Peer to peer lending, also commonly referred to simply as “P2P” lending, has increased in popularity since being introduced in just over a decade ago. This type of lending is also often known as “social lending” because of the way it works. Peer to peer lending is the kind of lending that occurs between two individuals instead of in the traditional manner that involves a bank or other financial institution. There are a number of peer to peer lending companies around the world that offer loans to individuals who prefer an alternative to loans offered by banks. Two of the best-known lending companies, Lending Club and Prosper, offer funding for just about any purpose. Peer to peer lending offers benefits for both the borrower and the lender.
What are the Benefits of Peer to Peer Lending for Borrowers?
- Easy Application Process: Applying for a peer to peer loan is very easy. It is done online and takes only a few minutes. All that’s needed is for the borrower to include personal information into the online application. You can be approved for a loan mere minutes after submission of the application.
- Interest Rates: Peer to peer lending offers extremely reasonable interest rates that are similar to those of loans acquired from banks. On average, a quote for a P2P loan is an APR of around seven percent for the most qualified candidates. When a borrower is approved for the loan, there are a few different payback timelines offered, ranging from one, three or five years. The interest rate is adjusted based on which payback term the borrower chooses.
- Speed of Funding: One of the biggest benefits of peer to peer lending for the borrower is the speed at which funding comes. Depending on the size of the loan, funding usually takes only one to three weeks. Smaller loans that amount to less than $5,000 can be funded in less than a week.
- Higher Funding Rates: Funding amounts for peer to peer loans have increased over time, meaning that the borrower can acquire an even greater amount for their loan. Generally, the amount of a P2P loan can range from $1,000 to as high as $35,000.
What are the Benefits of Peer to Peer Lending for Lenders?
Lenders also get to reap the rewards of the peer to peer lending process. Here are some of the notable benefits of P2P lending for lenders:
- Spreading Risk: Lenders are not large financial institutions and are instead, regular people. Many peer to peer loans are filled in significantly smaller increments. Investors are drawn to this type of loan because of its lower interest rates.
- High Returns: Returns on P2P loans can average at around 10 percent depending on the type of loan and its term. This amount is very attractive in the market.
- Lenders Choose: Lenders can benefit by choosing who they want to get their loan after the borrower passes identity verification. The lender can also choose to invest in a loan that piques their interest. For example, if you are a lender and you don’t like that a borrower wants a loan to consolidate their credit card debt, you can pass on that person. However, if you see a lender who wants a loan to make minor home improvements, you can choose to fund for them.
These are some of the greatest benefits of peer to peer lending. Both the borrower and the lender can enjoy these winning situations.
When it comes to financial matters, the world revolves around credit. Unless you come from wealth and riches, it’s hard to function in life without a good credit score. Credit scores are taken heavily into consideration when it’s time to get a loan for a home, car or apartment. Some jobs even look at an applicant’s credit score before hiring them. Because your credit score is such a major determining factor in almost everything in life, you’ll want to make sure it’s good. If it’s low, there are ways to improve it.
Try not to have more than six revolving accounts open. However, if you have between four and six accounts open, this isn’t bad. Abruptly canceling the accounts can do more harm than good. Keep a few credit card accounts open so that the credit bureaus can see that you understand how to manage a few accounts at a time. Consider using credit cards for places that you shop often. For example, if you plan on purchasing all of your home goods and appliances from a major department store, keep that credit card open. Whenever it’s time for you to purchase a new knife set or pillows for your bedroom set, purchase them with the store credit card.
2. Pay all of your bills on time.
While it is very wise to keep revolving accounts open, it’s even more important to pay all of your bills on time. This doesn’t just apply to the credit card bills. You need to be intentional about paying every utility bill on time. You even need to remain timely with your internet, gym membership and cell phone subscription. When you fail to pay these bills on time, this shows up as a negative mark on your credit score. Negative marks can force your score to go down at least 35 points.
3. Keep longer loan in good standing.
There are certain loans like a mortgage or an auto loan that’ll be around for a while. You’ll want to make sure these loans remain in good standing. As you continue to pay these loans down, you might get bored of them and want to jump ship. Completely avoid defaulting on a loan as this will plummet your credit score. Make sure you do everything you can to keep your longer loans in good standing and pay them off as soon as you can.
