interest that accrues in your account. The more frequently interest is compounded (e.g., daily vs. quarterly) makes it possible for you to earn more interest more quickly. </p><p>And if you&#39;ve invested in bonds, understanding how accrued interest works can help ensure that you get the money you&#39;ve earned, especially if you sell the bond between scheduled interest payments. For example, if you sell a bond three months after your last payment, you won&#39;t receive the amount of interest that accrued during that time. Because the buyer will receive the full semi-annual (every six months) interest payment despite only owning the bond for three months, they should pay you the amount that has accrued since your last payment on top of the price of the bond. </p><h2>How Is Accrued Interest Calculated? </h2><p>On loans, lenders generally calculate interest on a daily basis using either a 360-day or 365-day year. The lender will divide the loan&#39;s interest rate by one of those numbers to determine your daily interest rate, which it then applies to your balance. </p><p>On interest-bearing deposit accounts, interest generally accrues daily. Depending on how often your financial institution compounds interest, the amount that accrues each day may be calculated based on the principal balance plus previously accrued interest. </p><h2>What Is an Example of Accrued Interest?  </h2><p>Let&#39;s say you have a personal loan with a $20,000 principal balance and a 12% interest rate. To calculate the amount of interest that accrues every day, you&#39;ll do the following equation: </p><p>Calculation for daily interest rate: </p><p>0.12 / 365 = 0.000328767123288 </p><p>Calculation for daily accrued interest: </p><p>0.000328767123288 x $20,000 = $6.58  </p><p> In other words, you&#39;ll have $6.58 in daily accrued interest. Over 30 days, that amounts to $197.40.</p>

A debt that is written off as a loss because the financial institution or creditor believes it is no longer collectible due to a substantial period of nonpayment.

<p>A debt that is written off as a loss because the financial institution or creditor believes it is no longer collectible due to a substantial period of nonpayment.</p><h2>What Is a Charge-Off?  </h2><p>A charge-off on your credit report indicates the financial institution or creditor has written the account off as a loss and has stopped attempting to collect on a debt that you owe. However, a charge-off does not mean your debt is forgiven—it may be transferred to a collection agency or sold to a debt buyer. As long as the debt remains outstanding, you&#39;re still responsible to pay it. </p><h2>How Does a Charge-Off Work? </h2><p>When you miss a payment on a loan or credit card or have a bank account with a negative balance, the creditor or financial institution will attempt to collect the amount you owe. At some point, the creditor may determine the debt is uncollectible and decide to charge it off. This means the creditor has written off the remaining balance as a loss.  </p><p>At this point, the creditor will report the account as “Charged Off” to the credit reporting agencies which will appear on your credit reports along with the account balance. If the charge-off is legitimate and you can&#39;t convince the creditor to remove it, a charge-off can remain on your credit reports for up to seven years after your first missed payment. </p><p>Once a creditor has charged off a debt, they may decide to sell it to a debt buyer or transfer it to a debt collection agency for pennies on the dollar. If this happens, your account will be closed, interest will stop accruing on your balance, and your credit report will reflect that the account was &quot;Charged Off.&quot; However, you will still be liable for paying off the debt to the debt collection agency. Additionally, the collection agency may report a collection account for the same debt, further impacting your credit score. </p><h2>Will a Charge-Off Impact Your Credit Score? </h2><p>Your payment history is the most influential factor in your FICO credit score. Missing just one payment could have a significant negative impact on your credit score. </p><p>If a debt balance remains unpaid long enough for the creditor to stop attempting to collect payment, the worsening delinquency and subsequent charge-off could have a long-term  and far reaching impact to your credit score.  </p><p>For example, a low credit score and history of nonpayment may make it more difficult to get approved for credit in the future. It may also impact your ability to get approved for a residential lease or to qualify for lower interest rates on auto or homeowners insurance.  </p><h3>How Can You Repair a Charge-Off? </h3><p>The best way to repair a charge-off is to prevent it from happening. If you start missing payments, don&#39;t ignore the situation. Contact your lender and ask if there’s anything that can be done to help you avoid a charge-off situation. </p><p>In the event your debt is charged off, as long as there is a balance, you’re still responsible for repayment which is why you should consider ways to pay off the debt as soon as possible to avoid having it go to collections. Even if you cannot pay off the debt in full, you may want to consider negotiating a payment settlement with the creditor for less than what you owe or, if necessary, having the debt discharged in bankruptcy.  </p><p>In some cases, you may be able to negotiate with the lender to remove the charge-off from your credit report in exchange for full payment—a process known as “pay for delete.” Even if you can&#39;t get it removed, paying off the balance could potentially reduce the impact to your credit score.  </p><p>If the creditor does sell the debt to a collection agency, you&#39;ll face more attempts to collect the amount you owe. Some debt collectors may even resort to lawsuits to force collection through a court order. </p><h3>How Can You Limit Charge-Off Damage? </h3><p>The timeframe for when a creditor decides to charge-off an account ranges from 120 to 180 days from your initial delinquency date. You&#39;ll typically receive letters and phone calls reminding you of the past-due payment, urging you to get caught up. Don&#39;t ignore the creditor—this is the best time to talk to the lender to see if you can avoid a charge-off. </p><p>If you&#39;ve had an account charged off recently, contact the creditor as quickly as possible to verify the accuracy of the account details and look for opportunities to pay off some or all of the debt to avoid transfer to a collection account and further damage to your credit score. </p><p>In some cases, a charge-off could be reported in error. If this happens, it could damage your credit score, so you should act quickly to dispute the negative item with the credit reporting agencies. As long as the dispute isn&#39;t frivolous, the credit bureaus are required to investigate it and remove or update the information if it&#39;s found to be innacurate.  </br> </br>To contact the credit bureaus:  </p><ul><li><p><a href="https://www.equifax.com/personal/credit-report-services/credit-dispute/"><u>Equifax</u></a> </p></li><li><p><a href="https://www.experian.com/contact/personal-services-contacts.html"><u>Experian</u></a> </p></li><li><p><a href="https://www.transunion.com/credit-disputes/dispute-your-credit"><u>TransUnion</u></a> </p></li></ul><p>If the creditor decides to charge-off your account, it&#39;ll only report only to the credit reporting agencies that it normally reports to. For many lenders, it&#39;s all three, but some lenders may only report to one or two of the major credit bureaus. </p>

