How to Manage Credit Card Debt Wisely in 9 Steps

According to Experian’s 2019 Consumer Credit Review, 75% of American consumers with credit cards carry an average balance of over $6,000. And the impacts can be financially devastating. 

Credit cards can be enticing, offering not only the ability to buy now and pay later, but also a bevy of rewards like cashback and airline miles. However, there are downsides. Credit card offers often come with high interest rates, a variety of fees and the potential to damage your credit score, if mismanaged. 

Learning how to manage credit card debt today can help improve and keep your credit score high. In return, a high credit score will help your borrowing power should you someday need to get a mortgage, open up a HELOC or take out a personal loan

Here are 9 steps to help you manage credit cards to minimize interest payments, avoid fees and take full advantage of the benefits many credit cards offer:

1. Live Within Your Means

The number one key to learning how to manage credit card debt (and your entire financial life) is to live within your means. In short, this means identifying the difference between your net income from paychecks (plus other sources like Social Security or investment income) and your consistent monthly debt obligations. 

To calculate your monthly debt obligations, list your rent or mortgage payment then any car or loan payments, as well as the money you need for gas, groceries, streaming services and cell phone bills, plus other expenses you incur on a month-to-month basis. This figure should not be larger than your take-home pay each month. If it is, it’s time to reevaluate not only your spending but your employment situation to see about earning more income, possibly from a second job or side hustle. 

2. Set Up Autopay

According to a CreditCards.com survey from May 2020, seven of the country’s top 16 credit card issuers now charge customers up to a $40 late fee, even if you miss your due date by a single day. The easiest way to avoid late fees is to enroll in autopay. You can typically set this up for the minimum payment due, the full statement balance or any amount in between to be paid automatically from your checking or savings account each month, on the due date or any date before. By taking advantage of autopay, you’ll never forget to make your payment or have to pay a late fee.

3. Pay More Than the Minimum

You should always pay at least the minimum payment due each month. However, paying only the minimum will leave you in debt longer and could mean paying thousands of dollars in interest. 

As an example, let’s say you’re carrying a $6,000 balance on a credit card that charges a 14.99% interest rate, and you make only the minimum payments. In doing so, you may eventually pay upward of $4,000 in interest before you even pay off your original $6,000 balance! 

4. Pay in Full

The opposite of paying the minimum is paying in full. When you pay your entire statement balance in full before the due date each month, you’ll pay no interest. If you’re using a rewards credit card and have learned how to manage credit cards effectively in this way, you’ll get all of the benefits (cashback, airlines miles, hotel points, etc.) while paying the credit card issuer nothing for these rewards. This is the pinnacle of wise credit card management.

5. Pay Your Bill Only After Your Statement Period Ends

Speaking of those rewards… It’s great to pay down your balance or pay your credit cards in full as soon as you have the money to do so. But there’s a caveat… If you pay current charges before the statement period ends, you could be missing out on the rewards for those charges. This is because rewards are often calculated based on the charges posted and due at the end of each statement period. If you pay off or pay down this balance before the monthly statement period closes, that’s less you’ll earn rewards on. The sweet spot to pay your credit card is anytime after the statement period closes but before the due date.

6. Track Your Spending

You can either track your spending habits on your own or use a free credit card spending tracker app. Some of these apps even offer color-coded summaries to easily identify how and where you typically spend your money. 

For example, are you spending hundreds on groceries each month yet still ordering a lot of takeout? Tracking your credit card spending will illuminate trends and point you toward ways you might improve your financial life. No matter how you keep tabs on your spending, it’s a key step toward learning how to manage credit cards successfully. 

7. Find a Credit Card with No Annual Fee

While many rewards credit cards carry an annual fee (although some may be waived for the first year), some credit cards offer no annual fees. Choosing a card without annual fees could save you upward of $99 each year while still allowing you to build your credit history and improve your credit score.

8. Manage Your Credit Utilization Rate

This tip is all about managing your credit score. One of the factors that goes into calculating your credit score is your credit utilization rate. This is the amount of your credit card’s spending limit you regularly use. 

For example, if you have $6,000 in credit card debt but a credit limit of $20,000, your utilization rate is 30%. The lower your credit utilization percentage, the better, because it means your credit cards aren’t maxed out. A low percentage also shows potential lenders that you know how to manage credit card debt.

