Credit Archives | Page 7 of 87

Aug

2024

Can a Money Order Be Refunded?

By Jacqueline DeMarco | Credit, money | Comments Off

It may be possible to cancel a money order before it’s cashed and seek a refund. A money order is a type of payment that is very secure due to the fact that the payer purchases the money order with cash upfront. That way, the recipients don’t have to worry about the payment not going through like they would with a check that could bounce.

If for whatever reason the payer needs to get the money order refunded, that can be done before the recipient cashes or deposits the money order. Read on for more insight into how to get a money order refund and other important considerations about canceling or returning a money order.

Why You Might Need to Return a Money Order

These are a few common reasons for requesting a refund on a money order.

• When a money order is lost. If for whatever reason the money order is lost in the mail, it’s wise to act as quickly as possible to ensure the wrong person doesn’t try to cash that money order. Luckily, money order issuers typically have a protocol established in the event that a money order is lost, similar to how a bank can help you if a check written against your checking account gets lost.

They can either cancel the payment, replace the money order, or refund the money order. These services do come with a fee, but it’s usually much smaller than what the loss of the whole money order would be.

• When a money order is stolen. If a money order is stolen or fraud occurs, the issuer can take steps to cancel, replace, or refund the money order. Again, it’s important to make this request quickly before the thief gets a chance to cash a money order.

• When the payment is no longer necessary. In some situations, the payer decides they no longer need the goods or service they used the money order to pay for. In this situation, they may want to cancel it and request a refund from the issuer before it’s cashed, instead of trying to get a refund from the payee after they deposit or cash it.

What Do You Need for a Money Order Refund?

If you decide you want to get a refund for a money order you purchased, it can be a wise move to first track the money order and see if it’s been cashed. If it hasn’t, you can then contact the issuer of the money order so they can share what’s required to issue the refund. That being said, most money order issuers require the following things in order to refund a money order.

• The receipt. The easiest way to start the refund process is to present the money order issuer with the receipt. If you don’t have the receipt, you can likely contact or visit the physical location of where you purchased the money order to talk through their options for moving forward. With most issuers, you can submit a research request form to have the details of the money order confirmed; there’s often a fee for this service.

• A completed cancellation request form. Next, you usually need to complete and sign a cancellation request form in order to cancel the money order so you can qualify for a refund. Once the money order is canceled, you can request either a refund of the purchase price or a replacement money order.

• Method of identification. Usually, presenting your ID is necessary in order to cancel a money order.

• Money to pay cancellation fee. Most money order issuers charge a cancellation fee, and that fee can increase without a receipt present, as described above. Currently, fees can range from just a few dollars to $15 to $20, varying with the provider and the amount of the money order.

Recommended: Where to Cash a Money Order

Process of a Money Order Refund

Here is a step-by-step guide to what to expect when refunding a money order.

Step 1. Find the Receipt

It’s important to hold onto the receipt for a money order in case the payer does end up wanting to return it. It can still be possible to return the money order without a receipt in some cases, but the process may not be as seamless.

Step 2. Submit a Cancellation Form

In order to qualify for a refund, the money order first needs to be canceled. To cancel a money order, you usually need to complete and sign the cancellation form. At this point, you typically need to show your ID, so this probably takes place in person at a money order purchase location. When you submit a cancellation form, you may have the option of requesting a refund.

Step 3. Pay the Cancellation Fee

It’s important to be aware that canceling a money order usually comes with a fee and that fee can increase when someone doesn’t have the original receipt, as noted above.

How Long Does a Money Order Refund Take?

How long it takes to refund a money order depends on the issuer, but this process can take up to 60 days.

How Much Does It Cost for a Money Order Refund?

How much it costs to get a refund for a money order depends on the fee structure charged by the issuer. All issuers set their own fees, and some may charge more if someone doesn’t have a receipt for their money order. That being said, it can cost between about $5 to $30 to get a refund for a money order with a face value of $5 or more.

The Takeaway

A money order can often be refunded if it has not yet been cashed. You may want to pursue this process if a money order has been lost or stolen or if it was used to pay for goods or services you have not received or are not satisfied with. There are a few steps to the process, and there may be a fee charged, but it’s usually fairly minimal and is likely worth getting the original amount of money back.

Money orders are just one way to cover spending. A checking and savings account can provide other options.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.30% APY on SoFi Checking and Savings.

FAQ

Can you get a refund for a money order that has been accepted?

Once a money order has been deposited or cashed by the recipient, it is not possible for the issuer to offer a refund. Because of this, it’s vital to be certain that you want to issue a money order before committing to buying one.

How long do money orders last?

One good thing about money orders is they don’t expire, so the payee can wait a while to cash them. That being said, it’s important not to wait too long to cash or deposit a money order. Usually, if a money order hasn’t been cashed after one to three years, a non-refundable service charge is deducted from the principal amount of the money order and may continue to be charged, which can diminish and even deplete the value of the money order.

How can I tell if someone has cashed the money order?