{noun} An interest rate that remains the same for a set time, usually for the life of the loan.

<p> An interest rate that remains the same for a set time, usually for the life of the loan.</p><h2>What Is a Fixed Interest Rate?</h2><p>A fixed interest rate is an interest rate that remains the same for a set time, usually for the life of the loan. With fixed-rate financing, borrowers can enjoy payment stability and avoid the risk of a variable interest rate—which may increase substantially over time, especially in rising interest rate environments.</p><h2>How Do Fixed Interest Rates Work?</h2><p>When you take out a loan with a fixed interest rate, your loan terms will define the fixed rate period.</p><p>Generally, for financial products like fixed rate mortgages and personal loans, your interest rate will remain the same throughout your loan term, as will your monthly payment amounts.</p><p>For financial products such as adjustable rate mortgages, the interest is variable, which means it can change periodically. Often, an adjustable rate mortgage (ARM) will have an initial period where the rate is fixed. After the fixed period, your interest rate may stay the same or it may adjust based on prevailing interest rates at the time.</p><h2>What Is the Difference Between Fixed and Variable Interest Rates?</h2><p>Fixed interest rates generally won’t change—either for the life of your loan or during a predetermined fixed period. In contrast, variable interest rates fluctuate based on market conditions and may change at any time.</p><h3>What Benefits Do Fixed Interest Rates Offer?</h3><p> Having a fixed rate loan offers several benefits for your finances.</p><ul><li><p><b>Financial Predictability. </b>A fixed interest rate makes it easier to plan your finances since your monthly payments don’t fluctuate over the fixed period, usually the life of the loan. Such predictable payments can  help you more easily manage your budget and alleviate stress.</p></li><li><p><b>Eliminate Interest Rate Risk. </b>With a fixed interest rate, you don&#39;t have to worry if interest rates start to increase in a volatile economy. Compared to loans with variable rates, a fixed-rate loan with a lower interest rate could save you money in a rising interest rate environment.</p></li><li><p><b>Potentially Lower Borrowing Costs. </b>With fixed-rate loans, you’ll know your total borrowing costs—including interest and fees—before you sign your loan documents. With variable-rate loans, it’s difficult to calculate your total borrowing costs since your interest rate may change substantially over time.</p></li></ul><h3>What Are the Drawbacks to Fixed Interest Rates?</h3><p>While a fixed interest rate can help you plan your finances for the long term, there are a few drawbacks to consider.</p><ul><li><p><b>Potentially Higher Rates. </b>Adjustable-rate financial products often have lower interest rates for an initial, introductory fixed period which may temporarily lower your cost to borrow. Fixed-rate products don’t offer such “teaser” rates.</p></li><li><p><b>Risk in Decreasing Interest Rate Environments. </b>If interest rates start going down, you may end up paying more to borrow on a higher interest rate than if you took out a new loan.</p></li><li><p><b>Refinancing Costs. </b>Even if you decide to refinance to get a lower rate, refinancing costs may outweigh the savings you may realize, and the process can be time-consuming. It’s  important to compare the total cost of borrowing of your existing versus a potentially new loan before making a decision.</p></li></ul><h2>What Can You Do to Get a Good Fixed Interest Rate?</h2><p>Generally, having a high credit score and a demonstrated track record of responsible debt management can help you land a lower fixed interest rate. In contrast, if you have a low credit score and a spotty history of on-time payments, the lender may view you as a higher-risk borrower and may not offer you the best fixed interest rate they have available.</p><h2>Can You Switch from a Variable Interest Rate to a Fixed Interest Rate?</h2><p>In most cases, you can&#39;t switch from a variable to a fixed interest rate on an existing loan. While you may be able to refinance your loan—either with your current lender or a new one—and move to a fixed-rate loan that way, it’s important to consider how well you would be able to cope with economic uncertainty. A low variable rates may be tempting initially, but should economic conditions sour and rates begin to rise rapidly, it may be difficult to find a good fixed rate when you want one. Or you may experience an unexpected obstacle, like job loss, that could make refinancing into a fixed interest rate loan difficult.</p><h3>Are Credit Card Interest Rates Fixed?</h3><p>Generally, credit card interest rates are variable, not fixed.</p><h3>Are Student Loan Interest Rates Fixed?</h3><p>It depends on the type of student loan. Student loans like Perkins Loans and PLUS Loans have fixed interest rates. Many other direct federal student loans—both subsidized and unsubsidized—have fixed rates as well.</p>

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