More people are turning to peer-to-peer (P2P) lending sites to borrow money for debt consolidation. During November, 54% of loans at Prosper were for debt consolidation, according to a release from the P2P lending marketplace.
“This is the second month in a row where the majority of borrowers on Prosper are seeking to knock out their credit card debt at better rates and terms,” said Chris Larsen, chief executive officer and co-founder of Prosper. “Debt consolidation has always been the number one use case on Prosper with business loans being the second most popular.” Read the rest of this entry »
Struggling under too much debt? When a burden is too big, it can help to address it in sections. The following steps can help you analyze and prioritize your debt. Once you’ve done that, you are in a position to decide how to handle debt consolidation, or if other options may better serve your needs.
Understand what kind of debt you have, and what it costs: Make a list of all of your unsecured debt including credit cards, personal loans, and student loans. Pay close attention to the annual percentage rate for each account. The APR is the amount of all finance charges related to each account expressed as an annual percentage of the account balance. Interest rates are part of the APR, which also includes late fees, membership fees, over-limit fees, and any other charges.
Develop a cash-based budget: You need to know exactly what’s coming in each month and how much you’re spending. This can be a painful process that’s easy to avoid, but not having a cash-based budget is the main cause of carrying debt. Running short between pay days leads to using pay day loans, charging essential items on credit cards, or borrowing from family and friends.
Move forward based on your new budget: If you find that you must pay out more than you earn each month, you need to increase your income or decrease your expenses. If you are unable to eliminate enough expenses or cannot generate more income, credit counseling services can help you establish a budget and manage debt repayment through a debt consolidation plan negotiated and approved by your creditors. These plans can include reduction or waivers of fees and interest charges.
Focus on high APR accounts first: Make a list of accounts from highest APR to lowest. Plan on paying off the highest APR first, then the next highest APR and so on. If you have one or more small balances that can be paid off in one or two installments, go ahead and eliminate those, and then concentrate on your highest APR accounts. Why? The higher the APR, the more a particular debt is costing. Typically, the highest APR debts include pay day loans, pay day advances, pawn loans, and credit card debt.
Don’t forget personal loans: Although these may not be included in a formal debt consolidation/repayment plan, please do include them in your budget. Repaying family members, friends, and others who’ve lent you money is an essential part of your financial recovery plan.
Whether getting out of debt is a New Year resolution or part of a financial improvement plan, using these steps can help you achieve your goal of financial security.
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Chris Rocks is the Regional Director of the National Credit Federation (NCF). NCF is a nationwide membership-based organization that assists consumers recovering from a financial difficulty and those who need a significant increase in their credit score.
Chris began his financial services career as a Financial Advisor helping young families with risk management and asset accumulation strategies. It was during that time that Chris realized that many of these young families also needed someone to guide their choices with regards to debt management.
He made the transition into the mortgage industry where he first worked as a loan originator and later the Vice President of a small mortgage company. As Chris came across clients who had suffered through financial challenges and saw the difficulty they had in re-entering our credit driven economy, he discovered there was a real opportunity to leverage his unique background and help others.
He can be contacted by visiting his personal site, GoodCreditLiving.com.
Francine L. Huff is the Publisher and Editorial Director of Super Savvy Publishing, LLC, which provides editorial and publishing services. She is a gifted author, freelance journalist, and motivational speaker who has entertained and motivated a variety of audiences through workshops, panels and keynote addresses. Francine is the author of The 25-Day Money Makeover for Women, which has inspired and motivated many readers to rein in poor financial habits, become good stewards over their money and work toward a debt-free life. She has appeared on a variety of TV and radio shows. Francine previously worked for the Wall Street Journal, where she was the spot news bureau chief, a news editor and a copy editor. She has interviewed a variety of financial professionals about financial issues and strives to present information about managing money in an easy-to-understand format that is accessible to people of all backgrounds and income levels.
Karen Lawson is a freelance writer with more than 15 years of experience working in mortgage banking and loan servicing. She holds BA and MA degrees in English from the University of Nevada, Reno. She enjoys writing informative articles about debt management and personal finance.