Just because you have a large amount of credit access doesn’t mean you should use the entire thing. If anything, many credit experts suggest using no more than 30% of the allotted credit card amount. When you max out on your credit cards, this shows the credit bureaus that you don’t keep enough cash available. Even if you pay off the credit cards on time, it’s still a very risky move to use the entire amount of credit available. Plus, if you only use a smaller amount of the credit, you’ll have less to pay off and you’ll avoid late fees and high-interest rates.
Credit can be such a tricky concept. In order to eliminate the major confusion, just be intentional about living within your means and paying your bills on time. As long as you remain consistent in those areas, your credit score will be in great shape.
The largest expense for most households is the mortgage payment, which is typically 28 percent of your income before taxes. Most people would enjoy paying less each month towards their home loan to free up their budget. When you want to lower your mortgage payment, there are a few different ways to pay less.
According to lendingtree.com, you can add extra years to your repayment term to lower your mortgage payment without having to refinance your mortgage. Although you may need to pay your lender an average of $250 for this service, it can allow you to add an extra decade to the loan. The option is an ideal choice if you’re a borrower that needs more money immediately and are considering refinancing in the upcoming years.
2. Contribute More Money Towards the Principle
Making extra payments towards the principle on your mortgage each month can allow you to obtain a lower payment gradually. Those who can afford it can consider making double payments for an entire year to spend less on interest and reduce the amount of money that is owed on the principle. Making extra payments may not be an ideal situation or attainable for some households, but is possible if you receive a bonus or have two people in the home who work.
3. Challenge the Tax Assessment
According to thebalance.com, you can challenge the tax assessment. Many of the assessments are too high and are based on how much the land and house are worth. The assessment is likely inaccurate if the area has been rezoned, which can cause the price of your house to decline.
You can protest the assessment through the county or by scheduling a hearing through the state Board of Equalization. Your taxes on your home will immediately be reduced if your protest is approved, which can allow you to save potentially hundreds of dollars on your mortgage payment each month.
4. Rent Out Your Home
If you’re struggling to make payments on your mortgage each month and are afraid of losing the property, consider renting out a room to lower your payment. You can also rent out a backhouse if it’s up to code, which can make it easy to afford the house and continue owning it long-term by finding the right tenant.
You can drop your private mortgage insurance by repaying more of the mortgage payment to attain more than 20 percent equity on the house. Homeowners are required to obtain the insurance if they put less than 20 percent down on the property when it was purchased. Contact your lender to ask about additional steps that you may need to take to drop the PMI to reduce what you pay on your mortgage by hundreds to thousands of dollars throughout the year. You may need to have an appraiser visit the property to determine if you currently have more than 20 percent equity on the home to adjust your mortgage payment.
One of the best ways to increase your wealth beyond the rate of inflation is to invest in the stock market or in private ventures. However, what you invest in may depend on how much capital that you have available. Let’s take a look at some of the best investment options for those who have $1,000, $10,000 or $100,000 at their disposal.
If you have $1,000 available to invest, it may be a good idea to look into mutual or index funds. Many brokers allow you to start with $1,000 or less, and Charles Schwab allows you to contribute to index and other funds with no account minimum. In addition to the low barrier to entry, index and mutual funds are seen as safer investments because they offer adequate diversification with just one purchase.
The Best Ways to Invest $10,000
For those who have a little more money at their disposal, it may be worthwhile to start investing in real estate. There are several websites that allow you to invest either in mortgages used to finance purchases or by directly funding the purchase of commercial or residential property.
You could also choose to act as a hard money lender as you can charge high rates of interest on loans that may be repaid in as little as 90 days. Hard money loans are often secured with the property being purchased, which makes it more likely that you will get your money back.
The Best Ways to Invest $100,000
Once you grow your account balance to $100,000 or more, you can invest in almost anything that you want. Ideally, you will balance the need to grow your portfolio with the need to preserve capital for the long-term. This means that you may want to consider investing some of your money in startups while also investing some of your money in government bonds.
Investing in a startup may be ideal because you can see a large return on your investment in a matter of months or years. By investing in bonds, you get a guaranteed return that can help to offset any losses that you experience elsewhere. Income from bonds or dividend stocks may also keep you liquid until you have a chance to sell your stake in a startup.
Whether you have $1,000 or $100,000, it is important that you start investing as soon as possible. Through the magic of compound interest, your money can grow exponentially over the course of several months and years. In most cases, it will grow faster than the inflation rate, which means that you actually increase your buying power as time goes on.
