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Both a high-yield savings account (HYSA) and a certificate of deposit (CD) outperform a traditional savings account. 

<h2>Quick Answer</h2>Both a high-yield savings account (HYSA) and a certificate of deposit (CD) outperform a traditional savings account. For most savers, the biggest difference is access to your money. A HYSA lets you move money freely at a variable APY; a CD locks your funds for a fixed term in exchange for a guaranteed rate. If there&#39;s any chance you&#39;ll need the money within the term, the HYSA wins. CDs often offer only a modest APY advantage over HYSAs, though the gap varies with market conditions. If you have a defined timeline and genuine certainty about access, a CD offers rate certainty that a HYSA can&#39;t match.<h2>Key Takeaways</h2><ul><li>A HYSA earns a variable rate with no lock-in; a CD earns a fixed rate for a defined term with an early withdrawal penalty. Both outperform a traditional savings account.</li><li>An emergency fund should always be in a HYSA or equivalent liquid account – never a CD.</li><li>Early withdrawal penalties on CDs – typically 3–6 months of interest – can erase the rate advantage over a HYSA if you need the money before maturity.</li><li>The CD&#39;s rate premium over a HYSA is typically less than 0.5% in most rate environments; the liquidity trade-off is often not worth it unless you have genuine timeline certainty.</li><li>Splitting savings between a HYSA (for liquidity) and a CD or CD ladder (for rate certainty on longer-horizon funds) is a practical strategy for savers with both goals.</li></ul>Both products beat a traditional savings account. In many rate environments, their APYs are close enough that the rate difference isn&#39;t the deciding factor – the liquidity trade-off is. A HYSA earns a variable rate you can access anytime. A CD locks in a fixed rate for a set term, with a penalty if you withdraw early. Neither is universally better. Choosing the right account starts with understanding how soon you&#39;ll need your money. One is better for your situation, and the decision usually comes down to three questions.<h2>How a HYSA and a CD actually work</h2>High-yield savings account (HYSA): A savings account that pays a significantly higher APY than a traditional savings account, with no fixed term. Funds can be deposited or withdrawn at any time. The APY is variable – it moves with prevailing interest rates, typically tracking the Federal Reserve&#39;s benchmark rate. For example, Happen Bank&#39;s LevelUp Savings account earns 4.00% APY when $250 or more is deposited per month, with no minimum balance requirement and no monthly fees.1Certificate of deposit (CD): A savings product that pays a fixed APY for a defined term – commonly 3, 6, 12, or 24 months. The rate is locked in at opening and doesn&#39;t change, regardless of what happens to interest rates during the term. The trade-off: withdrawing funds before the term ends typically forfeits 3–6 months of interest, depending on the institution and term length. That&#39;s the <a href="https://www.lendingclub.com/resource-center/personal-savings/cd-early-withdrawal-penalty-what-you-need-to-know">early withdrawal penalty</a> – and it&#39;s worth understanding before you commit.Here&#39;s the comparison at a glance:<table><tr><td></td><td>HYSA</td><td>CD</td></tr><tr><td>APY type</td><td>Variable</td><td>Fixed</td></tr><tr><td>Term</td><td>None</td><td>Defined (6 months–5 years)</td></tr><tr><td>Access</td><td>Anytime</td><td>Locked until maturity without penalty; early withdrawal available, but subject to penalty</td></tr><tr><td>Early withdrawal penalty</td><td>None</td><td>Typically 3–6 months of interest</td></tr><tr><td>Rate certainty</td><td>No</td><td>Yes</td></tr><tr><td>Best for</td><td>Flexible savings; emergency fund</td><td>Defined-timeline savings; rate-lock value</td></tr></table><h2>Three questions that determine which is right for you</h2>1. How soon will you need the money? This is the most important question, and it has a clean answer. If there&#39;s any realistic chance you&#39;ll need the funds within the CD term – for an emergency, a planned purchase, a change in circumstances – a HYSA is the correct choice. Early withdrawal from a CD typically costs 3–6 months of interest, which in most rate environments erases the rate advantage over a HYSA entirely.If the timeline is genuinely defined – you know you won&#39;t need the money for 12–24 months – a CD&#39;s rate lock is worth considering, particularly if you believe rates are headed lower.2. How will interest rates affect you?A HYSA&#39;s variable APY moves with the Fed funds