How to Start Investing in Peer-to-Peer Loans

How to Start Investing in Peer-to-Peer Loans

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 you’re 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

How to Start Investing in Peer-to-Peer Loans

You don’t necessarily have to be a millionaire or an heiress to start investing in peer-to-peer loans. In some cases, you’ll 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 you’re investing through the website Prosper, you can’t 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 you’re a company director, an executive officer or you’re 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 Prosper’s site, if you live in California and you’re 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 you’re visiting gives you that option.

After you create your account, you’ll be able to fill your investment portfolio with different kinds of notes. These notes are parts of loans that you’ll 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 don’t want to manually choose notes, you can set up your account so that it automatically picks them for you based on the risk level you’re most comfortable with. Note that there will likely be a minimum threshold that you’ll 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?

How to Start Investing in Peer-to-Peer Loans

Investing in personal loans may seem like a foreign concept. If you’re eligible to become an investor, however, it might be worth trying.

For one, investing in personal loans isn’t 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 don’t 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 there’s no guarantee that you’ll see a return on your investments. By investing in a peer-to-peer loan, you won’t have to deal with so much volatility and you’re 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 isn’t for everyone. The online company you’re 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 can’t 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 don’t have enough loans in your portfolio you’re putting yourself in a riskier predicament.

Final Word

If you’re 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, it’s important to be aware of the risks you’ll be taking on.

Photo credit: Â©iStock.com/bymuratdeniz, ©iStock.com/M_a_y_a, ©iStock.com/sirius_r

The post How to Start Investing in Peer-to-Peer Loans appeared first on SmartAsset Blog.

Source: smartasset.com

Chase Credit Journey: Check Your Credit Score For Free

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:

  • Credit Karma
  • Credit Sesame
  • Credit.com
  • Lendingtree
  • NerdWallet
  • WalletHub
  • Creditcards.com

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 you’re 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, let’s 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, you’ll 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, let’s 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 SmartAsset’s 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.

Source: growthrapidly.com

Guide to Small Business Startup Loans

Man working on a puzzle

It takes money to make money and virtually any small business will require some startup capital to get up and running. While the personal savings of the founders is likely the most common source of startup funding, many startups also employ loans to provide seed capital. New enterprises with no established credit cannot get loans as easily from many sources, but startup loans are available for entrepreneurs who know where to look. Here are some of those places to look, plus ways to supplement loans. For help with loans and any other financial questions you have, consider working with a financial advisor.

Startup Loans: Preparing to Borrow

Before starting to look for a startup loan, the primary question for the entrepreneur is how much he or she needs to borrow. The size of the loan is a key factor in determining where funding is likely to be available. Some sources will only fund very small loans, for example, while others will only deal with borrowers seeking sizable amounts.

The founder’s personal credit history is another important element. Because the business has no previous history of operating, paying bills or borrowing money and paying it back, the likelihood of any loan is likely to hinge on the founder’s credit score. The founder is also likely to have to personally guarantee the loan, so the amount and size of personal financial resources is another factor.

Business documents that may be needed to apply include a business plan, financial projections and a description of how funds will be used.

Startup Loan Types

There are a number of ways to obtain startup loans. Here are several of them.

Personal loan – A personal loan is another way to get seed money. Using a personal loan to fund a startup could be a good idea for business owners who have good credit and don’t require a lot of money to bootstrap their operation. However, personal loans tend to carry a higher interest rate than business loans and the amount banks are willing to lend may not be enough.

Loans from friends and family – This can work for an entrepreneur who has access to well-heeled relatives and comrades. Friends and family are not likely to be as demanding as other sources of loans when it comes to credit scores. However, if a startup is unable to repay a loan from a friend or relative, the result can be a damaged relationship as well as a failed business.

Venture capitalists – While these people typically take equity positions in startups their investments are often structured as loans. Venture capitalists can provide more money than friends and family. However, they often take an active hand in managing their investments so founders may need to be ready to surrender considerable control.

SBA loan applicationGovernment-backed startup loans – These are available through programs administered by the U.S. Department of Commerce’s Small Business Administration (SBA) as well as, to a lesser degree, the Interior, Agriculture and Treasury departments. Borrowers apply for these through affiliated private financial institutions, including banks. LenderMatch is a tool startup businesses use to find these affiliated private financial institutions. Government-guaranteed loans charge lower interest rates and are easier to qualify for than non-guaranteed bank loans.

