3 Things Startups Should Know About Using P2P Loans

3 Things Startups Should Know About Using P2P Loans – SmartAsset

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Starting a new business requires a certain level of commitment. You’ll also need to have access to plenty of money. Startups often have a hard time qualifying for business loans. But peer-to-peer (P2P) lending could be a financing option worth considering if you can’t get funding elsewhere. Here’s what you need to know about using P2P loans to kickstart a business.

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1. You May Have to Apply for a Personal Loan

Getting a personal loan to support a business isn’t the same thing as getting a business loan. That’s something to keep in mind since borrowing limits for personal P2P loans may not be as high as they are for business loans.

Lending Club, for example, lets you borrow up to $40,000 for a personal loan. But the maximum borrowing limit for business loans is $300,000. If you want a business loan, your company needs to be at least two years old and you need to have at least $75,000 in annual sales.

If you can’t qualify for a business loan, you may need to take out more than one personal loan. But by taking on more debt, it may take longer for your business to become profitable.

2. Lenders Will Look at Your Personal Credit History

When you’re trying to get a personal loan through a P2P lender, your odds of being approved hinge solely on your personal credit history. Every P2P lender has its own credit rating system for borrowers. Finding someone who’s willing to loan you money may be difficult if you have bad credit.

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Before you start shopping around for a loan, it’s best to learn about the credit requirements that different P2P lenders have. Then you can check your credit reports and scores to see how you measure up. If your score is lower than you expected it to be, you might want to put off launching your business. The higher your credit score, the more appealing you’ll be to P2P loan investors (and you’ll probably have access to better loan terms).

3. You’ll Be Personally Responsible for What You Borrow

Getting a personal loan to fund your new business will be one challenge. Another will be paying back what you borrow. If your business doesn’t do as well as you’d hoped, that won’t change your responsibility to the P2P lender or the investors who funded your loan.

If you default on the loan, your lender may sue you. And your personal assets could be seized (depending on the way your business is structured). Before you commit to a P2P loan, you’ll need to know exactly what you’ll be risking if things don’t work out.

Related Article: How to Get a Personal Loan

Final Word

As you’re comparing P2P lenders, it’s important to pay attention to interest rates and fees. Compared to banks, peer-to-peer loans often come with higher rates, which increase the cost of borrowing. If you want the best deal on a loan for your new business, it’s best to shop around.

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Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.
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5 Things to Consider Before Getting a Personal Loan

Consider This Before Getting a Personal Loan – SmartAsset

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It’s a new year and if one of your resolutions is to get out of debt, you might be thinking about consolidating your bills into a personal loan. With this kind of loan, you can streamline your payments and potentially get rid of your debt more quickly. If you plan on getting a personal loan in 2016, here are some key things to keep in mind before you start searching for a lender.

Check out our personal loan calculator.

1. Interest Rates Are Going Up

At the end of 2015, the Federal Reserve initiated a much anticipated hike in the federal funds rate. What this means for borrowers is that taking on debt is going to be more expensive going forward. That means that the personal loan rates you’re seeing now could be a lot higher six or nine months from now. If you’re planning on borrowing, it might be a good idea to scope out loan offers sooner rather than later.

2. Online Lenders Likely Have the Best Deals

The online lending marketplace has exploded in recent years. With an online lender, there are fewer overhead costs involved, which translates to fewer fees and lower rates for borrowers.

With a lower interest rate, more money will stay in your pocket in the long run. Lending Club, for example, claims that their customers have interest rates that are 33% lower, on average, after consolidating their debt or paying off credit cards using a personal loan.

Related Article: How to Get a Personal Loan

3. Your Credit Matters

Regardless of whether you go through a brick-and-mortar bank or an online lender, you  likely won’t have access to the best rates if you don’t have a great credit score. In the worst case scenario, you could be denied a personal loan altogether.

You can check your credit score for free. And each year, you have a chance to get a free credit report from Experian, Equifax and TransUnion. If you haven’t pulled yours in a while, now might be a good time to take a look.

As you review your report, it’s important to make sure that all of your account information is being reported properly. If you see a paid account that’s still showing a balance, for example, or a collection account you don’t recognize, you’ll need to dispute those items with the credit bureau that’s reporting the information.

4. Personal Loan Scams Are Common

As more and more lenders enter the personal loan arena, the opportunity for scammers to cash in on unsuspecting victims also increases. If you’re applying for a loan online, it’s best to be careful about who you give your personal information to.

Some of the signs that may indicate that a personal loan agreement is actually a scam include lenders who use overly pushy sales tactics to get you to commit or ask you to put up a deposit as a guarantee against the loan. If you come across a lender who doesn’t seem concerned about checking your credit or tells you they can give you a loan without doing any paperwork, those are big red flags that the lender may not be legit.

Related Article: How to Avoid Personal Loan Scams

5. Not Reading the Fine Print Could Cost You

Before you sign off on a personal loan, it’s best to take time to read over the details of the loan agreement. Something as simple as paying one date late could trigger a fee or cause a higher penalty rate to kick in, which would make the loan more expensive in the long run.

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Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.
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How to Get a Personal Loan (Application, Approval, Alternatives)

  • Personal Loans

Personal loans are typically unsecured loans offering up to $50,000 with a term of up to 5 years. They come in several shapes and sizes and interest rates, fees, and terms can differ greatly, but the average personal loan in the United States is between $7,000 and $8,000 and charged at a rate of 11% and 12%.

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Steps to Getting a Personal Loan

  1. Check Your Credit Report
  2. Compare Rates and Terms
  3. Get a Pre-Qualification
  4. Look at the Fine Print
  5. Look at Alternative Options
  6. Receive Final Approval

1. Check Your Credit Report

The better your credit score is, the lower the interest rate of the loan will be. You can get a free credit check from all three of the main credit bureaus (TransUnion, Experian, Equifax) once a year and use this to see what the lenders will see.

Your credit report will show your credit history in intricate detail, as well as your personal details and all active accounts. If your credit score is below 600, you’ll likely be refused a personal loan; if it’s lower than 700, you may succeed, but won’t necessarily get the best rate.

