5 Features to Look For in a Personal Loan

Corrects: Second sentence in the seventh paragraph.

You’ve researched a few different financing options and settled on a personal loan, but your work isn’t done yet. The next step is to decide which lender can make you the best offer.

Affordability should be a top priority: If one lender offers a standout annual percentage rate, that’s probably the best option. But when you have two or more competitive offers, weigh special features such as discounts, funding time and payment flexibility to break the tie.

Here are five features to look for when comparing personal loans.

No fees

Application and prepayment fees are rare with personal loans, but you could encounter an origination fee. This charge — usually 1% to 10% of your loan amount — is often subtracted from the loan before you get it, but a lender may include it in the monthly payments, says Jovan Johnson, an Atlanta-area certified financial planner. You don’t get anything for the fee; it’s just money the lender charges to process the loan.

An origination fee doesn’t automatically make a loan the most expensive, Johnson says. Compare annual percentage rates, which include the interest rate and other fees, to see which loan costs the least.

Some online lenders that work with good- or excellent-credit borrowers (690 or higher FICO) charge zero fees, including late and nonsufficient funds fees.

Rate discounts

Rate discounts are usually small perks that can add up. Many lenders offer to reduce your rate by a small amount — often 0.25 to 0.5 percentage points — if you set up automatic payments.

Other lenders may reduce your rate by a percentage point or two on a debt consolidation loan if you let them directly pay off your debts, instead of giving the money to you.

Banks often provide discounts for their existing customers, especially those with a large amount of money in a savings or investment account, says Tyler Smith, a CFP with BBK Wealth Management in the Indianapolis area.

Pre-qualification lets you check your rate without hurting your credit score, but it’s more common at online lenders than banks. You could use the rate you were quoted by an online lender to negotiate a lower rate at your bank, Smith says.

“Especially if you’re in a position where you have good credit and good payment history, they will do anything that they can to get you to borrow money,” he says.

Fast funding

Personal loans can help you cover urgent expenses, like a roof repair, because they’re typically funded in under a week — and sometimes even faster.

Online lender LightStream says applications submitted before 2:30 p.m. ET on a weekday with all the necessary documentation may be approved and funded the same day. Other lenders can approve and fund a loan within another day or two, says Alvin Carlos, a Washington, D.C.-based CFP with District Capital Management.

“If, let’s say, you need to pay a medical bill that’s due tomorrow, some lenders will give you the money as soon as the next day,” Carlos says.

A tip to keep things moving: Gather documents like W-2s, pay stubs and proof of address before you start an application.

Payment flexibility

Your loan’s repayment term factors into the size of your monthly payment. A longer term results in lower monthly payments but more interest paid overall, Johnson says.

Choose a timeline that gives you affordable monthly payments while still keeping interest costs low, he says. Some lenders let you repay a loan in three or five years, while others offer terms between two and seven years.

Johnson recommends taking flexibility further by asking a lender what happens if you lose your job or run into an emergency and need to skip a payment or two.

“With any loan that you apply for, you always need to know the ‘what-ifs,’” Johnson says. “Will they work with you? Will they extend the loan with no additional fee or upcharge?”

Marcus by Goldman Sachs lets borrowers defer a payment after 12 consecutive on-time payments. Online lender SoFi offers unemployment protection that puts a loan in forbearance.

Customer experience

Customer experience isn’t as easy to quantify as origination fees and rate discounts, but gauging how things will go once you have the loan could save you from future headaches.

Offering autopay isn’t enough to make repayment seamless anymore, Smith says. If you use a budgeting app or manage finances another way, choosing a lender that links your loan could save years-long hassles.

“With the amount of technology out there, having that convenience to hook it up is very important,” he says.

Subjective reviews from friends and previous customers, as well as objective online reviews, can surface issues you may not see before you borrow.

You can find out what other borrowers think about the lender by reading complaints at the Consumer Financial Protection Bureau or Better Business Bureau websites.

It’s even better if you have a friend or family member who’s used a lender before, Johnson says.

Disclosure: A previous version of this article misstated the details for a rate discount. This article has been corrected.

