In the past year, we have seen banks cut back credit lines, raise interest rates, and limit new loans to only people with immaculate—and I mean immaculate–credit histories. That means it’s become difficult, if not impossible, for well-meaning borrowers to consolidate debt or transfer their debt to a lower interest rate through a traditional bank.

Fortunately, however, there’s another way: A peer-to-peer loan through either Lending Club or Prosper.

Lending Club and Prosper are social lending networks that bring together investors and creditworthy borrowers to provide personal loans at rates that are generally better than those offered by traditional banks. Here’s how they work:

• Borrowers apply for a loan with an online profile
• Lenders (people like you and me, not bankers) choose whether or not to lend you money.
• If enough lenders invest $25 or $50 each, your loan is funded
• You make monthly payments to the network, who distributes your payment to lenders

Who Can Get a Peer-to-Peer Personal Loan?

To receive a Lending Club or Prosper personal loan, you must be a US citizen or permanent resent, at least 18, and have a valid bank account and social security number. For the time being, residents of a few states are excluded (check on their site to see the status of your state).

Lending Club also specifies some minimum credit requirements. In order to qualify for listing a loan request with Lending Club, you will need:

• A FICO score of at least 660
• A debt-to-income ratio (excluding mortgage) below 25%
• At least three years of credit history
• No current delinquencies or recent bankruptcies (seven years)
• No open tax liens, charge-offs, or non-medical collections account in the past 12 months
• No more than 10 inquiries on your credit report in the last six months
• A revolving credit utilization of less than 100%
• At least three accounts on your credit report, of which more than two are currently open

Prosper does not specify minimum credit requirements to list a borrower application, although you can expect them to be similar to have a good chance of getting your loan funded.

How To Apply for A Peer-to-Peer Personal Loan

Think you’ve got what it takes to score a lower rate and consolidate your debts with a Lending Club or Prosper personal loan?

You’ll create an account (email address and password), select an amount and purpose of your loan, and enter your contact information and credit and employment specifics. The network will check your credit, ask for any additional information, and list your loan. If your loan is funded, you’ll have the cash deposited in your bank account within a few days of your listing ending.

• Lending Club: Learn more about Lending Club or apply for a loan
• Prosper: Learn more about Prosper or apply for a loan

Posted on Sep 24th, 2009 by David Weliver in Debt Help
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It’s a hot-button question: If you’re in debt, do you get rid of all of your credit cards and stick to debit cards and cash only? Or can you discipline yourself to still use credit cards for routine purchases and pay the balance off in full every month, even if you’re digging out of existing debt? I’ve chosen to continue using a credit card for monthly purchases, with a keen eye on making sure I can pay it off each month. Others argue that total credit elimination is the only sure-fire way to rid yourself of debt. But that leaves you with debit cards. Although convenient, debit cards are not perfect.

In fact, debit cards have created so much controversy recently, on Tuesday two of the nation’s largest banks—JPMorgan Chase and Bank of America—announced plans to eliminate and lower fees and provide new ways for customers to opt-out of overdraft protection. The banks’ plans will make it harder for debit card users to overdraw their checking accounts when making debit card purchases and reduce fees for those overdrafts that are currently between $25 and $40 a pop. Still, there are a number of debit card dangers you need to watch out for. Read more…

Posted on Sep 24th, 2009 by David Weliver in Consumer Protection
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For today’s information workers, offices don’t make sense. Why commute in rush-hour traffic to sit in a cube and write, research, and make phone calls: all things you could do anywhere? For many workers, ending—or at least reducing—daily treks to the office may be as simple as asking their employer. Especially in challenging economic times when employers can’t always offer raises, companies may actually see telecommuting as an affordable way to keep employees happy. If you have ever considered telecommuting but don’t know how to approach your manager about working from home, here’s a look at things to consider before requesting a telecommuting arrangement and a way to propose working remotely to your manager in the best possible way. Read more…

Posted on Sep 23rd, 2009 by David Weliver in Career
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I’ve been on a simplicity kick for a while. To give you an example: My wallet now consists of my ID and three other cards wrapped up in a rubber band. My key chain holds my house key and my car key—that’s it. I’m just tired of wasting time with extraneous “stuff”. The way I see it, the 80/20 rule can applies to everything. We use 20 percent of our things 80 percent of the time; 80 percent of our stuff 20 percent of the time. Why not whittle down to the 20 percent and learn to live without the rest? The same holds true with how much time I spend on my finances. Here are a few easy ways I simplify my finances. Give them a try and let me know how they work!

1. Use a Checkbook Register. Remember those little booklets that come with boxes of checks? I still use one! I use a checkbook register to track every debit card purchase, every deposit, every check. Since I started doing this, I’ve never had to worry about overdrafts—I’ve always known exactly how much was in my checking account. I don’t actually carry around the check register everywhere I go, but I leave it at home or in my suitcase if I’m traveling and I update it with my receipts once a day.

