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Prosper.com Offers Special, New Loan Promotion for Fri. Oct. 21

Do you need a loan fast but don’t want to deal with a bank? Well, you might want to check out Prosper.com (*aff link) the peer‑to‑peer lending marketplace. And if you do it fast, you may be eligible to receive a financial incentive‑‑a promotion, in fact‑‑that Prosper is offering today only.

Here’s the deal. If you apply for a new loan any time on Friday, October 21, Prosper says they’ll make your second loan payment for you, up to $250.

Essentially, to be eligible for this offer, you can’t have posted a loan listing or applied for a Prosper loan within the past 30 days. You must submit your new listing any time between 12:01 in the morning and 11:59 PM Pacific Standard Time on October 21, 2011. So this is a one‑day‑only deal, that’s only runs on Friday, October 21.

People who need a loan right now are often finding it tougher to get approved for cash from a bank. This is one big reason why a marketplace like Prosper has been thriving.

I had an opportunity to recently interview Chris Larsen, the CEO of Prosper, recently, and he told me that business is booming, in fact, partially thanks to this tighter lending requirement. According to Larsen, Prosper is helping to quickly facilitate loans for scores of borrowers who are quite credit‑worthy, bur remain nevertheless unable to get traditional loans from lenders.

Larsen also noted that between 60% and 65% percent of the loans applications submitted on Prosper are from people who are looking to pay off their outstanding credit‑card debt. So if you’re burdened by high credit card interest rates, or are worried about the prospect of your bank raising your rates, you might want to check out a peer‑to‑peer loan.

The thing that I like about peer-to-peer loans is that they’re a more responsible way to use credit and debt, because you’re essentially going to swap out your revolving debt (i.e. your credit‑card debt) and replace it with an installment loan. Whereas you could have a $10,000 credit card balance, pay the minimum payment on it, and be in debt for 25 years, that’s not how a peer-to-peer loan works.

A loan you get from Prosper.com – or any other peer-to-peer lending site, such as Lending Club – has to be paid off over a fixed period of time, such as three years. And it’s reported to the credit bureaus as such, as an installment loan, which is more advantageous for your credit standing than is a revolving loan or credit‑card debt.

Of course, you should always do your homework and read the fine print before entering into any financial transaction. Here are a couple of things you should know about getting a loan from Prosper.

For starters, you have to pay closing fees when you do a loan with Prosper. The exact fees vary for different borrowers, based on several factors. But the closing fee ranges anywhere from 0.5% to as much as 4.5%.

Don’t get behind on your payments, either, or don’t fail to make a payment. There is a failed‑payment fee of $15.

Your interest rate, of course, on whatever loan you get is very much dependent upon your credit rating. They are going to pull your credit rating, and Prosper assigns letter grades and certain interest rates, of course, based on how good your credit is. This is one way that they’re able to keep their loss rate down, and assure the lenders/investors (i.e. the people who put up the money to supply the loans on Prosper’s site) that they’ll be able to recoup their investment and they’ll make money off of the loans that they’re funding.

Have you ever been involved with peer-to-peer lending – either as a borrower or an investor? If so, share your experiences here on AskTheMoneyCoach.

* This article contains paid affiliate links identified with the words (aff link) following the hyperlinked text. The image within this article may contain an affiliate link as well. This blog may earn a commission if a purchase is made.

Reasons Why People Consider a Strategic Default

Author: The Money Coach

If the effects of the recession have left you with a home or condo that is worth less than the amount of your current mortgage balance, you may have considered a strategic default.

A strategic default is when a borrower decides to default on their mortgage – basically refuses to make payments – and walks away from the loan.

The bank will obviously report this delinquency to the credit bureau. But for many borrowers, the cost savings and the ability to be financially free from a burdensome home is enough to prompt this type of drastic move.

Reasons Why People Consider a Strategic Default

An increasing number of borrowers with very strong credit and a healthy credit history are choosing a strategic default in recent years.

Foreclosure defense attorneys warn that borrowers should consider all of the long-term consequences of this type of move, but many are still going ahead with it.

According to a national survey by Reecon Advisors, nearly one out of 10 homeowners, or 7.4 million, would be likely to choose a strategic default strategy if they were in a situation where their house was worth less than what was owed on the mortgage.

Many homes have fallen “underwater” from the recession, and most homeowners are finding it impossible to sell their homes for anywhere close to pre-recession prices. While there is always the option to wait it out and hope that your home value improves when the economy turns around, this could take several years.

Effects of a Strategic Default on Your Credit Score

Officials from Fair Isaac Corp., creators of the FICO credit score, report that borrowers who choose a strategic default on their mortgage typically lose about 150 points from their credit score. This is a significant amount when you consider that the highest FICO score you can have is 850. Unless you have a very high score – somewhere above 750 points — you could put yourself at risk for a very poor credit rating from this single move, at least in the near-term.