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5 Car-Buying Mistakes to Avoid in Today’s Overheated Market

If you’re shopping for a new or used car in today’s overheated market, you’ll find that the game has changed. A variety of conditions have seemingly given sellers the upper hand.

“Skimpy inventories and sky-high prices have caused many buyers to postpone their purchases,” says Michelle Krebs, executive analyst for Cox Automotive, a leading communication, media and automotive service company.

Postponing your purchase until the market stabilizes is the best option. But if you have to buy a car now, make sure you avoid these five common mistakes:

1. Being unprepared

This is a new car-buying environment and you may need to reset expectations. Here are the significant adjustments to be aware of before you can snag a car:

Pricing. Most buyers are paying sticker price or above, and “there is no end in sight for price increases,” says Ivan Drury, senior manager of insights for Edmunds.com, an online resource for automotive inventory and dealer reviews. For used vehicles, “the ceiling keeps rising as new transaction prices reach all-time highs,” he says.

Krebs says that the average transaction price for a new vehicle soared to more than $45,000 in September. And while this figure might seem exaggerated, it is not. According to Kelley Blue Book, while Americans bought 7.3% fewer cars in September than in August, the average price for a new car was $45,031.

Inventory. Since new-vehicle inventory is about 2.5 million units less than it was at this time in 2019, according to Krebs, you will have to conduct a broader search to find the car you want. It helps to be flexible when choosing a brand, color and options, as well as whether you buy a new or used vehicle.

Timing. With inventories so low, make sure you’re ready to buy when you find a car that’s available at a competitive price. “You snooze, you lose,” Drury says. “The days on the lot are getting to the lowest levels we’ve ever seen.” With today’s high demand and low supply, cars don’t sit on the lot and often sell before arrival.

If you can’t find the car you want on the lot, ask what cars are being shipped to the dealership and reserve one. Be prepared to pay a deposit to hold your car as soon as you select one.

2. Losing money on your trade-in

Used car values have shot up and dealers are scrambling to beef up used car lots. This puts you in a stronger position when trading in your old car — if you follow a few simple steps:

  • Using a pricing guide, such as Kelley Blue Book or Edmunds, look up your car’s value, adjusting it for condition, options and mileage. Also, check automotive classifieds, such as AutoTrader, to gauge the asking price in your area.
  • Get offers from used-car-buying sources such as Carvana or CarMax. Keep in mind that these prices might change after your car has been inspected.
  • After you agree on the price for your new car, see if the dealer can beat the researched price or the online quotes you got for your trade-in. If it won’t match it, sell your car to the highest bidder and use the money as a down payment on your new vehicle.

Keep in mind that, depending on the state you live in, even if the dealer’s price is lower than other sources, a trade-in might reduce the amount of sales tax you will pay on your new car.

3. Not getting preapproved financing

Getting preapproved for a car loan will help you identify any credit problems before going to a dealership. Preapproved financing also provides other advantages:

  • It offers you a chance to set up your own loan with the right down payment and loan term.
  • It may simplify dealership negotiations by allowing you to focus on the “out-the-door price.”
  • It could serve as a bargaining chip in getting the dealer to offer a better rate.

4. Buying unnecessary extras

With low inventories and high buyer demand, dealers are loading up their cars with profit-boosters, according to Oren Weintraub, president of Authority Auto, a concierge car-buying service in the Los Angeles area. Such upsells include additional warranties, anti-theft devices and dealer add-ons such as mudguards and wheel locks.

You can flush out these hidden charges early by asking for the out-the-door price, which then empowers you to tell the dealer what you want and what you don’t need.

5. Ignoring the out-the-door price

Given the likelihood you’ll see some additional markups on most cars, it’s essential to focus on the big picture: the out-the-door price. Does it matter if the paperwork includes $595 worth of anti-theft window etching you never asked for, as long as you hit the overall price you wanted?

The out-the-door price is a single, simple number that reveals the specific cost of everything — the car, registry fees, taxes, dealer-added extras. It’s a number you can write a check for and drive away or take to the finance office to arrange a loan.

A similar and dangerous distraction is when the dealer focuses only on the monthly payments. But, if you’ve prearranged a loan or used a car loan calculator, you should have an idea of what you can borrow and what the payments will look like.

