Money Management

Rejection hurts, especially when you need to borrow money. Keep reading to learn why your personal loan application could be denied. 

Personal loans can be a great way to borrow money in certain circumstances, especially if you need to finance a large purchase or consolidate higher-interest debt. While many lenders offer personal loans for all types of borrowers, it’s not a guarantee you’ll be approved if you apply for one. Let’s take a look at a few reasons you might be turned down, and what you can do to get approved the next time you apply for a personal loan.

1. Your credit

Many personal loans are unsecured, which means there is no collateral for the lender to take possession of if a borrower stops making payments on the loan. A secured loan, on the other hand, is “secured” by collateral. Two big examples of secured loans are mortgages and auto loans. If you stop paying one of those, you could lose your home or car.

Lenders offering unsecured personal loans often have stringent credit score requirements, since they need to rely on your credit history to decide whether you’re likely to repay a loan. Payment history reflects 35% of your FICO® Score, and it makes sense that this factor would be so important — the biggest concern of a lender of any kind is whether the applicant will pay back what they borrow. So if your credit score isn’t looking so hot, that could certainly be why you were turned down for a personal loan.

2. Your income/employment situation

Another factor that tells lenders you can manage the payments on a loan is your income and employment situation.

If you’re hoping to borrow a much larger amount of money than you could comfortably afford to repay on your salary, it may give lenders pause about approving your application. Similarly, if you’re unemployed or only work part-time, it might be difficult to get approved.

3. Your current debt load

Finally, a lender will consider your debt-to-income ratio to decide if you’ll be approved for a personal loan. Your DTI measures how much of your income goes to debt payments, and is expressed as a percentage.

For example, let’s say you bring home $4,000 per month and your debt payments amount to $1,600. In this instance, your DTI is 40% ($1,600 divided by $4,000, multiplied by 100). If you already have a lot of debt payments every month (and a high DTI), you might not be able to manage another loan on top of them — definitely a reason you might be turned down for a personal loan.

How can you get approved next time?

Having a loan application denied is disappointing. Here’s what you can do to maximize your chances of approval the next time you apply.

Improve your credit score

Paying off debt is an incredibly effective way to boost your credit score. But that may not be possible for you at this stage, especially if you’re hoping to get a loan to consolidate existing debts and save money on interest.

But you can make a renewed commitment to pay your creditors on time (remember, payment history makes up 35% of your FICO® Score) and get a copy of your credit report. Scan it for errors (which are common; a third of volunteers found errors on their credit reports in a Consumer Reports study). If you find any, you can ask that they be removed, which should also help your credit score.

Apply with the right lenders — and shop around

Not all lenders work with people of all credit scores. Thankfully, The Ascent has lists of lenders we like that are a great fit for different personal finance situations:

Best personal loans for bad creditBest personal loans for fair creditBest personal loans for good credit

No matter your situation, talk to multiple lenders and see what interest rates you’re offered. This is the best way to get approved and find the cheapest loan possible.

Get pre-approved

Some lenders allow you to apply for personal loan pre-approval, and this is worth doing. The lender will do a soft pull on your credit (which doesn’t impact your credit score), and you can find out your chances of being approved for real. If the odds aren’t good, you can find a different lender.

If you were turned down for a personal loan, chances are, one of these reasons is to blame. Take a close look at your finances and credit score and make some improvements for next time. Good luck!

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Having access to your emergency fund is important. Learn why one type of bank account might be perfect for this. 

An emergency fund is your best protection against unexpected bills hitting your budget like a speeding freight train. There’s no possible way to account for every expense life will throw at you, and it can be a terrible feeling to put a surprise car repair or medical bill on a credit card because you’re otherwise unable to cover the cost.

Experts recommend saving at least three to six months’ worth of expenses for your emergency fund (to figure out how much you should save, have a look at our emergency fund calculator). But honestly, any amount of extra cash can help you out of a jam, so don’t feel bad if it’s hard for you to save.

You’ll also need a safe place to keep your money, and there’s one type of bank account that could be the perfect fit. Let’s take a closer look at money market accounts and why they work for emergency funds.

Really, a money market account?

Depending on how deep you are in banking and the personal finance space, you might be unfamiliar with money market accounts. These bank accounts are almost like a cross between a checking account and a savings account, with some of the features from each.

