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How To Bypass the Banks for a Loan


Having trouble borrowing money for a personal loan at a bank? I want to talk to you about another opportunity called peer-to-peer (P2P) lending.

P2P lending is a way to cut the banks out of the equation and allow people to go online to borrow and lend money directly to each other. Prosper.com is the granddaddy in the field, but LendingClub.com has been growing nicely in recent times too.

Karrot.com is among the newer services in the marketplace. It's a spinoff of online business lender Kabbage.

Try these options if you can't borrow from a bank

Here's how P2P lending works for a potential borrower: You agree to a credit check and to disclose your debt-to-income ratio. Based on that information, you're assigned what amounts to a credit risk score. Taking that score into account, you're assigned a letter grade and APR befitting the credit risk you pose to potential lenders on these kinds of sites.

If you don't put a high enough interest rate based on your profile, most lenders probably won't touch you. That's one way they limit their risk. But lenders also protect their interests in P2P lending by buying little tiny slices and dices of multiple loans, instead of pouring all their dough into one big loan. That way if any given borrower defaults, a lender only loses a fraction of his or her money, not the whole amount.

Be aware that you may have to pay an origination fee of 1%.

ARTICLE: Best Websites To Get Small Business Loans

An evolving business model

In the early days of P2P lending, companies like Prosper and LendingClub didn't set high enough standards about who could borrow and they didn't adequately communicate to investors (lenders) about the level of risk involved. So the business model kind of blew up in everybody's face. Now the standards have gotten more refined and more sophisticated with time.

So you can consider using a site like Prosper or LendingClub to borrow, or, and I love this, you can increase the return you're now getting on your money by becoming a lender. If you want to take the time to learn from others, there are lots of free forums that have info and advice that will walk you through ways to lower your risk as a lender. (Just do a search for "P2P lending forums" using your favorite search engine.)

This could be a nice way to boost the return on your money that's earning around 1% (if you're lucky) right now in CDs and simple savings!  

Is a Financial Planner Worth the Cost?

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Is a financial planner worth the cost? Is it a smart money move to dedicate some of that hard-earned cash to someone else to have them move it around in the market?

All too often, people are quick to answer that financial planners and advisors aren’t worth the cost. They think financial planners are too expensive, salesy, or disingenuous. And when it comes to Gen Y, negative connotations and suspicious rise.

But these assumptions are based on some stereotypes that are quickly becoming outdated.

If, when you heard the term “financial advisor” or “planner,” you envision a older man in a fancy office who profits off the financial products you buy -- well, it’s time to take a look at what today’s younger, newer advisors and planners offer to consumers. Many are changing the game and wanting to provide something better for regular folks like you and me.

Whether or not a financial planner is worth the cost will depend on your situation, your proficiency with managing wealth, and your assets. Not all financial planners are expensive, and those that work as fiduciaries have literally sworn to work in the best interest of their clients at all times.

The Internet Makes DIY Planning Possible

You can find a financial planner who truly does work for what’s best for you and removes conflict of interest from their business model. (In other words, some advisors are paid a flat fee rather than being paid commissions on financial products they sell.) There’s still another side to the argument of whether or not a financial planner is worth the cost, however.

There has never been a better time than now to self-educate on almost any topic imaginable. The Internet is absolutely brimming with fantastic resources -- that are completely free to access. You even have virtual financial planning services, like Jemstep and Betterment, that can still help with planning where you need it but are more hands-on and less expensive than hiring a real live human to help you one-on-one.

ARTICLE: Free Investment Advice for Small Investors

In the past, it may have been difficult to navigate lifelong financial planning without hiring a professional. But thanks to our constantly connected digital world, it’s not unreasonable to take a do-it-yourself approach with your money.

DIYers don’t have to worry about being able to afford anyone’s help, and make their own decisions on assets and investments. For those that feel a financial planner is an unnecessary middleman, the Internet makes it possible to eliminate the paid professionals.

So, what’s the answer? Is a financial planner worth the cost?

The Benefits of Working with a Financial Planner

Sure, financial planners come at a price. But you need to look at the idea of professional financial advice like your other investments and ask yourself an important question: What’s my ROI?

In other words, would working with a financial planner and paying the fee for doing so allow you to grow your wealth more -- or provide a bigger return -- than trying to manage your money by yourself would provide?

If you’re the type of person who doesn’t have the time, patience, or willingness to research the best courses to take with your finances, you can greatly benefit from having a financial planner working on your financial team.

