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The best personal loan rate in 2026 isn't the one with the lowest advertised interest rate: it's the one with the lowest APR, which includes additional finance charges. APR (Annual Percentage Rate) is the only apples-to-apples comparison figure because it includes both the interest rate and any origination fee. 

Key TakeawaysAPR is the only valid comparison figure when evaluating personal loan offers. It includes the interest rate plus certain fees, such as the origination fee and processing fees. Comparing a stated interest rate from one lender to an APR from another produces a misleading result.Checking your rate with Happen Bank has no impact on your credit score4. A hard credit inquiry only appears on your report when a loan is issued to you.Happen Bank&#39;s Direct Pay feature reduces APR by 0.75%–8% for qualifying borrowers who route funds directly to eligible creditors.5Happen Personal Loan rates start as low as 6.53% APR, with no prepayment penalty and terms up to 84 months.2What makes a personal loan rate &quot;good&quot; in 2026?Three numbers determine what you actually pay: the interest rate, the origination fee, and the APR. APR combines interest rate plus certain fees, such as origination fees or processing fees. Two loans with the same APR can still cost different amounts in total interest if the terms differ. Here&#39;s what each component means. <a href="https://www.happen.com/glossary/a/annual-percentage-rate-apr">APR (Annual Percentage Rate)</a> includes the interest rate plus any finance charges, specifically the origination fee, annualized into a single figure. APR is always equal to or higher than the interest rate. When you&#39;re comparing offers, compare APR to APR. Comparing an interest rate from one lender to an APR from another hands one lender an artificial advantage.Interest rate is the annual cost of borrowing the principal, expressed as a percentage. It does not include fees, which is exactly why it&#39;s the number most prominently displayed.Origination fee is a one-time processing charge, typically deducted from the loan amount at disbursement rather than paid upfront. For instance, on a $30,000 loan with a 6% origination fee, you receive $28,200. As it&#39;s already baked into the APR, APR remains the right comparison figure.What counts as a good rate depends on your credit profile. Here&#39;s a general benchmark by credit tier:<table><tr><td>Credit score range</td><td>Typical personal loan APR</td></tr><tr><td>720-850 (Excellent)</td><td>14.52%</td></tr><tr><td>690-719 (Good)</td><td>18.82%</td></tr><tr><td>630-689 (Fair)</td><td>22.67%</td></tr><tr><td>300-629</td><td>26.10%</td></tr></table>Averages based on aggregate pre-qualification data from NerdWallet users as of July 1, 2026. Your actual rate will vary based on lender, loan amount, term, and credit profile. Source: https://www.nerdwallet.com/personal-loans/learn/average-personal-loan-rates<h2>How to compare loan offers the right way</h2>Once you understand what drives APR, applying it to a real comparison is straightforward. Before choosing a lender, use this four-step framework to compare offers: 1. Calculate total repayment, not just monthly payment. A lower monthly payment often means a longer term and more interest paid overall. Multiply the monthly payment by the number of months to see your true cost.2. Back out the origination fee from the disbursed amount. If you need $25,000 in hand and a lender charges a 6% origination fee, you&#39;ll need to borrow closer to $26,595. This changes your monthly payment and your total cost.3. Match funding speed to your actual need. A marginally lower APR that takes two weeks to fund may not suit a time-sensitive situation. Check each lender&#39;s typical disbursement timeline, and whether same-day or next-day options exist.4. Check for a Direct Pay option if you&#39;re consolidating debt. Rather than receiving loan funds and paying creditors yourself, Direct Pay routes the money directly to your named creditors at origination. With Happen Bank, qualifying borrowers receive an APR discount of 0.75% to 8% for using it.5<h2>Best personal loan rates in 2026</h2>The table below compares key features, including APR ranges, fees, loan amounts, and funding speed, to help you identify the lender that best fits your needs.<table><tr><td>Lender</td><td>APR range</td><td>Loan amounts</td><td>Origination fee</td><td>Funding speed</td></tr><tr><td>Happen Bank</td><td>5.96%– 35.99%</td><td>$1,000–$75,000</td><td>0%–8%</td><td>Funding in as little as 24 hrs7</td></tr><tr><td>SoFi</td><td>6.99%–35.49% </td><td>$5,000–$100,000</td><td>0–7%</td><td>Same-day fund transfer available</td></tr><tr><td>Upstart</td><td>6.20%– 35.99%</td><td>$1,000–$75,000</td><td>0%–12%</td><td>Same-day fund transfer available</td></tr><tr><td>Upgrade</td><td>7.74%–35.99% </td><td>$1,000–$50,000</td><td>1.85%–9.99%</td><td>Same-day fund transfer available</td></tr><tr><td>Prosper</td><td>8.99%– 35.99%</td><td>$2,000–$50,000</td><td>1%–9.99%</td><td>May receive funds in 1 business day</td></tr><tr><td>Best Egg</td><td>6.99%– 35.99%</td><td>$2,000–$50,000</td><td>0.99%–9.99%</td><td>May receive funds within 1–3 business days</td></tr><tr><td>Rocket Loans</td><td>7.99%– 29.99%</td><td>$2,000–$75,000</td><td>3.23%–9.99%</td><td>Same-day fund transfer available</td></tr></table>Rates updated as of 7th July, 2026. Rates are subject to change and eligibility requirements apply. Always verify current terms directly with each lender before applying. See references for further details.<h2>What affects your personal loan rate?</h2>While every lender weighs applications differently, these factors generally have the biggest influence on the rate you may receive: <a href="https://www.happen.com/glossary/c/credit-score">Credit score</a> is the single largest driver. The gap between a 680 and a 720 can mean several percentage points of APR: sometimes the difference between a rate that saves you money and one that doesn&#39;t. If you haven&#39;t checked yours lately, <a href="https://www.happen.com/resource-center/personal-finance/how-to-read-your-credit-report-identify-red-flags">reading your credit report</a> and identifying potential red flags is a good starting point.<a href="https://www.happen.com/glossary/d/debt-to-income-dti-ratio">Debt-to-income ratio (DTI)</a> measures your total monthly debt obligations against your gross monthly income. Most lenders want this to be below 40%. Paying down revolving balances before applying can improve your DTI and your offer.Loan amount and term both affect pricing. Generally, choosing a longer repayment term means you&#39;ll pay more interest over the life of the loan. If you can afford higher monthly payments, you&#39;ll typically pay less in total interest. Credit history length matters to lenders assessing repayment consistency. A longer track record of on-time payments tends to produce better offers across the board.Loan purpose can also shift your interest rate or APR. Some lenders adjust pricing based on how loan funds are used.<h2>How to get the best rate before you apply</h2>Check your credit report for errors first. Inaccuracies can cost you several percentage points of APR, and disputing them is free. Start at <a href="https://www.annualcreditreport.com/">AnnualCreditReport.com</a>.Pay down revolving balances.<a href="https://www.happen.com/resource-center/personal-finance/what-is-credit-utilization-and-how-to-improve-it"> Credit utilization</a>, the share of available credit you&#39;re using, responds faster than almost any other factor. Getting below <a href="https://www.experian.com/blogs/ask-experian/credit-education/score-basics/credit-utilization-rate/">30%</a> , a threshold most experts recommend, can move your credit score within a single billing cycle.Pre-qualify with multiple lenders using soft pulls. Pre-qualification generally has no impact on your credit score. Comparing offers from three or four lenders before committing takes less time than most people expect and can be worth hundreds of dollars over the life of the loan.Choose the shortest term you can comfortably afford. If you think you might pay ahead of schedule, look for a lender that doesn&#39;t charge a prepayment penalty.Consider Direct Pay if you&#39;re consolidating credit card or other debt. Routing loan funds to creditors directly through Happen Bank qualifies eligible borrowers for an APR discount of 0.75%– 8% at origination.5 <h2>Ready to find your rate?</h2>The right personal loan comes down to more than the headline APR: it&#39;s the combination of rate, fees, funding speed, and whether the lender&#39;s structure actually fits what you&#39;re trying to do. Before committing, it&#39;s worth checking independent sources: platforms like <a href="https://www.nerdwallet.com/personal-loans/reviews/lendingclub-personal-loans">NerdWallet</a> and <a href="https://www.trustpilot.com/review/happen.com">Trustpilot</a> give you a view of real borrower experience that no lender&#39;s own marketing can substitute. Happen Bank has earned a 4.8/5 rating from over 13,800 Trustpilot reviews8. Additionally, NerdWallet named Happen Bank the 2026 Best Personal Loan for Debt Consolidation, its second consecutive year winning the award. If you&#39;d like to compare your options, the next step is to <a href="https://happen.com/personal-loan">check your rate</a>. It takes seconds and doesn&#39;t impact your credit score. Frequently Asked Questions<h3>What is a good interest rate on a personal loan in 2026?</h3>A competitive personal loan APR in 2026 averages around <a href="14.54%25">14.54%</a> for borrowers with excellent credit (720+ FICO). For context, the<a href="https://www.federalreserve.gov/releases/g19/current/"> average credit card finance rate is </a><a href="https://www.federalreserve.gov/releases/g19/current/">21.39%</a> 1. Any fixed personal loan APR meaningfully below that figure represents a genuine cost reduction for someone carrying credit card balances. Your actual rate depends on your creditworthiness, including but not limited to credit score, DTI, loan amount, and the lender&#39;s credit criteria.<h3>What is the difference between APR and interest rate on a personal loan?</h3>The interest rate is the annual cost of borrowing the principal, expressed as a percentage. APR includes the interest rate plus any finance charges, most importantly the origination fee, annualized into a single figure. APR is always equal to or higher than the interest rate. When comparing offers, compare APR to APR.<h3>Does pre-qualifying affect my credit score?</h3>No. Pre-qualification generally uses a soft credit inquiry, which has no impact on your score. A <a href="https://www.happen.com/glossary/h/hard-credit-inquiry">hard credit inquiry</a> (https://www.happen.com/glossary/h/hard-credit-inquiry) only appears on your report when a loan is issued to you: not at application submission, and not during pre-qualification. If you decide to move forward with a loan after reviewing your offer, a hard credit inquiry may be required. <h3>Can I get a lower rate by paying off debt directly?</h3>Yes, with Happen Bank&#39;s Direct Pay. Loan funds go directly to your named creditors, and qualifying borrowers receive an APR discount of 0.75% to 8% at origination. Borrowers who consolidated 51% or more of qualifying debt using Direct Pay saw an average FICO score increase of 35 points within the first three months. 14<h2>Related Terms</h2><a href="https://www.happen.com/glossary/a/annual-percentage-rate-apr">Annual Percentage Rate (APR)</a><a href="https://www.happen.com/glossary/c/consolidation-loan">Consolidation Loan</a><a href="https://www.happen.com/glossary/c/credit-score">Credit Score</a><a href="https://www.happen.com/glossary/d/debt-to-income-dti-ratio">Debt-to-Income (DTI) Ratio</a><a href="https://www.happen.com/glossary/f/fixed-interest-rate">Fixed Interest Rate</a><a href="https://www.happen.com/glossary/h/hard-credit-inquiry">Hard Credit Inquiry</a><a href="https://www.happen.com/glossary/r/revolving-credit">Revolving Credit</a><h2>Disclosures</h2>All loans are subject to credit approval. Actual APR, loan amount, and terms depend on creditworthiness and other underwriting factors. Rates are subject to change. Not all applicants qualify for the lowest advertised APR or fastest funding.Happen Bank and its affiliates (collectively, &quot;Happen Bank&quot;) do not offer legal, financial, or other professional advice. The content on this page is for informational or advertising purposes only and is not a substitute for individualized professional advice. Happen Bank is not affiliated with or making any representation as to the company(ies), services, and/or products referenced. Happen Bank is not responsible for the content of third-party website(s), and links to those sites should not be viewed as an endorsement. By clicking links to third-party website(s), users are leaving Happen Bank’s website. Happen Bank does not represent any third party, including any website user, who enters into a transaction as a result of visiting a third-party website. Privacy and security policies of third-party websites may differ from those of the Happen Bank website.<ol><li>Between April 2026 and June 2026, on average, the APR for a Happen Personal Loan was 18.40% with an origination fee of 6% and a principal amount of $15,262 for loans with term lengths of 36 months, based on current credit criteria and an analysis of historical borrower data. Between January 2026 and March 2026, the average APR for credit cards was 21.00%, according to publicly available information published by Federal Reserve <a href="https://www.federalreserve.gov/releases/g19/current/">https://www.federalreserve.gov/releases/g19/current/.</a>If a borrower pays off a credit card balance of $14,346 with an APR of 21.00% over 36 equal monthly payments, the borrower will pay $5,112 in total finance charges. If the borrower obtains a Personal Loan with a term of 36 months and an amount financed of $14,346 (principal amount of $15,262 with an origination fee of $916) at 18.40% APR, the borrower’s monthly payment will be $522 and the borrower will pay $4,429 in total finance charges over the term of the loan, a savings of $682 as compared to the average credit card finance charges over the same 36-month term for Happen Personal Loan borrowers with average credit scores.</li><li>For Personal Loans, APR ranges from 5.96% APR to 35.99% APR and origination/processing fees range from 0.00% to 8.00% of the loan amount. APRs and origination/processing fees are determined at the time of application. The lowest APR may be available to borrowers with excellent credit, subject to additional factors including, but not limited to, loan amount, loan term, and sufficient investor commitment. Advertised rates and fees are valid as of 06/01/2026, are subject to change without notice, and may not be available for all Personal Loan products and/or through all application channels or platforms. A representative example of payment terms for a Personal Loan is as follows: a borrower receives a loan of $19,658 for a term of 36 months, with an interest rate of 13.24% and a 6.00% origination fee of $1,179 for an APR of 17.63%. In this example, the borrower will receive $18,479 and will make 36 monthly payments of $665. Loan amounts range from $1,000 to $75,000 and loan term lengths range from 24 months to 84 months. Some amounts, rates, and term lengths may be unavailable in certain states.</li><li>Between 1/1/2026 and 1/31/2026, 68% of Happen Bank Personal Loans offers were generated in under a minute from the beginning of the application process. </li><li>Checking a rate through us generates a soft inquiry on a person’s credit report, which does not impact that person’s credit score. A hard credit inquiry, which may affect that person’s credit score, only appears on the person’s credit report if and when a loan is issued to the person.</li><li>The APR discounted rate is a discount that some customers may receive for taking out a loan to pay down existing qualifying debt paid directly by Happen Bank; such rate is discounted from the rate given for taking a full cash loan. Not all applicants will qualify for the discount. Any actual discount rate will be determined at the time of application. The best APR discounts may be available to borrowers with excellent credit. Advertised discounted rates are subject to change without notice.</li><li>Between January 2026 and March 2026, 64% of Happen Bank Personal Loans that were approved for funding (which is after your loan application is approved) on a given business day were disbursed within 24 hours. Happen Bank Personal Loans that are approved for funding before 12:30 PM ET on a business day may be disbursed the same day. Actual availability of funds may vary and is dependent on multiple factors, including, but not limited to, your receiving bank’s processing times and policies. A business day is defi ned as Monday through Friday and excludes the weekend and bank holidays</li><li>Based on reviews collected by Trustpilot. All such reviews can be accessed at trustpilot.com/review/happen.com. This is one person&#39;s experience. Individual results may vary.</li><li>Between January 2025 and March 2025, borrowers who used LendingClub&#39;s Direct Pay to refinance 51% or more of qualifying debt within the first three months saw an average FICO score increase of 35 points. Reducing debt and maintaining low credit balances may contribute to an improvement in credit score, but results are not guaranteed by Happen Bank. Individual results vary based on multiple factors including but not limited to payment history and credit utilization. </li></ol><h2>References</h2><ol><li>https://www.federalreserve.gov/releases/g19/current/</li><li>https://www.supermoney.com/reviews/personal-loans/upstart-personal-loans</li><li>https://www.consumerfinance.gov/consumer-tools/personal-loans/</li><li>https://www.sofi.com/personal-loans/</li><li>https://www.upstart.com/</li><li>https://www.upgrade.com/</li><li>https://www.prosper.com/</li><li>https://www.bestegg.com/</li><li>https://www.rocketloans.com/</li><li>https://www.nerdwallet.com/personal-loans/learn/average-personal-loan-rates</li><li>https://www.experian.com/blogs/ask-experian/credit-education/score-basics/credit-utilization-rate/</li></ol>

A credit card consolidation loan replaces multiple high-interest card balances with a single fixed-rate personal loan – one monthly payment, one interest rate, and a defined payoff date. For borrowers carrying balances at 21.39% APR or higher, the interest savings are often substantial1. The math works for the same term when your consolidation loan APR is lower than your current weighted average card APR and the fixed monthly payment fits your budget.