In any case, it always helps to build your credit score and it’s also very easy to do. If you follow the steps below, you may see a sizeable improvement in a few short months:

  • Increase Credit Limits: Your credit utilization ratio calculates your debt in relation to your credit limits. Someone with a debt of $100,000 is not necessarily worse off than someone with debt of $10,000 if the former has a credit limit of $2 million and the latter has a credit limit of $20,000. By judging debt in this way, your credit score builds an accurate and relative picture of your financial situation. By increasing your credit limits, you can improve this part of your credit score in one quick move.
  • Payoff Debt: Debt is the other half of the credit utilization ratio and works just as well as increasing your credit limit. If you have a debt of $5,000 and a credit limit of $10,000, your credit utilization is a high 50%. If you repay just $1,000 and increase your credit limit by $1,000, this ratio drops to a respectable 36%.
  • Get a Secured Credit Card: A secured credit card uses a security deposit as collateral, allowing you to sign-up even if you have very bad credit or no credit at all. It can build your credit in as little as 6 months as all payments are reported to the credit bureaus. Your deposit will set your credit limit and is completely refundable.
  • Stop Applying: Every time you apply for a new auto loan, personal loan, credit card or mortgage, you receive a hard credit inquiry, which can reduce your FICO credit score by between 2 and 5 points. What’s more, every new account will reduce your score even more and make it harder to quickly build a strong score. Keep applications to a minimum and only apply when you absolutely need a new account.
  • Keep Making Payments: Your payment history accounts for 35% of your FICO credit score, which is more than anything else. It takes a long time to build your score this way, but as soon as you miss a payment, your score can drop by over 100 points and undo all your hard work, while making your task considerably harder.

At the same time, however, your credit score is not the only thing that matters. There is a misconception here, one that claims you can get pretty much anything you want as long as you have an excellent credit card. But that’s simply not the case.

If you are self-employed with an inconsistent income that never goes higher than $15,000 a year, it’s still possible to have an excellent credit score. After all, as long as you keep credit applications to a minimum, meet your payment obligations on time and keep a strong credit utilization ratio, you can build a great credit score.

But does that mean you’ll be offered a $200,000 mortgage or a $50,000 personal loan? Of course not. You’re not making enough money to cover those debts. You might be offered a low limit credit card with relative ease, but you’ll struggle to get a sizeable personal loan and may be refused outright.

2. Compare Rates and Terms

An estimated rate is, as the name suggests, just an estimate. It can vary greatly depending on your credit score, income, and a few other factors. However, your eventual rate will always fall into the estimated range and by looking for the best ranges and comparing the most likely rate based on your current credit score, you can avoid wasting your time on high interest loans.

Many borrowers will look for the lender they are most familiar with, including the ones they have a bank account or mortgage with. But your checking account is irrelevant here and by skipping the comparison shopping you could end up with a much higher rate than you can afford.

Look for the cheapest rates and compare these to the best loan amounts. Calculate how much you will need and whether or not you can sacrifice a few dollars here and there to save more on interest. 

3. Get a Pre-Qualification

A pre-qualification will give you an idea of what sort of loan you can get based on your credit score and income. You can then use this information to compare and contrast, ensuring you find the best and most suitable loan for you.

You will need to supply all of the following information, and this will be used to determine if you’re a good fit or not:

  • Your Social Security Number
  • Your full income and debts (debt-to-income ratio)
  • Your date of birth, home address, phone number, and email
  • All your previous addresses dating back a fixed number of years
  • Details of your education

If your income is too low, your debt-to-income ratio is too high, your credit score is poor or you have made too many credit applications, you may be refused a pre-qualification.

4. Look at the Fine Print

Does the loan have a prepayment penalty? Does it charge high fees and penalty rates? Is there an origination fee? This information may not be included on the main offer page, but it’s essential for determining the worth of a loan, so dig around in the terms and conditions, and make sure you’re getting the best loan possible in terms of the lowest rate as well as the lowest fees.

5. Look at Alternative Options

A personal loan is not the only option at your disposal, and it may not even be the best one. Depending on what you need the money for, there are a host of better alternatives out there, ones that may be more forgiving of your credit score and more willing to give you a large sum and a low rate.

It’s not all about banks. There are online lenders, credit unions, and a host of other financial institutions willing to help you out.

We have outlined some of the best alternative options a little further down this article.

6. Receive Final Approval

Once you have browsed multiple loan offers, checked loan rates, and decided on the best option for you, it’s time to apply and get final approval. You will need to provide some additional info, including W-2 forms and pay stubs, and then the lender will check your credit score and you’ll receive a hit of between 2 and 5 points.

If there are no issues, the loan will be finalized. Some online lenders offer to pay your funds by the next business day and other lenders offer instant payment on acceptance of the loan application. However, many will pay within 1 week.

What are Personal Loans Used For?

You can use a personal loan for a variety of reasons and in most cases, the lender doesn’t care which one you choose. As long as you meet the monthly payments and have a respectable credit score, they don’t care if you’re blowing it on a vacation or launching a business. Here are a few reasons to apply for a personal loan, some of which make more sense than others.

Debt Consolidation

If you have a lot of credit card debt, you can use an unsecured personal loan to clear it. You’ll still have debt, as you’re essentially swapping one debt for another, but you may be charged a lower interest rate or smaller monthly payment.

There are debt consolidation and debt management companies that specialize in this service and can do all the hard work for you. However, these companies focus mainly on reducing your monthly payment and interest rate in exchange for a prolonged-term. You’ll pay less per month and may have an APR that is several points lower, but the increased term means you will pay much more over the length of the loan.

If you have a strong credit score, are in a good financial position and have several high interest credit card debts, you can get a low rate, short-term loan. You’ll pay more per month, but over the term, you could save thousands of dollars in interest payments.

Vacation

It’s rarely a good idea to accumulate debt just so you can enjoy the vacation of a lifetime. But what if it’s the only chance you have of taking that vacation? What if it would be a life goal realized and you’re confident that you can make the monthly payments and eventually clear the debt?