Bank loans – These are the most popular form of business funding, and they offer attractive interest rates and bankers don’t try to take control as venture investors might. However, banks are reluctant to lend to new businesses without a track record. Using a bank to finance a startup generally means taking out a personal loan, which means the owner will need a good personal credit score and be ready to put up collateral to secure approval.

Credit cards – Using credit cards to fund a new business is easy, quick and requires little paperwork. However, interest rates and penalties are high and the amount of money that can be raised is limited.

Self-funding – Rather than simply putting money into the business that he or she owns, the founder can structure the cash infusion as a loan that the business will pay back. One potential benefit of this is that interest paid to the owner for the loan can be deducted from future profits, reducing the business’s tax burden.

Alternatives to Startup Loans

Crowdfunding – This lets entrepreneurs use social media to reach large numbers of private individuals, borrowing small amounts from each to reach the critical mass required to get a new business up and running. As with friends and family, credit history isn’t likely to be a big concern. However, crowdfunding works best with businesses that have a new product that requires funding to complete design and begin production.

Nonprofits and community organizations – These groups engage in microfinancing. Getting a grant from one of these groups an option for a startup that requires a small amount, from a few hundred to a few tens of thousands of dollars. If you need more, one of the other channels is likely to be a better bet.

The Bottom Line

Green plant growing out of a jar of coinsStartup businesses seeking financing have a number of options for getting a loan. While it is often difficult for a brand-new company to get a conventional business bank loan, friends and family, venture investors, government-backed loan programs, crowdfunding, microloans and credit cards may provide solutions. The size of the loan amount and the personal credit history and financial assets of the founder are likely to be important in determining which financing channel is most appropriate.

Tips on Funding a Startup

  • If you are searching for a way to fund a business startup, consider working with an experienced financial advisor. Finding the right financial advisor who fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors who will help you achieve your financial goals, get started now.
  • One way to minimize the challenge of getting startup funding is to take a “lean startup” approach. That approach could be especially helpful to baby boomers, who are “aging out” of their careers and living longer than earlier generations but still need (or want) an income. Learn how many of them are turning their retirement into business opportunities.

Photo credit: ©iStock.com/Andrii Yalanskyi, ©iStock.com/teekid, ©iStock.com/Thithawat_s

The post Guide to Small Business Startup Loans appeared first on SmartAsset Blog.

Source: smartasset.com

Should You Transfer Balances to No-Interest Credit Cards Multiple Times?

Karen, our editor at Quick and Dirty Tips, has a friend named Heather who listens to the Money Girl podcast and has a money question. She thought it would be a great podcast topic and sent it to me. 

Heather says:

I had a financial crisis and ended up with a $2,500 balance on my new credit card, which had a no-interest promotion for 18 months when I got it. That promotional rate is going to expire in a couple of months. I have good credit, and I keep getting offers from other card companies for zero-interest balance transfer promotions. Would it be a good idea to apply for another card and transfer my balance so I don't have to pay any interest? Are there any downsides that I should watch out for?

Thanks, Karen and Heather! That's a terrific question. I'm sure many podcast listeners and readers also wonder if it's a good idea to transfer a balance multiple times. 

This article will explain balance transfer credit cards, how they make paying off high-interest debt easier, and tips to handle them the right way. You'll learn some pros and cons of doing multiple balance transfers and mistakes to avoid.

What is a balance transfer credit card or offer?

A balance transfer credit card is also known as a no-interest or zero-interest credit card. It's a card feature that includes an offer for you to transfer balances from other accounts and save money for a limited period.

You typically pay an annual percentage rate (APR) of 0% during a promotional period ranging from 6 to 18 months. In general, you'll need good credit to qualify for the best transfer deals.

Every transfer offer is different because it depends on the issuer and your financial situation; however, the longer the promotional period, the better. You don't accrue one penny of interest until the promotion expires.

However, you typically must pay a one-time transfer fee in the range of 2% to 5%. For example, if you transfer $1,000 to a card with a 2% transfer fee, you'll be charged $20, which increases your debt to $1,020. So, choose a transfer card with the lowest transfer fee and no annual fee, when possible.

When you get approved for a new balance transfer card, you get a credit limit, just like you do with other credit cards. You can only transfer amounts up to that limit. 

Missing a payment means your sweet 0% APR could end and that you could get charged a default APR as high as 29.99%!