<h2>What is a credit card consolidation loan, and how does it work?</h2>A fixed-rate credit card consolidation loan pays off your card balances, replacing revolving debt – which has no defined end date and compounds interest on whatever you carry – with an installment loan that has a fixed rate, fixed monthly payment, and a set payoff date.There are two ways the funds get to your creditors. With a credit card consolidation loan, the money is deposited into your account and you pay each card directly. With Happen Bank&#39;s Direct Pay, the funds go straight to your named creditors at origination.How Direct Pay works: Rather than receiving the loan funds yourself, you designate the qualifying creditors and balances at application. Happen Bank pays them directly. Qualifying borrowers receive an APR discount of 0.75% to 8%3 for using Direct Pay. This also removes the temptation or risk of redirecting the funds.There&#39;s a credit score dimension worth understanding too. Paying off revolving balances reduces your credit utilization – typically the fastest-moving factor in a credit score – and adding an installment loan <a href="https://www.myfico.com/credit-education/credit-scores/credit-mix">diversifies</a> your credit mix. Direct Pay borrowers from Happen Bank who consolidated at least 51% of their qualifying debt saw an average FICO score increase of 35 points within three months.5 <h2>Consolidation loan vs. your other options</h2>A credit card consolidation loan isn&#39;t the only option available. Here&#39;s how the main options compare:<table><tr><td>Method</td><td>APR</td><td>Fixed or Variable APR</td><td>Collateral</td><td>Key consideration</td></tr><tr><td>Credit card consolidation loan (Happen Bank)</td><td>6.53%–35.99% APR6</td><td>Fixed</td><td>None</td><td>Direct Pay discount; defined payoff date</td></tr><tr><td>Balance transfer card</td><td>0% intro, then 18–28% (Source: https://www.bankrate.com/credit-cards/balance-transfer/best-balance-transfer-cards/)</td><td>Variable after promo ends</td><td>None</td><td>Promo cliff risk; requires good credit</td></tr><tr><td>HELOC</td><td>Variable, often lower at first, then changes with market conditions</td><td>Variable</td><td>Your home</td><td>Approval takes weeks; home at risk</td></tr><tr><td>HELOAN or Home Equity Loan</td><td>Fixed, often slightly higher than variable rate.</td><td>Fixed</td><td>Your home</td><td>Requires equity; home at risk</td></tr><tr><td>Debt Management Plan</td><td>Reduced interest via negotiation</td><td>Varies</td><td>None</td><td>Best for borrowers struggling to pay</td></tr></table>If your 0% intro APR has expired and your card APR has jumped, a personal loan replaces that variable rate with a fixed one that doesn&#39;t change for the life of the loan. And unlike a HELOC or home equity loan, a personal loan is unsecured: your home is not on the line. <h2>Should you consolidate? Run the numbers first</h2>Consolidation makes sense for most borrowers carrying high-interest card balances, but the numbers have to work. Here are four questions you should reflect on:1. Is your consolidation loan APR lower than your current weighted average card APR? This is the non-negotiable. If your loan APR is higher than your average card APR, consolidation costs you money. The<a href="%20average%20credit%20card%20APR%20is%2021.39%25"> average credit card APR is 21.39%</a>1 as of Q1 2026; any fixed personal loan APR meaningfully below that represents real savings for a consolidation borrower.2. Can you comfortably afford the fixed monthly payment? A shorter term reduces total interest but raises the monthly payment. Run both scenarios and choose the term that&#39;s genuinely manageable, not optimistically tight.3. Should you close the cards after consolidating? Closing multiple cards at once can temporarily reduce your available credit and hurt your credit score. Leaving them open at zero balance is generally better for <a href="https://www.happen.com/resource-center/personal-finance/what-is-credit-utilization-and-how-to-improve-it">credit utilization</a> (https://www.happen.com/resource-center/personal-finance/what-is-credit-utilization-and-how-to-improve-it). Here&#39;s a simple decision frame:Consolidation likely makes sense if: you&#39;re carrying balances at <a href="21.39%25">21.39%</a>1 (https://www.federalreserve.gov/releases/g19/current/) APR across multiple cards, your utilization is high, and you want a defined payoff date with a predictable payment.It&#39;s worth a closer look if: your balances are small (under $3,000) and origination fees may erode the savings, or your credit score is low enough that your consolidation loan rate won&#39;t be much better than your card APR.Another option may be better if: you have significant home equity and time for a HELOC approval process, or you&#39;re carrying a balance you can realistically clear within a 0% intro APR window.<h2>How to get a credit card consolidation loan with Happen Bank</h2>Here are four quick steps to get a <a href="https://www.happen.com/personal-loan/debt-consolidation">credit card consolidation loan</a> with Happen Bank.1. Check your rate. You can check your rate and get real personalized offers in seconds8: there is no hard credit pull until the loan is funded2.2. Choose Direct Pay. Select the creditors and balances you want paid directly. Qualifying borrowers receive an APR discount of 0.75% to 8% at origination.33. Submit your full application. Confirm the loan amount, term, purpose and any other details.4. Funds are disbursed. With Direct Pay, Happen Bank pays your creditors directly. For eligible loans approved before 12:30 PM ET on a business day, same-day disbursement may be available.7 Loan amounts are available in the range of $1,000 to $75,000.<h2>Ready to see your numbers?</h2>Credit card debt is expensive by design: revolving balances, variable rates, and minimum payments that barely touch the principal. A consolidation loan doesn&#39;t change what you owe. It changes the terms on which you&#39;re paying it back: one fixed rate, one monthly payment, and a date when it&#39;s done.Whether that trade makes sense comes down to one number: your loan APR versus your weighted average card APR. Pre-qualification generally is a soft pull2, takes seconds8, and shows you exactly where you stand.<h2>Frequently Asked Questions</h2><h3>What credit score do I need for a credit card consolidation loan?</h3>There is no single minimum credit score that can be defined. Your credit score is one of several factors lenders evaluate alongside your debt-to-income ratio, loan amount, and credit history. Generally, borrowers with scores above 680 tend to qualify for more competitive APRs. <h3>Does consolidating credit cards hurt your credit score?</h3>The effect of consolidating credit card debt is typically positive: paying off revolving card balances reduces your credit utilization – which accounts for roughly <a href="https://www.myfico.com/credit-education/whats-in-your-credit-score">30% of a FICO score</a> (https://www.myfico.com/credit-education/whats-in-your-credit-score)– and on-time loan payments build a positive payment history.<h3>Is a consolidation loan better than a balance transfer credit card?</h3>For most borrowers, yes – particularly if the balance can&#39;t be paid off within a 0% intro APR window (typically 12–21 months). A balance transfer credit card offers a lower initial cost but reverts to a high variable rate at the end of the promotional period. A consolidation loan&#39;s fixed rate applies for the full term, with no promotional cliff. For borrowers with excellent credit and a realistic payoff plan within the promo window, a balance transfer credit card can be cheaper. For everyone else, the fixed-rate certainty of a consolidation loan is usually the better trade.<h3>What is Direct Pay and how does it help?</h3>Direct Pay is Happen Bank&#39;s feature that routes loan funds directly to your named creditors at loan origination – rather than depositing money into your account for you to pay cards yourself. Qualifying borrowers receive an APR discount of 0.75% to 8% applied at origination, and the direct-payment structure removes any risk of the funds being spent elsewhere.3 It is available for debt consolidation loans and is worth selecting if you&#39;re consolidating card balances.<h2>Related Terms</h2><a href="https://www.happen.com/glossary/a/annual-percentage-rate-apr">Annual Percentage Rate (APR)</a><a href="https://www.happen.com/glossary/c/consolidation-loan">Consolidation Loan</a><a href="https://www.happen.com/glossary/c/credit-score">Credit Score</a><a href="https://www.happen.com/glossary/d/debt-to-income-dti-ratio">Debt-to-Income (DTI) Ratio</a><a href="https://www.happen.com/glossary/f/fixed-interest-rate">Fixed Interest Rate</a><a href="https://www.happen.com/glossary/h/hard-credit-inquiry">Hard Credit Inquiry</a><a href="https://www.happen.com/glossary/r/revolving-credit">Revolving Credit</a>All loans are subject to credit approval. Actual APR, loan amount, and terms depend on creditworthiness and other underwriting factors. Rates are subject to change. Not all applicants qualify for the lowest advertised APR or fastest funding.Happen Bank and its affiliates (collectively, &quot;Happen Bank&quot;) do not offer legal, financial, or other professional advice. The content on this page is for informational or advertising purposes only and is not a substitute for individualized professional advice. Happen Bank is not affiliated with or making any representation as to the company(ies), services, and/or products referenced. Happen Bank is not responsible for the content of third-party website(s), and links to those sites should not be viewed as an endorsement. By clicking links to third-party website(s), users are leaving Happen Bank’s website. Happen Bank does not represent any third party, including any website user, who enters into a transaction as a result of visiting a third-party website. Privacy and security policies of third-party websites may differ from those of the Happen Bank website.<ol><li>Between April 2026 and June 2026, on average, the APR for a Happen Personal Loan was 18.40% with an origination fee of 6% and a principal amount of $15,262 for loans with term lengths of 36 months, based on current credit criteria and an analysis of historical borrower data. Between January 2026 and March 2026, the average APR for credit cards was 21.00%, according to publicly available information published by Federal Reserve <a href="https://www.federalreserve.gov/releases/g19/current/">https://www.federalreserve.gov/releases/g19/current/.</a> If a borrower pays off a credit card balance of $14,346 with an APR of 21.00% over 36 equal monthly payments, the borrower will pay $5,112 in total finance charges. If the borrower obtains a Personal Loan with a term of 36 months and an amount financed of $14,346 (principal amount of $15,262 with an origination fee of $916) at 18.40% APR, the borrower’s monthly payment will be $522 and the borrower will pay $4,429 in total finance charges over the term of the loan, a savings of $682 as compared to the average credit card finance charges over the same 36-month term for Happen Personal Loan borrowers with average credit scores.</li><li>Checking a rate through us generates a soft inquiry on a person’s credit report, which does not impact that person’s credit score. A hard credit inquiry, which may affect that person’s credit score, only appears on the person’s credit report if and when a loan is issued to the person.</li><li>The APR discounted rate is a discount that some customers may receive for taking out a loan to pay down existing qualifying debt paid directly by Happen Bank; such rate is discounted from the rate given for taking a full cash loan. Not all applicants will qualify for the discount. Any actual discount rate will be determined at the time of application. The best APR discounts may be available to borrowers with excellent credit. Advertised discounted rates are subject to change without notice.</li><li>Based on NerdWallet&#39;s 2026 Best-Of Awards, announced January 7, 2026. Full award criteria and methodology can be accessed at nerdwallet.com/l/awards-personal-loans-2026. NerdWallet&#39;s ratings are determined independently. </li><li>Between January 2025 and March 2025, borrowers who used Happen Bank Direct Pay to refinance 51% or more of qualifying debt within the first three months saw an average FICO score increase of 35 points. Reducing debt and maintaining low credit balances may contribute to an improvement in credit score, but results are not guaranteed by Happen Bank. Individual results vary based on multiple factors including but not limited to payment history and credit utilization. </li><li>For Personal Loans, APR ranges from 5.96% APR to 35.99% APR and origination/processing fees range from 0.00% to 8.00% of the loan amount. APRs and origination/processing fees are determined at the time of application. The lowest APR may be available to borrowers with excellent credit, subject to additional factors including, but not limited to, loan amount, loan term, and sufficient investor commitment. Advertised rates and fees are valid as of 06/01/2026, are subject to change without notice, and may not be available for all Personal Loan products and/or through all application channels or platforms. A representative example of payment terms for a Personal Loan is as follows: a borrower receives a loan of $19,658 for a term of 36 months, with an interest rate of 13.24% and a 6.00% origination fee of $1,179 for an APR of 17.63%. In this example, the borrower will receive $18,479 and will make 36 monthly payments of $665. Loan amounts range from $1,000 to $75,000 and loan term lengths range from 24 months to 84 months. Some amounts, rates, and term lengths may be unavailable in certain states.</li><li>Between January 2026 to March 2026, 64% of Happen Personal Loans that were approved for funding (which is after your loan application is approved) on a given business day were disbursed within 24 hours. Actual availability of funds may vary and is dependent on multiple factors, including, but not limited to your receiving bank&#39;s processing times and policies. A business day is defined as Monday through Friday and excludes the weekend and bank holidays. </li><li>Between 1/1/2026 and 1/31/2026, 68% of Happen Personal Loan offers were generated in under a minute from the beginning of the application process. </li></ol>

The best home improvement loan depends on two things: how much equity you have and how quickly you need the funds. Homeowners with significant equity can access lower starting rates through a Home Equity Line of Credit (HELOC) or home equity loan, but closing costs and appraisal fees may narrow that advantage on mid-size projects. An unsecured personal loan requires no equity, no appraisal, and can be funded in days1 – at a fixed rate that won't move over the life of the project. Happen Bank offers eligible applicants a 1% interest rate discount on personal loans used for home improvement.

The best home improvement loan depends on two things: how much equity you have and how quickly you need the funds. Homeowners with significant equity can access lower starting rates through a Home Equity Line of Credit (HELOC) or home equity loan, but closing costs and appraisal fees may narrow[2] that advantage on mid-size projects. An unsecured personal loan requires no equity, no appraisal, and can be funded in days1 – at a fixed rate that won&#39;t move over the life of the project. Happen Bank offers eligible applicants a 1% interest rate discount on personal loans used for home improvement. Your home improvement financing optionsHere are the five main options you may consider for financing your home improvement.<table><tr><td>Option</td><td>APR</td><td>APR type</td><td>Collateral</td><td>Approval speed</td><td>Best for</td></tr><tr><td>Personal Loan </td><td>Rates as low as 6.53% APR3</td><td>Fixed</td><td>None</td><td>Days</td><td>No-equity borrowers; fixed-cost projects</td></tr><tr><td>HELOC</td><td>Variable, often lower at first, then changes with market conditions</td><td>Variable</td><td>Your home</td><td>Weeks (appraisal required)</td><td>Large phased projects; strong equity</td></tr><tr><td>HELOAN or Home Equity Loan</td><td>Fixed, often slightly higher than variable rate.</td><td>Fixed</td><td>Your home</td><td>Weeks (appraisal required)</td><td>Large defined-cost projects; strong equity</td></tr><tr><td>Cash-out refinance</td><td>Mortgage rates</td><td>Fixed</td><td>Your home</td><td>Weeks</td><td>Only if new mortgage rate ≤ existing rate; also has closing costs which can dilute the rate gap</td></tr><tr><td>0% intro APR credit card</td><td>0% introductory APR, then typically 18%–28%</td><td>Variable after promo</td><td>None</td><td>Days</td><td>Small projects (under $5,000); confident payoff within promo window</td></tr></table>Rate ranges are approximate. Actual rates depend on credit profile, lender, and market conditions.Each option has a situation where it&#39;s the right call. But a HELOC isn&#39;t always the obvious winner it&#39;s made out to be: once you factor in the equity requirement, appraisal cost (typically <a href="https://griffinfunding.com/blog/mortgage/does-a-heloc-require-an-appraisal/">$300–$700</a>), closing costs (typically <a href="https://www.bankrate.com/home-equity/home-equity-loan-closing-costs/">1%–5%</a> of the credit limit), and a variable rate that may rise over a long draw period, a fixed-rate personal loan often competes on total cost for mid-size projects. <h2>Which home improvement financing option fits your situation?</h2>Two variables drive the decision: how much equity you have and how large the project is.Large project + strong equity (15%+): A HELOC or home equity loan typically offers the lowest starting rate. Before assuming it&#39;s cheaper overall, factor in appraisal fees, closing costs, and – for a HELOC – the possibility of rate increases over the draw period. For phased renovations where costs emerge over time, the HELOC&#39;s draw structure has a genuine advantage over a lump-sum loan.Large project + little or no equity: A Personal Loan can be a good unsecured financing option for home improvement projects. Happen Bank (https://www.happen.com/personal-loan/home-improvement-loan) offers eligible applicants a 1% interest rate discount on personal loans used for qualifying home improvement projects. Unlike many home equity financing options, personal loans do not require home equity or an appraisal and typically offer fixed interest rates with predictable monthly payments.Mid-size project + any equity position: Once HELOC closing costs and appraisal fees are factored in, a home improvement loan often competes on total cost for projects. The fixed rate also eliminates the risk of the rate rising over the project term – relevant on renovations that run several months.Small project (under $5,000): A 0% intro APR credit card is worth considering if you qualify and can realistically clear the balance before the promotional period ends. Otherwise, a small personal loan with no prepayment penalty keeps costs predictable. If you do go the card route, ensure you understand the <a href="https://www.happen.com/resource-center/personal-finance/what-is-credit-utilization-and-how-to-improve-it">implications of credit utilization</a> clearly.No equity, time-sensitive project: A personal loan is typically the fastest path to funding without putting your home at risk. Pre-qualification takes seconds3 and generally doesn&#39;t affect your credit score.4<h2>What does a home improvement loan actually cost?</h2>Here are three illustrative examples based on common project sizes. Please note that the actual rate depends generally on credit profile, DTI, loan terms and other factors.<table><tr><td>Project</td><td>Loan amount</td><td>APR</td><td>Term</td><td>Monthly payment</td><td>Total interest</td></tr><tr><td>Kitchen update</td><td>$10,000</td><td>12%</td><td>36 months</td><td>~$332</td><td>~$1,950</td></tr><tr><td>Bathroom remodel</td><td>$20,000</td><td>15%</td><td>48 months</td><td>~$557</td><td>~$6,750</td></tr><tr><td>Roof and HVAC replacement</td><td>$35,000</td><td>18%</td><td>60 months</td><td>~$889</td><td>~$18,340 </td></tr></table><h2></h2><h2>Using a personal loan for home improvement: what to expect</h2>A personal loan for home improvement is unsecured – your home is not collateral, and missing a payment doesn&#39;t put your home at risk. The full loan amount is disbursed as a lump sum via ACH, which suits projects with a known total cost. Unlike a HELOC&#39;s draw period, you receive the funds at once and begin repaying on a fixed schedule.Happen Bank personal loans eligible to use for home improvement projects carry a fixed rate from 6.53%–35.99% APR, with loan amounts from $1,000 to $75,000 and terms from 24 to 84 months.2 There&#39;s no prepayment penalty – if a project comes in under budget or you want to pay ahead of schedule, you keep the full savings. A 1% interest rate discount may also apply on personal loans!<h2>Frequently Asked Questions</h2><h3>What is the best loan for home improvements?</h3>Homeowners with 15%+ equity and time for an appraisal process may find that a HELOC or home equity loan offers the lowest starting rate on large projects, once closing costs are factored in. Homeowners without significant equity, or those who need funds quickly, typically find an unsecured personal loan – which requires no equity, no appraisal, and can fund in days – is the most practical option. <h3>Can I get a home improvement loan with no equity?</h3>Yes. An unsecured personal loan doesn&#39;t require home equity – your home is not collateral, and no appraisal is needed. Happen Personal Loans are available from $1,000 to $75,000 with a fixed APR as low as 6.53%2, and eligible applicants may receive a 1% interest rate discount for personal loans used for home improvement. Eligibility is based on creditworthiness rather than equity position. <h3>Does a home improvement loan affect your credit score?</h3>Pre-qualifying with a soft pull generally has no impact on your credit score4. A hard credit inquiry appears on your report only when a loan is funded. Once funded, on-time monthly payments may contribute positively to your payment history over time5.<h3>How much can I borrow for home improvements with a personal loan?</h3>Happen Bank personal loans for home improvement range from $1,000 to $75,000. The amount you qualify for depends on your creditworthiness, including but not limited to credit score, income, and debt-to-income ratio – not your home equity. Pre-qualifying shows your available loan amounts and rates in seconds3 with generally no impact to your credit score.4 <h2>General Disclosures</h2>All loans are subject to credit approval. Actual APR, loan amount, and terms depend on creditworthiness and other underwriting factors. Rates are subject to change. Not all applicants qualify for the lowest advertised APR or fastest funding.Happen Bank and its affiliates (collectively, &quot;Happen Bank&quot;) do not offer legal, financial, or other professional advice. The content on this page is for informational or advertising purposes only and is not a substitute for individualized professional advice. Happen Bank is not affiliated with or making any representation as to the company(ies), services, and/or products referenced. Happen Bank is not responsible for the content of third-party website(s), and links to those sites should not be viewed as an endorsement. By clicking links to third-party website(s), users are leaving Happen Bank’s website. Happen Bank does not represent any third party, including any website user, who enters into a transaction as a result of visiting a third-party website. Privacy and security policies of third-party websites may differ from those of the Happen Bank website.<ol><li>Between January 2026 to March 2026, 64% of Happen Personal Loans that were approved for funding (which is after your loan application is approved) on a given business day were disbursed within 24 hours. Actual availability of funds may vary and is dependent on multiple factors, including, but not limited to your receiving bank&#39;s processing times and policies. A business day is defined as Monday through Friday and excludes the weekend and bank holidays. </li><li>For Personal Loans, APR ranges from 5.96% APR to 35.99% APR and origination/processing fees range from 0.00% to 8.00% of the loan amount. APRs and origination/processing fees are determined at the time of application. The lowest APR may be available to borrowers with excellent credit, subject to additional factors including, but not limited to, loan amount, loan term, and sufficient investor commitment. Advertised rates and fees are valid as of 06/01/2026, are subject to change without notice, and may not be available for all Personal Loan products and/or through all application channels or platforms. A representative example of payment terms for a Personal Loan is as follows: a borrower receives a loan of $19,658 for a term of 36 months, with an interest rate of 13.24% and a 6.00% origination fee of $1,179 for an APR of 17.63%. In this example, the borrower will receive $18,479 and will make 36 monthly payments of $665. Loan amounts range from $1,000 to $75,000 and loan term lengths range from 24 months to 84 months. Some amounts, rates, and term lengths may be unavailable in certain states.</li><li>Between 1/1/2026 and 1/31/2026, 68% of Happen Personal Loan offers were generated in under a minute from the beginning of the application process. </li><li>Checking a rate through us generates a soft inquiry on a person’s credit report, which does not impact that person’s credit score. A hard credit inquiry, which may affect that person’s credit score, only appears on the person’s credit report if and when a loan is issued to the person.</li><li>Between January 2025 and March 2025, borrowers who used Happen Bank Direct Pay to refinance 51% or more of qualifying debt within the first three months saw an average FICO score increase of 35 points. Reducing debt and maintaining low credit balances may contribute to an improvement in credit score, but results are not guaranteed by Happen Bank. Individual results vary based on multiple factors including but not limited to payment history and credit utilization.</li></ol><h2>Related Terms</h2><a href="https://www.happen.com/glossary/a/annual-percentage-rate-apr">Annual Percentage Rate (APR)</a><a href="https://www.happen.com/glossary/f/fixed-interest-rate">Fixed Interest Rate</a>

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

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>

Your credit utilization rate measures the balances of your revolving accounts against your credit limits. Naturally, your ratio can influence your credit scores. A low utilization rate could improve your credit scores while a high utilization rate may hurt them. 