If someone isn’t certain whether the recipient of their money order has cashed it, they can check the status of the money order with the issuer. Usually, this can be done online on the money order issuer’s website. They may need to provide information such as the money order’s serial number and the issued amount in order to confirm whether it was cashed or not.

Photo credit: iStock/MicroStockHub

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.30% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.30% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.30% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/8/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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Aug

2024

Guide to Letters of Credit

By Caroline Banton | Credit, money | Comments Off

A letter of credit is a document from a bank or financial institution guaranteeing that a buyer’s payment to a seller will be made on time and for the correct amount. As part of a sales agreement, a seller may require the buyer to deliver a letter of credit before a deal takes place.

Letters of credit are often vital in international trade where the two parties involved are not yet familiar with one another. Letters of credit facilitate new trade and prompt payments.

Read on to learn more, including:

• What a letter of credit is

• How a letter of credit works

• What the different types of letters of credit are

• The pros and cons of letters of credit

• How to get a letter of credit.

What Is a Letter of Credit in Banking?

A letter of credit in banking is a document that a bank issues to a seller that guarantees payment from their customer for an order or service. The bank where the buyer’s business account is held usually assumes responsibility for the payment for the goods. However, the conditions laid out in the letter of credit must be fulfilled. If the buyer is unable to fulfill the purchase, the bank must pay the seller the purchase amount. The bank or financial institution charges the buyer a fee for guaranteeing the payment and issuing the letter.

Letters of credit are common in international trade situations because various factors can affect cross-border transactions. For example, the deal might involve different legal frameworks, a lack of familiarity between the parties involved, and geographic distance.

If you are a buyer who is planning to be involved in international trade, you will likely want to open a bank account that can provide you with a letter of credit when you need it.

How a Letter of Credit Works

When used properly, letters of credit can work to minimize credit risk and help international trade go smoothly. A vendor selling products or services overseas may want assurance that a buyer of their products or services will pay. Perhaps the buyer is new to them or just a new business, period.

So how does a letter of credit work? It serves as a guarantee from a bank that payment will be made to the vendor once the requirements are met. The letter lays out the conditions of payment, such as the amount, the timing of the payment, and the delivery specifications. The letter may help the business placing the order build their credit, too.

The bank charges the buyer a fee for issuing a letter of credit (often around 0.75% to 1.5% of the amount of the deal). It also does the due diligence to verify the buyer’s creditworthiness. The bank requires collateral or security from the buyer for the payment guarantee. In essence, the bank acts as a third party facilitating the deal.

Types of Letters of Credit

Here are four types of letters of credit.

• Commercial Letter of Credit: This is a method in which the issuing bank pays the seller directly. For a stand-by letter of credit, which is a secondary method of payment, the bank only pays the seller if the buyer cannot transfer funds.

• Revolving Letter of Credit: With this type of letter of credit, the bank guarantees payment for a number of transactions, such as a series of merchandise shipments within a set period of time.

• Traveler’s Letter of Credit: With this kind of letter, travelers can make withdrawals in a foreign country because the issuing bank guarantees to honor any withdrawals.

• Confirmed Letter of Credit: A seller using a confirmed letter of credit involves a secondary bank, typically the seller’s bank. This bank guarantees payment if the first bank fails to pay.

There is also an irrevocable letter of credit. This is a letter of credit that can’t be changed or canceled unless all parties agree.

Letter of Credit Example

Here’s an example of a letter of credit: A bank provides commercial letters of credit and stand-by letters of credit within two weeks. The funds are secured through deposits at the bank, and the terms are renewable. These documents can help reassure parties doing business internationally with new businesses or clients who have recently started a business.

The Money Behind a Letter of Credit

So where do the payment funds for a letter of credit originate? The party paying for the goods or services typically deposits funds in advance to the bank that issues the letter of credit to cover the payment. Alternatively, the amount might be frozen in the payer’s account or the payer might borrow from the bank using a line of credit.

When Does Payment Happen?

Payment usually occurs when the seller has completed all the stipulations in the letter of credit. For example, the seller might have to deliver the goods to a specific address or onto a ship for transportation in the case of international trade. In the latter case, shipping documents would serve as proof that the requirements for payment have been fulfilled. They might then trigger the payment transaction.

What to Watch Out for

Here are some common mistakes sellers may make when relying on a letter of credit for payment.

• Failing to check all of the requirements in the letter of credit.

• Failing to understand the documents required for the deal.

• Failing to confirm whether the time limits for delivery and payment are reasonable.

• Failing to meet the time limits.

• Failing to get the necessary proof of delivery documents to the bank.

Letters of Credit Terminology

Here are some terms and phrases to know if you may be using letters of credit.

• Advising bank: This is the bank that informs the seller that the letter of credit has been completed. The advising bank is also called the notifying bank.

• Applicant: The party or buyer of products or services who applies for the letter of credit from the bank.

• Beneficiary: The party, or seller, who will receive payment. The seller usually requests a letter of credit to guarantee payment.