In such cases, while we would never recommend it, using a personal loan for a vacation is understandable. It’s something that many older married couples do to pay for cruises and trips across Europe. It’s also a method used by young married couples to have the honeymoon they have always dreamed of.

College Education

Student loans aren’t always readily available, nor are they the best option. And while they are usually more preferable to personal loans, they may not provide the coverage that you or your grandchildren need.

In the last decade or so, there has been an over 1,000% increase in the number of senior student loan borrowers. This isn’t the result of an influx of mature learners, but rather it’s because they are assuming debts on behalf of their grandchildren and children, co-signing to help them through college.

Pay for a Major Expense

Life can throw several major and unexpected expenses your way, and if you don’t have any money in your savings, a personal loan may be your only option. Many couples live their lives relatively debt and problem-free until one of the following expenses raises its head and they opt for a personal loan.

  • Marriage: A marriage is not something that happens unexpectedly, unless you’re a parent and your child is the one getting married. In either case, it’s a massive expense that can cripple you financially, with the average wedding costing over $30,000.
  • Adoption: The average cost of adoption in the United States ranges from between $40,000 and $50,000. Like a wedding, it’s not necessarily something that happens unexpectedly, but also like a wedding, when the time is right and the need is there, it’s something you feel like you have to do.
  • Funeral: Funerals can cost upwards of $10,000 and often occur out of the blue. If the deceased is insured or has assets, it’s not a problem, but there are countless people who are not insured, don’t have assets, and die unexpectedly. If you’re the closest person to them, you may find yourself assuming responsibility for their funeral.
  • Medical Services: If you fall ill and need a specific type of treatment or surgery that your insurance won’t cover, a personal loan could be the only option. Medical treatments are very expensive, and many Americans simply can’t afford to cover these costs out of their own pockets.

Launch a Business

Launching a business is another risky way to use a personal loan, but one that many borrowers are submitting to every year. This is the golden age of entrepreneurs, and there has never been a better time to launch a business.

Of course, grants and business loans are also available, but the former often requires you to work in specific niches and abide by specific terms, while the latter will be weighed against your personal finances if your business is small or new. A personal loan, therefore, may be the only option for business owners seeking to launch a new project.

Alternative Options to Personal Loans

A personal loan isn’t your only option when you need a little cash. You can borrow money through several different avenues, and the best option for you will depend on what you’re using the money for:

Credit Building

You need credit to build credit; you need a credit card or a loan before you can get the FICO score you need to get a credit card or a loan. It can feel like a Catch-22 situation, but it’s not as complicated as it might initially appear.

If you have no credit or bad credit, you may be offered a super high interest rate loan or credit card and that can help you to build a respectable score. However, it’s a risky way to do it and there are many better options out there if your only goal is to build credit.

For loans, you can use something known as a credit builder loan. Much like a reverse loan, a credit builder loan requires you to complete many of the same steps as a traditional loan, only the lender keeps the lump sum amount and moves it to a secured account. 

That loan payment earns you a small rate of interest and this helps to offset some of the interest you pay the lender. Every month, you make a payment on the loan, paying some of the principal in addition to the monthly interest, and the lender will report your payments to the three major credit bureaus (TransUnion, Experian, Equifax).

Every month, your score will improve slightly as your payment history receives a boost and then, at the end of the term, they’ll release the lump sum to you, and you’ll get most of your money back (minus the interest) in addition to the credit score boost.

Paying Off Debt

A personal loan is a great way to clear debt, but it’s not necessarily the best option. If you’re struggling to meet your monthly payment obligations, it’s not the right option at all, as your monthly payments will increase as your term decreases.

Instead, you can look into the following options:

  • Debt Payoff: Sometimes, simple debt payoff strategies like the Debt Avalanche and the Debt Snowball are enough to clear your debt and can do so in a way that won’t cost you dearly or damage your credit score.
  • Debt Settlement: One of the best and cheapest ways to clear credit card debts, debt settlement works by agreeing reduced settlement amounts with your creditors.
  • Debt Management: A form of debt consolidation performed by a specialist credit counselor. You will pay less every month and can receive greatly improved terms.

Launching a Business

Once you’ve cut costs, reduced expenses, and considered all possible ways to reduce your initial outlay for a business launch, then it might be time to consider crowdfunding. Sites like Kickstarter can help you to get the funds you need and if you have a good idea or product, along with perks, it can give you capital.

You can also sell shares in your business to friends and family, or simply ask them for a small loan.

Expanding a Business

One of the best loan options for expanding your business is something known as PayPal Working Capital, a program that we have touched upon and praised several times before. If you accept PayPal for your business and have processed many payments through your PayPal account, you’ll be offered a lump sum to help you grow.

The loan amount you’re offered will depend on how much money you receive every month. As for the repayment term, you need to pay 10% of the total every 90 days, and all payments are taken as a percentage of your income. If you opt for $20,000, you may pay a fee of $2,000, taking the total to $22,000, and be asked to pay $2,200 every 90 days for a 20% cut.

This means that for every $1,000 you earn, you’ll pay $200 back to your PayPal Working Capital loan, in addition to the usual PayPal fees. The application process is quick and easy, and you can have the money in your PayPal account in just a few minutes.

Paying for Education

While a personal loan can be a useful option when paying for your education or a family member’s education, student loans often provide better rates and loan terms. They can also cover most of the costs associated with college, although if you need extra money for living costs, then a personal loan can be considered.

Paying for Vacations or Other Expenses

If you are a homeowner and have built substantial equity in your home, then a home equity loan or home equity line of credit may provide you with better loan terms and a much higher loan amount. 

A home equity loan or line of credit is a secured loan, as it uses your home as collateral. If you fail to make the payments every month and eventually default on your loan, the lender can simply take your asset and use it to recover the costs of the loan. 

As a result, the annual percentage rate is often much lower. You will still need good credit and a respectable debt-to-income ratio to apply, but the best home equity loan is typically much more favorable and cheaper than the best personal loan.