You can use a transfer card for just about any type of debt, such as credit cards, auto loans, and personal loans. The issuer may give you the option to have funds deposited into your bank account so that you can send it to the creditor of your choice. Or you might be asked to complete an online form indicating who to pay, the account number, and the amount so that the transfer card company can pay it on your behalf.

Once the transfer is complete, the debt balance moves over to your transfer card account, and any transfer fee gets added. But even though no interest accrues to your account, you must still make monthly minimum payments throughout the promotional period.

Missing a payment means your sweet 0% APR could end and that you could get charged a default APR as high as 29.99%! That could easily wipe out any benefits you hoped to gain by doing a balance transfer in the first place.

How does a balance transfer affect your credit?

A common question about balance transfers is how they affect your credit. One of the most significant factors in your credit scores is your credit utilization ratio. It's the amount of debt you owe on revolving accounts (such as credit cards and lines of credit) compared to your available credit limits. 

For example, if you have $2,000 on a credit card and $8,000 in available credit, you're using one-quarter of your limit and have a 25% credit utilization ratio. This ratio gets calculated for each of your revolving accounts and as a total on all of them.  

Getting a new balance transfer credit card (or an additional limit on an existing card) instantly raises your available credit, while your debt level remains the same. That causes your credit utilization ratio to plummet, boosting your scores.

I recommend using no more than 20% of your available credit to build or maintain optimal credit scores. Having a low utilization shows that you can use credit responsibly without maxing out your accounts.

Getting a new balance transfer credit card (or an additional limit on an existing card) instantly raises your available credit, while your debt level remains the same. That causes your credit utilization ratio to plummet, boosting your scores.

Likewise, the opposite is true when you close a credit card or a line of credit. So, if you transfer a card balance and close the old account, it reduces your available credit, which spikes your utilization ratio and causes your credit scores to drop. 

Only cancel a paid-off card if you're prepared to see your credit scores take a dip.

So, only cancel a paid-off card if you're prepared to see your scores take a dip. A better decision may be to file away a card or use it sparingly for purchases you pay off in full each month.

Another factor that plays a small role in your credit scores is the number of recent inquiries for new credit. Applying for a new transfer card typically causes a slight, short-term dip in your credit. Having a temporary ding on your credit usually isn't a problem, unless you have plans to finance a big purchase, such as a house or car, within the next six months.

The takeaway is that if you don't close a credit card after transferring a balance to a new account, and you don't apply for other new credit accounts around the same time, the net effect should raise your credit scores, not hurt them.

RELATED: When to Cancel a Credit Card? 10 Dos and Don’ts to Follow

When is using a balance transfer credit card a good idea?

I've done many zero-interest balance transfers because they save money when used correctly. It's a good strategy if you can pay off the balance before the offer's expiration date. 

Let's say you're having a good year and expect to receive a bonus within a few months that you can use to pay off a credit card balance. Instead of waiting for the bonus to hit your bank account, you could use a no-interest transfer card. That will cut the amount of interest you must pay during the card's promotional period.

When should you do multiple balance transfers?

But what if you're like Heather and won't pay off a no-interest promotional offer before it ends? Carrying a balance after the promotion means your interest rate goes back up to the standard rate, which could be higher than what you paid before the transfer. So, doing another transfer to defer interest for an additional promotional period can make sense. 

If you make a second or third balance transfer but aren't making any progress toward paying down your debt, it can become a shell game.

However, it may only be possible if you're like Heather and have good credit to qualify. Balance transfer cards and promotions are typically only offered to consumers with good or excellent credit.

If you make a second or third balance transfer but aren't making any progress toward paying down your debt, it can become a shell game. And don't forget about the transfer fee you typically must pay that gets added to your outstanding balance. While avoiding interest is a good move, creating a solid plan to pay down your debt is even better.

If you have a goal to pay off your card balance and find reasonable transfer offers, there's no harm in using a balance transfer to cut interest while you regroup. 

Advantages of doing a balance transfer

Here are several advantages of using a balance transfer credit card.

  • Reducing your interest. That's the point of transferring debt, so you save money for a limited period, even after paying a transfer fee.
  • Paying off debt faster. If you put the extra savings from doing a transfer toward your balance, you can eliminate it more quickly.
  • Boosting your credit. This is a nice side effect if you open a new balance transfer card and instantly have more available credit in your name, which lowers your credit utilization ratio.

