When Is Crowdfunding Better than Taking out a Loan?

The concept of crowdfunding has become very popular in the last decade, with a growing number of businesses looking at this form of financing rather than going to the bank in order to get a business loan. However, allowing individuals to directly finance a business or the development of a product is not always a good idea.

Although there are several crowdfunding platforms to choose from, and most people know that they can find funding through them, nobody explains how much risk is involved using them, especially when it comes to using the money to start a business or to design a product from scratch. Here is what you need to know.

What Is Crowdfunding?

Crowdfunding, as a concept, refers to the ability of individuals or companies to seek financing directly from regular individuals. There are several platforms that offer this type of service and each of them has a different structure.

Generally speaking, an entrepreneur or a company can create an account with the platform, after which they will receive access to a page that will act as a portfolio/presentation platform. They can then present their idea on that page and set a monetary goal to start raising money. Other users can then contribute with various amounts of money towards that goal.

The money is deposited in the accounts of the platform and once the financial goal has been reached, the business or entrepreneur will gain access to the full amount. If, however, the goal is not reached, the money is returned to the users.

What Are the Pros of These Platforms?

The biggest advantage of using a crowdfunding platform is the fact that it is much easier to find financing, provided that the entrepreneur has an attractive presentation for the product.

Furthermore, it is a common practice for most companies to offer rewards to individuals who contribute to their financial goal.

Users that crowdfund the idea are usually only interested in the reward and do not care if the product will be successful or not.

It is also worth noting that these platforms are ideal for startups or individuals who simply want to create a product, for a limited time, and offer it to a specific audience.

What Are the Risks of Using Them?

Crowdfunding is great for individuals who want to develop niche products, as long as they have are actually able to deliver on their promises. In other words, entrepreneurs can find financing through crowdfunding platforms, but raising the required money often takes time and the product will die off if the product page is not constantly updated with information about how this are developing.

These platforms are well embedded in social media and companies need to constantly hype up their products in order to reach their financial goals. This means that work on the product must start before the financial goal has been met, which will require additional financing.

When Is It Better to Get a Business Loan from a Bank?

Banks are extremely cautious when giving out business loans. Unlike crowdfunding services, they require the borrowers to meet certain financial and operational standards before they approve a loan request.

However, as restrictive as banks may be, companies and entrepreneurs won’t have to wait for a financial goal to be met. If the business plan that they submit is in order and their product idea seems viable, the lender will give them the loan so that they can start production right away.

In a sense, business loans from banks are better because they are given out by business men who recongise investment opportunities, not by regular individuals over the internet. There is no social media component here, no need to create hype for the product or service.

What Is the Safest Way to Invest Your Money During the Pandemic?


Since the Covid-19 pandemic began, the world economy has grown more and more unstable. This trend is not likely to change, mostly because, as the virus continues to spread, governments will need to constantly spend more money in order to contain the pandemic and treat the sick.

However, the biggest issues are created by the measures that are designed to protect the population from infection, namely the temporary closing of many businesses and companies.

This can, naturally, restrict one’s options when it comes to finding safe investment opportunities, especially when considering that the pandemic has even affected international trade.

Luckily, there are industries and economic sectors that have been affected less than others and there are even a few that have prospered despite the economic instability of the past year. These continue to offer great investment opportunities.

This having been said, today we will look at one of the best investment opportunities for beginners who are not yet prepared to invest large amounts of money or are not yet ready to risk their earnings in the stock market.

P2P Lending Platforms and the Opportunities That They Present

These platforms have been around for some time and are now more popular than ever. This is mainly because they enable individuals to borrow money without having to worry about credit ratings, loan requests, or endless amounts of paperwork. P2P platforms only perform credit checks for loans that go over a certain amount and work much faster than other lenders such as banks.

As useful as P2P lending platforms may be to individuals who need to borrow money, they can be extremely lucrative for those looking to invest.

There are two types of user accounts that can be created on these platforms. One for borrowers and one for lenders. The platform itself only facilitates the transaction and puts borrowers in contact with lenders.

Once a lender joins a P2P platform, he will be able to deposit money into his online account and specify how it will be used for loans. It is possible to only allow the platform to lend the money to a single users, which is usually the more risky choice, but the lender is also able to set the money to be spread out across as many users as possible.

How Is Your Money Protected?

