When a lender gets an investment from someone besides the government, people take notice.  Today it was announced that LendingClub is getting $12 million in venture capital money to help it keep growing.  That’s big news when traditional financial institutions are taking billions just to stay in business.

I’ve posted before about LendingClub, the peer-to-peer lending network.  Unlike traditional banks, they help people loan money directly to one another via their network, and hope to get better rates to both lenders and borrowers in the proceess. 

They’ve grown in both members and as a company.  They’ve reportedly doubled in size over the past 5 months and have filed with the SEC, both very important steps.  But they also now have some major financial backing as they have closed a $12 million round of funding, which gives them a lot of strength as a lender and plenty of room to grow.

I really see places like LendingClub as the future of lending.  The recent news of bank colapses and near colapses (like Citibank’s stock falling below a dollar) has put traditional banking on notice.  But like a traditional bank, they offer a variety of loans, from debt consolidation loans to auto loans to home improvement loans. 

The rates paid to vary on a sliding scale according to the one’s credit score, with the best loan rates being well below the national average.  As of this writing, LendingClub reports rates starting at 7.88% with national averages for personal loans being at 11.43% and credit cards at 13.64%.  So why not check it out?

Already use LendingClub or another peer-to-peer lending service?  Tell us about it in the comments below…

Source: TechCrunch

Between the bank bailout, the auto industry bailout and the stimulus plan, the US government has throw almost one and a half trillion dollars into the economy. The good news is that this may make a short term impact on the economy. The bad news is that we may be headed right back into the same problems as soon as the economy stabilizes.

Learn More: Buy The Return of Depression Economics and the Crisis of 2008

Why all the doom and gloom? In spite of the government’s best intentions, it’s my opinion that we’re really not fixing the root of the problem, which is the lax lending and banking laws After throwing over a trillion dollars into the economy, partly to remove “toxic debt” the laws that allow it are still in place.

Let me explain. After the Great Depression, the Glass-Steagall Act was passed. The act, in part keeps banks from getting involved in issuing credit and turning around and making investments. That kept banks limited in what they were allowed to do for decades, and for the most part, the economy did OK.

In the 1980’s there were moves to repealing the act. After all, things were going fine, and banks could handle things better now that the Great Depression was a half-century in the past. Changes were made and rules were relaxed. Then came the economic boom of the 1990’s.

At the end of the 1990’s the Gramm-Leach-Bliley Act was passed in 1999. That act passed on a vote of 214 to 213 in Congress and allowed banks to become conglomerates that allowed banks to do a lot of things they hadn’t been able to do.

One of the things that banks could now do is create investments, such as mortgage-backed securities out of the money they loaned. As many people know, those investments, combined with sub-prime lending and “exotic” loans, such as interest-only mortgages and a variety of adjustable rate mortgages, were a big part of the cause of the “toxic debt” and real estate meltdown that’s fueling our current recession.

Unless we change the laws, it stands to reason that we’re going to end up in the same mess all over again. It took just 10 short years after the repeal of Glass-Stegall for us to end up in one of the worst recessions since the Great Depression. Maybe the next meltdown won’t involve real estate, but I’m of the opinion that it will happen soon.

Here’s some great resources to learn more:

From the gigantic brains at Wikipedia:

• Gramm-Leach-Bliley Act
• Glass-Steagall Act

From the other gigantic brain at PBS Frontline:

• The Long Demise of Glass-Steagall

What bothers me about this is that for all the talk I see about the stimulus, I don’t see any talk of changing the banking laws. Maybe we don’t need to go all the way to completely reinstating the Glass-Steagall Act, but we need to do something, or toxic debt will continue to poison our economic system.

What do you think? Am I way off base here? Let me know in the comments below…

Just how safe is your identity?  Identity theft is all over the news, but I wanted to learn a little more about how prevalent this crime actually was, so I did a little research and came up with some stats to make it seem a little more real, and it wasn’t exactly encouraging.

