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5 Reasons to Choose Debt Consolidation

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Trying to gain control over debt can feel like a losing battle. However, you might want to consider debt consolidation before you throw in the towel and decide to keep managing your debt the way you are already doing it. 

Debt consolidation can relieve you of the overwhelming management of multiple debts that can be difficult to keep track of all of it. You can work with a financial advisor to determine how best to consolidate your debt, whether through transferring debts to one area or securing a more manageable loan to pay off your debts. 

There are many reasons to choose debt consolidation to improve your finances, which will all come together to reduce the insurmountable stress that having debt causes. 

What Exactly Is Debt Consolidation?

There are two main methods of debt consolidation.

  • First, if you are trying to manage credit card debt from multiple credit cards, you could opt for a transfer balance card (this is the first type). This takes all the credit card debt you have and transfers it to one card that you will pay off with interest. As a result, you will typically get an interest rate lower than most traditional credit cards. 
  • Secondly, the debt consolidation process will review the debts you have and determine an amount that can be loaned to you based on your debt, income, and other information. This loan is then distributed to your debtors to pay them off. You will then make payments with interest towards this loan to pay it off in a certain amount of time. 
  • Finally, you can also manage your debt on your own by using a personal loan to pay off your debts (this is the second type). This will make things easier on you as you’ll have fewer debtors to pay, but you do not automatically have the aid of a financial advisor to ensure your debt consolidation is managed well. You must do all the work yourself. 

Consolidates Multiple Interest Rates

For example, if you have credit card debt, you likely have some steep interest rates that you are up against when trying to pay off your card.

In addition, if you have multiple cards, you might not realize how much extra money you are paying to have a balance on your cards. 

Doing a debt consolidation allows you to pay off those cards in full, so you are only working with one interest rate from your debt consolidation loan. In addition, these interest rates tend to be a lot lower than those interest rates on other types of debt. 

Eliminates Making Multiple Payments

If your calendar is full of dates you need to keep track of to make your debt payments on time, you can reduce that need to track your bank account.

When you undergo debt consolidation via a bank loan, this loan will be transferred to your debtors to eliminate your balance with them.

You then arrange to send a monthly payment to your financial institution. Furthermore, you can have this come out of your bank account automatically, so all you have to do is ensure there is money in there. 

You Avoid Late and Missed Payments

Since you will only have to worry about paying one debt source after debt consolidation, you will not run the risk of late and missed payments adding up. This is especially effective if you ensure you always have the money you need in one of your accounts and set up an automatic withdrawal with your financial institution. 

Late and missed payments get reported on your credit score, making borrowing money in the future challenging. 

Improves Your Credit Score

Missed debt payments can harm your credit score. Your credit score is essential to securing yourself a much simpler financial future. When you have some liability, it shows on your credit score. 

If you eliminate those debts and continue to make your monthly payments on your debt consolidation, this will help improve your credit score.

Your score will reflect that you have eliminated debt and managed the loan well by making on-time payments. 

Potentially Helps You Pay Debt Faster

Depending on the severity of your debt situation, having a debt consolidation loan with a lower interest rate could help you potentially pay off your debt faster.

As we know, interest rates can compound the debt we already have to the point where it can be impossible to get ahead. So, not working against all these rates could reduce the overall amount you have to pay. 

One thing to consider is that you can even pay off your debt consolidation early or make more than one payment if you have some extra money. However, check the terms of your agreement first, as some consolidations might stipulate a fee for paying early. 

For debt consolidation to work to your benefit, you need to practice discipline when avoiding future debt where possible. While most of us will always have some level of debt, irresponsible spending can lead to unnecessary debt. If you go and max out your credit cards again, you will not get the benefits that debt consolidation can have for you.

Image credit: [Peshkova]

Best P2P Lending Platforms in 2021

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Are you looking for loans to fund your next big purchase? A P2P lending platform may be able to help you! However, there are so many different options out there. You will want to make sure that you are choosing a reliable platform that is going to be worth your time. 

Many of the most trustworthy sites have more than ten years’ worth of experience. These sites are very secure and consistently deliver your loans. You will not need to worry when you decide to go with one of these long-standing P2P platforms.

What is a P2P Lending Platform?

A P2P, also known as a peer-to-peer lending platform, allows you to get loans directly from others.

This option is best when you want to cut out lenders, such as banks. Many people with lower credit choose P2P lending since they can still get loans in this way.

Many of these platforms use specialized software to match lenders with borrowers. If you are looking for more loan options to pay for something expensive, you will want to consider this method. It is worth noting that you will still need to pay interest on your loan, most of the time.