Disadvantages of doing a balance transfer

Here are some cons for doing a balance transfer. 

  • Paying a fee. It's standard with most cards, which charge in the range of 2% to 5% per transfer.
  • Paying higher interest. When the promotion ends, your rate will vary by issuer and your financial situation, but it could spike dramatically. 
  • Giving up student loan benefits. This is a downside if you're considering using a transfer card to pay off federal student loans that come with repayment or forgiveness options. Once the debt gets transferred to a credit card, the loan benefits, including a tax deduction on interest, no longer apply. 

Tips for using a balance transfer credit card wisely

The best way to use a balance transfer is to have a realistic plan to pay off the balance before the promotion expires.

The best way to use a balance transfer is to have a realistic plan to pay off the balance before the promotion expires. Or be sure that the interest rate will be reasonable after the promotion ends.

Shifting a high-interest debt to a no-interest transfer account is a smart way to save money. It doesn't make your debt disappear, but it does make it less expensive for a period.

If you can save money during the promotional period, despite any balance transfer fees, you'll come out ahead. And if you plow your savings back into your balance, instead of spending it, you'll get out of debt faster than you thought possible.

Source: quickanddirtytips.com

A Guide to Consolidating and Refinancing Student Loans

Student loan consolidation and refinancing can help you manage your debts, reducing monthly payments, creating more favorable terms, and ensuring you have more money in your pocket at the end of the month. 

But how do these payoff strategies work, what are the differences between private loans and federal loans, and how much money can consolidation save you?

Private and Federal Student Loan Consolidation

Federal student loan consolidation can combine multiple federal loans into one. Private consolidation can combine both federal loans and private loans into a new private loan. The act of consolidation can improve your debt-to-income ratio, which can help when applying for a mortgage and greatly improve your financial situation.

Which Loans Qualify for Student Loan Consolidation?

You can generally consolidate all student loans, including Federal Perkins loans, Direct loans, and other federal loans, as well as those from private lenders. You cannot consolidate private loans with federal loans, but you can consolidate them with other private loans.

What Should you Think About Before Consolidating Student Loans?

Consolidating isn’t just something to consider if you’re struggling to meet current terms. In fact, private lenders often require a minimum credit score in the high-600s and you’ll also need to have a stable income (or a cosigner) and a history of at least a few punctual payments.

Federal student loans are a little easier to consolidate and available to more borrowers, including those looking to qualify for income-based repayment or student loan forgiveness schemes.

In either case, it can reduce your monthly payments, making your loans more manageable.

How to Consolidate Private Student Loans

Some of the private lenders offering this service include:

  • LendKey
  • Citizens One
  • CommonBond
  • SoFi
  • Earnest

The rate you receive will depend on your credit score and whether you opt for a variable interest rate or a fixed interest rate, but generally, they range from 3% to 8%. Each lender has their own set of terms and requirements, but they’ll often require you to:

  • Be at least 18 years old
  • Have no more than $150,000 in debt
  • Be the main borrower (not the cosigner)
  • Complete a credit check

The lender will run some basic checks to determine your creditworthiness before offering you a consolidation sum that will clear your debts and leave you with a single monthly payment. There are different types of private loan depending on whether you’re applying to consolidate just private loans or both federal loans and private loans.

If you only have federal loans, you should apply for federal student loan consolidation instead.

What Will I Pay?

The main goal of student loan consolidation is to reduce your monthly payment. If you have a strong credit score you can get a reduced interest rate and may even benefit from a reduced repayment term. However, as with most forms of consolidation, it’s all about reducing that monthly payment, improving your debt to income ratio and increasing the money you have leftover every month.

Shop around, consider all loan terms carefully, run some calculations to make sure you can meet the monthly payment, and compare repayment options to find something suitable for you.

Don’t feel like you need to jump at the first offer you receive. A personal loan application can show on your credit report and reduce your credit score by as much as 5 points, but multiple applications with multiple private lenders will be classed as “rate shopping”, providing they all occur within 14 days (some credit scoring systems allow for 30 or 45 days).

How Federal Debt Consolidation Loan Works

Federal student loan consolidation won’t reduce your interest rate, but it does make your repayments easier by rolling multiple payments into one and there is no minimum credit score requirement either.

When you consolidate federal student loans, the government basically clears your existing debt and then replaces it with a Direct Consolidation Loan.