Your credit utilization rate measures the balances of your revolving accounts against your credit limits. Naturally, your ratio can influence your credit scores. A low utilization rate could improve your credit scores while a high utilization rate may hurt them. For that reason, it’s worth understanding exactly how credit utilization rates work and how they impact your credit. While the math is straight forward—you only need to know addition and division—it’s not always clear which numbers to use.<h2>How credit utilization ratio works</h2>Credit utilization refers to the percentage of your total available revolving credit, such as credit cards and personal lines of credit. The balance on installment loans, including <a href="/personal-loan">personal loans</a>, aren’t part of credit utilization rate calculations, though they can impact your credit score.You actually have two utilization rates: Individual account utilization and your overall utilization. To determine your individual utilization rate, credit scoring models like FICO divide the reported revolving balance by the credit limit on each card or line of credit.[1] Your overall credit utilization rate is the comparison of all applicable revolving balances and the limits. Both your overall credit utilization rate and the utilization rate of individual accounts can be important to your credit score.<h2>How does credit utilization affect your credit score?</h2>Credit utilization rates can be a major factor in your credit score. However, the specific impact will depend on the type of credit scoring model and your overall credit profile.FICO, for example, lists revolving utilization as a subcomponent of the “amount owed” portion of its scoring formula, which can account for 30% of your FICO Score. A low utilization rate—both overall and on individual accounts—is generally better for your score.Lowering your utilization rate can be one of the fastest ways to <a href="/resource-center/personal-loan/how-to-improve-credit-score">improve your credit score</a> because most scoring models only consider your utilization rate as it is reported. Meaning, you may see a quick credit score boost if you’re able to pay off a high utilization rate at once.<h2>Why credit utilization is important for lenders </h2>Lenders use you credit score as a benchmark to determine if you qualify, among other things, for a loan, as well as its rates and terms. Because your credit utilization rate can be a major scoring factor, it could have a direct impact on the lender’s decision. If you have high revolving credit limits and low balances, creditors take that as a sign that you know how to use credit wisely. If you are borrowing heavily against all your credit cards and revolving lines of credit, that can be a sign you’re not as financially responsible as you could be—or are under financial strain.<h2>How to calculate your credit utilization</h2>You can calculate your credit utilization rate by dividing the amount of revolving debt you owe by the amount of credit available. For example, suppose you have a credit card and a line of credit, each with a limit of $5,000, for a total credit limit of $10,000. You owe $1,000 on the line of credit and $2,000 on the credit card, for a total of $3,000 owed. Given this, your credit utilization ratio is 30%.There are several key points to remember when calculating utilization rates:<ul><li>Many credit card issuers report balances monthly, around the end of each statement period or billing cycle. </li><li>The bill for the statement period may be due around three weeks later. </li><li>Credit scoring models only calculate the balances reported on your credit reports at the time. </li><li>Typically, credit card companies will report your balances to the credit bureaus around the end of each billing cycle.[2]</li><li>If the creditor reports to credit bureaus before you pay off the credit balance in full each month, you could still have a high credit utilization rate. </li></ul>To calculate the most accurate utilization rate, review your credit report rather than your current credit card balance. Some credit reports may also include your credit utilization ratio, saving you the math.<h2>5 ways to improve your credit card utilization</h2>In the end, there are only two numbers that matter—the balance and the credit limit—but there are ways to decrease your credit utilization rate and potentially boost your credit scores.<h3>1. Ask for a credit limit increase. </h3>As long as your balance doesn’t increase as well, a higher credit limit can lower your utilization rate and make it easier to maintain a low rate. You can ask card issuers for a credit limit increase. However, the request may lead to a hard credit inquiry, which might cause a temporary dip to your credit score.Also, check the annual income amount you reported to the credit card company, which you can typically find in your online account. If your income has risen, updating the amount may help you get approved for a higher credit limit or lead to a credit limit increase initiated by the card issuer.<h3>2. Pay down credit card balances early.</h3>Lowering your credit card’s balance <a href="https://www.myfico.com/credit-education/blog/credit-score-factor-amounts-owed">before issuers report</a> it to the bureaus could also lead to a lower utilization rate. While the reporting often occurs around the end of each statement period, you could call your card issuer to confirm the exact timing. <h3>3. Open a new credit card. </h3>Opening a new revolving credit account, such as a credit card, can increase your total available credit. However, keep in mind that a new card may carry an annual fee and could increase the temptation to spend, racking up debt and increasing—rather than helping—your utilization rate. <h3>4. Keep your credit cards open.</h3>If you have a credit card you’re considering closing, you may want to keep it open to maintain your available credit limit to potentially have a lower utilization rate. You could use the card for a small monthly bill and turn on autopay to ensure on-time payments and avoid account closure due to inactivity. Or, set a calendar reminder to use the card every few months (and another one to pay it down).If there’s a specific reason you don’t want the card due to its annual fee or concerns about overspending, closing it may be a better option. <a href="https://www.happen.com/resource-center/personal-finance/how-to-cancel-a-credit-card-without-hurting-your-credit-score">Learn more about closing a credit card account</a>.<h3>5. Become an authorized user on another person&#39;s card.</h3>Credit card issuers may report accounts to the credit bureaus under both the primary and authorized users’ names. As an authorized user, you could benefit from having the additional available credit limit. Keep in mind, as an authorized user, you’re also giving up some control. For instance, if the primary cardholder generates a high utilization rate, it could show up on your credit report as well. If they fail to make on time payments, your credit scores could also be impacted.<h2>How personal loans help you lower credit utilization ratios</h2>There are two ways a personal loan might lower your credit utilization rate.The first is if you use a personal loan rather than a credit card for a major purchase. Since personal loans are installment accounts, the balance and initial loan amount aren’t part of utilization calculations.You can also use a <a href="/personal-loan/credit-card-consolidation-loan">personal loan to consolidate credit card debt</a>. In other words, you could take out a loan and use the money to pay down your debt. By eliminating your credit card balances and leaving the cards open, you could significantly lower your utilization rate.By using a personal loan to pay down credit card debt, you will typically have a fixed interest rate, single monthly payment, and know exactly when the loan will be paid off. You can pre-qualify for a <a href="/personal-loan">debt consolidation loan</a> and check your rate with Happen Bank, formerly LendingClub, without impacting your credit score. <h2>Manage your credit utilization responsibly</h2>Tracking your credit card balances, credit limits, and statement period end dates can be prudent activities from a personal finance perspective. The most active way to manage your utilization rate is to make payments before issuers report your balances to the credit bureaus. It’s generally better to avoid using credit cards for big purchases if cash is available to pay off your entire statement balance. This helps prevent high-interest credit card debt.<hr/><h2>Credit utilization FAQs</h2>Still have questions? Some of these commonly asked questions may provide the answer.<h3>When is credit utilization calculated?</h3>Credit utilization is calculated each month when credit card issuers report your balance to credit bureaus. Changes in your credit report, such as a new reported balance on a credit card, can lead to a different utilization rate. <h3>Does credit utilization matter if you pay in full?</h3>Yes, it still matters. Even if you pay your credit card bill in full, you could have a high utilization rate that may hurt your credit scores. Credit card balances are often reported weeks before the bill’s due date, and the reported balance is what impacts your utilization rate. <h3>How does credit utilization affect your credit score?</h3>Credit utilization rates can have a major impact on your credit scores. The specific amount of points will depend on the scoring model and the other information in your credit report. But if you have a high utilization rate, lowering it may be a way to increase your credit scores. <h3>What is a good credit utilization ratio?</h3>There’s no specific point where a utilization rate goes from good to bad. Keeping your overall utilization rate below 30% can be a helpful rule of thumb[3]—but the lower, the better. <hr/><ol><li><a href="https://www.myfico.com/credit-education/blog/credit-utilization-be">FICO</a>. &quot;What Should My Credit Utilization Ratio Be?&quot;</li><li><a href="https://www.experian.com/blogs/ask-experian/credit-card-balance-vs-utilization/">Experian</a>. &quot;What Is the Difference Between Credit Card Balance and Utilization?&quot;</li><li><a href="https://www.experian.com/blogs/ask-experian/how-to-calculate-credit-card-utilization/">Experian</a>. &quot;How to Calculate Credit Card Utilization.&quot;</li></ol>

Allowances are common in the U.S., but it’s important to weigh out the pros and cons before giving your kids an allowance.

Around 79% of U.S. parents give their children an allowance, according to the <a href="https://www.moneyconfidentkids.com/content/dam/mck/pdfs/2022_Final_PKM_Deck_2022_Update.pdf">2022 </a><a href="https://www.moneyconfidentkids.com/content/dam/mck/pdfs/2022_Final_PKM_Deck_2022_Update.pdf">T. Rowe Price Parents, Kids, and Money </a><a href="https://www.moneyconfidentkids.com/content/dam/mck/pdfs/2022_Final_PKM_Deck_2022_Update.pdf">Survey</a>.1 It&#39;s clear allowances are popular with American families, and rightfully so. Allowances have benefits when used wisely, but there are also some downsides. As a parent or caregiver, it’s essential to understand both sides of the coin if you&#39;re considering giving your child an allowance.  Here&#39;s a look at the benefits of allowances and their potential drawbacks, common reasons for paying kids an allowance, average allowances, and more.   <h2>Reasons for paying kids an allowance </h2>An allowance is a small amount of money parents give to their kids on a regular basis. Parents might pay their children an allowance for several reasons, including <a href="https://www.consumerfinance.gov/about-us/blog/heres-why-childhood-is-an-important-time-to-learn-about-money/">teaching kids about money management</a> or introducing (and emphasizing) the concept of working to earn money.  In past T. Rowe Price surveys, some parents indicated they paid their child an allowance because their child&#39;s friends received one. This suggests there may also be some societal pressure involved for today’s parents to give their kids an allowance.[1]  <h2>Pros and cons of allowances  </h2>Allowances are a staple in many U.S. households, but giving your kids cash regularly has both benefits and drawbacks. Weighing the pros and cons carefully can help you decide if an allowance makes sense for your family. Pros: <ul><li>May encourage financial responsibility, saving, and budgeting skills in kids </li><li>Helps children understand the value of work if the allowance is tied to chores </li><li>May motivate kids to help around the house </li><li>Could help children be more responsible with their belongings if they&#39;ve used their allowance to purchase them </li></ul>Cons: <ul><li>Could make children feel entitled to rewards for all contributions at home </li><li>An allowance by itself may not teach kids about responsible saving and budgeting </li><li>Kids might spend the money they earn frivolously </li><li>Could stretch the household budget, depending on household income and allowance amount </li></ul><h2>What&#39;s the average kid&#39;s allowance? </h2>Here&#39;s a breakdown of the average child&#39;s allowance by age, based on numbers from a 2023 study conducted by kids&#39; money management app Greenlight.[2]  <table><tr><td>Age group </td><td>Average allowance </td></tr><tr><td>Ages 5–7 </td><td>$6.62 per week </td></tr><tr><td>Ages 8–10  </td><td> $8.46 per week </td></tr><tr><td>Ages 11–12 </td><td>$10.98 per week </td></tr><tr><td>Ages 13–15  </td><td>$15.02 per week </td></tr><tr><td>Ages 16–19  </td><td>$27.12 per week </td></tr></table><h2>How to set an allowance for your kids </h2>If you think an allowance is the right choice for your kids, it&#39;s important to consider these factors first: <ul><li>Your family budget </li><li>Whether the allowance will be tied to chores </li><li>How often you plan to give your child an allowance </li><li>What amount you think is reasonable for your child </li></ul>The best approach to allowances will differ by family, though many parents give their children an allowance of $1 per year of age. For example, a 10-year-old child might get a $10 allowance per week. You might also decide to give your younger children a smaller weekly allowance because they have fewer expenses than your older children. <h2>How an allowance can help teach your kids about money </h2>An allowance alone may not teach your kids too much about money, but it could if you also use it along with other teaching tools, like thoughtful conversations. Talk to your child about why you&#39;re offering them an allowance, and introduce the concepts of spending and personal savings. Besides an initial conversation, checking in regularly about good spending and saving habits can help reinforce these concepts for your child. Potential conversation starters could include: <ul><li>What are you saving up for? </li><li>How are you using your allowance? </li><li>I&#39;m saving up for an item on my wishlist. Do you want to talk about how? </li><li>I just donated some money to my favorite charity. Is this something you&#39;d be interested in, too? </li></ul>If you tie your child&#39;s allowance to chores, it could also help teach them the concept of working to earn money. That way, they&#39;ll be familiar with it and potentially more motivated to apply for a first job once they&#39;re old enough.<h2>The bottom line </h2>An allowance alone may not help your child <a href="https://www.happen.com/resource-center/personal-finance/financial-lessons-to-teach-your-kids-at-every-age">learn about money</a>. Instead of just simply giving them cash each week, take the opportunity to have conversations about saving, spending, and working for those earnings. Thoughtful discussions combined with a weekly allowance will help your child build financial literacy skills they can apply in adulthood.    <hr/><ol><li><a href="https://www.moneyconfidentkids.com/content/dam/mck/pdfs/2022_Final_PKM_Deck_2022_Update.pdf">T. Rowe Price</a>. “2022 Parents, Kids &amp; Money Survey.” </li><li><a href="https://greenlight.com/learning-center/earning/average-allowance-by-age-for-kids">Greenlight</a>. “Average allowance by age for kids and teens.” </li></ol>

Personal Finance

Debt consolidation is a debt management strategy that uses methods like a debt consolidation loan to combine multiple debts into an easy-to-manage monthly payment—usually with a lower interest rate.[1]

<a href="https://www.happen.com/personal-loan/debt-consolidation">Debt consolidation</a> is the process of refinancing multiple debts into a single payment, ideally with a lower interest rate. People often use debt consolidation to combine high-interest-rate credit cards—and sometimes loans or other debt—into one single monthly payment.[1]   It may be something to consider if you’re looking for an end goal or you’re financially overwhelmed. Sometimes people choose debt consolidation when their credit has improved, making them eligible to pay off high-interest debt cheaper and faster.  Debt consolidation loans and <a href="https://www.happen.com/resource-center/personal-loan/line-of-credit-vs-loan-how-to-decide-whats-best-for-you">lines of </a><a href="https://www.happen.com/resource-center/personal-loan/line-of-credit-vs-loan-how-to-decide-whats-best-for-you">credit</a> like 0% APR balance transfer credit credits are common tools people use to consolidate existing debt. Other options include a home equity loan or a 401(k) loan, but these tend to be seen as riskier.[2]  <h2>How does debt consolidation work? </h2>Debt consolidation works differently depending on the type of debt you’re consolidating and how you choose to consolidate it. For instance, let’s say you have three credit cards with a total balance of $15,000 and with an average interest rate of 27%. Maybe you’re making the minimum payment on each card or you’re able to swing a bit more, but either way, you’re not able to pay off your balances in full each month.  With a debt consolidation loan, you take out the loan and use the funds to pay off your cards. You’ll still have the $15,000 to repay, but instead of multiple card payments, now you just pay one lender back. Your monthly payment may be less than what you were paying for all three credit card payments, and you have an end date in sight for when all your debt will be paid off.[2]  That’s just one type of debt consolidation.  You could instead choose to transfer your high-interest balances to one 0% APR balance transfer credit card. These cards often come with long introductory offer periods ranging from 12 to 21 months. You won’t pay interest as long as you pay off the total balance within this time frame. While there’s typically a balance transfer fee, often 3% to 5% of the balance, you may save in the long run because of the 0% interest rate and quicker payoff timeline.[2] <h2>What is a debt consolidation loan? </h2>A debt consolidation loan is a type of unsecured fixed-rate <a href="https://www.happen.com/resource-center/personal-loan/what-is-an-installment-loan">installment loan</a> that’s used to consolidate different types of debts. You may be able to qualify for a low interest rate based on your creditworthiness and financial situation. If the rate is fixed, your monthly payments and interest costs will be predictable over the life of the loan.[1][2]   You can use the money from a debt consolidation loan to cover most kinds of debt. So, if you have several types of debt, like medical bills, credit cards, or even another personal loan you want to refinance, you can consolidate them all into your new debt consolidation loan. However, it’s important to note that some debts, like student loans, cannot be consolidated with this type of <a href="https://www.happen.com/resource-center/personal-loan/what-is-a-personal-loan-how-to-apply-in-3-simple-steps">personal loan</a>.[2]   To avoid a hit to your credit when shopping around for loans, look for lenders that allow you to check your rate. With Happen Bank, formerly LendingClub, checking your rate has no impact on your credit score because we use a soft credit pull.   <h2>How debt consolidation may help you save money </h2>To figure out how much you’d potentially save through debt consolidation, calculate your potential interest costs. For instance, you could take out a debt consolidation loan to pay off the $15,000 in credit card debt we mentioned earlier. Taking out a loan for $15,000 with a 14% interest rate and three-year term would save you nearly $1,700 compared to paying down the cards directly.  Here’s a look at how the monthly payment, payoff timeline, and total interest costs compare.   <table><tr><td>Creditor/lender information </td><td>Credit cards </td><td>Debt consolidation loan </td></tr><tr><td>Amount owed (principal) </td><td>$15,000 </td><td>$15,000 </td></tr><tr><td>Interest rate </td><td>27% (average APR) </td><td>14% </td></tr><tr><td>Monthly payment  </td><td>$750 (minimum payment) </td><td>$512.66 </td></tr><tr><td>Time to pay off </td><td>2 years and 3 months </td><td>3 years </td></tr><tr><td>Total interest paid </td><td>$5,151.26 </td><td>$3,455.92 </td></tr><tr><td>Total amount saved </td><td>– </td><td>$1,695.34 </td></tr></table><h2>Pros and cons of debt consolidation </h2>Weigh the pros and cons carefully if you’re considering debt consolidation. The specifics may vary depending on the loan you’re using and the types of debt you’re consolidating.[2]  <table><tr><td>Pros of debt consolidation </td><td>Cons of debt consolidation </td></tr><tr><td>May lower the interest rate on your debt[1]  </td><td>May require good credit[1]  </td></tr><tr><td>May lower your monthly payments[1]  </td><td>A fixed repayment term could take longer to repay[1]  </td></tr><tr><td>Streamlines multiple monthly payments into one[1]  </td><td>Might increase the risk of losing collateral, depending on loan type[1]  </td></tr><tr><td>May help improve your credit score if you don’t add new credit card debt[1]  </td><td>May charge fees[1]  </td></tr></table><h2>When is debt consolidation a good idea? </h2><a href="https://www.happen.com/resource-center/personal-loan/how-many-times-can-you-consolidate-debt">Consolidating your debts</a> could make sense when it helps you save money or makes managing your finances easier. Here are some scenarios when debt consolidation is a good idea.  <h3>You may save money </h3>If you get a loan offer with a lower interest rate than you’re currently paying, consolidating the debt could save you money overall. You may have several loan offers to choose from, and you can decide what’s best based on your goals. Generally, a shorter repayment period can lead to the most savings, but it will also have the highest monthly payments. <h3>You want fewer payments </h3>Combining multiple monthly loan payments into a single payment could make planning your monthly finances easier. Sometimes, even if it doesn’t lead to significant savings, consolidation could be helpful as a debt management tool. <h3>You want lower monthly payments </h3>Consolidation may also help lower your monthly payments, especially if you choose a loan offer with a long repayment period. Even if your loan has a lower interest rate, longer loan terms may lead to paying more interest overall. But it could be a worthwhile trade-off to free up extra money in your monthly budget. <h3>When shouldn’t you consolidate debt? </h3>If you don’t qualify for a loan with a lower interest rate or monthly payment, then you may not want to consolidate your debts right now. Additionally, there are a few more scenarios when consolidation isn’t ideal, even if you can lower your interest rate. <h3>You’re close to paying off your debt </h3>When you’re only a few months away from paying off the debt, staying the course could be the best option. Once you factor in a debt consolidation loan’s origination fee or a credit card balance transfer fee, you might wind up spending more overall, even if you lower your interest rate.  <h3>You don’t want to take on more risk </h3>The savings might not be worth the added risk if you’re considering using a secured loan, such as a mortgage-backed loan, to consolidate unsecured debts. Similarly, even if it saves you money in the short term, using a private student loan to refinance and consolidate federal student loans could lead to more risk because you’ll lose access to federal benefits. <h3>If you might wind up getting deeper into debt </h3>Consolidating high-interest credit card debt can be a productive step toward getting out of debt. However, consider why you have credit card balances in the first place. If it’s primarily from overspending, freeing up your credit limits could lead to more overspending and more overall debt. <h2>Does debt consolidation hurt your credit score? </h2>Your creditworthiness (as well as your <a href="https://www.happen.com/resource-center/personal-loan/what-is-debt-to-income-ratio-how-to-improve-it">debt-to-income ratio</a>) plays a large role in the interest rate you’ll receive for a debt consolidation loan or 0% APR balance transfer credit card. While you may be able to still qualify with less-than-perfect credit, you won’t save as much as you would if your credit is excellent. People with excellent credit (740 and higher) typically receive the best interest rates and terms, meaning they’ll likely benefit most from debt consolidation.[3]   Before applying, remember that obtaining a new line of credit may cause your credit score to decrease temporarily. However, in time, consolidating credit card debt with a debt consolidation loan, like a Happen Bank personal loan, may actually increase your credit score by lowering your credit utilization ratio. Additionally, your on-time payments could be added to your credit reports and help improve your credit. <h2>The bottom line </h2>Debt consolidation may be a good choice for people who want to streamline payments to creditors into one easy-to-manage monthly payment and save on interest. However, before deciding to consolidate your debt, it’s important to consider your financial situation, creditworthiness, and how much debt you have left to pay back.   If you do decide to consolidate debt with a debt consolidation loan, 0% APR balance transfer credit card, or another method, be sure to compare offers from different lenders and creditors, ideally with financial institutions that let you check rates without a hit to your credit score.     <hr/><ol><li><a href="https://www.consumerfinance.gov/ask-cfpb/what-do-i-need-to-know-if-im-thinking-about-consolidating-my-credit-card-debt-en-1861/">Consumer Financial Protection Bureau</a>. “What do I need to know about consolidating my credit card debt?” </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/ask-cfpb/what-is-the-difference-between-a-loan-interest-rate-and-the-apr-en-733/">Consumer Financial Protection Bureau</a>. “What is the difference between a loan interest rate and the APR?” </li></ol>

