APY GUY: Maximize Your Savings & Earnings

Wells Fargo Checking Account Bonus – Now $400 [Nationwide]


image credit: bonusoffer.wf.com/promo400

Yes, you read that right—a $400 checking account bonus available to new customers nationwide!

​Wells Fargo​ routinely proves how much they want your business with excellent welcome offers such as this one. From now until the end of July 2020, Wells Fargo will provide all new checking account customers with $400 after jumping through a few hoops.

We know this is a lucrative checking account bonus and we’re excited to see Wells Fargo offer it. Just be sure this checking account would be right for you even without the bonus before signing up.

How To Get The $400 Checking Bonus From Wells Fargo

The ​Wells Fargo Everyday Checking account​ is Wells Fargo’s most popular account and from now until the end of June you can snag $400 for opening it!

image credit: bonusoffer.wf.com/promo400

Here’s how to earn the $400 bonus (Online and In-Branch):

  1. Open an Everyday checking account using this link OR bring a printed out copy of the bonus code to your nearest branch. You can use the link (above) and click the “open in-branch” tab to have your code emailed to you.
  2. Deposit at least $25 into your new checking account to fund it.
  3. The kicker: You must receive a total of $4,000 or more in qualifying direct deposits to the new checking account within 90 days from account opening (the qualification period).
  4. $400 will then be deposited into your account within 30 days of meeting the above requirements.

The toughest criteria for receiving this cash bonus is likely going to be receiving at least $4,000 in direct deposits. Just remember this can be in the form of salary, ACH transfers from an employer, social security, income from a rental property, side-hustle or small business, etc.

Finally, you must have a positive balance for this entire period in the account (and it goes without saying, but the account must not be closed for any reason).

If you do not meet these offer requirements within 90 days of opening your account, you will not receive the bonus. But if you ​do​ follow these steps, the bonus will be automatically deposited into your checking account within 30 days. Please keep in mind that this bonus will be considered taxable income.

Certain groups of people will not be eligible for this offer, including current owners of Wells Fargo consumer checking accounts, Wells Fargo employees, and any individuals that have received a Wells Fargo bonus offer on a new consumer checking account within the past year. So you don’t technically have to be a new Wells Fargo customer, but you can’t already have a checking account with them.

Locations That Qualify For The $400 Checking Account Bonus

When Wells Fargo first rolled out this lucrative promotion in the beginning of 2020 it was exclusively available to residents of Orlando, Florida and Phoenix, Arizona.

Now, it’s available nationwide. Simply apply online or visit the Wells Fargo branch location nearest to you and open an account with the printed out code.

How to Avoid Fees with the Wells Fargo Everyday Checking Account

As with many checking accounts offered by large, national banks, you will have to meet a few requirements to avoid a monthly maintenance fee.

The Wells Fargo Everyday checking account will charge you a monthly service fee of $10, but this can be avoided in a few different ways.

  1. First, if you are between the ages of 17 and 24, this maintenance fee will be automatically waived for you.
  2. If you are older than this, you can avoid the monthly fee by maintaining an average daily balance of at least $1,500.
  3. You may also avoid the fee by setting up direct deposits totaling $500 or more into this account.
  4. Lastly, you can avoid the fee by making 10 or more transactions with a linked debit card per statement period (not including ATM transactions or ACH transactions via account and routing number).

Some other account fees cannot be avoided, but you should still know about them.

You’ll be charged $12.50 per overdraft transfer (when you’re enrolled in overdraft protection), $35 per overdraft or returned item, $2.50 per transaction using an out-of-network ATM in the U.S., and $5 per transaction using an out-of-network ATM outside of the U.S. Withdrawals from Wells Fargo ATMs are, of course, free.

Wells Fargo Checking Account Features & Perks

By and large, this checking account is basically your standard checking account. However, it does boast a few features and perks that help to make it more attractive.

One of the most advertised features is the Debit Card On or Off feature. This is unique to Wells Fargo and is a good safety measure that could save your account balance in the event of card theft or loss.

Simply turn off a card temporarily that you’ve had stolen or misplaced without canceling it, and your balance will be protected until you turn it back on.

With an Everyday Checking account, you’ll have access to the usual—but still nice—features available through this bank such as:

  1. Online and mobile bill pay and transfers.
  2. 24/7 customer service.
  3. Over 13,000 Wells Fargo ATMs.
  4. Debit Card Overdraft Services (customer must opt-in). Details below.
  5. Overdraft Rewind. Details below.
  6. Card-free ATM access. Allows you a one-time ATM code for use at a Wells Fargo ATM right from the bank’s mobile app.
  7. Text banking. Access your account balance, transactions, due dates, and more via text message.

If you add Debit Card Overdraft services to your account, your debit card transactions could be approved and put into overdraft (at the discretion of Wells Fargo), rather than just having them automatically declined when you can’t pay for them based on your balance.

You will incur a fee of $35 for every overdraft applied, but this will be waived if you can get the money to pay for the transaction into your account on the same business day.

Overdraft Rewind, a much less common practice, is a free account feature that will allow you to dodge an overdraft fee if your account receives a direct deposit covering the full amount of the transaction that went into overdraft by the next day. You might not take advantage of this all the time, but it could come in handy once in a while.

Final Thoughts

This is a very solid checking account bonus by Wells Fargo.

The Everyday checking account that the bonus is applied to is quite versatile and can be beneficial to a wide array of customers.