How P2P Lending Works

P2P lending is a straightforward process and works much like you would expect it to. You will experience a soft credit check, which is there to make sure you can pay back the loan.

Once you make it through this step, the platform performs a hard credit check, then assigns you a rank. This rank or grade shows lenders on the forum what levels of risk they take when investing in you.

At this stage, you have access to the platform! You can make a post about what you need for the loan, as well as what interest rates you can pay. Finally, lenders make “bids” on your post. These bids include the amount the lender will offer- then you choose the one that suits you the best.

After you accept a bid on your listing, the loan amount enters your bank account. You will have to pay it back over time, but you now have the funds for your purchase.

Why Use a P2P?

There are a variety of reasons for anyone to use a P2P platform. Many people use P2P lending to provide funds for personal projects and similar situations. If you do not want to work with an institution, then P2P is your best choice! The sites still report to the credit bureaus, so you can still build your scores using these sites.

https://www.moneyunder30.com/peer-to-peer-lending-sites-for-borrowers-and-investors

However, there are plenty of sketchy P2P platforms online. You only want to borrow from reliable sources, so make sure to check out all the options below.

The Best P2P Lending Platforms

Now that you understand how to use a P2P lending site best, you will want to choose a platform that suits you the best. There are plenty of different sites available, so you will want to choose one that fits all your needs. For example, if you have Fair Credit, then Payoff may be best for you.

1. Peerform

Peerform is an excellent P2P lending platform. The site offers competitive interest rates, does not have prepayment penalties, and is perfect for Fair credit scores. This platform is very trustworthy since it’s been around since 2010. The people running the site also have ample experience in the field because of this.

The maximum loan amount is $25,000, which is not as high as others on this list. Still, you receive great rates and reliable services. It is also worth noting that the minimum loan amount is $4,000.

Overall, Peerform is the best P2P lending platform for many people. It comes with a low credit requirement, which is a 600-credit score. If you happen to be late paying on the due date, you also have 15 days before receiving a late fee.

https://www.thebalance.com/best-peer-to-peer-lending-companies-4580285

2. Payoff

The payoff is another reliable P2P lending platform that you will want to consider. Payoff even works with those who have a short credit history or fair credit scores. Many borrowers also said they appreciated having free access to their FICO scores on the site.

You can also pre-qualify as an added benefit, giving you a higher chance of getting the loans you want. There also are no prepayment penalties, so you can pay off the loan as soon as you are ready. 

Payoff also started in 2005, giving the site many years’ worth of experience. The platform also has lower fees and sends you the funds quickly. Their maximum loan amounts also fall between $5,000 and $40,000, which is more than enough money for many situations.

Overall, Payoff is an excellent option for anyone with fair credit who wants to build on their score. Most borrows can find the loans they need there.

3. Upstart

Upstart is a trustworthy P2P lending site that you should also investigate. The starting interest rate is a bit higher than the above two options at 8.27%. However, it is still great for borrowers who do not have an extensive credit history.

To offer loans to more people, Upstart does look at your job history and education, but these factors should work in your favor when you have low credit scores. The platform accepts those with scores of at least 600, which is lower than many other lenders.

Upstart came into existence in 2012. Today, you can borrow between $1,000 and $50,000. Additionally, about 90% of borrowers pay off their loans from the platform- making it an excellent place for those looking to invest on a platform. 

4. Prosper

Prosper is another wonderful option, but it is much better for those with a long credit history. Many of their lenders mention appreciating that the site allows them to change their monthly due dates. That way, you can choose a date that will enable you to make payments reliably.

Prosper was the first P2P lending site, which came online in 2005. During the years since the platform has gained a lot of experience and is very well-known. They can be a little slow to provide you with the funds, but you can borrow between $2,000 and $40,000.

This lending platform is best for those with a more extended credit history because the venue requires at least three open credit accounts. Those just starting on building their credit may not have that many credit accounts open. In short, Prosper is very trustworthy and always makes sure that you get your funds from accepted loans.

Final Thoughts

To summarize, there are many trustworthy P2P lending platforms that you can make use of. Many borrowers use these loans to pay for home improvement, new cars, starting a business, and other large purchases- we’re sure you will find them helpful!

Image credit: Wutzkoh

Can You Survive with Just a PayPal Account?

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The digital world offers some alternatives to traditional banking, like PayPal. PayPal is popular. It can be a savings account, a bill pay tool, even a primary line of credit.  

https://www.forbes.com/advisor/banking/paypal-as-bank-account/

You can make purchases, track purchases, get paid, and enjoy FDIC insurance. Forbes Advisor (link above) says several financial services offered by PayPal could be enough to meet the banking needs of some people.

