Hindsight at 20/20, there are a few things one could learn from my car buying experience. For me, luxury car meant seven year-old VW Jetta. After driving one that belonged to my friend and knowing my old Buick was breaking down, I went to the closest dealership to my house and said “yes” to everything the man said including, “Oh, those scary electrical signals will just go away if we buy you a new battery.” I took whatever I could get because I was amazed I could even get a car with my credit. I did not know then that it may have been worth it to take a interest rate of something like 20% if I had to, because I could easily re-finance for a better rate with another company after just three months of solid payments. (Editor’s Note: Or use Prosper for the Car Loan) What actually happened is that I paid that ridiculous rate on time for exactly a year before I even knew I could re-finance.

This was obviously before I had any sense of finances, interest rates or FICO scores. I found out about four months later when I went to open a airline credit card that the used car dealer I went to had tried to get me the “best rate” by letting ten different financiers check my credit. Each of those inquiries show up on my credit report and I looked desperate to lenders.

Through the first year of owning the car I had four unsuccessful repairs at Volkswagon dealerships and other shops. Each would get rid of the engine misfires telling the car’s computer strange messages in bright red on my dashboard- for only days or a week before it would come back.  In the state I bought the car, like in most states, lemon laws do not apply to used cars. (If you do have a new car that is a lemon or may prove to be a lemon, send an immediate notice to the manufacturer to document each repair.)  It doesn’t seem to be unsafe, but it does cause cause me grief and anxiety. I would trade it in or sell it, but I of course paid more for it than it was worth, of course, and now I would lose thousands of dollars on it’s sale. And with it’s obvious engine problems, I am not likely to get a very good deal.

So my only option was to re-finance for a much lower interest rate (they say even a rate of two percent lower than what you are currently paying may be worth it), and have a smaller payment while I put money into finding someone who can fix the problem, and will hopefully be willing to help me force my warranty company to pay for it. If I can get the car to start acting normally, and my credit score continues to climb, I will trade it in for something cheaper to fix. Another option would be to pay off the car as soon as possible if you have funds from somewhere else, obtain the title and then sell the car for full private party amount which will bring you the most value.

Be careful. Shop around.  Know that even if you have bad credit, your business is worth something to the sellers. Do not consent to letting a dealer shop around for rates with more than two financiers. Know your credit standing (FICO score) before you buy. If your credit score has been climbing, even a little, then do re-finance after 3-5 months, especially if you have been otherwise working on improving your credit. Here is the Low Down How-To from CarBuyingTips.com

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Moorea Malatt writes with QueerCents LGBT financial blog.
She is a folk musician, performance artist and Certified Life Coach.
www.mooreamalatt.com
www.queercents.com

Guest post by Brett of Personal Loan Portfolio. 

Although the tax rebate is not yet finalized, many people are already mentally spending the money. Most people only consider the options: save or spend. I have noticed many finance bloggers already announcing their plans to save the rebate. Other people feel it is a patriotic duty to spend it. I believe that the choice is personal, but I have an idea to help resolve this dilemma.

Paying off high interest debt or saving an emergency fund should be your first choice of uses for the money. But if you do not need the money for those purposes, should you invest or spend the money? When congress passes a rebate, they hope that Americans will spend the money to lift the economy. However, the majority of Americans saved, invested, or paid off debt with their 2001 tax rebate. According to one study, only 22% of people said that they spent the money.

Investing in stocks (with the exception of a public offering) does not help a business grow. Investing in the stock market only passes money between investors. There is an alternative to investing in stocks that will allow you to invest your rebate and stimulate the economy - Prosper loans. With a Prosper loan, you can put your rebate in the hands of people who will spend the money stimulating the economy. Dilemma resolved. You can earn a reasonable return on your investment and do your part to help the economy with your tax rebate.

As you search for Prosper loans, limit an advanced loan search to borrowers who need the money for Small Business or Home Improvements. Personal loans and Other loans may also be good categories but you must read the descriptions to ensure that the borrower is planning to spend the money. Funding a vacation, a kitchen remodel, or a wedding are just a few of the opportunities regularly available for lending on Prosper where the money will be used to help the economy.