Philip Reed writes for NerdWallet. Email: articles@nerdwallet.com. Twitter: @AutoReed.

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How to Fix an Overdrawn Bank Account

Experiencing an overdrawn bank account can be stressful. Since banks can charge an overdraft fee multiple times a day, fees can add up quickly, piling on to the negative balance and the stress.

The consequences of overdrawing can be serious, so it’s essential to fix your account as soon as you can. The bank may temporarily suspend or even close your account. A closure could go on your record with ChexSystem, an agency that tracks customers who have had problems with their bank accounts. This could make it difficult for you to open future bank accounts, says Bruce McClary, senior vice president of communications for the National Foundation for Credit Counseling.

Here are some steps you can take to recover after an overdrawn account and tips to avoid overdrafts in the future.

Make a transfer to cover the charges

If you have cash in another account, transfer it to cover the deficit and avoid additional fees. That should be the first step you take, says Andrea Brashears-Lusk, a certified financial planner and president and founder of Wise Financial Counsel in Fort Washington, Maryland. For example, some banks charge a fee for having a negative balance for consecutive days, and that fee could be charged multiple times.

Ask your bank for a refund

If your bank doesn’t automatically waive fees for some overdrafts, call your bank and ask for a refund. The bank could be gracious and refund you, especially if it’s your first time or not a recurring issue, Brashears-Lusk says.

McClary recommends taking another step when you call the bank: Discuss how you can avoid overdrawing again. Most banks and credit unions should be willing to help you, McClary says. You might also consider contacting a nonprofit credit counseling agency to get free help on your entire financial situation, he says.

Stop using the account

“Stop using the account, period,” Brashears-Lusk says. This action also will include one-time and recurring transactions, which are tricky to keep track of and could overdraw your account even more. While figuring out expenses versus your cash flow, she recommends using a prepaid debit card to manage spending. To pay bills that require payments from a bank account, pay by money order, Brashears-Lusk says.

Use these tips to avoid overdrafts

Once you’ve fixed an overdrawn account, you can take a few critical steps to prevent overdrawing again.

Track your expenses

“You don’t have to physically balance a checkbook, but you should have some way of tracking expenses,” says Brashears-Lusk. Balancing your checkbook and budgeting don’t necessarily mean you have to stick to a spreadsheet; several budgeting apps could work.

Use low balance alerts

Automated alerts can help you avoid overdrawing an account. You can specify a threshold for a low balance and set up an alert to notify you when the account reaches that balance.

Reconsider overdraft protection

Overdraft protection transfers are an optional service that lets you move money from a linked account to your checking account to cover transactions that would overdraw the account. These transfers are typically cheaper than an overdraft charge and free at some banks, but if they’re not free, they’re a vital charge to consider.

It’s good to have overdraft protection if cash flow is tight and you’re using the bank account as your main account for expenses, Brashears-Lusk says.

But if you’re racking up fees because of frequent overdraft protection transfers, you might be better off opting out and having transactions declined. Beth McCarter, a teacher who lives outside of Dallas and tutors online, says she’s strongly opposed to overdraft protection after her experience with her first bank account in college.

“Within a single day, I had accrued $500 in overdraft [protection] fees,” McCarter says. “While it sucks to be in line and have a cart full of things and have your card declined, I would rather take that.”

Choose the right bank account

A fundamental way to avoid adding to the damage of an overdrawn bank account is to choose a bank that doesn’t charge overdraft fees or offers alternatives to costly overdraft coverage. If you select one of these bank accounts, overdrawing likely won’t be such an issue going forward.

Ruth Sarreal writes for NerdWallet. Email: rsarreal@nerdwallet.com.

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How Gratitude Can Help Your Financial Life

Gratitude makes us more aware of the sources of joy, wonder and hope in our lives. Being grateful also can improve health, strengthen relationships and help us manage our money.

Developing gratitude requires us to focus on what we have rather than on what we lack, says Meghaan Lurtz, a senior research associate with financial planning site Kitces.com and past president of the Financial Therapy Association. Such thankfulness has been shown to reduce feelings of impatience, perhaps making it easier to save and delay gratification as well as decreasing the temptation to spend.

