The following is a guest post by Eric Lindeen, of Anna Buys Houses.
The second quarter of 2020 marked the highest U.S. mortgage delinquency rate (reported as 60-days past due) since 1979. Amidst the chaos of the pandemic, federal and state governments have made efforts to protect against the financial strain U.S. consumers are enduring—including mortgage payment forbearance of foreclosure.
What Is a Forbearance?
Forbearance is the postponement of mortgage payments, or the lowering of monthly payments for a specified time period; it’s not loan forgiveness. Repayment terms are negotiated between the borrower and lender. Mortgage forbearance is one tool to help protect homeowners from foreclosure due to temporary hardships, such as a job loss, natural disaster, or pandemic. Some homeowners may opt for strategic forbearance, meaning they proactively enter a forbearance agreement just in case they lose their ability to make their mortgage payments.
As of October 25, data from the Mortgage Bankers Association (MBA) reports that approximately 2.9 million U.S. homeowners are currently in forbearance plans. That number represents 5.83% of servicers’ portfolio volume. MBA data also shows that nearly 25% of all homeowners in forbearance plans have continued to make their monthly payment (perhaps an indicator of the use of strategic forbearance).
How Do Forbearance Plans Work?
Mortgage payment forbearance programs have come at a time when many Americans are losing their livelihood and others fear the potential fallout from the health and economic crisis. Not all forbearance plans are created equal. Therefore, it’s critical to understand how different plans are structured to protect your financial health and credit.
The Coronavirus Aid, Relief and Economic Security (CARES) Act is one measure enacted to provide relief to consumers facing hardships due to the impacts of the coronavirus. One provision of the Act allows mortgage payment forbearance and provides other protections for homeowners with federally or Government Sponsored Enterprise (GSE) backed or funded (FHA, VA, USDA, Fannie Mae, Freddie Mac) mortgage loans.
If you have a federally or GSE-backed mortgage, no documentation is required to request forbearance, other than an assertion that you are facing a pandemic-related hardship. Borrowers are entitled to an initial forbearance period of up to 180 days. If necessary, an extension of an additional 180 days may be requested. Federally backed mortgages are protected against foreclosure through December 31, 2020.
Recently, the foreclosure moratorium was extended yet again to at least March 31, 2021 for GSE-backed loans (Fannie Mae and Freddie Mac). Be sure you understand who owns your loan and the terms of your loan as these deadlines approach. Extensions are likely to continue to help borrowers keep their homes and lenders navigate the constant uncertainty that is 2020.
The CARES Act amended the Fair Credit Reporting Act (FCRA) with a provision that when a lender agrees to forbear an account of a consumer impacted by the pandemic, the consumer complies with the terms of the forbearance. Then, the mortgage issuer must report that account as current to credit reporting agencies.
How Your Credit Factors into Forbearance
On paper, knowing that your credit won’t be affected by forbearance seems like a good deal. There’s an important distinction here. Your loan doesn’t need to be current to qualify for forbearance under the CARES Act. However, any delinquencies on your account prior to entering a forbearance plan will impact your credit report. Make sure that your loan is current, and being reported as current to the credit bureaus, before you agree to a forbearance of foreclosure.
What about Private Mortgages?
Around 30% of single-family mortgages are privately owned. Many private banks and loan servicers have voluntarily implemented relief measures that don’t fall under the same protections of the CARES Act. Terms vary by institution and state of residence. And relief plans may not be structured in the same manner as federally-backed and funded loans.
For example, borrowers with private loans may be required to pay back all missed payments in a lump sum as soon as the forbearance period ends. Lump sum payments are not required for GSE-backed loans. Additionally, if modifications are made to a privately funded loan, the new terms could impact your credit score depending upon how the lender reports the status of your loan to the credit bureaus.
The good news is that the three major credit bureaus (i.e., Equifax, Experian, and TransUnion) are providing free weekly online credit reports through April 2021. Be sure to check these reports to ensure that the new terms of your loan are being reported as “paying as agreed” and not reported as late. Credit.com also has resources to help check and manage your credit.
It’s also important to understand the terms of your loan. Some homeowners who recently refinanced were asked to sign a form that was quickly described as “new COVID paperwork.” The fine print stated that their new loan was not eligible for forbearance relief measures.
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Mortgage payment forbearance is one tool that can protect homeowners from defaulting on their loan, damaging their credit, and worst of all, losing their home to foreclosure. Key takeaways include, knowing who owns your loan, who services your loan, and what type of protections are available to provide relief if the current economic crisis is impacting you or you fear that it might.
There are proactive steps to protect against foreclosure and determine the right path for your personal situation.
One of President Biden’s first executive directives after he took office was to extend the pause on federal student loan payments until September 30. The suspension is welcome news to borrowers who are experiencing economic hardships, and in some cases it could reduce the amount they owe.
During the moratorium, borrowers are credited for monthly payments for the purposes of loan forgiveness, even though they’re not making the payments. A borrower who was enrolled in the public service forgiveness program when the first moratorium was announced last March will be credited for 19 of the 120 credits required for loan forgiveness by September, according to Savi, a tech company that helps borrowers manage their student loans.
Similarly, borrowers who are participating in an income-driven repayment plan, which provides loan forgiveness at the end of a 20- to 25-year repayment term, will also get repayment credits during the moratorium, says Mark Kantrowitz, a financial aid expert and author of How to Appeal for More College Financial Aid.
For that reason, it doesn’t make sense for borrowers who are enrolled in one of these programs to make payments during the moratorium, “because that just reduces the amount of loan forgiveness you’re eligible to receive,” Kantrowitz says.