The $400 bounty for becoming a new checking account customer is also on the high end for bonuses of these types, that generally stay in the $100 – $200 range.

Just keep in mind, the $4k in direct deposits you’ll need to set-up to qualify for the bonus isn’t an easy ask for everyone.

Also, in the longer run, if you see yourself having trouble avoiding the monthly fees this could eat away at the cash bonus over time, so be sure you can meet these requirements comfortably.

Deposit Accounts 101 – Everything You Need to Know


Deposit accounts are bank accounts held at banks and credit unions that allow for safe-keeping of your funds.

Most of these accounts also provide interest while your funds are held, but some accounts like everyday checking accounts, may not.

These accounts come in two distinct types:

  1. ⏲️ Time Deposits
  2. 🏦 Demand Deposits

Time deposits, such as certificates of deposit, limit access to your funds for a fixed amount of time in exchange for interest paid to you. 

Demand deposits such as money market and checking accounts, provide access to your funds ‘on-demand.’ The bank or credit union will let you withdraw the entirety of your sum without needing permission from them.

You’ll want to note that while the bank or credit union can’t stop you from accessing your funds in demand accounts, they can impose strict fees for doing so. 

There are two primary benefits of deposit accounts:

  1. 🔐 Security
  2. 💰 Interest (APY)

Security. Although these waters haven’t been tested since the bank collapse of 2008, you can rest easy knowing your funds will be there when you need them. FDIC insurance (NCUA for credit unions) backs up all deposit accounts in the event of credit union or bank failure to the tune of $250,000 per depositor. For joint accounts, deposits up to $500,000 are insured ($250,000 x 2 depositors = $500,000 FDIC coverage).

Interest. Since the bank is using your deposit for commercial endeavors – namely, to loan out to borrowers – it only makes sense that you get a kick back in the form of a dividend for your part in the equation. 

Banks and credit unions compete for consumer deposits with attractive interest rates. The longer the consumer keeps his/her funds with the bank, the higher the interest rate and APY (annual percentage yield) they will receive.

On fixed deposits like CDs, rates generally ascend with terms. So longer duration CDs like 5 year deposits provide higher returns than 12 month deposits. And why shouldn’t they? Consumers should be increasingly rewarded with the duration in which the bank gets to hold their funds.

But that’s not the only reason your money earns more over time. The second factor is “compounding interest.”

Depending on the specific institution you’re banking with, interest is usually compounded daily, weekly or monthly with the proceeds being re-deposited into the account to ‘compound.’ The more frequent the compounding (daily, weekly, monthly) the higher your overall APY or annual percentage yield will be. That’s why when comparing deposit accounts you always want to look at the APY rather than the interest rate to calculate your bottom line earnings.

Now that we understand some of the nuances of deposit accounts, let’s dive into the specifics of each account type.

Certificates of Deposit (Time Deposit)

Certificates of deposit are fixed-rate, time deposits that generally come with terms between 3 months and 10 years. With these accounts you will not have access to funds prior to the deposit’s maturity date. If you do need access, you will incur a fee. These fees generally eat away at some, most, or even all of the interest you’ve accrued on your deposit. In most cases, these fees won’t eat away at your principal, but you’ll have to check with the institution’s fine print to make sure this holds true for your bank of choice.

You’ll also want to set a reminder for yourself to let you know when your CD is about to mature. Banks and credit unions have “grace periods” upon maturity, that generally last around 10 days. During this period you can change the deposit terms or move your funds fee-free to another account. If left untouched, the funds automatically renew into the same deposit product.

When should someone open a certificate of deposit?

  • In a falling interest rate environment. Timed deposits come with fixed rates. This can be a good thing or a bad thing depending on how interest rates are trending. In a falling interest rate environment certificates of deposits are a great strategy. In this environment look for longer term maturities to ride out the interest rate downturn. Conversely, in a rising interest rate environment variable rate products are better as their rates rise with the tide.
  • When promotional or ‘special term’ deposit products are offered. Some banks and credit unions have promotional deposits that can come with cash bonuses or extremely high rates on certain balances. These should always be considered when looking for FDIC-insured savings vehicles. Some credit unions, and online banks in particular, also offer deposits with special terms such as “No Penalty CDs,” which allow for penalty free access to your funds, or “bump-up” or “step-up CDs” which allow for your rate to rise during the life of the CD. It should be noted that step-up CDs are similar but not identical to bump-up CDs. For bump-up CDs the consumer specifies when the rates get a bump and with step-up CDs the rates rise at intervals set by the financial institution.
  • When you don’t need access to your money. Just be sure to pick a term you’re comfortable with as early withdrawal penalties are steep. Also, double check online savings account rates and money market rates before locking in a fixed rate CD. They may be more lucrative than the particular CD term you’re after.

IRA CD (Time Deposit)

IRA CDs are certificates of deposit held within your individual retirement account. Much of what we covered (above) applies to IRA CDs as well, just note you’ll have the added tax-advantage that IRAs offer.

Credit Unions and banks (both offline and online) as well as brokerage firms all offer IRA CDs. They can offer these in the form of traditional IRAs or Roth IRAs.

You’ll want to note that the IRS takes 10% of all sums withdrawn from an IRA account prior to the owner turning 59 and a half. They will make some considerations for new home purchases, emergency or unforeseen payments, and others.

When should someone open an IRA CD?

See above as the same conditions that apply for standard CDs also apply for an IRA CD. 

Be sure to set notifications for grace periods on deposits held within IRA accounts if you plan on moving the funds upon maturity as these can be easier to forget.

Money Market Account (Demand Deposit)

Looking for competitive rates AND access to your money? Try a money market account. 

Unlike CDs, these are demand deposits that allow for full access of your funds – at your demand. 

Accessing your money can generally be done through ATM/debit cards or checks. ACH transfers are also permissible. Just note that per federal regulation D, only six transfers are allowed per month. Check with your individual institution on the fee structure beyond six as it varies. 

Minimum deposit and/or monthly balance requirements for these accounts are generally steeper than traditional savings accounts. In normal interest rate environments rates are tiered so that larger balances receive higher APYs. In less competitive savings environments rates tend to be flat across all balances.

When should you open a money market account?

  • When you have larger sums of money and want to earn a respectable interest but still have access to your funds.
  • In rising interest rate environments. Money market accounts tend to offer higher APYs than standard savings accounts but often require higher balances. Rates are variable and rise and fall with the overall interest rate environment.

Savings Account (Demand Deposit)

Like money market accounts, savings accounts are on demand deposit accounts that provide access to your money and an interest on your balance. 

Access to your funds isn’t quite as easy as it would be with a checking account, but it’s still available to you if you need it. Some accounts offer ATM or debit cards as well as check writing capabilities, but most online savings accounts do not. 

With online savings accounts you generally get a top tier interest rate but access to your funds is usually restricted to ACH transfers. Again, this varies by institution so check with your bank of choice prior to opening an account.

Same federal Regulation D regulations apply to savings accounts as they do with money market accounts, limiting you to 6 ACH transfers per month. Transfer fees will apply to anything beyond that and, in some cases, your account can be shut down or transitioned into a checking account.

When should you open a savings account?

  • When you want to separate funds designated for savings from your everyday spending money. Savings accounts are great for slowly building up funds for a later date. Whether you’re saving for an emergency or a big ticket item you wish to purchase in the future, savings accounts are great tools to use to achieve these goals.
  • When you want to safely earn an interest on your savings. Like all other deposit accounts, savings accounts are FDIC or NCUA insured up to $250,000 per depositor. APYs on these accounts, especially online savings accounts, can be quite competitive in normal interest rate environments.

Checking Account (Demand Deposit)

Checking accounts are your everyday bank account. They are used for withdrawing and depositing funds. You can access money easily with a debit or ATM card, check or online transfers. Funds can be deposited digitally via a mobile app or direct deposit from your employer. They can also be deposited physically with cash or check.

You won’t receive much interest on these accounts compared to other deposit accounts, but we have seen promotions featuring cash bonuses for signing up.

If you decide to open a checking account with a large national bank, beware that many impose monthly maintenance fees up to $15/month. Especially for accounts that don’t meet certain balance and/or activity requirements. 

When should you open a checking account?

  • When you need to open your first bank account. Because these accounts are designed for your everyday banking needs, it’s likely the first account we open with a bank or credit union. These accounts usually come with tools to help you learn about saving and budgeting as well as facilitate your everyday banking needs.

Rewards Checking Account (Demand Deposit)

These are eye-catching accounts that first started popping up in the product suite of local and community credit unions. The rewards these accounts feature can definitely grab your attention, but be cautious of the fees and activity requirements.

The rewards come in the form of cash bonuses or abnormally high interest rates. The interest rates can be upwards of 3 – 4% APY in this environment, but they’ll likely cap that yield to balances of $10,000 or less.

Here’s what is generally required of the consumer to obtain these rewards:

  • Usually 10 to 15 debit card transactions from the account are required. Meaning this will likely have to be your primary account, potentially even replacing your basic checking account.
  • You’ll likely have to set up at least one direct deposit OR one automatic ACH automatic withdrawal from the account. So a direct deposit from your employer or an auto pay on your mortgage, student or car loan would likely suffice.
  • You’ll also have to go mostly (or completely) digital as the accounts require the use of self-service options like e-statements or online bill pay at least once per month.

As you can see this is no easy feat to obtain the flashy rewards. However, if you can meet the requirements, they may be worth a look.

When should you open a rewards checking account?

  • When you’ve demonstrated to yourself that you can meet the monthly requirements of the rewards account through your everyday checking, then it may be worth switching over.
  • When the rewards checking account comes without so many strings attached. Occasionally less cumbersome versions of these rewards checking accounts hit the market and can be considered after reading the fine print.

Complete Guide to Peer to Peer Lending [As Investor & Borrower]


Peer to Peer platforms connect borrowers with investors seeking higher rates of return.

The current interest rate environment makes it difficult for investors to earn a reasonable rate of return. Income investors, such as retirees, need earnings to pay for living expenses, and producing a sufficient level of income is a challenge.

Investment rates of return at traditional lending institutions are near historical lows. Savings accounts, checking accounts, and certificates of deposit rates may not be attractive to you.

A growing number of investors and savers are considering peer-to-peer platforms as a viable alternative to traditional savings accounts or deposits.

Peer-to-peer (P2P) lending is an investment vehicle that can produce higher rates of return for investors who are willing to accept a higher level of risk. This comprehensive guide explains P2P lending, and the pros and cons for investors and borrowers. 

This guide also reviews the top eight P2P platforms, along with the advantages and drawbacks of these institutions.

P2P lending was started to provide borrowers an alternative to traditional banks. P2P platforms connect people who need to borrow with investors who are seeking higher rates of return. P2P firms use data analytics to assess the creditworthiness of investors, and to monitor the risk of borrower defaults.

In 2005, Zopa, Ltd. started P2P lending in the UK, and Prosper Marketplace started operations in the US. In 2008, the Securities and Exchange Commission (SEC) required P2P lenders to submit to oversight rules. The SEC determined that the P2P lenders were selling unregistered investment securities, and required more regulation. 

Today, P2P firms must provide an SEC registered prospectus to each investor.

Loan originations reached $36 billion in 2015, but the industry started to experience larger than expected loan default rates. In 2016, the US Treasury called for increased oversight of P2P lending after LendingClub asked its CEO and other senior managers to resign for poor management practices.

Both investors and borrowers need to understand the basics of P2P lending before opening an account.

How Does P2P Lending Work?

Here is the process a borrower can use to apply for and repay a P2P loan:

  • Apply: Create a login on the P2P platform, and enter the information requested to apply for a loan. Most sites use your Social Security number to determine the interest rate and dollar amount of your loan. This step does not impact your credit history.
  • Finalize the loan: If you choose to accept the terms of the loan, you’ll need to provide more information, including data to verify your employment. Borrowers pay an origination fee when the loan is closed, and the fee is added to the balance of your loan.
  • Loan payments: You make monthly payments through the P2P platform, and each payment includes principal and interest.

If you want to invest through a P2P platform, follow these steps:

  • Apply: In most cases, investors in P2P platforms must meet the requirements to be accredited investors. The P2P platform will ask about your net worth, annual income, and investment experience before you’re allowed to invest.
  • Invest: Investors deposit funds and purchase notes, which include a portion of a number of individual loans. You can choose the types of loans you prefer, based on the projection interest rate paid and the credit risk of the borrowers. 
  • Diversify your portfolio: Loans that are rated as a higher credit risk pay higher interest rates to investors. To reduce the risk of an individual borrower defaulting on a loan, you can spread your investment dollars among dozens (or hundreds) of individual loans. 
  • Withdraw funds to reinvest: As you earn interest, you can choose to reinvest your earnings in more loans, or withdraw funds.

This form of lending provides an alternative to traditional bank loans, and offers a competitive rate of return to investors. With peer-to-peer (P2P) lending, borrowers are connected with lenders through an online marketplace, with the P2P company serving as a facilitator. P2P firms earn loan origination and servicing fees.

The borrower doesn’t have to go through a lengthy loan approval process. Instead, the application process is simplified, and decisions are made quickly. The investor earns a return, based on a share of the interest rate charged to the borrower.

Companies such as Upstart and Funding Circle facilitate personal and business loans. PriceWaterhouseCoopers estimates that the market could reach $150 billion or higher by 2025.

These are unsecured loans, and there is a risk of default by a borrower. Fortunately, you can spread your risk by investing a small dollar amount in a number of different loans. Both the SEC and state entities regulate P2P lenders.

To start investing, the investor opens an account on a P2P website and deposits funds. These funds then get dispersed out to a number of borrowers determined by the investor and the platform.

What to Expect as an Investor + Pros and Cons

Both individual investors and institutions loan funds to P2P borrowers. Finder explains that the institutional investors, such as hedge funds, are now providing a large amount of funding to P2P firms. These institutions are seeking higher rates of returns than they can earn on traditional investments.

The risk of loan default is the primary concern for P2P investors. Investopedia reports that Zopa had a default rate of 4.52% for loans granted in 2017, according to the Financial Times.

The P2P platforms discussed below each report on their default rates, and you’ll find average default rates of 2% to 8%. For example, Upstart’s default rate is between 4% and 9%.

Here are the pros and cons of investing in P2P loans:

Pros

  • P2P investors earn better than average rates of return
  • Investors help real people overcome financial obstacles

Cons

  • P2P investing presents a higher level of risk than bank deposit or savings account, due to the risk of loan default
  • A growing percentage of P2P investors are institutions, leaving less options for retail investors who want to invest in P2P

Borrowers may want a loan for business purposes, or for personal reasons. Many consumers borrow funds to pay off higher interest rate credit cards, to finance a home improvement project, or to buy a car. How does the process work?

What to Expect as a Borrower + Pros and Cons

Borrowers with a high credit rating can expect to pay interest rates below 10%, while higher risk borrowers may pay 20% to 30% annual interest rates. Dozens of individual investors may purchase a portion of your loan. 

Once approved, you can get your P2P funds within a week. You’ll make payments through the P2P platform monthly, and your payments include interest and repayment of principal.

Here are the pros and cons of borrowing on P2P platforms

Pros

  • Borrowers with lower credit scores can find access to credit 
  • Once approved, you can receive funds within a week 

Cons 

  • The interest rate charged may be much higher than rates charged for a bank loan, or on credit cards balances

Here are the best P2P lending platforms, and details about each company’s lending practices.

Best Peer to Peer Lending Platforms

All of the platforms are required to quote loan interest rates based on the annual percentage rate, or APR. Investopedia defines APR as the actual yearly cost of funds over the term of a loan. The rate also calculates the amount of principal you’ll repay each year. 

APR includes both the interest on the loan, and the loan origination fee costs. Note however, that APR does not take interest compounding into account. 

Here are some of the larger P2P platforms used by investors and borrowers.

Lending Club Overview

The LendingClub has issued over $50 billion in loans to over 3 million customers.

The firm offers fixed interest rate personal loans of up to $40,000, and collateral is usually not required. Borrowers can get a loan decision and funds in as little as four days, and there is not a penalty for loan prepayment.

Borrower details

LendingClub’s current loan rates range from 10.68% to 39.89% APR.  Borrowers are charged a one-time loan origination fee of 2% to 6%, based on the individual’s credit score, and the fee is deducted from the loan proceeds. If the borrower receives a loan offer, he or she is given the choice of a 36-month or 60-month loan.

Once the loan is in place, the borrower must make payments on time. If a payment is more than 15 days late, the borrower is charged 5% of the unpaid payment amount or $15, whichever is larger. Late payments sharply increase the cost of the loan.

Investor details

Investors can start an account with a minimum of $1,000. Investors purchase notes, and notes are securities that correspond to fractions of loans. Here are some facts regarding notes, which apply to most P2P platforms:

  • Notes are considered investment securities that are registered with the SEC. 
  • Each note is graded, based on the credit risk of the loans in the note, and interest rate charged on the note’s loans.
  • The company recommends that investors purchase a diversified portfolio of notes to reduce investment risk. LendingClub states that 99% of investors with more than 100 notes have earned positive returns on their investments.

Notes mature in three to five years and are repaid monthly by borrowers. As principal and interest is repaid on the loans, you can reinvest using an automated allocation process, or use a manual system to reinvest. You can set the automated system to reinvest in notes based on credit risk, and interest rate criteria that you choose.

Upstart offers some unique features to P2P investors.

Upstart Overview

Upstart has originated more than $6.7 billion in consumer loans since launching in May 2014, and the company has a unique process for determining a borrower’s default risk:

“Our proprietary underwriting model goes beyond FICO scores — it identifies high-quality borrowers based on signals of their potential, even if they have limited credit and/or employment experience. We call these consumers ‘future prime’ borrowers.”

Borrower Details

In addition to credit history, Upstart uses the borrower’s education and job history as factors when making a loan decision. When you initially apply for a loan, the application will not impact your credit score. Here’s an explanation of the credit reporting policy:

“When you check your rate, we check your credit report. This initial (soft) inquiry will not affect your credit score. If you accept your rate and proceed with your application, we do another (hard) credit inquiry that will impact your credit score. If you take out a loan, repayment information will be reported to the credit bureaus.”

You can borrow from $5,000 to $30,000, and interest rates vary from 6.18% to 35.99%. You can choose a 3 or 5-year term for a loan. Currently, the average 3-year loan on the Upstart platform charges a 22% interest rate.

If the borrower accepts a loan by 5pm ET (not including weekends or holidays), he or she will receive the funds the next business day. For loans that are being used for education-related purposes, there is an additional 3-business day period between loan acceptance and when the individual receives the funds.

There is no prepayment penalty on Upstart loans. 

Investor details

Upstart funds loans using assets from financial institutions and wealthy individuals, which the firm refers to as partners. Upstart promotes its use of AI to improve the lending process for partners:

“Upstart offers a complete range of AI solutions for optimizing consumer lending. With smarter decisions, you can say yes to more borrowers and improve your portfolio performance.”

An Upstart study used the loan underwriting process of three banks, and evaluated the approval rates and loan loss rates using Upstart’s borrowers (as of 12/31/17).

Upstart’s study indicated that the firm had 173 percent more approvals with the same default rate when compared to big banks. The company also noted 75 percent fewer defaults with the same approval rate as big banks, based on how they qualify borrowers.

About 88% of Upstart loans are either current or paid in full.

FundRise Overview

FundRise markets itself as the first simple, low-cost real estate investment platform. Investors purchase a portfolio that invests in dozens of real estate projects, and the fund reports 8.7% to 12.4% historical annual returns. 

Many investors have portfolios in stock and bond investments, but not in real estate. By adding real estate to the portfolio, investors add diversification. This strategy spreads the investment risk over three types of investments, rather than two.

There are downsides to investing in real estate, however. Selling real estate requires appraisals and other legal work, and the process can take months. For this reason, real estate is considered an illiquid investment (an investment that cannot be sold quickly).

Conversely, stocks and bonds are liquid, because they trade on exchanges that are open each business day.

This firm invests in private market real estate. FundRise explains here that investment portfolios with at least 20% of the assets in real estate have outperformed portfolios that only invest in stocks and bonds.

Commercial real estate produces investor returns from rent and lease payments, and through the price appreciation of the real estate. You can choose an investment plan that focuses on steady rental and lease income, or a plan that focuses on price appreciation.

You can open an account for a minimum of $500.

Funding Circle Overview

Funding Circle focuses on the small business market. The company offers Small Business Administration (SBA) loans, including SBA 7(a) loans to provide capital to small businesses. The firm has helped over 81,000 small businesses obtain $11.7 billion in financing.

Funding Circle emphasizes that small businesses should be protected from unfair, deceptive financial practices. The firm co-wrote the first standard for the small business lending market, The Small Business Borrower’s Bill of Rights. Funding Circle is also a founding member of the Marketplace Lending Association, which was created to protect borrowers.

Borrower Details

SBA 7(a) loans allow small businesses to borrow anywhere from $25,000 to $500,000, and the interest rate is currently 6%. The loan term can be up to 10 years, and there is no prepayment penalty.

Funding Circle works with Preferred SBA Lenders, which are firms that offer in–house approvals and accelerated processing. These lenders give business owners fast answers and even faster closings.

Small businesses who meet the below criteria are eligible to apply for an SBA 7(a) loan:

  • In business for more than 3 years
  • At least $400,000 in annual revenue
  • No federal tax liens
  • 680 FICO for personal guarantor (Business owner’s personal guarantee)
  • Positive book value (company assets are greater than liabilities)

How to apply for an SBA 7(a) loan:

  1. Start your application online in 6 minutes by answering a few questions about you and your business. Applying will not impact your firm’s credit score
  2. Receive a call from your dedicated Account Manager who will get to know your business and discuss your needs in order to help you complete your application
  3. Submit applications to SBA preferred lender partners. 
  4. Review and approve your Proposal Letter outlining the terms of your unique loan
  5. Collect remaining documents and submit complete loan package for final underwriting
  6. Sign your formal loan agreement

When you apply for the loan, you must provide three year of business financial statements and tax returns. Any owner who is guaranteeing the loan must also allow the lender to pull their credit history, and provide three years of personal tax returns.

Small business borrowers pay these fees:

  • SBA Loan Guarantee Fee – 1.7% for loans up to $150k and 2.25% for loans greater than $150k
  • Broker / Agent fee – Origination fee paid to the lender
  • Closing Costs – Costs associated with underwriting expenses such as background checks, placing liens, credit pulls

Over 100,000 global investors have used Funding Circle’s loan marketplace, including individuals, national banks, and governments.

Investor details

Individuals can invest in American small businesses through the purchase of notes issued by Funding Circle. Small businesses receive the funds they need to grow, and investors can earn attractive returns through the borrower’s monthly installment repayments.

Here are some other features:

  • Investors use their online account to easily lend to hundreds of businesses looking to borrow.
  • Funding Circle reviews applications and approves creditworthy businesses. The company then pays out their loans and process repayments for investors.
  • Businesses make fixed monthly repayments with interest, which Funding Circle distributes to all the investors who lent to them.

Funding Circle investors have earned historical annual returns of 5% to 7%. Historical annual returns are calculated as the sum of interest paid, minus the 1% servicing fee and defaults, plus recoveries, relative to the principal amount. 

How to invest:

  • Sign up for an account, and Funding Circle will verify your status as an accredited investor. Investopedia explains the requirements to be an accredited investor. Generally speaking, these investors have higher annual income, net worth, and more investment knowledge than other investors.
  • Invest a minimum of $25,000 into fractional notes, which represent a portion of a small business loan. You can automate the investing process, or choose notes manually. You can invest as little as $500 in a specific fractional note.
  • Monitor the monthly repayment of loans online. You can reinvest your earnings automatically or manually.

You are charged a 1% fee on loan repayments, and there are no other fees charged to investors.

StreetShares Overview

StreetShares provides secured and unsecured loans to businesses.

Borrower details

Secured loans require collateral. Business owners can secure the loan with personal property (real estate, vehicles), or by using business inventory, equipment, or accounts receivable balances. 

Owners can also apply for unsecured loans, which do not require collateral. StreetShares provides unsecured lines of credit that businesses use for short-term financing. 

The company also focuses on business loans for veterans. These owners may have gaps in their financial history, due to military service. Veteran small business loans are often easier to qualify for, and can offer better rates and terms than traditional small business loans. 

To apply, owners provide company bank statements, tax forms, and credit reports. The lender will also need time to secure the collateral and appraise the assets, if necessary.

Investor details

Investors can purchase Veteran Business Bonds, which currently pay a 5% interest rate. StreetShares has used the proceeds from bond sales to originate $100 million in loans. 

The bonds have a 3-year term, and investors must pay a 1% fee on any funds withdrawn before the end of the term. Investors can open an account with as little as $25. You can download an offering summary that explains the investment details here.

Peerform Overview

Peerform offers unsecured loans with rates from 5.99% to 29.99% APR. You can apply online, and the application will not impact your credit score. 

Borrower details

Loan amounts range from $4,000 to $25,000, and Cross River Bank originates the loans. The interest rate you are charged depends on your credit ranking, which is your Peerform grade. Borrowers pay a loan origination fee of 1% to 5%, based on the Peerform grade.

There is no prepayment penalty on your loan.

Investor details

Accredited investors can invest in Peerform loans. Peerform uses an algorithm to analyze the risk of loans and to determine the loan interest rates. Currently, the firm provides investing access to institutional investors purchasing whole loans.

Cross River Bank underwrites loans based on specific loan criteria, including:

  • Minimum FICO credit score of 600
  • Borrower debt-to-income ratio below 40%
  • A credit profile with no current delinquencies

Peerform uses a number of other factors to grade each loan, and the grade helps to determine the loan’s interest rate.

Prosper Overview

Prosper has provided $17 billion in loans to 1 million customers.

Borrower details

Just as with other P2P firms, Prosper provides loans with 3 or 5-year terms, and there is no prepayment penalty. Eligible consumers can borrow up to $40,000.

Origination fees vary between 2.41%-5%, and interest rate APRs through Prosper range from 7.95% to 35.99%, with the lowest rates for borrowers that have the best credit evaluations. Checking the interest rate available on a loan does not affect your credit score.

Investor details

Investing in Prosper requires you to meet suitability requirements. Investors must document their gross income, net worth, and investment experience, because P2P investing is more complex and carries more risk than traditional investments. Suitability requirements vary by state.

Prosper provides investors loan ratings from AA (lower risk, lower return) to HR (higher risk, higher return). Annual investment performance has ranged from 3.4% to 8.3%, and the historical return averages 5.1%.

Investors can search Prosper loans based on credit rating, dollar amount borrowed, interest rate charged (yield), and percentage of the total loan funded by investors. The minimum investment amount is $25.

Kiva Overview

Kiva is an international nonprofit, founded in 2005 and based in San Francisco, with a mission of expanding financial access to help underserved communities thrive. More than 1.7 billion people around the world are unbanked and can’t access the financial services they need, and Kiva exists to address that problem. 

The firm has worked with over 1.9 million lenders who have financially supported 3.6 million borrowers in 76 countries. A Kiva loan may fund a student’s tuition, help a woman start a business, or allow a farmer to invest in equipment. Kiva does not pay investors a rate of return, and you should view Kiva investing as a donation that a borrower will pay back without interest.

100% of funds lent on Kiva go to funding loans, which are referred to as Monthly Good support. Optional donations fund Kiva’s operations.

Investor details

You can start with Kiva by signing up for a monthly funding amount. Here are some other details that explain the lending process:

  • Kiva lends 100% of your funds to a borrower who needs financing to reach his or her goal. The borrower might be a farmer, student, artisan, or shopkeeper. 
  • Kiva updates the investor monthly to explain who the borrower is, and how they are using the funds to overcome a particular problem.
  • As the borrower repays funds, you can set up your account to automatically reinvest the proceeds into a new loan.
  • If you choose to stop monthly contributions, you can have Kiva continue to loan the balance in your account, or you can withdraw your funds.

Kiva reports that 96.7% of loans have been repaid.

Borrower details

In a Partner Loan, Kiva works with local nonprofits or lending institutions, which approve the borrower’s request. Kiva performs due diligence on the borrower’s application, and monitors the repayment status of the loan.

A Direct Loan is approved through “social underwriting”. Friends or family members determine the trustworthiness of the borrower, because they lend a portion of the loan dollars requested. In other cases, a Kiva-approved Trustee will confirm the trustworthiness of the borrower.

Once either type of loan is approved, investors fund the loan through the Kiva website.

Advantages, Drawbacks and Controversy of Peer to Peer lending

Investors and borrowers must fully understand P2P lending before opening an account on any P2P platform.

Investor risks

P2P platforms do not have the same financial controls in place as traditional lenders, and this increases risks for investors.

Bloomberg points out that the industry lacks the sorts of collateral and loan reserves that get traditional banks through tough times. A bank will require collateral (home, car) before originating loans to most individuals. Bank regulators also require banks to set funds aside to cover potential losses on loan defaults. 

P2P firms may not have these controls in place to reduce default risk. In a slowing economy (particularly during the coronavirus pandemic), borrowers may lose their jobs or see revenue declines in their businesses. These borrowers may fall behind on loan payments, or default.

P2P loans are, for the most part, unsecured. If a large number of unsecured loans default, P2P investors will incur large losses. There is no collateral for the lender to sell, and the P2P firm is not required to set up reserves to pay investors for losses.

Borrower risks

Interest rates charged on P2P loans may be much higher than rates charged by traditional lenders, and higher rates make it more difficult to repay the loan over time.

High interest rates mean that the monthly repayment amount will be higher. In an economic downturn, a borrower on a limited income will find it more difficult to repay a loan. The risk of default is higher, and a default has a big impact on the borrower’s credit rating.

Is Peer to Peer Lending Safe?

P2P investors and borrowers are exposed to higher levels of risk, when compared with traditional investments.

Bank checking accounts and certificates of deposit (CDs) offer Federal Deposit Insurance Corporation (FDIC) insurance to protect investors from losses. Financial institutions are also required to reserve funds, which are used to cover the cost of loan losses. P2P firms do not have this requirement.

While the historic risk of P2P defaults listed above are fairly low, the current economic downturn may sharply increase default rates. P2P investors and borrowers face higher risks today than in past years.

Investors must understand that the FDIC does not provide insurance for P2P loans. The investment may lose value, and past investment performance is not an indication of future returns.

Final Thoughts

P2P investing may be suitable for experienced investors with a high net worth.

If an individual invests a small portion of their investment dollars into a P2P lending platform, they are able to diversify a portfolio that is invested only in stocks and bonds. High net worth can afford short-term losses in a P2P investment, and experienced investors have the sophistication to understand the risks and potential returns.

Investors who are less experienced should consult with a financial professional before investing in P2P platforms.

P2P borrowers must understand how higher interest rates make it more difficult to repay a P2P loan. While P2P platforms lend to borrowers who can’t get loans through traditional banks, loan repayment can be a challenge. Borrowers should carefully consider the total cost of borrowing before signing a P2P loan agreement.

Foreign Currency CDs – Are They Worth It?


If you’re dismayed with the current interest rate environment as a saver then you may be considering foreign currency CDs as a potential alternative. Perhaps with the hope that another country might have a more favorable interest rate landscape than our own.

While you’d be correct to assume that other countries have better savings rates, you may be surprised to know that foreign deposits inherently carry quite a bit of risk.

Additionally, for retail investors, we would strongly recommend consulting with a certified financial advisor prior to opening any foreign currency CD. Unless one has a thorough understanding of government and monetary policy in the desired country of investment, outside advice by a certified professional should be sought.