“(Gratitude) can help to quell that ‘I need more, I need different, I need this, I need that’ feeling,” Lurtz says.

Gratitude makes us happier

Gratitude is a social, relationship-strengthening emotion with two parts, according to Robert Emmons, a professor of psychology at the University of California, Davis, and author of “Thanks! How the New Science of Gratitude Can Make You Happier.”

The first part is acknowledgement of the gifts and benefits we’ve received. The second is recognition that we have been blessed by help from others, good luck or perhaps the intervention of a higher power. Gratitude “requires us to see how we’ve been supported and affirmed by other people,” Emmons writes.

“There is a really important social quality to gratitude,” Lurtz says. “It can bring us together, it can connect us, it can help us to feel safe.”

It also short-circuits many negative emotions, such as resentment, envy or regret, Emmons found — it’s tough to feel envy and gratitude at the same time, for example. Lurtz believes that gratitude can increase contentment and reduces the desire to “keep up with the Joneses” by overspending or working excessively.

“We’re always trying to get to that next level,” Lurtz says. “We should be asking, ‘When is enough, enough?’ ”

The positive effects of gratitude, such as improvements in mental health, can strengthen over time. In a 2017 study, college students who wrote weekly letters of gratitude to another person for three weeks reported better mental health than other participants four weeks later, and the difference in mental health increased after 12 weeks, according to researchers at Indiana University.

“When you bring to mind that these things are going well, eventually, you’ll get to the point where you see more of those good things,” Lurtz says.

Gratitude can help couples navigate money conflicts

Gratitude can help couples weather financial conflicts, a 2015 study by researchers at the University of Georgia found.

Feeling appreciated and expressing appreciation are hallmarks of strong partnerships, says Ed Coambs, a certified financial planner and couples therapist in Charlotte, North Carolina.

“In a flourishing, healthy relationship, gratitude flows naturally and pretty easily,” Coambs says. “In a functioning relationship, it’s more intermittent, a little less consistent. In a dysfunctional relationship, it’s absent.”

Lurtz believes many couples’ disputes over money stem from partners not feeling appreciated. For example, one partner may reward themselves with purchases because they don’t feel adequately rewarded elsewhere in their lives. Meanwhile, the other partner may feel underappreciated for their efforts to save money and look after the couples’ future.

The future-focused spouse isn’t “right” and the present-focused one isn’t “wrong.” Financial planning is all about finding a balance between the present and the future. Expressing gratitude for each other can help couples strengthen their bonds and cultivate feelings of well-being so they can find that balance, Lurtz says.

Gratitude can be cultivated, but not demanded

Research shows that writing down a few things you’re grateful for, keeping a gratitude journal or composing letters thanking others for something they’ve done can all contribute to more positive emotions, better relationships and greater happiness.

Positive emotions and strong relationships are in turn associated with greater “financial self efficacy,” or people’s belief in their ability to accomplish their financial goals, Lurtz says.

And while sadness can increase feelings of “economic impatience” — the desire for a smaller cash award now over a larger one in the future — gratitude has the opposite effect, helping people to delay gratification, according to a 2014 study by researchers from Northeastern University; University of California, Riverside; and Harvard.

What doesn’t work is demanding that someone else feel grateful. Admonitions to “count your blessings” can actually intensify feelings of shame, anger or resentment, Coambs says.

“It may be well intended, but it can land very inconveniently,” he says.

This article was written by NerdWallet and was originally published by the Associated Press.

Liz Weston writes for NerdWallet. Email: lweston@nerdwallet.com. Twitter: @lizweston.

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Make Your Money More Exciting — By Keeping It Boring

The idea of gaining wealth in flashy ways isn’t new. After all, Charles Ponzi, for whom Ponzi schemes were named, defrauded investors more than 100 years ago with a get-rich-quick scheme built on a foundation of lies. Today, speculative investments, multilevel marketing companies and other risky efforts to turn a profit still lay seductive traps.