If you’re not eligible for loan forgiveness, making payments during the reprieve will go directly to the loan’s principal, which would reduce the amount you owe when payments resume. But before you tell your lender you want to make payments — which you’ll need to do, since the suspension is automatic — consider whether there are better uses for your money. You should first pay off any high-interest debt, such as credit card debt, and have at least enough in an emergency fund to cover half a year’s living expenses.
Once you have a solid cost estimate for your new pool and you’ve decided to finance it with a loan, the next step is to figure out your monthly payments so you can budget for them.
Enter a loan amount, repayment term, and estimated APR to see how much you might pay each month and the total interest.
How much does it cost to build a pool?
An above-ground pool costs $2,500 on average, according to HomeAdvisor, while an inground pool can run you $50,000 or more. The price can vary based on the size of the pool and materials you use.
When you finance with a personal loan, your annual percentage rate can be anywhere from 6% to 36%, and some lenders will finance up to $100,000 over a two- to 12-year repayment term.
Your credit score is an important factor lenders consider when they decide your loan amount and rate. On average, NerdWallet members with excellent credit (720 or higher FICO) received pre-qualified loan offers with rates between 10.7% and 12.5% in 2020, according to marketplace data. Lenders also consider factors like your income and existing debt.
A $50,000 loan with a six-year repayment term and a 11% APR would require monthly payments of $952. That loan would cost $68,544 in total, and $18,544 of that would be interest.
How to compare pool loans
Here are a few features to consider as you compare offers.
Annual percentage rates: APRs are the best apples-to-apples comparison for personal loans because they include the interest rate and other fees a lender charges. You can use this rate to compare offers between loans or to compare a loan with other financing options like a home equity loan.
Repayment terms: Most personal loan terms span from about two to seven years, but some lenders offer extended repayment terms on home improvement loans. For example, online lender Lightstream lets borrowers choose a repayment term up to 12 years. Your repayment term determines your monthly payment and the loan’s total interest — the longer your repayment term, the more you pay in interest.
Funding time: Some online lenders say they can fund a loan the day your application is approved or the following day. Banks and credit unions, however, can take a few days. Most personal loans can be funded within a week, though.
Ability to pre-qualify: Many online lenders let you pre-qualify to see your potential rate, loan amount and repayment term without affecting your credit score. You can pre-qualify with multiple lenders at once on NerdWallet to nail down another estimate of your monthly pool loan payments.
Bad credit is not something that can be solved overnight. Although you can work to repair your credit, progress usually takes time. Sometimes, you do not have time to wait for your credit score to improve because you need a loan right now.
Life has a habit of throwing unexpected expenses in your path such as an unexpected medical bill or car repair. Whatever has you seeking a personal loan, it is likely something that you need the money for soon. It might be ideal to wait for your credit score to improve but that is not always possible.
Luckily, there are many online lenders that are willing to provide bad credit personal loans for $5,000 or more. Let’s take a look at some of the best lenders who provide personal loans to people with bad credit.
Best Personal Loans for Bad Credit
You can absolutely secure a personal loan with bad credit. However, you should keep in mind that you will likely not receive the best terms. With bad credit, lenders are likely to charge you a higher interest rate for the loan. Make sure you absolutely need a personal loan before moving forward.
CashUSA
CashUSA serves as your one-stop shop to connect with online lenders that offer personal loans with bad credit. With a quick request process, CashUSA will work to connect you to a lender that is willing to work with you.
CashUSA lenders provide personal loans with a loan amount of $500 to $10,000. APR can vary widely based on the individual lender and your credit score, but it can range between 5.99% to 35.99%. The interest rate is variable with terms between 90 days and 72 months. Funds are deposited directly into your bank account.
Full review of CashUSA
BadCreditLoans.com
As the name suggests, BadCreditLoans.com is a place to find unsecured personal loans if you have bad credit. BadCreditLoans.com is not a direct lender but the site will connect you to lenders that are willing to work with you.
Lenders in the BadCreditLoans.com network offer loan amounts up to $10,000. Although most of the personal loans through these lenders are smaller than $10,000, it is possible to obtain the full $10,000.
The APR on personal loans can range between 5.99% and 35.99%. Interest rates are variable but generally on the shorter side, starting at just 3 months. You can get the money deposited in your bank account as soon as the next business day.
Full review of BadCreditLoans.com
PersonalLoans.com
PersonalLoans.com works to connect borrowers with personal loan offers between $500 and $35,000. If you have bad credit, then you should not expect to be approved for the maximum $35,000 loan. Although not everyone is able to qualify for the maximum amount, every applicant can request the amount they are seeking.
The APR on personal loans ranges from 5.99% to 35.99%. The APR you qualify for will be largely based on your credit score. One big benefit offered by PersonalLoans.com is the flexibility of repayment terms which range from 6 to 72 months. You’ll have the ability to choose the timeframe you’d like to repay the loan.
A final benefit of these personal loans is that there is no prepayment penalty. You’ll be able to repay your debt as quickly as you’d like without any repercussions.
Full review of PersonalLoans.com
Avant
Although Avant typically works with borrowers of average to above-average credit, it is still a company worth looking into. You do not need good credit to apply for an Avant personal loan.
The company offers personal loans with loan amounts between $1,000 and $35,000 with APRs that range from 9.95% to 35.99%. Many Avant borrowers are using the personal loan as a way to consolidate their debts. If you are using this strategy to rebuild your credit, the Avant may be the right choice for you.