You can consolidate directly through the government, with the loan being handled by the Department of Education. There are companies out there that claim to provide federal student loan consolidation on behalf of the government, but some of these are scams and the others are unnecessary—you can do it all yourself.

You can apply for consolidation once you graduate or leave school and you will be given an extended loan term between 10 and 30 years.

Just visit the StudentLoans.gov website to go through this process and find a repayment plan that suits you.

What is Student Loan Refinancing?

Student loan refinancing is very similar to consolidation and the two are often used interchangeably. In both cases, you apply for a new loan and this is used to pay off the old one(s), but refinancing is only offered by private lenders and can be used to “refinance” a single loan.

The process is the same for both and in most cases, you’ll see “consolidation” being used for federal loans and “refinancing” for private loans.

Student Loan Forgiveness and Other Options

You may qualify to have your federal student loans fully or partially forgiven. This is true whether you have previously been accepted or refused for repayment plans and it can help to lift this significant burden off your shoulders.

  • Public Service Loan Forgiveness (PSLF): Offered to government workers and employees with qualifying non-profit companies. You can have your federal loans forgiven after making 120-payments. This program works best with income-focused repayment plans, otherwise, you may have very little left to forgive (if anything) after that period.
  • Teacher Loan Forgiveness: Teachers can have their federal student loans partially forgiven if they have been employed in low-income schools for at least five years. They can have up to $17,500 forgiven.
  • Student Loan Forgiveness for Nurses: Nurses can qualify for PSLF and this is often the best option for getting federal student loans forgiven or reduced. However, there are a couple of highly competitive options, including the NURSE Corps Loan Repayment Program.

There are also Income-Driven Repayment Plans, which is definitely an option worth considering.

Income-Driven Repayment Plans

An income-focused repayment plan is tied to your earnings, taking between 10% and 20% of your earnings, before being forgiven completely after 20 or 25 years. There are four plans:

  • Pay as you Earn (PAYE): If you have graduate loans and are married with two incomes then you may qualify.
  • Revised Pay as you Earn (REPAYE): Offered to individuals who are single, don’t have graduate loans, and have the potential to become high earners.
  • Income-Based Repayment: If you have federal student loans but don’t qualify for PAYE.
  • Income-Contingent Repayment: If you have Parent Plus loans and are seeking a reduced monthly payment.

These programs can greatly reduce your monthly payment and your obligations, but they are not without their disadvantages. For instance, they will seek to extend the repayment term to over 20 years, which will greatly increase the total interest you pay. If anything is forgiven, you may also pay taxes on the forgiven amount.

You can discuss the right option for you with your loan servicer, looking at the payment term in addition to your current circumstances and projected income as well as your student loan terms.

Conclusion: Help and More Information

Student loan refinancing and consolidation can help whether you’re struggling with federal loans or private loans, and there are multiple options available, as discussed in this guide. If you have credit card debt, personal loan debt, and other obligations weighing you down, you may also benefit from a debt management plan, balance transfer credit card, or a debt settlement program.

You can find information on all these programs on this site, as well as everything else you could ever want to know about federal student loans and private loans.

A Guide to Consolidating and Refinancing Student Loans is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

Best Personal Loans for Good Credit for 2021

A personal loan can be used for any number of things in life, from building an addition on your house to consolidating your debt. When you have good credit, doors open even more widely compared…

The post Best Personal Loans for Good Credit for 2021 appeared first on Crediful.

Source: crediful.com

How Does Coronavirus Affect Life Insurance?

Coronavirus hasn’t entirely ended life as we knew it, but it’s certainly caused changes, some of which are likely to be with us for a very long time.

For some the coronavirus is literally a matter of life and death, and it raises an important question: how does coronavirus affect life insurance?

No one likes to think about the possibility of losing their life, or that of a loved one to this virus, but for over 150,000 families here in the US, it has turned out to be a reality.

Let’s examine the impact it may have on your existing policies, and perhaps more importantly, how it may affect applications for new life insurance coverage.

How Does Coronavirus Affect Life Insurance You Already Have?

There’s good news if you already have a life insurance policy in place. Generally speaking, the insurance company will pay a death benefit even if you die from the coronavirus. With few exceptions, life insurance policies will pay for any cause of death once the policy is in force. There are very few exceptions to this rule, such as acts of war or terrorism. Pandemics are not a known exception.