You can always leave your money alone in an interest-bearing account and let time do its thing, but that doesn’t exactly make for exciting party conversations, does it? So we open and close accounts. We invest in hot stocks and sell them at the first sign of bad news. We mess with our money because, in our minds, growing wealth is supposed to take effort.

“In almost everything else we do, there’s a payoff to activity: If I want to be a good runner, I should run every day. If I want to be a good painter, I should constantly practice,” Morgan Housel, partner at The Collaborative Fund and author of “The Psychology of Money,” said in an email. “But if you want to be a good investor, the best thing by far for people to do is not trade, not tinker, just leave it alone — and I think that’s just so counterintuitive because it’s so unique to investing.”

In a world full of financial influencers peddling products and friends bragging about buying NFTs, it’s perfectly fine to manage your money in a mostly yawn-inducing way. Here’s why.

Being boring gives you more time to live your life

Dealing with your money is a necessary chore, and it’s not exactly fun. Thankfully, we live in efficient times. In a few minutes, you can set up automatic money transfers that quietly send your cash into separate accounts serving different purposes. Why keep money management on your to-do list when it can happen on its own quite literally while you sleep?

“Money is a means by which you live your life, not life itself,” Meg Bartelt, financial planner and founder of Flow Financial Planning, said in an email. “The more complicated, changeable or scary your investments are, the more time you spend working on them or thinking about them, and therefore the less time you have to live life.”

Being boring keeps you from making rash decisions

It’s important to take a peek at your investment accounts periodically, but obsessing over every market move is exhausting and counterproductive. It can lead to making reactive decisions that hurt your wealth in the long run.

Choosing to be boring with your money is an exercise in letting go of the illusion of total control. Yes, there will always be round-the-clock financial news, but not everything happening in the larger economy affects you as an individual. Turn off news and stock market alerts on your phone so you no longer feel that itch to react. Instead, mindfully decide when to watch the news and check on your accounts so you can stay informed with less stress.

What boring money management looks like

  • Create a plan you (mostly) stick to: Bartelt finds that, whether her clients avoid their money or obsessively track it, it’s because they all feel the same emotion: fear. The antidote is a financial plan based on specific goals and values. “Having a plan is reassuring,” she said. “Once they have the plan, or hell, once they know they’re going to have one, people relax.” Base your savings and investing goals on what you intend to spend money on in the short-, medium- and long-term. Leave wiggle room for life changes and other uncertainties, because those are guaranteed to happen.
  • Prepare for emergencies: There’s nothing particularly sexy about emergency funds, life insurance and up-to-date wills, but should the unexpected happen, these things can help you stay financially steady.
  • Automate your money: Transfer funds automatically from checking to savings or from checking to a brokerage account. Contributing to a 401(k) through your job is automation, too, since that money comes out of your paycheck directly. Making regular contributions to different accounts, and increasing them as your budget allows and goals shift, will grow your nest egg.

Once you have your boring financial foundation in place, you can sprinkle on some riskier investments if you want. But remain faithful to your plan. “You have to actively and continuously ignore the ubiquitous distractions, charlatans, and blowhards in order to stay true to your own values and goals,” Bartelt said.

This article was written by NerdWallet and was originally published by The Associated Press. The content is for educational and informational purposes and does not constitute investment advice. 

Sara Rathner writes for NerdWallet. Email: srathner@nerdwallet.com. Twitter: @sarakrathner.

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Student Loan Forgiveness: What’s Getting Fixed?

A limited waiver announced by the U.S. Department of Education is expected to immediately wipe the slate clean for 22,000 student borrowers seeking Public Service Loan Forgiveness and speed the process for at least 500,000 more.

It’s not the broad student loan forgiveness borrowers may be dreaming of. Instead, it’s the latest example of the Biden administration’s strategy of tackling student loan debt through existing programs.

“The Biden administration has committed to an overhaul of the student loans system and how it functions — whether the programs are easy access and whether people can get forgiveness — and I think this is an important step forward on that path,” says Sarah Sattelmeyer, project director of education, opportunity and mobility in the higher education initiative at New America, a public policy think tank.