Full review of Avant
OneMain Financial
You can obtain a personal loan from OneMain Financial with a loan amount of between $1,500 and $25,000. However, the company has set slightly different limits for each state, so you will need to confirm your state’s limit with your local office.
As an applicant, you’ll have the option to pursue a secured or unsecured personal loan. If you have poor credit scores, then a secured loan may be the better option.
The interest rates will vary greatly based on your credit history but you can expect an APR range from 25.10% to 36%. The maximum loan term we’ve seen in 60 months. Make sure you ask about the origination fee as it varies per state.
One thing to note about these personal loans is that they will need to be executed after communication with a loan officer. That means you’ll need to make an appointment with a loan officer and talk to them in-person or over the phone.
Full review of OneMain Financial
NetCredit
This Chicago-based lender works with borrowers across the country to provide bad credit personal loans. The company offers unsecured personal loans with a loan amount of $1000 up to $10,000.
NetCredit evaluates each loan application on a case-by-case basis. Your loan offer will likely vary greatly based on your credit score and the state you live in.
Since the company works in many states, the APR range is extremely wide, from 36% to 155%. You’ll need to check out NetCredit in your state to better understand what this company can offer you. There may also be an origination fee depending on where you live.
Full review of NetCredit
Bottom Line
A personal loan can seem difficult to obtain at a bank or credit union if you have bad credit. However, the lenders above can help you get approved for a loan to fund whatever life throws your way.
While it is possible to obtain a personal loan with a poor credit score, it may not be the best financial move, especially if you want to use it to consolidate credit card debt. It is more than likely that you will be offered unfavorable loan terms and high interest rates, which could cost you thousands over the course of your loan.
You could be using those funds to pay down other debts to improve your credit score. With a higher credit score, you’ll be able to obtain more favorable personal loan terms in the future. With that said, bad credit installment loans are still usually a better option than payday loans. Just make sure you can afford the monthly payments before you move forward with a personal loan.
Before applying for short-term loans, think of other ways that you could fund the immediate emergency. You could sell belongings, pick up a side hustle, or find a way to fix the problem yourself. If you are interested in rebuilding your credit score, then take advantage of our free DIY guide.
Staying at home during the pandemic has changed the way homeowners renovate, but not always in ways you might expect.
You could assume, for example, that homeowners are desperate for privacy and therefore adding more walls.
But interior designer Max Humphrey says rumors of the open floor plan’s death, which bubble up every year, are exaggerated.
“I think middle America still loves their open floor plans,” says Humphrey, who is based in Portland, Oregon. “Designers are talking about how open floor plans are over, but believe me, they’re not.”
Instead, homeowners are creating spaces they’d want to visit if they didn’t live there. Home kitchens have replaced restaurants, and your favorite outdoor bar is now your patio.
Many homeowners paid for their upgrades with savings last year, according to NerdWallet’s 2020 Home Improvement Report. Indeed, if the economic impact of the pandemic hasn’t hit your own finances, cash is the cheapest way to cover home renovations.
But there are also affordable financing options, including cash-out refinancing and personal loans, for those who don’t have or want to use savings.
Here are projects interior designers expect to see more of as the pandemic stretches into 2021, plus financing options to make them a reality.
Whole house renovations
Stephanie Sullivan is busier now than at any time since she became a full-time interior designer in 2014.
Her clients are seeing again the things in their homes they wanted to change when they bought the house but stayed busy enough over the years to ignore.
“It’s amazing how we don’t notice stuff until we’re stuck at home going, ‘hmm, really,’” she says. “So they’ve been walking past it for years, and now everybody’s home and they’re going, ‘Wait, I can’t do this.’”
A homeowner asking her to redesign the entire house is common these days, says Sullivan, who is based in Austin, Texas.
She says multiple clients in the last year have said, “I just need you to start at the front door.”
Fully remodeling most or all of the rooms in your house is likely an expensive endeavor.
If your project is $50,000 or more, certified financial planner Sarah Ponder recommends a cash-out refinance, which involves replacing your existing mortgage with a larger one and using the extra money to renovate.
Cash-out refinance is a good option only if you have enough home equity to match the project cost and if you get a low interest rate — a real possibility given today’s low mortgage rates, says Ponder, whose company, Real Estate Wealth Planning, is based near Austin.
It’ll take patience, too. The refinance process used to take about a month, Ponder says, but lately, it can take two or three months.
Room conversions
Another common request Sullivan says she receives from homeowners: Turn a master bathroom into an at-home spa.
“Since they can’t go to the spa, they’re creating spa retreats in their bathrooms,” she says.
They’re redoing their kitchens as places to connect with family, she says, but they also want their own getaway, even if it’s just upstairs.
Homeowners are also transforming basements and spare rooms into home offices and study rooms, or gyms and playrooms, Humphrey says.
He says his clients are looking for ways to sprawl out.
For midsized projects like one- or two-room renovations, refinancing your mortgage may not be worth the time and effort.
San Antonio-based CFP Tess Downing says a personal loan could work for projects around $20,000. These loans don’t use your home as collateral, and qualifying is based on your creditworthiness and finances. Good credit and little existing debt are must-haves to get a low rate.
Consumers who qualified for a personal loan in 2020 with excellent credit (720 or higher FICO) typically were approved for rates between 10.7% and 12.5%, according to NerdWallet marketplace data.
DIY projects
There are also affordable ways to get a fresh look in your home on a budget.
Replacing light fixtures can make a big difference, says Humphrey, and first-timers can get help from YouTube.
“It’s things that you notice every day, you know, that’s the light in your house,” he says. “Even as a renter, I would swap light fixtures.”