Most platforms insure the users, which means that if a borrower cannot return the money, the company owning the website will reimburse the lender. However, these are rare occurrences because P2P lending platforms only give out loans to individuals who meet certain requirements, such as providing proof of income, proof of address, and a bank statement from an active account. Payday loans in the UK sometimes also operate like this.

These measures ensure that borrowers are unable to trick the platform and evade repaying the money.

How Much Can You Earn by Investing in a P2P Lending Platform?

This depends on how much you invest, but also on how you allow the platform to lend your money to others. Allowing the P2P website to use the money form long term loans is usually more productive, however, it is not suited for those who want to see progress from one month to the next. Alternatively, you will be able to give out microloans using your deposit, but your earnings will be frequent and low in value.

Investing in P2P lending platforms should be approached as a passive financial activity. It is not useful for those who hope to get rich from one year to the next. This having been said, these platforms offer the best way to “make your money work for you”.

How to Budget Your Income for 2021?


The New Year has started and the pandemic continues. While a large number of people may have already started budgeting their personal finances in order to prepare for a possible financial depression, others may be just starting to feel the effects of the Covid-19 pandemic. Whichever the case, creating a budget and sticking to it is both an efficient way to create a financial safety net, as it is useful for those looking to save money.

There is no better time to create a monthly budget than at the start of the year, when most individuals reset their views on their financial progress. This having been said, we will look at how to create a proper budget for 2021 and we will also take into account the possible financial dangers that may await in the near future. Here is what you need to know:

Stick to the Budget No Matter What

Monthly budgets are only effective if you treat them with discipline. Once you decide how you will spend your money, it is important to not break the rules that you set for yourself unless there is a serious emergency that takes precedence over the budget. Furthermore, every time your income changes, you will have to reassess your expenses and other financial decisions.

Look at How You’ve Spent Money in the Previous Year

There is not winning formula when it comes to monthly expense budgets. Each individual is different and, as a result, each must come up with his own expense plan.

The best way to start is by looking at how you’ve spent money in the previous list. Get a sheet of paper and try to remember all of your biggest expenses from 2020. Once you finish this list, move on to the less expensive products or services that you might have purchased. Do this until you reach weekly expenses such as groceries, utility bills and various monthly subscriptions? At this point, you will have to look at the expenses that you’ve had during the last couple of weeks.

Keep in mind that the purpose of this step is to determine how you are currently spending your money and figure out which expenses are vital and which can be eliminated.

Create Your Budget with a Financial Buffer in Mind

It is likely that the job market and the economy in 2021 will be as variable as they were in 2020. As a result, you should consider creating a financial buffer that you will contribute to each month. This can be in the form of a savings account, a debit card that you will only use in case of serious emergencies, simply a paper envelop that you fill with cash.

Regardless of your choice, try to contribute to your buffer every month. This will give you a safety net to use if you are ever laid off from work or if your income is reduced to the point where paying your vital monthly expenses is difficult.

Consider Eliminating Some Creature Comforts

2021 is a year when most people should focus on saving money. In some cases, this may mean giving up various creature comforts that you may be currently paying. This includes Netflix subscriptions, online game subscriptions such as Nintendo Online or Xbox Live, and others. In other aspects of your monthly expenses, you should look for ways to pay for what you need. For example, if you do not use all the benefits included in your cell phone plan, switching to a more affordable one may be a good way to save money.

Keep in mind that most of the money that you save should go into your savings account or otherwise be left untouched. If no emergencies arise by the end of the year, you will at least have a larger budget for the winter holidays.

3 Financial Habits That Will Destroy Your Credit Rating


An individual’s credit rating is calculated based on his long-term financial decisions. It contains information gathered over several years and shows lenders how a potential borrower will behave once he receives access to financing.

Generally speaking, most individuals build up their credit ratings passively, without knowing. They do so by taking out loans, returning the money, using their credit and debit cards, and even paying bills. However, there are certain things that may be damaging to their credit score that people do without realising. As a result, they go about their lives until they need a loan and apply for one only to discover that the lender denies their request.

This having been said, today we will look at the 3 most damaging financial habits that have the potential to destroy an individual’s credit rating.

  1. Owning to Many Credit Cards and Using Them Too Often

Many individuals use their credit cards on a regular basis, for small purchases. While this is only moderately damaging, the issue amplifies during the holidays, when everyone pays for expensive gifts or creature comforts using the cards. This creates two issues. The first one is using the credit cards too often, especially in you would have the money needed to pay for what you buy. However, there is also the fact that most people to pay their credit card debt before the month ends.