Consolidating debt often helps your credit—at least over the long term. A lower interest rate and a single fixed monthly payment make it easier to pay down debt, and lower credit card balances and on-time loan payments often help raise your score. 

Consolidating debt often helps your credit—at least over the long term. A lower interest rate and a single fixed monthly payment make it easier to pay down debt, and lower credit card balances and on-time loan payments often help raise your score. Debt consolidation isn’t foolproof, however, and could potentially hurt your score. Your credit might dip temporarily after debt consolidation, and you’ll have to avoid running up new credit card balances. Before deciding to consolidate debt, it’s important to consider how it affects your credit scores.[1] <h2>What is debt consolidation and how does it work? </h2><a href="https://www.happen.com/resource-center/personal-loan/what-is-debt-consolidation">Debt consolidation</a> is a debt management strategy used to refinance multiple debts into an easy-to-manage single monthly payment—ideally with a lower interest rate. Many people consider debt management when they’re financially overwhelmed or their credit situation has improved, making them eligible for lower interest rates. Common ways to consolidate debt include a debt consolidation loan or a 0% APR balance transfer credit card.[1]  Consolidating debt works a bit differently, depending on which method you choose. For instance, by using a personal loan to pay down your higher-interest loans and credit card balances, you replace several monthly bills with one. While the loan may take a few years to pay off, you’ll often save over time thanks to a lower monthly payment and interest rate.[1]  <h2>How does consolidating debt affect your credit score? </h2>Debt consolidation is generally helpful for your credit score, but it does have the potential to affect your score negatively. Let’s take a closer look at how debt consolidation can help or hurt your credit.  Ways debt consolidation can help your credit score  Debt consolidation primarily helps your credit by making your debt easier to pay down. It’s often easier to make a single loan or credit card payment. Your new monthly payment may also be reduced, thanks to a lower, fixed interest rate.[1]  Here’s how debt consolidation can help your credit score in the long run.  <ul><li>May help your payment history: Your payment history accounts for 35% of your credit score, making it the most important factor. Consolidating debt doesn’t guarantee you’ll make your debt consolidation loan or balance transfer credit card payment on time. However, it may decrease your chances of overlooking a payment or forgetting to set aside enough money to pay it.[2] </li><li>Improves credit utilization: Credit utilization is the percentage of credit you’re using out of your available revolving credit, and it’s the second biggest factor in credit scoring. A credit utilization ratio of more than 30% can hurt your credit scores, while a ratio below 10% is ideal for score improvement. When you use a debt consolidation loan to pay off high-interest credit cards, the credit utilization on your credit cards drops to zero.[2]  </li><li>Diversifies your credit mix: Having a mix of credit accounts—such as credit cards, home loans and auto loans—tends to benefit your credit score. That’s because having a range of credit products shows you know how to manage different types of accounts. Adding an installment loan could help diversify your credit mix and give your credit score a small lift.[2]  </li></ul><h2>Ways debt consolidation can hurt your credit score </h2>For all its potential positives, debt consolidation can also hurt your credit score, especially when you first get a loan or new 0% APR balance transfer credit card. However, these effects are typically minor and are often offset over time by a positive payment history, improved credit utilization, and diversified credit mix.   Here’s how debt consolidation can negatively affect your credit.   <ul><li>Adds a hard credit inquiry: During the loan (or credit card) application process, the lender typically checks your credit report, a process known as a “hard pull” or “hard inquiry.” <a href="https://www.happen.com/resource-center/personal-finance/key-differences-of-a-soft-credit-check-vs-hard-credit-check">Hard inquiries</a> appear on your credit reports and can cause a minor drop in credit score.[3] </li><li>Decreases average age of accounts: The average age of your credit and loan accounts is a measure of how long you’ve been managing debt. Long-standing accounts have a positive effect on your credit score. When you get a new loan or credit card, the average age of your accounts goes down, which can cause a dip in your credit score.[2] </li><li>Doesn’t address money management issues: If you have a history of paying your bills late, you might continue to miss payments after debt consolidation. It can also be tempting to rack up purchases on your newly freed-up credit cards, which could add to your total debt and hurt your credit score.[1] </li></ul><h2>Different ways to consolidate your debt </h2>You have multiple options for consolidation, depending on the types of debt you have and which assets you can access. Here are some of the most common ways to consolidate debt. <h3>1. Use a debt consolidation personal loan </h3>Unsecured personal loans are fixed-rate <a href="https://www.happen.com/resource-center/personal-loan/what-is-an-installment-loan">installment loans</a> and one of the most popular options for consolidating debt. Because a <a href="https://www.happen.com/personal-loan/debt-consolidation">debt consolidation loan</a> is unsecured, you won’t risk losing property when taking out the loan. Additionally, you may be able to qualify for a low interest rate based on your credit and financial situation.[1]   <a href="https://www.happen.com/resource-center/personal-loan/what-is-a-personal-loan-how-to-apply-in-3-simple-steps">Personal loans</a> are also flexible in that you can use the money for almost anything. If you have several types of debt, such as medical bills and credit cards, you can consolidate them all into your new personal loan. However, there are some debts, such as student loans, that cannot be consolidated with a personal loan.[5] <h3>2. Look into credit card balance transfer offers </h3><a href="https://www.happen.com/resource-center/personal-finance/balance-transfer-loan-or-balance-transfer-credit-card-how-to-choose">Credit card balance transfers</a> let you transfer debt from one credit card to another. Finding a low introductory rate or 0% APR balance transfer credit card offer may save you money on interest during the promotional period. Keep in mind, you may have to pay balance transfer fees, and the high card balance could impact your credit scores. If you don’t pay off the balance before the promotional period ends, you may wind up paying more interest in the long run.[4]  <h2>How to consolidate debt without hurting your credit score  </h2>Consolidating your debt can impact your credit score, but as long you manage your debt responsibly, any negative effects will be temporary. You can minimize negative effects on your score by following these tips.   <ul><li>Check your credit before you shop. Better loan rates and terms are generally available to individuals with higher credit scores. <a href="https://www.happen.com/resource-center/personal-finance/how-to-read-your-credit-report-identify-red-flags">Knowing your credit score</a> and what’s in your credit reports can help you compare rates on loans (or 0% APR balance transfer cards) that fit your credit profile.[1] </li><li>Limit hard credit inquiries by using pre-qualifications. Many lenders, like Happen Bank, formerly LendingClub, can pre-qualify you for a loan without doing a “hard” credit pull that affects your credit score. Pre-qualifications give lenders a quick read on your credit and financials so they can quote loan rates and terms more accurately. Once you decide on a loan option, your lender will do a hard credit pull to approve your loan.[3] </li><li>Think carefully about payment amount and terms. Consider your monthly payments and loan term. Will you be able to meet your monthly payments on time every month? Will you be able to pay off a 0% APR balance transfer card before the introductory period ends? Before you sign on to a new loan or transfer your balances, make sure you can swing payments and terms.[1] </li><li>Avoid running up new debt. Once you’re paying down your debt using a debt consolidation loan or other method, try to avoid building up new balances on your credit cards. You may find yourself with multiple monthly bills and high credit utilization again.[1]  </li></ul><h2>The bottom line </h2>Debt consolidation can help you simplify multiple debts, save you money on interest, and even help keep your credit on track—especially if you’re overwhelmed with high-interest credit card balances, multiple loans, medical bills, or other debt. Having fewer bills and a solid plan for paying down debt won’t affect your credit directly. However, using debt consolidation often improves your credit as long as you avoid pitfalls that can lead to credit problems like missed payments.[1] <hr/><ol><li><a href="https://www.consumerfinance.gov/ask-cfpb/what-do-i-need-to-know-if-im-thinking-about-consolidating-my-credit-card-debt-en-1861/">Consumer Financial Protection Bureau</a>. “What do I need to know about consolidating my credit card debt?” </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><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.consumerfinance.gov/ask-cfpb/how-long-can-i-keep-a-low-rate-on-a-balance-transfer-or-other-introductory-rate-en-15">Consumer Financial Protection Bureau</a>. “How long can I keep a low rate on a balance transfer or other introductory rate?”   </li><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></ol>

Personal Loan

What does it take to achieve financial independence early in life? The end goal for many FIRE followers is early retirement—but it’s not the only goal.

What does it take to achieve financial independence early in life? The end goal for many FIRE followers is early retirement—but it’s not the only goal. If you’d like to spend less, save more, and build creative, new options for yourself by becoming more financially independent, the FIRE movement and its philosophy may be what you’re looking for. <h2>What is the FIRE movement​ &amp; how does it work​? </h2>The Financial Independence Retire Early (FIRE) movement is a financial planning philosophy and lifestyle that encourages followers to drastically cut expenses and spend less, save aggressively, minimize or eliminate all debt, and invest wisely to achieve financial independence—and possibly retire well before your late 60s or early 70s. Inspired by the 1992 book Your Money or Your Life by Vicki Robin and Joe Dominguez, the FIRE movement invites and challenges you to consider accumulating wealth by being satisfied with less. While going full FIRE may not be something everyone will want or be able to strive for, FIRE tools can help you set some ambitious financial goals and provide a mindset for achieving them.<h3>How does it work?</h3>The FIRE movement encourages saving money and adjusting your lifestyle dramatically to reach financial independence as quickly as possible. It starts with your FIRE number, the amount of money you need to retire or to attain your vision of financial independence. Two formulas can help you calculate your FIRE number:<h3>The rule of 25</h3>The FIRE rule of 25 says you’ll need to save roughly 25 times your annual expenses to have enough of a nest egg to draw out expenses indefinitely without running out of money. If you need $60,000 per year to live, your FIRE number is $60,000 x 25 = $1.5 million.<h3>The 4% rule</h3>The FIRE 4% rule refers to the amount experts say you can withdraw from your retirement savings each year without running out of money over a 30-year retirement. There’s some debate about whether the 4% rule is the right rule of thumb for an early retirement that might go well beyond 30 years. The rule is also based on historical market data, which might not be matched in the decades to come. Some experts suggest using 3.3% as a guideline instead. Still, for estimating purposes, 4% gives you a quick calculation of what your savings might yield in retirement income. Say you already have $750,000 in retirement savings. Based on the 4% rule, you can withdraw $30,000 per year, adjusting each year for inflation, without worrying too much about depleting your savings.<h2>Key elements of the FIRE lifestyle</h2>How do you get to $1.5 million in retirement savings quickly? FIRE followers design their lifestyles around their financial goals aligned around a few key pillars:<h3>Be frugal. </h3>Many forgo expensive homes, cars, and other worldly goods in favor of saving 30% to 70% of their incomes. Getting there may require extreme measures. For example, FIRE followers may choose to live with family to save on rent, explore van life or tiny homes, or work remotely from a location with a lower cost of living.<h3>Work hard. </h3>To maximize income, FIRE followers may hold down multiple jobs or freelance in their spare time. <h3>Avoid debt. </h3>Carrying high-interest credit card debt or lingering student loan debt cuts into your ability to save. FIRE followers aim to pay down existing debt as quickly as possible and avoid taking on future debt.<h3>Save aggressively.</h3> In addition to putting aside a high percentage of their incomes, this group maximizes their tax advantages and returns by using a combination of savings accounts, traditional and Roth retirement accounts, and investments.<h2>Does ​the FIRE philosophy work for everyone?</h2>Some FIRE tactics, like saving as much as possible or cutting back on spending, work for just about anyone. However, the goal of saving 25 times your annual expenses by the time you’re 35 or 40 and retiring early on 3% to 4% of your savings may not be the right approach for everyone—especially people with lower incomes or people who live and work in major metropolitan areas where the cost of living is high. If your income barely covers your basic expenses, this plan may not be doable for you. The FIRE lifestyle isn’t always sustainable. Missing out on vacations, swapping weekend time with the family for a second job, and denying yourself simple luxuries like owning a car ultimately may feel limiting to some. Setting ambitious FIRE goals may be more realistic if your income is high and your responsibilities are few. Throw a couple of kids and a mortgage into the mix, however, and early retirement can start to feel a lot more challenging.Still, retiring at age 35 isn’t the only goal. Financial independence might mean saving enough money early in your career to give yourself better options in midlife. For example, you may want to take a sabbatical, start a new midlife career, downshift to part-time work or consulting, or simply worry less about meeting your day-to-day living expenses. For some, retiring early might mean exiting the workforce comfortably at 60, having paved the way with good financial habits over your adult lifetime.FIRE can’t account for all of life’s unpredictability, especially if you’re young and the path forward is long. If the markets don’t perform as well in the next 25-30 years as they have in the past, you may have to save more, withdraw less, or continue working to make up the difference. You may have surprise medical expenses that consume a large chunk of your savings. (You may also inherit money or invent a million-dollar product.) FIRE can’t remove uncertainty, but it can help you to be resilient: Learning to budget, developing a savings habit, avoiding debt, getting serious about investing—these skills can help you navigate the changes life throws at you, pre-and post-retirement.The FIRE movement isn’t everyone’s cup of tea, but many in the movement feel empowered by taking control of their finances and working toward their goals. FIRE followers encourage each other to stick to their plans and continually improve their financial standing, which is useful counterprogramming in a consumerist culture.<h2>Is there a right way to achieve financial independence and retire early?</h2>Achieving financial independence and retiring early means different things to different people. When thinking about your financial goals, FIRE encourages you to consider different versions of financial independence and early retirement. These may become your ultimate goals or may provide milestones to measure your success along the way. Here are a few ways some choose to interpret the FIRE movement:<h3>Barista FIRE </h3>Barista FIRE means saving enough money to exit the rat race and work in a less demanding job. Barista FIRE requires less money than traditional FIRE by lowering the amount you would need to withdraw from your savings. For instance, if you needed $4,000 to cover your monthly expenses and could earn $1,500 working part-time, your Barista FIRE number would be 25 x $30,000* = $750,000. This is much less than the $1.2 million if you had to plan to withdraw a full $4,000 per month with the traditional FIRE. Attaining Barista FIRE can be an important psychological marker. Even if you don’t choose to work part-time when you reach Barista FIRE, it may be reassuring to know that you have the financial freedom to do so.*$4,000 - $1,500 = $2,500 x 12 months = $30,000<h3>Lean FIRE </h3>Lean FIRE is the least amount of savings you would need to retire without working. Lean FIRE envisions a scaled-down version of retirement where you live minimally on $40,000 a year or less. If you were able to whittle your expenses down to $3,000 per month, your Lean FIRE number would be $900,000. Here, years of living frugally and avoiding debt may act as a training ground for a low-expense retirement—if it doesn’t burn you out. In any case, reaching Lean FIRE means you’ve crossed an important line: Retirement is now possible for you. <h3>Fat FIRE </h3>Fat FIRE is for those who want to live on $100,000 a year (or more) in retirement. Fat FIRE followers plan to travel and enjoy life, and don’t want to worry about paying for medical expenses or elder care down the road. It provides for a less stressful retirement by giving you a bit more wiggle room in your budget. With Fat FIRE, reaching an annual income of $100,000 in retirement would of course require $2.5 million in retirement savings. <h2>How do social security benefits play into FIRE? </h2>In any of these scenarios, the impact on whether and how much you will receive in Social Security benefits should be considered. Essentially, early retirement will very likely decrease your Social Security benefit because you’ll be missing out on your prime earning years. The reason for this is because Social Security benefits are accrued over your working life and calculated by taking your highest 35 earning years and averaging them out to a monthly earning. If you’re not earning (or earning much less) during your prime earning years, it can have a significant impact on the Social Security benefits you’ll receive in retirement.Depending on how much you do receive in Social Security benefits, it can help reduce the amount of money you’ll need in retirement (and the target expense figure you use to calculate your FIRE number). But depending on how early you hope to retire, you’ll also need to account for extra withdrawals during the years before your Social Security benefits begin. Your FIRE number is useful for estimating a savings goal and giving you a target to aim for. Before you embark on FIRE, and well before you’re ready to retire, you’ll want to double-check your math to make sure your living expenses will be covered for the duration.<h2>7 strategies to reach financial independence, retire early (FIRE) status </h2>The FIRE movement provides several strategies to help you quantify your goals and break them down into actionable steps. Your FIRE number and the goals that go with it are entirely up to you. Whether you go all-in or use FIRE strategies to attain smaller financial goals, these seven FIRE-inspired strategies may help:<h3>1. Embrace a vision. </h3>When your entire financial focus is on paying monthly bills, it’s hard to work toward big-picture goals like being financially independent and retiring early. Having a vision for your future can help guide you and deserves your attention. It’s important to lift your head from the grindstone long enough to make room for lifelong goals while also managing the day to day.<h3>2. Get out of debt, stay out of debt. </h3>High-interest debt can drag down your finances and keep you from reaching your financial goals. Manage your revolving debt carefully. Where you can, pay down high-interest credit card balances or consider <a href="https://www.happen.com/personal-loan/debt-consolidation">using a debt consolidation loan</a> to lower your interest costs and help eliminate your consumer debt. <a href="https://www.happen.com/auto-refinancing">Refinancing a high-interest car loan</a> or student loan debt may save you money or speed up the repayment process. <h3>3. Maximize your income. </h3>If your income doesn’t leave much room for savings, look for ways to reduce expenses and earn more on the side. In the short term, you might find a side gig or source of passive income to supplement your paycheck, or proactively move up the pay scale at your current job. Longer term, consider a career that will earn more income or think about starting your own business if your current job doesn’t offer the growth potential you’ll need.<h3>4. Prioritize savings. </h3>FIRE movement followers save 30% to 70% of their income to meet their financial goals. If saving this much feels unrealistic right now, how about a consistent 10% to 15%? FIRE followers also take savings seriously, seeking out <a href="https://www.happen.com/personal-savings/high-yield-savings">high-yield savings accounts</a> and <a href="https://www.happen.com/personal-savings/cd">using CD ladders</a> to earn the most interest to grow their hard-earned dollars.<h3>5. Invest wisely. </h3>As you build wealth, investments play a critical role in getting to your FIRE number. Investing can also help you maintain your savings throughout your retirement years. Finding a good financial advisor can help, but don’t overlook the value of learning about investing yourself. The better you understand the fundamentals of investing, the more effective you can be at managing your money, whether you work with an investment pro or not.<h3>6. Live below your means.</h3> Our consumer culture encourages us to spend, spend, spend—on our homes, cars, kids, technology, fashion, dining out, travel, pets, fitness, on and on. But meeting your financial goals means channeling your money away from spending and toward debt reduction and savings. The difference is mathematical, but it’s also philosophical: Create a lifestyle that serves your financial goals.<h3>7. Get an early start. </h3>Embracing the FIRE movement early in your working career means getting a head start on long-term savings. The earlier your start puts more time on your side. Whether the goal is early retirement, financial independence, or simply putting yourself on a solid financial footing, now is the best time to start.<h2>The bottom line</h2>The FIRE movement brings the sometimes-distant goals of financial independence and retirement into focus. By putting numbers to big-picture financial objectives, FIRE makes long-term savings more concrete and measurable. And while there’s no way to make saving 25 times your annual expenses easy—or remove the risk of an entirely obligation-free retirement over multiple decades—FIRE offers real steps to get you there. At the same time, FIRE provides a framework for thinking about money. By making conscious choices about saving and spending, by challenging yourself to consider how much money is enough (to live on or to retire on), you can use your money to do more than pay your bills or buy things. Even if you don’t become a dedicated FIRE follower, at the very least the philosophy of aiming for financial independence to retire early can help you be more intentional with what you do with your money. That alone is a step in the right direction.