Homeowners can also add a roll of stick-on wallpaper, he says, or a fresh coat of paint. Even new towels, lightbulbs and bedsheets can change the look of a room.
If the cost of your project is below $10,000, a zero-interest credit could be a good pick, Ponder says. If you can pay the balance during the card’s promotional period (often 12 to 18 months) you’ll finish your project interest-free.
More traditional credit cards and store rewards cards can also help you cover purchases on these projects, especially if you have a card with a hardware or furniture store. Be sure you can pay the balance in full each month to avoid interest.
Resale considerations
It’s probably not worth your time and money to go all-out renovating a home you’re going to sell in a couple of years because you won’t make that money back, Humphrey says.
He cautions his clients against overpersonalizing a home they don’t plan to stay in long-term.
“I don’t love to think about resale when I’m designing for somebody, but the pandemic isn’t going to be forever,” he says. “So I do encourage people to think a little bit about resale.”
But for as long as home remains a restaurant, spa, gym, school and office, go ahead and make some changes you can afford just because they make you happy.
In July of 2013, I finished paying off my student loans.
It was a fantastic feeling and something I still think about to this day. Even though I have a success story when it comes to paying off student loans, I know that many others struggle with their student loan debt every single day.
The average graduate of 2015 walked away with more than $35,000 in student loan debt, and not only is that number growing, the percentage of students expected to use students loans is on the rise. Plus, if you have a law or medical degree, your student loan debt may be in the hundreds of thousands of dollars.
This is a ton of money and can be quite stressful.
After earning three college degrees, I had approximately $40,000 in student loan debt.
To some, that may sound like a crazy amount of money, and to others it may seem low. For me, it was too much.
At first, paying off student loans seemed like an impossible task, but it was an amount I didn’t want to live with for years or even decades. Due to that, I made a plan to pay them off as quickly as I could.
And, I succeeded.
I was able to pay off my student loans after just 7 months, and it was all due to my blog.
Yes, it was all because of my blog!
Without my blog, there is a chance I could still have student loans. My blog gave me a huge amount of motivation, allowed me to earn a side income in a fun way, and it allowed me to pay off my student loans very quickly.
I’m not saying you need to start a blog to help pay off your student loans, but you might want to look into starting a side hustle of some sort. Blogging is what worked for me, and it may work for you too.
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I believe that earning extra income can completely change your life for the better. You can stop living paycheck to paycheck, you can pay off your debt, reach your dreams, and more, all by earning extra money.
This blog changed my life in many other ways, besides just allowing me to pay off my student loans. It allowed me to quit a job I absolutely dreaded, start my own business, and now I earn over $50,000 a month through it.
If you are interested in starting a blog, I created a tutorial that will help you start a blog of your own for cheap, starting at only $2.95 per month (this low price is only through my link) for blog hosting. In addition to the low pricing, you will receive a free blog domain (a $15 value) through my Bluehost link when you purchase at least 12 months of blog hosting. FYI, you will want to be self-hosted if you want to learn how to make money with a blog.
Below is how blogging helped me pay off my student loans.
Quick background on my student loans.
In 2010 I graduated with two undergraduate degrees, took a short break from college, found a job as an analyst, and in 2012 I received my Finance MBA. Even though I worked full-time through all three of my degrees, I still took out student loans and put hardly anything towards my growing student loan debt.
Instead, I spent my money on food, clothing, a house that cost more than I probably should have been spending, and more. I wasn’t the best with money when I was younger, which led to me racking up student loan debt.
After receiving my undergraduate and graduate degrees, the total amount of student loans I accumulated was around $40,000.
Shortly after graduating with my MBA I created an action plan for eliminating my student loans, and in 7 months was able to pay them all off. It wasn’t easy, but it was well worth it.
The biggest reason for why I was able to pay off my student loans is because I earned as much money as I could outside of my day job. I mystery shopped and got paid to take surveys, but the biggest thing I did was I made an income through my blog.
I worked my butt off on my blog.
Any extra time I had would go towards growing my blog. I woke up early in the mornings, stayed up late at night, used lunch breaks at my day job, and I even used my vacation days to focus on my blog.
It was a huge commitment, but blogging is a lot of fun and the income was definitely worth it.
While I was working on paying off student loans, I earned anywhere from $5,000 to $11,000 monthly from my blog, and that was in addition to the income I was earning from my day job.
This helped me tremendously in being able to pay off my student loans, especially in such a short amount of time.
My blog allowed me to have a lot of fun.
One reason why I was able to work so much between my day job and my side hustling is that I made sure my side hustles were fun. Because I didn’t like my day job, I knew I just didn’t have it in me to work extra on something everyday if I didn’t enjoy it.
That’s where blogging came in.
Blogging is a ton of fun, and I have made many great friends. At times it can be challenging (the good type of challenging!) but also a lot of fun. I love when I receive an email from a reader about how I helped them pay off debt, gave them motivation, taught them about a certain side hustle, and more. Helping others along the way is another part of what really makes it worthwhile.
The fun I had blogging made it feel like a hobby, and that’s why I was able to put a crazy number of hours into it.
I focused on growing and improving my blog.
I knew I had to keep earning a good income online in order to pay off my student loan debt, so I made sure that I spent time growing and improving my blog as well. Since I love blogging so much, this was a fun task for me.
Improving my blog included learning about social media, growing my website, knowing what my readers want, producing high-quality content, keeping up with changes in the blogging world (things change a lot!), and more.
I put nearly every cent from side hustling towards paying off student loans.