2. Make Your Budget with a Spreadsheet. I used to budget on pen and paper too, but I found it was a lot easier to let a spreadsheet like Microsoft Excel do the math for me. That’s why I created my original budget spreadsheet. Recently, I created a really simple budget worksheet that simplifies the monthly budget even further by grouping categories of expenses. Don’t get me wrong, I love—and use—fancy budgeting tools like Quicken and Mint.com from time to time, but I find they can’t replace the simplicity of a good spreadsheet. Read more…

Posted on Sep 22nd, 2009 by David Weliver in Frugal Living, Personal Finance
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The $8,000 first-time home buyer tax credit program has been such a success, Washington is asking: Can we live without it? That credit is set to expire on December 1, 2009, but Sen. Johnny Isakson, (R-Ga.), has introduced legislation that would provide a $15,000 home buyer tax credit to any home buyer (not just first timers) who occupy the home they purchase for at least two years. Are you a prospective first-time home buyer? Here’s your gamble: Act quickly to take advantage of the $8,000 tax credit before it expires, or wait to see if the $15,000 home buyer tax credit becomes law.

Isakson’s proposed legislation would make available up to a $15,000 tax credit for any home buyer of any home over the next year. It would also remove the income limits that currently apply to the first-time home buyer tax credit. In a press release on the Senator’s Website, he says:

“If we do this, home values will return, unemployment will go down, our economy will turn, and consumer price confidence will go up. I would submit it is a part of the main solution we need to take an economy that is on the bottom and move it back toward equilibrium and prosperity for America.”

Another bill recently introduced would extend the $8,000 first-time home buyer tax credit for another six months. If this bill passes, first-time home buyers would have more time to claim the existing credit, although the rules would remain the same. (The tax credit would only apply to first-time home buyers and income caps would remain in place).

I predict that the first-time home buyer tax credit will be extended but Congress debates expanding the program to a $15,000 home buyer tax credit for a long time. If the expansion passes, I would bet it will include limitations (or even be for less than $15,000). What do you think? Is expanding the credit a good idea, or has the first-time home buyer tax credit run its course?

PS: If you’re looking for answers on the existing tax credit, visit my FAQ on the first-time home buyer tax credit or brief guide on how to buy your first home.

Posted on Sep 21st, 2009 by David Weliver in Real Estate, Taxes
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Many people live paycheck-to-paycheck. Income goes into your checking account, and all of it’s gone before next payday. That’s scary.

Even scarier? Living credit card-to-credit card.

In other words, using credit cards that already have balances to make most of your monthly purchases. Then, when you get paid, you use most of your paycheck to “clear room” on your credit card balance so you can do the same thing next month. I was guilty of this tactic long, long ago, and have known others. I got out. One friend declared bankruptcy. Some are still trapped. Read more…

Posted on Sep 18th, 2009 by David Weliver in Debt Help
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My bank, Bangor Savings Bank, pulled a cool publicity stunt yesterday here in Portland, Maine. They paid the city $10,000 to make downtown parking meters free for the day. The bank covered meters with a blue hood that read “Free parking today from Bangor Savings Bank. Unconditionally free ATMs every day.”

The bank’s free ATM feature is what led me to become a customer in the first place. Bangor Savings Bank refunds any ATM fee, anywhere in the world, immediately. Take that, Stank of America!

“The bread and butter of community banking is having a person’s primary checking account,” Yellow Light Breen, a senior vice president for Bangor Savings told MaineToday.com. “It’s hard to get people to change banks. But when people are frustrated, maybe they’ll think of your bank to turn to.”

In addition to free ATMs wherever I roam, I like banking with a local bank because I know my money is staying local and that I can walk into any branch in the state and be treated like a person, not a number. I admit, I keep the bulk of my savings in high-yield savings accounts offered by bigger banks to take advantage of their high rates, but I’ll always keep my checking account local.

I just don’t see what advantages big national banks offer checking customers, other than a large ATM network—which Bangor Savings Bank’s ATM feature altogether negates.

Do you use a local bank that you love? Who are they, and why do you love them?

Posted on Sep 18th, 2009 by David Weliver in Saving
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If you haven’t noticed, the stock market is rallying. I’m an automatic investment, buy and hold kind of guy, so I don’t really care; but it does have me thinking about investing and saving for retirement at the moment. Fortunately, there happen to be some great posts in the blogosphere this week on, what else, retirement and investing! Read more…

Posted on Sep 18th, 2009 by David Weliver in Roundups and Carnivals
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Matt, 26, feels it’s time to stop renting and think about buying a home. He earns $48,000 a year at his IT job outside Washington, D.C, he has saved $20,000 he could use for a down payment (and more in his 401k), and he has no debt. And that’s the problem. Today, more and more twenty and thirtysomethings ready for home ownership are discovering their credit history isn’t adequate to qualify for a mortgage. Read more…

Posted on Sep 17th, 2009 by David Weliver in Credit
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Credit card issuer Chase rolled out a new feature today—called Blueprint—that will allow consumers to divide credit card charges they want to pay in-full or over time. Blueprint will enable Chase cardholders to pay everyday charges in-full each month interest-free, even while paying other purchases off over time. Read more…

Posted on Sep 16th, 2009 by David Weliver in Credit, Debt Help
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