Back in the day, if you needed a personal loan to start a business or finance a wedding you had to go through a bank. But in recent years, a new option has appeared and transformed the lending industry. Peer-to-peer lending makes it easy for consumers to secure financing and gives investors another type of asset to add to their portfolios. If youâre interested in investing in something other than stocks, bonds or real estate, check out our guide to becoming an investor in peer-to-peer loans.
Check out our personal loan calculator.
What Is Peer-to-Peer Lending?
Peer-to-peer lending is the borrowing and lending of money through a platform without the help of a bank or another financial institution. Typically, an online company brings together borrowers who need funding and investors who put up cash for loans in exchange for interest payments.
Thanks to peer-to-peer lending, individuals who need extra money can get access to personal loans in a matter of days (or within hours in some cases). Even if they have bad credit scores, they may qualify for interest rates that are lower than what traditional banks might offer them. In the meantime, investors can earn decent returns without having to actively manage their investments.
Who Can Invest in Peer-to-Peer Loans
You donât necessarily have to be a millionaire or an heiress to start investing in peer-to-peer loans. In some cases, youâll need to have an annual gross salary of at least $70,000 or a net worth of at least $250,000. But the rules differ depending on where you live and the site you choose to invest through.
For example, if youâre investing through the website Prosper, you canât invest at all if you reside in Arizona or New Jersey. In total, only people in 30 states can invest through Prosper and only folks in 45 states can invest through its competitor, Lending Club.
Certain sites, like Upstart and Funding Circle, are only open to accredited investors. To be an accredited investor, the SEC says you need to have a net worth above $1 million or an annual salary above $200,000 (unless youâre a company director, an executive officer or youâre part of a general partnership). Other websites that work with personal loan investors include SoFi, Peerform and CircleBack Lending.
Keep in mind that there may be limitations regarding the degree to which you can invest. According to Prosperâs site, if you live in California and youâre spending $2,500 (or less) on Prosper notes, that investment cannot be more than 10% of your net worth. Lending Club has the same restrictions, except that the 10% cap applies to all states.
Choose your risk profile.
Becoming an Investor
If you meet the requirements set by the website you want to invest through (along with any other state or local guidelines), setting up your online profile is a piece of cake. You can invest through a traditional account or an account for your retirement savings, if the site youâre visiting gives you that option.
After you create your account, youâll be able to fill your investment portfolio with different kinds of notes. These notes are parts of loans that youâll have to buy to begin investing. The loans themselves may be whole loans or fractional loans (portions of loans). As borrowers pay off their personal loans, investors get paid a certain amount of money each month.
If you donât want to manually choose notes, you can set up your account so that it automatically picks them for you based on the risk level youâre most comfortable with. Note that there will likely be a minimum threshold that youâll have to meet. With Lending Club and Prosper, you can invest with just $25. With a site like Upstart, you have to be willing to spend at least $100 on a note.
Should I Invest in Peer-to-Peer Loans?
Investing in personal loans may seem like a foreign concept. If youâre eligible to become an investor, however, it might be worth trying.
For one, investing in personal loans isnât that difficult. Online lenders screen potential borrowers and ensure that the loans on their sites abide by their rules. Investors can browse through notes and purchase them.
Thanks to the automatic investing feature that many sites offer, you can sit back and let an online platform manage your investment account for you. That can be a plus if you donât have a lot of free time. Also, by investing through a retirement account, you can prepare for the future and enjoy the tax advantages that come with putting your money into a traditional or Roth IRA.
As investments, personal loans are less risky than stocks. The stock market dips from time to time and thereâs no guarantee that youâll see a return on your investments. By investing in a peer-to-peer loan, you wonât have to deal with so much volatility and youâre more likely to see a positive return. Lending Club investors, for example, have historically had returns between 5.26% and 8.69%.
Related Article: Is Using a Personal Loan to Invest a Smart Move?
But investing in peer-to-peer loans isnât for everyone. The online company youâre investing through might go bankrupt. The folks who take out the loans you invest in might make late payments or stop paying altogether.
All of that means you could lose money. And since these loans are unsecured, you canât repossess anything or do much to recoup your losses.
You can lower your investment risk by investing in different loans. That way, if someone defaults, you can still profit from the loan payments that the other borrowers make. But if you donât have enough loans in your portfolio youâre putting yourself in a riskier predicament.
If youâre looking for a way to add some diversity to your portfolio, investing in peer-to-peer loans might be something to think about. There are plenty of benefits that you can reap with this kind of investment. Before setting up an account, however, itâs important to be aware of the risks youâll be taking on.
Chase Credit Journey is one of the many credit monitoring services that gives you a credit score for free. Launched by Chase, Credit Journey also monitors your score and gives you advice on to improve it.
One of the best ways to get approved for a loan or a credit card is to have a good credit score. Think of this 3-digit number as a representation of your credit worthiness and credibility.
In fact, lenders use your credit score to see how risky it is for them to let you borrow. The higher your score, the better.
So, it is very important to use a free tool like Chase Credit Journey, to know your credit score before applying for a loan, a credit card, or an apartment.
Doing so will give you an idea whether or not you will be approved or denied.
One way to get a credit score for free and monitor it is through Chase Credit Journey. If your credit score is excellent, then you are all good.
All you have to do is maintaining it. If it’s bad, then you can take steps to raise your credit score.
In this article, we will address what Chase Credit Journey is, why you should use it, and some of its limitations.
What is Chase Credit Journey?
Chase Credit Journey is a free online service offered by Chase that gives consumers a credit score and credit report for free. You don’t have to be a Chase customer to use the service.
You’ll need to register by entering personal information, including your credit cards information, existing loans, etc.
Checking your credit on Chase Credit Journey does not hurt your credit score, because it counts as a soft credit inquiry. Soft inquiries, as opposed to hard inquiries, leave your credit score untouched.
In addition to getting a credit score from Chase Credit Journey, you can get one from the following credit monitoring services all for free:
How Does Credit Journey Work?
Chase Credit Journey uses Experian, one of the three credit bureaus, to give you a credit score and report.