Money market accounts earn interest, like savings accounts do. In fact, among bank accounts that allow you to add and remove money while the account is open (unlike CDs, which require locking your money up for the term of the CD), money market accounts have the highest average APY as of this writing, at 0.62%. However, this is an average of all money market accounts, and some online banks are paying much higher rates.

Take a look at our favorite money market accounts and you’ll see that many are paying at least 4%. That could generate a handsome return indeed. If you have a $10,000 emergency fund and you stash it in a money market account earning 4% APY, you’ll make almost $400 in a year if your APY doesn’t change and you don’t add any more money to the account.

Money market accounts also come with check-writing capabilities or a debit card (and sometimes both), just like checking accounts do. It’s this quality that makes them especially great for an emergency fund. When you have a surprise bill to pay, you might need that money immediately, and savings accounts don’t always offer the best access to your money.

I have a high-yield savings account that I opened with an online bank last year, and while I love many things about the account, it was a little irritating that I had to open a checking account to link to it so I could get a debit card. And I still have to transfer money from my savings to my checking if I want access to my saved cash. A money market account makes it easy to reach your money in a pinch.

One potential drawback of money market accounts

Before you rush to open a money market account for your emergency fund, slow your roll and consider one quality of these accounts that might give you pause. Some money market accounts have a minimum balance requirement to open the account or earn the highest APY offered.

This isn’t ideal, especially if you’re still in the process of building your emergency fund and don’t yet have enough money to open the account or to earn a high APY. So if you’re trying to decide between accounts, definitely read the fine print and make sure the ones you’re considering can be opened with a smaller amount of money (or even none at all) and will pay you the best rate regardless of your balance.

If you currently have your emergency fund stashed in your checking account or stuck in a regular savings account and earning no interest, take a closer look at money market accounts. One might just be a great home for your emergency fund.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Earning travel rewards is only half the battle — the easy half. Here’s a look at where the real work kicks in. 

There is no shortage of articles about earning credit card rewards — some of which are actually useful. With a bit of planning and some good advice, you really can earn hundreds of thousands of credit card points in no time at all.

Now what?

You see, there’s a dark side to credit card points that doesn’t get nearly enough headline attention: redeeming them. Since all the points in the world aren’t worth a shilling if you can’t use them, this is a big problem.

The value/headache scale

In the rewards space, there’s a bit of a value versus headache scale of redemptions.

At one end, you have low-value redemptions that are remarkably easy. This includes things like cash back or using points at checkout with a retailer. These options require almost no work at all to use, but you’ll only earn between $0.006 per point to $0.01 per point, depending on the program.

At the other end, you have the high-value redemptions that can be worth three or four times as much. Unfortunately, these tend to require a process reminiscent of the Labors of Hercules.

That’s right, I’m talking about travel redemptions.

Facing the travel redemption gauntlet

A few travel rewards cards let you redeem points for statement credit to cover travel-related card purchases. This is akin to redeeming for cash back, and it has the ease and low per-point value associated with that.

Next, there are the travel portals. Pretty much all the major points programs have some sort of travel portal where you can use your rewards points to book flights, hotels, and even rental cars.

American Express Membership RewardsCapital One Venture RewardsChase Ultimate RewardsCiti ThankYou Rewards

While this tends to give better value than cash back strategies — some cardholders will get up to $0.015 per point this way — it’s still not going to give you those headline-worthy redemption values. No, for that, you need to transfer your points.

Award space roulette

Long before you actually transfer your card points, you need to figure out the redemption. (Once you transfer your points to an airline or hotel, you can’t transfer them back, so you should know how you’re going to use them before you start.)

Now you need a lot of research — and a good deal of luck.

The hardest part of the whole process is generally finding award availability. Many airlines have a specific number of seats on each flight open to award travel. If those seats are already sold, you’re going to need to find a different flight.

Unfortunately, award flights are rarely nice, neat, nonstop options. Instead, be prepared for complicated itineraries with weird layovers in places you’d never normally stop. This can be especially irritating to folks trying to leave (or end) via regional airports instead of major hubs.

Winning the game

It can be frustrating to search and search for award space and continually come up short. Here are a few tips I’ve used over the years to book my own award travel.

Book early — or really, really late

Your best bet at finding the right award space is to book as soon as possible — or at the very last minute.

Many airlines post their award space about six months out. When you’re checking a particular airline, use its calendar to find how far out you can book. Then, look for award space around those dates. Chances are good you’ll find more variety than you will on sooner flights.