If you’re feeling at all uncomfortable about how the coronavirus might impact your existing life insurance policies, contact the company for clarification. Alternatively, review your life insurance policy paying particular attention to the exclusions. If there’s nothing that looks like death due to a pandemic, you should be good to go.

But once the policy is in place, there are only a few reasons why the insurance company can deny a claim:

  • Non-payment of premiums – if you exceed the grace period for the payment, which is generally 30 or 31 days, your policy will lapse. But even if it does, you may still be able to apply for reinstatement. However, after a lapse, you won’t be covered until payment is made.
  • Providing false information on an application – if you fail to disclose certain health conditions that result in your death, the company can deny payment for insurance fraud. For example, if you’re a smoker, but check non-smoker on the application, payment of the death benefit can be denied if smoking is determined to be a contributing cause of death.
  • Death within the first two years the policy is in force – often referred to as the period of contestability, the insurance company can investigate the specific causes of death for any reason within the first two years. If it’s determined that death was caused by a pre-existing condition, the claim can be denied.

None of these are a serious factor when it comes to the coronavirus, unless you tested positive for the virus prior to application, and didn’t disclose it. But since the coronavirus can strike suddenly, it shouldn’t interfere with your death benefits if it occurs once your policy is already in force.

How Does Coronavirus Affect Life Insurance You’re Applying For?

This is just a guess on my part, but I think people may be giving more thought to buying life insurance now they may have at any time in the past. The coronavirus has turned out to be a real threat to both life and health, which makes it natural to consider the worst.

But whatever you do, don’t let your fear of the unknown keep you from applying for coverage. Though you may be wishing you bought a policy, or taken additional coverage, before the virus hit, now is still the very best time to apply. And that’s not a sales pitch!

No matter what’s going on in the world, the best time to apply for life insurance is always now. That’s because you’re younger and likely healthier right now than you’ll ever be again. Both conditions are major advantages when it comes to buying life insurance. If you delay applying, you’ll pay a higher premium by applying later when you’re a little bit older. But if you develop a serious health condition between now and then, not only will your premium be higher, but you may even be denied for coverage completely.

Don’t let fears of the coronavirus get in your way. If you believe you need life insurance, or more of it, apply now.

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That said, the impact of the coronavirus on new applications for life insurance is more significant than it is for existing policies.

The deaths of more than 100,000 people in the US is naturally having an effect on claims being paid by life insurance companies. While there’s been no significant across-the-board change in how most life insurance companies evaluate new applications, the situation is evolving rapidly. Exactly how that will play out going forward is anyone’s guess at the moment.

What to Expect When Applying for Life Insurance in the Age of the Coronavirus

If you’re under 60 and in good or excellent health, and not currently showing signs of the virus, the likelihood of being approved for life insurance is as good as it’s ever been. You can make an application, and not concern yourself with the virus.

That said, it may be more difficult to get life insurance if you have any conditions determined to put you at risk for the coronavirus, as determined by the Centers for Disease Control (CDC).

These include:

  • Ages 65 and older.
  • Obesity, defined as a body mass index of 40 or greater.
  • Certain health conditions, including asthma, chronic kidney disease and being treated by dialysis, lung disease, diabetes, hemoglobin disorders, immunocompromised, liver disease, and serious heart conditions.
  • People in nursing homes or long-term care facilities.

Now to be fair, each of the above conditions would require special consideration even apart from the coronavirus. But since they’re known coronavirus risk factors, the impact of each has become more important in the life insurance application process.

If any of these conditions apply to you, the best strategy is to work with insurance companies that already specialize in those categories.

There are insurance companies that take a more favorable view of people with any of the following conditions:

  • Over 65
  • Kidney disease
  • Certain lung diseases, including Asthma
  • Liver disease
  • Certain heart conditions

More Specific Application Factors

But even with insurance companies that specialize in providing coverage for people with certain health conditions, some have introduced new restrictions in light of the coronavirus.

For example, if you have a significant health condition and you’re over 65, you may find fewer companies willing to provide coverage.

The insurance company may also check your records for previous coronavirus episodes or exposures. Expect additional testing to determine if you’re currently infected. Most likely, the application process will be delayed until the condition clears, unless it has resulted in long-term complications.

Travel is another factor being closely examined. The CDC maintains an updated list of travel recommendations by country. If you’ve recently traveled to a high-risk country, or you plan to do so in the near future, you may be considered at higher risk for the coronavirus. How each insurance company handles this situation will vary. But your application may be delayed until you’ve completed a recommended quarantine period.

