What does the term “financial wellness” mean to you? For some it means consistently making progress in your checking/savings accounts; for others it involves saving for big, and often unplanned, expenses or emergencies; and for many, it’s about paying off debt.
At Prosper Marketplace, we believe that financial wellness starts with the feeling that you’re in control of your finances. In an effort to better understand the current state of financial wellness and Americans’ sentiments toward their financial standing, we surveyed 1,000 adults about their money habits and resolutions.
Today, we’re excited to release the findings in the form of our Prosper Marketplace Financial Wellness Study.
Overall, the study showed that amidst ongoing economic volatility, Americans are struggling to make ends meet, and few (only 29 percent) feel strongly that they are in control of their finances. Many do not have the financial freedom to enjoy life but improving financial wellness is a top priority for 2016 and beyond.
Here are some of the most interesting findings:
Nearly 50 percent of people surveyed are living paycheck to paycheck and few (less than 50 percent) have the means to absorb unexpected expenses;
Many are struggling with their debt; over 60 percent of Americans have credit card debt and two-thirds are going deeper into debt by not paying them off in full each month;
Debt relief is ranked a top priority for improving standing; closely followed by consistent progress in paying off debt (44 and 34 percent, respectively);
When asked about current and upcoming steps towards financial wellness, over 60 percent of those surveyed said they currently have, or plan to have, a financial plan in place.
Additionally, the survey asked people about the impact of technology on one’s financial wellness. Here’s some of the findings:
The majority of Americans (65 percent) are currently using technology to improve their financial well-being, and those people say it’s making them feel more in control of their finances (84 percent);
The majority of respondents use between one and three applications to manage their finances, and most use those apps at least a few times a week;
A growing number of survey participants are also using personal financial management tools such as BillGuard (29 percent) and marketplace lending services like Prosper (16 percent).
What do you think? Do you feel like you have control of your finances? Do you have plans in place to get on top of your finances? What tops your list of financial goals this year? Tell us in the comments! You can also share your thoughts with us via Twitter or Facebook.
If you’re struggling with debt, chances are there are two words you’ll hear repeatedly as a possible solution: debt consolidation. Even so, when it comes to the process, you might be confused where to start. Here’s a primer.
First, what is debt consolidation?
Let’s say you owe money on three credit cards. Each charges you on a different payment schedule and at a different interest rate—a fairly complicated process to manage. Consolidating your debt means you put it all together to refinance it. In other words, you change its terms and schedules by putting it all in one place via an agency or lender. This means you have only one monthly payment at a new (often lower) interest rate. The lender then sends tailored payments to all your original creditors. This can make life a lot easier—you know exactly how much you need to pay each month, where that money is going, and it may even help improve your credit score.
To decide if debt consolidation is right for you, ask yourself these questions:
Do you have a lot of unsecured debt? Unsecured debt is any debt that does not have physical property as collateral against it, like your credit card bills. If yes, then consolidation is a good option. Don’t consolidate against secured debt, like your home, or you may end up losing it if you miss payments.
What are the APRs on your credit cards? The average credit card rate can range from 16 to 19 percent, but when you don’t pay your minimums, this range jumps to 23 to 29 percent. If you are in the latter range, you should look to consolidate, as you will likely get a better rate.
Do you have good credit? Your credit score will dictate how low a rate you can get. If you have a credit score of 640 and above, online marketplace lenders such as Prosper could be a great option to make it easy for borrowers to consolidate high-interest debt. Instead of juggling multiple bills with varying high interest rates, you can take out a loan to pay off all your debt, and then simply repay the one loan at a lower interest rate. Loans offered through Prosper have rates that are typically lower than credit cards. In addition, loans are fixed-rate, fixed-term with no prepayment penalties.
If you want to explore consolidating your debt, here is what to do next.
Set up a counseling session. A credit counselor can help you look at your finances holistically and identify the best avenue to reach your debt-free goals.
Do the math: Consolidating via a marketplace lender like Prosper can save you a lot of money. Let’s say you put a $10,000 medical expense on your credit card. According to Bankrate.com, if you just pay the minimum each month, it will take 28 years to pay off your debt, and you will end up spending more than $12,000 in additional interest payments. Compare that to marketplace lending, where you can pay off your debt in three years with a fraction of the interest payments—savings could amount to more than $11,000.
Research a good credit agency. Many agencies have high service fees and interest rates that are very comparable to other creditors, so do your homework. Look for an agency that belongs to either the National Foundation for Credit Counseling or the Financial Counseling Association of America. Marketplace lending is a smart approach for debt consolidation because of its low interest, fixed rates, fixed terms, and lack of prepayment penalties or hidden fees. It’s also fast, with most people getting their money in 3-5 days.
Know that your work isn’t done. Refinancing your debt is only the first step. As you would with a credit card company, make sure to stick to your plan to make timely, regular payments over the course of your loan term. Remember that your debt still exists—it just looks different (and a lot better!).
