In this guide, we’re going to provide 11 of the best online banks, most of which pay interest rates on deposits well above “traditional” banks.

Let’s start with a high-altitude summary with the table below. We’ve listed all 11 banks and their basic features. Take a quick glance through the table, then move down to the summary reviews of any you’re interested in just below the table.

Our Picks for Best Online Banks

Below is our list of the 11 best online banks, and what each bank is especially good at:

• Ally Bank: Best All-Around

• Discover Bank: Best Rewards Checking

• Alliant Credit Union: Best Online Credit Union

• CIT Bank: Best for High-Interest Savings

• Capital One Bank: Best Online Banking with Credit Cards

• Chime: Best for Depositors with Bad Credit

• PenFed: Best High Interest on CDs

• Bank of America: Best Full-Service Bank

• NBKC: Best Small Full-Service Online Bank

• PNC: Best Banking Virtual Wallet

• Betterment: Best Investment Service with Banking

• Products Offered: Checking, online savings, money markets, and CDs

• Minimum Balance Required: None

• APY on Best Account: 4.40% APY (Money Market Account)

• Monthly Fees: None

• ATM Network: 43,000+

Ally Bank got our vote as the best all-around online bank. Not only do they pay 4.40% APY on their money market accounts, but they also offer interest-bearing checking, and high-yield certificates of deposit (CDs).

But that’s not all that makes this online bank stand out. In addition to interest-bearing deposit accounts, they also offer mortgages, car loans, and personal loans. They also offer self-directed trading of most investment securities, as well as a robo-advisor and wealth management services.

Ally Bank offers interest checking with two tiers. The account pays 0.10% APY on balances less than $15,000, and 0.25% APY on balances above. The account also comes with a Round Up feature enabling you to save money as you spend.

Ally Bank also offers CDs with terms between three months and five years, and interest rates ranging from 0.50% and 2.75% APY.

• Products Offered: Online savings, checking account, money market, and CDs

• Minimum Balance Required: None

• APY on Best Account: 3.60% APY on online savings account

• Monthly Fees: None

• ATM Network: 60,000+

Best known for its high-rewards credit cards, Discover also offers online banking with high interest. Though their online savings account pays the highest rate at 3.60% APY, their money market comes close, with 3.50% APY on balances up to $100,000, and 3.55% APY on higher balances. They also offer CDs in terms of 12, 24, and 60 months, with interest rates ranging between 4.15% and 4.30% APY.

Much like Ally Bank, Discover has none of the usual fees. They even waive the excess withdrawal fee on their online savings account. Meanwhile, you can receive 1% cashback on debit card purchases up to $3000 each month with their no-fee checking account.

• Products Offered: Savings, interest checking, and children’s accounts

• Minimum Balance Required: $5, but $100 to earn interest

• APY on Best Account: 1.00% APY on high-yield online savings

• Monthly Fees: None with electronic statements

• ATM Network: 80,000+

Alliant Credit Union is one of the largest credit unions in the nation. And though based in Illinois, it’s available to depositors nationwide. As a credit union, they offer a full line of banking services. This includes credit cards, mortgages, home equity lines of credit, auto loans, personal loans, and even commercial real estate financing.

Their High-Rate Savings Account currently pays 1.00% APY with a minimum balance of $100, and no monthly fee if you choose electronic statements (paper statements are $1 per month). Meanwhile, the high-yield checking account pays 0.25% APY with no monthly service fee or overdraft fees and has no minimum balance requirement.

• Products Offered: Money market, savings account, eChecking, and CDs

• Minimum Balance Required: $100

• APY on Best Account: 1.35% APY on Savings Connect account

• Monthly Fees: None

• ATM Network: 7, but up to $30/month ATM fee reimbursement

CIT Bank’s star account is their Savings Connect account. It currently pays 1.35% APY and requires a minimum of $100 to open. It requires connecting the savings account with an eChecking account. And speaking of eChecking, that account pays interest of 0.10% APY on balances less than $25,000 or 0.25% above. It also requires a minimum opening balance of $100.