Conversely, if you are very flexible, you could find some interesting last-minute redemption options on undersold flights. This could be a good option for folks who are open to spontaneous adventures in new places.

Don’t be choosy about the airline, or even the airport

In some cases, it’s worth the extra work to fly on a specific airline. This is most often the case if you’re set on a specific product, such as the notoriously awesome suites you can find flying international first or business class with some airlines.

Outside of that, however, there’s not as much benefit to airline loyalty, especially when you’re redeeming points (you typically won’t earn status points on award flights). And since the major transferable rewards all have multiple airline partners, being flexible here can open up a lot more options.

Similarly, the smaller your local airport, the harder it’s going to be to find decent award space (or any at all). If you can travel to a larger airport, you could open up your award availability significantly. (As a bonus, you may even get better lounge access!)

Take advantage of airline partnerships

All of the major airlines are part of larger partnerships — typically called alliances — with other airlines. An interesting side effect of these alliances is that you can often use miles from one airline to book flights on partner airlines.

How easy this process is will vary a lot depending on the specific airline and/or alliance. The best ones let you redeem rewards for partner flights online as easily as you’d redeem for their own flights.

Others are not so convenient. You may need to check availability online and then call on the phone to complete your booking. Or, worse, you may have to do the entire thing over the phone. While annoying, this could be worthwhile for those big aspirational redemptions.

Determination pays off

While this may all seem like a lot of work to some, there are plenty of us who find it a fun challenge. Perhaps that’s why, though surveys have found that as much as 70% of cardholders have unused rewards, only a small percentage of that — 13%, according to one survey — are sitting on unused miles.

In other words, if you get a thrill from scoring an amazing deal, managing credit card points could be a fun hobby. But if just reading this article has been enough to make you anxious, perhaps sticking with cash back cards is best.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Citigroup is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Brittney Myers has positions in American Express. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.

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A long-distance move is expensive and can be overwhelming. Find out how to make your move smoother and less of a hassle. 

If there’s one thing I can claim expert knowledge of, it’s moving. I’ve moved 35 times to date, and this includes moves within the same neighborhood all the way up to long-distance moves. Moving isn’t cheap, and if you’re moving across the country, you’ll be looking at big bills. Angi found that the average cost of a cross-country move is $4,760 (with a range of $2,612 to $6,985). This vast gulf is indicative of the many factors that go into a move — such as whether you hire movers or DIY it.

If you’re feeling overwhelmed at the prospect of a long-distance move — and the hit to your checking account — read on for a few ways to make the process easier.

1. Declutter first

If you’re planning a long-distance move, do yourself a massive favor and take the time to downsize your belongings first. This is one thing I wish I had done every single time I moved. I’m hoping my next move will be the last one for a while, and between now and then (likely next year), I intend to declutter as if my life depends on it.

Paring down your belongings will save you money on boxes and packing supplies, and you might be able to move with a smaller, cheaper truck or moving container.

2. Pack your own boxes

Yes, you can hire full-service movers who will pack your belongings as well as load them onto a truck and drive them wherever you’re moving. But you’ll save money by opting to do the packing yourself instead.

Packing is often the most overwhelming part of the move process, especially if you’ve lived somewhere for a long time and accumulated a lot of stuff. After you declutter, I recommend going room to room and packing items you won’t need until after your move — so if it’s summer, pack your winter stuff first.

3. Use a moving container

I’m sure you’ve heard of PODS before, but that’s not the only game in town when it comes to moving containers. Several companies will deliver a steel moving container to you, then you fill it with your belongings and the company transports it on a truck for you. Going this route may not be the cheapest, especially if you have a lot of stuff to move, but in terms of lowering your stress, it can’t be beat.

I used one of these companies (ABF’s U-Pack service) a decade ago for part of one of my big moves. I needed to transport a storage unit’s worth of stuff after I had already settled into my new home, and I paid almost $2,000. I got a quote from PODS at the time, too, and it was about twice as much. So if you want to do this, definitely call around and get multiple quotes to find the best deal.

4. Drive the truck yourself

The more stressful but likely cheaper option for your long-distance move is to rent and drive a truck yourself. In this instance, you’ll pay for the truck rental itself, along with gas. Angi says the cost of moving this way will likely range from $1,200 to $2,100.