Prevalence of Identity Theft: By The Numbers

• The average amount obtained during a theft was $1,882: That’s quite a bit. The good news is that banks will usually cover the charges if identity theft happens.  The bad news is you’re in for a bit of a shock once you find out it’s going on.
• Victims had to pay about $371 out-of-pocket expenses: There still are expenses, such as payment of fraudulent debt, wages lost, legal fees and other costs.
• 1 in 10 had to spend at least 55 hours resolving the problems caused by identity theft:  Many didn’t have that bad of a problem, but those who got hit hard took a long time to set things right.  1 in 20 had to spend 130 hours or more!
• The total obtained by thieves was $15.6 billion: That’s getting close to government bailout size money.  To put it in perspective, that’s almost six times what Forbes magazine says Donald “You’re Fired” Trump is worth.
• 8.3 million people in the US were ID theft victims: That’s as if the entire populations of Los Angeles, Chicago and Philadelphia had their identities stolen in a single year.

I got these stats from the Federal Trade Commission’s 2006 summary. That’s a little dated, but based on current news reports and how easily your identity is stolen, I only assume that identity theft is more prevalent.  Not to mention all the ways identity thieves conspire to sell your stolen data these days.

Fortunately, there are things you can do, such as check your credit reports yearly at www.annualcreditreport.com or by signing up with a credit monitoring service, such as one of Equifax’s credit monitoring products (that’s what I use) or one of the many others out there.  I want to be able to catch things before they get out of hand.

What’s your experience with identity theft?  Got any statistics?  Let me know in the comments below…

The bad economic news is everywhere.  The Washington Post says “Economic Signs Turn From Grim To Worse” and CNN Money proclaims this the “Sharpest decline in 26 years.”  Sure, times are tough, but I wanted to end the week with some resources to help us cope in hard times.

Here are a few categories that I can think to look to to help you get employed and save a penny or two during good times, bad times and horrible times.

Jobs

• Monster.com – huge site, some annoying ads, but they’ve supposedly had a big redesign recently.
• CareerBuilder.com – Big site that also has content for job seekers.
• jobs.yahoo.com – Owned by Yahoo! so there’s tons of exposure.
• Dice.com – Mostly IT, but great if that’s your line of work.
• LinkedIn.com – A great way to network and control you professional presence on the web.

Saving

• IngDirect.com – They’ve had cutbacks like all other banks, but they also have some sweet rates of return on savings.
• FNBO Direct – Another place that lets you park your money for a better return than many places offer.

Borrowing/Lending Money

• LendingClub.com – I recently outlined this peer-to-peer lending site.  If you’ve got a credit score of at least 660, or want to lend money at a solid rate of return, check it out.

Geting out of debt

• Radio host Clark Howard recommends the National Foundation For Credit Counseling to help if you’re having trouble with debt. — nfcc.org
• Dave Ramsey – He’s got a no-nonsense approach that works for some and seems to irritate others.  In addition to authoring multiple books, he runs a radio show and offers live seminars around the US.  I attended one of his seminars a while back andlearned from it. — daveramsey.com

Got any resources you’d like to share that can help during a downturn?  Post them in the comments below…

The global credit crunch may mean an opportunity for new lending strategies, such as peer to peer lending.  Banks are facing huge losses and the lack of transparency has made it hard for banks to lend between each other, opening the door for a newer, more direct type of lending, known as peer to peer lending.

Peer-to-peer, (or person-to-person) lending is just what it’s name implies.  You loan money to another person, with a third party acting as the intermediary.  The key to doing it this way is the opportunity to get a better return on money you lend, or a better rate on the money you borrow.

There is a downside.  Just as with traditional lending, sometimes people will default on loans.  The intermediary should do some kind of background check on those seeking money.  For instance, Lending Club currently requires a FICO score of 660, among other criteria to loan people money.  You’ll have to check with the intermediary to see exactly what the details currently are.

There’s a even a global twist to this.  Kiva.com is a site that coordinates loans between lenders and businesses in developing countries.  What makes it interesting is that lenders can pick individuals they want to help.  I’m not sure on the returns, but one is likely knowing that you’re helping develop an economy in troubled times.

No matter what, peer to peer lending is expected to grow dramatically.  With that kind of growth and better returns possible, peer to peer lending just might be the future of how we loan and borrow money.

Have you tried peer to peer lending? Any good or bad experiences?  Let us know in the comments below.  You can check out Lending Club here.

With the economic downturn, people have turned to pawn shops in an attempt to get some cash.  In an attempt to get some extra cash, people are pawning items for quick money.

In case you’ve lived an unusually sheltered life, pawn shops will give you a loan for an item, usually at high interest rates.  You’ll have a time period to buy the item back (in other words pay the loan off in full) or the item is put up for sale.  It’s traditionally considered a last resort for people the poor and desperate, but more an more people are apparently turning to these sorts of loans for quick money.