Consider the costs of going it alone. You could not only fail to grow your wealth at the same rate as you would with a financial planner helping develop a plan of action for you, but you could end up worse off by trying to handle all aspects of your finances by yourself. People are emotional creatures, and we don’t often act rationally -- which is the very reason many average investors end up buying high, selling low, and wrecking their wealth.

When you’re on your own, you need to manage not only your money, but your emotions too. You need to constantly monitor your actions and ensure the steps you take are sensible and rational. That’s extremely difficult and exhausting.

Plus, there’s always the cost of mistakes. Certified financial planners are trained professionals with a certification. They’ve had a formal education and are required to continue their education with ongoing tests and trainings to take and pass. That doesn’t mean they’re infallible, but it does indicate that their rate of errors should be lower than that of the average Joe. (That would be you, in this case.)

Tips for Working with the Right Financial Planner

If you believe your ROI will be favorable and want to work with a financial planner, your work with your money isn’t quite done. You need to ensure you’re choosing the right advisor for you. Consider and look for these factors when searching for a professional:

  • Fee-Only: This means you’ll pay a flat one-time or ongoing rate to your financial planner. Fee-only advisors do not make any commissions off the products they recommend, so there is no conflict of interest involved.
  • Fiduciary: Having your financial planner be a sworn fiduciary means they have taken an oath to protect your interests. This allows for you to have a better relationship with your financial planner as you know you can trust them.
  • Rate: Make sure the fees you’ll pay to an advisor are within your budget. Advisors with the new XY Planning Network typically charge on a monthly cycle, just like all your other bills, and come in at $100 per month -- which is considerably more affordable than traditional advisors who skim commission fees off the top of your earnings.

 

When DIY Financial Planning Makes Sense

In some cases, you might not be completely comfortable with having someone else manage your portfolio (regardless of if they have a sworn fiduciary duty or not). Or your financial situation may still be simple, straightforward, and uncomplicated -- in which case, you likely won’t see a good ROI on paying for professional financial advisor.

If you know where to look for answers, you’ll be able to work things out on your own. There are lots of people taking the DIY approach to their finances, so you won’t be alone. There’s a lot of free information out there in the form of books, blogs, websites, forums, and apps. Even doing a simple Google search on a question you have can open a world of knowledge to you.

If you have more complex questions, there are forums and Q&A resources out there where experts and other knowledgeable individuals can help you figure things out. Two forums that come to mind are the Bogleheads forums (geared toward investing), and Mr. Money Mustache forums (focused on frugality and early retirement).

Can you create a DIY financial plan for yourself? Yes. Good information is out there and the fundamentals of personal finance are easy to understand. But there is a catch.

ARTICLE: Clark's Investment Guide

Drawbacks of Trying to Handle Your Finances While Flying Solo

Here’s the thing about the Internet: anyone can put anything on a web page and call it accurate, factual, or good advice. Sorting through the endless information online and deciding what’s correct and what’s nonsense isn’t easy, and it’s a major pitfall of going the DIY route and forgoing the guidance of a professional.

You have to make sure you’re looking at trusted resources, not something that someone slapped together. Otherwise, you could seriously damage the state of your personal finances. The easiest way to find trusted resources is to read well-regarded blogs and books to see what tools and methods they personally recommend. Even then, use a healthy dose of skepticism, seek out multiple sources, and don’t stop asking questions.

Another downside to DIY financial planning is that it can be time consuming. Researching investments can take a while. Unless you’re passionate about figuring things out on your own, you might find yourself thinking that your time could be better spent on other projects.

As a general rule, financial planners are worth the cost once your financial situation becomes complicated enough or if you simply doubt your ability to DIY. You’re better off paying a professional than possibly making mistakes with your money (and losing some in the process). Remember to choose a fiduciary and fee-only planner.

The free resources available to you should be used to increase your financial education, whether you go the DIY route or not. By learning, you’ll have a better understanding of your situation and what your planner is doing.

That said, if you feel confident in making good decisions regarding your assets, then go for it! You can always consult with a financial planner to “spot check” your work and make sure you’re on the right track. There’s nothing wrong with taking a hybrid approach.

 



About the author: Kali Hawlk is the founder of Common Sense Millennial, a resource for members of Gen Y who want to do more with their money. She works as a writer and content manager, and is passionate about personal finance and business. You can connect with her on Twitter @KaliHawlk.

10 Things To Know Before Buying a Home

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If you've read my previous articles on ClarkHoward.com, you know that I paid off my $86,000 mortgage in 2 years. Now, I'm excited to be moving into a new home after recently becoming a third-time homebuyer. While the real estate process isn't new to me, there's always something to learn because the industry is evolving so quickly.

