There are reasons why you might not want to go to a bank to get a loan. Maybe your credit isn’t very good, maybe you only need a small amount, or maybe you’re looking to make an investment that the bank won’t support. Some people look for hard money investments. Others might turn to high interest payday loans. Some might even dip into their own credit cards to get this money. But there are other options. One of the most interesting technological advances that the Internet has brought to financing is a concept called peer-to-peer lending. But what is peer-to-peer lending, how does it work, and why should you look into it?
What Is Peer-to-Peer Lending?
Peer to peer lending, or P2P, is an alternative to borrowing from financial institutions. You don’t borrow directly from an institution; instead, you borrow from an individual or a pool of individuals who lend money to those who meet the requirements.
Lenders can sign up to a P2P lending network, with the intention of earning a return from lending the money to borrowers. This is a form of crowdsourced financing and took off mostly in the 2010s. Keep reading this blog on Peer-to-Peer lending work.
Who Is Peer-to-Peer Lending Best For?
P2P loans are great for people or businesses looking for relatively small loans. Different networks have different minimum and maximum loan amounts, so you will want to check with the P2P lending network.
Generally, P2P loans are not meant for those with bad or no credit. Most networks have a minimum FICO score requirement of 600 and a low debt-to-income ratio. However, there are some networks that specialize in riskier loans for investors that are seeking higher returns.
On the lending side, P2P lending can provide investors with returns that are not very common in other debt markets. They also present an opportunity for investors who want to lend small amounts to a large variety of people for various reasons.
How Do You Get Started?
I Want To Borrow
To start borrowing from a P2P lending network, all you gotta do is sign up to one. We’ve listed a few of the most popular P2P lenders where you can instantly create an account.
P2P lending networks make it easy to get your money. Typically, all you gotta do is add your bank account information and you get the money directly deposited into your account.
I Want To Lend
P2P lending networks make lending quite easy. Simply go to their website and apply to become a lender. You will have to go through an application process and your application is not guaranteed to be accepted.
Some networks may require you to be an accredited investor; that is, an investor who meets certain qualifications such as an income of over $200,000 or a net worth (not including primary residence) of $1 million. To be accepted on one of these networks, you simply need to provide proof that you meet the qualifications.
Popular Peer-to-Peer Lending Networks
Options for Student Loan Repayment in 2021
Back in March, the US government announced that it would be suspending all payments on federal student loans. This moratorium on payments was extended until January 31, 2021.
Although we don’t rule out the possibility of this moratorium’s extension by the Biden administration, we wanted to teach you about your options for student loan repayment in 2021.
What Are My Options For Student Loan Repayment in 2021?
Income-based repayment is a great way to get started on paying down your student loans without making it impossible for you to afford basic living expenses. So what are income-based repayment programs, and how do they work?
With an income-driven repayment program, you only have to pay a small amount every month, less than your typical payment would be.The way they assign your payment amount is based on a percentage of your discretionary income. The US Federal Student Aid website defines discretionary income as “the difference between your annual income and 150% of the poverty guideline for your family size and state of residence”.
There are several different types of income-based repayment plans, and all of them will differ depending on your situation. To figure out which one is the best for you, you’ll want to apply for income-driven repayment by going here (directs you to the Federal Student Aid website).
Income-based repayment options may not be available for privately held student loans, such as loans issued by Sallie Mae.
For more information about income-driven repayment plans, go to the US Government Student Aid website.
Deferment and forbearance
After the moratorium ends, you may still be able to put your loans in forbearance. Forbearance is when you and the lender agree that you will stop payments on the loan for a set length of time (usually 3 months). Interest continues to accrue, but you don’t owe anything extra if your loan is in forbearance.
Deferment is a bit different, and usually you need to meet certain conditions to qualify for student loan deferment. Deferment is generally available to those who are current students, medical residents, or those who are working in professions such as teaching. In some situations, your interest may no longer accrue.
If you’re concerned about being able to make your payments in February, you may want to consider putting your loans in forbearance.
Refinancing or Consolidation
Many student borrowers find that their loan has an enormous interest rate, making it hard to afford the payments on them. Refinancing or consolidation can help you, providing low monthly payments with a fixed interest rate.
