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You can refinance a personal loan by paying off an existing loan with a new personal loan—usually with more favorable terms like a lower interest rate or lower monthly payments than the original loan. 

Refinancing a personal loan often helps you save money or lower your monthly payments. A personal loan refinance involves taking out a new loan and using that money to pay off your existing debt. You can sometimes do this directly with your original lender, or you may want to work with a new lender.  What does it mean to refinance a personal loan? <a href="https://www.lendingclub.com/personal-loan">Refinancing a personal loan</a> means that you’re using a new loan to pay off your existing loan. This is often a good choice if you’re able to get a more favorable term than your original loan. For instance, a new loan may have a lower interest rate or lower monthly payments than your existing loan.   Keep in mind that when you refinance a personal loan, it doesn’t technically mean that you’re taking on more debt. Instead, refinancing helps you chip away at debt more quickly if you secure a <a href="https://www.lendingclub.com/resource-center/personal-loan/apr-vs-interest-rate-whats-the-difference">lower APR</a>.  <h2>When is a good time to refinance your personal loan? </h2>Before you refinance your personal loan, consider if it’s the right time. Here’s a closer look at a few common instances when refinancing may be a good idea.  <ul><li>Your credit score has improved. Your credit score affects your interest rate. If your credit score has changed for the better since you took out your current loan, it may be a smart move to refinance. With a lower interest rate, you’ll pay less for the total cost of the loan.[1]  </li><li>You want to pay off the loan quicker. A loan with shorter terms can help you pay off your loan faster and save on interest over the life of the loan. However, your monthly payment will go up, so be sure you’re able to swing a higher amount in your budget.  </li><li>You want a lower monthly payment. If your existing loan’s monthly payment is straining your budget, you may be able to get a new loan with a lower monthly payment. However, by paying less each month, your new loan will likely have a longer term, meaning you’ll pay more interest over time. </li><li>Interest rates dropped. Lenders may offer lower or higher interest rates based on market trends. Even if your credit picture hasn’t improved since you first took out a loan, you might still qualify for a lower rate.[2]   </li><li>Stabilize your interest rate. Some personal loans have variable interest rates, which can cause your rates to rise and fall over the life of the loan. By locking in a <a href="https://www.lendingclub.com/glossary/f/fixed-interest-rate">f</a><a href="https://www.lendingclub.com/glossary/f/fixed-interest-rate">ixed interest rate</a>, you gain more control over your budget and overall financial goals.[1]  </li></ul><h2>When should you wait to refinance a personal loan </h2>It’s not always a good time to refinance a personal loan. Here are some instances in which sticking with your existing loan could make sense.   <ul><li>The upfront fees are too expensive. Some loans come with an <a href="https://www.lendingclub.com/resource-center/personal-loan/what-is-a-personal-loan-origination-fee">origination fee</a>, which is a percentage of the loan amount that’s deducted from the loan funds. These can add to your overall loan balance. Understand the terms involved with refinancing to ensure it makes financial sense. If you can’t afford the extra cost, consider waiting to refinance.[3]  </li><li>Interest rates are higher than your existing loan. Refinancing isn’t a good idea when you can’t get a lower interest rate because your credit score has dropped or market rates have gone up. Choosing to refinance at a higher interest rate could cost you more, so it’s best to wait until you can get a lower rate.[1][2]   </li><li>Your current loan has prepayment penalties. Some lenders charge fees for paying off your loan early. In some cases, this penalty may be a percentage of the outstanding loan balance you pay off. Read the fine print of your existing loan terms carefully to determine the cost—if any—associated with paying off your loan early. Then compare offers to make sure you’re still getting a fair deal after paying the fee.[4] </li><li>Your credit could be affected. While you can often check loan rates with a soft credit check, some lenders require a hard credit pull before funding your new loan. This can lower your credit score by a few points temporarily, so keep this in mind before refinancing.[5] <a href="https://www.lendingclub.com/resource-center/personal-finance/key-differences-of-a-soft-credit-check-vs-hard-credit-check">Learn more about soft vs. hard credit inquiries</a>. </li></ul><h2>How to refinance a personal loan </h2>Getting approved for a personal loan refinance will depend on your financial situation. You can get the process started by following these steps. <h3>1. Decide how much money you need </h3>First, look up how much you owe on your current personal loan. Then, check if your current lender charges any prepayment penalties or fees, as that will affect the total amount needed for payoff. Add both of these numbers to get your estimate.  Or, if you want to refinance more than one loan, add up the total combined amount (including potential penalties or fees). Refinancing multiple loans is also called <a href="https://www.lendingclub.com/personal-loan/debt-consolidation">debt consolidation</a>, as you’re essentially combining multiple loans into one. In some cases it makes sense to take out one personal loan and use those funds to pay off other personal loans, credit cards, and high-interest debts all at once. <h3>2. Check your credit </h3>You may also want to <a href="https://www.lendingclub.com/resource-center/personal-finance/how-to-read-your-credit-report-identify-red-flags">check your credit score</a> to see if you’re likely to qualify for a new personal loan with a more favorable interest rate. Having excellent credit—a score above 750—is ideal. However, loan options may still be available even if your credit scores are in the fair or good ranges.  When checking your credit report, review it closely for any errors. If you find any, file a dispute with one of the three major credit bureaus immediately, as errors can affect your credit score.[6] <h3>3. Compare personal loan refinance rates and fees </h3>Many lenders, like LendingClub Bank, let you check to see if you prequalify for any loan offers before applying. This gives you the opportunity to review the estimated loan amounts, interest rates, loan terms, and application and origination fees to see if refinancing your debt(s) makes sense. If possible, opt for lenders who, like LendingClub Bank, don’t charge a prepayment penalty or exit fee in case you need to refinance your debt in the future. Keep in mind, an origination fee may be subtracted from the loan disbursement. For example, if you take out a $10,000 loan with a 3% origination fee ($300), you would receive $9,700. With this in mind, consider how much you’ll need to borrow to refinance or consolidate your debts.[3] <h3>4. Find the right lender and apply </h3>It helps to compare loan offers between several lenders to ensure you’re getting the best deal possible. Even if you received loan estimates before applying, review your official loan offer closely, as the number or terms may be different, especially if there’s been a significant change in your creditworthiness. LendingClub Bank loan offers include your loan’s annual percentage rate (APR), loan amount, term, and origination fee—making it easy to understand terms and compare offers. <h3>5. Pay off your other loan(s) </h3>Your new personal loan will generally be sent, or “funded,” directly into your bank account. From there, you’ll need to use those funds to pay off your other loan(s) to complete the refinancing. The approval process for personal loans varies by lender.   Once approved, it can take several business days to receive the funds, and it may take another few days for the payoff to process from your new lender to your existing lender. To avoid a missed payment, be sure to pay your current loan payments as usual until you receive confirmation that the debt has been paid.  <h2>Pros and cons of refinancing a personal loan </h2>You can refinance at any time, so there’s no rule to how soon you can refinance a personal loan. However, as we covered above, it’s not always a good time to get a new loan. If you’re thinking about refinancing a personal loan, be sure to weigh the pros and cons first. Here are some potential advantages and disadvantages to consider before refinancing.  <table><tr><th>Pros </th><th>Cons </th></tr><tr><td>Potentially get a lower interest rate[1] </td><td>Origination fees can be expensive[3] </td></tr><tr><td>Pay off your loan faster </td><td>May not qualify for more favorable terms[1] </td></tr><tr><td>Lock in fixed rates[1] </td><td>Credit score could be affected temporarily[5]  </td></tr><tr><td>Lower your monthly payment </td><td>Some loans have prepayment penalties[4] </td></tr></table><h2>The bottom line </h2>If you’re thinking about a personal loan refinance, it may come with many benefits, like a lower interest rate, lower monthly payment, or the ability to pay off your loan faster. However, it’s important to consider your personal financial situation, goals, credit score, and market rates. Before agreeing to any personal loan offer, be sure to compare rates and terms against your existing personal loan to make sure you’ll benefit from refinancing.   If you want to refinance a LendingClub loan or a personal loan from another lender, LendingClub Bank lets you <a href="https://www.lendingclub.com/personal-loan">quickly check your rate</a> for free without impacting your credit. LendingClub Bank offers fixed-rate personal loans that can be used to refinance existing debt. Choose the loan amount and terms that work for your personal finances, and then use the cash to pay off your old loan. While your credit score may initially see a dip as a new tradeline is added, you may improve your credit score over time by making timely payments on your loan.<hr/>    <ol><li><a href="https://www.consumerfinance.gov/ask-cfpb/what-is-a-personal-installment-loan-en-2114/">Consumer Financial Protection Bureau</a>. “What is a personal installment loan?”  </li><li><a href="https://www.federalreserve.gov/releases/g19/current/">Board of Governors of the Federal Reserve System</a>. “Consumer Credit - G.19.” </li><li><a href="https://www.consumerfinance.gov/ask-cfpb/do-personal-installment-loans-have-fees-en-2120/">Consumer Financial Protection Bureau</a>. “Do personal installment loans have fees?”  </li><li><a href="https://www.consumerfinance.gov/ask-cfpb/what-is-a-prepayment-penalty-en-1957/">Consumer Financial Protection Bureau</a>. “What is a prepayment penalty? </li><li><a href="https://www.consumerfinance.gov/ask-cfpb/whats-a-credit-inquiry-en-1317/#:~:text=Hard%20inquiries,frequently%20you%20apply%20for%20credit.">Consumer Financial Protection Bureau</a>. “What’s a credit inquiry? </li><li><a href="https://www.consumerfinance.gov/ask-cfpb/how-do-i-get-and-keep-a-good-credit-score-en-318/">Consumer Financial Protection Bureau</a>. “How do I get and keep a good credit score?” </li></ol>