I have a personal story to contribute to this discussion. I tried to open a bank account after I moved from Florida. The bank denied me over a bad ChexSystems report. I was an awful money manager, and I had overdrawn my account. So, I applied for a PayPal account to buy some time. Here is what PayPal did and did not do for me.

Opening an Account Was Easy

All I had to do was apply for an account. There was no credit check, and I was quickly approved. PayPal offered me a Mastercard Debit Card linked to my PayPal account. I had it in a few days.

The PayPal Cash Card gave me several benefits.

  1. I now had an account number and routing number.
  2. I also had the protection of FDIC insurance. A PayPal account alone does not have FDIC protection. However, when a Mastercard links to the account, any funds go into a pool with FDIC protection by the Bancorp Bank.

My debit card allowed me to make purchases anywhere Mastercard was accepted. For online purchases, my Mastercard worked when PayPal wasn’t an option.

It Provided a Place to Deposit My Cash

I may be a cash person, but enough was enough. I did not want to hide my money in a sock or under the mattress. PayPal allowed me to go to a merchant and, for a small fee, I was able to deposit cash into my account.

I Was Able to Have Direct Deposit of My Paychecks

Paying for cashing paychecks was an annoying expense, but PayPal took that expense away. I enjoyed using the account and routing number for my PayPal Cash Card to have my paychecks directly deposited into my PayPal account for free.

Once I had direct deposit set up, I could withdraw cash at any ATM if I ever ran out of money in my sock.

In addition, if I used a MoneyPass ATM, I avoided a service fee from PayPal for my withdrawal.

I was able to get paid by my employer, and other people could pay me, too. I also could pay them. If I performed some side work, people could send money from their PayPal account straight to mine. PayPal even enabled me to customize and send invoices! Likewise, if I lost a bet or owed cash for another reason, I could pay up with PayPal.

Credit Is Available Through PayPal

Buy now and pay later seems to be the mantra of all but the most enlightened financial gurus. PayPal tries to fit itself to the minor credit needs of most people, assisting and not unconscionably taking advantage of them with exorbitant interest rates.

PayPal Credit

This is an online service wherever PayPal is accepted. It allows the privilege of making purchases over $99 and paying for them over time, interest-free if paid off in six months or less.

Pay In 4

You can purchase and pay in four equal payments every two weeks without any interest charges with this option. Note that the first payment is due at the time of purchase. Also, your credit score is not going to get better by using this service.

Cash Back and Rewards

 Do you want 2% cashback on any purchase? PayPal offers a Cash Back credit card without a fee.

The PayPal Extras Mastercard lets you earn points for spending on certain things. You earn three points for every $1 spent on gas and restaurant purchases; you earn two points for each $1 spent on PayPal and eBay purchases.

Finally, all other purchases make one point per $1. You can use Reward Points to get cash, cover travel expenses, buy gift cards, and even purchase merchandise.

Savings

Most people would not think of a PayPal account as a savings account, but it works like one. For average daily balances less than $1,000 on your prepaid Mastercard, PayPal pays interest at an annual percentage yield of 5.0%. The bad news is, when your balance is more than $1,000, the interest rate lowers to 0.5% on the portion greater than $1,000.

Money Management

It is not a big deal, but PayPal has a website where you can view your balance and track transactions. Plus, you can do it from all of your devices.

PayPal sends a text message each time I receive money. I can set notifications to send me an email anytime there is any purchase activity in my account.

A Few More Extras

I made it to the point where I took care of my overdraft in Florida, and the bank was suddenly more than happy to open a checking account for me. I seriously considered keeping my PayPal account alone, but I am old-school and felt better with a traditional account.

I found that my PayPal account worked great in tandem with my checking. When my PayPal balance was over $1,000, I could quickly transfer money into my checking or savings account. If my PayPal account dropped to $0, it automatically pulled from my checking account to cover any purchases I made.

Okay, What’s the Bad News?

I think there is bad news only for conventional banking when it comes to PayPal. I have no doubt PayPal is capturing a portion of traditional banking’s market.

However, PayPal cannot match the comfort factor provided by conventional banking. I like going to the bank. It’s comfortable.

Do you remember the days of standing in a check-out line, groaning a little when Granny took out a checkbook to write a check for her purchase? PayPal supports those frustrated by waiting in a check-out line. PayPal doesn’t provide paper checks. Die-hard check writers will have to go to the bank for a supply.

Finally, PayPal has not yet found a way to provide the range of services offered by traditional banks. If you need a more significant line of credit, like an auto loan or a home mortgage, PayPal cannot help you. If you need help with wealth management or financial advice, PayPal can’t help you with that, either. You might need more than PayPal to survive.

Image credit: Arthon Meekodong