Refinancing and consolidation are similar, but they refer to different things. Refinancing is when you pay off one loan by taking a new one, often with lower payments and/or a lower interest rate. Consolidation takes multiple loans and bundles them together into one loan, often by using the new, large loan to pay off the smaller ones.
The US Government offers a Direct Consolidation Loan which you can apply for here. You can choose to consolidate your loans using a private lender instead. Depending on the interest rate you get and the payments you will have, you may decide to choose one over the other.
If you refinance or consolidate federal student loans using a private company, you may lose some of the benefits of taking out federal student loans such as subsidized interest rates and income-based repayment. We recommend saving refinancing for private student loans or federal loans with higher interest rates such as PLUS loans.
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Credit Score Hacks for 2021
It’s almost time for New Year’s Resolutions, and one of the biggest ones that people have is to get their personal finances in order. One big aspect of one’s overall financial profile is their credit score. Having a good credit score means that you’ll have access to lower interest rate loans. It’s also important for qualifying for mortgages and other large loans.
If you want to increase your credit score in 2021, we’ve got just the thing for you. In this article we will be going over some things that you can start in January to help you get a better credit score in 2021.
Although these aren’t so much “hacks” as they are “strategies”, we still feel it’s important to share these ways for you to improve your credit score in 2021.
Hacks To Improve Your Credit Score in 2021
Snowball your credit card debt
Your credit card debt is one of the biggest things holding your credit score back. If you have credit card debt, it should be the first debt that you tackle, as it’s the most impactful to your credit score and could cost you many times more than the principal in interest.
One of the best ways to see early credit score “wins” regarding your credit card debt is to snowball your debt. We wrote an entire article on snowballing debt, which we recommend that you read.
In short, to snowball your debt is to focus all your debt repayment efforts on the smallest balances in order to pay them off quickly. This does two things at once: first, it lowers your monthly debt repayment obligation as you snowball your debt (even though you’ll likely be committing the same total amount per month to your debt). Second, it reduces your overall balance which improves your credit score as you pay your debt balances down.
This strategy for reducing debt is one of the best ways to boost your credit score quickly while also taking care of a nagging debt obligation.
Remember: if you’re paying off your credit card debt, you want to keep old accounts open and available to you! There’s no need to close an old credit account; instead, keep them open and have statements sent to your email every month.
Refinance your debt
If you have debt with high interest rates, there are ways that you can refinance it. Refinancing is when you take out a new loan to pay off an old one. It’s commonly done when you can get lower interest rates to refinance a loan. It’s also done when consolidating multiple loans, which is a good way to get a handle on debt payments.
Refinancing your debt won’t increase your credit score right away: in fact, it may lower it in the short term. However, there are refinancing strategies that can help you increase your credit score this year. If you’re able to make payments whereas before you were unable to afford them, you should see your credit score slowly rise.
There are many different ways to refinance your debt obligations, including your mortgage, your student loans, and other large sources of debt.
The most important thing to remember when refinancing is to consider the long term implications. Refinancing your student loans could save you thousands of dollars over the lifetime of the loan.
Get your annual credit report & dispute items
If you don’t know what’s on your credit report, you might be an unwitting victim of fraud or clerical errors made by lenders or credit reporting agencies.
In 2020, the federal government was giving out unlimited copies of your credit report to make sure that people were able to get access to their credit history during these difficult times. You can still get one free credit report per year from each of the three bureaus from https://annualcreditreport.com. Check your credit report and see what’s on it: you might be surprised.
If you ARE surprised about anything you find on your credit report, it might be time to make some phone calls. First, you’ll want to contact the lender in question to see what they have on file in your name. This alone could clear up any mistakes. Next, you’ll want to call the credit bureau that issued your report (Experian, Equifax, TransUnion). They’ll then take you through the dispute process, which can take several weeks to resolve.
We at The Credit Pros can help you with the dispute process. Learn more about how the dispute process works!