Higher credit scores provide access to lower interest rates and better terms when you apply for credit. However, if your credit score needs work, there may be credit hacks you can take to improve your score.

An excellent score usually means you’ll likely qualify for the lowest interest rates on <a href="https://www.lendingclub.com/resource-center/personal-loan/top-reasons-to-get-a-personal-loan">personal loans</a>, credit cards, auto loans, home loans, and other types of credit. However, if your score is low, your credit options may be limited and often come with high interest rates.  You may also not be able to qualify for certain necessities like an apartment or mobile phone plan, and even your auto insurance rates can be affected by a poor credit score. Taking steps to <a href="https://www.lendingclub.com/resource-center/personal-loan/how-to-improve-credit-score">improve your credit score</a> can help you qualify for the best rates and other goals that involve credit checks.  <h2>7 impactful hacks to increase your credit score</h2>Building great credit takes time, but you can take action right away to start giving your credit a boost. And if you focus on factors that matter most when determining your credit score, you’ll likely see improvement quicker.   Whether you simply need to improve your score or are building credit from scratch, here’s a closer look at seven helpful hacks to increase your credit score fast.  <h3>1. Pay every bill on time </h3>Payment history is the most important factor in your credit score—accounting for 35% of your <a href="https://www.myfico.com/credit-education/whats-in-your-credit-score">FICO</a><a href="https://www.myfico.com/credit-education/whats-in-your-credit-score">®</a><a href="https://www.myfico.com/credit-education/whats-in-your-credit-score"> Score</a>, the most widely used credit-scoring model.[1][2] Paying your monthly credit card or personal loan payments late even a few times can knock valuable points off your score. So, the single best thing you can do to beef up your creditworthiness is to <a href="https://www.lendingclub.com/resource-center/personal-finance/steps-to-paying-bills-on-time">pay your bills on time</a>.[3]  Creditors typically report your payments once a month to the credit bureaus—noting if they’re on-time, late, or missed—so you’ll likely see your score change a few months after consistently paying your bills on time. Payments that are more than 30 days late can remain on your credit report for seven years, but you can lessen the impact by paying bills on time moving forward.[4]  Need some help sticking to a bill-paying schedule? Try these tips:  <ul><li>Alert yourself. Use technology to your advantage. Log into your loan or credit card accounts and set up notifications. You can choose to receive text or email notifications when a bill’s due date is approaching. </li><li>Set up automatic bill pay. Have your credit card issuer or lender automatically pull the payment owed from your bank account before the bill is due. </li><li>Align your payment dates. Check with your lenders to see if they’ll allow you to change your monthly due dates. It’s much easier to remember one or two due dates a month than to keep tabs on all your bills separately. </li></ul><h3>2. Use less credit </h3>Your <a href="https://www.lendingclub.com/resource-center/personal-finance/what-is-credit-utilization-and-how-to-improve-it">credit utilization rate</a>—or the percentage of how much credit you’re using compared to your total available revolving credit. For instance, if you have a $200 balance on a credit card with a $1,000 limit, your credit utilization would be 20%. Your credit utilization rate makes up 30% of your FICO® Score.[1]  Ideally, experts recommend using less than 10% of your available credit to qualify for the best rates. Try these tips to minimize your credit utilization ratio and improve your credit score:  <ul><li>Charge less on credit cards. If swiping your plastic too often is driving up your credit utilization ratio, try a different payment method whenever possible. Pay with a debit card, initiate a bank transfer, use a cash app like Venmo, or pay with plain old cash.[3] </li><li>Pay down debt. Any balance you carry on your credit cards adds to your utilization ratio. If you’re struggling with high-interest debt, try a proven strategy for paying off your debt faster, like the <a href="https://www.lendingclub.com/resource-center/personal-finance/steps-to-decimate-debt-the-debt-snowball-method">snowball</a> or <a href="https://www.lendingclub.com/resource-center/personal-finance/what-is-the-debt-avalanche-method-and-how-does-it-work">avalanche</a> methods. Or, a <a href="https://www.lendingclub.com/personal-loan/credit-card-consolidation-loan">debt consolidation loan</a> can help you pay off all your credit cards at a lower interest rate with one convenient payment. </li><li>Consider timing your payments. Credit card issuers usually report your account balance to the credit bureaus at the end of the statement period.[4] You&#39;ll receive your statement at this time, and your bill is due a few weeks later. If you had a balance when your card issuer reported your account details, your utilization rate could rise unexpectedly—even if you paid off the balance when you got the bill. To help lower your utilization ratio going forward, pay off your balance before your statement period closes.  </li></ul><h3>3. Request an increase to your credit limits </h3>Keeping credit card balances low is one way to reduce your credit utilization. However, you can also lower your ratio by increasing your credit limits.[3]  Here’s an example: Suppose you still charge $200 to your card. Only now, your limit has increased from $1,000 to $5,000. Your new credit utilization ratio is just 4%—well below the recommended 10% cap.   Check with each of your creditors to see if you’re eligible for an increase to your credit limits. (If you’re not, find out when you will be.) While this hack is a good way to lower your credit utilization, it’s important not to increase your credit credit balances at the same time. Otherwise, you’ll be back to square one.   Keep in mind that requesting an increase to your credit limit might initiate a hard inquiry, which will appear on your credit reports. This might impact your credit score in the short term, but as long as you’re keeping your spending the same (or lower) and practicing good credit habits, it should bounce back quickly. <h3>4. Don’t close old credit cards </h3>The length of your credit history makes up 15% of your FICO® Score.[1] Potential lenders want to see that you have a long history of being responsible with debt, and credit cards you’ve carried for years can provide some of that evidence. While it may be tempting to close an old credit card you don’t use often, keeping it open can help you maintain a long credit history.[3]   In general, leaving older cards open may help your credit score, but it&#39;s important to consider other factors as well, such as any annual fees you may be paying, or the need to reduce the temptation to spend. Be sure to use your open cards and try to pay them off each month to get the best scores.[3]  Applying for new credit cards can also affect your credit history by decreasing your average age of accounts and potentially lowering your credit scores. A lengthy account history often takes years to establish, but closing an account may have an immediate negative effect.[3] <h3>5. Avoid applying for new credit (if possible) </h3>New credit applications for credit cards and loans typically result in a hard credit inquiry, which can often lower your score by a few points temporarily. New inquiries make up 10% of your FICO® Score.[1]  To keep your credit healthy, try to only apply for new credit when you need it, and avoid making multiple credit inquiries in a short time frame—especially with credit cards. When shopping around for a new credit card or loan, check to see if the lender offers a prequalification tool. This can show whether you’re eligible for the credit and display your potential terms with just a soft credit pull, which won’t affect your score. <a href="https://www.lendingclub.com/resource-center/personal-finance/key-differences-of-a-soft-credit-check-vs-hard-credit-check">Learn more about soft vs. hard credit </a><a href="https://www.lendingclub.com/resource-center/personal-finance/key-differences-of-a-soft-credit-check-vs-hard-credit-check">inquiries</a>.  In some cases, like comparing home, auto, or student loan rates, your credit may not be affected if you complete your rate shopping during a consolidated window of time, usually 14 to 45 days.  <h3>6. Become an authorized user </h3>Having a family member or partner add you as an authorized user on their credit card can improve your score. It can take a month or two for the card issuer to report the account’s history to the credit bureaus with your name, but this hack is a great strategy to establish credit quickly—especially if you’re new to credit or rebuilding a poor credit history.[5]  Keep in mind that how the credit card is managed will directly affect your score—even if you’re not the person using the card or paying the bills. Ideally, you’ll want to make sure the account has a low credit utilization rate and a positive payment history. However, this won’t be entirely in your control since you’re not the account owner.[5] <h3>7. Add to your credit mix  </h3>While not nearly as important as your payment history or age of accounts, your credit mix still makes up 10% of your FICO Score.[1] Having a diverse range of credit shows lenders you can manage different kinds of debt.   People with high credit scores often have a mix of accounts, including auto loans, personal loans, and credit cards. However, before opening a new account for the purpose of adding to your credit mix, it’s still important to make sure you can take on the extra debt.[2]  The bottom line No matter where you’re starting from, applying these valuable credit score hacks now to increase your credit score can make a difference. Like anything that is worth doing, building your credit score takes time. So, the sooner you incorporate these practices into your everyday life, the sooner you’ll be on your way to an amazing score and a brighter financial future.  It’s also a good idea to <a href="https://www.lendingclub.com/resource-center/personal-finance/how-to-read-your-credit-report-identify-red-flags">check your credit reports</a> regularly to keep tabs on your scores and look for inaccuracies. You can request free copies of your credit reports from each of the three major credit bureaus—Equifax, Experian, and TransUnion—once a week at <a href="http://annualcreditreport.com/">AnnualCreditReport.com</a>. And if you find anything that doesn’t look right, be sure to get in touch with the credit bureau.[3]   <hr/><ol><li><a href="https://www.myfico.com/credit-education/whats-in-your-credit-score">myFICO</a>. “What&#39;s in my FICO Scores?”  </li><li><a href="https://www.fico.com/en/newsroom/fico-score-remains-most-widely-used-credit-score-securitization-market-keeping-lender">myFICO</a>. “FICO Score Remains the Most Widely Used Credit Score in the Securitization Market, Keeping Lender Confidence.”  </li><li><a href="https://www.consumerfinance.gov/ask-cfpb/how-do-i-get-and-keep-a-good-credit-score-en-318/">Consumer Financial Protection Bureau</a>. “How do I get and keep a good credit score?” </li><li><a href="https://www.experian.com/blogs/ask-experian/credit-information-is-updated-continuously/">Experian</a>. “How Often Is a Credit Report Updated?” </li><li><a href="https://www.myfico.com/credit-education/whats-in-your-credit-score">myFICO</a>. “How do authorized user accounts impact the FICO Score?  </li></ol>

Timing matters when refinancing an auto loan. So before opting for a new loan, make sure you understand when it’s a good idea to refinance and when it’s better to wait. 