• Confirming bank: The bank that guarantees the payment of the required funds to the seller. If a third party is involved, the confirming bank is often the seller’s bank.

• Freight forwarder: A shipping company that provides the transportation documents to the seller.

• Intermediary: These are companies that link buyers and sellers and may use letters of credit to ensure transactions are executed.

• Issuing bank: The bank that issues the letter of credit.

• Negotiating bank: If a third party is involved, the negotiating bank works with the beneficiary and the other banks involved. They likely determine the letter of credit requirements to complete the transaction.

• Shipper: The transportation company that ships goods.

• Stand-by letter of credit: A secondary letter of credit that’s used when a deal requirement has not been met. For example, if payment does not occur within the specified timeframe, a stand-by letter of credit would then be used to help guarantee that the deal goes through.

Pros and Cons of Letters of Credit

A letter of credit provides security for both parties involved in a trade, but it can also add costs and time to business transactions.

Pros	Cons
• Reduces the risk that payment will not be made for goods or services, thereby providing security • Allows for additional requirements to be built into a letter of credit, such as quality control and delivery stipulations • Provides transaction security for both the buyer and the seller • Forges new trade relationships	• Incurs bank fees for the letter of credit, typically for the buyer, which increases the cost of doing business • Adds time by preparing a letter of credit; transactions can be delayed • May require a separate letter of credit for each transaction • Typically stipulates that the buyer provides collateral to the bank

Pros

Cons

• Reduces the risk that payment will not be made for goods or services, thereby providing security

• Allows for additional requirements to be built into a letter of credit, such as quality control and delivery stipulations

• Provides transaction security for both the buyer and the seller

• Forges new trade relationships

• Incurs bank fees for the letter of credit, typically for the buyer, which increases the cost of doing business

• Adds time by preparing a letter of credit; transactions can be delayed

• May require a separate letter of credit for each transaction

• Typically stipulates that the buyer provides collateral to the bank

How to Get a Letter of Credit

Getting a letter of credit usually requires a few steps. It’s wise to get the necessary paperwork together first. Various documents will usually be listed as requirements for a trade, such as a shipping bill, a commercial invoice, insurance documents, a certificate of origin, and a certificate of inspection.

Here are the steps typically taken to obtain a letter of credit.

1. The buyer and seller come to agreement on the sale terms and the use of a letter of credit.

2. The buyer contacts their bank where they have a checking account and requests a letter of credit and provides necessary documents.

3. The issuing bank prepares the letter based on the terms of the sales agreement and sends it to the confirming bank or advising bank, which is typically in the seller’s home country.

4. The confirming bank verifies the terms and forwards the letter to the seller.

5. The goods can then be shipped, and the exporter sends documentation to the advising or confirming bank.

6. Document verification and settlement of payment can then occur.

When to Use a Letter of Credit

A letter of credit is beneficial for sellers entering into a new trade relationship or an international trade relationship. It can provide assurance that the seller will receive payment because the issuing bank guarantees payment once the requirements have been met. Sellers may also use the guarantee of payment to borrow capital to fulfill the buyer’s order.

The Takeaway

A letter of credit is usually requested by an exporter or seller to minimize credit risk. The buyer of the goods or services applies to a bank and requests a letter of credit based on the sales agreement. This document helps guarantee that payment will be made. It can provide priceless peace of mind when conducting international trade or doing business with a new customer.

Another path to financial peace of mind: Choosing the right bank account. Whether you’re looking for a business account or a personal account, it’s wise to shop around to find the best banking fit for your needs.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.30% APY on SoFi Checking and Savings.

FAQ

How much does a letter of credit cost?

A typical fee for a letter of credit is typically 0.75% percent to 1.5% of the amount of the deal, but the rate will vary depending on the country and other factors.

How do you apply for a letter of credit?

Once the terms of a trade are agreed upon between the buyer and the seller, a buyer contacts their bank to request a letter of credit. They then gather the required documentation and fill out an application with that bank.

Why do you need a letter of credit?

The parties involved in a trade typically use a letter of credit to minimize risk. For the seller, a letter of credit can guarantee payment for goods once certain requirements have been met and the buyer confirms their creditworthiness as a trade partner.

Photo credit: iStock/Lesia_G

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This article is not intended to be legal advice. Please consult an attorney for advice.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

4.30% APY
SoFi members with direct deposit activity can earn 4.30% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.30% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.30% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/8/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

SOBK-Q224-1916963-V1

Aug

2024

Using a Personal Loan for a Down Payment

By Jackie Lam | Budgeting & Goals, Credit, Financial Topics | Comments Off

Coming up with enough cash for a down payment to buy a house is often the biggest hurdle for prospective homebuyers. To avoid paying for mortgage insurance, you typically need to put down 20% of the purchase price. These days that can be a hefty sum: The average home sales price in the second quarter of 2024 was around $500,000, which means a typical buyer will need to accumulate at least $50,000 to purchase a home.