Neither President Joe Biden nor Congress has committed to forgiving loans en masse despite calls to do so from prominent Democrats, state officials and consumer rights advocacy groups.

But since the start of Biden’s term, the Department of Education estimates that more than $11.5 billion in loans have been canceled for over 580,000 borrowers through updates to existing forgiveness programs.

The department is clearing backlogs of applications from borrowers who were defrauded by their schools, faced school closures before attaining a degree and have permanent disabilities — now, that list also includes those seeking forgiveness in exchange for public service.

Here are the improvements that have been made so far.

Where Public Service Loan Forgiveness stands

The Department of Education issued new guidance in October to ease the burdensome application process for Public Service Loan Forgiveness, or PSLF. It’s a program to discharge debt for borrowers who work for public service employers, like the government or public schools and hospitals.

Forgiveness through PSLF has been notoriously difficult to attain because of complex rules about the type of loans and repayment plans allowed. Plenty of technicalities have disqualified payments from counting toward the 120 needed for discharge. And then there’s the paperwork: 10 years’ worth of employment certification.

As a result of the red tape, only about 1% of the nearly 400,000 borrowers who have applied have ever had loans forgiven through PSLF, according to federal student aid data.

When the PSLF program was created, total student debt was around $550 billion, says Seth Frotman, executive director of the Student Borrower Protection Center. “We were worried about the impact student debt was having on the viability of those entering and staying in public service fields,” Frotman says. “It’s even more important that this program works in light of where we find ourselves today — facing a $1.7 trillion student debt crisis.”

The department has pursued quick fixes before, like combining employment eligibility forms with the application and temporarily expanding eligibility for select borrowers. But the Department of Education acknowledged in a June 2021 memo that those efforts haven’t been enough to curb “confusion and frustration.”

“There are a lot of people who were paying on their federal loans, working in a qualifying job, believing they were working toward forgiveness only to find out, when they eventually submitted an application, that they had the wrong type of loan, like a FFEL loan, or they were not in the right type of repayment plan,” says Bradley Custer, senior policy analyst for higher education at the Center for American Progress, a public policy think tank.

What’s new for borrowers seeking PSLF

Under the new PSLF limited waiver, borrowers who worked full time for a qualifying public service employer can get prior loan payments counted toward PSLF, even if payments were:

  • Made on disqualified Family Federal Education Loan program loans (that is, commercially held) or Perkins loans, so long as they consolidate into a direct loan.
  • Previously consolidated, which reset payments that counted toward PSLF to zero.
  • Made in the wrong repayment plan, like a standard, graduated or extended plan.
  • Made late.
  • On pause while the borrower was on active duty in the military.

Parent PLUS borrowers were left out of this limited waiver; those borrowers can still apply, but old application rules remain. Student loan experts are unsure why parent PLUS borrowers were excluded.

Betsy Mayotte, president and founder of The Institute of Student Loan Advisors, says the waiver solves “operational issues we’ve seen up to now that have plagued the PSLF program,” but still encourages borrowers to be aware of all the details of PSLF rules for the best chance of getting their loans discharged.

Borrowers who are eligible for relief under the new limited waiver must submit a PSLF form by Oct. 31, 2022, to qualify. Beginning immediately, borrowers can consolidate their student loans via the federal student aid site and submit the PSLF form to certify employment and apply for PSLF.

Federal student loan payments are paused through Jan. 31, 2022. During this forbearance, which began March 2020, each month of nonpayment counts toward forgiveness.

Borrowers should also remember this: You never have to pay anyone to apply for PSLF, consolidate your debt or access the benefits of the PSLF waiver. Any company promising to do the work for you is a scam.

What else has changed and what’s next

The Department of Education under Secretary Miguel Cardona has updated other existing discharge programs, including:

  • Borrower Defense to Repayment: Over $1.5 billion in claims among nearly 92,000 borrowers who were deceived or misled by their schools has been approved.
  • Closed School Discharge: $1.1 billion was made automatically available to 115,000 borrowers who attended the shuttered ITT Technical Institute. Borrowers who attended a school that shut down between Nov. 1, 2013, and July 1, 2020, can expect an automatic loan discharge as long as they didn’t enroll in another school within three years of the closure.
  • Total and Permanent Disability Discharge: A total of $7.1 billion among 364,000 borrowers who qualify as disabled has been discharged. To identify future eligible borrowers, data will be shared with the Department of Education from the departments of Social Security and Veterans Affairs. Earnings documentation requests are also suspended.