<a href="https://www.lendingclub.com/auto-refinancing">Refinancing your auto loan</a> can help you get a lower interest rate or change the loan term, which could save you money on interest, lower your monthly payments—or potentially both. If you only recently bought your car, or you’ve had it for several years, you might be wondering if it’s too soon, too late, or the perfect time to refinance.  <h2>When to refinance your car loan </h2>Timing can be a huge factor when considering an auto loan refinance. Many lenders have required waiting periods before you can refinance or cut off periods when it’s too late. Let’s take a closer look at some of the timing restrictions lenders may have around refinancing.  <h3>The first 60 to 90 days of the car loan </h3>Most lenders require that you’ve had the loan for at least a few months before you can apply to refinance. At LendingClub Bank, for example, the minimum requirement is 90 days. This allows time for the car title to transfer from the manufacturer or previous owner to your current lender. The new lender also wants to see if you’ve been making on-time payments for the first few months. <h3>At least 24 months remaining on the car loan </h3>If you’re considering refinancing, you’ll want to act while there’s still some time left on your loan because many lenders have a minimum requirement. For instance, LendingClub Bank requires at least 24 months remaining on the original loan term. Plus, the later in the term you are, the more interest you’ve already paid off—which means it could be more cost-effective to simply stick with your original loan and finish off the principal. <h2>7 signs it’s a good idea to refinance your car </h2>There are more telltale signs refinancing your car loan is a good option for you. Consider these common situations when it may make sense to try to refinance your auto loan. <h3>1. Your credit score has increased </h3>If you’ve been paying your debts on time, your credit utilization has decreased, or you’ve made other moves to improve your credit score, you may be able to qualify for a lower rate than you received when you first bought the car. Even a small reduction can meaningfully impact your total interest and monthly payments. When you applied for the original loan, the lender likely did a hard inquiry on your credit report. Waiting a few extra months can give your score time to recover, which may help you get a better interest rate.[1] <h3>2. Interest rates have dropped since you purchased your vehicle </h3>If prevailing interest rates were higher when you first took out your loan, it might be worth checking whether you can lower your rate. Many lenders allow you to check your potential rate without doing a hard credit check, so you can see your savings without impacting your credit score.[1] <h3>3. You want a lower monthly payment </h3>Refinancing isn’t just about potentially saving money—you can also refinance to put more room in your budget. Lengthening your term may increase your overall interest costs, but it also reduces your monthly payment. If bills are tight, refinancing to lower your payments may be the solution you’re looking for.[2] <h3>4. You financed your current auto loan with a dealership </h3>Dealer-financed auto loans are often not the best deal. Because dealers act as a go-between for shoppers and the bank, they tend to mark up the interest rate to get a cut. By refinancing directly with an online lender, credit union, or other financial institution, you’re avoiding that markup, which can save you money.  <h3>5. You want to pay off your auto loan sooner </h3>Can you swing a higher monthly payment? If so, you may be able to refinance into a loan with a shorter term. Not only will you pay off your loan more quickly, but you could also save on overall interest.[2] <h3>6. You want to remove a co-signer </h3>Maybe you needed a co-signer to qualify for your original loan, but you’ve established or improved your credit since then. If so, you can try to remove your co-signer by refinancing into a loan of your own.[1]  <h3>7. You need extra cash </h3>Some lenders offer a cash-out refinance option, which means you can take out a loan for more than the value of your car and keep the difference in cash. <h2>5 signs you shouldn’t refinance your auto loan </h2>Auto refinancing can make a lot of sense for some people—but before choosing to refinance, it’s important to make sure the timing is right. Here’s a closer look at some common situations when you may want to hold off on refinancing your loan.  <h3>1. The interest rate is higher than your current loan </h3>If your credit score has gone down or rates have gone up since you first took out the loan, you could end up with a higher interest rate through refinancing. That might be okay if your goal is to get a longer term and lower monthly payments. However, it’s important to do the math first to make sure the trade-off is worth it. <h3>2. You owe more than the value of your car </h3>Depending on how far along you are into repaying your loan and other factors, like depreciation or missed payments, you may owe more on your current loan than the vehicle is worth. This situation leaves you “underwater” or “upside down” on the loan. Most lenders won’t refinance this type of loan. If they do, the rate and terms will likely be unfavorable. Before applying for a refi, check your car’s value compared to your loan payoff amount to see where you stand.[3]  <h3>3. You waited too long to refinance your auto loan </h3>Lenders typically require borrowers to have at least two years left on the loan in order to qualify for refinancing. Additionally, it can be tough to refinance a car that’s over 10 years old or with 140,000 (or more) miles on it.  <h3>4. Your current auto loan has a prepayment penalty </h3>Paying off your current loan early could cost you a prepayment penalty fee, often charged as a percentage of your outstanding loan balance. Be sure to read the disclosures and fine print to understand whether your existing loan is subject to any prepayment fees and how much they’ll cost. Then, weigh the fee against the potential savings you’ll get with a new loan to see if it makes sense financially.[2]  <h3>5. You don’t want your credit score affected </h3>Refinancing an auto loan typically results in a hard credit inquiry from the lender, which can cause your score to drop. The dip is usually only a few points, and it’s temporary. However, if you’re in the middle of applying for a mortgage or other credit, it’s probably a good idea to hold off on refinancing your auto loan. <a href="https://www.lendingclub.com/resource-center/personal-finance/key-differences-of-a-soft-credit-check-vs-hard-credit-check">Learn more about soft vs. hard credit inquiries</a>.[4]  <h2>Is refinancing worth it?  </h2>Refinancing may be worth it, depending on your financial goals and situation. Before deciding to refinance your auto loans, it’s important to carefully consider your credit situation, interest rates, and your motivation for refinancing. The timing may not always be right, and in some cases it may not even be possible to refinance due to lender restrictions.   How to get started refinancing your auto loan If you’re thinking of refinancing your auto loan, you can start the <a href="https://www.lendingclub.com/resource-center/auto-refinance/how-does-refinancing-a-car-work">refinancing process</a> by reviewing the details of your current auto loan, including your outstanding loan balance, annual percentage rate (APR), and time left on the loan term. Next, check your credit to make sure it’s in good shape. If it needs improvement, then take steps to <a href="https://www.lendingclub.com/resource-center/personal-loan/how-to-improve-credit-score">improve your score</a>.   Check with lenders to see what kind of interest rate and terms you can qualify for. Many lenders, including LendingClub Bank, will show you a potential rate without doing a hard credit inquiry. When it comes to actually applying for loans, submit all your applications within a span of a couple of weeks to minimize the impact to your credit score.[1]  <h2>The bottom line </h2>Whether you want to pay off your vehicle faster, have smaller monthly payments, or save on interest, auto loan refinancing can be a powerful personal finance strategy that can be tailored to your unique financial situation. However, it’s important to carefully consider a wide range of factors to determine if the timing makes sense to refinance your auto loan.     <hr/><ol><li><a href="https://www.consumerfinance.gov/ask-cfpb/what-should-i-know-before-i-shop-for-auto-loan-at-a-bank-credit-union-dealership-or-other-lender-en-755/#will-my-credit-impact-my-interest-rate">Consumer Financial Protection Bureau</a>. “What should I know before I shop for a car or auto loan?” </li><li><a href="https://www.consumerfinance.gov/ask-cfpb/can-i-prepay-my-loan-at-any-time-without-penalty-en-843/">Consumer Financial Protection Bureau</a>. “Can I prepay my loan at any time without penalty?” </li><li><a href="https://consumer.ftc.gov/articles/auto-trade-ins-and-negative-equity-when-you-owe-more-your-car-worth">Federal Trade Commission Consumer Advice</a>. “Auto Trade-Ins and Negative Equity: When You Owe More than Your Car is Worth” </li><li><a href="https://www.consumerfinance.gov/ask-cfpb/whats-a-credit-inquiry-en-1317/#:~:text=Hard%20inquiries,frequently%20you%20apply%20for%20credit.">Consumer Financial Protection Bureau</a>. “What’s a credit inquiry? </li></ol>

A personal loan and credit card can be important financial tools, but it's important to understand how they each work before deciding which one to use. 