The effects of a drastically lower credit score include:

Difficulty obtaining a home loan at an attractive interest rate
Inability to open up new lines of credit
Missing out on low-interest credit card offers
Being turned down for even a basic personal loan or auto loan from a bank or other financial institution

Still, thousands of homeowners are choosing a strategic default just so that they don’t have to deal with a mortgage that is now underwater. They feel like they’re “throwing good money after bad” to keep paying a lender for a house that’s clearly not worth what’s owed on it.

If you have considered strategic default to catch up financially, or to simply walk away from a house that doesn’t make economic sense to own, the good news is that the hit to your credit rating doesn’t have to last seven years.

Yes, it’s true that negative information, such as a foreclosure, will remain on your credit reports for seven years. But it’s also the case that how well you handle your finances after a strategic default is equally critical.

For example, since the credit-scoring system places a heavy emphasis on your payment behavior in the two most recent years, you can help restore your credit rating more quickly by making sure that you pay all your bills on time following a strategic default.

Also, to the extent it is possible to isolate the strategic default, doing so will help your credit rating. In other words, if it’s feasible, pay your other obligations on time – such as your car note, credit card bills, etc. That way, the credit-score damage from the strategic default will still be severe, but not as bad as it would be had to let all your bills go delinquent.

The bottom line is that you can bounce back and recover after a strategic default or a foreclosure. And it won’t necessarily take as long as you may have thought.

“Ask The Money Coach™” is a syndicated column written by personal finance expert Lynnette Khalfani-Cox – Follow Lynnette on Twitter at @themoneycoach.

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Study: Many Homeowners Overpaying Mortgage By $52,000

Author: The Money Coach

Are you leaving money on the table when it comes to your mortgage and needlessly overpaying for your house? That’s what many Americans are doing, according to CreditSesame.com, which has found that scores of U.S. homeowners are overpaying their mortgages by about $52,000 over a 10-year period.

An analysis of household data by Credit Sesame found that about eight million American households will pursue a mortgage refinance in 2011. But according to data from Credit Sesame, more than 20 million U.S. households actually qualify for a refinance and would benefit from it significantly.

So why the disparity, or why are roughly residents of 12 million U.S. households missing out on refinancing their home loans and saving money such a large pot of money?

CreditSesame.com CEO Adrian Nazari believes it boils down to three things.

First, despite all the media reporting about interest rates being at historically low levels, some people simply remain unaware of the big potential for savings. So certain homeowners may hear about low rates, but not have a concrete idea about how much money they could pocket each month if they successfully refinanced.

Second, some consumers are just flat-out disenchanted. Sure, they’re heard about low interest rates. But they’re heard a lot more about the ongoing credit crunch. These potential borrowers are keenly aware that lenders have tightened their credit standards. So this group of homeowners is so worried or doubtful about their own ability to qualify, that they’ve effectively thrown in the towel before they really even get started with a refi application.

Then there’s a third group of consumers who are outright discouraged. Maybe they went to one bank or perhaps even two, and they got turned down for a home loan. Maybe their credit was marginal. Maybe the home equity in their home was deemed by one lender to be insufficient. Maybe they didn’t show enough income according to another lender.

Whatever the case, they might actually qualify for a loan, if only they were willing to shop around and further explore their options. But so far, these consumers haven’t taken the time to fully investigate their options.

How Much Can You Save?

Now, the interesting thing about the statistics from Credit Sesame is that the company looked at people who, realistically, would qualify for a home refinance.

So we’re not talking here about the roughly 25% of homeowners nationwide who are underwater and they owe more on their homes than those properties are worth. Clearly lenders are not going to lend against those houses.

Instead, Credit Sesame analyzed data from its user base of people who actually would qualify. These are individuals who could reap tremendous savings and get a mortgage approval based on a number of factors, such as their credit standing, the equity in their home, and so forth.

Credit Sesame says that, on average, Americans who do qualify for a refi but have not yet pursued refinancing, are overpaying about $436 per month on their mortgage. That works out to be about $52,000 over a 10-year period.

So my advice is this: don’t let one rejection from a lender turn you away and prevent you from doing a refinance if it would be a smart decision for you to do so.

Most of us could use a little extra cash. And I know plenty of people who would literally jump at the chance in order to get a reduction of their mortgage – especially if they knew the true cost savings to be reaped, and that it wasn’t going to be too much of a hassle to get the refi process done.