Source: pocketyourdollars.com

The Dos and Don’ts of Borrowing Money

The Dos and Don’ts of Borrowing Money – SmartAsset

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Taking on debt is a thorny subject. Signing on an affordable mortgage is one thing. Racking up credit card debt on unnecessary purchases? Quite another. Any time you borrow money, you put your finances at risk. That’s why it’s important to do your research before committing to new debt. If you’re not sure whether to borrow money, read our list of dos and don’ts. And if you need hands-on help managing your financial life, consider linking up with a financial advisor.

Do: Comparison shop when deciding where to borrow

Thinking of borrowing money? Don’t just go for the first credit source you can find. Look around for a loan that meets your requirements and leaves you with monthly payments you can actually afford. If you’re not happy with what lenders are offering you, it may be best to take the time to build up your credit score and then try again.

Don’t: Just look at the interest rate

Comparing loans is about more than searching for the lowest interest rate you can get. Look out for red flags like prepayment penalties. Stay away from personal loans that come with pricey insurance add-ons like credit life insurance. These insurance policies, particularly if you decide to finance them by rolling them into your loan, will raise the effective interest rate on the money you borrow. Approach payday loans and installment loans with extreme caution.

Do: Go for “good debt”

Good debt is debt you can afford that you use on something that will appreciate. That could be a home in a desirable neighborhood or an education from a reputable institution that will help your future earning power. Of course, you can’t be 100% sure that your home will appreciate or your advanced degree will pay off but you can take leaps based on thorough research.

Don’t: Go overboard with consumer debt

Consumer debt is generally considered bad debt. Why? Because it’s debt taken out for something that won’t appreciate. You’ll spend the money and get fleeting enjoyment but you’ll be making interest payments for months or years. In other words, it’s generally better to save up for that new tablet or vacation than to finance it with consumer debt.

Do: Keep a budget

Real talk: Anyone who has debt should be on a budget. Budgets are great for everyone, but those who owe money to lenders are prime candidates for a workable budget. Start by keeping track of your income and your spending for one month. At the end of that month, sit down and go over what you’ve recorded. Where can you cut back? You can’t be sure you’ll be able to make on-time payments unless you’re keeping track of your spending – and keeping it in check.

Don’t: Be late

Speaking of making on-time payments: Making a late payment on a bill you can afford to pay is not just careless. It’s also  costly mistake. Late payments lower your credit score and increase the interest you owe. They can also lead your lender to impose late-payment penalties and increase your interest rate, making your borrowing more expensive for as long as it takes you to pay off your debt.

Do: Seek help

If you’re having trouble keeping up with your debt payments or you’re not sure how to tackle a handful of different debts, seek help from a non-profit credit counseling organization. A credit counselor will sit down with you and review your credit score and credit report. He or she will help you correct any errors on your credit report. Then, you’ll work together to set up a debt repayment plan. That may mean you make payments to your credit counselor, which then pays your lenders on your behalf.

Don’t: Throw good money after bad 

Why a non-profit credit counselor? Well, there are plenty of people and companies out there that want you to throw good money after bad. They may offer counseling or they may try to sell you on bad credit loans. At best, they’ll charge you an arm and a leg for advice about debt repayment that you could be getting for free. At worst, they could lead you further into debt.

Do: Automate

If you have debts to pay off then automation can be your friend. Setting up automatic transfers for your bills and your loan payments will remove the temptation to overspend, to make only the minimum payment or to skip a payment altogether. If you can afford it, set up automatic savings while you’re at it. The sooner you start saving for retirement the better. Just because you’re still paying off your student loans doesn’t mean you should defer your retirement savings until middle age.

Bottom Line

Most of us will borrow money at some point in our adulthood. These days, it’s easier than ever to borrow money online and take on debt quickly. The choices we make about when, how and how much to borrow? Those can make or break our finances. Before you take on debt, it’s important to ask yourself whether that debt is necessary and how you will pay it back. Happy borrowing!

If you want more help with this decision and others relating to your financial health, you might want to consider hiring a financial advisor. Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with top financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.

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Amelia Josephson Amelia Josephson is a writer passionate about covering financial literacy topics. Her areas of expertise include retirement and home buying. Amelia’s work has appeared across the web, including on AOL, CBS News and The Simple Dollar. She holds degrees from Columbia and Oxford. Originally from Alaska, Amelia now calls Brooklyn home.
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Guide to Bar Loans: Pros, Cons, and More

  • Personal Loans

It can take several months to prepare for the bar exam, and they are some of the most important months in an aspiring lawyer’s life. In that time, many students take preparation courses or devote all their time to studying and preparing, increasing their chances of passing the exam and taking that important step.

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Bar loans are a type of financial aid offered to students going through this difficult time. A bar loan can provide them with essential living costs, while covering the cost of academic materials and preparation fees. That way, they can focus on what’s important, and don’t have to worry about getting a part-time job and spending time away from their studies.

What is a Bar Loan?

Also known as a bar study loan, a bar loan is a type of private loan offered by private lenders. Unlike federal student loans, they are not backed by the Department of Education and, as a result, are subject to the same standards and criteria as personal loans.

You have two main options for taking out a bar loan. The first is to simply borrow more money than you need during your last year of school, covering you for all costs during that final year and running over into the bar loan afterward. 

Alternatively, you can submit a separate application and acquire your loan via one of the bar loan lenders we have listed below. To determine how much you need, simply calculate your living expenses and other costs and contact a lender.

Pros of a Bar Study Loan

  • Provide you with the freedom to study without worrying about how you’ll afford everything.
  • You can apply even after you have graduated.
  • You can borrow more money than you need, which isn’t always possible with student loans.
  • Move you one step closer to achieving your goal

Cons of a Bar Study Loan

  • Charge higher interest rates than most other student loans
  • You’re not covered or protected like you are with student loans
  • Need good credit to apply

The Best Bar Loans

You can get bar study loans from many major banks, credit unions, and lenders. We have shortlisted a few of our favorites below to help you:

Discover Student Loans

Discover is best known for its credit cards, including the Discover It, which we have highlighted many times on this website. But it also offers a host of additional banking services, including private loans and bar loans.