Check out the video about this I found on Afternoon Rally’s video feed.

But there’s a down side for pawn shops, who are now getting overloaded with inventory.  What sells?  At least in the US, it’s guns and motorbikes, according to the video.

I can’t help but think that someone could be much better off trying to sell their stuff at a discount on a place like eBay or Half.com than hope to pay off a hefty loan.  I just couldn’t risk putting a high-ticket item like a family heirloom up either.

Have a pawn shop experience?  I’d love to hear about it.

What better way to start off the new year than by taking care of some personal finance matters?  OK, that might not sound like the most exciting thing in the world, but by summer, you’ll be more likely to spend a worry free vacation knowing you’ve handled a few of the basic issues back in January.

I’ve compiled a short list of good personal finance links I think most everyone should visit, separated into both free and pay links.  I think they are all worth paying a visit to.  Here’s the list:

Free Links

• Do Not Call List: Keep the telemarketers at bay by registering your number here.  Registration is permanent and should curb most calls.  There are loopholes, such as political campaigns and surveys, but I hardly get virtually no sales calls now.  https://www.donotcall.gov/
• Opt Out Prescreen: Sick of the credit card offers?  You can opt out of the pre-screen list, getting you out of most of those mail credit card offers.  It might also be a way to fight off one source of identity theft. https://www.optoutprescreen.com/
• Annual Credit Report: You can get one report per year for free.  I think that it’s not a total solution, but it’s worth checking what’s on your report so you can correct errors and see if someone’s been using your report for their credit. https://www.annualcreditreport.com/cra/index.jsp
• Mint: Mint is personal finance tracking software and it’s pretty slick.  They’ve updated since my Mint review, including a new iPone app. http://www.Mint.com

Pay sites:

• Identity Protection: With identity theft on the rise, it’s smart to have a solution that works for you 24/7 to make sure thieves are at bay.  The annual credit report I mentioned is great, but a LOT can be done with your identity in far less than 12 months. ProtectMyID is run by one of the biggest credit agencies out there, so they have a lot of experience behind them.  Try it free for 30 days and see if it makes a difference.
• Big Crumbs: I started shopping at BigCrumbs a while back and think it’s pretty slick.  The idea is simple - they offer you a rebate for things you buy though the site.  Think of it as a coupon site, except you don’t need to search for the right coupon, you just shop and get money back.  Tip: sign up as a CrumbSaver and you’d get more money back on what you buy.  Unless you’re really going to get a lot of referrals, it’s the best route.

That’s the sites I have so far.  What sites do you know of?  feel free to comment below.

Identity theft is still around. Of course, it always has been, but sometimes it takes a story to bring things back into the spotlight.

What caught my attention this time is that the identity thieves aren’t cloak-and-dagger types, they aren’t working in some organized crime ring abroad, nope, they are pretty regular people — a boyfriend and girlfriend who learned to live large on other people’s debt. Check out the before and after photos of the woman who just entered a guilty plea and now faces 2 years or more in prison.

Who’s Stealing your Identity?

The fact is, identity theft can still happen to any of us at any time, without us even knowing. What’s even more shocking is that the Federal Trade Commission’s 2006 Identity Theft Survey Report shows that 16% of the time the victim actually knew the thief — often a family member, friend or neighbor.

How to Prevent Identity Theft

There are several ways to stop theft before it happens. The FTC lists several, including:

• Protect Your Social Security Number — It’s a key ID thieves can use to access your data.
• Treat your trash and mail carefully — Dumpster and mailbox dives are big ways thieves get your identity.
• Verify sources before sharing information — never give data out to someone who’s called you on the phone, be sure of who you’re communicating with.
• Select intricate passwords — Using “password1″ just isn’t going to cut it. Thieves can get an online ID and then hack every site they think you might use.
• Be careful on the internet — Sadly, “phishers,” thieves who set up fake sites to get your data, have made it so we must be careful about what sites we are on.
• Safeguard your purse and wallet — The $100 in cash in your wallet can be the least of your worries these days. A thief can access all your account numbers and start using your cards and ID to get new accounts.