9. Consolidate Your Debt

If your past credit card usage has become a heavy burden, debt consolidation may help you get a handle on your credit card debt. Learning how to use home equity to consolidate debt or applying for a debt consolidation loan through Prosper may help get your financial life in order and improve your emotional well-being. 

Read more: 5 Tips to Manage Holiday Shopping Debt

What Debt to Pay Off First: How to Prioritize Debt on a Limited Budget

As the pandemic takes its toll on our economy, our unemployment rate and your personal financial wellness, there is no better time to figure out what debt to pay off first, especially if you are already on a limited budget. As we prepare for what is being called “the coronavirus recession”, there are steps you can take to stay on top of your bills and keep your credit in check.

We’ve shared with you loan and debt relief options available during COVID-19. Now, we’re sharing a 3-step approach to figuring out how to prioritize debt.

How to Prioritize Debt in 3 Steps

According to the National Consumer Law Center’s (NCLC) online resource, Surviving Debt, determining what debt to pay off first starts with one rule: “Prioritize debts whose non-payment immediately harms your family.”

Here are the 3 steps the NCLC recommends for how to prioritize debt.

1. High-Priority Debt

Step one of determining what debt to pay off first is to figure out your high-priority debt. Not sure how to do that? Ask yourself –  what payments could harm you most if you skipped a payment? Hint: your answer cannot be, all of them. While it can feel that way, it’s important to really think about what can harm you and your family. For example, not paying a criminal justice debt you owe could land you in jail. That is high-priority. 

What other debt examples fall under this category? Here are a few outlined by the NCLC:

  • Auto loans: If you don’t pay this, you can lose your car which limits travel and can potentially cost you a job.
  • Child support payments: This is a legal obligation that can lead to prison if payment is avoided.
  • Rent: If you don’t pay rent, you could get evicted.
  • Utility bills: You want to keep the water running and the lights on as this is an essential for your family’s wellness. So utility bills can’t be put off. 

2. Medium-Priority Debt

Next step in how to prioritize debt is to determine which payments you should consider medium priorities. Medium-priority debt includes monthly payments that are important BUT you’re able to delay them without serious penalties. Why are they considered medium priority? Because these bills could end up being high-priority debt down the road, but the severe impact is not immediate. This would include debt like:

  • Your mortgage
  • Property taxes
  • Federal student loans
  • Federal tax payment

If you’re struggling financially during the pandemic, there are federal programs and other relief options that may help you defer these payments until you’re in a better place.

3. Low-Priority Debt

Now that you know what debt to pay off first and second, the third, and final category is low priority debt. Again, low-priority debt is important to pay off, but the penalties you face are far less than high or medium-priority debt. So what kind of debt does low-priority include? According the NCLC, the following bills are considered low-priority debt:

  • Medical debt
  • Credit card debt
  • Private student loans
  • Personal debt owed to friends and family
  • Debts owed with a co-signer

Like any debt, if put off long enough, low-priority debt can climb the ranks to become high priority, so you don’t want to avoid paying these bills for too long.

What Debt to Pay Off First: The Bottom Line

While there are ways to prioritize your debt, it’s important to note that no matter the level — low, medium or high — there are consequences to skipping  monthly payments. If you have the finances to cover your monthly bills, do it.  

If you’re struggling to make ends meet, in addition to prioritizing what debt to pay first, there are relief options available for certain loans and bills. Also, it never hurts to call your service provider or lender and see if there’s a special payment plan or short-term arrangement that can be made to accommodate your limited budget. 

Read more: Managing Finances During a Work Furlough

Emergency Loans With No Job: Options for the Unemployed

While the unemployment rate in June showed a decline to 11.1%, that rate is still extremely high. Add to that the possibility of future declines as we continue to grapple with coronavirus, and it’s easy to see why the need for emergency loans has increased. 

But what if you’re among the millions of unemployed workers? We’ll explore the options you have when it comes to applying for emergency loans with no job.

Can I qualify for a loan if I’m unemployed?

The simple answer: it depends. There are two factors that can help your chances of being approved for a personal loan, even if you don’t have a job: alternative income and your credit.