You can get a loan of between $1,000 and $16,000 for up to 20 years, with both fixed-rates and variable rates available, typically between 7% and 13%. There are no fees for applying, missing payments or pre-paying.

To apply, you must either be in your final year or have graduated within the last 6 months.

Sallie Mae

A trusted lender that has been in the student loan business for decades, Sallie Mae offers up to $15,000 for 15 years, with interest rates as low as 4.5% and as high as 11.56%. You can apply up to 12 months after graduation and there are no loan fees. What’s more, you won’t be asked to make any loan payments while you’re still in school.

Wells Fargo

Wells Fargo options are a little more restrictive, as you can only borrow a maximum of $12,000 over a maximum of 7 years. What’s more, you need to be enrolled in an eligible school or have graduated within 30 days, so if you graduated more than a month ago then you’ll need to look at one of the two listed above.

Do You Need A Bar Loan?

You need money to get through this period as you likely won’t have time to work and study, and if you try and force it your studies may suffer. If you’re still living at home, as many students are, your parents may cover most of your living costs. Assuming they can also cover your additional expenses, you won’t need a bar loan.

However, if they can’t afford to pay your fees or rent, you’ll need to consider one of the following options:

Side Hustle

While a traditional part-time job can be overly taxing during this busy period, you may have some time to freelance. It is easier than ever to earn a little extra cash by writing, designing, coding, and even doing some simple consulting work.

You’re a lawyer, not a writer, but if you’ve made it this far it means you’ve completed countless essays and assignments and have a good grasp of the English language. You likely can’t compete with professional writers getting the big bucks, but you can certainly compete with those at the bottom end of the scale and earn upwards of $20 an hour for your time.

If the idea of writing doesn’t appeal to you, think about consulting work. Many smaller companies and individuals can’t afford to spend hundreds of dollars an hour on legal fees, not when they just need a little legal advice concerning their property or business. Instead, they turn to students who have the knowledge but don’t demand the same high fee.

Ask Your Employer

If you have a job lined up after graduation, your employer may cover some or all of your fees. However, you will need to make a commitment, agreeing to work with them for at least a few years after you have graduated.

Personal Loan

A bar loan is a specialized personal loan and may charge higher fees then you can get with a traditional personal loan. If you have a good credit score, you should consider applying for a traditional loan, comparing this to the bar study loan to see which one offers the best fees.

Bottom Line: A Life-Changing Loan

A bar loan can hurt your credit score and give you even more debt to worry about, but at the same time, it means you won’t have to worry about money while you study and focus on your future.

Ultimately, that’s the main goal here, because as damaging as that extra debt could be in the short term, if you eventually get the job of your dreams then you’ll have more than enough money to clear the balance and focus on your future.

Source: pocketyourdollars.com

What Is A Consumer Loan?

A consumer loan is a loan or line of credit that you receive from a lender.

Consumer loans can be auto loans, home mortgages, student loans, credit cards, equity loans, refinance loans, and personal loans.

This article will address each type of consumer loans.

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Types of consumer loans:

Consumer loans are divided into several kinds of categories. They include auto loans, student loans, home loans, personal loans and credit cards. Regardless of type, consumer loans have one thing in common: you have to repay the loan at some period of time. 

Auto loans

Most people who are thinking of buying a car will apply for an auto loan. That is because buying a car is expensive.

In fact, it is the second largest expense you will ever make besides buying a house. And unless you intend to buy it with all cash, you will need a car loan.

So, car loans allow consumers to purchase a vehicle where they may not have the money upfront. With an auto loan, your payment is broken into smaller repayments that you will make over time every month.

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You can choose between a fixed or variable interest rate loan. But the most important thing is, whether you’re buying a new or used car, it’s important to compare loans to help you find the right auto loan for your needs.

Start comparing auto loans now!

Home loans

Another, and most common, type of consumer loans are home loans. A home loan or mortgage is a loan a consumer receives for the purpose of buying a house.

Buying a house is, undoubtedly, the biggest expense you’ll ever make in your life. So, for the majority of consumers who want to purchase a house, they will need to borrow the money from a lender.

Home loans are paid back over a period of time. Those mortgages term are typically 15 to 30 years. They can be variable rate or fixed rate. A fixed rate means that your repayments are locked in for a fixed term.

Whereas a variable rate means that your repayments depend on the interest rate going up or down when the Federal Reserve changes the rate.

Over the loan’s term, you will pay back the principle amount of the loan plus interest. This makes it very important to compare home loans. Doing so allows you to save thousands of dollars on interest and fees.

Personal Loans

The most common types of consumer loans are personal loans. That is because a personal loan can be used for a lot of things.

A personal loan allows a consumer to borrow a sum of money. The borrower agrees to repay the loan (plus interest) in installments over a period of time.

A personal loan is usually for a lower amount than a home loan or even an auto loan. People usually ask for $500 to $20,000 or more.

A personal loan can be secured (the consumer backs it with his or her personal assets) or unsecured (the consumer does not have to use his or her personal asset).

But most of them are unsecured, so getting approved for one will depend on your credit score, income and other factors.

But consumers use personal loans for different purposes. People take out personal loans to consolidate debts, such as credit card debts. You can use personal loans for a wedding, a holiday, to renovate your home, to buy a flt screen TV, etc…

Student Loans

Consumers use these types of loans to finance their education. There are two types of student loans: federal and private. The federal government funds a federal student loan.

Whereas, a private entity funds a private student loan. Generally, federal student loans are better because they come at a lower interest rate.

Credit Cards

Believe it or not credit cards is a type of consumer loans and they are very common. Consumers use this type of loan to finance every day expenses with the promise of paying back the money with interest.

Unlike other loans, however, every time your pay with your credit card, you take a personal loan.

Credit cards usually carry a higher interest rate than the other loans. But you can avoid these interests if you pay your balance in full immediately.

Small Business Loans

Another type of consumer loans are small business loans. These loans are used specifically to create a business or to expand an already established business.