How To Monitor Your Credit For Identity Theft

If thieves do get your identity, it’s important to stop the damage as soon as you can. The law in the US has mandated that everyone has access to their credit report from all three major agencies — Experian, TransUnion and Equifax — once a year. You can get all three reports from www.annualcreditreport.com for free, but be aware that identity thieves take a lot less than 12 months to operate. That’s why I use Equifax’s Credit Watch to monitor my credit as well. It comes with automatic triggers and emails me if something is up. So far, I’m safe.

Got an ID theft story? Share it below in the comments…

Note:  I first wrote this article in 2006.  It’s interesting to see what’s happened in the mean time.  The much-hyped  exotic loans have caused a collapse in the credit industry. Here’s an update to what I wrote back then.  It’s sad to see how things have ended up slightly worse than what I predicted.  Here’s the toll silly lending has taken:

 Not only are home owners facing a mortgage crunch, the banks that handed out the money are finding they aren’t getting the returns they hoped for.

LendingTree.com has had to let go of 255 people and is just one example of the credit crunch.  Mortgage companies and banks have had to close, consolidate or cut jobs. 

In a bit of silver-lining news, WaMu will apparently require more disclosure from brokers.  That’s good news for everyone, if you ask me.  Some sense being added to the whole process will slow the market for a while, but will keep the kind of collapse we’re seeing from happening in the future.

Here’s the original article:

Owning a home.  It’s the American dream.  This used to be easy – at least in theory.  This is how I remember people it going:

• Save up 20% down.
• Get a 15 to 30-year fixed mortgage.
• Sign your name (about 100 times).
• Make payments and eventually own the place.

Granted, that was way back in the late 1900’s, so my memory might be off.  Some people chose an adjustable rate back then, but many refinanced that (like I did on my first house).

My, how things have changed.  Here’s the new way to buy a home:

• Save up next to nothing down.
• Get one of a variety of exotic mortgage products, including a variety of adjustable rate mortgages, interest only mortgages or even longer term mortgages like the new-fangled 50-year mortgage.
• Get a second mortgage to cover that 20% you didn’t have to put down.
• Sign your name like 100 times.
• Freak out when interest rates go up.
• Refinance.
• Refinance again to pull cash out of your home.
• Hit a snag when gas prices go up, or the economy goes down.
• Refinance your credit card balances into your home.
• Fall behind on payments.
• Sell the home or get foreclosed on.

Isn’t the 21st century great?  This isn’t a plan for how to own a home, it’s a recipe for how to stay in debt forever.  I just read that foreclosures are up as well as bankruptcy filings.  It’s part of why I’m worried about the economy, but I can’t do much about anyone but me.  I read that mortgage rates may have dipped a bit recently, so I’m going to try to get out of the interest only mortgage I’m in and get into something fixed and no longer than 30 years.   Someday, I’ll actually own the place I call home.

ANOTHER UPDATE:  I’ve gotten out of my interest-only mortgage and have a 30-year fixed.  It has worked great for me.  I can only imagine what my interest-only payments would be now.

I’m talking about plastic money – credit cards.  A new twist on this is the use of debit cards in games.  Of course, marketers and game makers are always looking for ways to mix advertising into a game.  Just look at the multiple editions of Monopoly that exist, such as university branded games.  But is it right to add plastic money to a game children will play?

Here’s my quick list of games or toys I found that include credit or debit cards:

• Cashless Monopoly – Hasbro is introducing a version of monopoly with (Visa branded) debit cards for payment.  This is what got me worked up enough to write this article.  Yes, it’s just debit cards, and yes, I use one myself.  But I’m worried that kids might start thinking that money comes from payment processing companies.  I’d prefer they learn to handle cash first.  Maybe that’s just me.
• Mall Madness – This game, which is apparently targeted at girls, allows them to spend money at the mall – including the use of credit cards.  It drives me nuts.  It’s also one of my oldest daughter’s favorite games.
• Shopping Spree Barbie – I thought they had canceled this one, but I guess I was wrong.  According to the description, Barbie isn’t just packing a female figure that doesn’t occur in nature, she’s carrying credit cards for her shopping spree.

I wonder what a “Frugal Living Barbie” would look like.  She could come with a complete line of thrift store clothing, a sensible used car and would always stick to her monthly budget.  Oh, the fun a young girl could have!  Um, maybe not.

Anyone out there know of any other games or toys that promote plastic payment?  Comment on it below – I’d love to hear about it!