Chase Credit Journey uses the VantageScore 3.0 model, which is a collaboration from the three credit bureaus.
Your score is updated weekly but you can access it as much as you can and anytime you want.
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Also, you can sign up for credit alerts through Credit Journey which can notify you if your score changes or if something suspicious is happening on your credit file.
If there are errors, Chase Credit Journey will guide you on how to file a dispute with the credit bureaus. You can’t get your FICO score via Chase Credit Journey.
In addition to getting a free credit score, you also get an analysis of your score and advice on how to raise it and other free resources. This way you can take steps to improve your credit score.
If you’re ready to give Chase Credit Journey a shot, go online to the homepage to see how Credit Journey works.
You can also access the Chase Credit Journey through the Chase mobile app as well. If you’re not convinced yet, keep reading.
Chase Credit Journey helps you understand the 6 factors to come up with your VantageScore credit score. They are:
1) Payment history (or late payments): payment history accounts for 35% of your total credit score. In fact, it is the most important factor in your total credit score. Late or missed payments can negatively affect your credit score.
2) Credit utilization ratio (or credit usage): Credit utilization is how much of your credit limit youâre using versus your balance. Credit card utilization accounts for 30% of your total credit score. So keeping it low is ideal. Keeping your credit card balance under 30% is the way to go. For example, letâs suppose your credit card has a credit limit of $5000. You have used $2500 of that credit. Then your credit utilization is 50%. To keep it below 30%, you should only use $1500 of that credit.
3) Credit age: The third most important factor of your total credit score is your credit age. That means how long you have had credit. Lenders like to see a longer credit age. In your credit report, youâll be able to see your average credit age.
4) Hard Inquiry: The higher your credit inquiries, the lower your credit score can become. Anytime you apply for a loan or a credit card or when a landlord checks your credit, it can cause a small dip in your credit score. So multiple credit inquiries can hurt your credit score rather than improving it.
5) Total Balances: total balances refer to the amount owed over all of your credits, including your mortgage, student loans, credit cards, personal loans, etc.
6) Available credit: This factor represents the current amount of unused credit you have over your accounts.
Chase Credit Journey best feature: the score simulator
In addition to providing you a free credit score and report, a credit alert, and credit resources, Chase Credit Journey has an invaluable feature called the score simulator.
The score simulator gives you an estimate of how certain changes in your credit behavior can affect your credit score. Those changes include missing a payment, card balance transfer, and closing an old account, etc.
The importance of checking your score via a free credit service like Chase Credit Journey
Your credit score is perhaps the first thing lenders look at to decide whether to approve you for a loan or credit card. The better your score, the higher is your chance of getting that loan.
On the other hand, if you have a bad credit score, getting a loan or a credit card not only can prove very difficult, but applying for it puts a hard inquiry that can actually lower your already bad credit score.
So knowing your score before you actually apply will give you an idea whether lenders will approve you. It will also allows you to apply for credit with confidence. That’s why is important to use a free credit service.
Additionally, checking your credit score and credit report on a regular basis will help you identify what is on your credit report. Outstanding debts and a history of late payments can directly impact your credit score.
You can get your credit report for free by logging on AnnualCreditReport.com from each of the three credit bureaus. But these credit reports do not give you a credit score. Moreover, you get these reports only once every year.
While there are several options, Chase Credit Journey is just another option. It’s never a bad idea to have several options to choose from.
In other words, it’s better to get your score from more than one source. However, there are some limitations to using Chase Credit Journey.
Chase Credit Journey Limitations
One of the limitations Chase Credit Journey has is that it only uses one of the three major credit bureaus, which is Experian. When you get your score from only one credit bureau, you might not see the whole picture.
So, your credit score might not be entirely accurate.
For example, letâs say you transfer a credit card balance to a new credit card. If Transunion and Equifax are the only credit bureaus that recorded the card was closed during the transfer, you credit score might drop, because Experian recorded you opened a new card.
Another disadvantage of Chase Credit Journey is that the VantageScore’s scoring model is not the industry standard. Most companies use FICO scores to decide whether to approve or decline you for a loan or credit.
And while VantageScore and FICO scores range from 300 to 850, the two models use different criteria in coming up with your credit score. In other words, each model weighs the factors differently in calculating your credit score.
So your Chase Credit Journey credit score might be different than a FICO score. So, if you are ready to apply for a loan, find out which actual credit score your lender will use to improve your chance of approval.
The Bottom Line
Chase Credit Journey provides free credit scores and reports from Experian. The scores are updated weekly. The free credit score is based on the VantageScore 3.0 model.
However, while VantageScore’s system is accurate, it is not what most companies use. But one important thing about Chase Credit Journey is that it one other free tool that allows you stay proactive and monitor your credit on a regular basis. In turn, it allows you to know your score before applying for credit.
Speak with the Right Financial Advisor
You can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
The post Chase Credit Journey: Check Your Credit Score For Free appeared first on GrowthRapidly.
A savings bond used to be a common gift, though not always a welcome one. Well-meaning relatives gifted savings bonds for your birthday or the holidays. The goal was often to help you pay for college in the future. But for us kids, all we knew was it wasnât the Pound Puppy or Care Bear we really wanted!
Nowadays 529 plans and other higher-interest earning options have replaced the savings bond. But that doesnât mean theyâve disappeared. In fact, they may be sitting at the back of your closet right now. But you are cleaning out your closetÂ or your safe deposit box, and now this long-forgotten and unexpected savings bond can help you clean up your finances.
Itâs Still Good
That savings bond is still worth something. Thatâs the good news. Savings bonds gain value over time by earning interest and keep earning interest for 30 years. They pay interest every six months until they mature. So depending on how long itâs been since you cleaned your closet, you may still be making money as you read this. Now there are some steps you have to take to get money in return.
What Type of Savings Bond
There are several kinds of savings bonds. So you much determine which kind you have in your possession. Savings bonds are a contract between you and the federal government. If itâs an old bond from your childhood it is probably either an EE or an I bond. It will be clearly specified in the title which one you have.