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2021 New Year’s Resolutions For Personal Finance (And How To Achieve Them)
Most of us have thought about or written down our New Year’s resolutions back in January of this past year… but usually have forgotten them or given up on them by mid-March. Although 2020 was a strange year (gyms were closed, many people were laid off, and a lot of us had to cancel our wedding plans) there was still room for our resolutions. No sense dwelling on the past though: 2021 is almost here! Check out this blog on new year resolutions for personal finance.
If you’re wondering how you could get started on improving your financial situation in 2021, here’s our guide to new year’s resolutions for personal finance.
New Year’s Resolutions for Personal Finance in 2021
Getting Back to Work (Or Getting a New Job)
2020 really messed things up for a lot of people. Millions of Americans were either laid off, furloughed, or found themselves temporarily out of work due to the pandemic. If you’re one of them, it might be time to take back your life and start getting back to work.
This is important, especially now, because it won’t be long until the moratorium on evictions is lifted on December 31. Worse yet, COVID-19 economic relief will end soon. If you’re currently out of work or are unsatisfied with your current job, consider adding “Get A New Job” onto your resolution list.
There are a few things you can do to get started on achieving this resolution.
- Get your resume updated or redone. This includes your LinkedIn profile. You may be able to find free resume clinics by searching on Google, Eventbrite, or LinkedIn.
- Set a goal to send in a certain number of applications every day. Remember: if you’re open to remote work, feel free to apply to remote postings from places outside your area!
- Practice interviews regularly. Have someone you trust (preferably someone who has actually hired or interviewed people before) take you through a mock interview. Research questions that people are likely to ask in your field. Doing this will help increase your confidence in interviewing.
Pay Off Credit Card Debt
Credit card debt can be a serious hindrance for those trying to get themselves back on their feet financially. If you’ve dealt with an extended period of unemployment, you may have racked up some of your bills on your credit card. The interest can add up significantly!
Set a resolution to pay off a certain amount of credit card debt. Depending on your income and your current balance, you might be able to set a resolution to pay off the entire thing!
Paying off your credit card debt is an important step to take for both improving your credit score AND eliminating your debt altogether. Credit card debt is typically the most expensive long-held debt that people have, and at rates as high as 24% APR, it’s easy to see why.
One way you can get started on clearing out your credit card debt is to use a technique that Dave Ramsey calls “snowballing your debt”. We wrote an article about snowballing your credit card debt: check it out!
Build Up Savings
If 2020 has taught us anything, it’s that savings could mean the difference between financial security and financial ruin in tough times. One great resolution for 2021 is to build up your savings to a comfortable amount.
A good barometer for savings is to have at least six month’s rent saved up for a rainy day. After all, 2020 was the longest rainy day that we’ve had to live through, and it’s possible that 2021 might be no different (especially as the economic relief stops and evictions start up again!)
We understand that you might not be able to build up your savings due to your situation. If that’s you, then you might want to look at your income and your expenses to see where you could improve.
To start building up your savings, you will want to do a few things. First, look at your expenses and see what you can eliminate. Second, look at your income and see what you could do to increase it (a higher-paying job, a 2nd job, side hustles, starting a business). Third, commit to a specific amount that you want to save every month. To make this easy, you can set up your online banking to send a certain amount of money to your savings every single month.
Improve Your Credit Score
Your credit score is an important part of your overall financial well-being. Without a good credit score, you won’t be able to get the best rates on loans or qualify for a mortgage for your dream home.
To start working on your credit score, take the following steps. First, use one of many credit score tools to get an estimate of your credit score. Then, get your free credit report from https://annualcreditreport.com (this is an official US government website).
Once you’ve done this, you can start working on steps to improve your credit score.
- Remove fraudulent or erroneous entries on your credit report by disputing them. We wrote an article explaining the dispute process here.
- Settle delinquent accounts. These will stay on your credit report for up to 10 years (7 in most cases), however your outstanding balance on these and your payment history will be reflected in your credit score.
- Resume or renegotiate payments on accounts that are past due.
- Pay down credit card debt. Credit card debt (and your credit utilization ratio) is a big part of your credit score.
We wrote several guides on how to improve your credit score: here’s one that explains what your credit score is made of!
The Credit Pros offers comprehensive credit repair and credit monitoring tools to help you improve your credit score in 2021. Learn more about credit repair here!
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