Investing your tax rebate on other people’s spending using Prosper loans eliminates the false choice of spend versus save. When someone asks if you are spending or saving your tax rebate, you can honestly answer “Both!”

Brett is a relatively new Prosper lender who writes about his lending experiences on the blog Personal Loan Portfolio.

Tomorrow Prosper will mark its two year anniversary. Since launching on February 13, 2006, Prosper’s funded loan volume has grown to over $117 million, up approximately $81 million or 225% from its first year. Prosper’s national membership now consists of over 580,000 individuals, up approximately 405,000 or 230% over the same period.

“We’re looking forward to formally celebrating our two year anniversary and the community who pioneered people-to-people lending in America - Prosper lenders and borrowers – at our second annual Prosper Days conference,” said Chris Larsen, co-founder and Chief Executive Officer of Prosper. “Together with Prosper community members and social lending experts, we will assess our first two years and provide a glimpse of what’s in store for the future.”

January 2008 Prosper People-to-People Lending Market Survey

Membership and Loan Volume Statistics

Estimated Annual Return on Prosper Select Index

Average Borrower Rates on Prosper Select Loans

Mix of Funded Borrowers

Definitions

Since Inception: November 1, 2005 through January 31, 2008. Prosper’s by invitation only “friends and family” launch began on November 1, 2005 and Prosper launched to the general public on February 13, 2006.

Prosper Select Index: The Prosper Select Index return is the estimated average annual return on principal, based on actual delinquency performance to date. The Prosper Select Index includes AA - E credit grade loans for borrowers whose credit reports at the time of application indicated zero current delinquencies, three or fewer credit inquiries, and a debt-to-income ratio of 40 percent or less. The annual return period reflects loans originated in the twelve month period ending one month prior to the observation date of January 31, 2008. Prime Select includes AA and A credit grade loans (credit scores of 720+). Near Prime Select includes B, C, D credit grade loans (credit scores between 600 and 719). Sub Prime Select includes E credit grade loans (credit scores between 560 and 599).

Average Borrower Rates: Average Borrower Rates are the weighted average borrower rates on Prosper Select Index loans with loan amounts between $5,000 and $10,000. Rates shown are interest rates, not annual percentage rates.

Mix of Funded Borrowers: Prime includes all AA and A credit grade loans (credit scores of 720+). Near Prime includes all B, C, D credit grade loans (credit scores between 600 and 719). Sub Prime includes all E and HR credit grade loans (credit scores below 600).

Thinking about using a debt consolidation loan to get rid of high interest debt? Don’t just jump into it, do it the right way. Here are some tips for selecting the right amount and price.

Examine Your Budget

If you haven’t already created a budget, now is the time. List every monthly expense you have. Here is the example Prosper provides:
          Monthly expenses: $ (Fill in Total)
          Housing: $
          Insurance: $
          Car expenses: $
          Utilities: $
          Phone, cable, internet: $
          Food, entertainment: $
          Clothing, household expenses $
          Credit cards and other loans: $
          Other expenses: $

If you leave something blank here, be sure to explain. For example, no rent because you live with your parents. Cool, make sure to mention that. You might want to include 2 lists or total monthly expense figures: 1) current monthly expenses and 2) total monthly expenses with your prosper loan. This can be especially useful if this loan will decrease your monthly expense load.

Be conservative here, everybody slips sometimes. You don’t want to deceive potential lenders, but more importantly you want to be honest with yourself. Missing payments on a Prosper loan will ding your credit score just like any other loan. Don’t risk it.

List Debt Obligations with Interest Rates

Not only are the lender interested in these figures, but these numbers are very important to you as a borrower. Here’s my list when I applied for a loan:

As you can see, some obligations are more pressing than others. These 22-30% APR accounts were killing me. I just couldn’t get ahead. By the way, this is a great time for you to call your credit card companies. Many are willing to lower your rates if you have a good payment history. Those that won’t? They become the target for your consolidation loan.

Determine a Cut Off Line

I decided to attack the accounts above 20% (shaded in table above). That is 7 out of the my 10 accounts with balances totaling more than $7000. I found a 0% balance transfer for $2000 and requested a $5000 loan from Prosper at 19%. Consolidating these debts would not only reduce my monthly finance charge, but would also help me improve my credit score by reducing the number of accounts carrying balances.