If you don’t have that kind of cash sitting around, using a personal loan might sound like a great solution. Unfortunately, many mortgage lenders do not permit you to do this. Even if you can find one who does, it may not be a good idea. Here’s what you need to know about using a personal loan for a down payment.

Why Can’t I Use a Personal Loan as a Down Payment?

As part of the mortgage application process, a lender will want to verify the sources for your down payment. Being able to provide documentation that you have enough money in savings to cover your down payment (and then some) gives the lender confidence in your strength as a borrower and your ability to repay the loan.

If you fund a down payment through a personal loan, however, a lender may see it as a sign of potential financial instability, which raises their risk. As a result, some types of mortgages — including conventional mortgages and FHA mortgages — forbid the use of personal loans as a down payment for a home.

Why Is It Bad to Use a Personal Loan for a Down Payment on a House?

Even if you are able to find a mortgage lender who allows you to use a personal loan for a down payment, doing so can have several negative consequences. Here are the primary reasons why it’s considered a bad idea.

• It can increase your DTI: Having a personal loan on your credit reports impacts your debt-to-income (DTI) ratio — how much of your monthly income goes to repaying debts. A higher DTI ratio can make it more challenging to qualify for a mortgage or reduce the amount for which you can qualify.

• It might increase your interest rate. Taking out a personal loan to cover a down payment signals to a mortgage lender that you’re financially stretched and may not be able to afford homeownership. This makes you a greater risk. To protect themselves, a lender may offer you a higher rate than a borrower using savings for their down payment.

• Higher monthly payments: Personal loans typically have shorter terms and higher interest rates than mortgages. Using a personal loan for a down payment means additional debt on top of a mortgage, which could be difficult to manage and lead to financial strain.

• Greater risk of default. If your budget is stretched due to multiple debts, you could potentially fall behind on your personal loan, mortgage payments, or both. If that happens, you risk defaulting on your debt, damaging your credit, and in a worst-case scenario, losing your home.

What Are Alternatives to a Personal Loan for a Down Payment?

Instead of using money from a personal loan for a down payment on a house, here are other ways to fund this milestone purchase.

Savings

If you’re not in a rush, you may want to push back your home purchase and ramp up your savings. To ensure consistency with your savings, consider setting up an automated transfer from checking to a dedicated savings account for a set day each month. You might also want to put any windfalls — like a tax refund, work bonus, or cash gift — toward your down payment fund to get to your goal faster.

Gifts From Family

Many mortgage lenders allow down payment funds to come from gifts provided by family members. If you have relatives who are willing and able to assist, this can be a viable option. Since a lender may ask you to substantiate any large deposits into your bank account, it’s a good idea to ask the giver to provide a letter to your lender detailing the amount and confirming that it is a gift and not a loan.

Down Payment Assistance Programs

Various local, state, and federal programs offer down payment assistance to eligible homebuyers. These programs can provide grants, low-interest loans, or forgivable loans to help cover your down payment and closing costs. They’re typically geared toward first-time homeowners who are low- to middle-income. The Department of Housing and Urban Development (HUD) allows you to search local home-buying programs by state on the HUD website.

Look Into Loans That Require a Smaller Down Payment

There are some types of mortgages that do not require a large down payment. FHA loans (which are insured by the Federal Housing Administration), for example, allow eligible borrowers to put down as little as 3.5%. USDA loans (targeted to certain suburban and rural homebuyers) and VA loans (designed for U.S. service members and their surviving spouses) don’t require any down payment.

Retirement Account Loans or Withdrawals

Some retirement accounts, like a 401(k) or IRA, allow you to take out a loan or make a withdrawal for a home purchase. While this option can provide the necessary funds, it’s essential to understand the implications, such as potential taxes, penalties, and the impact on your retirement savings. It’s a good idea to consult with a financial advisor to determine if this could be a good option for your situation.

Recommended: Guide to Personal Loans for Beginners

The Takeaway

Taking out a personal loan might seem like a good way to get the funds for a down payment on a home. The problem is that many mortgage lenders won’t permit you to use a personal loan for down payment and, if they do, may charge you a higher interest rate or lower your loan amount, as they will view you as a risky borrower.

Personal loans are generally better left for other purposes, such as covering emergency expenses, consolidating credit card debt, or making home repairs or improvements (once you become a homeowner). If you are considering getting a personal loan, be sure to shop around to find the right offer. Personal loans from SoFi, for instance, offer competitive fixed interest rates.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

Can you use a personal loan for closing costs?

It may be possible to use a personal loan to cover closing costs when buying a home. These costs, which may include appraisal fees, title insurance, and attorney fees, can add up quickly. Just keep in mind that some mortgage lenders may not approve a borrower for a mortgage if they have recently taken out a personal loan, as it shows you may not be in a strong financial position to take on other new debt.

Do banks check what you spend your loan on?

Banks typically do not check or monitor what you spend the funds from a personal loan on. Once the loan is approved and the funds are transferred to your bank account, it is up to you to use the money as agreed upon in the loan agreement.