EE bonds are similar to savings accounts. Paper bonds used to be sold at half the face value (you paid $50 for a $100 bond) and the interest continued to increase even after the face value is reached, so your $100 savings bond is probably worth more than $100 now. Paper EE bonds are no longer available and digital EE bonds are purchased at face value.
I bonds are similar to EE bonds. The chief difference is that the interest earned on an I bond is determined by a combination of a fixed rate and an inflation rate.Â So there is some cost-of-living protection for the bondholder.
Find Out What Itâs Worth
Before you decide to cash in the savings bond, youâll probably want to know what itâs worth. The interest rates and even the way interest rates are determined have changed over the years so it matters when you got yours. The best way to determine the current value of your savings bond is to use the Treasury Direct website. Whether you want to cash in the bond or continue to let it mature is then up to you.
There are some penalties for cashing in the savings bond early. If you redeem the bond early, you will lose three monthsâ worth of interest during the first five years. There are no penalties after five years. The earliest you can cash in the bond is after one year. If the bond is more than 30 years old, it has stopped earning interest and you should cash it in.
While you will have to pay federal taxes on your bonds, you do not have to pay state or local income taxes. There are some exemptions â most notably when bonds issued after 1989 are cashed in to pay qualified higher education expenses at an eligible institution.
Visit the Bank
Most banks should be able to help you cash your paper bonds. If they arenât, they should be able to direct you to a financial institution that can. You will have to prove your identity to cash in your old bonds. You will have to fill out an tax form either when you redeem the bonds or at the end of the year. Your tax preparer should be able to help you with this part of the process.
More Money-Saving Reads:
Whatâs a Good Credit Score?
How to Get Your Free Annual Credit Report
Whatâs a Bad Credit Score?
How Credit Impacts Your Day-to-Day Life
The post What to Do With a Childhood Savings Bond appeared first on Credit.com.
You don’t have a separate rating called aÂ mortgageÂ credit score, but lenders do look at your score, credit history and several other factors when deciding whether to approve you for a homeÂ loan. Contrary to what some people think, though, you don’t necessarily need an excellent orÂ good credit score to get a homeÂ loan. How high your score is depends on your current financial situation, downÂ payment and other factors.
What Does MyÂ Credit Score Need to Be for a Mortgage?
The short answer is that it depends.Â Mortgage lenders will do a hard inquiryÂ on your credit to see the score and the details behind it. YourÂ credit score is typically a good first impression on how risky of an investment you are.Â Mortgage lenders don’t want to be left holding the keys to your home if you don’t or can’t make regularÂ monthly payments, or if you makeÂ late payments, on your homeÂ loan.
Factors that can impact whether yourÂ credit score is high enough to be approved for a mortgage include:
What type of homeÂ loan you’re seeking
How much otherÂ debt you have
The details of your credit history, such as positive and negative items reported toÂ theÂ credit bureaus
The size of your downÂ payment
FHA mortgage loans may be among the easiest loans to get in terms ofÂ credit score requirements. Individuals whoÂ qualify as first-time home buyers under FHA (Federal Housing Administration) backed lending programsÂ may be ableÂ toÂ qualify for mortgage approval with aÂ credit score as low as 580 and a low downÂ payment of only 3.5%. In cases where buyers can put forward 10% or more for a downÂ payment, some lenders may approve individuals with FICO scoresÂ as low as 500.
For moreÂ conventional loansâthose that meet theÂ underwriting standards put forth by Freddie Mac or Fannie Macâapproval usually requires aÂ good credit score. At minimum, these types of loans usually require a FICO score of around 620, but that assumes other factors are in your favor. A lower downÂ payment orÂ higher credit utilization, among other things, could mean you need aÂ higher credit score to secure mortgage approval.
What Is a DecentÂ Credit Score for a Mortgage?
The answer is probably 620 or higher. You do want to minimize any surprises during the mortgage application and home buying process. Take the following steps to avoid this risk.
Get a look at yourÂ credit score andÂ report. If you haveÂ bad credit, consider taking steps toÂ improve your credit score.
Dispute or work with a credit repairÂ company to fix any inaccuracies on theÂ report before you apply for a mortgage.
Evaluate whether your credit history and score positions you to achieve your homeownership goals now or if you should take time toÂ improve your scoreÂ organically first.
Research the mortgage processÂ so you understand how it works.
Consider working with a mortgage broker if you’re uncomfortable with the entire process. These pros can often help you understand which type of mortgage is right for you and howÂ toÂ qualify for it.
Can YouÂ Buy a House with aÂ Credit Score of 590?
You may be ableÂ toÂ qualify for an FHA or nontraditional homeÂ loan with a lowÂ credit score. Your chances of doing so are higher if you can tie your low score to a single issue and you otherwise have a strong credit history. You can also increase your chances by lowering your credit utilization rate, having a lowÂ debt-to-income ratio and saving up to put a large percent down when you buy the home.
Should You Get a Mortgage with Your CurrentÂ Credit Score?
Ask yourself this important question: Are you so preoccupied with whether you can get approved for a mortgage with your currentÂ credit score that you forgot to ask yourself whether you should?
YourÂ credit score impacts more than whether or not aÂ lender approves you for a homeÂ loan. It also impacts yourÂ loan and term options, which can impact the overall cost of the home. One of the most important parts of the mortgage that may be tied directly to yourÂ credit score is the interest rate.
A good orÂ bad credit score can mean a shift up or down for your mortgage interest rate. And even a fraction of a percent in either direction can drastically change how much youÂ pay for your home. Consider the examples below, which are applied to a $200,000 homeÂ loan for a term of 30 years.
An interest rate of 3.92% equals payments of $946 per month and a total home cost of $340,427 over 30 years.
An interest rate of 4.42% equals payments of $1,004 per month and a total home cost of $361,399 over 30 years.
An interest rate of 4.92% equals payments of $1,064 per month and a total home cost of $382,999 over 30 years.