When deciding between a <a href="https://www.lendingclub.com/personal-loan">personal loan</a> or a credit card, it’s important to weigh their key differences, how you plan to use the funds, and your personal financial situation. A credit card may make sense for smaller purchases, like groceries, gas, or your morning coffee. As long as you’re confident you can pay off the total balance at the end of the month, using a credit card can be a good option. However, if you’re looking to finance a larger purchase, like a home remodeling project, a personal loan can help you access the funds you need with a fixed interest rate and repayment plan.[1][2] <h2>Differences between personal loans and credit cards </h2>A personal loan is a lump sum of money that’s paid back over a predetermined period of time, while credit cards offer a line of credit that accrues a balance and requires a monthly minimum repayment. Here’s a closer look at how personal loans and credit cards compare.[1][2] <h3>At a glance: The differences between personal loans and credit cards</h3><table><tr><th></th><th>Personal Loan</th><th>Credit Card</th></tr><tr><td>What is it:</td><td>A lump sum of money that’s repaid in monthly installments over a set period of time with interest  </td><td>Payment card used for charges against a revolving line of credit with accruing balances that’s repaid with a minimum monthly payment </td></tr><tr><td>When to use:</td><td>Consolidate high-interest debt or pay for one-time major expenses like weddings, vacations, or home improvements </td><td>Cover day-to-day expenses or unexpected needs without cash or checks </td></tr><tr><td>Best for...</td><td>Access to quick funds with fixed interest rates and predictable monthly payments </td><td>Access to revolving credit for small purchases or emergencies </td></tr><tr><td>Interest rate type </td><td>Fixed rate for life of the loan </td><td>Variable rate on unpaid balance </td></tr><tr><td>Repayment type </td><td>Fixed monthly installment </td><td>Monthly payment based on current balance  </td></tr><tr><td>Advantages </td><td>Larger borrowing limits; lower interest rates than most credit cards; predictable repayment plan; can help build and improve credit </td><td>Convenience; no interest due if total monthly balance paid in full; earn rewards or cash back on purchases </td></tr><tr><td>Disadvantages </td><td>Loan repayment starts immediately; some lenders may require an origination fee or prepayment penalty </td><td>High, variable interest rates; credit limits can vary; potential for high-cost debt to accumulate quickly; possible annual and late fees; can quickly damage credit if used irresponsibly  </td></tr></table><h2>Personal loans </h2>A <a href="https://www.lendingclub.com/resource-center/personal-loan/guide-to-choosing-the-best-personal-loans">personal loan is a lump sum of money</a> you can borrow for almost any purpose, such as <a href="https://www.lendingclub.com/resource-center/personal-loan/what-is-debt-consolidation">consolidating credit card or other debt</a>, paying moving costs, or making home improvements. With a personal loan, your interest rate is typically fixed and lower than most credit card interest rates, and you’ll have a set amount of time to pay the loan back. Personal loans can be an effective financing choice in many situations—including those that involve larger cash sums that you want to pay off over time.[1][2] Here are some common reasons to choose a personal loan:  <ul><li>You want to consolidate credit card debt. Credit cards tend to charge higher interest rates compared to other borrowing options. Using a personal loan to pay off higher-interest debt lets you fold multiple payments into one manageable payment with a more favorable interest rate and term, which can save you money.[3] </li><li>You need a large amount of money. Generally, a personal loan gives you flexible access to more cash than a credit card does, without the drawback of racking up high interest on large purchases that can’t be paid off within a month or two. With a fixed and typically lower interest rate, personal loans can be used to make major purchases, handle big expenses, or fund important goals. </li><li>You prefer more control over your cash. Personal loans offer added flexibility when it comes to accessing and disbursing your money. Because funds are usually deposited directly into your bank account within days, you can decide when and how to fill a short-term cash need for an emergency or invest in a big purchase, managing your priorities as necessary. </li></ul><h3>Personal loan pros and cons </h3>Before taking out a personal loan, it’s important to weigh the pros and cons. Here’s a breakdown of some of the key advantages and disadvantages of using a personal loan.[1]    Pros: <ul><li>Large borrowing limits </li><li>Lower interest rate than most credit cards </li><li>Predictable repayment plan with fixed interest rate and monthly payment amount </li><li>Swift application and disbursement of funds </li><li>Positively impacts credit score with on-time payments </li></ul>Cons: <ul><li>Loan repayment starts immediately </li><li>Required, fixed payments with interest </li><li>People with less-than-perfect credit may not qualify for the best rates or terms </li><li>Possible <a href="https://www.lendingclub.com/resource-center/personal-loan/what-is-a-personal-loan-origination-fee">origination fee</a>, prepayment penalty, or late fees </li><li>While not common, collateral may be required for secured loans </li></ul><h3>Who a personal loan is best for  </h3>A <a href="https://www.lendingclub.com/resource-center/personal-loan/how-do-loans-work">personal loan</a> is best for people looking to borrow a large sum of money and pay it back over time. Consider a personal loan if you need to consolidate other debt, like high-interest credit cards, into one easy-to-manage monthly payment—often with a lower interest rate. A personal loan might also be best if you need to finance a large, one-time expense like a wedding, dream vacation, or home repairs.[1] [3]   Personal loans must be paid back with fixed monthly installments, so they’re a good option if you like to plan your monthly expenses upfront. People with excellent credit generally qualify for the best rates, highest loan amounts, and most flexible repayment terms. So personal loans may be a good choice if your credit is excellent. If you’re working on rebuilding your credit, consider waiting to apply until your credit improves—or ask a creditworthy family member or friend to be a co-borrower.[1]   <h2>Credit cards </h2>Credit cards are convenient financial tools for most people—in fact, <a href="https://www.federalreserve.gov/publications/files/2023-report-economic-well-being-us-households-202405.pdf">according to the Federal </a><a href="https://www.federalreserve.gov/publications/files/2023-report-economic-well-being-us-households-202405.pdf">Reserve</a>, 82% of us have at least one. While credit cards can help pay everyday expenses, finance purchases, and build credit history, those perks can come with costs—especially if you struggle to manage credit wisely. When compared to personal loans, credit cards are more often used for smaller purchases and come with higher interest rates.   <h3>Common reasons to choose a credit card include:   </h3><ul><li>You want a reliable way to pay for important purchases. When you pay for something with a credit card, you&#39;re often protected against damage, theft, or loss of the item for as long as 90 to 120 days after the purchase. Known as <a href="https://www.experian.com/blogs/ask-experian/what-is-credit-card-purchase-protection/">purchase protection</a>, this credit card benefit is kind of like short-term insurance for products you buy. </li><li>You want to take advantage of rewards programs. Many of the best credit cards offer perks like cash back, discounts, points, or miles on all purchases, letting you maximize rewards and save money simply by paying with your card. For example, you could use a card that offers the best grocery bonuses to do all your food shopping, earning free cash for regular purchases.[4]  </li><li>You want a backup plan. Credit cards give you the option to safely pay without cash, checks, or debit cards. And having a card on hand can give you peace of mind should you need it—even if you reserve it purely for emergencies.    </li></ul><h3>Pros and cons of credit cards </h3>Before using a credit card, it’s important to understand the pros and cons. Here are some key advantages and disadvantages of using credit cards.   Pros: <ul><li>Purchase and fraud protection </li><li>Widely accepted form of payment  </li><li>No interest when monthly balance is paid in full </li><li>Options for rewards, discounts, or cash back on purchases </li><li>Responsible use can build positive credit history </li></ul>Cons: <ul><li>Credit limits and interest rates can vary </li><li>Possible annual fees and late fees </li><li>Research needed to choose the best credit cards </li><li>Potential for high-cost credit card debt to accumulate </li><li>Credit score damage if used irresponsibly </li></ul><h3>Who a credit card is best for </h3>Credit cards are a good option for people looking for a convenient, secure way to pay for everyday purchases. Consider a credit card if you need to make several smaller purchases. Credit cards are also handy in an emergency if you need to cover unexpected expenses like car repairs, broken appliances, or medical costs.   A credit card may also be a good choice if you want to earn rewards for your spending on everyday purchases like gas, dining, or groceries. To avoid <a href="https://www.lendingclub.com/resource-center/personal-loan/apr-vs-interest-rate-whats-the-difference">paying interest</a>, credit cards are best for people who don’t carry a balance from month to month. People building (or rebuilding) credit may also benefit from using a credit card, but only when used responsibly.[2][4] <h2>Do personal loans and credit cards affect your credit score differently? </h2>When you apply for a personal loan or credit card, the lender will perform a hard inquiry into your credit history. This usually makes your credit score drop by a few points. However, the effect is temporary and your score typically bounces back in just a few months.[5]   Once you have a personal loan or credit card, be sure to pay your bills on time. Your payment history is reported to the credit bureaus and plays a major role in <a href="https://www.lendingclub.com/resource-center/personal-finance/what-affects-your-credit-score">determining your credit score</a>. A positive payment history can help keep your credit on track, and even help boost your score, while a negative payment history can cause your score to drop. Defaulting on your loan or failing to pay a credit card could have serious consequences that affect your score for up to seven years.[6]   Using a credit card responsibly can also help give your score a boost, but it’s important to keep an eye on your credit utilization. Keeping your card balance under 30% of its credit limit typically keeps your credit healthy. In other words, don’t max out your cards, and pay your balance in full each month if you’re able to.[6]   <h2>The bottom line </h2>There’s a lot to think about when you’re evaluating pros and cons of a personal loan versus a credit card. Before you choose, you’ll want to consider how much money you need and how quickly you can pay it off. Then compare interest rates and fees, and weigh the overall cost of each borrowing option. Research credit cards that meet your needs, or compare online lenders for the most competitively priced personal loan you can afford. To avoid an initial hit to your credit, look for lenders like LendingClub Bank that let you check your rate with just a soft credit pull. <hr/><ol><li> <a href="https://www.consumerfinance.gov/ask-cfpb/what-is-a-personal-installment-loan-en-2114/">Consumer Financial Protection Bureau</a>. “What is a personal installment loan?” </li><li><a href="https://www.consumerfinance.gov/ask-cfpb/how-does-my-credit-card-company-calculate-the-amount-of-interest-i-owe-en-51/">Consumer Financial Protection Bureau</a>. “How does my credit card company calculate the amount of interest I owe?” </li><li><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/">Consumer Financial Protection Bureau</a>. “What is the difference between credit counseling and debt settlement, debt consolidation, or credit repair?” </li><li><a href="https://www.consumerfinance.gov/data-research/research-reports/issue-spotlight-credit-card-rewards/">Consumer Financial Protection Bureau</a>. “Credit Card Rewards” </li><li><a href="https://www.experian.com/blogs/ask-experian/hard-inquiry-vs-soft-inquiry/#:~:text=Hard%20inquiries%20can%20impact%20your,for%20less%20than%20a%20year.">Experian</a>. “What’s the Difference Between a Hard and Soft Inquiry?”  </li><li><a href="https://www.myfico.com/credit-education/whats-in-your-credit-score">myFICO</a>. “What&#39;s in my FICO Scores?”  </li></ol>

Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus any accumulated interest. Due to the interest-on-interest effect, compound interest grows faster over time.

Whether you’re saving or borrowing money, you should understand the difference between simple interest and compound interest. Why? Because these rates are commonly used for loans, credit cards, and savings accounts—but they’re calculated differently. In other words, it impacts how much you’re paying (or earning). <h2>What is simple interest? </h2>Simple interest is the interest calculated on the principal amount of a loan.  For example, if you open a $10,000 certificate of deposit (CD) with a 3% interest rate and simple interest, the CD will accrue $300 of interest every year ($10,000 x 3% = $300). If it has a three-year term, you’ll earn $900 of interest overall.  With a loan, the simple interest can determine how much you’ll pay. However, the total amount can be a little difficult to calculate because your principal balance will decrease as you repay the loan. <h3>How to calculate simple interest </h3>Simple interest depends on the principal balance, interest rate, and time period. Here is the simple interest formula: I = P*r*t <ul><li>I is the total interest amount </li><li>P is the principal balance </li><li>r is the interest rate </li><li>t is the time period </li></ul>You want to use the same timeframe for the inputs to ensure you get the correct results. For example, if interest is charged daily, use the daily interest rate for (r) and a single day for (t) to determine how much interest accrues each day. If you want to figure out how much interest you’ll pay each year, use the annual interest rate and one year as the time. You can often review a loan agreement or statement to find the loan’s interest rate. It may be shown as the annual rate, but the loan agreement could explain how a daily rate is determined. Often, the annual interest rate will be divided by either 360 or 365 to determine the daily interest rate. <h2>What is compound interest? </h2>Compound interest applies the interest rate to both the principal balance and accrued interest. In other words, it charges interest on interest. With a loan, compound interest can lead to paying more interest over time. For example, a credit card may use daily compounding interest if you’re carrying a balance. Each day, interest is calculated based on your current total owed and your card’s daily interest rate and then. added to your balance. On the following day, interest is calculated again on your new balance, and the cycle continues. With savings, compound interest can be a good tool to build wealth over time. Because you can earn interest on your interest, your account may grow more quickly. Checking and savings accounts often show you the account’s annual percentage yield (APY), which includes compounding interest in the calculation. <h3>How to calculate compound interest </h3>Calculating compound interest can be tricky because there’s an additional variable. That is the frequency of compounding. We’ll use an example to explain this concept below. This is the compound interest formula: A = P (1 + r/n)nt <ul><li>A is the total amount </li><li>P is the principal balance </li><li>r is the annual interest rate </li><li>n is how often interest compounds per year </li><li>t the number of years </li></ul>If you only want to find the total accumulated interest, you could use:  I = P (1 + r/n)nt - P  For example, let’s say you take out the same $10,000 CD with a 3% interest rate and three-year term. But this time, the interest compounds monthly. A = 10,000 (1+.03/12)(12*3) = $10,940.51 You earned $940.51 in interest—an additional $40.51 compared to the simple interest CD—because you earned interest on your interest. The frequency of compounding can also be important, as you’d earn more if interest compounded daily, but less if it compounded annually. You can find out how frequently interest is compounded for your account by reviewing your terms. <h2>Simple interest vs. compound interest loans </h2>Compound interest is often best when you’re saving money because you’ll earn interest on interest. If you’re taking out a loan, a simple interest loan may be the better option since it could lead to less costs overall. However, even with a simple interest loan, there are situations when your outstanding interest could be “capitalized,” or added to the principal. For example, this could happen when certain federal student loans leave deferment or forbearance. The interest rate would then apply to the new, larger principal balance.  Remember, it’s important to look beyond the interest methods and consider the rest of the loan terms, such as the fees and repayment terms. If you have a tight budget, it might make sense to go with an option that has a lower monthly payment, even if it results in paying more interest overall. <h2>How simple interest personal loans could save you money </h2>Assuming all other loan terms are the same, a loan that uses simple interest could have lower monthly payments and cost you less overall than a loan using compound interest. You may be able to save additional money by making extra payments. By paying down part of your principal early, you can decrease how much interest accrues on your loan, With a fully amortized loan, your monthly payment amount might not change because you have a fixed repayment schedule—but making early payments could lead to paying off the loan early or having a lower final payment. Saving money by making extra payments can work with both simple and compound-interest loans, but it’s not true of loans that use precomputed interest. With precomputed interest, the lender calculates and adds the interest to your loan. <h2>The bottom line </h2>Loans and deposit accounts may use simple or compound interest to determine how interest accumulates. When an account uses simple interest, the interest rate only applies to the principal balance. But compound interest gets applied to the principal balance and accumulated interest. Over time, an account that uses compound interest can lead to paying (or earning) more interest than one that uses simple interest. However, interest is only one factor when opening a new account. You may also want to review the accounts’ other features, terms, and fees to determine which is best. <h2>Compound interest vs simple interest FAQ</h2><h3>1. Is it better to open a compound interest or simple interest account? </h3>You should review the terms of any saving or borrowing product carefully to make sure you’re getting the best deal. That being said, the cost of borrowing may be lower with a simple interest rate loan than with a loan that uses compound interest. Conversely, if you’re saving money, a checking or savings account with compound interest may grow more quickly than one with simple interest. Keep in mind, there are other factors to consider beyond interest when opening a new account. <h3>2. How do simple-interest personal loans compare to compound-interest loans? </h3>Simple-interest loans may accrue less interest over time than loans using compound interest. With simple interest loans, you don’t pay interest on top of the interest that’s already accrued. However, there are unique situations when interest is capitalized and added to the loan’s principal—like when certain federal student loans leave deferment or forbearance. <h3>3. Can simple interest be used for car loans? </h3><a href="https://www.lendingclub.com/auto-refinancing">Auto loan lenders</a> may offer you an auto loan with simple interest, but that depends on the lender. Review the terms of your loan offers to see how interest would be calculated on your car loan. <h3>4. Do banks offer simple interest loans? </h3>You can find simple interest loans from both banks and online lenders. If you’re not sure what the lender uses, ask a representative or review the loan offer. <h3>5. How does LendingClub Bank calculate personal loan interest? </h3>LendingClub Bank offers unsecured <a href="/personal-loan">personal loans</a> that are fully amortized and have fixed interest rates. We charge simple interest, and there’s no prepayment penalty for borrowers who want to save money by paying off their loans early.

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.

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 <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.<h2>Limited Time Offer to Double Your Cash Back Through 12/31/22</h2>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.“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.”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—doubling their earnings for a limited time through 12/31/22.* Cash back can be redeemed for e-gift cards through the Earnings Dashboard.<h2>New Name, Better Rewards</h2>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.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.*Double Cash Back Offer on eligible transactions expires 12/31/22. See <a href="/legal/terms-of-use">Terms of Use</a> for full details. Offer is subject to change without notice.Stackit is a non-deposit product offered by LendingClub Bank.

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. 

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>.<h2>Being Unbanked Increases Costs for Families</h2>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. 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.<h2>More Rewarding Banking for More People</h2>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:<h3>Low Minimum Opening Balance</h3><ul><li>Access Rewards Checking with an opening deposit of only $25</li><li>Freedom from Fees Save more of your hard-earned money with no overdraft, monthly maintenance, and incoming wire transfer fees1</li></ul><h3>Unlimited Cash Back</h3><ul><li>Earn <a href="/personal-checking/rewards-checking">unlimited 1% cash back</a> on Qualified (signature-based) Purchases when using your Rewards Checking debit card2</li></ul><h3>Free ATM Access</h3><ul><li>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 banks3</li></ul><h3>Get Your Paycheck Early</h3><ul><li>Set up direct deposit into your account and you could be eligible to receive your money up to 2 days earlier4</li></ul><h3>Earn Interest</h3><ul><li>Earn an APY that’s more than the national average with account balances of at least $2,5005</li></ul><h3>FDIC Insurance</h3><ul><li>Rest easy knowing your deposits are FDIC-insured up to the maximum amount allowed—$250,000 per depositor for each ownership category</li></ul><h3>Best Online Experience</h3><ul><li>Based on our easy-to-use mobile app and award-winning <a href="/personal-checking/rewards-checking">online checking account</a>, NerdWallet named us Best Bank or Credit Union for Online Experience</li></ul><h2>What Our Members Say</h2>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 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.”Robin, a LendingClub Bank Member“The rewards checking account with cash back every month has helped me ditch my credit card and debt.”Lauren, a LendingClub Bank MemberRead more member reviews.<h2>Your Financial Well-Being Matters to Us</h2>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. Testimonials reflect the real-life experiences of individuals who used our products; however, individual results may vary.<hr/><h4>Terms and Conditions</h4>Accounts subject to approval. $25 minimum opening deposit required. See Product Terms &amp; Conditions for additional details.1. Miscellaneous fees may apply. View Product Terms &amp; Conditions for complete details.2. The Debit Card Rewards Program (“Cash Back Rewards”) provides 1.00% cash-back on all Qualified Purchases using a debit card tied to an Eligible Account.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.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.Qualified Purchases are defined as: 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 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). 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. 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.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.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. 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.

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.

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.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.  “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.” 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.  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: “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 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. Thanks again to all of our members for helping us achieve this incredible milestone.

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

In March 2022, we hosted our first quarterly webinar where we celebrated our one-year anniversary as a digital marketplace bank. During the webinar, Anuj Nayar, our Financial Health Officer, discussed:<ul><li>Our journey to get to where we are today </li><li>Lessons learned from our 15-year history as a fintech pioneer</li><li>How we’re leveraging our digital marketplace bank to further our mission to help Americans on their path towards financial health</li><li>We recently reported Q4 2021 and year-end earnings</li><li>New data on the financial health of U.S. consumers from our latest Paycheck-to-Paycheck report</li></ul>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. <a href="https://vimeo.com/686043451">Check out the video below to learn more.</a>

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.  

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.  This includes our yacht loan business. Yacht loans are simply not in line with our mission to help everyday Americans on their path to financial health and we plan to grow our auto refinance business to take its place.  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.   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.  These business model changes will have no material effects on our business operations and we plan to report more details when we issue our Full Year 2021 and Q4 earnings in a few weeks. Scott Sanborn CEO  LendingClub<hr/>Safe Harbor StatementSome 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.

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{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.