1. Alternative Income Options

If you have no proof of employment due to a layoff or furlough, you can provide your lender with alternative income options to show you’re able to pay back what you borrow. Unemployment benefits can be used to represent your income, as well as the following: 

If you already have money in your savings account, or have freelance work or a pending job offer, those can also count as income for some lenders.  

2. Your credit

Your credit can be a huge factor in whether you can get approved for an emergency loan with no job. Lenders will want to look at your credit history and credit score to see how reliable you are when it comes to managing your debt and paying back what you borrow. 

The higher your score, the better for lenders. Typically, a good credit score is 670 or above. In the end, it depends on the scoring model used: FICO or VantageScore.  

Credit scores are calculated using data from your credit reports, which you can check free every 12 months. If your history is in good shape, odds are so is your score. It’s important to check your credit and fix any inaccuracies immediately to get your score up where it needs to be. 

Important note: Every past-due account that is more than 30 days old can cost you at least 100 points on your credit score. Make sure to stay on top of your bills and correct any wrong information ASAP.

Options If You Don’t Qualify for a Personal Loan.

If you just don’t have the income to make a personal loan happen, there are alternatives for emergency loans if you don’t have a job. Here are three.

1. Apply with a co-signer

If your credit score is keeping you from being approved for a personal loan while unemployed, using a co-signer may help. A co-signer can be a friend or family member who has a good credit score. The advantages to using a co-signer include a higher probability for approval, better potential for a lower interest rate and possible access to a higher amount.

Just remember: Both you and your co-signer are responsible for payments, so if you miss or skip one, you’re both on the hook financially.

2. Get a joint personal loan

Like a co-signer, a joint personal loan allows you to apply with someone who has financial security and good credit. The difference? Both applicants own the loan, whereas the co-signer in the scenario above only shares the responsibility, not the ownership. This can benefit friends, families and couples in which one person is unemployed while the other has steady income. 

3. Apply for a home equity line of credit (HELOC)

If the above options don’t fit your current situation and you’re a homeowner, a home equity line of credit, or HELOC, may be able to provide you with the emergency cash you need while you search for a job. A HELOC allows you to borrow against the equity in your home, so it‘s not based on your income. It’s a revolving line of credit from which you can borrow as much or little as you need.

While a HELOC isn’t backed by your income, it does use your home as collateral. If you cannot keep up with payments, be very careful and consider choosing another route for financial assistance.

Additional Help For The Unemployed.

Sometimes circumstances don’t allow for emergency loans with no job. You may not have a cosigner, or home, or additional income. It’s important to know what financial relief is available at this time, from temporary assistance with your bills to federal aid specifically set up for COVID-19. 

Do your research and do what you can to keep your financial wellness in check. Remember, you have options, relief and alternatives available. Be sure to reach out to lenders to learn more.

Read more: Emergency Funds That Offer You Financial Assistance During COVID-19

All personal loans through Prosper made by WebBank, Member FDIC. 

Safe Online Loans: What to Know Before Applying.

When borrowing a lot of money, many people are nervous about using an online platform to apply for a personal loan. We have everything you need to know about how to find safe online loans and the warning signs to look out for.

Safe Online Loans: Where to Begin

The internet has made many things easier, like shopping and paying bills. But when it comes to applying for safe online loans, you want to make sure you know exactly who you’re dealing with because you’re providing sensitive information virtually and discussing a large amount of money. The risks involved if you don’t do research about a lender include:

  • Losing money
  • Paying too much, and 
  • Identity theft

That’s why the first step in finding safe online loans is identifying a reputable lender or lending platform. 

How to Choose a Safe Lender

Just because you’re in a hurry to get approved for a personal loan online doesn’t mean you should skip important steps. It‘s extremely important to take the time to find out as much information as possible about the lender, their history, their reviews, as well as their loan terms. The search for safe online loans should start with two steps.  

1. Find a trusted brand

There’s a reason brands become known and recognized. They’ve built a consistent reputation for being trusted over time. Factors like experience, consistency and successful outcomes cannot be ignored when searching for a trusted brand. 

For example, Prosper was the first peer-to-peer lending platform, and has built up a great reputation since 2005, facilitating $17B in loans to more than a million customers. 