Grocery shopping can eat all of your cash if you don’t know how to control your spending. However, buying your own groceries to prepare meals is still cheaper than going to restaurants. To avoid wasting money at the supermarket, use these important tips that are recommended by experts.
Tip 1: Visit a Supermarket’s Website
Today, most supermarkets have websites that offer additional savings at least once a week. Not only can you see a supermarket’s current advertisement, but also, you can sign up for coupons for free products. At an online supermarket website, you can often sign up for perks with a special code so that you receive other discounts at the cash register.
Tip 2: Have a Budget For Buying Groceries
Create a written budget for buying groceries so that you won’t overspend at the grocery store. Depending on when you are paid at your job, you can have a weekly or monthly budget. With a monthly budget, you can take advantage of the sales at a supermarket by stocking up on many items to save money.
Tip 3: Create Meal and Snack Plans
Rather than grabbing anything at a supermarket, have weekly meal and snack plans for your family. Determine how many pieces of fruit are required for an afternoon snack so that you can buy big bags of apples or oranges that cost less per pound. You can also cook whole chickens to have extra meat to prepare recipes for the rest of the week’s lunches and dinners.
Tip 4: Look For Unadvertised Specials
Despite making meal plans, you should remain flexible while at the supermarket. If a store is overstocked on perishable items, then the manager often marks down packages of food. When you find a special sale on pork chops, change your meal plan to have that meat instead of having chicken.
Tip 5: Check Prices Carefully While Shopping
Instead of selecting the cans of vegetables that are displayed at eye level, look at the higher or bottom shelves to find bargains. Make sure to bring along your reading eyeglasses to see the tiny print on the price labels on the shelves. In addition, be willing to try the store-brand or generic products that typically cost less.
Tip 6: Use Paper Coupons Wisely
Your local newspapers may have coupons that you can clip and use at the supermarket. If you are a savvy shopper, then you will combine a coupon with a sale price. However, don’t use a coupon on products that are more expensive than the prices of store-brand items.
Tip 7: Don’t Overbuy Perishable Groceries
Don’t waste money on perishable foods that you can’t freeze because it will waste money. Beverages such as milk and produce such as lettuce only remain fresh for a few days, so you are better-off returning to the supermarket to buy more of these items throughout the week.
Student loan debt has ballooned to epic proportions over the last 20 years. The total amount of outstanding student loan debt in the United States today stands at over $1.2 trillion. What’s worse, the outstanding amount has been expanding roughly linearly for the last two decades. It would appear to be a trend that is simply not sustainable.
Student loan debt was, once upon a time, a tool for post-grads who had a high probability of landing an extremely well-paying job. However increasingly, becoming seriously indebted by student loans has become a perverse rite of passage for nearly all high school graduates. This raises a number of serious questions.
The first is whether or not attending college is even worth the almost certainty that in order to graduate, one must rack up tens of thousands in student debt. In an increasingly competitive and automated economy, the prospect of not being able to find a job after running up tens or hundreds of thousands in student debt is not just more likely than ever, it’s utterly disastrous to the debtor.
Another serious question is what will happen when the inevitable wave of defaults – some argue it is already happening – starts kicking in, leaving the debt holders and underwriters on the hook for billions in non-collectible debt. Many economists agree that the student loan sector already has all the tell tale signs of an outright bubble.
White hat methods
The best way to avoid student loan debt is simply never to take out a student loan. This may sound too obvious to mention but there are some subtleties and advantages to never taking on student debt that are worth pointing out.
First, the price of a college education has roughly quintupled since the mid 60s. However, the quality of education has arguably not increased at all. In fact, many would say it has declined. This leaves a situation where, especially for the very smart and talented, paying $300,000 or more for a paper credential is a transaction with rapidly diminishing returns.
In the gig economy, those who can code, create music or design websites can quickly make good money, just based on raw talent, no credentials required. And it’s arguably the best time in U.S. history to be an entrepreneur. If you want to be an airline pilot or heart surgeon, you’ll have to bite the bullet and pay tuition, one way or another. But if you don’t want a traditional career and you’re ambitious and smart, college is far from the automatically optimal career path.
A whole book could be written on this topic. One idea: Open a bank account in Canada. It’s that simple. Don’t want to pay back that student loan? Put all of your assets in Canada, they can’t touch them there. Opening an account is easy for U.S. citizens and Canadians will cooperate with the U.S. government on criminal matters but won’t on almost anything else.