One thing I did with the extra income I earned each month was putting as much of it as I could towards paying off student loans, and this way I wasn’t tempted to spend the income on something else.
So, as I earned money from my blog, I put it towards paying off student loans as quickly as I could.
This is probably easier said than done, though.
When you start earning a side income it can be very tempting to buy yourself some things. After all, you are tired, you have been working a lot, and therefore you may justify purchases to yourself.
But before you know it, you may have just a fraction of what you’ve earned left and able to put towards paying off your student loans.
It’s better to think about WHY you are side hustling and put a majority of the income you earn towards that instead.
I stayed positive when paying off student loans.
It was hard to manage everything. I was working around 100 hours each week between my day job and my side jobs, which left little time for sleep or seeing loved ones.
Luckily, I love blogging and that made it much easier to spend so much time on my blog. Watching my student loans get paid off and the debt going down was a huge motivator.
At first I thought it was impossible, and now I know it wasn’t!
Paying off my student loan debt has been one of the best choices I have ever made.
Do you have student loan debt? How are you paying off student loans?
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While college students can get their own federal student loans without a cosigner in most cases, there are some situations where a cosigner is required. Federal Direct Parent PLUS loans, for example, can actually be taken out on behalf of dependents to help pay for higher education. Students can also apply for private student loans to pay for college. These loans tend to have high credit requirements that make it difficult for young people to qualify on their own.
But should you really cosign on student loans for your child? And should you cosign on any loans they can’t qualify for on their own? You can certainly consider it, but it helps to enter the situation with eyes wide open and understand all the pros and cons.
The main advantage of cosigning is the fact that you’re helping your child (or dependent) pay for higher education when they may not be able to otherwise. However, it can also be a huge risk. Here’s everything you need to know before you sign on the dotted line.
You’re obligated to repay the debt no matter what
Whether you take on a Parent PLUS loan or you cosign with your child for a private student loan, the first thing you have to understand is that, no matter what, you’re obligated to pay that debt back. If your child stops making payments, you’ll be required to make them. If your child flat-out refuses to get a job and completely defaults on their responsibilities, you will need to repay that loan.
Cosigning on a student loan is similar to buying a house with someone or cosigning on a car loan. You’re both jointly responsible for repayment regardless of what the other person does. That can be a huge problem if your child doesn’t take their bills very seriously, but it may not be an issue if they treat their credit with care and stay on top of their bills.
Student loans are almost never discharged in bankruptcy
Another detail to understand is the fact that student loans are rarely ever discharged in bankruptcy. For the most part, they’ll stick around forever unless the borrower dies or you can prove you have some inescapable hardship.
As a parent, you’re probably trying to save for retirement and reach other financial goals, so it’s important to understand that the student loans you cosign for will never go away until you pay them off — once and for all.
There’s no going back
When you cosign on a student loan, you can’t just change your mind and back out of the deal. Your child may be able to refinance their student loans in their name, but only if their credit score is good enough to qualify for student loan refinancing on their own. And if that was the case, they wouldn’t have needed a cosigner in the first place.
Your finances may be perfectly fine right now, but you should think through how they may be in five or 10 years. If you’re nearing retirement, you may not want to put yourself in a situation where you’ll be stuck paying off a child’s student loans. Plus, you never know how your health will be or the status of your career several years from now. Cosigning for student loans leaves you on the hook no matter what, and it’s hard to change that after the fact.
Cosigning on a loan could affect your credit score
When you cosign on a student loan, you have to remember that you’re jointly accepting responsibility for the debt and any consequences that arise out of late payments or delinquency. So you should only cosign if you know your child or dependent is dedicated to paying their bills on time and avoiding default at all costs.
If you’re not paying attention, you could easily take a huge hit to your credit score without even knowing. Since payment history makes up 35 percent of your FICO score, it’s easy to see how even one late payment could cause major damage. Just think of what could happen if the student loans you cosigned for were paid late month after month. If you’re not also receiving a bill in the mail, you may not find out until the damage is already done.
The bottom line
There are situations where it can make sense to cosign on a student loan, but this decision should never be taken lightly. You may be helping your child earn their degree, but you’re taking a significant risk. (See also: Should You Co-Sign a Loan?)
You may want to assess the career field they plan to enter into and figure out how much they might earn upon graduation before you cosign. Some fields have plenty of promise right now, while others offer almost none, and you should know either way before you make any type of financial commitment. Maybe your college student could even spend time improving their credit score so they can qualify for student loans on their own.
Cosigning on student loans should be a last resort for parents, not an easy fix for students who don’t take time to consider all their options.
New to peer-to-peer lending? It’s a type of lending that has been around for over 15 years in the U.S. and has continued to grow in that time. It’s a way for borrowers to access competitive rates outside the traditional bank lending model.
It also brings the potential for higher returns to individual investors, often even including those who are non-accredited. P2P lending is a platform meant to cut out the middleman and generally democratize the loan landscape.
On top of that, there are reputable lenders across industries. That means better diversification amongst personal loans, business loans, and even commercial real estate projects.
Let’s jump in and find out how peer-to-peer lending works and who are the best P2P lenders out there today.
How does peer-to-peer lending work?
Peer-to-peer loans take online lending to the next level, directly pairing borrowers with investors in a virtual platform. It’s a unique alternative to traditional banking and often comes with lower interest rates for borrowers and higher yields for investors.
Peer-to-peer lending cuts out a lot of the costs generally associated with taking out loans through a bank. There are no physical branches to support, and staffing is generally a much less substantial expense for P2P lending companies.
How does the peer-to-peer lending process differ from bank lending?