rate. When rates rise, your HYSA earns more. When they fall, it earns less. A CD locks in today&#39;s rate for the full term, regardless of what happens next. This is the genuinely speculative element of the comparison. Future interest rate movements are uncertain. A practical rule of thumb is that if you expect rates to fall during your savings window, a CD offers certainty that a HYSA can&#39;t. If you&#39;re uncertain or you expect rates to hold or rise, the HYSA&#39;s flexibility wins without meaningful cost.3. How easily do you need to access your funds?It is generally recommended to keep emergency savings in a liquid account such as a HYSA rather than a CD. A house down payment you&#39;re saving toward a defined closing date 18 months out is a legitimate CD candidate. The rule is simple: if there&#39;s a meaningful chance you&#39;ll need the money before the term ends, the CD&#39;s rate premium isn&#39;t worth the liquidity cost.<h2>HYSA vs CD – how the numbers compare</h2>Here are two scenarios using the same starting balance:Scenario A: $10,000 for 12 months , funds not needed until maturityHYSA at 4.00% APY: ~$400 earned (variable; this example assumes that the rate holds and the balance remains untouched)312-month CD at 4.50% APY: ~$450 earned (fixed; no access without penalty)Difference: $50 in the CD&#39;s favorThe CD wins by $50 – but only if the rate stays below 4.50% for the HYSA and the full balance remains untouched until maturity. Either condition changing closes that gap.3Scenario B: $10,000 for 12 months, access needed at month 8HYSA at 4.00% APY: ~$267 earned (8 months, proportional, no penalty, assuming the rate holds and the balance is untouched)312-month CD at 4.50% APY, early withdrawal at month 8: ~$338 earned, minus 3-month early withdrawal penalty (~$113) = ~$225 netDifference: $42 in the HYSA&#39;s favor – despite the lower headline rate. This example illustrates why liquidity can outweigh a slightly higher advertised APY. 3The takeaway is that the CD&#39;s rate advantage is real but narrow, and penalties erase it quickly the moment circumstances change. For most savers, a HYSA is the lower-risk default; a CD is the better call only with genuine timeline certainty.If you expect to need access to your funds within the year, or you&#39;re not comfortable locking money away for that long, Happen Bank CDs are also available from 6 months. A shorter term means a lower rate lock-in period and less exposure to early withdrawal penalties if circumstances change. <h2>Which should you open?</h2>Open a HYSA if: you&#39;re building or maintaining an emergency fund, your savings timeline is uncertain or shorter than the shortest CD term you&#39;re comfortable committing to, you plan to make regular deposits or withdrawals, or you simply want the flexibility to access your money without a penalty. Open a CD if: you have a lump sum you genuinely won&#39;t need until a defined future date, you want the certainty of a locked rate in a potentially falling-rate environment, and you&#39;re comfortable with your funds being inaccessible for the term. CD terms at Happen Bank start at 6 months: you don&#39;t need a long horizon to benefit from rate certainty. Consider both if: you have enough saved to separate your money by purpose. Keep 3–6 months of living expenses in a HYSA for liquidity. Place surplus savings with a defined timeline – even as short as 6 months – in a CD or a CD ladder (multiple CDs at staggered maturities) that returns portions of your money at regular intervals while keeping some funds in a locked, higher-rate instrument. <h2>Ready to put your savings to work?</h2>The best savings account is the one that matches your actual timeline and access needs – not the one with the highest headline rate. If flexibility matters, a high-yield savings account earns a competitive return without any commitment. If you have a defined timeline and want rate certainty, a CD delivers that.If you&#39;re looking for flexibility alongside a competitive yield, Happen Bank&#39;s <a href="https://happen.com/personal-banking/savings/high-yield-savings">LevelUp Savings</a> is one option to compare against current CD offerings. LevelUp Savings earns 4.00% APY when $250 or more is deposited per month – no minimum balance, no monthly fees, and no lock-in period. Funds are accessible anytime.1If you have a defined timeline and want rate certainty, Happen Bank&#39;s <a href="https://www.lendingclub.com/personal-banking/savings/certificate-of-deposit">certificates of deposit</a> offer terms from 6 months to 5 years with a $500 minimum opening deposit. 2<h2>Frequently Asked Questions</h2><h3>Is a CD better than a high-yield savings account?