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.
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?
Today is the last in the Pay Off Your Debt Faster series. Over the last month, I shared step by step how the two of you can speed up your debt free plan. The last step – automating your payments – has been touched on briefly, but it has such a huge impact on your success, I want to take a few minutes to focus on how you can do it today.
Why You Should Automate Your Debt Payments
It’s no secret that I love automating finances, whether it’s for debt, savings, or investing. It’s a solution that has helped us tremendously with reaching our money goals.
One of the biggest reasons why automating your finances makes sense is that most couples I know live full (and sometimes hectic) lives and their payments already scheduled lets them focus on more important things. We have had times where work or family have kept us busy, but because our payments were already schedule, our cash flow didn’t suffer and we avoided getting it with late fees.
How to Set Up Your Debt Payments
Most banks and credit unions offer this money and time saving feature for free. If yours doesn’t or they are slow with their bill pay system, it’s time to switch for your joint accounts. Your bank should be helping you build your finances, not make it harder. We made the switch years ago to Capital One 360 and we’ve been happy with their service and the nice little bonus of earning some interest with checking. Always a plus in my book!
Getting your debt payments started is as simply as getting the minimums and debt snow ball payments up with them schedule early enough so you don’t ever have to pay late fees again.
We only needed around 20 minutes to set things up and we spend like 15 minutes each month just to review things.The goals is to make it easy for us to maintain and monitor so we can focus on more important things. You can also use services like Personal Capital, Finovera, or Mint to keep you up to date of your progress.
So how do you do it?
Log into your checking account and go to your bill pay section
Schedule your minimum and snowball/avalanche payments
When scheduling payments give your bank enough time to process so you don’t ever get hit with late fees. (If they have really slow service, go ahead and switch banks. You shouldn’t have to stress over bills getting paid on time.)
And just like that, you’re done!
The only time you’d probably need to mess with things is when you have to increasing payments (huzzah!) or when you’ve paid off your debts (score!).
Thoughts on Paying Debt Off Faster
I’d love to get your take on how you manage to stay the course for your finances. How much of your financial system is automated? How many of you have scheduled your debt payments? Which bank or credit union do you recommend? Which ones do you avoid?