Banks and the Small Business Administration (SBA) usually provide these loans. Small Business Loans are different than personal loans, because you usually have to provide a collateral to get the loan.

The collateral serves as a way to protect the lender in case you default on the loan. In addition, you will also need to provide a business plan for the lenders to review.

Home Equity Loans

If you have your own home, you can borrow money against it. These types of consumer loans are called home equity loans. If you’ve paid off the mortgage on the home, you can borrow up to the full value of the home.

Vice versa, if you’ve paid half of the mortgage on the home, you can borrow half of the value of the house. You can use a home equity loan for several purposes like you would with a personal loan.

But most consumers use this type of loan to renovate their house.  One disadvantage of this type of loan, however, is that you can lose your house in case of a default, because your house is used as a collateral for the loan.

Refinance loan

Loan refinancing is a basically taking a new loan to replace an existing one. But you get this loan specifically either to refinance your existing mortgage or to refinance your student loans or a personal loan.

Consumers usually refinance in order to receive a lower interest rate or to reduce the amount of monthly payments they are making on their existing loans.

However, reducing to a lower payment will lengthen the time to pay off the loan and you will accrue interest as a result.

Consumers also use this type of loan to pay their existing loans off faster. However, some mortgage refinancing loans come with prepayment penalties. So do you research in order to avoid that extra charge.

The bottom line is consumer loans can help you with your goals. However, understanding different loan types is important so that you can choose the best one that fits your particular situation.

So do you need a consumer loan?

Get Approved for personal loan today.

Speak with the Right Financial Advisor

If you have questions about your finances, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.

Source: growthrapidly.com

The Millennial Guide to Getting a Personal Loan

The Millennial Guide to Getting a Personal Loan – SmartAsset

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Personal loans have made something of a comeback over the last few years thanks to the rise of online lending. According to TransUnion, the number of consumers who are using personal loans jumped by 18% between Q3 2013 and Q3 2015. Millennials, in particular, are increasingly relying on them to consolidate debt or finance big purchases. Here’s a rundown of what 20-somethings need to know about applying for a personal loan.

Online Lenders and Traditional Banks Aren’t the Same

In the past, if you needed to borrow money you had to head to a brick-and-mortar bank to do it. The online personal loan industry has changed all that and millennials have more choices when they need loans. There are, however, some differences to keep in mind.

Because online banks tend to have fewer overhead costs, they can often afford to offer the most credit-worthy borrowers lower interest rates than traditional banks. They may also charge fewer fees. With a regular bank, however, you’ve got the advantage of dealing with a loan officer face-to-face, which may come in handy if you have a question or a problem later on.

Many online lenders also take a different approach when it comes to underwriting. Upstart and SoFi, for example, cater to millennial borrowers and both consider not just your credit score and your income but your long-term financial outlook when making lending decisions. With a traditional bank, your personal merits are less likely to factor into whether or not you’re able to get approved.

Check Your Credit Before You Apply

Even though online lenders may be a bit more flexible, they’re still going to take a look at your credit score when you apply. Considering that some online lenders charge interest rates as high as 36%, you need to know what kind of deal you can expect to get.

Take a look at your credit report from each of the three credit reporting bureaus – Equifax, Experian and TransUnion – to make sure your accounts are being reported properly. If you see an error, it’s best to dispute it as soon as possible. Otherwise, it could pull your score down and you could end up with a higher interest rate on a personal loan.

If you’re still in your 20s and you don’t have a substantial credit history yet, you might face an uphill climb to getting a loan. Paying your student loans and other bills on time each month and applying for a secured credit card with a low limit are two effective ways to establish credit. Payment history accounts for 35% of your FICO score so it’s a good idea to focus on that area if you’re aiming to get a personal loan with the best rates.

Crunch the Numbers on the Payoff

Personal loans aren’t open-ended, which means you have a fixed amount of time to pay them back. Depending on the lender, the loan term may last anywhere from one to five years.

If you’re in your 20s and you’re not making a lot or you’re balancing student loan payments, you need to be sure that you can afford the monthly personal loan payments. Missing a payment could do serious damage to your credit. Doing the math is also important where the interest is concerned.

For example, let’s say you want to borrow $5,000 to consolidate credit card debt. Bank A offers you a 3-year loan with a 12% simple interest rate while Bank B is offering you a 5-year term at a 10% simple interest rate. On the surface, the lower rate seems like the better deal but if you go with Bank B, you’ll end up paying at least $700 more in interest.

If you’re on the lookout for a loan, using our personal loan calculator can help you figure out the true cost of borrowing.

Photo credit: ©iStock.com/Lorraine Boogich, ©iStock.com/filo, ©iStock.com/GlobalStock

Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.
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How to Get Debt Consolidation Loans When You Have Bad Credit

  • Personal Loans

Debt consolidation is one of the most effective ways to effectively manage debt. It can greatly improve your debt-to-income ratio and help you get back on your feet. You will have more money in your pocket and less debt to worry about, and while your options are a little more limited if you have bad credit, you can still get a consolidation loan.

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In this guide, we’ll look at the ways that a debt consolidation loan will impact your credit score, while also showing you the best ways to consolidate credit card payments and find a credit card consolidation plan that suits your needs.

What is a Debt Consolidation Loan and How Does it Work?

A debt consolidation loan can help you to manage credit card debt and other unsecured debts by consolidating them into one, manageable monthly payment. You get a large loan and use this to clear all your current debts, swapping several high-interest debts for one low-interest loan.

You’ll consolidate multiple payments into a single monthly payment, and, in most cases, this will be much less than what you’re paying right now.

The problem is, creditors aren’t in the business of helping you during your time of need. They’re there to make money, and in exchange for your reduced monthly payment, you’ll get a loan that extends your debt by several years. So, while you may pay a few hundred dollars less per month, you could pay several thousand dollars more over the lifetime of the loan.

Why Consider Debt Consolidation for Bad Credit?