</h3>It depends on when you need the money. A CD earns a fixed rate and can offer rate certainty in a falling-rate environment, but accessing funds early typically forfeits 3–6 months of interest, which erases the rate advantage in most scenarios. For savers with a genuinely defined, long-horizon timeline, a CD can come out ahead. For most savers – particularly those building an emergency fund or with uncertain timelines – a HYSA&#39;s flexibility wins without meaningful cost.<h3>What happens if I withdraw from a CD early?</h3>Early withdrawal typically forfeits a portion of the interest you&#39;ve earned – usually 3–6 months&#39; worth, depending on the CD term and the institution. On a 12-month CD, a 3-month penalty at withdrawal month 8 means you keep only 5 months of interest rather than 8.<h3>Can I have both a HYSA and a CD?</h3>Yes, and for many savers with enough saved to separate by purpose, having both makes sense. Keep your emergency fund and near-term savings in a HYSA where they&#39;re accessible anytime. Place surplus savings with a genuine long-term horizon – a house down payment two years out, for example – in a CD or a CD ladder for rate certainty. The two products serve different functions and work well together.<h3>Does Happen Bank offer CDs?</h3>Yes. Happen Bank offers <a href="https://www.lendingclub.com/personal-banking/savings/certificate-of-deposit">certificates of deposit</a> with a minimum opening deposit of $500. Both deposit products are FDIC-insured up to $250,000 per depositor per ownership category. 2, 4

The unsecured personal loan market continues to hit record highs, and despite challenging macroeconomic conditions, shows few signs of slowing down.

Highlights:<ul><li>Personal loans are a growing sub-asset class of consumer credit that offer investors access to a growing $253 billion market.</li><li>Short-duration asset classes, like personal loans, typically offer favorable returns, without the same risk as longer-dated consumer assets, like mortgages.</li><li>The resilience of the unsecured personal loan market makes it an attractive asset class for banks and credit unions looking to diversify their portfolio mix.</li></ul>The unsecured personal loan market continues to hit record highs, and despite challenging macroeconomic conditions, shows few signs of slowing down. According to a May 2025 <a href="https://newsroom.transunion.com/q1-2025-ciir/">TransUnion</a> industry report, the personal loan market hasn’t just rebounded, it’s expanding. New loan originations, new account balances, and total loan balances are all up — quarter after quarter, year over year. As banks and credit unions seek new ways to <a href="https://www.happen.com/resource-center/institutional-investing/how-diversification-builds-resilience-in-banking">diversify their portfolio mix</a>, personal loans as an asset class offer a unique opportunity to invest in shorter-duration loans with high-yields. Let’s take a closer look at what investors need to know about what’s driving sustainable growth in the unsecured personal loan market and benefits this expanding asset class offers institutional investors. <h2>What is the unsecured personal loan market? </h2>As of Q1 2025, unsecured personal loans represent a <a href="https://newsroom.transunion.com/q1-2025-ciir/">$253 billion market</a> with a total of 29.8 million loans. Currently 24.6 million Americans have an unsecured personal loan and carry an average of $11.6K in debt per borrower. <h2>6 trends personal loan market trends for investors to watch</h2>As the personal loan market continues to expand, here’s closer look at six <a href="https://www.transunion.com/content/dam/transunion/global/business/documents/fs2025/q1-ciir-consumer-lending-report.pdf">key trends</a> investors should keep an eye on:<ul><li>Total balances are hitting record highs In Q1 2025, total balances climbed to $253B, but the average individual consumer’s loan balance dropped to $11.6K, about a 2% decrease compared to the prior year. </li></ul>Why this matters for investors: A rise in total balances shows strong growth in the personal loan market overall likely indicates continued resilience despite turbulent economic times. <ul><li>New loan originations are climbing. In Q4 2024, new originations increased for the fourth consecutive quarter, hitting a record 6.3 million — an increase of 26% year-over-year. </li></ul>Why this matters for investors: Growth in new originations may signal strong demand and a healthy market, creating more investment opportunities, better diversification, and scalable volume for recurring purchases or securitizations. <ul><li>New account balances are increasing. Total new account balances grew 17.3% year over year to $33.9 billion in the last quarter of 2024. </li></ul>Why this matters for investors: Rising new account balances might suggest greater borrower capacity and demand, supporting higher loan economics and stronger yield potential.