Just a difference of 1% can result in savings (or losses) of more than $40,000 over the life of your mortgage. Use Credit.comÂ toÂ check credit score andÂ creditÂ report card to make sure yourÂ credit score is as high as possible before you start the mortgage application process.
The post What Should My Mortgage Credit Score Be? appeared first on Credit.com.
With the stock market still in roller coaster mode and more and more companies reducing or eliminating retirement benefits, many peopleâfrom Boomers and Generation Xers to savvy Millennialsâare facing the fact that they need to seize control of their retirement financial plan. And they need to do it sooner rather than later.
Boomers in particular are quickly realizing that the landscape for long-term savings has changed dramatically since they signed up for their 401(k)s in the 1970s, 1980s or 1990s.
Planning wasnât as crucial back then, said David Krasnow, 44, President/CEO of Pension Advisors in Cleveland. âBetween pension plans, 401(k)s, and home equity, it was assumed that the continual growth of investments and home value together with Social Security would provide plenty of money when employees stopped working,” he said. With a formula that basic, professional planners didn’t need deep investment expertise to deliver solid results.
“There were few certifications or fee disclosure requirements,” Krasnow pointed out. “The same person who sold you health insurance might sell you an investment program.”
That laissez-faire approach might have worked for people who worked, uninterrupted, until 65 (not facing protracted periods of unemployment) and not as contractors and/or part-timers or small-business owners. It worked when the stock market produced steady 8% gains per year, not tumultuous volatility. It worked when companies offered generous 401(k) matchesâand stayed out of bankruptcy to actually fund pensions. And it worked when home property values were growingâor at least stable.
But it doesn’t work now, and this is why:
We canât assume continual growth of investments or home equity. Nor can we count on Social Security to be solvent 30-40 years from now. That’s the new economic normal.
Weâre anticipating living longer, staying active longer (which influences spending and other financial considerations), and with advancing age, facing the likelihood of considerable medical-related expenses.
Our parents are living longer. Boomers looking to retire may want to help fund their parents’ later years as well as their own. And, of course, there’s the question of children and grandchildren, and whether (and how much) to spend on them when you don’t have a full income.
Traditional pensions or other employee-sponsored retirement plans may not be sufficient sources of retirement funds.
Investment products are more plentiful and more complex (read: confusing) than ever.
Retirees often continue working long past their 60s, which affects traditional assumptions about how much savings is needed when they do stop working.
So what does all of this mean for anyone intent on building a solid retirement financial plan?
1. Recognize the Need for a Professional Adviser
âIn a constantly improving market I used to be able to manage my mutual fund investments on my own,” said Peter Doris, 66, a career and nonprofit expert from Philadelphia. “Now I need a professional’s help. It isnât just a question of putting money aside. Itâs a question of being really smart and current about each investment, and I simply don’t have the time or the background.”
2. Do Your Homework
âThere is a minimum set of skills and knowledge base you must have, even if you use a professional,â said Jim McGrath, an Executive Vice President of Law and Administration, 67, in Orland Park, Ill. âTake seminars, do online research and read up so that you have solid financial literacy,” he suggests. “You can’t make informed decisions without fully understanding your choices, their projected outcomes and their potential risks.â
3. Be on the Same Page With Your Significant Other
If you’re married or in a relationship, make sure both spouses/partners are in agreement about life planning, investment objectives, reasonable returns and levels of acceptable risk. âMy wife and I built our business together,â said Ted Vlamis, 78, an active CEO in Wichita. âShe knows the numbers, so there are no surprises. We know that the chances are good that one partner will outlive the other, and any survivor shouldn’t be blindsided by financial problems they knew nothing about … or have to face, unprepared and grieving, the host of decisions that have to be made about a business or an investment portfolio.”
4. Own It
Dr. Deborah Ewing-Wilson, 58, a neurologist in a large Ohio medical system, advises people to “give the same due diligence to their personal and financial lives that they give to their work and businesses.” It’s time-consuming and sometimes tedious, she admits, but then again so is taking care of one’s health. “Iâm here to help educate, recommend, and advise, but I canât take responsibility for anyone else’s behavior or decisions,” she says. “It’s the same with a financial plan.” In other words, it’s your money, your plan, your life.
5. Start Now
âFind a professional you trust, start saving as soon as you can, and stay on top of your plan, ready to make decisions as markets–and your lifeâevolve,â says Rich Iafellice, 57, vice president of an engineering services firm near Akron. He suggests working with an adviser who works on a fee basis, not on a percentage of growth of your portfolio. âThat way they’re focused solely on your needs and risk tolerance, not the potential for them to make big profits off of a portfolio that might be too ambitious for your comfort.â
Two last caveats: When shopping for an investment adviser, look for the designations CFP (certified financial planner), PFS (personal financial specialist) and CFA (chartered financial analyst). Anyone with these credentials has to have completed training from an accredited body, and passed rigorous exams demonstrating their competence. Certification is only one indicator of ability, however. The real test is whether an adviser has been successful for an extended period of time and is recommended by people you trust and respect.
More Money-Saving Reads:
Whatâs a Good Credit Score?
How to Get Your Free Annual Credit Report
Whatâs a Bad Credit Score?
How Credit Impacts Your Day-to-Day Life
The post Will You Ever Be Able to Save Enough for Retirement? appeared first on Credit.com.
Dear Penny, Iâm a housewife who does not work outside my home. The only income I have on my own is my Social Security, which isnât much. My husband and I have had bad credit in the past. I want to establish credit in my name. Is there a way I can go about doing [â¦]
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
If you need to borrow money but your credit is less than stellar, itâs possible youâll wind up with a bad credit loan. These loans are geared toward individuals with imperfect credit histories who can prove their income and ability to repay the loan. As a result of their bad credit, however, consumers who use bad credit loans typically pay much higher interest rates and loan fees. Bad credit loan customers may also be limited in how much they can borrow as well as the terms of their loanâs repayment.
From our perspective, LendingClub is the overall best option when it comes to getting a loan when you have bad credit.