Why not consolidate all of my debt into one payment? Several reasons:

1. Lower amounts fund quickly. You are more likely to get funded if you request a small amount. It will take fewer lenders to fully fund a small loan. Also, its going to seem less risky for them. They want to see a monthly payment that you can definitely handle. Plus you’ll have a lower DTI, that helps too.
2. More likely to get funded at a higher rate. If you’re credit is less than perfect, you can not expect a low rate. By selecting only your highest interest debts for this loan, you can reasonably ask for a rate that will save you money.
3. Gain leverage with the credit card companies. As soon as my balances were paid in full, Chase and Discover began to see the light. Credit limit increases and great balance transfer deals started flying my way in no time. APRs were dropping like flies. For example, Chase offered me a fixed 5.99% balance transfer with no fee. That is a great deal. I was able to use that on my next highest interest credit card account for additional savings. I would have lost the opportunity to take advantage of that if I had consolidated all of my debts at once. You might also want to stay on the lookout for 0% transfers for some of your remaining balances. No loan on Prosper will ever beat that deal!

Determine a Good Rate

This rate should be lower than the average APR of the debts you’re consolidating and close to the average APR for loans with your credit grade. Prosper will suggest a rate. Depending on your stats, you might want to go with that rate. If you have a steady income, low DTI, less than 2 inquiries in the last 6 months, and a well-written listing you might be able to go with a couple points lower than the average. Remember, if you’re loan is funded, there’s a great chance that people will bid below this rate. My listing started at 19% and ended below 15%. Choose a number higher than you hope for to make the loan more attractive — but don’t go higher than the average APR of the loans you’re consolidating.

Most importantly, take time filling out a detailed and honest listing. This loan could help you out tremendously, it’s definitely worth the time. Good luck consolidating your debts! I hope that you find my experience helpful.

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Me vs Debt in an excellent personal finance blog written by a sucessfule Prosper borrower.

My all-time favorite movie is Breakfast at Tiffany’s.  Even though it’s insanely glamorous, infused with oddball humor, and driven by some pretty wacky plotlines, it has this really warm, sincere core that most movies don’t have.  One of the reasons for this, I suspect, is that it’s one of very few romantic comedies where people are actually worried about money.

I’m sure that as a personal finance blogger I’m thinking and talking about money a little more than most people.  Still, though, I also notice that people on television and in the movies hardly ever talk about money at all, even though our finances inform our lifestyles, dreams and fears right at their foundations.  I can’t be the only one who sits in front of the TV and constantly asks, “But how is she even paying her rent?” (Yeah, Carrie Bradshaw, I’m looking at you.)

Breakfast at Tiffany’s answers that question.  Holly pays her rent by trading her time as a party girl; Paul is “kept” by a wealthy society dame.  The film is driven by the conflict between maintaining these lifestyles and maintaining their integrity, especially in the face of their increasing romantic entanglement.  And it’s so interesting! Why don’t more people make movies about paying rent?

Each week, Holly visits mob boss Sally Tomato in prison, and passes along messages for him.  After she tells him she’s having trouble saving money, he tells her to switch to a cash-only lifestyle and to track all of her income and expenses.  (Sound advice is sound advice, after all!)

Sally Tomato reads Holly’s expenses to Paul, a writer, and tells him that one day he’ll be able to take this little book and turn it into a novel.  Holly demurs, saying no one would want to read it, and Sally Tomato says, “No, this here will break your heart.”

This makes for such an interesting story because it’s based on something a lot simpler and truer than the convoluted setups of most romantic comedies.  It recognizes that the characters’ lives depend on their money-which shouldn’t be so strange, but it’s a realization that even real people tend to avoid as long as they can.  We all have to get real about our finances eventually-if an awesome old movie full of Givenchy gowns can help us get there, that’s even better.

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Melissa Eastlake is a contributing writer at Queercents, a syndicate of personal finance writers serving the lesbian, gay, bisexual and transgender (LGBT) community. Since its launch, Queercents has offered up daily tips and financial commentary to over 250,000 visitors.