More changes are expected to be made to PSLF by the end of 2022, according to the Department of Education.

Also in flux: Who is servicing student loans

Following in the footsteps of fellow federal loan servicers Navient and GSMR, FedLoan, the private servicer managing all loans for borrowers on track for PSLF, is ending its contract after Dec. 31, 2021. That means borrowers seeking PSLF will have a new servicer. Before losing access to your FedLoan account, download all payment records to ensure nothing gets lost in the transition.

Loan servicer MOHELA is taking on the FedLoan portfolio, according to the department, but it’s still unclear which servicer will be managing PSLF in the future.

Borrowers should update the contact information in their Federal Student Aid, or FSA, accounts to receive information directly from the government about the PSLF waiver.

Anna Helhoski writes for NerdWallet. Email: anna@nerdwallet.com. Twitter: @AnnaHelhoski.

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How you can travel without a credit card

Do you need a credit card to travel? Not exactly. Though it’s true that built-in card benefits, like purchase protection and the ability to dispute a charge, make using a credit card often the easiest and safest way to pay for travel, not everyone wants to get a credit card — or is able to get approved for one. And yet, those individuals will still likely want to travel at some point.

If you fall into this category, you have several other payment options to choose from, depending on the type of travel you’d like to book. Here’s how to pay for travel without a credit card.

Ways to finance travel without a credit card

1. Use a debit card

You can use a debit card that is connected to your checking account to pay for various travel reservations. When purchasing a flight with a debit card, simply enter your debit card details in the credit card section. Be aware that if the money isn’t automatically debited from your account at the time of purchase, the airline may place a hold for the amount of the ticket until the flight purchase clears. The funds placed on hold in your bank account cannot be used to make other purchases.

If you put your hotel or car rental reservation on your debit card, the hotel or car rental company may place a larger hold on your card than the cost of the booking to safeguard for any accidents. For example, at Marriott, a hold may be placed on your debit card for the total cost of the room plus taxes, any applicable resort fees and a hold for incidentals (these daily fees can vary by location). The hold may remain on the card until five days after your departure. Be sure that you’re comfortable with the hold that is placed on your card because until the hold is released, that money in your bank account cannot be used for other purchases.

2. Get a PayPal account

You can use PayPal to pay for your flight, hotel or car rental. PayPal is a money transfer company where you can link your bank account and make online purchases. Using PayPal as a purchase method provides the security of paying for travel without entering your credit or debit card details with the airline or hotel.

3. Buy gift cards

Another way to pay for flights or hotels is to purchase gift cards where they are sold. For example, many grocery stores sell specific airline and hotel gift cards, as well as Airbnb gift cards. You can purchase those cards using cash or debit, and then use the gift cards to pay for your flight, hotel or rental booking when you’re ready.

4. Pay with cash

Although you cannot use cash to purchase a plane ticket online, many airlines will allow you to pay for tickets in cash at certain airports.

United Airlines, American Airlines and Southwest Airlines’ websites all mention that they accept cash as a form of payment at designated check-in counters at specific airports.

5. Search for miscellaneous payment options

Depending on which airline or hotel you’re booking with, additional payment options may be available. For example, Uplift, which allows you to pay for purchases using an installment loan option, is listed as a payment method on United and Southwest.

6. Open a bank account that waives foreign ATM fees

International travel without a credit card is also possible. If you plan on using your debit card to pay for travel or withdraw cash when you’re away from your local bank, opening a bank account that waives foreign ATM fees is recommended. If you have a bank account that doesn’t waive ATM fees, you may end up paying two sets of fees:

  • Your bank may charge you to take out cash from another bank’s ATM.
  • The other bank’s ATM may charge an additional withdrawal fee on its own.

There are several banks out there that waive ATM fees or that waive a specific number of foreign ATM fees per month, so make sure you do your research when opening a bank account so you avoid paying unnecessary fees.