What happens when you take money out of a CD before the maturity date? Here's everything you need to know, including how CD early withdrawal penalties are calculated, how to avoid these fees, and when incurring them might be a good idea.

If you need to withdraw your funds early (before the maturity date), it generally means paying a <a href="https://www.happen.com/personal-savings/cd">certificate of deposit (CD)</a> early withdrawal penalty fee to the bank or credit union. This is often based on the term and amount of interest earned, but can also be a set amount determined by your financial institution. It’s important to understand what happens when you take money out of a CD before the maturity date, including how CD early withdrawal penalties are calculated, and how to avoid these charges. We also cover a few reasons why you might want to consider making an early withdrawal on a CD despite the penalty you would incur. <h2>What is a CD early withdrawal penalty?</h2>A CD early withdrawal penalty is the fee charged by your bank or credit union when you withdraw funds from a certificate of deposit account before the term ends. Financial institutions charge a fee for withdrawing CD funds early because when you open a CD you are agreeing to hold a fixed amount of money (principal) in the account for a predetermined length of time (term) in return for an agreed-upon fixed interest rate and yield (APY). The end of the fixed term is known as the maturity date.While a CD offers a low-risk way to earn a higher, fixed interest rate on your deposits, it also requires you to leave your money until the end of the term, which can range from a few months to several years. Often, CDs with longer maturity dates earn a higher interest rate (APY). If you wait until the CD maturity date, you can withdraw all or part of your original deposit plus earned interest without penalty.Banks and credit unions charge a CD early withdrawal penalty fee to comply with reserve requirements on time deposit accounts such as CDs. The amount of the CD early withdrawal penalty can vary based on the financial institution, CD terms, interest rate, and market conditions. If the penalty is more than your earned interest, you stand to lose some of your principal. It’s important to review your account agreement for CD early withdrawal policies specific to your bank and your account.<h2>What types of penalties might you have to pay if you withdraw early?</h2>Before investing in a CD, it’s important to carefully review your account agreement and disclosures to understand how the early withdrawal penalty is calculated. Penalties vary by financial institution, and even between CDs offered by the same bank. Here are a few ways an early withdrawal penalty could be assessed.<h3>Monetary penalty</h3>You might be charged a percentage of interest based on the original principal or the amount withdrawn. This percentage-based fee may be calculated based on a set number of days, weeks, or months.  For instance, depending on your financial institution, you could be charged the equivalent of three months’ interest for an early withdrawal from a CD that matures in six months or less. If you have five year CD, you might pay a penalty of 12 months’ interest or more. Or, your bank could charge a specific dollar amount such as the full amount of interest you’ve earned as of the date of the withdrawal.  Typically, CDs with longer maturity dates have higher early withdrawal penalties. <h3>Loss of bonus</h3>On CDs offering a cash bonus, you could lose any cash bonus you earned when you opened or reinvested in the CD as penalty for early withdrawal. <h2>How does your financial institution calculate early CD withdrawal penalties? </h2>If you’re thinking about making an early withdrawal, knowing how your financial institution will calculate a CD early withdrawal penalty charge can help you make an informed decision. Here are some of the ways they can be calculated:A. Some financial institutions charge for a certain number of days’ worth of interest calculated on the original CD deposit amount as a penalty for early withdrawals. <blockquote>Penalty = Interest Rate ÷ 365 (or 366 in a leap year) × Penalty Days × Original Principal Balance</blockquote>For example, let’s say your bank charges an early withdrawal fee of 60 days of interest on a 24-month CD with an APY of 4.50% and you’ve deposited $10,000. Here’s how the penalty would be calculated:<blockquote>Penalty = .045 ÷ 365 x 60 x $10,000Penalty = $73.97</blockquote>B. Some financial institutions calculate the penalty based on the amount of deposit being withdrawn from the account.<blockquote>Penalty = Interest Rate ÷ 365 (or 366 in a leap year) × Penalty Days × Amount Withdrawn</blockquote>Let’s say you withdraw $2,000 from the CD described in A above and the penalty is 60 days’ interest on the amount withdrawn. Here’s how the penalty would be calculated:C. And if your penalty is calculated in months, instead of days, here’s how that would be calculated:<blockquote>Penalty = Interest Rate ÷ 12 × Penalty Months × Original Principal Amount (or Amount Withdrawn)</blockquote>Using our example of a 24-month CD with an APY of 4.50% and a $10,000 initial deposit. If the early withdrawal penalty is 3 months’ interest on the original principal, here’s how the penalty would be calculated:<blockquote>Penalty = .045 ÷ 12 x 3 x $10,000Penalty = $112.50</blockquote><h2>When could an early withdrawal be a good idea?</h2>While an early withdrawal from a CD account generally results in a penalty fee, there are some circumstances where it may be your better, or only, option. Here are a few situations where you might want, or need, to consider making an early withdrawal on a CD account:<ul><li>You need to cover a large emergency expense. If you were to put an unexpected medical bill on a higher-interest revolving credit card balance, your interest expense on the card could potentially be more costly than incurring the CD early withdrawal penalty and using some or all the funds to help you pay off the medical bill. </li><li>You find a better investment that could earn more yield. If rates have risen sharply since you made your CD deposit and you think taking advantage of a new, different opportunity could outweigh the early withdrawal penalty you would incur by accessing your CD money before maturity, it might be worth considering taking.</li><li>You need extra money to cover a down payment. If putting the money in your CD toward a down payment on a new home could reduce the size of your loan and save you money on the cost of financing, making the early withdrawal might be worth it.</li><li>You forgot to close your CD account before the maturity date and you don’t want to leave your money invested for another term.</li><li>Your accounts or property are garnished. In certain cases, such as when a garnishment or levy has been issued against your income or assets, early withdrawal from your CD may be your only option if you don’t otherwise have the money to satisfy the debt owed.</li></ul><h2>How to avoid CD early withdrawal penalties</h2>Giving yourself more flexibility in your CD selection can help you avoid paying early withdrawal penalties, sometimes even if you need to access your money before the CD matures.<h3>Know when an early withdrawal penalty applies. </h3>Carefully read your CD account agreement for information to learn what could trigger an early withdrawal penalty or fee. Even if the bank doesn’t use the word “penalty,” it must explain under what conditions you stand to lose your principal or interest earned if you withdraw your funds before the CD maturity date.<h3>Know your maturity date. </h3>Generally, most banks and credit unions set up CDs so that they automatically renew, or rollover, at the end of the term unless you specifically tell them not to. If you have a CD that automatically rolls over and you forget to withdraw funds in time, the new CD will typically have the same term as the matured CD, however, the interest rate and yield could be lower. When a CD matures and automatically renews into a new CD, typically there is a grace period (between 5 and 15 days) during which time you withdraw your funds and close the CD without an early withdrawal penalty. <h3>Choose a no-penalty CD. </h3>Unlike a traditional CD, a no-penalty CD offers you the flexibility to withdraw your money (including interest earned) starting seven days after you make your initial deposit without paying an early withdrawal penalty. However, typically you can only make an early withdrawal of the full balance, not a partial balance. Also keep in mind, generally, no-penalty CDs offer lower APYs and shorter terms (usually one year). <h3>Build a CD ladder strategy. </h3>A CD ladder strategy involves splitting up your deposit into CDs with different maturity dates, allowing you to take advantage of higher long-term rates without locking up all your funds for longer than you would like. Having multiple CDs with carefully staggered maturity dates enables you make sure your never more than a few months away from being able to access your money without risk of early withdrawal penalty.<h3>Request a waiver. </h3>Some banks may waive early withdrawal penalties in certain situations, such as: <ul><li>Depositor is declared legally incompetent, becomes disabled, or dies</li><li>CD is retitled to a new owner without a change in term or interest rate (APY) </li><li>Withdrawal is required by court order</li><li>Widespread economic or market crises</li></ul><h2>The bottom line</h2>Certificates of deposit have the potential to help you <a href="/resource-center/personal-savings/what-is-a-high-yield-cd-and-how-does-it-work">reach your savings goals faster</a> compared to regular savings accounts. However, if you need to access your money before the CD maturity date, you may incur an early withdrawal penalty which could mean giving up some of your interest earned or losing some of your principal balance. Knowing when a CD early withdrawal penalty applies, staying on top of your maturity date, and choosing flexible CD options such as a CD ladder can all help you to maximize yields while maintaining a certain measure of “liquidity” and avoid a CD early withdrawal penalty should you need the money.

Savings accounts are considered a low-risk and highly liquid place to hold cash—and typically provide a very low annual return. Recently, high-yield savings accounts are proving to be the exception.

A high-yield savings account is a special type of savings account that offers a higher interest rate or annual percentage yield (APY) than a traditional savings account, helping your money grow faster. Here, we cover what is a high-yield savings account, how it works, as well as some of the benefits and drawbacks to consider.<h2>What is a high-yield savings account &amp; how do they work? </h2><h3>What it is:</h3>A <a href="https://www.happen.com/personal-savings/high-yield-savings">high-yield savings account</a> is a special type of savings account that offers a higher APY than a traditional savings account—potentially paying up to 20 to 25 times the national average of a regular savings account.It used to be that most people would hold their savings and checking accounts at the same bank, making it easy to quickly transfer between the two. However, with rising interest rates and the blossoming of online-only banks, as well as traditional brick-and-mortar banks that support online account opening, competition for depositors has skyrocketed, creating a new category of “high-yield” savings accounts. <h3>How they work:</h3>Generally, high-yield savings accounts work like regular savings accounts, except they can also offer a relatively higher interest rate. As with a regular savings account, the APY on a high interest savings account is variable and fluctuates, up or down, depending on market conditions. This means the rate promoted today may not be the same rate offered tomorrow, just as the rate you obtain upon opening your account is also subject to change as you own the account.One factor affecting APY is how frequently interest compounds. Interest compounding occurs when interest accrues both on your principal balance and on your previously accumulated interest. Depending on the type of savings account you choose, interest on a high-yield account may be compounded daily, monthly, quarterly or annually.Below are other features of high-interest savings accounts:<ul><li>Availability: High-yield savings accounts are offered by some brick-and-mortar banks and credit unions but are most commonly available at online-only banks</li><li>Fees: High-interest savings accounts may or may not have monthly maintenance fees like other bank accounts. In some cases, the fee may be waived if you maintain a certain account balance or meet certain conditions, such as signing up for electronic statements.</li><li>Opening deposit requirements: It’s possible to open a high-yield savings account with $0 at some online banks, however, some financial institutions may require an initial deposit of $100 or more.</li><li>Minimum balance requirements: Generally, you can find online high-yield savings accounts that don’t require you to maintain a certain balance. However, some financial institutions gear their high-yield savings products toward customers who can maintain very high balances, like $50,000 or more. Interest rates on these types of high-yield savings accounts may be offered on balance tiers, with higher balances earning incrementally higher APYs.</li><li>Protections: High-yield savings accounts at banks backed by the Federal Deposit Insurance Corporation (FDIC) and credit unions insured by the National Credit Union Administration (NCUA) guarantee your deposits up to $250,000 per account owner, per account type. This means if the bank or credit union closes its doors because it can’t meet its financial obligations, you could get up to $250,000 of your money returned for each account ownership type.</li></ul><h3>Benefits of a high-yield savings account</h3>Here are some of the advantages of opening a high-interest savings account:<h4>1. Earn more on your savings.</h4>Earning a higher-than-average APY means your money works harder for you. For example, let’s say you put $10,000 in a traditional savings account earning a 0.30% interest rate compounded daily. After 12 months, your savings would have earned $30.04 in interest.Now let’s say you found a high-yield savings account offering a much higher 3.5% interest rate compounded daily. If you made no other deposits, that $10,000 could grow by $356.18 after 12 months. This amount of money could be enough to cover a few bills or a couple of trips to the grocery store.<h4>2. Open your account easily, online.</h4>Generally, high-yield savings accounts can be opened online in just a few minutes, and you can connect an external account for easy money transfers. When opening an account, financial institutions typically ask for basic information like your name, address, Social Security number or tax identification number.<h4>3. Access your money quickly.</h4>Saving in a high-yield savings account compared to a brokerage (investment) account means you can access your money quickly. Maybe your tire goes flat on your car, and you need $500 fast to make for the repair. While there may be limitations on the number or amount of withdrawals you can make per month, you can reasonably expect to be able to quickly access your money by transferring cash from your savings into a connected checking account to make the withdrawal.<h2>Disadvantages of high-yield savings accounts</h2>Here are a few of the minor drawbacks of a high-interest savings account.<h3>Availability is limited.</h3>High-yield savings accounts aren’t offered by all traditional banks. So, if your current brick-and-mortar bank or credit union doesn’t have this type of account, you’d have to go through the process of opening an account and transferring funds to a new financial institution. Also, many high-yield options are often online-only accounts without in-person customer service. If you prefer banking face-to-face with a teller, online-only banking might not be right for you.<h3>Accounts may have minimum balance requirements.</h3>High-yield savings accounts may require that you maintain a certain balance to avoid fees or to earn the highest APY. If the account charges fees, that cost can eat into the interest you earn from the account.<h3>APYs are variable.</h3>APYs on savings accounts are variable, not fixed, so the return you’ll see over a year isn’t guaranteed.In a climate where savings rates are projected to increase, this can actually benefit you because your rate will rise as market rates rise.However, in an environment where rates are projected to fall, APYs on savings accounts can also trend downward. In this scenario, <a href="https://www.happen.com/personal-savings/cd">certificates of deposit (CDs)</a> are a way to lock in a high yield. CD accounts put your money into an account for a preset term during which you receive a fixed amount of interest.<h2>How do high-yield savings accounts compare to regular savings accounts?</h2>Traditional savings accounts and high-yield savings accounts are generally similar aside from the APY offered. However, one other differentiator is high-yield savings accounts may be online-only accounts where you don’t have access to branches for in-person customer service.Larger brick-and-mortar banks with locations nationwide that do offer high-yield savings accounts may require a higher balance to earn a higher APY.<h2>What to look for in a high-interest savings account</h2>When shopping for a new savings account, the first factor to consider is APY followed by the monthly maintenance fee or any other fees that may be charged. Next, compare opening deposit requirements across different accounts at different financial institutions to see what meets your needs. Then, review account features (such as its smartphone app, budgeting, or automated savings tools) to see if the account has the financial tools you’re looking for. Finally, check customer reviews to determine what other customers have to say.<h2>The bottom line</h2>Comparing <a href="https://www.happen.com/personal-savings/high-yield-savings">high-yield savings accounts</a> is the best way to find one with fees and balance requirements that meet your needs. And keep in mind that high-yield savings accounts are just one of several places you can hold your savings. For money you don’t need access to right away, Certificates of Deposit accounts may provide a higher interest rate when you lock into a term.Depending on when you need the money, it’s prudent to have a mix of investments for different savings goals. Savings for everyday expenses and “rainy day” emergencies are better off left in liquid savings accounts, such as high-yield savings accounts, while money you won’t need to tap into for years or decades could be considered for other types of accounts.

