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Should You Use Peer to Peer Lending To Get Out of Debt?

Learn how peer to peer loans can save you a ton of money and help you pay off your debt faster.

One goal that couples have when they want to build their finances is getting rid of their debt. High-interest ones, like credit cards (whose interest rates can be around 20-25%), can especially drain you.

Using a debt snowball while lowering your interest rate on those debts can have a huge impact and peer to peer lending can be a practical way for you to reach that goal.

What is Peer to Peer Lending?

At its core, peer to peer lending is about people directly lending to other. It is a form of crowdfunding, but instead of money for a business, it’s for an individual.

Two fo the biggest ones in the United States are LendingClub and Prosper. Borrowers may have a very affordable solution to help consolidate high-interest debts into something more manageable.

With current rates ranging from 6.4% (A grade)-16.2% (C/D grade), there’s a good chance that you can have more of your debt snowball is going more towards the principle. This can significantly cut down on the time it takes to get rid debt.

Another benefit is that these loans are at a fixed rate, allowing you to budget accordingly and not worry about rates skyrocketing.

How Peer to Peer Lending Works

Having a peer to peer to loan doesn’t mean you’ll just be handed over money. Like bank loans, borrowers must apply and their finances should justify the loan they requesting.

Unlike a bank, getting a P2P loan is a fairly straightforward and quick process (here’s a review from Simon about his LendingClub loan).

  • Submit an application: You give your general information and finances along with the loan amount you’re seeking.
  • Look at terms: You may be given a couple options on the rates and loan length. The longer you carry the loan the higher the rate.  Run the numbers again and choose the best terms for your situation
  • Provide additional documentation: You will most likely be required to send in bank statements, taxes, and pay stubs. You’ll also be asked to verify that your bank account is correct with a small transaction.
  • Results: If approved, the money is deposited into your bank account. If you’re rejected you’ll receive an explanation so you can improve your numbers.

The entire process can take about 5-7 business days, fairly quickly when you’re looking to consolidate.

Thoughts on Peer to Peer Loans

I’d love to hear from you – have you ever used peer to peer lending sites like Prosper or Lending Club? How did it go for you?

If you don’t have debt, but you like the idea of peer to peer loans, you may want into being an investor. Investing in peer to peer loans can be a wonderful way to earn a return on your money and help others.

 

What Money Questions Do You Have?

I want to share some news about the Couple Money Podcast.

This year has flown by, but as I was preparing next week’s podcast show, I did a double take as I realized that we had over 60 shows up in the last 6 months!

I’m so grateful for the support that you have given and it’s my goal to continue covering financial questions and situations that couples go through. Right now I’m working on several episodes, including:

  • Investing in Peer to Peer Loans to Help Yourself and Others
  • Leveraging the Power of Community to Dump Debt
  • Tips and Tricks to Renovating Your Home to Stay on Budget
  • How Spouses With Opposing Money Habits Can Win With Their Money
  • Saving Big Money on Smartphones

If you have ideas on questions or topics you’d love to hear on the podcast please let me know in the comments or email me!

Couple Money Around the Web

Here are few things I’ve been busy with on the podcast and around the web this past week:

Money and More Posts I Loved This Week

I found a few gems about managing your money this week that I wanted to pass on.

Have a great weekend!

Why You Need an Emergency Fund (And How It Saved Us)

Find how emergency funds can be a financial lifesaver

We were reminded this month the importance of having an emergency fund (financial cushion if your prefer). Thankfully no true emergency happened, but we were slammed with several bills and expenses.

Timing is Everything (Especially with Money)

Sometimes it’s not the bills that throw you off, it’s the timing of them. Let me show you.

Just within the last seven days here are expenses taken out from our joint checking:

  • Two Tires Replaced and State Inspection: $226.37
  • Hospital Bill $360.41
  • Car Registration and Taxes: $149.20
  • Total: $735.98

That is s significant amount of money to be draining checking account on top of our regular bills.

State Inspection: This wasn’t a surprise, but having to have two tires replaced wasn’t. I called around to make sure that the mechanic shop was offering a competitive price. They were so we went ahead and got that done.

Hospital Bill: After reviewing the statements from last month, we knew this was due. We scheduled it to be paid.

Car Registration: This was also expected, comes the same time every year. Because our registration is tied in with the inspection, we had to get this done ASAP.

But wait, there’s more…

Switching Another Line to Republic WirelessLearn why you need an emergency fund and how to get started.

On top of all this money leaving us, my husband’s cell phone has gone from bad to worse. He’s tried diagnosing it so we can get it repaired, but we have no idea what is causing it. It used to randomly shut down once in a blue moon and now it is constantly messing up.

The phone used to randomly shut down once in a blue moon which was annoying and inconvenient, but now it is constantly powering down. I’ve seen it power down, restart, only to power down again.

I was planning on switching to Republic Wireless (I already use them for work and love them!) for my personal home line once my current phone broke down, but now it looks like I will give him my Nexus so he can continue with his plan and I’ll make the switch now.

Knowing how often I use my ‘home’ phone, I’ve signed up for the Unlimted 3G Plan plan. While I’m not ecstatic about buying another so quickly, there is a $50 coupon I can use for the purchase which is awesome.