Borrow Money with LendingClub
What To Do If You Think You Have Bad Credit
Step 1 â Get Your Actual FICO Score
The only way to find out if you have bad credit is to take a look at your FICO score, which isnât difficult since many companies offer online access for free. While your FICO credit score isnât the only credit score you have, itâs the one used by most lenders that offer personal loans.
According to myFICO.com, the credit score ranges are as follows:
Exceptional: 800 and up
Very Good: 740 to 799
Good: 670 to 739
Fair: 580 to 669
Poor: 579 or below
If your credit score falls below 579, thereâs a good chance you could only get approved for a bad credit loan. If your credit is just âfair,â on the other hand, thereâs still a chance youâll wind up with a loan for bad credit.
Get My FICO Scores
Step 2 â Compare Multiple Offers
Once you have determined your credit score, you’ll want to start comparing offers from different lenders to see what fits your needs. You can use this tool to start that process.
Continue reading to find out how Good Financial Cents breaks down the best loans for bad credit and what you should watch out for.
Best Bad Credit Loans of 2021
If you feel youâre a candidate for a bad credit loan, it still makes sense to compare loan options to find the best deal. Loans for bad credit may come with higher interest rates and more fees, but some are still better than others.
For the purpose of this guide, we compared all the bad credit lenders to see how their loan products stack up. The following loans are the best of the best when it comes to loans for poor credit:
Bad Credit Loan Reviews
Before you apply for a loan with one of the bad credit lenders above, it helps to have a basic understanding of their loan offerings, interest rates, and any other important details they offer. The following individual loan reviews can help you determine which lender offers loans that might work for your situation.
LendingClub is a peer-to-peer lender that operates outside of traditional banks. This means loans funded through the platform are initiated by private investors instead of banks, and it also means you may be able to get funding through LendingClub if you canât get approved for a loan elsewhere.
Investors in search of higher returns on their money can agree to offer loans to consumers with bad credit who present a higher risk. As a result, LendingClub personal loans come with APRs that range from 6.95% to 35.89%. Obviously, loans with rates on the higher end of the scale will go to those with low credit scores.
Before you apply, it’s important to be aware that LendingClub charges an origination fee that can equal up to 6% of your loan amount. You can repay your loan anywhere from 36 to 60 months, and thereâs no prepayment penalty if you pay your loan off early.
Pros: No minimum credit score requirement: check your rate online without a hard inquiry on your credit report
Cons: Potential for a high origination fee and interest rate
Get a Loan from LendingClub Today
Avant is another lender that often extends personal loans to consumers with low credit scores. With Avant, your interest rate will fall somewhere between 9.95% and 35.99% and you can repay your loan from 24 to 60 months. A loan funding fee of up to 4.75% of your loan amount is required as well, which will push up the cost of borrowing.
Avant claims that they have loaned $4 billion dollars to more than 600,000 consumers so far and that they have a 95% customer satisfaction rate. You can apply for a personal loan through Avant online, and you can even check your rate without a hard inquiry on your credit report.
Pros: No minimum credit score requirement; you can check your rate online without a hard inquiry on your credit report
Cons: High APRs and loan fees for bad credit
Borrow Better and Faster with Avant
LendingPoint is another bad credit lender that offers personal loans to consumers who are willing to pay whatever APR it takes. Loans from LendingPoint come with APRs between 15.49% and 35.99%, and your loan origination fee can be as high as 6% of your loan amount.
You can repay your loan for anywhere from 24 to 48 months, and loans are offered in amounts up to $25,000. LendingPoint also lets you check your rate online without a hard inquiry on your credit report. You do need a minimum credit score of 585 to qualify for one of their loans.
Pros: Check your rate without a hard inquiry; low minimum credit score requirement
Cons: Pricey APRs and loan origination fee; loans not available in every state
Sign Up Today with LendingPoint
#4: OneMain Financial
OneMain Financial offers personal loans in amounts between $1,500 and $20,000, and you can repay your loan for anywhere from 24 to 60 months. Interest rates range from 18.00% to 35.99%, and an origination fee may apply as well.
You can apply for a bad credit loan with OneMain Financial online, and you can get your loan approved and funded within a matter of days. You can even check your rate and gauge your ability to qualify without a hard inquiry on your credit report.
Finally, note that OneMain Financial has 1,600 physical locations in 44 states. To have your loan funded, youâll need to visit a OneMain Financial location and meet with a loan specialist.
Pros: No minimum credit score requirement; borrow up to $20,000
Cons: Potential for pricey APR and loan origination fee; you are required to visit a physical branch to have your loan funded
Get Started with OneMain Financial
Upstart is a unique online lender that makes it easier for borrowers with poor credit to qualify for a loan. This company considers more than your credit score when approving you for a personal loan, meaning they may give more weight to additional factors like your income and how much education you have.
Borrowers who qualify can access between $1,000 and $50,000 in loan funds with a repayment period of 3 or 5 years. Interest rates range from 5.69% to 35.99%, however, depending on creditworthiness and other factors.
Fortunately, loans from Upstart donât come with any prepayment penalties. You can also check your rate online without a hard inquiry on your credit report.
Pros: No minimum credit score requirement; borrow up to $50,000
Cons: Potential for pricey APR and loan origination fee
Get the Loan You Deserve with Upstart
How We Chose the Best Loans for Bad Credit
The lenders above offer loans that can be exorbitantly expensive when you factor in interest rates and fees. Since expensive loans are the norm for consumers with bad credit, however, these still represent the best loan options for people with risky credit profiles.
With that in mind, here are the factors we considered to come up with the loans for this list:
Easy Rate Check
Having the ability to check your loan rate online without a hard inquiry on your credit report is beneficial for potential borrowers who arenât quite ready to fill out a full loan application. We ranked lenders who offer this option higher as a result. With an easy rate check, you can get an idea of your interest rate and loan fees before you apply.
Check Your Credit Score for FREE
No Prepayment Fees
While loans for bad credit typically come with high interest rates and more loan fees, we think prepayment penalties cross the line. We looked for bad credit loans that donât charge prepayment penalties since borrowers should have the option to pay their loans off early.