Personal Savings

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

Chances are, you’re managing money differently today than you were a few years ago. If your shopping, spending, and money management have moved online and onto your phone, you might want to consider whether an online-only bank is a fit for you. At a traditional bank, fees and interest charges support retail branches and other services you may no longer want or need. Online banks don’t have retail locations. Instead, they hone in on providing online loans and deposit accounts with great rates, low fees, and digital features that make managing money easier now.Would an online bank work for you? Read on to learn more about the benefits of online banking.<h2>How managing money went digital</h2>Managing money online is now a primary way to transact. How many of these digital money moves do you recognize?<ul><li>Using your phone to deposit checks</li><li>Shopping and paying bills online</li><li>Using an app to pay or reimburse friends and family</li><li>Opening a bank, investment, or cryptocurrency account online</li><li>Paying a contractor through a payment app</li><li>Using a digital wallet</li><li>Adding multi-factor authentication (single-use passcodes) to your accounts for security</li><li>Monitoring your credit online</li></ul>You may check your real-time account balance before making a big purchase. You receive text alerts that remind you to pay bills. You use an app to pay a babysitter or split a check.Now that your relationship with money has gone mostly digital, how well does your bank support that relationship? If you’re not sure how to answer, you might want to look into an online bank.<h2>What is online banking?</h2>Online banking is what you do whenever you use a bank’s website or mobile app, but it also refers to a type of bank that focuses on digital banking. These banks don’t rely on retail locations to serve their customers (or members). <h2>How does online banking work? </h2>Just about everything happens online or by <a href="/mobile-app">mobile app</a>. You can:<ul><li>Use a banking website to open and access your accounts;</li><li>Download an app to get an instant read on transactions, transfer money between accounts, or send money to friends and family;</li><li>Pay bills and receive security alerts on your phone; and</li><li>Use any ATM to access cash (you may receive a refund for out-of-network fees).</li></ul>Online banking isn’t new: People have been using their bank’s websites to view accounts since the 1990s and mobile banking apps have been around for more than a decade. Online banks are taking digital banking to a new level by changing the economics of financial services.Branch locations cost money to operate along with other trappings of traditional banking, like paper statements and paper checks. By focusing on the key digital banking features consumers want, and ditching legacy features that drive up overhead, online banks can provide a great digital experience while keeping costs low.These savings translate to competitive rates on loans and savings, or <a href="/personal-checking/rewards-checking">rewards checking accounts</a> without maintenance fees—to name a few. You won’t get a nicely decorated branch to visit, but you will get the convenience of a bank that never requires you to visit a branch. And with less overhead, you may pay less and receive more on the loans, checking, and savings accounts you want.<h2>Traditional banks vs. Credit unions vs. Online banks</h2>When you shop for a bank online, you’ll find a wealth of options. Not every bank you find online is an online bank. Some, like credit unions, aren’t banks at all. Here’s a quick rundown on three common types of financial institutions:<h3>Traditional banks</h3>Traditional banks deliver a familiar mix of checking, savings, credit, and loans. Expect to find a network of national or regional retail branch locations, branded ATMs, online banking, mobile apps, and telephone-based customer service. Although banks can range from small community banks to nationwide megabanks, banks on the whole are full-service operations - a good place to look when you need a cashier’s check or safe deposit box. They’re also for-profit companies with profit margins to manage and shareholders to answer to.<h3>Credit unions</h3>Credit unions offer many of the same products and services as banks, but with a member-based business model that is not-for-profit. Rates and fees are typically competitive, and personalized service is a hallmark. Credit union membership is often based on where you live or work. You can go to <a href="https://www.mycreditunion.gov/about-credit-unions/find-join-start">mycreditunion.gov</a> to find credit unions you are eligible to join. Expect a range when it comes to digital experience: Some credit unions are tech-forward while others are a few steps behind.<h3>Online banks</h3>Online banks center on digital experience instead of maintaining branch locations or their own network of ATMs. Online banks typically offer lower rates and fees on loans and higher interest on checking and savings and have strong mobile apps and customer service features. As an example, <a href="/personal-checking/rewards-checking">Rewards Checking</a> at Happen Bank, formerly LendingClub, pays cash back rewards on Qualified Purchases using a debit card tied to Eligible Accounts, no maintenance fees, and no minimum balance requirements (aside from $25 to open the account).1 Like traditional banks, online banks are regulated, for-profit companies with profit margins and shareholders to manage.<h2>Pros and cons of banking online</h2>If you’re comfortable managing your money digitally, an online bank may give you a better deal on basics like checking, savings, and loans. Because online banks are built to function virtually, they’re invested in offering technology that works. Of course, you should check out any bank you’re considering individually, to make sure they have the accounts, features, and competitive rates you want.<h3>Do you need a branch?</h3>Some people prefer banking face-to-face. You might use in-branch services frequently - for example, if you own a small business and make regular large cash deposits. Maybe you’ve developed personal relationships with the people at your bank branch, and that gives you a sense of security and belonging.On the other hand, maybe you haven’t seen the inside of a bank branch in years. Maybe you only go grudgingly, when you can’t accomplish what you need online or at an ATM. Maybe your branch is now populated with automated tellers that handle tasks efficiently but can’t deliver a personal touch. Only you know whether you really need a branch to manage your money comfortably and effectively.<h3>Is an online bank safe?</h3><a href="/">Online banks</a> that are insured by the Federal Deposit Insurance Corporation (FDIC) offer the same protections as traditional banks. The FDIC insures up to $250,000 per depositor, per bank, for each ownership category including single accounts, joint accounts, trust accounts, and so on. Credit unions have similar insurance through the National Credit Union Association (NCUA).Wherever you bank, online security is a serious concern. Card-not-present (online) fraud is rising; security features that protect your account data and identity are a must. Look for security tools like single-use passcodes and biometric (face ID or fingerprint) identification that works with your phone. Online banks are constantly improving security technology to stay ahead of fraud. Avoid public Wi-Fi when you’re banking or shopping. Seek out and use your bank’s security features to keep your data as safe as possible.<h2>9 features you may find at an online bank</h2>One of the best reasons to consider an online bank is their range of convenient, money-saving products and features. Here are nine useful items you might find at an online bank:<ol><li><a href="/personal-checking/rewards-checking">Fee-free rewards checking with no minimum balance requirement</a></li><li><a href="/personal-savings/high-yield-savings">High-yield savings accounts</a> and CDs that pay top interest rates</li><li>A <a href="/mobile-app">mobile banking app</a> that covers all your basic banking</li><li>Nationwide <a href="/help/checking-accounts-faq/how-do-i-earn-atm-rebates-on-my-checking">ATM access with rebates</a> on out-of-network fees</li><li>Faster direct deposits that let you access your paycheck sooner</li><li><a href="/personal-loan">Loans with competitive rates</a> and fast online application, approval, and funding</li><li>24/7 customer service by chat or phone</li><li>Security features like multi-factor authentication and alerts that keep you connected to your accounts in real time</li><li>FDIC insurance (Member FDIC)</li></ol><h2>The bottom line</h2>In a digital-first world, an online bank can provide you with the loans, checking, and savings you want, with lower costs and a higher upside. If you already manage your finances in the digital realm, choosing a bank that does everything online and by app might not require much adjustment. Choose the right banking partner (or partners), plug in, and enjoy the benefits of banking online.<hr/>Terms and Conditions1. Rewards Checking Cash Back Rewards: The Debit Card Rewards Program (“Cash Back Rewards”) provides 1.00% cash-back on all Qualified Purchases using a debit card tied to Eligible Accounts. Eligible Accounts are: Rewards Checking accounts that meet the following requirements for the calendar month in review: (1) Maintain an average monthly balance of at least $2,500.00; or (2) Receives at least $2,500.00 in Qualifying Direct Deposits.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). 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.

Opening a bank account online is a convenient way to manage your money without setting foot in a local branch. Today, many online-only banks, traditional banks, and credit unions have easy online applications, so you can shop around and open an account from the comfort of your home. 

Opening a bank account online is a convenient way to manage your money without setting foot in a local branch. Today, many online-only banks, traditional banks, and credit unions have easy online applications, so you can shop around and open an account from the comfort of your home. Whether this is your first time opening an account or you need a quick refresher, here’s a step-by-step guide to opening a bank account online.<h2>4 steps to open a bank account online</h2><h3>1. Decide where to open an account.</h3>Shopping around with many banks and credit unions before opening an account can help you choose the right home for your money. So, consider putting together a list of financial institutions to compare based on customer reviews, banking app features, and available perks.Since you work hard for your money—and want to keep it safe—looking at how each bank or credit union protects your financial information and accounts is also important.Financial institutions have different security features to protect data. Encryption is used to hide your information, and you may be required to set up two-factor authentication to verify your identity each time you log into your account. For example, financial institutions could ask you to set up a password and activate two-factor authentication to enter the mobile <a href="/mobile-app">banking app</a>. When logging in on a non-mobile device, you may need to put in a password and answer security questions. These security measures are in place to make it more difficult for unauthorized people to gain access to your money.<h4>Know how your money is kept safe</h4>FDIC and NCUA insurance are government guarantees that protect up to a combined $250,000 in bank accounts at banks or credit unions, respectively. In the event a financial institution closes, these guarantees ensure you’ll be able to retrieve your money. Most banks have FDIC insurance and most credit unions have NCUA insurance, but it’s worth double-checking before opening an account.Financial institutions also provide protection in the event you lose your debit card. If someone gains access to your PIN or the card itself is lost or stolen and you report the loss within two business days, you’re typically only liable for up to $50 in fraudulent charges. You’ll be able to report the loss quickly by setting up alerts that notify you when your card is being used—even if you hadn’t yet noticed your card was missing.Even if you haven’t lost your card but you notice unauthorized charges on your periodic account statement, you’ll have 60 days (from the date you receive your statement) to report it, which is why it’s important to always review your statements when you receive them. Reporting after two months could make you responsible for more of the fraudulent charges.<h3>2. Choose an account type.</h3>After choosing a financial institution, the second step is choosing the type(s) of account you need. Four main types of bank accounts exist—<a href="/personal-checking">checking accounts</a>, savings accounts, money market accounts, and certificates of deposit. Here’s an overview of each.<h4>Checking accounts</h4>Checking accounts are deposit accounts you can use for day-to-day transactions. They typically come with a debit card to make purchases or withdraw money at ATMs. Some accounts come with paper checks, or you can order them. You can also use checking accounts to deposit checks, direct deposit your paycheck, make wire transfers, and more.Traditionally, checking accounts have paid little or nothing in interest. However, some high-yield checking accounts offer a higher-than-average return.Other factors to review when shopping for a checking account are the monthly maintenance fees, ATM fees, the minimum deposit to open the account, and the minimum balance you must maintain to keep the account open.<h4>Savings accounts</h4><a href="/personal-savings">Savings accounts</a> are a place to stash money for emergencies or financial goals, such as new furniture or a vacation. Savings accounts typically offer higher APYs than checking accounts. However, <a href="/personal-savings/high-yield-savings">high-yield savings accounts</a> may offer a better return.Unlike checking accounts, savings accounts do not typically come with checks or a debit card. Some banks and credit unions may charge a fee if you have more than a certain number of withdrawals from your savings account in a month.<h4>Money market accounts</h4>Money market accounts are like a checking and savings account hybrid. APYs for money market accounts can be comparable to those of savings accounts, and they may also limit how many transactions you can make per month. But like a checking account, money market accounts may come with a debit card and checks, giving you more payment options.<h4>Certificate of deposit (CD) accounts</h4>A CD is a deposit account that offers a fixed rate of return over a specified term. When the CD matures, you get the money you initially deposited plus interest, and you can withdraw funds or roll the CD into another term.Terms for CDs generally range from a few months to five years or more. In general, the <a href="/personal-loan">longer your loan term</a>, the higher the APY you can earn. However, withdrawing from the CD early can result in fees or forfeiting a few months’ interest. Also, if interest rates on savings products rise due to inflation, you could be stuck with low interest until the CD matures. (In that case, paying a fee or penalty to unlock the money may be worth it.)<h3>3. Fill out the online application.</h3>The process of opening the account involves filling out an online form and choosing an account authentication method, such as security questions to answer upon login. Here’s the information you could be asked to provide when opening an account:<ul><li>Name and physical address</li><li>Phone number and email address</li><li>Date of birth</li><li>Social Security number or taxpayer identification number</li></ul>To process your application, banks may review your checking and savings account history using information obtained from a credit reporting agency. Your credit report can include information such as where you’ve opened bank accounts, and if you have any returned checks, unpaid balances, or fraudulent activity on past accounts.Some banks may deny your application if you have an unfavorable banking history, such as a record of overdrafts or unpaid balances. However, an unfavorable banking history doesn’t mean you can’t get a checking account. Paying down unpaid bank overdrafts could help improve your chances of getting an account. You can also search online for second-chance banking options that are easier to qualify for. If you’re not sure what information is on your banking history record, you’re entitled to <a href="https://www.annualcreditreport.com/index.action">review your credit report annually for free</a>.<h3>4. Add money to your account.</h3>Now you’re in the home stretch—time to fund your account. The online application process usually includes a step where you can connect an external account to transfer funds to your new account. During the connection process, the new bank may make small deposits—and withdrawals—of a few cents in your existing bank account to verify that it is correct. You’ll then contact the new bank with the exact amounts to confirm.If you don’t set up the first deposit into your new checking account during the application, you could fund your account later through other methods, like setting up a direct deposit with your employer, depositing cash at a branch and ATM, or depositing checks or money orders using mobile check deposit.<h2>How to open a bank account for a minor online</h2>You typically need to be at least 18 to apply for a bank account. You can open an account on behalf of a minor, but that process requires different paperwork and may require permission from the child’s parent or legal guardian.Depending on the purpose of the account, consider whether the bank is the best place for it. Savings accounts can help teach children to save, and teens may benefit from learning to manage a checking account.<h2>How long does it take to open an account?</h2>It could take just a few minutes to open a bank account online, particularly if you already have a relationship with the financial institution. However, it might take several days if the bank needs more information from you. For example, if the bank can’t verify your identity, you may be asked for other documentation before the account can be set up.<h2>The bottom line</h2>Most banks offer online applications, so you have many options to consider. Even if you’re already a customer at one bank, expanding your options to look at what other banks offer might help you find higher APYs, lower fees, or better perks.Before shopping around, consider how much money you have available to deposit and how often you will want access to it. Also, check if there are conditions you must meet to avoid monthly fees. While some online bank accounts have no fees, others might charge you a fee if you don’t meet direct deposit or balance requirements each month.Fees are not the whole story, though. If you plan to use a smartphone to conduct your banking business, you’ll want to check that the bank has an easy-to-use mobile app and find out how responsive customer service is in case you need to call in for support.

Personal Checking

Auto loan refinancing is when you use a new car loan to pay down your old loan—often with a lower monthly payment or interest rate. 

You might choose to refinance a car loan for many reasons, from potentially lowering your monthly car payment to reducing your total interest costs over the life of the loan. If you’re thinking about refinancing your auto loan, it’s important to understand how refinancing works. The process is surprisingly straightforward, but there are a few key things to consider before you <a href="https://www.happen.com/auto-refinancing">apply for auto refinancing</a>.  <h2>What does it mean to refinance a car and how does it work? </h2>When you refinance a car loan, it means you pay down your existing loan with a new auto loan—usually from a different lender. You’ll make payments to the new lender until your loan is paid off, and the new lender’s name will appear on your car’s title. While refinancing won’t lower your total loan amount, you may benefit from more favorable terms.[1]   For example, if your new car loan has a lower interest rate, your new loan will accrue less interest each month. Even if you do not qualify for a lower interest rate, you could still lower your monthly payment by extending the length of your loan term. This strategy could be helpful if your finances have changed and you need some extra wiggle room in your monthly budget.  Alternatively, if you can afford a higher monthly payment, choosing a loan with a shorter term might help you score a lower interest rate. <h2>When could auto loan refinancing be a good idea? </h2>It’s important to <a href="https://www.happen.com/resource-center/auto-refinance/when-can-i-refinance-my-car-loan">consider timing when refinancing</a> your existing car loan. Here are a few situations when auto loan refinancing often makes sense.   <ul><li>Your financial situation has improved. You may want to shop for auto loan refinancing if your income or credit score have increased since you first took out your auto loan, or if you’ve paid off debts and have a lower <a href="https://www.happen.com/glossary/d/debt-to-income-dti-ratio">debt-to-income (DTI) ratio</a>. The changes could help you score a lower interest rate or more favorable loan terms if you refinance.[1] </li><li>Market interest rates have dropped. Even if your personal situation hasn’t improved, market competition impacts auto loan rates. When interest rates fall, lenders may offer lower rates to attract new customers. Check rates with multiple lenders to see if you might benefit.  </li><li>You didn’t shop around for your first loan. Dealerships can markup rates which may may result in higher interest rates and longer loan terms.[2] If you originally financed your auto loan through a dealership, you may qualify for better loan terms through a bank or lender. In some cases, the terms may still be better even if your financial situation or market interest rates haven’t changed.  </li><li>You want to lower your monthly payment. Sometimes lowering your monthly payments takes priority over getting a lower interest rate. If you need to free up room in your monthly budget, refinancing your auto loan could help you get a longer term and lower monthly payment.   </li></ul><h2>When could refinancing your car loan not be a good idea? </h2>Sometimes it’s better to wait before refinancing your auto loan. Here’s a closer look at times when you should hold off.  <ul><li>You can’t get a lower interest rate. If market interest rates have gone up or your financial situation hasn’t changed, it may make sense to hold off on refinancing.  </li><li>You’re upside down on your car loan. When you owe more on your vehicle than it’s worth, most lenders won’t allow you to refinance.[4]  </li><li>You don’t meet lender requirements. Many lenders won’t offer refinancing until you’re at least a few months into your current loan. On the flip side, some lenders require a longer period remaining on the loan term. If you’re near the beginning or end of the term, you may not qualify. </li><li>You don’t want to pay fees. Some lenders charge origination fees when you take out a new loan. In some cases, the amount is calculated as a percentage of the new loan amount and then deducted when the loan is funded. Your current loan may also charge you a prepayment penalty for paying off the loan early, often calculated as a percentage of the remaining loan amount.[3] </li><li>You don’t want your credit affected. Many lenders, like Happen Bank, formerly LendingClub, let you check your rate without affecting your credit score by conducting a soft credit inquiry. However, once you apply, the lenders usually perform a hard credit check, which could cause your score to take a temporary dip. <a href="https://www.happen.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>.[5]  </li></ul><h2>What do lenders look for when refinancing your car loan?</h2>Auto loan refinance terms, rates, and requirements usually vary widely between lenders. When you finance your car loan, lenders typically consider a range of factors, including information about your vehicle, current loan, and your creditworthiness. Here are some common things lenders look at when refinancing your car loan. <h3>1. Vehicle age, make, model, and mileage </h3>Lenders may refuse to refinance certain vehicle makes and models, or they may have limits on the car’s mileage and model year. For example, Happen Bank requires your vehicle to be less than 10 years old and have fewer than 120,000 miles. <h3>2. Current auto loan balance and remaining payments </h3>Your existing auto loan balance and remaining payments can also be a factor. A lender might choose not to refinance a loan if it has too low—or high—of a balance, or if you’re close to paying it off. <h3>3. Loan-to-value ratio </h3>Lenders may also look at the value of your vehicle relative to how much you owe on the loan, or the loan-to-value (LTV) ratio. A higher LTV can make it harder to get approved, especially if your LTV is over 100% and your car is worth less than the outstanding loan principal. This is also known as being “upside down” or “underwater” on your loan, and it can happen when your vehicle’s value depreciates faster than you pay down your loan.[4] <h3>4. Debt-to-income ratio </h3>Your monthly debt-to-income ratio helps lenders understand how easy it will be for you to afford your monthly payments. Qualifying for a new loan can be difficult if you have a high DTI ratio.  <h3>5. Your creditworthiness </h3>Lenders review your credit reports and credit score to help determine whether you qualify for a loan and to set your loan rates and terms. Having a long history of timely payments and low balances on your credit cards can help your credit score.  <h2>How to refinance your car loan </h2>If you’ve decided that refinancing your car loan is a good idea and the timing is right, follow these steps to get started.  <ul><li>Shop around. Many different types of lenders—like banks, credit unions, and online lenders—offer auto refinancing loans. Check your rate at multiple companies to find a competitive offer. When done properly, rate shopping may not impact your credit score.[6]</li><li>Get your documents in order. Most lenders will need your Social Security number, driver’s license number, registration paperwork, and the car’s vehicle registration number (VIN). You’ll also need to know the payoff amount for your existing loan. You can usually find this online when you log into your loan account or by contacting your current lender.  </li><li>Read the fine print about eligibility. Lenders will often have rules about which loans and cars are eligible for refinancing—for example, a minimum outstanding balance of $4,000 and fewer than 120,000 miles on the car. Save time by identifying each lender’s eligibility requirements before you apply. </li><li>Apply to refinance your car loan. When you’re ready to apply, it’s important to understand that most lenders use a hard credit inquiry with each application, which can impact your credit score. If you are applying to multiple lenders, consider submitting them all within a two week window. VantageScore® count all inquiries within a 14-day period for the same type of loan as just one inquiry on your credit report.[6]</li><li>Closely evaluate offers. Compare the terms of your existing loan against your offers to decide which one will help you accomplish your financial goals. Calculate how much you could save over the life of the loan, how much you could lower your monthly payment, and how quickly you could pay down the loan.  </li><li>Finalize your auto refinance loan. Once you’ve accepted a refinance offer, be sure to complete all of the paperwork. If the new lender is paying off the old lender, make sure your old loan is paid in full. Or if funds were deposited in your bank account, you may need to pay off the old lender directly.   </li><li>Make your first payment. Payments on auto refinance loans can start immediately. Be sure to note the due date of your first monthly payment, and make the payment on time.  </li></ul><h2>The bottom line </h2>Refinancing a car loan can be a good idea if your creditworthiness has improved, interest rates have dropped, or you want to change your loan’s terms. You could consider refinancing your car loan when you can qualify for a new loan with more favorable terms, such as a lower interest rate or monthly payment.   Keep in mind that applying for and taking out a new loan may <a href="https://www.happen.com/resource-center/personal-loan/does-refinancing-a-car-hurt-your-credit">impact your credit score</a> in the short term. However, in the long run, refinancing won’t necessarily hurt your credit if you make your loan payments on time.   <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.bankrate.com/loans/auto-loans/how-to-decide-between-bank-or-dealership">Bankrate</a>. &quot;Is it better to finance a car through a bank or dealership?&quot;</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><li><a href="https://www.experian.com/blogs/ask-experian/how-does-rate-shopping-affect-credit-score">Experian.</a> &quot;How Does Rate Shopping Affect Your Credit Scores?&quot;</li></ol>