Keep in mind, however, that misusing the funds from a personal loan can have financial and legal consequences. If you use the loan money for something other than what was outlined in the loan agreement, you are technically in violation of the terms of the loan. This could potentially lead to penalties, legal action, or damage to your credit score.

What happens if you don’t use all of your personal loan?

If you don’t use all of your personal loan, you’re still responsible for repaying the full amount borrowed, along with interest. If your lender doesn’t charge a prepayment penalty, you might consider using the excess funds to pay off your loan ahead of schedule — this can reduce the total amount of interest you’ll pay for the loan.

Photo credit: iStock/whitebalance.oatt

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOPL-Q324-004

Aug

2024

Personal Loan for Closing Costs

By Melissa Brock | Credit, Home Ownership, personal_loan | Comments Off

When you purchase a home, you must pay closing costs, which are the fees the lender charges to recoup loan processing costs. These can add up to a hefty sum, typically 3% to 6% of your mortgage amount.

Typically, you can take out a personal loan to cover those closing costs and help you across the finish line of a property purchase. You can often tap other funding sources as well. Take a closer look at the pros and cons of using a personal loan for closing costs, plus the alternatives, so you can decide what’s best for your needs.

What Are Closing Costs?

Closing costs are processing fees that you pay to your lender, either as the buyer or seller in a real estate transaction:

• Buyers: Buyers typically pay between 3% and 6% of the total loan amount in closing costs. Buyers must pay this amount out of pocket, so it’s important for them to have a plan for how they’ll access the money before they get to the closing table.

• Sellers: If sellers contribute to closing costs (say, to negotiate a home sale), those fees usually get taken out from the sale proceeds.

Here’s an example: If you plan to buy a home with a $300,000 loan, as the buyer, you’ll need to bring between $9,000 and $18,000 to the closing table. If you were the seller, you’d see that amount taken out of the costs you’d pocket from the sale.

Fees Associated with Closing Costs

Closing cost fees may include:

• Application fee: Lenders sometimes charge a one-time fee for borrowers to submit a loan application.

• Credit report fee: A credit report or credit check fee covers the cost to dig into your credit report, which shows your credit history. Your lender uses the information it uncovers to decide whether to approve your loan and how much they’ll lend you.

• Origination fee: You pay this fee to the lender to process the loan application.

• Appraisal fee: A fee paid to a professional to appraise the home based on an evaluation to determine its fair market value.

• Title search: A title search looks into public records to determine who actually owns the property and who has liens on the property (for example, an unpaid contractor’s lien for work done on the home).

• Title insurance: Title insurance protects you from financial loss and legal expenses in case the home has a bad title.

• Underwriting fee: Underwriting is the process of reviewing your finances to determine the risk of offering you a mortgage, and the fees cover this process.

• Property survey fee: Property survey fees cover the cost of checking the boundaries and easements of a property. This process shows exactly where the property’s perimeter is and what the property includes.

• Attorney fee: You will probably need to hire a lawyer to review the terms in your purchase contract and handle your closing.

• Discount points: Discount points are a way to balance your upfront costs and your monthly payment. If you use points to pay more upfront, you’ll likely have a lower interest rate, meaning that you could pay less monthly and over your loan term.

• Homeowners insurance premiums: Homeowners insurance provides financial protection if your home undergoes a disaster or accident. You must typically show your lender that you have paid homeowners insurance.

• Mortgage insurance: If you have a down payment of less than 20%, you will often have to pay mortgage insurance, a fee per month that protects your lender if you were to default. You’ll also have to pay a version of mortgage insurance on Federal Housing Administration (FHA) and U.S. Department of Agriculture (USDA) loans. You may have to pay these insurance fees with your closing costs in addition to your monthly payments, particularly for the FHA and USDA loans.

• Property tax: Homeowners pay property tax to state, county, and local authorities for schools, roads, and other municipal services. You may have to pay a portion of your property tax at closing.

• Homeowners association (HOA) fees: If you plan to move to a neighborhood that has an HOA, or an organization that makes and enforces rules for a neighborhood, you may owe HOA fees at closing. The seller may pay these on a prorated basis.

• Per-diem interest: Per-diem interest refers to the interest a lender charges for the days between a closing date and the first day of your billing period.

• Transfer tax: State or local governments often charge real estate transfer taxes, meaning that they charge when properties transfer ownership.

• Recording fee: State and local governments charge recording fees to legally record your deed, mortgage, and other home loan documents.

Note that this isn’t an exhaustive list of closing costs — you may be on the hook for other fees as well.

Can You Use a Personal Loan for Closing Costs?

First, it’s important to understand how a personal loan works. It is usually funded by a bank, credit union, or online lender. You can typically use the money however you want — there aren’t as many restrictions on personal loans compared to, say, student loans. After you receive a personal loan, you pay it back with regular, fixed payments (with interest) over a specified term.