Ability to Apply Online
Lenders that let you apply for a personal loan online are considerably more convenient, so we gave a better loan score to loan companies that offer this option. Bonus points were applied if you can complete the full loan application online and have your loan funded electronically.
We also looked at individual loan reviews on company loan pages and websites like Trustpilot. While all lenders have their share of poor loan reviews, the lenders that made our list boast considerably more positive user reviews than bad ones. Most of the lenders that made the cut for our ranking have customer approval rates over 90%.
Loans for Bad Credit: What to Watch Out For
Bad credit loans are not ideal since they come with high rates and fees that push up the total cost of borrowing. However, some bad credit loans are also considerably âbetterâ than others based on how they charge fees and the rates they offer. Hereâs everything you should watch out for before you apply.
Consider the Impact of High Rates
First, it can be immensely helpful to check your rate with multiple lenders in this space before you apply. Thereâs a huge difference between paying 25.00% APR and 35.99% APR even though both rates arenât great, so youâll want to pay the lowest interest rate that you can.
How much difference can it make? Imagine for a moment you need to borrow $10,000 and repay it over 60 months. Hereâs what your monthly payment would look like â and how much interest you would pay overall â if you repaid your loan over 60 months with three different rates:
Total Interest Paid
Avoid Origination Fees If You Can
Also try to avoid loan origination fees if you can, although this may be difficult if your credit score is on the low end of the scale. Loan origination fees are charged as a percentage of your loan upfront, so you canât avoid them â even if you pay your loan off early. They also add unnecessary expense to your bad credit loan without any benefit for you, the borrower.
Check for Prepayment Penalties
Also, make sure to check for any prepayment penalties that may apply to your loan, and if you can, opt for a lender that doesnât charge these fees. It would be nice to have the option to pay your loan off early without a penalty if you wind up having the money you need to do so. If youâre able to pay your loan off ahead of schedule, you could pay a lot less in interest over your loanâs term.
Bad Credit Loans: Should You Improve Your Credit First?
If youâre worried about the impact of a bad credit loan on your finances, it can make sense to spend some time improving your score before you apply. If youâre able to pay all your bills early or on time for several months, for example, you could have a positive impact on your score. Thatâs because your payment history is the most important factor that makes up your FICO score. According to myFICO.com, this factor alone makes up 35% of your score.
The same is true if youâre able to pay down debt to decrease your credit utilization. This advice is based on the fact that how much you owe in relation to your credit limits is the second most important factor making up your FICO score at 30%.
In the meantime, try to avoid opening and closing too many accounts since either of these moves can also ding your score.
If you were able to move the needle and boost your credit score in the âfairâ or âgoodâ range, thereâs a very good chance you could qualify for a less expensive personal loan with better rates and terms. Of course, this isnât always possible if you need to borrow money sooner rather than later.
The Bottom Line
Bad credit loans may come with pricey APRs, but they are often the only option of last resort for borrowers whose credit has taken a hit. If youâre in the market for a loan and know youâll need to get a loan for bad credit, the best thing you can do is compare loan options to find the best deal.
Keep an eye out for bad credit loans with the lowest interest rate and origination fee you can qualify for.
Also, look for lenders that let you check your rate and get prequalified online and before you fill out a full loan application.
With enough research, you should end up with a bad credit loan that helps your finances instead of making them worse.
The post What Are the Best Loans If You Have Bad Credit? appeared first on Good Financial CentsÂ®.
The major difference between Fingerhut and credit cards that cater to low credit scores is that Fingerhut credit is exclusively available for use with its own companyâs products and authorized partners. Youâll also find that the companyâs products are pricier than they would be through most other retailers, while also bearing the weight of higher interest rates. While it might seem like a good idea if you donât have good credit, itâs best to familiarize yourself with the ins and outs of the company beforehand so that you know what youâre signing up for.Â
How Fingerhut credit works
When you apply for a Fingerhut credit account, you can get approved by one of two accounts:
WebBank/Fingerhut Advantage Credit Account.
Fingerhut FreshStart Installment Loan issued by WebBank.
As it happens, by submitting your application, you are applying for both credit accounts. Applicants will be considered for the Fingerhut FreshStart Installment Loan issued by WebBank as a direct result of being denied for the WebBank/Fingerhut Advantage Credit Account. In other words, you wonât have a way of knowing which one you will be approved for prior to applying. Both credit accounts are issued by WebBank and are set up so that customers can purchase merchandise by paying for them on an installment plan with a 29.99% Annual Percentage Rate (APR). These are the only things that the different Fingerhut credit accounts have in common.
The WebBank/Fingerhut Advantage Credit Account
The WebBank/Fingerhut Advantage Credit Account works very much like an unsecured credit card, except that itâs an account that you can only use it to shop on Fingerhut or through its authorized partners.Â
This credit account features:
Â No annual fee.
A 29.99% interest rate.
A $38 fee on late or returned payments.
A possible down payment; it may or may not be required. You wonât know prior to applying.Â
If you get denied for this line of credit, your application will automatically be reviewed for the Fingerhut FreshStart Credit Account issued by WebBank, which is both structured and conditioned differently.
Fingerhut FreshStart Installment Loan issued by WebBank
If you get approved for the Fingerhut FreshStart Installment Loan, you must follow these three steps to activate it:
Make a one-time purchase of no less than $50.
Put a minimum payment of $30 down on your purchase, and your order will be shipped to you upon receipt of your payment. You may not use a credit card to make down payments, but you can use a debit card, check, or a money order.Â
Make monthly payments on your balance within a span of six to eight months.