Your credit score may be impacted when you refinance your auto loan thanks to a hard credit check, but the effects are typically short-lived.   

Before deciding to refinance your vehicle, it’s important to understand how it may affect your credit score. Let’s take a closer look at how refinancing a car loan impacts your credit. <h2>Will refinancing your auto loan hurt your credit score? </h2>Yes, refinancing an auto loan may hurt your credit score. When you refinance a vehicle, you’re applying for a new auto loan, then using that loan to pay down your existing car loan. During the application process, the lender will check your credit reports, resulting in a <a href="https://www.happen.com/resource-center/personal-finance/key-differences-of-a-soft-credit-check-vs-hard-credit-check">hard credit pull</a>.[1] Some lenders, like Happen Bank, formerly LendingClub, offer pre-qualification to <a href="https://www.happen.com/auto-refinancing">check your rates</a> first, which shows up as a soft pull rather than a hard pull on your credit report. <h2>How much will your credit score decrease if you refinance? </h2>Your credit score may decrease after a hard credit check when you refinance an auto loan. However, it could go down even more if you’re applying for additional credit over a short time.[1] If you’re <a href="https://www.happen.com/help/auto-refinance-faq/how-do-i-apply-for-an-auto-refinance-loan">applying for auto refinance loans</a>, you may want to reconsider whether applying for additional credit like a credit card or mortgage makes sense.   When you refinance your auto loan, the age of your accounts—or the length of your credit history—goes down. Fortunately, this <a href="https://www.happen.com/resource-center/personal-finance/what-affects-your-credit-scores">credit scoring factor</a> only makes up 15% of your score so your score may be impacted accordingly. Loans that are reported as “new” to the credit bureaus also signal that you’ve taken on more debt, which could lower your score.[2]   Your credit mix, or the different types of accounts on your credit report, may not change much since you’re replacing one auto loan with another.[2]  <h2>How long will it take for my credit score to recover? </h2>According to Experian, hard inquiries from the application process can stay on your credit report for up to two years, but generally the impact on your score only lasts about a year.[3] <h2>When refinancing your car loan might make sense </h2>Refinancing your auto loan can offer many benefits, like lower interest rates or a longer loan term. However the timing may not always be right, depending on your financial situation and other factors. Here’s a closer look at when refinancing your car loan might make sense.  <h3>1. You got the loan from the dealership </h3>If you got your original loan from the car dealer, you may not have received the best rate possible. A dealership is typically an intermediary between the buyer and the auto lender, and the dealer may mark up the interest rate to compensate for their involvement.[4] You may be able to get a better rate by refinancing directly with an online lender, credit union, or other financial institution. <h3>2. Your credit has improved </h3>If your credit score has increased since you first took out the loan, and you’ve been making on-time payments on your original loan for at least a few months, you may qualify for a lower interest rate through refinancing.[5]  <h3>3. Interest rates have gone down </h3>Interest rates fluctuate often. If interest rates have decreased since you first took out your loan, you may be able to take advantage of lower rates. Rate shopping without a hard credit check can help you determine whether you qualify for a lower rate. Credit scoring systems such as the FICO® and VantageScore® have built-in accommodations for rate shopping on installment loans. They treat inquiries related to multiple loan applications as a single event, as long as all applications are for the same loan amount and are submitted within a 14-day window.[6]<h3>4. You need a lower car payment </h3>Even if you’re unable to lower your interest rate, refinancing can still help you get a lower monthly payment. You’ll refinance a lower balance than what you started with, which shrinks your monthly payments. Refinancing into a longer term may also lower your monthly payments because they’re spread over more months. This can free up cash for other monthly expenses. Just keep in mind that this strategy can result in a higher total interest cost over the life of the loan. <h2>When an auto refinance loan might not make sense </h2>Refinancing can come with a number of benefits, but it’s not always the right move. Here’s a look at common reasons when an auto refinance loan might not make sense.  <h3>1. Your loan is almost paid off </h3>If you don’t have much time left on your loan, lenders likely won’t want to refinance your loan. <a href="https://www.happen.com/help/auto-refinance-faq/what-is-auto-refinance">Happen Bank</a>, for example, requires at least 24 months left on the loan term to consider a refinance loan. <h3>2. Your loan is underwater </h3>Being upside-down or underwater on your auto loan means the repayment amount on your loan is more than the car is worth. While it can be possible to refinance an underwater loan, it typically comes with high interest rates and unfavorable terms.[7] <h3>3. The prepayment penalty is too high </h3>Since the new lender is <a href="https://www.happen.com/resource-center/personal-loan/the-pros-and-cons-of-paying-off-a-personal-loan-early">paying off your old loan early</a>, you may be subject to prepayment penalties in the process. Check with your original lender to see what fees you may incur, then compare it with your potential savings to make sure it’s worth it.[8] <h2>Can you refinance an auto loan with poor credit? </h2>Yes, you can refinance an auto loan with poor credit. While it’s generally better to refinance when your credit is in good shape, it may be possible to refinance a car loan even with bad credit. However, you’ll likely pay a higher interest rate as your credit score decreases. Instead, you might consider working to improve your credit score before you try to refinance your auto loan.[9]  <h2>How to get started with the auto refinancing process </h2>Refinancing your auto loan is a straightforward process, but it&#39;s important to understand what’s involved before you get started. Here are a few pointers to keep in mind.   <ul><li>Determine if refinancing makes sense for you. Consider current interest rates, whether your credit score has improved, and other factors that may make it a good time to refinance or require you to wait. Be sure to also assess your car’s value to make sure you’re not upside-down on your existing loan. </li><li>Shop around. Many lenders will let you prequalify without a hard inquiry to your credit score. If you choose to complete the application, be sure to have all your documents in order, like your car’s vehicle identification number (VIN), existing loan’s payoff amount, and your Social Security number. Try to compare offers within a short period of time—usually no more than two weeks—to minimize the impact on your credit score.[6]  </li><li>Evaluate loan offers. Compare refinancing offers from different lenders to your existing loan to see how your financial situation will be impacted. Calculate how much you could save over the life of the loan, how much you could lower your monthly payment, and how quickly you could pay down the loan. With this knowledge in hand, you can confidently decide which refinancing offer will help you accomplish your financial goals.[9]  </li></ul><h2>The bottom line </h2>Is refinancing a car bad for your credit? It may impact your score, but as long as you make your monthly payments on time, your score should recover. Unless you’re planning to take out a large new loan in the very near future—for example, a mortgage—don’t let a short-term, small drop in your credit score keep you from refinancing your auto loan and saving money. If you didn’t shop around for your current auto loan, your credit score has improved, or interest rates have decreased since you took out your initial car loan, it’s likely worth looking into refinancing options.    <hr/><ol><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.myfico.com/credit-education/whats-in-your-credit-score">myFICO</a>. “What&#39;s in my FICO Scores?” </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.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-dealer-arranged-and-bank-financing-en-759/">Consumer Financial Protection Bureau. </a>&quot;What are the different ways to buy or finance a car or vehicle?&quot;</li><li><a href="https://www.experian.com/blogs/ask-experian/how-soon-can-you-refinance-car-loan/">Experian.</a> &quot;How soon can you refinance a car?&quot;</li><li><a href="https://www.experian.com/blogs/ask-experian/what-is-rate-shopping/">Experian</a>. “What is rate shopping?”</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/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://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></ol>

The total cost of owning a car includes the purchase price, interest on loans, insurance, fuel, maintenance, repairs, taxes, registration, depreciation, and unexpected expenses.

When it comes to estimating the true cost to own a car, the sticker price is only the start. Understanding the factors that go into cost of car ownership can reduce surprises and help you budget more accurately.  Here are six factors that impact the total cost of owning a car—plus tips for how to cut costs, where possible. <h2>1. Initial purchase price </h2>Naturally, price is a large component of the true cost of owning a car. Purchase price can also determine sales taxes, state registration fees, and licensing fees. How to lower it: Arm yourself with knowledge. Use online tools like Kelley Blue Book and <a href="https://www.truecar.com/">TrueCar</a> to research average selling prices and establish an appropriate value for your trade-in. Plug-in hybrids and electric vehicles come along with tax credits, which can offset part of the initial cost. You can also brush up on your negotiating tactics: <a href="https://cars.usnews.com/cars-trucks/advice/how-to-negotiate-the-best-price-on-a-new-car">U.S. News &amp; World Report</a> recommends controlling your emotions and knowing which fees are flexible. <h2>2. Interest rate </h2>About <a href="https://www.consumerreports.org/car-maintenance/the-cost-of-car-ownership-a1854979198/">two-thirds of buyers</a> use financing for their car purchase, and the interest charges can contribute meaningfully to the true cost of car ownership. How to lower it: Don’t settle for financing directly from the dealership. Our partners at NerdWallet recommend, “It’s wise to get pre-approved before you hit the dealership, so take a little time to compare auto loan interest rate offers from different lenders.” Making a down payment and keeping your credit score in good shape can also help you lock in a lower interest rate. If you already have a loan, <a href="https://www.happen.com/auto-refinancing">auto refinancing</a> can save you money on interest, lower your monthly payments, or potentially do both.<h2>3. Depreciation </h2>Unfortunately, even well-maintained cars lose value over time, making depreciation one of the largest cost factors—particularly for new cars. Depreciation may not seem like an explicit cost, but it’s one you’ll realize when you go to sell your car and purchase a new one. How to lower it: Buying a used car can diminish the sting of depreciation, since older cars depreciate at a lesser rate. <a href="https://www.trustedchoice.com/insurance-articles/wheels-wings-motors/car-depreciation/">New cars can depreciate by as much as 11 percent</a> the moment you drive them off the lot. Keeping your car longer can also reduce depreciation costs. <h2>4. Maintenance </h2>New tires, oil changes and unexpected repairs are included in the total tally for car ownership. How to lower it: Longer, more comprehensive warranties and maintenance plans can help defray some costs—though these might add to the initial purchase price of the car. Reliability reviews and ratings, like those available at <a href="https://www.consumerreports.org/cars/">Consumer Reports</a>, can help you estimate expected costs and decide if a deluxe warranty is a good choice, or if a different car would be a better option. <h2>5. Insurance </h2>Coverage is required by law in most states, and rates can vary widely. How to lower it: The <a href="https://www.iii.org/article/nine-ways-to-lower-your-auto-insurance-costs">Insurance Information Institute</a> recommends shopping around for at least three price quotes and requesting a higher deductible. Bundling auto and home insurance with one company can also help save money. Rates can also be impacted by your driving record, how you use your car (daily commute versus weekends-only) and where it’s parked (in a garage versus on the street). <h2>6. Fuel </h2>On average, fuel is the second-largest cost of car ownership—and the price goes up if you choose a gas-guzzling SUV. According to <a href="https://www.consumerreports.org/car-maintenance/the-cost-of-car-ownership-a1854979198/">Consumer Reports</a>, “You could pay more than $15,000 to fill up a Jeep Liberty over five years, while a similar-sized but more-efficient RAV4 V6 could save you $4,000 during that time.” How to lower it: Pick your new car with an eye for efficiency, and consider whether an electric or hybrid vehicle could be right for you. Once you’ve made your purchase, get the most out of your MPG by avoiding aggressive driving, using cruise control and lightening your load. <h2>Calculating the cost of car ownership </h2>Budgeting for the true cost of car ownership can get complicated, but an online cost estimator, like the <a href="https://www.edmunds.com/tco.html">Edmunds True Cost to Own® calculator</a>, can help.

Should you lease or buy your next car? Leasing costs less on a monthly basis and puts limits on how you can use your car. Buying comes with ownership responsibility but will cost you less in the long run.