<ul><li>Loan term lengths are falling. The average loan term length in Q4 2024 fell 9.8% from the prior year to just below 28 months. </li></ul>Why this matters for investors: Unlike longer-dated assets, like mortgages, short-duration loans can potentially offer attractive returns in just a few years.<ul><li>Estimated median APRs are increasing. Interest rates continued their upward trajectory for prime and near prime risk tiers in Q4 2024. Rates rose to an average median APR of 21.8%, a 12.4% increase from 2023.</li></ul>Why this matters for investors: Higher APRs can improve gross yields, potentially leading to stronger returns. This is especially true when credit performance remains stable.<ul><li>Delinquency rates are dropping. The overall borrower-level delinquency rate fell to 3.49% in Q1 2025, down from 3.75% in Q1 2024 and up slightly from 3.25% in Q1 2023. Many credit segments are now performing on par with, or better than, 2023 vintages, reflecting stable repayment behavior. </li></ul>Why this matters for investors: Consistently improving delinquency trends suggests that credit conditions are holding steady, which may offer investors greater confidence in cash flow reliability and portfolio resilience.<h2>Key factors promoting growth unsecured personal loans</h2>The <a href="https://www.transunion.com/content/dam/transunion/global/business/documents/fs2025/q1-ciir-consumer-lending-report.pdf%22HYPERLINK%20%22https:/www.transunion.com/content/dam/transunion/global/business/documents/fs2025/q1-ciir-consumer-lending-report.pdf%22%20/">TransUnion market </a><a href="https://www.transunion.com/content/dam/transunion/global/business/documents/fs2025/q1-ciir-consumer-lending-report.pdf">analysis</a> points to <a href="https://newsroom.transunion.com/q1-2025-ciir/%22HYPERLINK%20%22https:/newsroom.transunion.com/q1-2025-ciir/%22%20/">several </a><a href="https://newsroom.transunion.com/q1-2025-ciir/">factors</a> driving the lower delinquency rates in the personal loan market, and in turn, sustained growth for personal loans across all risk tiers: More competition for new originations: Direct mail volume has remained relatively steady since 2023; however online loan inquiry volumes were up ~42% in March 2025 over the prior year. In Q4 2024, fintechs accounted for just over 48% of total new account balances and 34% of new loan originations, accounting for an 8% market share increase over the prior year. Higher loan demand in the lower risk credit tiers. Super prime (FICO 781+) borrowers increased market share by ~2% and below prime risk tiers (FICO 660 and below) also saw significant growth in new loan originations. Total balances for the super prime risk tier saw the most increases, with modest growth in prime plus (FICO 721-780). New advances in lender risk management practices. Despite reduced delinquency rates and less risky borrower classes, lenders still appear to be maintaining cautious exposure. In Q4 2024, average loan originations were just over $6k, and loan terms were shorter for all risk tiers year-over-year — with super prime seeing the biggest decline of 13% year-over-year.<h2>How investors can manage rate risk with personal loans</h2>With <a href="https://www.reuters.com/business/fed-officials-see-two-rate-cuts-2025-overall-turn-hawkish-2025-06-18/?utm_source=chatgpt.com">two Fed cuts</a> still expected later this year, many investors are reassessing interest rate exposure. Personal loans may help manage rate risk by introducing shorter-duration assets into portfolios typically anchored to longer-term, fixed-rate instruments.If rates decline, refinancing activity could support continued growth in personal loan originations. This asset class may also offer diversification benefits and differentiated performance characteristics, though results depend on credit quality and market conditions.<h2>The takeaway</h2>During these times of economic uncertainty, capitalizing on the personal loan market may be a win for both borrowers and investors. Once seen as a last resort for consumers in financial distress, unsecured personal loans are now a go-to option for low-risk borrowers looking to refinance high interest debt. With new originations and balances hitting historic highs, and delinquency rates on a downward trajectory, investing in unsecured loans as an asset class could have a big payoff for investors.