You can use a debt consolidation loan to consolidate credit card debt, clear your obligations, reduce the risk of penalties and fees, and ultimately improve your credit score. What’s more, you may still be accepted for a debt consolidation loan even if you have a poor credit score and a credit report with several derogatory marks.

It’s an option that was tailormade for borrowers with lots of unsecured debt, and it stands to reason that anyone with a lot of debt will have a reduced credit score. Of course, it still helps if you have a high credit score as that will increase your chances of getting a low-interest debt consolidation loan, but even with bad credit, you can get a loan that will reduce your monthly payment.

How Does Debt Consolidation Affect Your Credit Score?

A debt consolidation loan can impact your credit score in a number of ways, all of which will depend on what option you choose:

  • A balance transfer can reduce your score temporarily due to the maxed-out credit card and a new account.
  • If you use a consolidation loan to clear credit card balances, you will diversify your credit report, which can benefit up to 10% of your credit score.
  • If you continue to use your credit cards after clearing them, your credit utilization will drop, and your credit score will suffer.
  • A new consolidation loan account will reduce your credit score because it’s a new account and because the average age of your accounts has decreased.
  • Debt management will reduce your credit utilization score by requiring you to cancel credit cards. This accounts for 30% of your total credit score. 

The good news is that all of these are minor, and the short-term reductions should offset in the long-term. After all, you’re clearing multiple debts, and that can only be a good thing. 

A debt consolidation loan will not impact your score in the same way as debt settlement or bankruptcy.

Alternatives to a Debt Consolidation Loan 

A debt consolidation loan isn’t your only option for escaping debt. There are numerous options for bad credit and good credit, all of which work in a similar way to a debt consolidation loan.

These may be preferable to working with a consolidation loan company, especially if you have a lot of unpaid credit card balances or you’re suffering from financial hardship.

How Does a Debt Management Program Work?

Debt management is provided by credit unions and credit counseling agencies and offered to individuals suffering financial hardship and struggling to repay their debts. A debt management plan typically lasts three to five years and works with unsecured debt only, which includes medical debt, private student loans, and credit cards, but not mortgages or car loans.

A debt management plan ties you to a credit counseling agency, which acts as the middleman between you and your creditors. The agency will help to find a monthly payment you can afford and then negotiate with your creditors. You make your monthly payment through the debt management program and they distribute this to your creditors.

Debt management specialists are experts in negotiation and know how to get creditors to bend to their ways. They understand that lenders just want their money and are keen to avoid defaults and collections, so they remind them that failing to negotiate may increase the risk of such outcomes.

Debt management programs are not free. You will be charged a small up-front fee in addition to a monthly fee. However, the amount of time and money they save you is often worth the small charge.

The only real downsides to a debt management plan is that you’ll be required to cancel most of your credit cards, which will impact your credit score, and if you miss a single payment then creditors will revert to previous terms and your progression will be lost.

A Balance Transfer

You don’t need a debt consolidation loan to consolidate your debt. You can also use something known as a balance transfer credit card. 

A balance transfer allows you to consolidate credit card debt onto a single card. These cards offer you 0% interest for up to 18 months and allow you to transfer multiple credit card balances.

As an example, let’s assume that you have the following credit card balances:

  • Card 1 = $5,000
  • Card 2 = $2,000
  • Card 3 = $3,000
  • Card 4 = $5,000

That gives you a total credit card balance of $15,000. If we assume an APR of 20% and a minimum payment of $500, you will repay over $20,000 in 42 months, with close to $6,000 covering interest alone.

If you use a balance transfer credit card, you will be charged an initial balance transfer rate of between 3% and 5%, after which you will not be required to pay any interest for up to 18 months. Continue making those same monthly payments, and you’ll repay $9,000 before that introductory period ends, which means your debt will be reduced to just $6,000 and can be cleared in 14 months with less than $800 in total interest.

This is a fantastic option if you have a strong credit score, otherwise, you may struggle to find a credit limit high enough to cover your debts. However, it’s worth noting that:

  • Your credit score may take an initial hit due to the new account and maxed-out credit card.
  • The interest rate may be higher, so it’s important to clear as much of the balance as you can before the introductory period ends.
  • You may be charged high penalty fees for late payments.
  • You can’t move credit card debt from cards owned by the same provider.

What About Debt Settlement?

Debt settlement works in a similar way to debt management, in that other companies work on your behalf to negotiate with your creditors. However, this is pretty much where the similarities end.

A debt settlement specialist will request several things from you:

  • You pay a fee (charged upon settlement).
  • You move money to a secure third-party account.
  • You stop meeting your monthly payments.

They ask you to stop making payments for two reasons. Firstly, it will ensure you have more money to move to the third-party account, which is what they use to negotiate with creditors. They will offer those creditors a lump sum payment in exchange for discharging the debt, potentially saving as much as 90%, on top of which they will charge their fee. 

Secondly, the more payments you miss, the more unlikely it is that your account will be settled in full, at which point the lender will be more inclined to accept a sizable settlement.

Debt settlement is not without its issues. It can reduce your credit score, increase the risk of litigation and take several years to complete. However, it’s the cheapest way to clear your debts without resorting to bankruptcy.

You can do debt settlement yourself by contacting your creditors and negotiating reduced sums, but you will need to have a large sum of cash prepared to pay these settlements and you’ll also need a lot of patience and persistence. There are also companies like National Debt Relief that can help, as well a huge number of lesser-known but equally reputable options. 

Who is Eligible for a Personal Loan for Debt Consolidation?

In theory, you can use a personal loan as a debt consolidation loan. In other words, instead of working with a debt consolidation company and allowing them to set the rates and find suitable terms, you just apply for a personal loan, use it to pay off your debts, and then focus your attention on repaying that loan.

This can work very well if you’re using it to repay credit card debt. The average credit card APR in the US is 16% to 20%, while the average personal loan rate is closer to 6%. A personal loan acquired for this purpose will give you more control over the total interest and repayment term. 

However, while you may pay less over the term, it’s unlikely that you’ll reduce your monthly payments. A debt consolidation loan is designed to provide an extended-term so that the monthly payment will be reduced, and unless you choose a loan with a long term, you won’t get the same benefits.