In this article we’ll discuss the benefits and drawbacks of investing in foreign currency CDs and where you can open them.

Understanding Foreign Currency CDs

In many ways a foreign currency CD is just as simple and straightforward as a traditional CD you’d open at your local bank or credit union. The opening process, minimum deposit requirements, potential early withdrawal fees are usually all fairly standard.

The major difference with these products – and where the inherent risk lies – is with the currency fluctuation while the deposit is active.

Any weakening of the foreign currency (relative to the US dollar) while your money is tied up has the potential to eat away your interest and even principal. Conversely, any major strengthening of the foreign currency (relative to the US dollar) could amplify your earnings.

Additional Account Details:

Foreign Currency CDs generally come with similar early withdrawal fees and minimum deposit requirements, however, their durations tend to be shorter than standard US-based certificates of deposit. Maturities on foreign currency CDs usually range from 3 to 12 months.

How To Open A Foreign Currency CD

Opening a foreign currency CD is not easy and only a small handful of institutions even sell the products. It’s possible to purchase foreign currency deposits by reaching out to overseas banks, however you wouldn’t be eligible for FDIC insurance in these cases.

The most notable institution in the US offering foreign currency CDs with FDIC insurance is TIAA Bank (formerly Everbank). They require a minimum of $10,000 to open a WorldCurrency CD and take as much as 1% on currency conversion.

TIAA Bank’s WorldCurrency CD

TIAA Bank’s most popular foreign currency CD product is what they refer to as their “WorldCurrency CD.” These products come with short durations (3 – 12 months) and require a minimum of $10,000 to open. They are IRA eligible and are FDIC-insured against bank insolvency but not currency fluctuations.

When selecting a WorldCurrency CD you can filter between two groups – major currencies and emerging currencies.

TIAA Bank’s Major Currencies:

Image credit: TIAABank.com

As you might assume, the ‘major currencies’ feature more economically stable currencies while the ’emerging currencies’ (see below) feature emerging economies with more volatility.

Major currencies don’t often come with major advantages either. Savings rates in these countries aren’t always higher than the US either. For example, Hong Kong closed out 2019 with savings rates near zero and in August of last year a Danish bank launched a savings account with 0.6% negative interest rate for millionaires. So don’t assume you’ll get a stellar rate with minimal currency fluctuation risk.

TIAA Bank’s Emerging Currencies:

Image credit: TIAABank.com

The ’emerging currencies’ group features a riskier set of currencies.

While many banks in these countries offer attractive deposit rates, their country’s currency will always carry a high degree of risk against the US dollar.

Just to give you an idea of what kind of rates you could potentially lock-in, the current Mexican interest rate Banxico (base rate) is 7.250%. That said, the price of the Mexican Peso relative to the US dollar also fluctuated over 8% in 2019.

WorldCurrency CD Baskets

TIAA Bank’s “World Currency CD Baskets” are perhaps the most innovative set of foreign currency CD products on the market. These products are designed specifically to diversify currency and deposit holdings to offset risk.

They divide up currencies by three criteria:

  • Commodity Rich – The nations whose currencies comprise these baskets may benefit from increased world demand for their tremendous natural resources.
Image credit: TIAABank.com
  • Economy Driven – The nations whose currencies comprise these baskets may benefit because of sound economic strategies that help drive their monetary strength.
Image credit: TIAABank.com
  • Geographically Inspired – The nations whose currencies comprise these baskets may benefit from certain regional strengths and geopolitical strategies.
Image credit: TIAABank.com

How Can You Lose Money With Foreign Currency CDs

What is the largest risk to your foreign currency CD? A strengthening US dollar.

Consider the following:

You decide to purchase a 6 month CD for $10,000 in Indian Rupees because it is currently paying a generous 5% APY.

To open this CD you first need to exchange your $10,000 US dollars into Indian Rupees.

The current exchange rate at the start of your deposit term is $1 US dollar for 70 Indian Rupees. Therefore your $10,000 USD becomes 700,000 Indian Rupees.

After you’ve converted your currency, you place your 700k Rupees into your 5% certificate of deposit.

Ok, now during the 6 month period in which your CD was open, let’s assume the US dollar strengthened against the Rupee so that $1.00 USD now equalled 75 Indian Rupees.

Let’s see what you’re left with…

First, let’s multiply your starting position (700,000 Indian Rupees) by your guaranteed interest rate of 5%. So, 700,000 x 1.05 = 735,000 Indian Rupees – a gain of 35,000 Rupees.

Second, (and before we celebrate) let’s convert your Rupees back into US dollars so we can return those funds to your domestic bank account.

735,000/75 (75 Indian Rupees now equals $1 USD in our scenario) = $9,800 US dollars.

Ouch! You just lost $200 on your 6 month CD that paid an APY of 5.0%.

Final Thoughts

We know that it is easy to be frustrated with the current savings environment, but before you look outside the US for more favorable rates, be sure you fully understand the risks associated with foreign currencies CDs.

While it’s true that banks in other countries can offer more favorable savings rates than our own domestic banks, a strengthening US dollar against the currency you’re temporarily invested in can negate your earnings and even principal.

Retail investors should always consult with a financial advisor before embarking on their own in foreign currency trading or when opening a deposit. Having a strong understanding of complicated government policies and scrutinizing a country’s monetary policies are a must before opening a deposit in any foreign country.