Banks that diversify across customer segments, lending categories, income streams, geographies, and digital platforms are not courting fragility, but insulating themselves against it.

Since the 2008 global financial crisis, the concept of banks diversifying their operations has sometimes been met with skepticism. Critics warned that expanding into new products, sectors, or geographies could make institutions too complex to manage and too interconnected to fail—ultimately increasing systemic risk. As a result, many banks chose to streamline operations and double down on their core competencies.But today’s economic landscape, marked by inflation, geopolitical instability, and technological change, demands a different approach. In this environment, diversification isn’t a liability; it’s a safeguard. Banks that diversify across customer segments, lending categories, income streams, geographies, and digital platforms are not courting fragility, but insulating themselves against it.<h2>What happens when banks lean into diversification</h2>A <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4147790">report from the Wharton School at the University of Pennsylvania</a> highlights how diversification, in its many forms, may enhance a bank’s stability and ability to weather economic shocks.Wharton finance professor Itay Goldstein, along with Michael Gelman (University of Delaware) and Andrew MacKinlay (Virginia Tech), analyzed U.S. bank diversification around the 2008 crisis. Their research found that banks that had already expanded beyond their original geographic and typical lending business boundaries were better positioned to sustain higher levels of lending, reduce risk, and stabilize revenue streams during the downturn.The study, which examined lending trends from 1997 to 2017, <a href="https://www.thebanker.com/content/2030a19f-0c17-5e91-a971-6a033aeccad0">revealed</a> that diversified banks were more resilient and continued lending throughout the crisis. In fact, they were able to sustain higher levels of lending activity during the downturn, especially to small businesses.Small businesses received more than twice as many loans from the most diversified banks compared to the least diversified. These loans played a critical role in helping businesses retain employees and create new jobs in local communities.Interestingly, when diversified banks expanded into new markets or product areas, the broader banking sector didn’t suffer. On the contrary, the overall economic impact was largely positive.<h2>3 strategies to leverage bank diversification</h2>The 2008 crisis proved that diversification can be a powerful tool for stability. As banks navigate today’s uncertainties, these three strategies can help boost lending, minimize risk, and stabilize revenue:<ol><li>Expand into New Business SegmentsDiversifying into non-lending activities—such as insurance, securities, investment banking, and trust services—can strengthen a bank’s ability to lend during economic stress. <a href="https://knowledge.wharton.upenn.edu/article/how-diversification-helps-banks-lend-more-cut-risk-and-boost-the-economy/#:~:text=%E2%80%9CDiversification%20gives%20banks%20more%20stability,not%20always%20been%20viewed%20favorably.">Insurance lines, in particular,</a> have shown strong performance during financial crises.</li><li>Broaden Geographic ReachLending across more counties or states enables banks to maintain higher lending levels during downturns. The most geographically diversified banks <a href="https://knowledge.wharton.upenn.edu/article/how-diversification-helps-banks-lend-more-cut-risk-and-boost-the-economy/#:~:text=%E2%80%9CDiversification%20gives%20banks%20more%20stability,not%20always%20been%20viewed%20favorably.">lent twice as much</a> to small businesses during the 2008 crisis compared to their less diversified peers.</li><li>Invest in Consumer Credit as an Asset Class<a href="https://blogs.cfainstitute.org/investor/2025/01/29/consumer-lending-unlocked-opportunities-and-risks-in-a-27-trillion-market/">Short-duration investments like personal loans</a> offer attractive returns with lower risk than long-dated assets. Allocating capital to non-mortgage consumer credit can help banks diversify their balance sheets and improve resilience.</li></ol><h2>Spotlight: personal loans are a growing asset class</h2>Personal loans are emerging as a compelling sub-asset class within consumer credit, offering access to a <a href="https://newsroom.transunion.com/q4-2024-ciir/">$251 billion market</a>. With shorter durations and higher yields than traditional fixed-income assets, personal loans can deliver strong earnings—even in a high-interest rate environment.While long-duration, lower-yielding assets will remain part of most portfolios, personal loans offer a unique opportunity for banks to diversify and strengthen their investment strategies <a href="https://www.americanbanker.com/news/banks-face-promise-and-peril-with-weakened-bank-regulators">amid regulatory and economic uncertainty</a>.<h2>The takeaway</h2>There’s no crystal ball to predict the future of the economy or the banking sector. But one thing is clear: banks must prepare for turbulence. Once viewed with caution, diversification has proven to be a powerful force for stability.As the Wharton study shows, diversified banks not only weathered the 2008 crisis—they helped fuel recovery. By embracing diversification across lending, geography, and investments, banks can reduce risk, support multiple local economies, and build the resilience needed to thrive in any economic climate.