Here's a list of 10 things that you need to know before buying your next place

1. Assess your needs and wants

Before I began my search for a new home, I made a list of my needs and wants on a piece of notebook paper and tucked it away in my wallet. This exercise helped me narrow the property search and save time. I realized that location was more important to me than square footage and that I would consider a fixer-upper for the right price. Be realistic. Just like on those real estate TV shows, you may not be able to get everything on your list.

2. Don't immediately fall in love

This can be tricky because when I went to preview homes I tried to visualize myself in the space. I would think about where I would put my furniture, how I would paint the walls and even where the plants would go. That's not a bad thing. However, I got into trouble by getting so excited about a property that ended up being out of my price range. Try not to get ahead of yourself. If it doesn't work out, you'll find something else.

3. Get pre-qualified before you write an offer

You want your offer to be the most attractive to the seller in this competitive real estate market. Sure, price is one factor. But another one is your overall financial health. Getting pre-qualified before you submit an offer gives the seller confidence that you'll be able to complete the transaction. It also gives you an idea about how much of a monthly payment you'll be able to afford.

4. It's okay to walk away

Negotiating doesn't come natural to all of us. I found the back and forth with the seller to be one of the most difficult parts of the homebuying process. If the seller isn't willing to negotiate, don't hesitate to move on. Maybe it's a sign that home isn't for you. With one particular home I was considering, the seller had a change of heart and wanted to negotiate after I had given up on the deal.

5. Shop for the best lender

Your real estate agent can provide you with a list of preferred lenders. Keep in mind, a competitive rate isn't the only factor to consider. As a buyer, you'll be asked to complete a lot of paperwork under deadline pressure. You want an organized loan specialist who won't "misplace" any of the documents that you've forwarded or completed. Still, I suggest creating a folder on your computer to store all of your forms in case you have to resend them in a hurry. Also, ask your lender how much can be done using an electronic signature. I found this very helpful. It really cut down on the amount of printing and scanning that I had to do.

6. You may not get a deal in this market

The market was struggling when I bought my first condo in 2008. In 2014, it's a different story. I made offers on multiple properties and kept wondering why I wasn't going under contract. It took me some time to come to terms with the fact that I might have to pay the asking price or even higher. Obviously, this depends on the location. Your real estate agent can help you assess how competitive the market is where you live.

ARTICLE: 6 Steps To Paying Off Your Mortgage Early

7. Try to put 20% down if you can

Putting 20% down makes it more likely for the bank to approve your loan. In addition, your interest rate may be lower if you can come up with 20% or even 25%. Another advantage is that you won't have to pay PMI (private mortgage insurance).

8. Read the condo/HOA documents carefully

This is especially important for condo buyers. If you think that you can turn around and rent your unit anytime, you better check the documents. Many condos have rental restrictions. In addition, you'll want to look closely at the rules and regulations, which outline things such as the number of people who can live in your unit and pet restrictions.

9. The seller may or may not show up at closing

I was caught by surprise to see the seller at my most recent closing. In the past, only the seller's real estate agent has showed up because the paperwork was completed in advance. Knowing that you could be sitting across the table from the seller is a good reason to be courteous when dealing with them during the negotiation process.

ARTICLE: 9 Things To Ask Before Selling a Home

10. A good real estate agent makes all the difference

Spend some time researching real estate agents in your area. You want someone who is knowledgeable, honest, a good listener, detail-oriented and accessible. If you don't have family or friends who can refer someone to you, read reviews on websites such as Zillow, Trulia, and Yelp. It's worth the effort. A good real estate agent can help make one of the most stressful times of your life a lot more manageable.

Have something to add to the list? Share it on below.



About the author: Michael Timmermann paid off his mortgage in two years when he was 27. Now, he shares his money-saving tips on his blog, Save on Almost Everything.

10 Healthy Halloween Treats That Will Save You Money

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It’s an unfortunate truth universally acknowledged that a child in costume must be in want of sugary treats every Halloween.

Yet as being health consciousness continues to grow, more of us are looking for healthier alternatives to the sugar-induced comas that go hand-in-hand with Halloween each year. Sadly, most people think it will cost a fortune to cut out the junk and substitute a better choice.

In reality, nothing could be further from the truth!

 

Here are 10 alternative treats for Halloween that you can get cheap

1. Honey sticks. They’re like pixie sticks, but all natural and yummy to boot! Most natural health food stores carry these, and they are relatively inexpensive to stock up on.

Price: $12 for 50 on Amazon.