Peer-to-Peer Lending Application Process
From the borrower’s perspective, the application process starts much of the same way as any other loan process. Most P2P lending platforms allow for prequalification that only requires a soft credit pull, giving you an idea of what kind of personal loan you could qualify for and with what terms. At this point, you’re also given a loan grade, which classifies your application as a risk rating.
Next, your funding request is posted on the P2P platform. Investors can review the details of your inquiry, such as what you’ll use your loan funds for, non-identifying aspects of your application, and their anticipated return. If interested, the investor can then commit any amount of funds to your personal loan. Once you reach a certain percentage of committed funding, your loan application moves onto the next level.
Other Requirements
You’ll need to submit information to verify your application, like proof of income and any other documentation required by the lender. It then goes to underwriting and you’ll receive an official loan agreement outlining the details of the loan, including rates, terms, and your repayment responsibilities.
After you sign and submit the loan agreement, the loan funds are typically deposited into your bank account within 24 to 48 hours.
Borrowing through P2P Platforms
Because there are extra steps involved in the approval process for a P2P loan, it can take longer to get your funding when compared to other lenders. On the plus side, however, borrowers can often qualify for more competitive rates and terms.
And since there’s upfront transparency to investors regarding each borrower’s credit rating, low credit borrowers may still get the chance to qualify for a loan, even if they’ve been denied by other lenders.
P2P platforms also offer a wide degree of flexibility on loan use. While they’re all different, most generally allow for common funding purposes such as debt consolidation, home improvements, life events, and other major purchases. Your exact need could influence which P2P lender you ultimately choose.
Investing through P2P Platforms
Investors are often drawn to peer-to-peer platforms for the pure fact that returns are often higher than other investment choices. Plus you get to administer as much control as you’d like when managing your portfolio. That’s because you can pick and choose how much you invest at any given moment, in addition to what mix of loan grades you want in your portfolio.
Alternatively, you’re also able to set your investments on autopilot with most of them. You generally can input how you’d like your investments to be distributed. The lender will then automatically disburse your funds to loan requests that meet your criteria.
This frees you up from having to manually review borrower requests, making the process as simple as you want it to be. While P2P lending certainly contains a large degree of risk, some investors may choose to make it a part of their portfolios.
Which is the best peer-to-peer lender?
There are a number of reputable peer-to-peer lenders online today. Here is a breakdown of the best ones to help you choose the right one, whether you’re interested in borrowing or investing.
Prosper
Prosper is one of the largest P2P lenders, having facilitated $13 billion in loan transactions. That’s a huge amount and they rely heavily on large institutional investors in addition to individuals who back loans for borrowers. Prosper offers loans that can be used for home improvement, vehicles, adoptions, engagement rings, special occasions, and more.
The eligible loan amount is broad, ranging between $2,000 and $40,000 with the choice of either a three or five-year repayment term. Interest rates are competitive and always fixed, meaning you know exactly how much your monthly payment will be for the entire life of the loan.
For investors, Prosper boasts a historical average of 5.5% and the ability to diversify your holdings beyond the typical stocks and bonds. They also pay out monthly returns, so you could potentially earn a steady stream of income. Any returns are deposited straight into your account on a regular basis, so you get quick access to those funds.
Read our full review of Prosper
LendingClub
LendingClub is another major player in the P2P space, helping clients borrow more than $85 billion over the years. The lender advertises a quick funding process with cash available within as few as seven days. Loan options include consolidating debt, paying off credit cards, making home improvements, or covering a major expense. In addition to personal loans, LendingClub also offers auto refinancing and medical debt loans.
The application process is easy for borrowers. You fill out an online form in just a few minutes, including the amount of money you’d like to borrow. If approved, you can review different loan offers that show your potential interest rate, repayment term, and monthly payment amount.
LendingClub works with both individual and institutional investors. For individuals, you can choose between an investment account and a retirement account, with historical returns ranging between 3% and 8%.
You can start with as little as $25 invested in a single loan. You can also automate your investments with pre-selected strategies that correspond to your financial goals, or you can manually select your investments.
Read our full review of LendingClub
Upstart
Upstart offers a huge variety of loan options, which is probably why it’s experiencing such enormous growth as a lender. As a borrower, you can use an Upstart loan to pay off your credit cards, consolidate debt, refinance student loans, pay for personal expenses, buy a car, or even start a business.
Smaller loan amounts are available and start at $1,000 or you can apply for as much as $50,000. You can repay your loan funds over three or five years.
What makes Upstart stand out to borrowers?
The approval process is much more holistic than many other lenders. Rather than placing a primary focus on your credit score, Upstart uses your education and your job history to help you qualify for lower rates. The thinking is that by factoring in these considerations, you have a financial potential that lessens your risk. Plus, you can get your loan funds in as fast as one day.
Investors have two choices when selecting Upstart. You can customize a plan for automatic investments or you can open a self-directed IRA to help supplement your retirement savings.
Upstart also states that 91% of their loans are either current or paid in full. This can help you determine the risk associated with the lending platform, which seeks to serve quality borrowers who simply have a limited credit history.
Read our full review of Upstart
PeerForm
Crediful’s rating
PeerForm offers loans on a P2P lending platform in amounts ranging from $4,000 to $25,000. All loans are unsecured, so as a borrower, you don’t have to worry about providing any collateral. You can check your rate by filling out a simple online form.
After that, you may receive one or more loan offers with different rates and terms. If one of those offers works for you, your loan is then listed on PeerForm’s lending platform.