If all of this sounds and looks overwhelming, don’t be deterred. You’ve taken the first step of educating yourself about your options. With the right partner and some reorganization, discipline, and perseverance, you will be on your way to financial well-being. For inspiration, check out these stories of people that successfully navigated this journey.
 According to the Bankrate.com Minimum Payment Calculator (http://bit.ly/wBsq2). This estimate assumes a 16.00% interest rate and a minimum monthly payment equal to 1% of the outstanding balance plus any new interest. Your actual minimum payment, payoff time, and payoff cost will depend on your account terms and any future account activity.
 This is based on a three year $10,000 loan with a Prosper Rating of AA and a rate of 5.32 % (5.99% APR) would have 36 scheduled monthly payments of $302 resulting in total interest charges of $842. To qualify for an AA Prosper Rating, applicants must have excellent credit and meet other conditions. Between October 1, 2014 and September 30, 2015 the average three-year loan rate presented to other pre-approved applicants was 12.8% (16.0% APR).
Jerry’s #MyProsperStory is about making an impact in the world.
In 2004 Jerry Hughes, a top advertising executive in Minneapolis, was diagnosed with HIV. His surprising diagnoses left him feeling uncertain about the future. The only thing Jerry knew for sure was that he wanted to help others. So, using all of his spare time, Jerry started the Hughes Foundation, a non-profit organization for people affected by HIV/AIDS globally.
Jerry used a loan through Prosper to consolidate debt so that he could “keep his peace” and dedicate his life to sharing hope with those who are less fortunate.
We reached out to learn more about how Prosper helped Jerry take control of his finances. Here’s what he had to say about financial well-being and the Hughes Foundation:
Q: What words come to mind when you think about your financial wellness?
A: Peace, hope, giving, free, blessings.
Q: How did you discover Prosper.com? What was the purpose of your loan through Prosper?
A: I first discovered Prosper through a friend. I had credit card debt and was paying a very high interest rate. I wanted to consolidate my debt and save money on interest so that I would be able to spend more time in India serving my calling, which is helping people make it through HIV/AIDS.
Q: How has a loan through Prosper helped you?
A: If it wasn’t for a loan through Prosper I would not be following my personal calling to serve people living with HIV/AIDS. I would be working an unfulfilling job just to pay bills that are endless and many. With a loan through Prosper, I was able to combine everything into one debt and one payment. This has helped me keep my peace and share hope with others. It’s been a ripple effect.
Q: Tell us about about a day in the life of Jerry Hughes…
A: I am currently serving people affected by HIV/AIDS in Nagpur, India. Many mornings consist of seeing guests of our Wheels of Hope program who have been abandoned in many ways because they are living with HIV/AIDS. We find out what their needs are, such as medication, food, or paying bills, and make sure they are moving in a hope-based way vs fear.
In the afternoons I speak at various schools or colleges and talk about HIV prevention.
The Foundation also works at a local orphanage for children with HIV who have been abandoned because their parents died from AIDS. We have a pen-pal program for them to help improve writing and reading.
Many days our team will also record our popular “Scooter Cams”, which is a way we use humor on the streets of India to record funny videos that teach ways to prevent HIV.
I end most of my days by responding to the thousands of emails that I get from all over the world from young people who are living with HIV/AIDS and have no one to talk with. I return each email as if I am sitting in person with them having a cup of tea.
Q: How can people get involved in the Hughes Foundation?
A: People can get involved with Hughes Foundation via financial support. We need support to operate our current Big Brother India Project and have just launched a documentary project about 17 children in India who are living with HIV and have been orphaned by AIDS.
We are also in need of volunteers who can recreate our Hughes Foundation website. And, if anyone is in Nagpur, India they can certainly volunteer with any of our programs here.
The #MyProsperStory Q&A has been edited for the purposes of this blog post.
Good credit is something to strive for, not to fear. Good credit makes it easier to get a loan, and may qualify you for better interest rates. A good credit score is also an insurance against a rainy day – if you’re faced with an expensive car or house repair, medical treatment not covered by insurance, or a family emergency, you’ll likely be able to get a loan on good terms to address these large expenses.
Here are 6 ways you can start to raise your credit score today:
Monitor your credit closely
There’s no reason your credit score should be a mystery. Thanks to consumer credit monitoring services, tracking your credit score has never been easier. And because of rampant data breaches, close monitoring of credit has never been more important—even if you have excellent credit.
Taking just a few minutes to sign up for a credit monitoring service is a great investment in your financial well-being. BillGuard is free to install. By enrolling, you can get your credit score, updated monthly, at no cost. You can also easily see the factors that contribute to your credit score, so you can work to improve the things that are holding you back from a higher number.
Increase your credit limits
Raising your credit score means lowering the proportion of the debt you owe to the credit you have. Aim for a percentage of 30% or less. Paying down debt can take a while, but if you can raise limits on existing credit cards, you may be able to lower your credit utilization ratio with just a few minutes of effort. (Opening new credit cards can have the opposite effect.) Call your credit card issuers to see if they will raise your limits.