As mentioned above, you can use the cash as you see fit. So, yes, you can use a personal loan for closing costs. However, you can’t use it for a down payment, and you must tell your lender that you’ll go this route and borrow to pay the closing costs. The lender will include it in your debt-to-income (DTI) ratio, which is the amount of debt you have relative to your income.

Applying for a personal loan can involve prequalifying with several lenders and comparing them, gathering required documents (ID, proof of address and income, Social Security number, and education history), filling out the loan application, and receiving your funds after approval. You may be able to get a personal loan in one to three days.

As you shop around for funds, you’ll likely want to consider what credit score you need for a personal loan at a given interest rate. Also consider the length of the loan term; this can typically range from one to seven years.

Recommended: Guide to Personal Loans

Pros of Taking Out a Personal Loan for Closing Costs

Here are some of the key benefits of taking out a personal loan for closing costs.

• Collateral not required: Personal loans are often unsecured loans, meaning that you don’t have to put an asset up in order to receive the loan. Therefore, if you fail to repay the loan, your lender will not claim the asset to repay your debts.

• Quick approval: It usually doesn’t take long to get a personal loan once you’ve been approved. After you submit your application and materials, it might take just a day to get the personal loan, though it could take longer.

• Flexible repayment options: You can tap into flexible repayment plans, including no prepayment penalty, meaning that the lender won’t penalize you for paying off the loan early.

Cons of Taking Out a Personal Loan for Closing Costs

Next, consider the downsides of using a personal loan to cover closing costs.

• DTI increase: Lenders will look at your overall debt under a microscope, so taking on a personal loan may factor into your overall debt. It may signal to the lender that you aren’t in a good financial position since an additional loan could raise your DTI ratio. It might keep you from being approved for a mortgage or could result in a higher mortgage interest rate.

• Additional loan payment: You might find it tricky to repay a personal loan in addition to a mortgage payment. Consider whether you can comfortably make both payments every month.

• High interest rates: There is the potential for high interest rates if you have poor credit. This can make it more challenging to afford a personal loan.

Recommended: Personal Loan Requirements

Alternatives to a Personal Loan for Closing Costs

You may have options vs. getting a personal loan for closing costs. Consider how else you might handle those fees.

• Roll them into your mortgage: You may be able to add your closing costs to your mortgage, but this means you’ll increase the principal balance of your loan. This will increase both the principal and the interest you’ll pay over your loan term and also translates to higher monthly payments.

• Ask for a waiver: Your lender may be willing to waive certain fees. For example, they may reduce certain processing fees. There’s no guarantee, but it can be worth asking. That might help you out with your final closing cost amount.

• Ask the seller to pay: As mentioned previously, sellers may pay for some of the closing costs if they’re eager to ensure that the property sale doesn’t fall through.

• Tap into assistance programs: Many state and local governments offer down payment and closing cost assistance programs for moderate- to low-income home buyers. Look into your state’s housing finance agency, your city or county website, the U.S. Department of Housing and Urban Development (HUD), or check with your lender to learn more about your options.

• Use gift money: Do you have a generous grandparent or parent who wants to help you cover your closing costs? Your state may have rules and regulations attached with gift money (especially ensuring that it’s an actual gift). Check with your lender to learn more.

The Takeaway

You can typically use a personal loan to pay for closing costs, the fees that can cost 3% to 6% of your home loan amount when you purchase a property. While this can be a convenient source of funding that is typically unsecured (meaning no collateral is required), it can raise your DTI and add to your monthly financial burden. It’s wise to carefully consider all the pros and cons, as well as alternative funding sources, when deciding whether to use a personal loan for closing costs.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

Is it smart to finance closing costs?

Whether it’s smart to finance closing costs depends on your personal situation. For example, for some people who can handle the additional monthly payment, it may be a convenient move. On the other hand, getting a personal loan may increase your DTI, so your mortgage lender might charge you a higher interest rate or deny you the loan altogether.

Can I put closing costs on a credit card?

While you’ll usually use a cashier’s check, certified check, or wire transfer to pay for closing costs, you can put some closing costs on a credit card, such as attorney, appraisal, and survey fees. Check with your lender to learn more about which fees you can put on a credit card. (Also note that using your credit card in this way can raise your credit utilization rate and potentially lower your credit score.)

What is not an acceptable source of funds for closing?

Closing costs are typically paid by a cashier’s or certified check or by wire transfer. Funds for these could be acquired by such sources as a government program or a personal loan. Less frequently, credit cards, debit cards, and personal checks may be accepted for some closing costs.

Photo credit: iStock/jacoblund

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOPL-Q324-010

Aug

2024

Why Did My Credit Score Drop When My Credit Card Balance Decreased?

By Ashley Kilroy | Credit, credit card | Comments Off

Paying down your credit card debt is a huge win for your finances, but you might see your credit score go down even after you lower your balance. While this can be confusing, the drop is often due to other factors, like the types of credit you have and the length of your credit history.

Read on to learn why your credit score may have dropped after paying off debt and how you can boost it.

Why Your Credit Score May Drop When a Credit Card Balance Decreased

While you might expect your credit score to go up after paying off debt, there are a few reasons why it could dip instead.