Once your loan is funded by investors, you simply need to submit a few pieces of documentation to verify your identity and income. Examples of information you may need to submit include a copy of your ID, bank statements, pay stubs, and/or recent tax statements.
When you invest with PeerForm, you can choose between whole loans and fractional loans, the latter of which are geared towards individual accredited investors. PeerForm advertises competitive, risk-adjusted returns. PeerForm assigns each loan applicant a grade, which comes with a corresponding interest rate.
Read our full review of Peerform
Fundrise – Real Estate Platform
Fundrise is another P2P real estate platform that gives individual investors access to multimillion-dollar projects. The investment horizon for each project is usually between three and seven years. While that’s certainly not as liquid as investing in the stock market, the benefit is that Fundrise’s investments are expected to perform better.
Investors can earn an 8% to 11% expected annual return. Most plans are charged an annual 0.85% asset management fee, while clients using investment services pay a 0.15% advisory fee.
How does Fundrise choose its investments?
The goal is to buy properties for less than their replacement cost, then improve them using local industry experts. All aspects of the project are analyzed, including the sponsor, the property itself, the local market, and the overall economy. Fundrise states in a year of reviewing 2,000 proposals, they approved less than 2%.
Fundrise Investment Plans
Fundrise offers three different investment plans:
Supplemental Income creates an ongoing income stream.
Balanced Investing allows you to heighten your diversification.
Long-Term Growth seeks to maximize returns over longer periods of time.
You can even get started with a minimum investment of just $500. Anyone over the age of 18 can invest with Fundrise. Read our full review of Fundrise.
Funding Circle – Small Business Loans
Funding Circle offers a slightly different model, providing P2P small business loans. Approvals can be received in just 24 hours, making it a faster option than traditional banks. Small business owners can borrow between $25,000 and $500,000, with repayment terms lasting anywhere from six months to five years. Plus, you get a dedicated account manager who can help with any questions throughout the process.
Funds can be used for a range of purposes, including increasing cash flow, hiring new employees, buying new equipment, or upgrading your premises. The initial application takes just 10 minutes to complete. Within a day, you may talk to both a loan specialist and underwriter to learn more about your business. Once you’re approved and agree to the loan terms, you can get funding within five days.
Investors can diversify their fixed income portfolios by choosing to invest in secured business term loans through Funding Circle. There is, however, a pretty hefty minimum investment, which starts at $250,000. You can either select notes manually from the marketplace or enroll in automatic investing.
PeerStreet – Real Estate Loans
PeerStreet allows investors to finance short-term real estate loans. According to PeerStreet, their investments could be less volatile than the stock market. Investors select first lien real estate loans that are highly vetted before being offered.
PeerStreet works with private lenders to source these investments, which must meet a variety of requirements using both algorithms and manual processes. Investors can choose their projects one by one or use PeerStreet’s tool to match with investments that meet their chosen criteria. Additionally, you can start with just $1,000 per loan, making it easy to diversify.
What kind of returns can you expect with PeerStreet?
Some investments could potentially bring in double-digit returns, but the company also states that an example yield is 6% to 9% over 12 months. Service fees generally range from 0.25% to 1.0% and are disclosed with each project. Obviously, there’s a risk with any investment, and these real estate loans are no different.
To qualify as an investor with PeerStreet, you must be accredited. That means you must have an annual income of at least $200,000 or $300,000 in joint income with your spouse. Additionally, your net worth must be at least $1 million.
How to Earn Money with P2P Lending
There are no guarantees with how much money you can make investing in P2P lending. It depends on so many variables, including your risk tolerance, the loan types you choose, as well as more general factors like the economy. Some of them advertise the potential for double-digit returns, and most at least say they outperform the stock market while also being less volatile.
P2P lending platforms generally offer investor materials that you can review to get more details on the risk versus return. To help increase your returns, however, you can consider some general advice. First, think about diversification in relation to your broader portfolio and your P2P portfolio.
You probably don’t want to invest solely in high-risk, high-yield loans. Try investing enough money so that you can spread the money over different loan grades.
Is peer-to-peer lending safe?
Just like your returns rely on a number of factors, so does your safety as an investor choosing P2P loans. Your funds aren’t insured, but all P2P platforms must register with the SEC. This keeps them under federal scrutiny to ensure they stay in practice with all the current regulations.
Still, diversity must be a priority in minimizing your risk when investing in these types of loans. If a borrower defaults on a loan you’ve invested in, you’ll lose that money. Be sure to create a healthy balance within your accounts. You can also start off conservatively as you learn the process, then add in higher yield loans to bolster your returns. It’s also important to check out the lender’s vetting process for its borrowers.
Bottom Line
Whether you’re interested in borrowing or investing in a P2P loan, there are countless options available today. Personal loans, business loans, and real estate investments have become more accessible to all parties thanks to automated lending platforms connecting individuals on both sides of the equation.
As with any financial decision, the key is to do your own research and compare options. Each P2P lender has its own strengths and weaknesses. Do some digging to figure out which one best meets your needs for either funding or investing. Once you find it, it’s a win-win for everyone.
It happens to the best of us. You might have been totally on top of your budget, and then an unexpected something turns up to throw you off course. Maybe it’s a medical bill, an unforeseen car repair, or a layoff. But regardless of the specifics, you find yourself in need of cash you just don’t have.
If you’re struggling with bad credit the situation is just that much more stressful. Because a poor credit score and history can make it very difficult to get your hands on the unsecured personal loans you need to get through a tough time. And that, in turn, can just drive your credit score even lower if it means you’ll end up defaulting on existing payment commitments.