The typical investment mix of long-term loans and securities may turn out to yield lackluster results. Banks may have another investment option: consumer credit. 

Bank leaders today are navigating a complex list of ever-changing challenges. With a premium on liquidity, commercial real estate under duress, and credit risks shifting across sectors, traditional asset strategies are being re-evaluated — forcing banks to rethink where, and how, they deploy capital. The typical investment mix of long-term loans and securities may turn out to yield lackluster results. Banks may have another investment option: consumer credit. In recent years, <a href="https://blogs.cfainstitute.org/investor/2025/01/29/consumer-lending-unlocked-opportunities-and-risks-in-a-27-trillion-market/">consumer credit</a> has emerged as a viable, but often overlooked investment alternative for banks that want to balance out their long-duration, lower-yielding fixed income portfolios. In particular, personal loans — a growing sub-class within consumer credit — have proven to be a solid investment option for banks, thanks to their short durations, high yields, and solid returns. Some banks choose to build a portfolio of personal loans by offering the product directly; others choose to invest in loan portfolios originated by fintech or other banks. Many banks like working with fintechs to benefit from access to the asset without the added infrastructure.<h2>Understanding personal loans as an asset class</h2><a href="https://blogs.cfainstitute.org/investor/2025/01/29/consumer-lending-unlocked-opportunities-and-risks-in-a-27-trillion-market/">Consumer lending</a> has a market size of $27 trillion (and growing) and is generally categorized into two core groups: property-backed residential mortgages and non-property-backed consumer loans. As an asset class, it offers investors access to a wide range of opportunities that provide exposure to the creditworthiness of consumers – from traditional residential mortgages and personal loans to emerging products, like buy now, pay later (BNPL) loans.This massive growth in consumer lending has largely been fueled by changing consumer behaviors and technology advances.<h2>Four key benefits of personal loans as an asset class</h2>When banks choose to invest in consumer lending, and more specifically the sub-asset class of unsecured personal loans, they can benefit from the following:<h3>1. Quality borrowers</h3>Consumers that take out personal loans are often individuals that are actively looking to improve their financial future. Borrowers are usually in their mid-30s to mid-50s with established credit histories, higher incomes, and relatively solid credit scores. They want to find a way to manage their debt responsibly and generally use personal loans to consolidate high-interest credit card debt. After consolidating debt with a personal loan, borrowers can benefit from one simple payment, fixed terms, and fixed interest rates. Plus, it’s common for their credit scores to increase. Happen Bank, formerly LendingClub, members, for instance, see a credit score increase of 48 points, on average, after consolidating debt with a personal loan.<h3>2. Solid returns banks can count on </h3>Personal loans often have shorter durations (with terms typically ranging from 24- to 72-months) compared to longer-dated asset classes, like mortgages. They also typically offer higher yields (typically approximately 6-8%) with a steady stream of income coming from borrowers who repay their loans. Delinquency rates for personal loans are low and trending downward across all risk tiers. In the last quarter of 2024, TransUnion reported the 60+ days past due delinquency rate dropped to <a href="https://newsroom.transunion.com/q4-2024-ciir/">3.57%</a>, down from 3.90% the previous year.<h3>3. Opportunity for diversification</h3>With their relatively high yields and short durations, personal loans offer banks the chance to diversify their investment portfolios. Long-duration, lower-yielding and traditional fixed income assets will likely continue to be a part of a bank’s investing strategy; adding shorter-duration assets can help balance out a portfolio. <h3>4. A growing asset class</h3>Personal loans as a market segment continue to grow. The latest <a href="https://newsroom.transunion.com/q4-2024-ciir/">quarterly data</a> on the US personal loans segment from TransUnion shows a 15% uptick in originations over the previous year — marking the third consecutive quarter of year-over-year growth. Currently, 23.5 million US consumers have an unsecured personal loan, with total loan balances reaching $251 billion, according to the latest TransUnion figures.