Be honest with yourself: If higher credit card limits have caused you to spend more in the past, this tactic just isn’t worth it. Instead, focus on the following steps.
Pay down your (revolving) debts
This one may seem obvious—the less debt you have, the better your score is — but not all debts are created equal. For example, a home mortgage or a student loan won’t count against you as long as you make regular, timely payments.
Focus on paying down your revolving debts: credit cards and things you have purchased through a financing plan, such as a new TV or computer. Pay off your small balances right away. Once you’ve paid off a credit card, don’t cancel it. Your free-and-clear line of credit will help to lower your credit utilization ratio.
Here’s a surprising thing about credit cards: Even if you pay your entire balance off every single month, using them could still be hurting your credit score. That’s because credit bureaus look at your statements’ monthly closing balances, not whether you’ve carried a balance.Using your credit cards less and lowering your statement balances is an easy way to increase your credit score, even if you already have good credit.
Consolidate your debt
Debt consolidation has two important goals, and they’re both good news for your credit score: 1) increasing the average age of your revolving lines of credit without reducing your total credit limit, and 2) lowering the interest you’ll pay over the lifetime of your current debts. Consolidating debt can also help you to pay off debts more quickly.
If you have several credit cards from a single issuer, ask to consolidate all of your credit cards onto the oldest card. If you qualify, consolidating credit card debt via a marketplace lender such as Prosper can help you to save even more because rates are often lower than a credit card. The idea is to stop using your credits cards, not to close them.
Be patient, pay on time and spend wisely
Like paying off your debts, raising your credit score doesn’t happen overnight. It’s important to take the strategic steps mentioned above, but ultimately, paying your bills on time every month, spending responsibly, and using your credit cards less (or not at all) will get you there.
Last month the Federal Reserve announced plans to raise short-term interest rates to between 0.25% and 0.5%—a move that affects millions of people’s lives.
The good news for consumers is that this is a small hike. If you have no or low debt, the rate hike probably won’t affect you significantly. But the average U.S. household, which carries $15,355 in credit card debt, has already been impacted by higher monthly interest rates.
At Prosper Marketplace, we’re dedicated to helping people achieve financial well-being, so we wanted to understand how consumers felt about the hike. We surveyed more than 500 Americans about the rate increase and found that nearly half of respondents didn’t know that rates had gone up.
In other words, our survey suggests many Americans are totally unaware of the recent Fed interest hike, which means they’re actually paying more for their previous debts — as well as for future purchases they make with a credit card — without realizing it.
These higher short-term interest rates also affect individual consumers.
How Higher Short-Term Interest Rates Could Affect You in 2016:
If you have credit cards, your interest has already gone up
Now that short-term interest rates have gone up, so has the average interest on credit cards. The credit card interest is now the highest rate in three years, meaning everyone with credit card debt is now paying more for their previous purchases.
It’s always in consumers’ best interest to consolidate high-interest debts if it means paying less in fees and interest. Consolidating high-interest debt via a marketplace lender, such as Prosper, can help save consumers money because rates are often lower than a credit card.
Your savings accounts won’t see much benefit
With higher interest on credit card debt, it may seem like individual savings accounts would see higher interest as well. With recent interest on personal savings accounts being so low—typically less than 1%—higher interest on savings would motivate consumers to save. While the higher short-term rate will likely trickle down to personal savings accounts, the increase is small enough that it won’t have much effect on most people’s savings.
Loans may be easier to get—but check those interest rates
Higher interest rates mean that debts are getting more expensive, whether it’s a $5 latte on a credit card or $50,000 to make home improvements. Higher interest rates also means that banks may be more willing to issue credit. While lending has rebounded to a certain extent since the financial crisis, credit has remained limited in some areas.
Don’t jump the gun, though. Remember—interest rates have just gone up. Loan seekers should still shop around for the most competitive rates, which may not be offered by traditional banks.
The bottom line is that the Fed’s recent interest rate hike won’t have a major impact on your finances unless you have a high balance. That said, regardless of how much debt you have, the changes that happen on a macroeconomic scale affect all of us to some extent. The more you know about how these changes impact you, the better you can plan for financial well-being.
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As of February 1, 2013, the Prosper marketplace was transferred by Prosper Marketplace, Inc. to Prosper Funding LLC, a wholly-owned subsidiary of Prosper Marketplace, Inc. From and after February 1, 2013 Prosper Funding LLC is the sole obligator of Notes offered and secured by loans made through the Prosper marketplace, including Notes originally issues by Prosper Marketplace, Inc. prior to such transfer. Prosper Marketplace Inc. contiinues to provide services to Prosper Funding LLC relating to loan and Note servicing, and may interact with borrowers and investors in relation thereto as agent of Prosper Funding, LLC. Except where otherwise noted, throughout this website "Prosper" refers to Prosper Funding LLC including acting directly or through its agents.
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