2. Do your research

Whether you’ve heard of your lender or not, it’s best to do additional research. The best place to start is the U.S. Consumer Financial Protection Bureau (CFPB), which keeps a database of consumer complaints. Here you’ll see complaints and responses from lenders which will provide you with a good sense of what you’ll be dealing with before you apply for your personal loan online. 

While conducting your online research, it’s important to look at both positive and negative reviews.

You can also reach out to friends and family to see if they have any recommendations based on their experiences. 

4 Red Flags to Watch Out For

While conducting your research into safe online loans, here are 4 red flags to look out for. 

1. Up-front fees

If a lender tells you they need you to pay a fee before they give you the money, find a new one. Upfront fees are a big signal a lender is not legitimate. The Federal Trade Commission (FTC) warns against any advance fees for “insurance,” processing, or “paperwork.”

Reputable lenders will disclose all their fees clearly, and any fees are usually paid AFTER the loan is approved.

2. Guaranteed approval

If a lender says they don’t need to do a credit check and your approval is guaranteed, you didn’t luck out; it’s probably a scam. Any reputable bank or lender will check your credit-worthiness because they want to make sure you can handle the loan and have the financial ability to pay it back. If you have bad credit, you have other options. But don’t fall for a scam.

Important: If a lender says there’s no need for a credit check but asks for your social security number or other personal information, walk away… fast.

3. Requests to wire funds

Never wire money or use a wire transfer service to pay your loan or send money to an individual. Wiring funds is a sign something is not right, and may be illegal. If you’re pressured to do so, find another financial institution to work with. Legitimate lenders will never ask you to wire money.  

4. Copycat names

Look closely at a company’s name. Does it look familiar, but maybe one word is off or switched around? Trust your gut. Using a copycat name is a common method used by scam artists to trick you into thinking you‘re working with a legitimate business. 

Applying for Safe Online Loans: Next Steps

Now that you know what to look for and what to avoid when it comes to searching for safe online loans, you’re ready to learn more about online loan solutions.

Read more: Personal Loans Online: How It Works

All personal loans through Prosper made by WebBank, Member FDIC. 

How to Protect Your Credit During Tough Times

During tough economic times like COVID-19, you may be as concerned with your financial wellness as you are with your physical health. One thing you can do is keep your finances in check, and more specifically, your credit.

It’s important to be proactive about making sure your credit remains good. We’ll explore how to protect your credit in 5 easy steps. 

How to Protect Your Credit: 5 Steps

Step 1: Pay your bills

When it comes to how to protect your credit, staying on top of your bills is the first and most important step. How much of an impact does a late bill make on your credit score? According to Consumer Reports, having a single account that’s more than 30 days past due can cost you up to 100 points on your credit score. So even if you can only afford the minimum payment, make it. 

Step 2: Contact your lender or service providers

If you’re one of the millions of workers who’ve been furloughed or laid off because of the Coronavirus, there may be relief programs to help you if you are struggling to keep up with your bills. 

Contact your lenders and service providers to find out if they can offer you assistance as many have policies in place to help. For example, service providers like Prosper are offering hardship benefits and may be able to place your loans in deferment or forbearance. These options mean you don’t have to make loan payments and late reports won’t be sent to credit bureaus.

“The economic impact of this virus has been real and immediate for many,” said David Kimball, CEO of Prosper Marketplace. “We are grateful to have extended relief to so many who need it, and to hear from our customers about the positive experience they have had with our service agents.”  

Step 3: Check your credit routinely

Another important way to stay on top of your credit is to make sure your credit reports are accurate. Inaccuracies hurt your credit, so you’ll want to get reports from the three credit bureaus: Experian, TransUnion and Equifax. You’re allowed one free copy of your credit report annually through annualcreditreport.com.

Step 4: Dispute inaccurate information

During your credit report checks, if you see any inaccurate information, dispute it immediately. First, contact the credit bureau where you found the error. Each bureau has their own process for disputes. Here’s the contact information you need for each bureau so you can correct any errors:

The Federal Trade Commission also offers a sample letter to help you with your dispute.

Step 5: Protect your identity

The last step of how to protect your credit involves protecting something else: your identity. During tough times like the Coronavirus pandemic, cases of identity theft tend to rise. The first step is awareness. 