Using a credit card too often may max it out, leaving an individual unable to pay for other expenses until he has paid it off. This affects an algorithm called the “credit utilisation ratio”, which looks at how much an individual has used out of the total credit that is available to him.

Generally speaking, having a credit utilisation ratio of over 30% will lower your credit rating and affect your chances of getting a loan. The same goes when talking about using a credit card too often.

How a borrower uses his credit cards, in relation to his income and expenses gives lenders information about how he manages his finances. Overusing your credit cards, especially before applying for a loan will lower your credit rating.

  • Lagging behind When Paying Your Utility Bills

This is a result of a somewhat new development, in the sense that utility companies have only recently started reporting their activity to credit reporting agencies. Nonetheless, how you pay your bills will now affect your credit rating. Those who lag behind with the payment of their bills will see their credit rating drop. The severity of this issue is determined by how often it happens.

Individuals who are regularly missing or delaying payments will suffer a more considerable long-term credit rating drop, while those who only do so once every couple of months may only see an almost negligible, short-term decrease.

  • Sending a Large Number of Loan Applications in a Short Amount of Time

When they need a loan, some individuals tend to send several loan applications to as many lenders as possible just to get a response and see if they are eligible or not, and if they are, what are the terms and conditions. While this may seem like a good way to gather the data needed to make an informed decision, each one of those applications is marked in their personal financial records.

Lenders tend to interpret this habit as prospecting and conclude that an individual has an ulterior motive for which he is looking for specific terms and conditions. If you need to take out a loan, it is recommended to use the calculators (these can provide all information that one might need, from the size of the payments to the interest rate) that are offered through the lenders websites, instead of sending applications.

How to Prepare for Your First Loan Application?


While personal finance education is relatively easy to find and most lenders do a great job when it comes to explaining how their products work, there are no guides that help individuals prepare for their first loan. The application process itself is fairly straightforward, regardless of lender.

However, what a borrower does before submitting the application can play an important role in determining what terms and conditions the lender will offer. Here is the best way to prepare for your first loan application:

Use the Cost Calculator Offered by the Lender

The first step also contains an important warning. Never submit a large number of loan applications in order to see what terms and conditions you would receive from different lenders. Doing so will reduce your credit score and may affect your chances of getting the loan.

Instead, go to the lenders’ websites and look for the loan calculators that they have made available to visitors. These web applications are designed to show you exactly how much your monthly repayments would be, as well as what interest rate will be attached to your loan.

Get Your Papers in Order and Keep Them in One Place

While on the lender’s website, also look at what documents and forms are needed as part of the loan request. If you have any questions you should be able to contact a bank representative either by phone call, or through the messaging app that is built into the website.

If, however, you decide to go to the bank and discuss directly with a representative, be sure to specify that you only want additional information and are not yet ready to submit your loan request.

Repay Your Credit Card Debt

Make sure that you pay off any credit cards that you might have prior to applying for a loan. Having a high credit utilisation ratio will have a negative impact on your credit rating and may result in higher interest rates.

You should also make sure that you make all loan monthly payments on time, for at least 3-4 months, before submitting your application. This will give your credit rating a boost and ensure that you get the best possible terms and conditions.

Space out Your Applications across a Large Period of Time

If you’ve submitted a loan application in the past, make sure that you wait at least a month before trying again, regardless of lender. Submitting a large number of applications in a short amount of time will decrease your credit rating and may even affect your chances of approval. The best course of action is to wait at least 30 days between applications and to never request a loan from the same lender twice consecutively, provided that you were refused the first time.

Know What Product You’re Interested in

Gather as much information as you can regarding both the lender as well as the product that you are interested in. Keep in mind that banks are, for most intents and purposes, commercial entities and their representatives will try to emphasize the advantages of a particular type of loan while avoiding the possible disadvantages. Go to the lenders website and read everything that you find regarding the loan that you’re interested.

Apply for the Loan

Lastly, apply for the loan. If you are already a client of the bank, you may be able to submit your application through an app or the lender’s website, however, it is usually better to go to the bank and do so in person. If any of your documents are not in order, there is a chance that the bank representatives will be able to solve the issue on the spot.