Investing one’s money has tremendous upsides. While risk exists with investing, the potential to increase one’s net worth also exists. The annual interest returns on an invest do wonders to increase the volume of assets a person possess.
In order to maintain a positive net worth, assets are weighed against debts. Debts are obligations that must be subtracted from the value of stocks, bonds, real estate, cash, and other holdings. Debt, combined with the interest on the debt, can drag down net worth significantly. This is why so many make prioritizing debt repayment over investing their main fiscal strategy.
Is this the right strategy to maintain, though?
Controversies and Conventional Wisdom
The conventional wisdom among most people is to simply get rid of the debt that has been amassed. Doing so would seem to make sense. Once all the debt and the various payment responsibilities associated with it are eliminated, the resultant greater cash flow could be directed towards all manner of different investments. While this conventional wisdom seems to make sense, not everyone completely agrees with it.
Interest exists with both investments and debt obligations. If the return on an investment yielded more interest than the interest charged on the debt, then investing could be a better plan. If a person has debt on a car loan that is 6% and a mutual fund could pay 8%, then investing in a mutual fund might as opposed to paying off the debt could be a good idea.
The interest on an investment compounds so the sooner money is put into the market, the quicker the compounded return on the investment may be realized. This is something to ponder and not overlook.
Do not overlook “missed opportunities” with certain investments. A 401(k) and an IRA are two examples of investments that cannot be “backdated”. In other words, if you miss the cutoff point to put money into the investments, the opportunity is lost. With the opportunity goes all the returns on the investments one would hope to acquire.
So, there are some benefits to sticking with investing as opposed to paying off debt. This does not mean the conventional approach of paying debt first is automatically a bad idea.
The Specter of Debt
The specter of debt can truly haunt someone and continually create havoc for a person’s finances. This is absolutely true when the interest rates on debt are enormous. Someone saddled with 20% interest rates on a credit card is not likely to find any type of investment capable of paying such a massive return. With excessive and costly debt, repaying the debt should be a high priority.
A split approach is also a possibility. That is, money could be directed towards paying down debt and also investing in reliable strategies. Taking this approach does require careful thinking. Those who are not sure how to go about it or what to do should think about discussing their situation with a credible financial planner and/or credit counselor.
A surprising number of people do not have a household budget. This might not seem like a big deal, but without a budget, it can be easy for your finances to spiral out of control, even if you bring in a good income.
If you’re looking to improve your financial situation by creating a budget, you might be a bit nervous about whether or not it’s going to be a success. Luckily, these tips can help.
1. Know How Much You Actually Make
Before you get started with your budget, you need to know exactly how much money you bring in each month. You can take a look at your most recent paycheck stubs to find this information.
2. Calculate Necessities First
You don’t want to budget out money for your “wants” first only to find that you do not have enough money to cover your “needs.” For a successful budget, you need to first determine which bills and expenses are most important. For example, paying your rent or house payment and your electric bill and then buying groceries for your family might be your first priorities.
After listing your most important bills and expenses, you’ll probably want to continue your list by importance. For example, you might consider your cable bill to be more important than your entertainment budget, but it wouldn’t be considered as important as your rent or house payment.
By listing things in order based off of how important they are, you can help ensure that your most important expenses are covered first. Then, if you run out of money in your budget, you can make adjustments to things that might not be as important, such as a budget to buy new clothing when you already have enough clothes to get yourself by.
3. Know How Much You’ve Been Spending
It can be difficult for you to put together a successful budget if you do not know how much you have been spending on things. It can be easy to lose track, but if you have been paying for most of your purchases with your credit or debit card, you can take a look at your statements to get an idea of what you have been spending on different types of items. Another option is to keep track of how much you spend on things in cash for a week or a month. This can give you basic numbers to work with.
4. Be Realistic
It is important to be realistic with your budget. Even though you might really want to save money, you might have a tough time sticking to your budget if you are unrealistic about it, such as if you plan on slashing your food budget in half all of a sudden. Being too unrealistic is setting yourself up for failure, so while it’s smart to look for ways to cut costs out of your budget, you shouldn’t get too wild when doing so, either.
As you can see, if you are a beginner to budgeting, there are a few tips that you can follow. If you follow these tips, you can help ensure that you are as successful as possible with your budget.
In this digital age, online security is a major concern. Whilst at one point online frauds appeared to exist largely in Hollywood creations surrounding corporate espionage, they have become increasingly prevalent. Hacking has evolved from corporate espionage and intergovernmental spying to personal finances.