An alternative: Sign up for a no-annual-fee credit card that waives foreign transaction fees

If you’re planning on going abroad and don’t have a credit card because you don’t want to pay an annual fee, consider a no-annual fee card that also waives foreign transaction fees. Foreign transaction fees can be as high as 3%, which can quickly add up — especially if you’re using your card abroad.

Although you may not get many travel-related perks like free lounge access or extra points on specific bonus categories, you can still get a card that you can use for international travel without paying a fee and without the hassle of dealing with ATMs or local currency.

If you want to try traveling without a credit card …

Although using a credit card to pay for travel is more convenient and safer than using other methods, you still have various options available to you that you can use to book your travel. PayPal, cash, gift cards and debit cards all make it possible to pay for travel without a credit card.

If a debit card is your preferred payment method, make sure you have a bank account that waives ATM fees so that you can avoid paying extra fees. If you are open to getting a credit card but don’t want to pay an annual fee, consider a card with no annual fee and no foreign transaction fee that you can use for purchases abroad. You’ll have more protections than paying with cash but won’t incur any fees.

Elina Geller writes for NerdWallet. Email: egeller@nerdwallet.com. Twitter: @elina_geller.

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The FAFSA, Your Ticket to Help Pay for College, Just Opened

October marks the open date for the Free Application for Federal Student Aid or FAFSA — and college-bound students should submit the application as soon as possible.

Completing the FAFSA allows you to be considered for federal, state and school-based aid. In addition, submitting it soon after the Oct. 1 open date will increase your chances of receiving scholarships and grants that schools include in aid packages.

For the 2020-21 academic year, 56% of families used scholarships to help pay for college, according to Sallie Mae’s 2021 How America Pays for College study.

Even if you’re unsure you’d qualify for free aid, it’s still important to fill out the FAFSA. Most people are eligible for federal student loans. However, what varies is need-based aid, which is calculated based on your family’s finances. Since this aid comes from limited funds, applying early matters.

Here’s what you need to know about applying for aid sooner rather than later.

Get started on the FAFSA now

Submitting the FAFSA, particularly if you’re the first in your family to do so, can be complicated.

It helps to have all of the necessary information to complete the FAFSA before you start filling it out. And if you need additional assistance, there are online and in-person resources to help you complete the FAFSA.

“Some colleges and universities do select students for scholarships and grants based on a priority basis, and when your FAFSA was received could make a difference,” said Joe Cooper of Michigan Technological University in Houghton, Michigan, in an email. Cooper, the executive director of Student Financial Services, added, “If you are able to, completing your FAFSA within the first couple months it’s available is usually a best practice.”

You need to submit the FAFSA every year that you want to be eligible for federal aid. The FAFSA for this upcoming award year, or 2022-23, will remain open until June 30, 2023. If you haven’t yet submitted the FAFSA for the 2021-22 award year, it remains open until June 30, 2022. But deadlines can differ for individual institutions and states, so check which deadlines apply to you.

Give yourself more time to make a college decision

By submitting the FAFSA early, you also give yourself more time to consider your college choices.

If you haven’t enrolled in college yet, you can submit the FAFSA to the schools you’re considering and compare your award letters before you choose one. The aid you’re offered, including federal and school-based, can differ among colleges.

Completing the FAFSA early can also give you more time to appeal your financial aid award by submitting a financial aid appeal letter or requesting a professional judgment, regardless of whether you’re submitting it for the first time or not. During the 2020-21 academic year, 29% of families who received a financial aid offer appealed for more aid, according to Sallie Mae’s 2021 study.

You can submit an appeal letter if you’re unhappy with the amount of aid you received or if your economic circumstances have changed since you submitted the FAFSA. Nevertheless, submitting the FAFSA early will ensure financial aid is still available when your letter is processed.

Regardless, completing the FAFSA in the first place makes you eligible for the more than $120 billion in federal aid the Department of Education distributes each year. And getting it done early “maximizes your potential to be considered for all available financial aid,” Cooper said.

Colin Beresford writes for NerdWallet. Email: cberesford@nerdwallet.com.

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