Worst case scenario: If someone uses your personal information to open a new credit account, or makes charges on your cards without your approval, your credit score may take a hit. The longer the fraud goes unnoticed, the harder it becomes to fix the issue.

More likely, closing your account after paying off a credit card balance can affect your credit score. This changes the overall picture of your credit usage and history, which might cause a small, temporary drop.

Remember that credit scores can fluctuate for many reasons, and a drop isn’t always a bad sign. You can keep track of your score with credit score monitoring.

Track your credit score with SoFi

Check your credit score for free. Sign up and get $10.*

Credit Score Factors

Let’s dive deeper into the factors that can affect your credit score. We’re focusing on the FICO credit scoring model, which most lenders use to make their decisions.

Payment History

A history of on-time payments has the biggest impact on your credit score, making up 35% of it. If you’ve recently missed a payment or two, your credit score might be negatively affected. On the flip side, staying on top of due dates, whether with a money tracker app or a calendar, can help you keep your credit score healthy.

Credit Utilization

Paying off your credit card balance and then closing the account could cause your credit score to drop. That’s because it increases the percentage of credit you’re using compared to the total amount available — also known as credit utilization. Lenders typically want you to have a credit utilization ratio under 30%. If yours is higher than that, rest assured there are ways to lower your credit card utilization.

Length of Your Credit History

Length of credit history refers to the average amount of time your credit accounts have been open. In general, the longer your credit history, the better your credit score may be. Closing a credit card account, especially one you’ve had for a long time, can bring that average down, and you may see a drop in your credit score as a result. So think carefully before you decide to close an account.

Credit Mix

Paying off certain types of debt might also lower your credit score because it reduces the variety of your credit types. Lenders like to see that you can responsibly handle different kinds of debt, such as installment loans and mortgages. When you pay off a car loan or other type of debt, it can decrease the diversity of your credit mix, which could lead to a drop in your credit score.

If you paid off both your credit card debt and a loan simultaneously, this might explain the drop in your score. Also, if you closed the credit card account after repayment, your credit mix may be impacted.

New Credit Card Applications

When you apply for a new line of credit, like an auto loan or credit card, the issuer usually performs a hard inquiry on your credit report, which can temporarily lower your score. Lenders check your credit to see if you’re a responsible borrower. Even requesting a credit line increase on an existing card can trigger a hard inquiry.

A soft inquiry is different. It just means you or another company looked at your report, but it doesn’t impact your score. If you’ve recently applied for credit, that hard inquiry could be the reason for the dip. It can be helpful to learn more about soft credit inquiries vs. hard credit inquiries.

How to Pay Off Debt and Help Your Credit Score

To pay off debt and help your credit score, here are a few steps to follow:

• Create a budget. By tracking your income and expenses, you can understand where your money is going. This will help you find ways to save money and put more toward paying off debt. A spending app can help automate budgeting.

• Prioritize debts. Depending on your situation, you may want to focus on paying off high-interest debts first, such as credit cards, while making minimum payments on lower-interest debts. Doing so could help you save money on interest in the long run.

• Make regular payments. Consistently pay at least the minimum amount due on all your debts. Whenever possible, pay more than the minimum, which can help reduce your debt faster.

• Consider debt consolidation. If you have multiple high-interest debts, you may want to consider consolidating them into a single loan with a lower interest rate. This can simplify your debt management efforts and potentially reduce overall interest costs.

• Use credit responsibly. Aim to keep your credit utilization ratio below 30% by not maxing out your credit cards.

How Do I Keep My Credit Score From Dropping?

It can take a while to build up your credit, so you’ll want to take steps to protect it. Here are some tips to help you keep your credit score from dropping after you pay off debt:

• Pay your bills on time. Sending bill payments on time is important because it’s such a big part of your credit score. If you need a hand, set up autopayments to make sure your lender or creditor gets your payment on or before the due date.

• Think twice before closing an account. After you pay off a credit card, try not to close it unless you really have to. If you’re worried about spending, you can cut up the card. Keeping older accounts open helps maintain the length of your credit history, which is good for your score.

• Avoid new credit applications. Every time you apply for new credit, it can result in a hard inquiry on your report, which might temporarily lower your score.Try to avoid opening new lines of credit unless you really need to.

• Check your credit report. Regularly check your credit report for any errors or signs of fraud. (There are ways to check your credit score without paying.) If you spot something unusual, be sure to dispute any inaccuracies right away.

How Long Does It Take for Your Credit Score to Improve After Paying Off Debt?

Lenders usually update account activity with the three major credit bureaus — Experian, Equifax, and TransUnion — at the end of the billing cycle. This means it can take 30 to 45 days for any changes to impact your credit report.

It’s a good idea to check your credit report at least once a year. You can get a free report from AnnualCreditReport.com. Remember that checking your credit report and score won’t hurt your credit score.