A type of credit that allows the borrower to make charges and payments against a set borrowing limit, paying interest only on outstanding balances.<h2>What is Revolving Credit?</h2>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.<h2>How Does a Revolving Line of Credit Work?</h2>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.<h3>Types of Revolving Credit</h3>The most common revolving credit products are lines of credit and credit cards.Lines of credit 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. Some lines of credit may be limited in how the funds can be used, such as only for balance transfers from credit cards.Credit cards 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. 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.<h3>Why is Revolving Credit Important?</h3>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.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.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.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.<h3>What Are the Risks of Revolving Credit?</h3>Revolving credit has some drawbacks you should be aware of.Collateral risk: 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.High interest rates: Revolving credit typically has higher interest rates than installment credit. Interest rates for most credit cards and many lines of credit are also variable, meaning they can change over time based on economic conditions.Excessive debt: If you only make the minimum payment on a credit card, you could accumulate a large balance. Credit card interest is typically compounded, 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.<h3>How Does Revolving Credit Affect Your Credit Score?</h3>Revolving credit could help your credit score in several ways.<ul><li>On-time payments: Making revolving credit payments on time could boost your credit, since timely payments are a major factor in your FICO® Score.</li><li>Responsible credit utilization: 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.</li><li>Diverse credit mix: A variety of accounts, including installment credit and revolving credit, could show lenders you can successfully manage different types of debt.</li></ul>Revolving credit could also have negative impacts on your credit score when not managed responsibly. Late payments: 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.Excessive credit utilization: Consistently carrying balances that exceed 30% of your available credit limit can reduce your credit score. Hard inquiry: When you apply for revolving credit, creditors perform a credit check called a hard inquiry, which could cause a small, temporary dip in your credit score.

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

<h2>What is Annual Percentage Rate (APR)?</h2>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. 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.<h2>How is Annual Percentage Rate Calculated?</h2>To calculate APR on a loan, you’ll need to know a few other numbers first:Interest: The total interest charges paid over the life of the loan, also known as the cost of borrowing money.Fees: Review the terms and conditions of the loan to find the fees that apply to your loan. Fees vary by loan type and lender. Principal: The original loan amount.Days in the Loan Term (n): 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.The formula to calculate APR is: <img src="//images.ctfassets.net/orqped9h4wgz/6cJEgR4ftSGoIaSuKLlek6/a3ce252e07839182be4e7550cd09e08a/Formula-Calculate-APR.png" alt=""/>The steps to calculate APR are:<ol><li>Find the interest charges</li><li>Add the fees</li><li>Divide the sum by the principal balance</li><li>Divide by the number of days in the loan’s term</li><li>Multiply by 365</li><li>Multiply by 100</li></ol><h3>Credit Card APRs</h3>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.Under the Truth in Lending Act, passed in 1968, lenders and other financial institutions must disclose APR when offering credit. <h2>Why is Annual Percentage Rate Important?</h2>Knowing the annual percentage rate helps you understand the true cost of borrowing. 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.<h2>Are There Different Types of APRs?</h2>There are different categories of APRs depending on the type of financial product.<h3>Credit Card APRs</h3>Credit cards have several APRs that may apply to different transactions or account activities.<ul><li>Purchase APR: The rate you pay for purchases. </li><li>Balance transfer APR: The rate applied if you use a card to pay down balances on other credit cards or loans. </li><li>Cash advance APR: The rate charged on ATM withdrawals or cash-equivalent transactions, like money-order purchases. </li><li>Introductory APR: 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.</li><li>Penalty APR: A higher-than-normal rate that results from violating a card’s terms of service. </li></ul><h2>What’s the Difference Between Fixed and Variable APRs?</h2>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. <h3>Adjustable-Rate Mortgages</h3>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. <h2>What Affects APR?</h2>The APR you&#39;re offered depends on a few factors: <ul><li>Whether a loan or line of credit is secured or unsecured</li><li>Current economic conditions</li><li>Your credit history</li></ul>Lenders may also consider your income and assets, down payment, and where you live when determining your APR.<h2>How Do You Get a Good APR?</h2>Getting the best APR on a loan or credit card typically requires shopping around. 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.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. 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.

{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>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.   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. <h2>How Does Accrued Interest Work? </h2>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).  <h2>Accrued Interest on Loans </h2>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. 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. 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.   <h2>Accrued Interest on Bank Accounts </h2>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. 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.  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. 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.   Calculation for daily interest rate: 0.05 / 365 = 0.000136986  Calculation for first day’s interest: 0.000136986 x 10000 = 1.36986  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">annual percentage yield</a>,  is 5.1267%. Compounding interest increases your savings over time, especially in a rising interest rate environment. <h2>Accrued Interest on Bonds </h2>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. Interest on bonds does not compound; that is, you don’t earn interest on your interest. <h2>How Accrued Interest Affects Borrowers </h2>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.   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. 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.  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.  If you want to avoid a growing balance, consider making interest-only payments while you&#39;re still in school. <h2>How Accrued Interest Benefits Savers </h2>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. 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. <h2>How Is Accrued Interest Calculated? </h2>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. 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. <h2>What Is an Example of Accrued Interest?  </h2>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: Calculation for daily interest rate: 0.12 / 365 = 0.000328767123288 Calculation for daily accrued interest: 0.000328767123288 x $20,000 = $6.58   In other words, you&#39;ll have $6.58 in daily accrued interest. Over 30 days, that amounts to $197.40.

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.

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.<h2>What Is a Charge-Off?  </h2>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. <h2>How Does a Charge-Off Work? </h2>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.  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. 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. <h2>Will a Charge-Off Impact Your Credit Score? </h2>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. 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.  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.  <h3>How Can You Repair a Charge-Off? </h3>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. 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.  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.  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. <h3>How Can You Limit Charge-Off Damage? </h3>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. 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. 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.   To contact the credit bureaus:  <ul><li><a href="https://www.equifax.com/personal/credit-report-services/credit-dispute/">Equifax</a> </li><li><a href="https://www.experian.com/contact/personal-services-contacts.html">Experian</a> </li><li><a href="https://www.transunion.com/credit-disputes/dispute-your-credit">TransUnion</a> </li></ul>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.

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

An interest rate that remains the same for a set time, usually for the life of the loan.<h2>What Is a Fixed Interest Rate?</h2>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.<h2>How Do Fixed Interest Rates Work?</h2>When you take out a loan with a fixed interest rate, your loan terms will define the fixed rate period.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.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.<h2>What Is the Difference Between Fixed and Variable Interest Rates?</h2>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.<h3>What Benefits Do Fixed Interest Rates Offer?</h3> Having a fixed rate loan offers several benefits for your finances.<ul><li>Financial Predictability. 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.</li><li>Eliminate Interest Rate Risk. 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.</li><li>Potentially Lower Borrowing Costs. 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.</li></ul><h3>What Are the Drawbacks to Fixed Interest Rates?</h3>While a fixed interest rate can help you plan your finances for the long term, there are a few drawbacks to consider.<ul><li>Potentially Higher Rates. 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.</li><li>Risk in Decreasing Interest Rate Environments. 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.</li><li>Refinancing Costs. 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.</li></ul><h2>What Can You Do to Get a Good Fixed Interest Rate?</h2>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.<h2>Can You Switch from a Variable Interest Rate to a Fixed Interest Rate?</h2>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.<h3>Are Credit Card Interest Rates Fixed?</h3>Generally, credit card interest rates are variable, not fixed.<h3>Are Student Loan Interest Rates Fixed?</h3>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.