You can become eligible to upgrade to the Fingerhut Advantage Credit Account so long as you are able to pay off your balance during that time frame or sooner without having made any late payments. Keep in mind that paying for the entire balance in full at the time you make your down payment will result in you not qualifying for the loan as well as being ineligible for upgrade.Â
How a Fingerhut credit account helps raise your credit score
The fact that it can help you improve your credit is one of the biggest advantages of using a Fingerhut credit account.Â
When you make your payments to Fingerhut in full and on-time, the company will report that activity to the three major credit bureaus. This means that your good credit utilization wonât go unnoticed nor unrewarded. If you use Fingerhut to improve your credit score, you will eventually be able to apply for a credit card through a traditional credit card companyâone where you can make purchases anywhere, not just at Fingerhut.Â
Additional benefits of a Fingerhut credit account
Besides using it as a tool to repair your bad credit, there are a few other benefits to using a WebBank Fingerhut Advantage Credit Account such as:
No annual fee.
Fingerhut has partnerships with a handful of other retailers, which means you can use your Fingerhut credit line to make purchases through a variety of companies. Fingerhut is partnered with companies that specialize in everything from floral arrangements to insurance plans.
There are no penalties on the WebBank Fingerhut Advantage Credit Account when you pay off your balance early.
How to build credit with Fingerhut
Fingerhut credit works the same way as the loans from credit card companies work: in the form of a revolving loan.Â
A revolving loan is when you are designated a maximum credit limit by your lender, in which you are allowed to spend. Whatever you spend, you are expected to pay back in full and on-time through a series of monthly payments. This act of borrowing money and paying off bills using your Fingerhut account causes your balances to revolve and fluctuate, hence, its name.Â
Your credit activity, good or bad, gets reported to the three major credit bureaus and in turn, will have an effect on your credit report. Revolving loans play a large role in your credit score, affecting approximately 30% of your score through your credit utilization ratio. If your credit utilization ratio, the amount of available revolving credit divided by your amount owed, is too high then your credit score will plummet.Â
When using a Fingerhut account, the goal is to try to keep your amounts owed as low as you possibly can so that you can maintain a low utilization ratio, and as a result, have a higher credit score.
Alternatives to Fingerhut
If youâve done all your research and decided that Fingerhut isnât the right choice for you, there are other options that might serve you better, even if you have bad credit. There are a variety of secured credit cards that you can apply for such as:
The OpenSky Secured Visa Credit Card: You will need a $200 security deposit to qualify for this secured credit card, but you can most likely get approved without a credit check or even a bank account. It can also be used to improve your credit, as this card does report to the three major credit bureaus. While this card does come with an annual $35 fee, you can use it to shop anywhere that will accept a Visa.Â
Discover it Secured:Â For all those opposed to paying an annual fee of any sort, this card might just be the one for you. With a $0 annual fee and the ability to earn rewards through purchases, thereâs not much to frown about with this secured credit card. One of the best perks, is that it allows you the chance to upgrade to an unsecured card after only eight months.Â
Deserve Pro Mastercard: This card is a desirable option for those with a short credit history. There is no annual fee and no security deposit required and, if your credit history isnât very long-winded, thatâs okay. The issuers for this card may use their own process to decide whether or not you qualify for credit, by evaluating other factors such as income and employment. This card is especially nifty because you can get cash-back rewards such as 3% back on every dollar that you spend on travel and entertainment, 2% back on every dollar spent at restaurants, and 1% cash back on every dollar spent on anything else.Â
Fingerhut is an option worth looking into for those with bad credit or a short credit history. If you want to use a Fingerhunt credit account to improve your credit score, be sure to use it wisely and make all of your payments on time, just as you would with any other credit card.
Even though it might be easy to get approved, the prices and interest rates on items sold through Fingerhut are set higher than they would be at most other retailers, so itâs important to consider this before applying.Â
There are a ton of options available, regardless of what your credit report looks like, if you are trying to improve your credit. If the prices of Fingerhutâs merchandise are enough to scare you away, you might want to consider applying for a secured credit card.Â
How to Build Credit with Fingerhut is a post from Pocket Your Dollars.
Most Americans haveÂ credit card debtÂ and will die withÂ credit card debt. It’s one of the most accessible types of credit there is, becoming available as soon as you’re financially independent. It’s also one of the most damaging, as tooÂ muchÂ credit card debtÂ could hurt yourÂ credit report, reduce yourÂ credit score, and cost you thousands of dollars in interest payments.
But how much debt is too much? What is the averageÂ total debtÂ for American consumers and households and when do you know if you have crossed a line?
HowÂ MuchÂ Credit Card DebtÂ is too Much?
TheÂ averageÂ credit card debtÂ in the United States is around $5,000 to $6,000 per consumer. However, this doesn’t paint a complete picture as these figures don’t differentiate rolling balances. In other words, even if you repay your balance in full every month, that balance will still be recorded as debt until it is repaid.
For many consumers, $6,000 is not “too much”. It’s a manageable sum that they can afford to clear. However, if you’re out of work, relying on government handouts and have no money to your name, that $6,000 can seem like an unscalable mountain. And that’s an important point to note, because everything is relative.
To the average American, unsecured debt of $50,000 is catastrophic. It’s the sort of debt that will cause you to lose sleep, stress every minute of the day, and panic every time your lender sends you a letter. To a multi-millionaire homeowner who runs several successful businesses, it’s nothing, an insignificant debt they could repay in full without a second thought.
One man’s pocket change is another man’s fortune, so we can’t place an actual figure on what constitutes “too much debt”. However, this is something that credit reporting agencies, creditors, and lenders already take into consideration and to get around this issue, they use something known as aÂ debt-to-income ratio.
YourÂ Debt-to-Income RatioÂ (DTI)
YourÂ DTIÂ can tell you whether you haveÂ too much debt, and this is true forÂ credit card debtÂ and all other forms of debt (student loans,Â car loans,Â personal loans, and even mortgages).Â
DTI is not used to calculate yourÂ credit scoreÂ and won’t appear on yourÂ credit report, but it is used by mortgage lenders and other big lenders to determine your creditworthiness and if you don’t past the test then you won’t get the money.
To calculate yourÂ DTI, simply calculate theÂ amount of debtÂ payments that you have and compare this to yourÂ grossÂ monthly income. For instance, let’s imagine that you make $400 inÂ credit card paymentsÂ and $600 inÂ autoÂ loanÂ payments, creating aÂ total debtÂ payment of $1,000. YourÂ grossÂ monthly incomeÂ is $4,000 and you don’t have any investments.