I frequently recommend movers, but the cost of using them for a long-distance move is going to be a lot. Consider hiring movers at your departure and arrival points to help you load and unload a truck, though. You’ll probably pay a set rate per hour for the labor if you decide to do this — Angi, again, says local movers’ hourly rate will likely be $25 to $50, but you’ll pay more if you need more than one or two helpers. Don’t forget to budget for a cash tip!

5. Use the right credit card for expenses along the way

In moving, as in so many aspects of personal finances, the right money tools will help. Consider putting your moving expenses on a credit card for purchase protections, rewards, and to easily keep track of what you spend.

And if you’re doing a multi-day move and will be staying at hotels along the way, a travel rewards credit card is the perfect way to cover the cost — you can earn points toward a future (and ideally more fun) trip.

6. See if you can get help with the costs

If you’re relocating for a job, see if your new employer can help defray the cost of the move. All of my long-distance moves as an adult were prompted by a job change, and I had a few employers that paid for all or part of my move. Even $500 can go a long way toward a long-distance move, especially if you’re on a shoestring budget and that $500 will cover a trailer attached to the back of a small SUV. (And yes, I made two moves of more than 1,000 miles each using this strategy.)

Take a deep breath, make a comprehensive moving checklist, and consider a few of these tips to make your long-distance move more manageable.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Online banks offer higher APYs on savings accounts and user-friendly mobile apps. Find out what problems you might encounter if you open one, though. 

If you’ve been tuned into the personal finance space lately (perhaps by reading The Ascent?), you’ve no doubt heard a lot of buzz about online-only banks. These are banks that exist only in cyberspace rather than as brick-and-mortar buildings in your town. These two bank options have different perks and drawbacks, so it’s important to get the whole story if you’re looking to open a new bank account. Let’s take a look at two pitfalls that come specifically with online banks, and see how to cope.

1. Withdrawing cash

Since online banks are, well, online, they don’t do so well with physical currency. Namely, if you need to take cash out of your account (rather than accessing it by other means), you might need to jump through a few extra hoops. I have four bank accounts with two different banks, one of which is online. I specifically opened a checking account with that bank so I could have access to cash that’s in the linked savings account — that account didn’t come with an ATM or debit card, but the checking account did. So I transfer money from the savings to checking, and then I can take it out using the card.

I don’t need to withdraw cash super often, but I like keeping a little on hand in case of a random cash expense. Thankfully, my online bank has a pretty robust ATM network, so I have no problem taking out money when I need it.

If you do a lot of spending in cash, ensure the online bank you’re considering has fee-free ATMs in your area or offers ATM fee reimbursements. And you’re just not likely to find a savings account that comes with an ATM or debit card, unfortunately. But you can either transfer cash to a checking account with the same bank, like I do, or transfer it to an account at another bank that you can then withdraw cash from.

2. Depositing cash

On the other hand, if you receive cash payments often (perhaps you’re a small business owner or earn tips), you may have difficulty depositing it into an online bank account if your bank doesn’t have ATMs that take cash deposits. Again, there are workarounds for this, but they involve extra steps.

I can’t remember the last time I had cash to deposit, but with my banking situation, if I wanted to put cash into my online bank accounts, I’d have to deposit it with my brick-and-mortar bank. Then, I’d need to transfer it to the online bank. A transfer going this way is instant, thankfully, thanks to a payments app that works with both banks.

This system could work for you if you deal in cash frequently and want the benefits of an online-only bank (more on those below). But it is worth considering how convenient it will be to jump through extra hoops to get cash into your account.

The benefits may outweigh the drawbacks for many people

I’ve found that these two pitfalls don’t lessen my appreciation of my online bank, and the perks of keeping my money there far outweigh the problem with cash. For example, my savings account is currently earning an APY of 4.25%. As of this writing, the average APY on savings accounts is just 0.43%, so to be earning almost 10 times that is great. Some of the entries on The Ascent’s best savings accounts list earn even more. Online banks can pay higher APYs because they have fewer overhead costs — meaning no physical buildings to maintain.

And I’m very comfortable doing my banking through a website and a banking app, which is another area where online banks shine. Finally, online banks often charge a lot fewer fees on their accounts (and in some cases, no fees at all). All of these benefits are certainly reason enough to consider online banks — I highly recommend them.

These savings accounts are FDIC insured and could earn you 12x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you 12x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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