Ways to Increase Your Credit Score After Paying Off a Loan

To help give your credit score a boost after paying off debt, stay on top of your other credit accounts by paying bills on time and using credit wisely. For example, if you have a credit card, use it for small purchases like gas or groceries, and pay off the balance each month. It proves to lenders that you can manage credit well.

Also try to keep the amount of credit you’re using low compared to your total credit limit. Remember, creditors usually like to see a ratio below 30%. This means using less than 30% of your available credit. Paying off smaller debts may help improve your overall debt-to-income ratio.

How to Get Credit Score Monitoring

Credit monitoring can help you keep an eye on your accounts and catch issues early. It tracks your accounts and alerts you to any unusual activity so you can address problems right away.

Many financial companies offer free credit monitoring, so it’s a good idea to contact your bank or credit card to see if you qualify. If you’ve been part of a data breach, you might get credit monitoring for free. Otherwise, you can sign up for it yourself, typically for a monthly fee of $10 to $30. Alternatively, you can take a DIY approach and monitor your credit for free.

The Takeaway

After paying off credit card debt, it’s possible to see your credit score dip. While this drop is usually short-lived, it can be due to changes in your credit mix, history length, utilization ratio, or a combination. To boost your score, focus on responsible credit management. Consider strategies like setting up autopay to ensure you make timely payments, and avoid taking on more debt. These habits can help you maintain a strong credit score.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

Why has my credit score gone down when nothing has changed?

Your credit score might change even if everything seems the same. Certain factors like report updates, identity theft, variations in credit usage, and new information from creditors can impact your score. By regularly reviewing your credit report, you can catch and address changes and errors.

Is a decrease in credit balance good?

It’s usually best to pay your credit card bill in full instead of carrying a balance, as carrying a balance doesn’t help your credit score. Aim to keep your balances below 30% of your total credit limit to maintain a healthy credit score.

Why is my credit score going down if I pay everything on time?

Even if you pay everything on time, your credit score might still go down because of things like using more of your available credit or applying for new credit. Closing old accounts or having a short credit history can impact your score, too.

Photo credit: iStock/milan2099

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SORL-Q324-005

Can a Money Order Be Refunded?

Why You Might Need to Return a Money Order

Get up to $300 when you bank with SoFi.

What Do You Need for a Money Order Refund?

Process of a Money Order Refund

Step 1. Find the Receipt

Step 2. Submit a Cancellation Form

Step 3. Pay the Cancellation Fee

How Long Does a Money Order Refund Take?

How Much Does It Cost for a Money Order Refund?

The Takeaway

FAQ

Can you get a refund for a money order that has been accepted?

How long do money orders last?

How can I tell if someone has cashed the money order?

Guide to Letters of Credit

What Is a Letter of Credit in Banking?

How a Letter of Credit Works

Types of Letters of Credit

Get up to $300 when you bank with SoFi.

Letter of Credit Example

The Money Behind a Letter of Credit

When Does Payment Happen?

What to Watch Out for

Letters of Credit Terminology

Pros and Cons of Letters of Credit

How to Get a Letter of Credit

When to Use a Letter of Credit

The Takeaway

FAQ

How much does a letter of credit cost?

How do you apply for a letter of credit?

Why do you need a letter of credit?

Using a Personal Loan for a Down Payment

Why Can’t I Use a Personal Loan as a Down Payment?

Why Is It Bad to Use a Personal Loan for a Down Payment on a House?

What Are Alternatives to a Personal Loan for a Down Payment?

Savings

Gifts From Family

Down Payment Assistance Programs

Look Into Loans That Require a Smaller Down Payment

Retirement Account Loans or Withdrawals

The Takeaway

FAQ

Can you use a personal loan for closing costs?

Do banks check what you spend your loan on?

What happens if you don’t use all of your personal loan?

Personal Loan for Closing Costs

What Are Closing Costs?

Fees Associated with Closing Costs

Can You Use a Personal Loan for Closing Costs?

Pros of Taking Out a Personal Loan for Closing Costs

Cons of Taking Out a Personal Loan for Closing Costs

Alternatives to a Personal Loan for Closing Costs

The Takeaway

FAQ

Is it smart to finance closing costs?

Can I put closing costs on a credit card?

What is not an acceptable source of funds for closing?

Why Did My Credit Score Drop When My Credit Card Balance Decreased?

Why Your Credit Score May Drop When a Credit Card Balance Decreased

Track your credit score with SoFi

Check your credit score for free. Sign up and get $10.*

Credit Score Factors

Payment History

Credit Utilization

Length of Your Credit History

Credit Mix

New Credit Card Applications

How to Pay Off Debt and Help Your Credit Score

How Do I Keep My Credit Score From Dropping?

How Long Does It Take for Your Credit Score to Improve After Paying Off Debt?

Ways to Increase Your Credit Score After Paying Off a Loan

How to Get Credit Score Monitoring

The Takeaway

FAQ

Why has my credit score gone down when nothing has changed?

Is a decrease in credit balance good?

Why is my credit score going down if I pay everything on time?

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