Meanwhile, the money market account pays 1.00% APY and requires a minimum of $100 to open. They also offer their Savings Builder account, which pays up to 0.70% APY. But this savings account is a bit complicated. It requires a minimum balance of $25,000 or making monthly deposits of at least $100, to earn the maximum interest rate. The rate falls to 0.34% if you don’t.

CIT Bank also offers an interesting array of CDs. Unfortunately, other than the No Penalty 11-month CD, currently paying 1.40% APY, the interest rate returns on their CD products pay well below 1%. CIT Bank also offers home mortgage loans, as well as business and commercial financing.

• Products Offered: Checking, savings, CDs, team checking, and kids savings accounts

• Minimum Balance Required: None

• APY on Best Account: 1.00% APY on 360 Performance Savings

• Monthly Fees: None

• ATM Network: 70,000+

Much like Discover, Capital One is perhaps best known for its line of very attractive credit cards. But they also offer online banking that includes interest-bearing checking and savings accounts, as well as a wide range of CDs. The most impressive program is the 360 Performance Savings account, which currently pays 1.00% APY on all balances. There are no monthly fees and no minimum balance requirement.

Their 360 Checking account is an interest-bearing checking account, currently paying 0.10% APY. Like the 360 savings account, there is no minimum balance and no monthly fees. Capital One also offers CDs with terms ranging from six months to 60 months, and interest rates between 0.75% APY and 2.90% APY.

• Products Offered: Checking and savings accounts

• Minimum Balance Required: None

• APY on Best Account: 0.50% APY on the High Yield Chime Savings Account

• Monthly Fees: None

• ATM Network: 60,000+

If you’ve been unable to open a checking account because of either bad credit or an unsatisfactory relationship with a previous bank, Chime can help. You can open an account with no money, and no credit check. Chime also offers fee-free overdraft protection with their SpotMe program which provides you with up to $200 in overdraft spending.

Chime also offers other services to help you better manage your finances and even improve your credit. Their Credit Builder program offers a secure Visa credit card with no annual fees or interest that will report to all three major credit bureaus.

Chime, however, is on the low end of the interest scale, with their top rate being 0.50% APY on their High Yield Chime Savings Account. But Chime is more a banking app for individuals looking to build credit, and not about paying high interest.

• Products Offered: Checking, savings, and money market accounts, and CDs

• Minimum Balance Required: $1,000

• APY on Best Account: 3.45% APY on their 5-year CD

• Monthly Fees: None

• ATM Network: 85,000+

PenFed is a credit union offering complete banking services. That includes checking, savings, and money market accounts, as well as high-yield CDs, credit cards, auto loans, personal loans and lines of credit, student loans, and the full range of mortgages and home loan products.

Their CDs are where they’re strongest. That starts with their five-year certificate which currently pays 3.45% APY on balances as low as $1,000. Meanwhile, their Premium Online Savings is currently paying 0.75% APY with a minimum of $5 to open an account.

They also offer a free checking account with no minimum balance and no monthly fees, as well as their Access America checking account paying up to 0.15% APY on balances below $20,000, and 0.35% APY on higher balances. The account requires a monthly direct deposit of at least $500, or a minimum daily balance of $500 to avoid a $10 monthly fee.

• Products Offered: Checking, savings, and CDs

• Minimum Balance Required: Varies by account type and program

• APY on Best Account: N/A

• Monthly Fees: Waivable fees on checking accounts, none on savings

• ATM Network: 16,000+

There’s good news and bad news with Bank of America. Let’s start with the bad news—interest on their checking, savings, and CDs is downright dismal. We’re talking rates of below 0.10% across the board, even with the recent increase in interest rates in general. Bank of America is simply not an institution where you’ll want to hold a large amount of cash for the purpose of earning interest on your money.