I went with the Moto X and for the phone, the first month of service, and taxes it came out to

The upside is that my cell phone plan will go from ~$50 + tax to $25/month and tax. Over the long term is a great deal, just wished my husband’s phone could’ve held off a little bit longer.

Financial Cushion and Emergency Funds Make a Difference

I’m grateful and happy to say that we had enough money in our buffer fund to cover all of these expenses. (Though I’d rather not have to shell out the money!) It was a simple transfer from our savings at Capital One 360 to our checking account. (Want more info about our accounts? Check out Read Tired of Your Bank – Make the Switch or Sign Up and Open an Account)

Having the money in savings definitely made the difference between being highly inconvenienced and stressing out on how to get things covered. I’ve had too many times with the latter, so I’m looking forward to building up the buffer again come next paycheck.

Thoughts on Budgets and Life

Have you ever had expenses hit you all at the same time? What happened? Was your budget thrown off? How big of a buffer do you guys keep for times like these?

 

Keeping Your Life Insurance Policy Up to Date

Protect your love ones and review your life insurance coverage

I’ll admit that it’s  not a pleasant topic to talk about, but getting life insurance coverage is an important one and can offer the two of you some peace of mind should the unfortunate happen.

Starting early is a smart way to get your coverage at a lower price as many companies factor in age with their premiums.

Do Your Homework with Life Insurance

Many people want to jump right into the numbers, but I think it’s vital that you also check out the companies you’re considering to use. The last thing you want is a company who is uncooperative. After all, it will be a difficult time for your family.

Review the company and make sure they have a stellar reputation for being reliable and paying out in a timely manner.

You can do this research for yourself or you can rely on companies like Life Plan (who specialize with Life Insurance in NZ) to present some options.

Deciding How Much is Enough

While there are certain general rules of thumb for how to figure the right amount of life insurance (8-10x your annual income), you really need to look at your family’s specific needs. (I believe that stay at home parents should have a policy even if they do not earn income.)

Some things you may want to consider:

  • Grieving: Losing a spouse/parent is life altering and your family needs time to grieve. Depending your family’s financial buffer, you may want to have enough so the surviving spouse can take time off, either for themselves or the children.
  • Final Expenses: You can get a ballpark estimate so your family will enough to take care of the funeral or cremation.
  • Financial Assistance: Do you want to leave money for your spouse and children to cover debts and help with future expenses?

Keeping Your Life Insurance Up to Date

It’s been a while since you updated your policy and you’ve had some significant life changes, now might be a good time to review getting additional coverage as a couple. This is something we’ve done the last few years.

After we were married, we got policies that covered enough to take care of bills for a few years and funeral expenses. When we became parents, we significantly increased that amount – we wanted each other to have the option to stay at home and take care of our child if needed.

Now that we have another one, we’re evaluating whether or not to increase. If we do, it won’t be a large amount as the household bills would already be covered with our previous policies.

Thoughts on Life Insurance

I’d love to hear from about how you determined how much life insurance you needed. What factors did you include in your calculations? What type of policy did you get?

I received compensation in exchange for writing this post.  The post topic and opinions are my own.

Fulfilling a Dream – Speaking at FINCON!

Elle Martinez from Couple Money speaking at FINCON 15

This week I received an email that told me I fulfilled a professional goal – I found out that one of the panel proposals I submitted was accepted. We’re speaking at FINCON 15!

I’m a huge fan of the conference Phil has created and grown so to have this be my first public speaking gig is fantastic.

What makes this opportunity even sweeter is the supportive and knowledgeable bloggers that will be on the panel. We all are excited to be a part of this conference and want to help others any way that we can.

I want to say thank you to everyone who helped me and that especially includes all of you who are reading this site and/or listing to the podcast. THANK YOU!

Couple Money Around the Web

Besides writing here, I also run the Couple Money Podcast, contribute to other personal finance sites, and occasionally interviews. Here are few things I’ve been busy with:

  • How to Save for Vacation: With the season, many people are thinking about getaways. If you want to go on a summer vacation, but don’t have the money now, I have some tips to get you ready.
  • Essential Guide to Getting Started with IRAs: Learn how easy it is to start investing with an IRA. This episode we go over how you can set up your account and choose the right investments for your situation.

Money and More Posts I Loved This Week

I found a few gems about managing your money this week that I wanted to pass on.

  • Pros and Cons of Doing a “Spending Diet” (+ Why It Worked for Me) on L Bee and the Money Tree-> I loved how Lauren explains that understanding yourself and what motivates you can help you achieve your goals, whether financial or not.
  • Debt Free in 24 Hours on Principles of Increase-> Need a boost to get you motivated so you can finally get rid of your debt? Check out Aja’s new book.
  • 5 Ways I Save Money That Most People Don’t Try -> Michael shares some unconventional ways he saves. Happy to find out we both use Republic Wireless :) It’s a fantastic way to slash your phone bill!
  • How to Throw a $5,000 Wedding  on Kiplinger’s -> If you’re planning your big day, you have to check this post out. The tips in here can help you save and make sure you get the biggest bang for your buck with your wedding budget.
  • Replace Worry with Action on Better Conversations on Money and Marriage -> Derek and Carrie has a wonderful show about how you can push out worry and take action with your biggest money issues.

Let me know which one was your favorite :) I hope you and your family have a wonderful weekend!