2. Stickers. These are always fun to get, and a pack of them can be picked up inexpensively at various stores.

Price: $1-$5 for a pack

3. Party rings. You can get a pack of them for 99 cents at most places right now, which is saving you money and avoiding handing out sugary candy.

Price: 99 cents

4. Annie’s gummy packs. While these do contain sugar, it is organic and doesn’t have any synthetic dyes, pesticides, and they are gluten-free as well. Costco carries boxes of these in bulk.

Price: $9.79 for a  24 pack at Costco.

5. Popcorn balls. I know a lot of parents are wary now of finding homemade items in their trick or treater’s bags, but this is a great choice if you’re handing out treats at a “trunk or treat” event or you’re going to a party and need to bring some treats along.

Price: $5 or less.

6. Glow sticks. Another non-eating item, glow sticks are a great thing to pass out that will actually help keep the kids safer while they go from house to house after dark. Dollar Tree carries packs for just a $1.

Price: $1

7. Party favor packs from the dollar store. We think about it when a birthday is coming up, but not really for Halloween and it’s a shame because those packs of party favors can be fun toys to hand out to all the kids. With how much candy the kids end up taking home, a fun toy will be a nice change and exciting for children.

Price: $1

8. Fruit leather. This makes for both a healthy and delicious treat that can also go into the lunchbox for school the next day.

Price: $10-$20 per pack of approximately 48, depending on the brand.

9. YumEarth Organic Lollipops. These lollipops are free of dyes, pesticides, and are gluten-free. You can find them at your local health-food grocery store, or pick them up in bulk on Amazon.

Price: $27.91 for a 5lb bag on Amazon

10. Small juice boxes. I know what you’re thinking -- lame! But the kids are walking around the neighborhood, and no one has hydration on the mind. Find a juice that has no added sugar, and you’ve got a healthy why to hydrate your trick or treaters. Costco carries various juice box brands for a good bulk price.

Price: Varies

With a little creativity, it is possible to have a healthier Halloween without it setting you back financially. What are some of your favorite treats to hand out?



About the author: Crystal Collins, a Savings.com DealPro, is an Atlanta local, adventurer, a health advocate and thrifty as can be. Check her out on her blog at  NaturalThrifty.com.

Does Aldi Save You as Much Money as They Claim?

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When it comes to grocery shopping, is Aldi really as cheap as they claim to be?

I recently received this advertisement (see picture) in the mail from Aldi grocery stores, which showed a sample basket of goods purchased both at Aldi and at another grocery store. The claim made is that the groceries purchased at Aldi represented savings of 42% versus the other grocery store.

While 42% is tremendous savings, the ad immediately struck me as flawed and unfair because it wasn’t comparing apples to apples (so to speak).

While the food purchased at the other grocery store were name brand goods, the food from Aldi was all store brand stuff, so of course it was cheaper.

Aldi vs. Walmart -- Battle of the Cheaps


The whole thing got me to thinking about the much more important question of how Aldi would do in a fair fight in its own weight class, against another store's house brand.

“Somebody should investigate this I thought,” then quickly realized that I was just the sort of guy who went around investigating that type of thing! So I set out to do a little grocery shopping and answer two questions.

The first question was “Is Aldi’s advertisement fair?”, but the more interesting question was “Do you really save money shopping at Aldi?”

I took a trip both to Aldi and to Walmart, the nation's largest grocery store. The first thing I did was try to price the exact items featured in the ad to see if Aldi’s claim was accurate. My results are in the following table:

 

Item National name brand
at Walmart
Store brand
at Aldi
100 sandwich bags $2.98 $1.99
14.4 oz graham crackers 2.98 1.39
12 oz vanilla wafers 3.28 1.49
26 oz applesauce 2.15* 1.39
9 oz fruit snacks 2.25 * 1.39
17 oz sandwich cookies 3.50 1.49
6 oz raisins 1.12* 1.19
8.4 oz granola bars 2.18 1.79
30 oz mayonaise 3.98 1.99
32 oz grape jelly 2.98 1.59
1 lb ham 4.98 3.29
12 oz cheese 3.12 1.79
1 lb turkey 4.48 3.29
20 oz mustard 2.11 * 0.69
     
Total price 42.09 24.76
     
Savings   41%

*Items marked with an asterisk were not available in the same size as the Aldi item. The price was adjusted to the Aldi equivalent size on a per unit basis.

As you can see from this table, Aldi’s advertisement is pretty darn accurate. Surprisingly, the prices at my local Aldi were actually a little lower than in the advertisement, and the savings of 41% were almost exactly the same as the advertised savings of 42%. But that really isn’t important. Anybody that really cares about saving money buys store brands, so how does Aldi stack up against Walmart’s store brands?