But what Bank of America is good at is being a full-service bank. Unlike many of the other banks on this list, Bank of America is a traditional brick-and-mortar bank. They have more than 4,000 retail financial centers across the country, which means the possibility of face-to-face banking is very high. But like an increasing number of traditional banks, they also offer complete online banking services.

As a full-service bank, they offer several credit cards, home loan programs, auto loans, and investing through Merrill Edge. And if that’s not enough, they also offer small business banking and wealth management. Bank of America is the perfect choice if those are the services you’re looking for.

• Products Offered: Checking and money market accounts, and CDs

• Minimum Balance Required: None, but you must make a deposit within 60 days of opening your account

• APY on Best Account: 0.40% APY on Personal Money Market

• Monthly Fees: None

• ATM Network: 37,000+

NBKC is a small, Kansas City-based bank with just four brick-and-mortar branches in the Kansas City area. But they distinguish themselves as an online bank, and one that provides full banking services. That includes home loans, personal loans, auto loans, bridge loans, and credit cards, in addition to checking and money market accounts and CDs. If that’s not enough, they also offer business services, like funds, disbursements and payments, fraud management, collections, and cash management.

On the bank deposit side, they pay interest on both their money market and checking accounts. The Personal Money Market currently pays 0.40% APY on all account balances, has no minimum balance requirement, and charges no monthly fees. Their Everything (checking) Account pays 0.25% APY on all account balances, has no minimum deposit requirement, and no monthly fees.

CDs have terms of between three months and five years, with interest rates between 0.10% and 0.75% APY. Each requires a minimum investment of $1,000 or $250.

• Products Offered: Checking, savings, and money market accounts, and CDs

• Minimum Balance Required: Varies by account

• APY on Best Account: N/A

• Monthly Fees: Varies by account

• ATM Network: 9,500+

PNC is another brick-and-mortar bank with a strong online presence. It’s one of the largest regional banks in the country, and it provides full banking services to individuals and businesses. They offer checking and savings accounts, credit cards, home financing, auto loans, and retirement plans, as well as business banking services.

Much like Bank of America, as a large banking concern, interest rates paid by PNC on deposit accounts are poor. For example, they offer multiple savings accounts, all with interest rates well below 0.10% APY, regardless of account balance. The situation is much the same with their CDs, with terms ranging from as little as one month to as long as 10 years.

But if PNC has a distinguishing feature, it’s their Virtual Wallet. That’s a feature that combines checking and savings accounts with money management tools. It will set you up with the primary checking account representing your spending account, a secondary checking account that will act as a reserve, and then a long-term savings account for growth. It will then add digital tools to track your spending and automate your savings.

• Products Offered: Checking, cash reserve, and automated investing

• Minimum Balance Required: None

• APY on Best Account: 1.10% APY with Cash Reserve account

• Monthly Fees: None

• ATM Network: None, but fees charged by other financial institutions are reimbursed

Betterment is an online, automated investment platform, better known as a robo-advisor. For a small fee (generally 0.25% of your investment account balance) they’ll create, manage, and rebalance your investment portfolio for you. All you need to do is fund your account.

But as the company has expanded its product offerings, they now offer both checking and a high interest cash reserve account. The cash reserve account currently pays 1.10% APY with no minimum balance required, and no monthly fees. However, you must have a Betterment investment account to be able to take advantage of the cash reserve. Meanwhile, your account will enjoy FDIC insurance protection on balances up to $1 million, or $2 million in a joint account.

Betterment also offers no-fee checking, which comes with a Visa debit card. The account has no fees, and is FDIC insured up to $250,000 per depositor. The Visa card will give you an opportunity to earn rewards at participating merchants, and though Betterment has no ATM network, they do reimburse fees charged by other financial institutions, as well as foreign transaction fees.

Online Banking vs. Traditional Banking

In truth, the line between online banking and traditional banking is fast becoming a lot less obvious than it used to be. That’s because nearly every bank in the country, including long-established brick-and-mortar banks, now offers online banking. Not only is it a feature consumers commonly prefer, but it also enables banks to attract customers well beyond their home territory.