If you’re trying to decide whether to buy or lease a car, both options have benefits and drawbacks. When you buy, you own your car outright once you repay your auto loan, and you have more flexibility regarding mileage and vehicle customization than you would with a leased vehicle. But your upfront and ongoing maintenance costs could be higher when you buy—and your monthly payments probably will be, too.[1]  This guide can help you understand whether leasing vs. buying a car makes more sense for you. <h2>Leasing vs. buying a car: what’s the difference? </h2>Understanding the differences between leasing vs. buying a car can help you make an informed choice if you’re shopping for a new vehicle.  <table><tr><td>Factor </td><td>Buying a car </td><td>Leasing a car </td></tr><tr><td>Ownership </td><td>You’ll own your car after repaying your auto loan. </td><td>You won’t own your car or build equity with monthly payments.  </td></tr><tr><td>Upfront costs </td><td>Your upfront costs may be higher. </td><td>Your upfront costs may be lower. </td></tr><tr><td>Monthly payments </td><td>Your monthly payments may be higher, but you’ll only make them for your loan’s term. </td><td>Your monthly payments may be lower, but they’ll continue as long as you lease. </td></tr><tr><td>Insurance </td><td>Your insurance premiums may be lower. </td><td>Your insurance premiums may be higher. </td></tr><tr><td>Warranty protection </td><td>It may cover your car’s maintenance and repairs for a few years. </td><td>It often covers your car’s maintenance and repairs for your entire lease term. </td></tr><tr><td>Mileage </td><td>You won’t have mileage caps. </td><td>You’ll generally have mileage caps. </td></tr><tr><td>Flexibility to customize </td><td>You have more flexibility if you want to customize your car.  </td><td>You have less flexibility if you want to customize your car.   </td></tr><tr><td>Sellability </td><td>You can sell your car anytime or keep it as long as you want. </td><td>You cannot sell your car, and you’ll need to turn it in or buy it for its full value when your lease term ends. </td></tr><tr><td>Depreciation </td><td>You’ll need to consider depreciation when you sell or trade in your car. </td><td>You won’t need to consider depreciation, as it’s built into your lease agreement. </td></tr></table>  <h3>1. Ownership </h3>When you choose to <a href="https://www.happen.com/resource-center/auto-refinance/tips-for-how-to-get-the-best-deal-on-a-new-car">buy a vehicle</a>, you will eventually own your car at the end of your loan term. With a lease, your monthly payments cover the estimated depreciation of your car with interest, so you won’t build equity or own your car at the end of its lease term.[1]   <h3>2. Upfront costs </h3>Your upfront costs may be higher if you choose to buy vs. lease a car. When you buy, you’ll generally need to pay sales tax on your car, plus registration and origination fees. Your lender might also require a down payment, which increases your initial costs.  Your initial costs may be lower with a lease because a down payment isn’t always required, though other fees apply. Your leasing company may charge acquisition and disposition fees, which cover the cost of setting up your lease agreement and cleaning and selling your car at the end of your term. You’ll also pay registration fees.[1]   <h3>3. Monthly payments </h3>When you buy or finance a car, your monthly payments go toward interest and loan principal, so they tend to be higher than what you’d pay with a leased vehicle. With a lease, your monthly payments go toward interest and the estimated depreciation of your car during its lease term.   Your payments might be higher if you choose to buy, but you’ll only make them during your loan term. After that, your loan will be repaid and you’ll own your car outright. When you lease, your monthly payments continue for as long as you choose to lease a car.[1]     <h3>4. Insurance </h3>You’ll probably need full-coverage insurance whether you lease or <a href="https://www.happen.com/resource-center/auto-refinance/when-is-a-good-time-to-buy-a-car">buy a car</a>, but you might need more coverage for a leased vehicle. Full coverage typically includes collision, comprehensive, and liability insurance, but leasing companies often require gap insurance, too. Gap insurance protects the lessor if your car is totaled after an accident. It pays for the difference between what your vehicle is currently worth and the amount you owe on the loan.[2]    Besides having stricter coverage requirements, some lessors also limit your deductible, or the amount you pay out of pocket before insurance kicks in, which isn’t the case with lenders. Lower deductibles typically result in higher monthly payments.[3]     <h3>5. Warranty protection </h3>Leased cars often have warranties that are effective for your entire lease term. These warranties typically cover regular maintenance costs and repairs, so you won’t need to worry about high unexpected costs cropping up with a leased car.  On the other hand, if you buy a car new, it may have a warranty that covers certain maintenance or repair costs. But that warranty will likely only be effective for a few years, after which you’ll need to pay for regular maintenance and repairs.[4]  <h3>6. Mileage </h3>You can drive as many miles as you’d like when you buy or finance a car, but this usually isn’t the case when you lease. Leasing companies often cap your mileage at 12,000 or 15,000 miles per year, and fees typically apply if you exceed your allotted mileage.[1]  <h3>7. Flexibility to customize </h3>Buying a car gives you more flexibility to customize it compared to leasing. So if you’d like to tint your windows or upgrade your wheels, you can do so when you buy or finance a car—but not if you lease.   <h3>8. Sellability </h3>You can sell your car anytime when you buy or finance it. Unfortunately, you won&#39;t have this option with a lease because you can&#39;t sell a leased vehicle. Instead, you&#39;ll need to turn it in at the end of your lease term or buy it from the leasing company for its full value.[1] <h3>9. Depreciation </h3>Once you purchase a car, it typically loses value (depreciates) instantly. While <a href="https://www.edmunds.com/tco.html">depreciation</a> may be a concern if you own your car and try to sell it before you&#39;ve established positive equity (when the remaining loan balance is less than the car&#39;s current market value), it’s less of a concern with a leased vehicle. Rather than selling, you’ll turn in the leased car or buy it for its full value once your lease is up.[1] <h2>Pros and cons: Buying vs leasing a car </h2><table><tr><td> </td><td>Buying </td><td>Leasing </td></tr><tr><td>Pros </td><td>- Opportunity to build equity and ownership - Monthly payments end once loan is repaid - No mileage caps - Can sell your car at any time - More flexibility to customize - Insurance costs may be lower </td><td>- Monthly payments may be lower - Warranty may cover maintenance costs for entire lease term - Can turn in your car once lease term is up - Can get newer cars more often </td></tr><tr><td>Cons </td><td>- Monthly payments may be higher - Warranty may only cover maintenance and repairs for a few years - Car is a depreciating asset - Upfront costs may be higher </td><td>- No equity or ownership opportunity  - Fees may apply for certain actions - Insurance costs may be higher - Mileage caps often apply - Long-term costs may be higher </td></tr></table><h3>When leasing a car makes sense </h3>Leasing a car could be a better option than leasing if you:  <ul><li>Don’t drive far or frequently: Many leases have mileage caps between 12,000 and 15,000 miles annually, so leasing could make sense if you have a short commute or don’t drive often.  </li><li>Get new vehicles often: If you prefer the dependability and features of newer cars, leasing may be the right choice. Lease terms are typically short, and you can simply turn in your car and lease another, newer vehicle once your term ends.  </li><li>Want low maintenance costs: Many lease warranties cover certain maintenance and repair costs for your entire lease term, so you won’t need to worry about unexpected expenses. </li><li>Can afford ongoing monthly payments: While you might not pay for maintenance and repairs, you’ll make monthly payments for as long as you lease a car.  </li></ul><h3>When buying a car makes sense </h3>Buying a car could be better than leasing if you:  <ul><li>Have a long commute or drive often: Since leases often have mileage caps, buying a car may be your best option if you drive more than 12,000 or 15,000 miles a year.  </li><li>Have a down payment saved: If you have a down payment set aside for a new car, buying could be a better choice. Making a down payment means you may have instant equity and benefit from lower monthly payments.  </li><li>Keep vehicles for several years: Buying may be a better option if you typically keep cars for several years. You’ll eventually repay your auto loan and own your car outright—and the lack of monthly payments may mean more potential for long-term savings. </li><li>Want more flexibility: Buying could also make more sense than leasing if you want the freedom to customize your car as you please.  </li></ul><h2>The bottom line </h2>Ultimately, choosing between leasing vs. buying a car depends on your preferences, habits, and goals. Buying is likely the better choice if you have a long commute or want to own your car eventually. Buying may also result in long-term savings, though your upfront costs may be higher. When you buy, you can also choose to <a href="https://www.happen.com/auto-refinancing">refinance your auto loan</a> if you’re not happy with the terms or your credit situation has improved.   On the other hand, leasing could be a good choice if you don&#39;t drive often and enjoy the benefits of newer cars. Leasing might help you save money in the short term, but perpetual monthly payments and higher insurance rates can mean higher long-term costs.    <hr/><ol><li><a href="https://www.consumerfinance.gov/ask-cfpb/what-should-i-know-about-leasing-versus-buying-a-car-en-815/">Consumer Financial Protection Bureau</a>. “What should I know about leasing versus buying a car?” </li><li><a href="https://www.iii.org/article/what-auto-insurance">Insurance Information Institute</a>. “What is auto insurance?” </li><li><a href="https://www.iii.org/article/insuring-leased-car">Insurance Information Institute</a>. “Insuring a leased car.” </li><li><a href="https://www.kbb.com/car-advice/car-leasing-guide/">Kelley Blue Book</a>. “Car Leasing Guide: How to Lease a Vehicle in 2024.”</li></ol>

Auto Refinance

A small business loan can help you get the cash you need to grow your business. Getting a business loan can sometimes be tricky, especially if you’re a new business owner. 

Growing your business can be an exciting time. It may also mean you need to come up with some extra cash to cover large expenses. Whether you’re looking to buy new equipment or lease a larger commercial space, a <a href="https://www.happen.com/business-loan/aof-loans">small business loan</a> may be able to provide the funding you need to reach your goal.  <h2>4 steps to take before getting your first small business loan </h2>Business loans can be tricky, especially for new business owners, but there are some steps you can take before getting your first small business loan. Here’s a closer look at what to do before getting your first small business loan.  <h3>1. Research what it takes to qualify </h3>Small business loans from banks and credit unions often have strict requirements. For example, many lenders only offer loans to businesses that have been in business for six months to a year, and some may require a minimum of at least two years in operation.   The annual revenue your business earns is also a deciding factor. Many lenders require a minimum annual revenue between $50,000 to $250,000.  <h3>2. Prepare a business plan </h3>Virtually any issuer of business loans, from a local financial institution to the U.S. Small Business Administration (SBA) to a private partner or investor, will want to see a business plan that shows how you plan to grow your company (and how a loan can enable that).  A good business plan includes a “SWOT analysis” that spells out your company’s strengths, weaknesses, opportunities and threats; revenue and earnings projections for the next one to five years, plus any costs of production, distribution, and marketing.   The <a href="https://www.sba.gov/business-guide/plan-your-business/write-your-business-plan">SBA provides advice and examples of effective business plans</a>. And if you need additional guidance, the SBA-affiliated nonprofit <a href="http://score.org/">SCORE.org</a> may be able to pair you with a mentor who can give you the benefit of real-world experience. <h3>3. Create a balance sheet </h3>Lenders typically want to see documentation of your company’s assets and liabilities, spelled out in a formal balance sheet. Assets can include equipment you own, product inventory, intellectual property and money you’re owed (accounts receivable). Liabilities include debts, outstanding leases on equipment or facilities, payroll, and employee benefits costs.   Running these numbers can also help you determine if you’re able to afford the cost of a loan.  Keep in mind that a business loan is another monthly expense on top of your existing operating costs. While the loan may provide your business the opportunity to grow, and ultimately earn more income, this may not happen overnight.  If you’re unsure how to create a balance sheet, a financial professional, like a certified public accountant (CPA) can help.  <h3>4. Check your credit score </h3>Lenders generally check your credit when considering an application for a small business loan — whether you’re applying with your own credit or using <a href="https://www.happen.com/resource-center/business-loan/how-to-build-your-business-credit">business credit</a>. Before applying for a small business loan, it’s a good idea to check your credit report to know where you stand.  Borrowers with poor credit are less likely to qualify for the best rates. So if your credit isn’t in the greatest shape, you may want to consider holding off on applying for a loan until you can improve your score.  <h2>Determine which type of small business loan is right for you </h2>Business owners can choose from many different types of small business loans. Finding the right business loan depends on many factors, including how long you’ve been in business, the financial health of your business, your credit, and how much you need to borrow.  Here’s a closer look at some of the common types of small business loans. <h3>Small business loan </h3>Traditional small business loans are available from banks and credit unions. With this type of loan, you’ll generally be able to get competitive interest rates, large loan amounts, and long repayment terms. To qualify, you’ll likely need consistent business revenue, a business that’s been established for at least two years, and good credit.  <h3>Government business loan </h3>The <a href="https://www.happen.com/business-loan/sba-loans">SBA offers low-interest small business loans</a> with long repayment terms. Under the 7(a) program, the SBA guarantees some types of small business loans issued through banks. The SBA also has a 504 loan program that can help you cover the cost of big purchases needed to grow your business like buildings, equipment, or land.1  <h3>Nonbank small business loan </h3>Traditional lenders like banks and credit unions may not be the best option if your business hasn’t been around long enough to qualify. Entrepreneurs looking to <a href="https://www.happen.com/resource-center/business-loan/guide-to-business-financing">finance a startup business</a> may have better luck applying for a small business loan from an online lender as online loans may have few restrictions to qualify. Online lenders often offer fast funding, sometimes as fast as the day you apply for the loan, but you’ll likely pay interest rates than with a bank or credit union. <h3>Microloan </h3>Microlenders are nonprofits that offer small, or micro, loans to businesses. Loan amounts are typically under $50,000 and the application process is detailed and lengthy. Micro loans often require lots of upfront work, like presenting a detailed business plan, financial statements, and an explanation of how you’ll use the loan. If you’re trying to fund a startup with no operating history, lack collateral, or have poor personal credit, a microloan offers an opportunity to borrow cash. <h2>What do you need to apply? </h2>Lenders may have different requirements during the application process. You’ll likely need to provide some or all of the following information: <ul><li>Business information: Applications typically require you to share basic information about your business, including business name, address, and employer identification number (EIN). You may also have to provide a business plan or other documentation about your plans to use the loan money.  </li><li>Business owner details: Whether you’re a solo entrepreneur or own a business with others, lenders require you to share personal information about each business owner, like Social Security numbers and addresses.  </li><li>Financial statements: To help gauge risk, lenders generally require documentation about how your business is doing financially, like annual revenue, profit and loss statements (P&amp;L), tax returns, and bank account statements. You may need to provide this information for the business as well as any business owners. </li><li>Potential collateral: Lenders may want you to offer assets they can seize and sell in  case you fail to repay your loan. This can include property owned by your company or, in a manner comparable to secured car loans and mortgages, equipment or other assets being financed through the loan. </li></ul><h2>Alternatives to small business loans </h2>Not all business expenses require a small business loan. And in some cases — like if your business is new or you have less-than-perfect credit — you may not be able to qualify for a business loan. If you still need access to cash, here are some options to consider:  <h3>Business line of credit </h3>If you need to fund cash flow for day-to-day expenses, a business line of credit may be a good choice. It lets you make purchases or issue checks against a preset borrowing limit, and to pay back those sums as you’re able, so that you pay interest only on the funds you use. This flexible form of financing can help you cover expenses like payroll or unexpected repairs and may be easier to qualify for than a small business loan.  <h3>Small business credit card </h3>If you don’t yet qualify for a small business loan, a business credit card could be a good option — especially if you only need to borrow small amounts of cash. Look for zero-interest credit cards or cards with perks that can help grow your business, such as cash back or travel rewards.   <h3>Personal business loan </h3>If a small business loan is out of reach, you may still be able to borrow money as an individual using a personal loan. Just keep in mind that you’ll likely still need good credit to get the best rates. <h2>The bottom line </h2>For those who qualify, small business loans can be a helpful tool to finance expenses like new equipment or other costs to help expand your business. Choosing the right fit for your business and financial situation can be tricky — especially if you need to seek funding from an online lender or microlender.   Before applying for a business loan, it’s also important to make sure you can afford the monthly payments. If you’re not sure which type of small business loan is right for your business, check with a trusted business advisor, like a CPA. <hr/>1. <a href="https://www.sba.gov/partners/lenders/7a-loan-program/types-7a-loans">https://www.sba.gov/partners/lenders/7a-loan-program/types-7a-loans</a>

Some small businesses seem to thrive no matter what the economy is doing. What’s their secret? Here are a few business ideas to consider and tips to help you bake some resiliency into your venture.

If you’ve been thinking about starting a small business, going freelance, or becoming a sole proprietor, you’re not alone: According to the U.S. Census Bureau, Americans submitted 5 million new business applications in 2022 (down only slightly from a record high of 5.4 million applications the year before). But what type of business will thrive in this (or any) economy? Is there such a thing as a recession-proof small business? Though there’s no foolproof answer, some small businesses tend to fare better than others no matter what the economy does. We’ve gathered some proven, recession-proof business ideas to help you prepare in the event of a downturn, plus a few tips to help you bake some resiliency into your own new (or existing) venture.<h2>What is a recession-proof business?</h2>Growing a business in any economy can be a challenge—and no venture is completely recession-proof. That&#39;s because almost all <a href="https://www.happen.com/business-loan/aof-loans">new entrepreneurs require some amount of funding</a> along with a raft of skills to launch, market, and keep a successful business running efficiently. However, some businesses seem better equipped to withstand a recession. For example, businesses with built-in, consistent demand for its products and services are typically less vulnerable to the ups and downs of a tight economy. And some new ventures may outperform during an economic downturn because they were created to address the needs and pain points brought about by recessionary times. Operational skills also make a difference, especially during difficult economic periods. Developing a solid marketing plan, mastering financial skills and money management tools, and being flexible to the demands of starting a new business all contribute to a venture’s ability to endure. Starting a business can be simultaneously exhilarating and demanding. Thought and planning on the front end will save you some difficulty later. <h2>7 recession-proof business ideas to explore</h2>If you want to go into business for yourself and are looking for inspiration, consider the following seven business ideas as a place to start. While these businesses aren’t completely immune to slowing sales or fluctuating supply and demand during a recession, they do have a track record of holding up when the economy is down. They may also spark more ideas about where to look for other opportunities that sound appealing to you.<h3>1. Discount, Bargain, Or Used Goods</h3>Affordability is a good look in an economic downturn. But even without a recession in play, thrifting and bargain hunting are gaining popularity. According to U.S. Census data, retail sales at used merchandise stores are on track to top $24 million in 2022, up from $16.4 million in 2020. Online reselling, retail pop-ups, and consignment businesses are capitalizing on this recession-friendly trend, which also helps sellers raise a few dollars in a tight economy and helps make for a more recession-proof business. Discount, bargain, and used goods aren’t limited to luxury items or vintage fashion. The key here is serving up in-demand goods at affordable prices, which is a decent business model in any economy but an especially timely one if the market starts to go south.<h3>2. Home Repair and Maintenance</h3>Recession or not, the demand for home repairs and the skilled professionals who perform the work continues unabated. While new home construction and high-end home renovations may lag during an economic slump, fixing a leaky pipe will always be a priority for homeowners. Along with home repair and maintenance contracting businesses, do-it-yourself products that help homeowners make their own repairs may prove to be smart recession-proof businesses ideas to consider.<h3>3. IT and Technical Services</h3>Regardless the size of business you may be focused on serving, most can’t operate efficiently without some hardware, software, or technical service providers. Online sales and customer management platforms, remote networks, and cybersecurity issues are only a few essential aspects of business technology. Business-to-business services that support and maintain technical operations or innovate for new efficiencies tend to do well when economic waters get rough.<h3>4. Accounting and Financial Services</h3>For consumers and businesses alike, taxes and finances are always top of mind and a constant concern. When the economy is in flux, that concern may intensify. In fact, a growing number of new businesses and self-employed workers may translate into an increased need for more accountants and bookkeepers. Economic changes may also create demand for more accessible financial and investment advice as people work harder to keep their businesses and personal retirement savings on track.<h3>5. Auto Repair and Maintenance</h3>Car maintenance and repair are in consistent demand, making this a recession-resistant market—and largely a recession-proof business. While new vehicle sales slow down and people hold onto their vehicles longer during a recession, the need for services such as maintenance, repairs, and mobile auto-detailing often expands. Because a slow economy could mean less money to spend on upgrades, recession-savvy entrepreneurs may want to focus on offering the essentials over luxuries. <h3>6. Food, Beverages, and Groceries</h3>People must eat. And while some food-related businesses are not startup-friendly in a down economy (supermarkets and swanky restaurants are good examples), affordable restaurants, food trucks, bars, coffee and tea houses, and food delivery businesses feed a hungry populace. Bonus points for businesses that address immediate needs: good food at budget prices, small indulgences that don’t break the bank, or comfortable places to gather with friends, for example.<h3>7. Professional Consulting Services</h3>Generally, most large businesses look for ways to reduce overhead during a recession, sometimes by reducing headcount. Freelance workers that can quickly flex their schedules to pick up the slack may find themselves in high demand. Consultants who can help navigate a difficult economy may also find a niche. However, starting or running a professional consulting-oriented venture in an economic downturn can be tricky: Since spending is down, these types of business services must deliver significant, measurable value to attract and retain clients.<h2>Businesses that work in a recession</h2>The seven types of businesses highlighted above aren’t the only potentially recession-proof businesses out there. Small businesses that can quickly offer products and services in response to recessionary pain points can often find a market of ready and willing buyers. For example, during the pandemic (which included a brief recession surrounded by major economic disruption), in-person fine dining establishments were hit hard. In response, online ghost kitchens offering a variety of delivered foods from a single location and restaurants that quickly pivoted to take-out found their moment. Generally, recession-proof businesses often have one or more of the following characteristics: <h3>Adaptability </h3>Small, nimble startups that can quickly lean into new opportunities brought about by recession have an edge. Laid off workers freelancing from home may need childcare that’s flexible instead of full time. Consumers who feel anxious about their finances may seek out the help of a financial advisor. Adaptability is also an asset when the economy picks up and needs change again.<h3>Recession-proof market</h3>Consumers with ultra-high incomes may not feel the pinch in a recession. Additionally, people who work in recession-neutral fields like healthcare and the government may have stable employment and steady incomes despite the economy. Some needs are essential: food, housing, clothing, and health.<h3>Access to capital</h3>Lean and mean is a mantra for recession-proof businesses, but access to business loans and credit may be what gets your business off the ground or helps you through a rough patch. Finding a business loan that will work for you can give you options you wouldn’t otherwise have.<h3>Unique delivery</h3>Online streaming services got their start during the Great Recession of 2007/08. Why? New technology made it possible for people to consume a lot of entertainment at a low cost without leaving the comfort of home—a perfect fit for a tight economy. Putting a new twist on an already established basic business model may help you meet a need that didn’t exist before.<h3>Affordable luxury</h3>Specialty lattes have survived many an economic downturn because they’re a small indulgence most people like to treat themselves to and can reasonably afford, even when money is tight. Consumers may be hungry for small splurges and low-cost “luxury alternatives” as budgets tighten.<h3>Financial fitness</h3>Minding your margins, managing cash flow, building and maintaining credit, and tending to your business’ overall financial health is critical during a down economy. Businesses that survive and thrive during a recession don’t just find demand—they meet that demand profitably and efficiently.<h2>The bottom line</h2>Starting a business in any economy means looking for opportunities that are responsive to the market and address the pain points of the times you’re in. Checking out recession-proof businesses is a starting point. You&#39;ll also need to consider whether a business suits your talents and expertise, whether it’s conducive to running as a small business, and if there are niche opportunities worth exploring.Creating a detailed business plan is also critical. It&#39;s important you fully understand the opportunity you’re considering and the operational challenges of making your business a success. If you need information and help getting started, the Small Business Administration’s SCORE (Service Corps of Retired Executives) program connects up-and-coming entrepreneurs with business mentors and a library of information on starting your own business.

Business Loan

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.