Again, the savings that you can rack up with a refi is significant, and that’s true even in places like Nevada where there are so many homes underwater. The average savings for those who are foregoing the opportunity to refi in Nevada is roughly $38,000 over a 10‑year period.

In New Jersey, where I live, the average savings is $97,000 for those who could reasonably qualify for a refinance.

So if you’re a homeowner and could stand to put a big chunk of money back in your wallet, this is definitely something worth considering. And if you have a chance to refinance, I would encourage you to explore it right away.

You Can Qualify For Student Loan Forgiveness If You Are Disabled

Author: The Money Coach

The Federal government can cancel some or part of your federal student loan (not private student loans) under certain circumstances. This is known as “student loan forgiveness”, and you will need to prove that you meet certain criteria in order to qualify for this type of loan cancellation. If you are disabled, and cannot work or earn a substantial income to pay back your student loan because of your disability, you may qualify for student loan forgiveness.

Here’s a breakdown of how this process works, and whether your disability might make you eligible for the program:

Qualifying for Student Loan Forgiveness with a Disability

Your student loan can be discharged if you meet the following conditions or under the following circumstances:

You become totally or permanently disabled after your student loan was granted
A physician, doctor of medicine or osteopathy doctor can certify that you are permanently disabled and that you meet some other requirements during a three-year conditional discharge period

It’s important to remember that just because a state agency or federal agency, such as the Social Security Administration, has declared you as “disabled”, this does not mean that you will be automatically eligible for student loan forgiveness. You will need to meet a separate set of requirements and prove eligibility of your condition in order to have your student loan discharged by the Federal government.

Reasons Why You Will NOT Qualify for Student Loan Forgiveness

You will not qualify for a discharge of some or all of your student loans under the following conditions:

You became impaired before you applied for the loan
You had a medical condition before applying for a student loan, unless you became increasingly impaired after the loan was granted and your medical condition has rendered you permanently disabled
You were totally or permanently disabled before you applied for your student loan

Veterans Qualifying for Student Loan Forgiveness

If you can provide formal documentation from the U.S. Department of Veteran Affairs that shows you are unemployable because of a disability that occurred from your service, you may be eligible for student loan forgiveness. The documentation will need to show that you were disabled during service, and are unable to secure gainful employment because of this disability. Veterans who do qualify under this standard do not have to undergo a three-year conditional discharge period. They can have their student loans completely discharged after showing appropriate documentation.

Requesting Student Loan Forgiveness

If you do feel you are entitled to student loan forgiveness, you will need to complete an official discharge application form and also have your doctor fill out the appropriate areas. You can download the form here. In addition to a completed form, you can send your most recent demand letter for your student loan that shows the balance owed and proof of any payments that have been made.

Everything will need to be sent to:

U.S. Department of Education
National Payment Center
P.O. Box 5609
Greenville, TX 75403

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Refinancing Your Mortgage Explained Plus A Free Download For You

Author: The Money Coach

Q: My question is; what is the process for refinancing your home for a lower rate and can you add on some of you existing loans on to the refinance? For instance, auto loan and personal loans and also credit cards. I just want to know what are the qualifications for refinance?

A: When you refinance a mortgage you are basically taking out a whole new home loan. The new mortgage will completely replace the old loan you got when you bought your house a year ago. So yes, ALL of the debt from your existing home loan will be converted into the new mortgage when you refinance.

However, lenders generally do not let you wrap in other debt, such as personal loans, credit card bills, etc. into your home loan. That’s because your mortgage is a “secured” loan, and it’s backed by collateral — the house itself. If you don’t pay your mortgage, the bank can foreclose on the house and take ownership of it. However, personal loans and credit cards are “unsecured” loans. The bank doesn’t know what you bought when you charged on your credit cards or spent money on that personal loan. Also, those debts have nothing to do with the value of your house. So they won’t qualify to be folded into a mortgage.

The qualifications to refinance a home are essentially very similar as those for getting a first mortgage. In terms of things you should think about, I want you to read a free excerpt from my book, Your First Home: The Smart Way to Get It and Keep It.

This information comes from the chapters in the book where I discuss what to look for in a mortgage, how to pick a lender, which loans to stay away from, questions to ask about a mortgage, as well as some do’s and don’ts of refinancing.

I hope this info helps you. Good luck!

Ask The Money Coach

Archive for the ‘Loans’ Category

Prosper.com Offers Special, New Loan Promotion for Fri. Oct. 21

Related Questions:

Reasons Why People Consider a Strategic Default

Related Questions:

Study: Many Homeowners Overpaying Mortgage By $52,000

Related Questions:

You Can Qualify For Student Loan Forgiveness If You Are Disabled

Related Questions:

Refinancing Your Mortgage Explained Plus A Free Download For You

Related Questions: