It may not be big news that consumers have learned some valuable lessons from the recession, but it might be surprising at how quickly they have adjusted to economic conditions. 

New Savings Emphasis

The one driving factor towards higher savings is the fear of a lost job. This motivation is providing the fuel for the current savings rate, which economists see going up further in the coming months. And even though they are saving less than they were after the last major recession in 1982, it is a welcomed sign.

Consumers are reducing debt to make room for saving. This is good because even though the standard savings account does not offer much in terms of interest, it is better than allowing unsecured loans to eat up money month to month. Also, this is an important trend because homeowners are recognizing that because of the housing market, they are not going to be able to rely on rising property values as a source for loans in the near term.

Borrowing Changes

People are fed up with credit cards and are shedding their accounts in record numbers. Debit card usage is at all time high levels. Most consumers feel like they have been shut out of the credit market and are seeking different ways to obtain money for the things that they need. They are turning to credit unions in droves because they offer lower rates and a less restrictive attitude when it comes to loans, etc.

Also, the newest rage is peer-to-peer lending in which several Internet based companies become an arbiter between family and friends who decide to loan money to one another. This helps keep the process clear and understandable as well as helping to insure that the borrower repays any loans made.

Less Spending Attitudes

Even though spending is down and expenses are cut to the bone, that trend will change as the economy improves and consumers see more money in their pockets. That will help provide a recovery that is desperately needed by businesses that depend upon consumer cash.

In a matter of months, most consumers will look back on the economic recession with lamentable fondness. Here’s hoping however, that they will not soon forget the lessons learned.

Consumers Have Learned from the Recession was created by and is property of American Consumer News.

You know the conventional wisdom about borrowing money from family members or friends? Never, ever get involved on either side. Even if you pay off the loan and everything is “ok” between you, there is still a possibility that things could go wrong. Then, you would be in a difficult position with this person and you might even damage the relationship beyond repair.

Relationships are the funniest things in the world. One minute everything is ok and the next there is a major problem; mainly because people refuse to handle things in a non-emotional way. Often, what should be a small matter gets blown out of proportion.

Now, add in finances into that kind of environment and you see why the fireworks start so quickly and explode into major, relationship-crashing events.

What are the consequences? The consequences are broken friendships or family relationships in which people who were once close, refuse to speak with one another ever again. You have to answer the question “is it worth it?”

But now there might be a different way to make this work.

What has changed? Enter the world of peer-to-peer lending, with a twist: an organization through which the loan is set up and administered. A company that specializes in this type of activity helps set everything up between the two parties, and the arrangements can be made and handled even though you might live miles apart.

Look into www.prosper.com or www.virginmoneyus.com. These two businesses offer to manage loan arrangements between family members and friends. They also offer traditional lending as well.

Known as “social lending,” you will find these services offered: loan documents, electronic funds transfer, email statements, credit reporting, year-end reporting, changes and re-structuring if needed, hand-holding and tough love.

Can this work for you? You might still be skeptical, and you have every right, but there is credibility to this business model and it is working for many people.

The steps to making this happen include: creating a loan proposal and finding someone to lend you the money; then, contacting one of these companies to manage the loan details; and finally, setting up an interest rate and payment schedule and consummating the transaction.

It’s not perfect but it is a giant leap from the normal methods of borrowing from family and friends. At least there is a structure to which both are beholden. Using this can help save relationships and actually make it an enjoyable experience!

Revisiting Loans from Friends or Relatives with Peer-to-Peer Lending was created by and is property of American Consumer News.

Signs of bad debt.

While any debt can become bad debt if it restricts your ability to grow financially, the following are warning signs of debt (or lenders) that are particularly toxic to your finances.

• Payday loans are a great example of bad debt for this reason, the interest rate for repayment of these loans is in the triple digits. More common which makes it more dangerous is credit card debt- which generally has a standard or default rate in the double digits making it harder to repay-keeping you in debt longer.

• The lender or creditor can change the terms of repayment or apply higher interest at any time with little restriction or provocation. You see this happening with credit card companies right now. You may have older or unused accounts canceled, your credit limit reduced and interest rates raised regardless of your payment history. You are not guaranteed fair treatment because you do something as routine as pay your bills on time.

• Lenders who make credit easily available, perhaps too easily may be trying to make it easier for you to spend more than you can reasonably afford to pay back, making it difficult if not impossible to break the cycle of higher payments that do little to reduce your debt.

Tips to unload bad debt.

Getting out of debt is not easy, in some cases it becomes so overwhelming that people avoid dealing with it completely. Ignoring debt will not make it go away instead you are just delaying the inevitable, there tips can help you begin the journey toward debt elimination.

• Get out of debt on your own. For many people the best (fastest, cheapest) way to get out of debt is to begin an aggressive repayment plan on your own. Referred to as the snowball method you begin by listing all of your debt, who and how much you owe and at the interest rates on the loans. You then begin paying the debts off one by one, starting with the most damaging (payday loans, or higher interest rate cards) putting as much money possible into your debt repayment. This may require picking up an additional job or selling some of the things cluttering up your home on ebay, but the goal is the same. Put all available money into debt repayment, paying the maximum available on one account while maintaining the minimum payments on the other accounts. When one account is paid off, redirect that payment to the next account you wish to pay off and continue until you are debt free.

• Avoid high risk solutions- Tapping into your home equity or 401(k) may seem tempting to get a lower interest rate but should be avoided if possible. In the current economy risking your home or banking on having your job for the next 5 years (or five months) is not sound financial planning.

• Look into social lending networks- Peer-to-peer lending is becoming more popular as securing traditional loans becomes more difficult. If you find the snowball method is not working, you may be able to secure a personal loan to consolidate your debt through a social lending network like Lending Club or Prosper.

• Recognize when you need help- If you find that your debt has become so unmanageable that the DIY method or social lending is no longer a realistic option, it may be time to throw in the towel and reach out for assistance. If you can no longer pay your minimum payments, lost your job or your debt is more than your annual income it may be time to look into other debt elimination options.

Unload Bad Debt- Tips To Get Started Today was created by and is property of American Consumer News.

Social lending sites make it possible for people who have extra money to lend it to people who are looking to borrow money – and both parties benefit.

Lenders benefit by earning interest on the money they lend – much like any other kind of investment. Just as other investments have risks, there are some risks associated with lending on a peer to peer lending website (for example – the borrower doesn’t pay the money back!). As a borrower, there are numerous advantages of using social lending websites rather than traditional sources like bank loans, payday loans, credit card cash advances or borrowing from friends and family.

Borrower Benefits:

Interest Rates: Traditional sources of lending set their interest rates by the prime rates for the most part, but when you borrow through a social lending website, the lenders can specify acceptable interest rates on the money they lend. Competition among lenders may help lower your interest rate.

Origination fees: Many bank loans charge an origination fee when you first take out a loan, and the actual amount can vary. On both Prosper.com and LendingClub.com, you pay between 1 and 3% of the total amount borrowed.

Credit Reporting: When you borrow from a friend or family member, you won’t be able to improve your credit score through making your payments on time. As you make on-time payments through a peer to peer lending source, you are reported to the credit bureaus regarding payment status, which helps your credit score.

How to Choose Between the Leading Social Lending Websites:

Prosper.com and LendingClub.com are by far the most widely known peer to peer lenders online.  Choosing between the sites may come down to your personal credit score because LendingClub.com has a minimum requirements for a credit score to be eligible for borrowing.  If  you don’t have at least a 640 credit score you will not be able to apply for a loan through their website. LendingClub also requires that your debt to income ratio is under 30%, and that you have had no delinquencies in the last year – where as Prosper allows everyone to apply for a loan and leaves the decision up to the lenders themselves as to whether they want to take the risk of lending to you.

Other than these slight differences in who is eligible to apply, both Prosper and LendingClub offer similar services to borrowers and there is nothing that stands out to make one site better than the other

Should You Consider Social Lending? was created by and is property of American Consumer News.

Starting on June 4^th, there will be a new type of peer to peer lending targeted to college students. GreenNote is launching a national social networking service that will enable students to raise money to pay for school, regardless of their credit scores.

At first, it might seem unnecessary for this type of lending, because historically, most students didn’t have any trouble obtaining loans for education. Unfortunately, the state of the economy is affecting student loan lenders – particularly private loans that many students have to rely on if they don’t qualify for federal loan programs.

In previous years, many parents would take home equity loans from their homes to help finance their children’s higher education – but homes are no longer working as well as “cash machines” and it’s not as easy to get equity from your home as it once was.

Private lenders are charging interest rates as high as 20%, and the government has cut back on the amount of money they lend each year. On top of the difficulty obtaining funding to attend college, the price of collect itself is increasing.

Silicon Valley-based GreenNote is using the power of microfinance to allow students to receive affordable loans without a credit check, co-signer or proof of citizenship, while lenders earn a return on their money and the knowledge that they are making a positive contribution to the next generation. It’s extremely similar to how Prosper.com operates- except for the fact that it’s targeted to students needing money for college, and that it doesn’t require good credit. (Why? Because most students have not yet established a credit score or adequate credit histories that can be used to determine the level of risk). Loans through GreenNote tend to offer reasonable interest rates (about 6.8%) for students borrowing for college.

GreenNote is backed by Menlo Ventures, and has the former CEO at PayPal and Intuit on the team as well as executives from WBC Financial Group and Glenbrook Partners

Peer to Peer Lending for College Students? was created by and is property of American Consumer News.