Other Financial Areas to Consider that May be Affected

Since the coronavirus is still very much active in the US and around the world, financial considerations are in a constant state of flux. If you’re concerned at all about the impact of the virus on other insurance types, you should contact your providers for more information.

Other insurance policies that my warrant special consideration are:

  • Employer-sponsored life insurance. There’s not much to worry about here, since these are group plans. Your acceptance is guaranteed upon employment. The policy will almost certainly pay the death benefit, even if your cause of death is related to the virus.
  • Health insurance. There’s been no media coverage of health insurance companies refusing to pay medical claims resulting from the coronavirus. But if you’re concerned, contact your health insurance company for clarification.

Action Steps to Take in the Age of the Coronavirus

Many have been gripped by fear in the face of the coronavirus, which is mostly a fear of the unknown. But the best way to overcome fear is through positive action.

I recommend the following:

1. Be proactive about your health.

Since there is a connection between poor health and the virus, commit to improving your health. Maintain a proper diet, get regular exercise, and follow the CDC coronavirus guidelines on how to protect yourself.

2. If you need life insurance, buy it now.

Don’t wait for a bout with the virus to take this step. It’s important for a number of reasons and the consequences of not having it can be severe. Compare the best life insurance companies to get started.

3. Consider no medical exam life insurance.

If you don’t have the virus, and you want to do a policy as quickly as possible, no medical exam life insurance will be a way to get coverage almost immediately.

4. Look for the lowest cost life insurance providers.

Low cost means you can buy a larger policy. With the uncertainty caused by the coronavirus, having enough life insurance is almost as important as having a policy at all. Look into cheap term life insurance to learn more about what you can afford.

5. Keep a healthy credit score.

Did you know that your credit score is a factor in setting the premium on your life insurance policy? If so, you have one more reason to maintain a healthy credit score. One of the best ways to do it is by regularly monitoring your credit and credit score. There are plenty of services available to help you monitor your credit.

6. Make paying your life insurance premiums a priority

This action step rates a special discussion. When times get tough, and money is in short supply, people often cancel or reduce their insurance coverage. That includes life insurance. But that can be a major mistake in the middle of a pandemic. The coronavirus means that maintaining your current life insurance policies must be a high priority.

The virus and the uncertainty it’s generating in the economy and the job market are making finances less stable than they’ve been in years. You’ll need to be intentional about maintaining financial buffers.

7. Start an emergency fund.

If you don’t already have one place, start building one today. If you already have one up and running, make a plan to increase it regularly.

You should also do what you can to maximize the interest you’re earning on your emergency fund. You should park your fund in a high-interest savings account, some of which are paying interest that’s more than 20 times the national bank average.

8. Get Better Control of Your Debts

In another direction, be purposeful about paying down your debt. Lower debt levels translate into lower monthly payments, and that improves your cash flow.

If you don’t have the funds to pay down your debts, there are ways you can make them more manageable.

For example, if you have high-interest credit card debt, there are balance transfer credit cards that provide a 0% introductory APR for up to 21 months. By eliminating the interest for that length of time, you’ll be able to dedicate more of each payment toward principal reduction.

Still another strategy for lowering your debts is to do a debt consolidation using a low interest personal loan. Personal loans are unsecured loans that have a fixed interest rate and monthly payment, as well as a specific loan term. You can consolidate several loans and credit cards into a single personal loan for up to $40,000, with interest rates starting as low as 5.99%.

Final Thoughts

We’ve covered a lot of ground in this article. But that’s because the coronavirus comes close to being an all-encompassing crisis. It’s been said the coronavirus is both a health crisis and an economic crisis at the same time. It requires strategies on multiple fronts, including protecting your health, your finances, and your family’s finances when you’re no longer around to provide for them.

That’s where life insurance comes into the picture. The basic process hasn’t changed much from the coronavirus, at least not up to this point. But that’s why it’s so important to apply for coverage now, before major changes are put into effect.

The post How Does Coronavirus Affect Life Insurance? appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

Guide to Bar Loans: Pros, Cons, and More

It can take several months to prepare for the bar exam, and they are some of the most important months in an aspiring lawyer’s life. In that time, many students take preparation courses or devote all their time to studying and preparing, increasing their chances of passing the exam and taking that important step.