  • Keep up with the latest scams that target your personal information and hurt your credit. 
  • Keep a close eye on your bank account(s) and credit card statements to make sure there are no unauthorized withdrawals or payments. 
  • If you think someone may have stolen your identity, put a security freeze on your credit through each of the bureaus to prevent access to your personal information and keep thieves from trying to apply for credit in your name. You can always lift the freeze, usually for free.

Start Protecting Your Credit Today

Now that you know how to protect your credit, put these steps into action sooner than later. 

Read more: How to Improve your Financial Help During COVID-19.

All personal loans made by WebBank, Member FDIC. 

How a Personal Loan Can Help During a Recession

As the country begins to reopen, the full impact of a coronavirus recession remains to be seen. While some sectors, like the housing market, have rallied back to pre-lockdown levels, others have yet to see improvement. Unemployment remains at record-level highs, and more job losses could occur in the future. 

Because of this economic uncertainty, some people are looking for ways to prepare financially for a recession. Here is how a personal loan may help you during a recession.

Reasons to Get a Personal Loan

There are many reasons people get a personal loan, including:  

  • Debt consolidation
  • Emergency expenses
  • Home repairs
  • Large purchases

While there are many uses for a personal loan overall, during a recession, debt consolidation and emergency expenses are the biggest reasons to apply.

Debt Consolidation

Paying down debt is one way to prepare your finances for a recession. You can consolidate all of your high-interest debt, like credit cards, into one payment with an unsecured personal loan

Before you apply for a personal loan with a traditional or online lender, it is important to weigh the pros and cons to make sure it’s the right solution for you. For example, you want to make sure your credit score is good (670 or higher) so you can get the lowest possible interest rate. 

It’s also important to remember that using a personal loan to consolidate debt can extend your repayment terms. That’s not necessarily a bad thing, but something to be aware of as you may be in debt longer under a single loan. Also, make sure the new loan has a lower interest rate than the debt you’re consolidating. Otherwise, it might not be worth it.

Emergency Coverage

There are many unexpected expenses you just can’t plan for, especially during a recession, including:

  • Medical bills
  • Emergency auto repairs
  • Home repairs

Because you need to get emergency items covered quickly, you need access to money faster. Many online lenders can fund loans within a few days. That means once you choose a personal loan, funding can come through quickly so you don’t miss any payments. 

If you do need to access emergency coverage, be sure to stay on top of payments to make sure your credit score stays in check during a recession.

Benefits of a Personal Loan 

Now that we’ve gone over the best uses for a personal loan during a recession, let’s look at 4 benefits a personal loan can offer. 

1. Higher borrowing limits 

Sometimes you need more money than credit cards can offer, especially for an emergency expense. A personal loan can provide access to more money, specifically if you have less debt and higher income. Most lenders offer personal loans anywhere from $2,000 to $40,000. 

2.  Lower interest rates 

Once you apply for a personal loan, lenders will conduct a credit check. Some require a hard credit pull, while others, like Prosper, initially only perform a soft credit pull. The difference? A soft credit pull will provide your rate and loan amount without impacting your credit score. Once the terms of the loan are accepted by the borrower, a hard pull will then occur, which may impact your credit score.

Generally, the higher your score, the lower your interest rate. Also, the length of your loan term may impact the rate (shorter term = lower rate). All of these factors make it important to shop around. You can check your rate instantly online to get started.

3. No collateral

Many personal loans are unsecured, meaning you don’t have to put up collateral. While you don’t have to risk your home or car, defaulting on an unsecured personal loan still has consequences financially. That makes it even more important to make sure you can keep up with payments.

4. Predictable payment schedule 

Speaking of keeping up with payments, a predictable payment schedule is also a great benefit to personal loans. Monthly payments are usually fixed, so there is never a surprise about how much you’ll owe each month.  

Next Steps

Before you jump into applying for a personal loan, it’s important to make sure it’s right for you. Protecting your financial wellbeing is essential during a recession, and you want to make sure a personal loan will lower your payments overall. Remember: The goal is to save money, not add to your debt. 

Read More: How to Get a Personal Loan: What You Need to Know.

All personal loans made by WebBank, Member FDIC.