The biggest issue, however, is that you need a very good credit score to get a loan that is big enough to cover your debts and has interest that is low enough to make it a viable option. This is easier said than done, and if you’re drowning in debt there’s a good chance your credit score will not be high enough to make this feasible. 

Is it Time for Bankruptcy?

If you have mounting credit card debt, personal loan debt, and private student loans, and you’re struggling to make the repayments or clear more than the minimum amount, you may want to consider bankruptcy.

It should always be seen as the last resort, as it can have a seriously negative impact on your credit score and make it difficult to get a home loan, car loan, or low-interest credit card for many years. However, if you’re not confident that debt settlement will work for you and believe you’re too far gone for debt management and consolidation, speak with a credit counselor and discuss whether bankruptcy is the right option.

You can learn more about this process in our guides to Filing for Bankruptcy and Rebuilding your Credit After Bankruptcy.

Debt Consolidation for Bad Credit Homeowners

If you own your home, you have a few more options for debt consolidation. When you use your home as collateral against a loan it’s known as a secured debt. It means the lender can repossess your home if you fail to meet the repayments. This also eliminates some of the risks associated with lending, which means they offer more favorable interest rates and terms.

Home Equity Loan and HELOC

An equity loan is a large personal loan secured against the value tied-up in your home. You can acquire an equity loan when you own a large share of your property, in which case you’re using that share as collateral.

Interest rates are very favorable, and you can receive a consolidation loan that clears all your debts and leaves only a small monthly payment and easily manageable debt in their place.

A home equity line of credit (HELOC), works in much the same way, only this time you’re given a line of credit similar to what you’d get with a credit card. You can use this credit to repay your debts, after which you just need to focus on repaying the HELOC.

An equity loan and a HELOC provide the lowest possible interest rates of any debt consolidation loan. However, failure to meet your monthly payments will damage your credit score and place your home at risk.

Cash-Out Refinancing for Consolidation

Cash-Out refinancing replaces your current mortgage with a new, larger mortgage. The difference between these two home loans is then released to you as a cash sum, allowing you to clear your debts in one fell swoop. 

Cash-Out refinancing is often used to fund a child’s college education or a new business, but it’s becoming increasingly common as a form of debt consolidation, helping American homeowners to clear credit card debt and other unsecured debts.

Reverse Mortgages

Reverse mortgages work in a similar way to home equity loans, but with a few key differences. Firstly, they are only offered to homeowners aged 62 or older. Secondly, there is no monthly payment and no other recurring obligations.

A reverse mortgage is only repaid when you sell the home or die. There are also some obligations with regards to maintaining the home and living in it full time, but you don’t need to pay any fees and can use the money gained from this mortgage to clear your debts.

Summary: Consider Your Options

A debt consolidation loan is a great option if you’re struggling with debt. You can try a debt management plan if you have bad credit, a balance transfer if you have great credit, and debt consolidation companies if you’re somewhere in the middle.

But as discussed already, these are not the only options. The debt relief industry is vast and caters for every type and size of debt. Do your research, take your time, and make sure you understand the pros and cons of each option before you decide.

Source: pocketyourdollars.com

Should You Help a Family Member in Debt?

Should You Help a Family Member in Debt? – SmartAsset

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Watching loved ones struggle with their personal finances is never fun, especially when you’re doing relatively well yourself. But before you rush to the aid of your mother, your brother or your favorite cousin, it’s a good idea to consider how that might impact your own financial situation. Check out some of the pros and cons of loaning money to a family member in debt.

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The Pros

Being able to support a family member who’s facing a financial difficulty can make you feel good about yourself. You’ll have the opportunity to work together to implement good financial strategies and in the process, you might learn something that can help you manage your own money more effectively. And since you can never be completely sure about your own financial future, helping your relative get back on track might provide you with a safety net that you can rely on if you need help from that same relative later down the line.

It’s important to take the time to sit down with your relative and discuss what has worked well for you financially in the past. You can help him or her create a tighter budget (with loan repayments to you built in) and connect him or her with a professional financial advisor or credit counselor if need be. The more comfortable your family member is with talking about money, the better the experience is likely to be.

The Cons

When it comes down to it, helping family members out of debt is a big deal financially speaking. Before you make that move, it’s best to think about how it could affect your relationship. You run the risk of turning your personal relationship into a business transaction, and you might feel like money is all you talk about. Eventually, it might create tension or lead a serious disagreement.

You could also make yourself financially vulnerable by lending a family member a portion of your wealth. If you choose to let someone borrow your money, keep in mind that you don’t want to lend any amount that could get you into trouble.

Related Article: 5 Tips for Lending Money to Friends or Family

Important Questions to Ask Yourself

As you weigh the advantages and disadvantages of lending money to a relative, there are several things you’ll need to clear up. Will this be a temporary situation or an ongoing arrangement? A gift or a loan? Can they afford to pay you back at some point? What will you do if they can’t?

You’ll also have to consider whether providing someone with a loan is a good use of your money. Instead of relying on you, could your family member turn to debt management, debt settlement or bankruptcy? Are there other ways you can help?

Related Article: 4 Signs It’s Time to File Bankruptcy

Final Word

Deciding how to assist a family member in need isn’t easy. As an alternative to becoming your relative’s sole source of financial support, (or turning down his or her request) you can always offer to fund part of the debt repayments. Managing your expectations and finding a happy medium that won’t jeopardize your chances of achieving financial success are key.

Photo credit: ©iStock.com/Ocskaymark, ©iStock.com/Christopher Futcher, ©iStock.com/SoumenNath

Liz Smith Liz Smith is a graduate of New York University and has been passionate about helping people make better financial decisions since her college days. Liz has been writing for SmartAsset for more than four years. Her areas of expertise include retirement, credit cards and savings. She also focuses on all money issues for millennials. Liz’s articles have been featured across the web, including on AOL Finance, Business Insider and WNBC. The biggest personal finance mistake she sees people making: not contributing to retirement early in their careers.
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