In this scenario, yourÂ DTIÂ would be 25%. as yourÂ monthly debt paymentsÂ ($1,000) are 25% of yourÂ monthly income. If you have a $1,000Â mortgage paymentÂ to make every month, your obligations increase and yourÂ DTIÂ hits 50%, which is when you should start being concerned.
Many lenders will not accept you if you have aÂ DTIÂ greater than 50%, because they are not convinced you will make your payments. $2,000 may seem like a lot of money to have leftover at the end of the month, but not when you factor tax, insurance, food, bills, and everyday expenses into the equation.
If yourÂ DTIÂ is below 50%, you may be safe, but it all depends on those additional expenses.
How to Tell If You’ve Borrowed Too Much
YourÂ debt-to-income ratioÂ is a good starting point to determine if you have borrowed too much, and if it’s higher than 50%, there’s a good chance you have borrowed more than you should or, at the very least, you are teetering on the edge. However, even if yourÂ DTIÂ is above 30%, which many consider the ideal limit, you may have tooÂ muchÂ credit card debt.
In such cases, you need to look for the followingÂ warning signs:
You Can’t Pay More Than the Minimum
Minimum paymentsÂ cover a substantial amount of interest and only a small amount of the actual principal. If you’re only paying the minimum, you’re barely scratching the surface and it could take years to repay the debt. If you genuinely don’t have the extra funds to pay more money, then you definitely have aÂ debt problem.
YourÂ Credit Card BalanceÂ Keeps Growing
The only thing worse than not being able to pay more than the balance is being forced to keep using that card, in which case the balance will keep growing and theÂ interest chargesÂ will keep accumulating. This is a dire situation to be in and means you have far tooÂ muchÂ credit card debt.
Your Debt is Increasing as YourÂ Take-Home PayÂ is Reducing
If yourÂ credit card billÂ seems to be going in the opposite direction as your paycheck, you could have a serious problem on your hands. You may be forced to takeÂ payday loans; in which case you’ll be stuck repaying these on top of your mountingÂ credit card interest,Â reaching a point when your debt eventually exceeds your disposable income.
You Don’t Have Savings or anÂ Emergency Fund
A savings account orÂ emergency fundÂ is your safety net. If you reach a point where you feel like you can no longer meet theÂ monthly payments, you can tap into these accounts and use the funds to bail you out. If you don’t have that option, things are looking decidedly bleaker for you.
Dangers of Having TooÂ MuchÂ Credit Card Debt
The biggest issue with excessiveÂ credit card debtÂ is that it has a habit of sticking around for years. Many debtors only make theÂ minimumÂ monthly payment, either because they can’t look at the bigger picture or simply can’t afford to pay more.Â
When this happens, a $1,000 debt could cost them over $2,000 to repay, which means they’ll have less money to their name. What’s more, thatÂ credit card debtÂ could impact theirÂ credit score, thus reducing their chances of getting low-interest credit and of acquiring mortgages andÂ auto loans.
It’s a cycle. You use a credit card to make big purchases and are hit with a high-interest rate. That interest takes your disposable income away, thus making it more likely you will need to use the card again for other big purchases.Â
All the while, yourÂ credit utilization ratioÂ (calculated by comparingÂ available creditÂ toÂ total debtÂ and used to calculate 30% of yourÂ credit score) is plummeting and your hopes of getting aÂ lowerÂ interest rateÂ diminish.
What to do if you Have tooÂ MuchÂ Credit Card Debt?
If you find yourself ticking off the boxes above and you have a sinking feeling as you realize that everything we’re describing perfectly represents your situation, then fear not, as there are a multitude of ways you can dig yourself out of this hole:
Credit counselorsÂ can help to find flaws in your budget and your planning and provide some much-needed insight into your situation. They areÂ personal financeÂ experts and have dealt with countlessÂ consumer debtÂ issues over the years, so donât assume they can only tell you what you already know and always look toÂ credit counselingÂ as a first step.
Credit card companiesÂ charge a higherÂ annual percentage rateÂ to consumers with poorÂ credit scoresÂ as they are more likely to default, which means they need those extra funds to balance their accounts. Another way they do this is to charge penalty fees, penalty rates, andÂ cash advanceÂ fees, the latter of which can be very damaging to an individual struggling withÂ credit card debt.
Cash advanceÂ fees are charged every time you withdraw money from an ATM, and the rate is often fixed at 3% with a minimum charge of $10. This means that if you withdraw as little as $20, it’ll cost you $10 in charges, as well as additional interest fees.
If theÂ cash flowÂ isn’t there, this can seem like a good option, but it will only make your situation worse and should be avoided at all costs.
UseÂ Debt Relief
Debt management, debt settlement, andÂ debt consolidationÂ can all help you to escape debt, creating aÂ repayment planÂ and clearing everything fromÂ credit card debtÂ toÂ student loanÂ debtÂ in one fell swoop. You don’t even need an excellentÂ credit scoreÂ to do this, as many debt management andÂ debt consolidationÂ companies are aimed towards bad credit borrowers.
AÂ balance transferÂ credit cardÂ moves all of your currentÂ credit card balancesÂ onto a new card, one with aÂ large credit limitÂ and a 0% introductory APR that allows you to swerveÂ interest chargesÂ for the first 6, 12, 15 or 18 months. It’s one of the best options available, assuming you have aÂ credit scoreÂ high enough to get the limit you need.
Monitor Your Situation
Whatever method you choose, it’s important to keep a close eye on your finances to ensure this never happens again. You should never be hit with an unexpected car paymentÂ orÂ mortgage payment, because you know those payments arrive every single month; you should never be surprised that you have interest to pay or that yourÂ credit scoreÂ has taken a hit because of a new account or application.Â
If you paid attention to your financial situation, you wouldn’t be surprised, you would understand where every penny goes, and as a result, you will be better equipped to deal with issues in the future.
How Much Credit Card Debt is too Much? is a post from Pocket Your Dollars.