<h2>A strong choice in uncertain economic times</h2>In this political and economic climate, <a href="https://www.americanbanker.com/news/banks-face-promise-and-peril-with-weakened-bank-regulators">the banking and lending regulatory landscape faces many unknowns</a>. A changing regulatory and macroeconomic landscape could <a href="https://www.reuters.com/world/us/financial-firms-hated-us-consumer-watchdog-rapid-unraveling-creates-limbo-2025-02-13/">keep the industry in limbo</a> for months to come. During times of unpredictability, it can be hard for investors to evaluate and make longer-dated investments. Short duration investments can provide compelling returns with a shorter time horizon. <h2>What to consider when investing in personal loans</h2>When <a href="https://blogs.cfainstitute.org/investor/2025/01/29/consumer-lending-unlocked-opportunities-and-risks-in-a-27-trillion-market/">investing in personal</a> loans, investors can choose from a range of structures with different risk and return profiles. For instance, Happen Bank offers investors the flexibility to purchase loans on a passive or active basis, in bulk or as individual loans. Loans can also be purchased as whole loans or in security format.Before investing in personal loans, banks should determine their objectives and where they want to play on the risk-return spectrum. They should also determine the best provider to work with—ideally one with deep experience in the space and a track record of delivering compelling returns. <h2>The bottom line</h2>With heightened uncertainty as multiple economic forces put pressure on banks’ balance sheets, U.S. banks would do well to look to new options. Despite the macro headwinds facing U.S. banks — tighter monetary policy, commercial real estate stress, and deposit volatility — personal loans stand out as a resilient asset class.Amid falling valuations in fixed-income securities and rising credit risk in commercial real estate and corporate lending, personal loans offer a diversified, high-yielding, and risk-adjusted opportunity that aligns with the ever-evolving needs of banks.

Budgeting is a lifelong money management skill that can help you control your spending, save for the unexpected, and build a strong financial foundation. 

Using a budget is a key part of being financially responsible. Understanding how budgets work and putting even the most basic budgeting techniques into practice can help you set a firm financial foundation and meet your future financial goals. Here&#39;s what you need to know about budgeting and why it plays an important role in your financial well-being.[1] <h2>Why is budgeting so important? </h2>The idea of setting up and using a budget may seem daunting—especially if you&#39;ve never had a budget before. It&#39;s important to remember that budgets are simply tools that can help you get where you want to be financially. No matter what life stage you&#39;re in, a budget can help you manage your everyday expenses, build your savings, pay down your debt, and plan for future goals like retirement.[1] Here are some key reasons why budgets are so important.  <h3>1. Budgeting helps keep you honest about where (and how often) you&#39;re spending money </h3>Budgets shine a spotlight on your spending habits—the good, the bad, and the ugly. This is likely the reason many people put off making a budget to begin with. However, having a clear outline of how much money you have coming in and going out each month can help you make smarter financial decisions.  When you take a hard look at your income, expenses, and financial goals, you&#39;ll be better able to see where you need to cut back. Plus, you may even find that you have some extra cash to put toward a short-term goal, like building up your emergency fund or paying down debt. You could even start saving for a dream vacation. Creating fun savings goals is one way to help you <a href="https://www.happen.com/resource-center/personal-finance/sticking-to-a-budget-common-problems-and-solutions">stick to your budget</a>.[1] <h3>2. Budgeting curbs overspending  </h3>If you have a tendency to overspend, a budget can help you make sure essentials are covered before you spend on extras. While enjoying a meal out or shopping online are often well-deserved treats, the costs of these extras can add up quickly. Creating a budget can help you identify your needs, wants, and goals, so you can allocate how you spend and save your cash accordingly.  While you may not need to cut out discretionary spending entirely, a budget helps set guardrails to keep overspending in check. For example, if you find you&#39;re spending too much on takeout, consider cutting back to one night of food delivery a week. Then you can put the cash you save toward another goal, like <a href="https://www.happen.com/resource-center/personal-finance/what-is-the-debt-avalanche-method-and-how-does-it-work">paying down debt</a>.