Unsecured Loans for People with Bad Credit
Fortunately, there are some online lenders who understand that life isn’t always ideal. They’ve created accessible unsecured loans that you aren’t automatically disqualified for just because your credit history has a few blemishes.
Of course, as with any loan, you will be paying interest for the privilege of borrowing the money. And the lower your credit score, the higher your interest rate will be on average. So, it’s important to reserve the use of an unsecured loan for true financial emergencies.
It’s also a good idea to shop around and find the lender that can offer you the best terms for your specific needs and credit standing. So without further ado, here are five of the best places to choose from when you need an unsecured loan even though you have bad credit.
CashUSA
By matching you with a variety of lenders, CashUSA allows you to get an unsecured loan with bad credit.
Plus, their sprawling network of providers can offer sizable unsecured loans of up to $10,000. This can be a godsend if you’re dealing with unexpected medical bills or other major expenses.
Your loan request can be approved within a matter of minutes and funded in as little as one business day, and all credit types are eligible (though interest rates and terms will vary based on your standing).
Loan Amount: $500 – $10,000+
APR: 5.99% – 5.99%
Term: 3 – 72 months
Read our full review of CashUSA
MoneyMutual
Although it’s not ideal, it’s a fact: most Americans couldn’t come up with even a few hundred dollars to spare in the face of an emergency.
That’s why MoneyMutual offers fast, short-term loans of up to $2,500, even to borrowers with bad credit.
Their services have been trusted by more than two million customers to date, and once approved, you can receive your funds via direct deposit, sometimes in less than 24 hours after approval. There’s no cost to fill out the online application, and it takes just minutes.
Loan Amount: Up to $2,500
APR: Variable
Term: Variable
Read our full review of MoneyMutual
PersonalLoans.com
Crediful’s rating
Whether it’s a quick $500 to cover rent or a serious financial undertaking costing tens of thousands of dollars, PersonalLoans.com can match you with lenders offering the funds you need fast. And there is no minimum credit score.
Better yet, you’ll have up to 72 months (i.e, six years) to repay it in easy monthly installments, making these unsecured loans a great choice for debt consolidation or to pay off a large standing balance at a lower interest rate.
Loan Amount: $500 – $35,000
APR: 5.99% – 35.99%
Term: 3 – 72 months
Read our full review of PersonalLoans.com
Bad Credit Loans
It’s right there in the name: this personal loan company is all about matching you with the lenders who will fulfill your needs, even if you have bad credit.
Loan amounts range from a quick $500 to a more substantial $10,000. Interest rates start as low as 5.99%. Bad Credit Loans is a great first stop on your unsecured loan shopping trip — especially since it’s totally free (and easy!) to submit an application.
Loan Amount: $500 – $10,000
APR: 5.99% – 35.99%
Term: 3 – 36 months
Read our full review of Bad Credit Loans
CashAdvance
If you just need a small amount of cash and can pay it off quickly, CashAdvance is a great place to get a personal loan, regardless of your credit score.
Although their lenders tend to max out loan agreements at $1,000 and carry fairly high interest rates, you can get the money delivered directly to your bank account quickly and easily.
Loan Amount: $100 – $1,000
APR: 200% – 2000%
Term: Variable
Read our full review of CashAdvance
How to Improve Your Credit Score to Get Better Loans Later On
These lenders offer a much-needed service to borrowers with imperfect credit scores. However, it’s in your best interest to work to improve your credit score over time. That way, you’ll be able to get better loan terms later on down the line. And that includes when you want to take on major financial commitments like homeownership.
If your credit history is dotted with blemishes, it can feel overwhelming, or even impossible, to get back on track. But that’s not the case! By implementing sustainable changes and habits and being persistent, you can rebuild your credit score and create the financial freedom you deserve.
Budgeting and Paying Off Debt
Start by looking at your budget and seeing if you can make any cuts. This will save you money that you can then funnel directly toward your standing debt totals. Some people start with the highest-interest account first, known as the “avalanche” approach.
This approach will save you more money over time. Others prefer the “snowball” method, which means starting by paying off the account with the lowest total and using that success as motivation to tackle your bigger debt projects.
No matter which way you go about it, you can achieve the debt-free lifestyle of your dreams! And sometimes, a personal loan is exactly what you need to start moving in the right direction.
You can consolidate private student loan debt, but the process is usually referred to as refinancing.
Student loan refinancing is a financial move you make to combine all of your existing loans with a new rate and loan term. You can refinance through a private credit union, bank or online lender. Moving forward, you will make payments to that lender on the new single loan, which makes it easier to manage your debt.
Refinancing is different from federal student loan consolidation, which applies only to federal student loans and is done through the federal government. Consolidation is a step required to be eligible for income-driven repayment plans.
Ideally you’ll refinance your private student loans at a lower interest rate, which can lower your monthly payment and save money on interest overall. A lender will look at your entire financial history (credit score, income, job history and education) to come up with your new interest rate. Typical interest rates range from 2% to more than 9%.
To get the best refinancing rate you’ll need:
Good or excellent credit, generally defined as credit scores of 690 or higher.
A stable job with a steady income.
Access to a co-signer who can meet the above criteria, if you can’t.
You’ll have multiple terms to choose from. A longer repayment term means lower monthly payments, but you’ll pay more in interest over the life of the loan. Conversely, a shorter repayment term means you’ll pay off your loans faster and pay less in interest, but your monthly payments will be higher.
You can refinance both private and federal student loans, but it’s not always recommended. That’s because federal student loans offer income-driven repayment plans that most private lenders don’t, along with opportunities for forgiveness.
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