As hackers continue to extend their reach, online security firms have responded with products and protocols to secure your financial information. However, there are practical steps you can take to contribute to the safety of your financial information. Do not aid the hackers by your complacency.
1. Employ Strong and Diversified Passwords
This is a basic but often overlooked aspect of online security. Many individuals choose passwords that are easy for them to remember forgetting to factor in the ease of hacking. Most financial institutions have tools that asses the strength of new passwords to help clients secure their accounts. Please comply with them and learn how to design passwords that are secure using symbols, numbers and letters from both lower and upper cases.
Additionally, ensure that you use different passwords for different online platforms. This has the benefit of isolating any breach in security to the individual affected account.
2. Use Secure Networks
Most hackers gain access to online accounts primarily through unsecure networks. Limiting the access to financial information to secure networks such as at work or at home will go a long way to ensuring security. To enhance security, use official company apps when away from the safety of a secure network.
One of the most popular approaches adopted by hackers to access financial information is through phishing. Here, an apparently authentic and innocuous email is sent to you from a financial company asking for some information. The provision of such information allows the hacker to reconstruct your online profile, hack your passwords and access your account.
To guard against this, simply ignore any unsolicited emails. Additionally, only provide such information in person or through the official websites and apps as previously known to you. Confirm any such requests via phone calls to the company.
4. Activity alerts
Most financial institutions have an alert system that notifies the account holder on the occurrence of any transactions. Such notification is instantaneous through text messages, emails or both. Ensure you have activated this feature on all your accounts and do not set a high limit for the notifications.
5. Adopt a Two-Factor Authentication System
A two-factor authentication system confirms the identity of the user through two different components. Most financial institutions rely on your password as well as an authentication code sent to your phone or email. Some companies issue their clients with random password generators that provide this secondary authentication every time you require access.
Whilst hackers continue to target innocent individuals with complex frauds, we are not defenseless. Simple protocols and vigilance on your part can go a long way in securing your financial information. Ensure that you have strong passwords and a secure network by default. Pay attention to any unusual emails and activities with your online information. These safeguards, while comparatively simple, are nevertheless very effective.
In the world of fast, easy credit, it can be difficult for consumers to truly explore all their options when it comes to financing purchases. One frequently overlooked tool in a buyer’s arsenal is the personal loan. Personal loans are unsecured loans that are issued on the basis of credit, but have a number of advantages over a credit card for certain purchases. Here are 4 uses for a personal loan and why you want one.
1. Buy a car from a private seller
Whenever you buy a car from a dealer, you will pay several thousand dollars more for a car than if you buy it from a private seller. Some of the fees incurred by buying from a dealer include dealer fees, dealer hold backs and destination fees – none of which you pay when buying from a private seller. Not to mention paying several thousand dollars for a warrantee that may or may not actually cover the cost of repairs to your car if it breaks down.
If you want to buy a newer car over $30,000, this is not such a big deal, but if you want to buy an older used car under $10,000, then you will most likely be paying an additional 25% of the purchase price just in dealer fees alone, without much more of a guarantee than if you bought from a private seller. Most banks will not issue auto loans unless you buy from an authorized dealer, so another way to get a car loan is to get a personal loan instead.
2. Medical expenses
While health insurance covers a great deal of medical expenses, there are a wide variety of additional expenses associated with certain medical procedures, ranging from deductibles to elective procedures. Personal loans are also a great way of covering veterinary expenses as well. Since personal loans often have lower interest rates than credit cards, they can be a great way of covering certain expenses.
Every few years, you may want to take a luxe vacation to some fabulous destination, but sometimes when you try to save money it seems like something more important always comes up and eats into your vacation savings. Taking out a personal loan for a vacation means you can pull together the money you need for your vacation and pay it back in small, monthly increments.
4. Vehicle repairs
Like medical expenses, vehicles can suddenly break down without warning and sometimes suddenly require several thousand dollars in repairs. Once again, putting this on a credit card incurs prohibitively high interest rates. Taking out a person loan, however, helps you build better credit and costs you less in interest
In addition to carrying a lower interest rate than credit cards, sometimes, it’s helpful to just pay one payment every month on all of your debt. Taking out a personal loan allows you to pay off a wide variety of smaller debt and consolidate it into one monthly payment and save some pretty significant money in the process.