[1]  <h3>3. It can help you reach your personal financial goals </h3>Everyone&#39;s financial goals are a bit different depending on your individual financial values, lifestyle, spending habits, and other factors. However, no matter what your personal financial goals may be, a budget can help you meet them.For example, let&#39;s say your goal is to build an emergency fund of $1,200 over the next year. You can then use your budget to allocate $100 a month into a high-yield savings account. If cash is tight, a budget can also help you figure out where you need to cut back on other expenses to make this goal happen. At the end of the 12 months, you may be able to celebrate reaching your goal and you may consider adjusting your budget to continue building your savings or set a new goal.[1]  <h3>4. Budgets help get you (and keep you) out of debt </h3>It&#39;s easy to rack up debt—especially if you have lots of high-interest credit cards or don&#39;t watch your spending carefully. By tracking your expenses carefully and setting specific goals each month, you can not only avoid reckless spending, but you may be able to pay down your debt faster.  If you find you&#39;re having trouble paying off your credit cards each month or struggling to keep up with different accounts, a <a href="https://www.happen.com/personal-loan/debt-consolidation">debt consolidation loan</a> could help. This type of loan rolls debt into one easy-to-manage monthly payment you can build into your budget, making it easier to stay on top of your debt. <h2>Types of budgeting that can help level-up your finances </h2>There is no one-size-fits-all approach to budgeting, and the type of budget you use can change over time. The most important thing when choosing a budget type is to find what works best for your money habits, spending needs, and savings goals.   <h3>Here are a few common types of budgeting strategies   </h3><ul><li>Zero-based budget: With this method, your take-home pay minus your expenses should equal zero each month. So if you bring home $5,000, then you&#39;ll allocate every dollar into some type of category like rent, groceries, utilities, transportation, and discretionary spending. It&#39;s important to include financial goals, like paying down debt and building your savings, in those categories, too.[2]  </li><li>50/30/20 budget: This approach involves dedicating 50% of your income to necessities like housing and food, 30% on discretionary expenses (like entertainment and personal-care items), and 20% on your financial goals, such as savings and retirement. This general rule of thumb may be easier to follow when setting your budget.[3]  </li><li>Pay yourself first budget: This budgeting strategy makes saving the top priority. To start, you&#39;ll need to set a monthly savings goal. Then, with each paycheck, set those funds aside to essentially &quot;pay yourself.&quot; After that, you can spend your remaining money however you choose. Just be sure you&#39;re still covering your essentials and paying down debt, so you don&#39;t get behind on your bills or take a hit to your credit.[4] </li></ul><h2>The bottom line </h2>Budgeting is a money management skill that&#39;s important to building both short- and long-term financial success. Although creating a budget may feel intimidating at first, once you get started you may find it enlightening. Setting goals and milestones to celebrate along the way can help you stick to your budget. Remember, it&#39;s OK for your budget to fluctuate over time as your income, spending habits, and needs change.[5]  <hr/>    <ol><li><a href="https://www.consumerfinance.gov/about-us/blog/budgeting-how-to-create-a-budget-and-stick-with-it/">Consumer Financial Protection Bureau</a>. “Budgeting: How to create a budget and stick with it.” </li><li><a href="https://www.incharge.org/financial-literacy/budgeting-saving/zero-based-budgeting/">InCharge Debt Solutions</a>. “Zero-based budgeting.” </li><li><a href="https://files.consumerfinance.gov/f/documents/cfpb_worksheet_my-spending-rule-to-live-by.pdf">Consumer Financial Protection Bureau</a>. “My spending rule to live by.” </li><li><a href="https://studentaid.gov/resources/prepare-for-college/students/budgeting/budgeting-tips">Federal Student Aid</a>. “Budgeting tips.” </li><li><a href="https://consumer.gov/managing-your-money/making-budget#what-to-know">Consumer.gov</a>. “Making a Budget.” </li></ol>

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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 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.

{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.

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.