Bar loans are a type of financial aid offered to students going through this difficult time. A bar loan can provide them with essential living costs, while covering the cost of academic materials and preparation fees. That way, they can focus on what’s important, and don’t have to worry about getting a part-time job and spending time away from their studies.

What is a Bar Loan?

Also known as a bar study loan, a bar loan is a type of private loan offered by private lenders. Unlike federal student loans, they are not backed by the Department of Education and, as a result, are subject to the same standards and criteria as personal loans.

You have two main options for taking out a bar loan. The first is to simply borrow more money than you need during your last year of school, covering you for all costs during that final year and running over into the bar loan afterward. 

Alternatively, you can submit a separate application and acquire your loan via one of the bar loan lenders we have listed below. To determine how much you need, simply calculate your living expenses and other costs and contact a lender.

Pros of a Bar Study Loan

  • Provide you with the freedom to study without worrying about how you’ll afford everything.
  • You can apply even after you have graduated.
  • You can borrow more money than you need, which isn’t always possible with student loans.
  • Move you one step closer to achieving your goal

Cons of a Bar Study Loan

  • Charge higher interest rates than most other student loans
  • You’re not covered or protected like you are with student loans
  • Need good credit to apply

The Best Bar Loans

You can get bar study loans from many major banks, credit unions, and lenders. We have shortlisted a few of our favorites below to help you:

Discover Student Loans

Discover is best known for its credit cards, including the Discover It, which we have highlighted many times on this website. But it also offers a host of additional banking services, including private loans and bar loans.

You can get a loan of between $1,000 and $16,000 for up to 20 years, with both fixed-rates and variable rates available, typically between 7% and 13%. There are no fees for applying, missing payments or pre-paying.

To apply, you must either be in your final year or have graduated within the last 6 months.

Sallie Mae

A trusted lender that has been in the student loan business for decades, Sallie Mae offers up to $15,000 for 15 years, with interest rates as low as 4.5% and as high as 11.56%. You can apply up to 12 months after graduation and there are no loan fees. What’s more, you won’t be asked to make any loan payments while you’re still in school.

Wells Fargo

Wells Fargo options are a little more restrictive, as you can only borrow a maximum of $12,000 over a maximum of 7 years. What’s more, you need to be enrolled in an eligible school or have graduated within 30 days, so if you graduated more than a month ago then you’ll need to look at one of the two listed above.

Do You Need A Bar Loan?

You need money to get through this period as you likely won’t have time to work and study, and if you try and force it your studies may suffer. If you’re still living at home, as many students are, your parents may cover most of your living costs. Assuming they can also cover your additional expenses, you won’t need a bar loan.

However, if they can’t afford to pay your fees or rent, you’ll need to consider one of the following options:

Side Hustle

While a traditional part-time job can be overly taxing during this busy period, you may have some time to freelance. It is easier than ever to earn a little extra cash by writing, designing, coding, and even doing some simple consulting work.

You’re a lawyer, not a writer, but if you’ve made it this far it means you’ve completed countless essays and assignments and have a good grasp of the English language. You likely can’t compete with professional writers getting the big bucks, but you can certainly compete with those at the bottom end of the scale and earn upwards of $20 an hour for your time.

If the idea of writing doesn’t appeal to you, think about consulting work. Many smaller companies and individuals can’t afford to spend hundreds of dollars an hour on legal fees, not when they just need a little legal advice concerning their property or business. Instead, they turn to students who have the knowledge but don’t demand the same high fee.

Ask Your Employer

If you have a job lined up after graduation, your employer may cover some or all of your fees. However, you will need to make a commitment, agreeing to work with them for at least a few years after you have graduated.

Personal Loan

A bar loan is a specialized personal loan and may charge higher fees then you can get with a traditional personal loan. If you have a good credit score, you should consider applying for a traditional loan, comparing this to the bar study loan to see which one offers the best fees.

Bottom Line: A Life-Changing Loan

A bar loan can hurt your credit score and give you even more debt to worry about, but at the same time, it means you won’t have to worry about money while you study and focus on your future.

Ultimately, that’s the main goal here, because as damaging as that extra debt could be in the short term, if you eventually get the job of your dreams then you’ll have more than enough money to clear the balance and focus on your future.

Guide to Bar Loans: Pros, Cons, and More is a post from Pocket Your Dollars.

Source: pocketyourdollars.com