Here are those results:

Item Walmart store brand Aldi store brand
100 sandwich bags $2.48 $1.99
14.4 oz graham crackers 2.18 1.39
12 oz vanilla wafers 2.00 1.49
26 oz applesauce 1.07 * 1.39
9 oz fruit snacks 1.48 1.39
17 oz sandwich cookies 1.95 * 1.49
6 oz raisins 1.48 1.19
8.4 oz granola bars 2.00 1.79
30 oz mayonaise 2.54 1.99
32 oz grape jelly 2.92 1.59
1 lb ham 3.48 3.29
12 oz cheese 2.88 1.79
1 lb turkey 3.48 3.29
20 oz mustard 0.91* 0.69
     
Total price 30.86 24.76
     
Savings   20%

*Items marked with an asterisk were not available in the same size as the Aldi item. The price was adjusted to the Aldi equivalent size on a per unit basis.

There you have it. On the basket of goods Aldi chose to compare, the real savings versus the store brands of Walmart is 20%. While that doesn’t come close to the advertised 42%, it is very impressive anyway.

So what do you think? Is 20% enough to convince you to do your shopping at Aldi?

ARTICLE: 3 Apps To Earn Cash Back on Groceries



About the author: More of Andy Prescott’s work can be found at ArtofBeingCheap.com, where unlike his groceries, the articles are never generic.

How To Get Trusted Referrals for Home Repairs

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Right now, renovating a home is much, much easier than it had been during the real estate bubble. So how do you pick a contractor?

I recall back during the bubble how often I'd get calls from homeowners complaining they couldn't get a call back from contractors. The frenzy around housing values going up and up and up drummed up plenty of business for contractors at that time.

During the bubble, I even heard of contractors who were so successful that they wouldn't even give price quotes. The price would just be whatever it would be and you'd have to be in a position to pay it when the bill came due.

Where can you go for trusted home repair referrals?

It's really hard when you need a repair done around your house to know who to trust and how much it should cost.

Here's one possible solution: You might want to check out an online startup called Pro.com, which is active in about 20 cities.

Pro.com gives you an estimate of what it should cost for various jobs. Painting a room, refacing cabinets, putting in a garbage disposal, etc. The list goes on and on...

They give you prices based on your zip code, and they have a referral system for contractors.

No telling if Pro.com will stand the test of time or not. But it is at least a promising possibility to get quotes and have a sense of what a particular job should cost today.

Meanwhile, if you want another site to try, there's one called Thumbtack.com, which goes beyond just home repair. They've been growing fast too.

What about Angie's List?

Money Adviser, a special imprint of Consumer Reports, recently ran an article that had some eye-opening info about Angie's List. Historically, I've been neutral on Angie's List. But while Angie's List says they are a consumer-driven service supported by membership fees, Money Adviser reveals that 70% of their revenue comes from ads purchased by the companies being rated!

So they're playing both sides. It's hard to give unbiased reviews -- even if your heart is in the right place -- when somebody's paying all that money.

I've discussed the same concerns with sites like Yelp in the past too. You might also want to read my article about how to spot a fake online review.

Keep in mind these pointers when you're hiring a home improvement contractor:

  • Be specific in writing about what the job you're hiring them for entails.
  • Thoroughly vet their references before hiring them. Ask for the names and numbers of people on the last 10 jobs they did. Find out what they did for those people and pay attention to the start and finish dates.
  • Be cautious with money you pay upfront. If possible, pay the supply houses directly.
  • Renovate only to enjoy your home, not to make money.

 

Is home remodeling worth it?

There are some real benefits to home renovation on the cost side today, with contractors readily available and some of the materials used being a lot less expensive than they were.

However, the average payback for a renovation has worsened over time. Historically, renovations never did pay back at a 1:1 ratio. For every dollar you put in a house, it might only yield 80 cents at time of resale. A moderate kitchen or bathroom redo had historically paid back about 85 cents on the dollar.

Yet today things are even worse. The latest numbers I've seen indicate the payback is more like 60 cents on the dollar.

That's why you never do a renovation to increase your home's value; you do it to increase your enjoyment of the home while you're living in it.

There are two possible mathematical exceptions when it does make sense from a dollars and cents perspective to do a remodel.

First, I read in Money magazine that those people who locked into ultra low mortgage rates wouldn't want to lose those rates by picking up and leaving and getting into a new house and a new mortgage. So in those cases, the math is more favorable to renovate than it is to move.

Second, energy improvements like attic insulation or changing out the light bulbs can give almost immediate payback. That's like a no-brainer.

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