However, expanding customer reach is hardly the only reason banks offer online banking. Because online banking doesn’t require physical branches, or the employees needed to staff them, it reduces their cost of operation. By passing those lower costs along to their consumers, online banks are able to attract a larger customer base.

That’s a big reason why online banks typically pay higher interest on deposits than traditional banks and charge lower fees. Many in fact charge no standard fees at all, starting with the monthly service charge.

Another major difference between the two is that online banks are fully functional from their web platforms. That includes giving consumers the ability to check individual transactions; balance their accounts; pay loans, merchants, and vendors online; transfer money between accounts or even to third parties; and contact customer service.

Online banking has progressed to the point where it is now possible to take advantage of mobile check deposit capabilities, enabling you to immediately deposit a paper check in your account for immediate crediting. It’s even possible to apply for a loan or credit card through an online banking platform. The combination of services has become so sophisticated, it has virtually eliminated the need to visit a bank branch.

There’s one other feature that’s proven to be critical to the success of online banking, and it’s mobility. Consumers can now access their accounts and conduct their banking business on a computer at home or at work, or even through their mobile phones. That can turn a bank transaction that once took up to an hour into just five minutes.

Tips to Find the Best Online Bank

Banking is a very personal service, and you need to approach finding the right online bank with that thought in mind. Determine what your own personal needs and preferences are, then set about finding the bank that will best match what you’re looking for.

For example, if you have a need to deposit or access cash, the size of an online bank’s ATM network will be very important to you. A large fee-free ATM network will give you greater flexibility to conduct cash transactions.

If you frequently need customer service, you’ll want to work with an online bank that offers live customer support by phone or by live chat. Many online banks now offer live customer service on a 24/7 basis.

You should also consider the most important reasons you use your bank. For example, if you still write a lot of checks, you’ll want to work with a bank that will offer fee-free checking, with unlimited check writing. Focus on finding the best checking accounts. This is especially important because many online banks are gradually moving away from paper checks.

If you’re primarily interested in saving money and earning high interest, focus on the banks that pay the highest rates. This will include the banks with the best savings accounts and the best high-yield savings. If you’re saving for long-term purposes, and want to lock in high interest rates, look for banks offering the best CD rates. Or perhaps you’re interested in other services the bank may provide—like loans. For example, you may be interested in working with an online bank that offers personal loans, since they’re usually the prime choice for the best debt consolidation. Similarly, if you plan to buy a car in the near future, you may be interested in an online bank that offers favorable auto loans.

How We Found the Best Online Banks

We used very specific criteria to come up with this list of the best online banks. Below are the features we consider to be the most important in making that determination:

• Products Offered: At a minimum, we looked for checking and savings accounts, but also money market and CDs. Non-deposit features were also taken into consideration, such as credit cards, loans, and business banking.

• Minimum Balance Required: As you can tell from the banks included on this list, we’ve given a strong priority to banks that have no minimum initial deposit requirement, or ongoing balance requirements.

• APY on Best Account: Though most of the banks include a relatively small number of interest-bearing accounts, some offer many. For that reason, we chose to highlight the single account paying the highest rate of interest. And, generally speaking, if a bank pays a higher rate on one account, it follows through to the other accounts they offer.

• Monthly Fees: We absolutely favor the banks that charge no monthly fees. But we included a couple of larger banks that do have fees but waive them with very minimal requirements.

• ATM Network: Banking with an online bank usually means an absence of brick-and-mortar branches. That means ATM access becomes even more important as a source of cash. We favor the banks that have the largest fee-free network of ATMs or provide reimbursement for out-of-network fees.

We also consider other services offered by each bank. Betterment is an excellent example, since they provide automated investment services, while PNC offers their Virtual Wallet to help you better manage your money and build savings.

Information was taken primarily from each bank’s website, and also from independent bank reviews where necessary.

Summary of the Best Online Banks

Let’s wrap this up by giving you one last look at our list of the 11 best online banks and why we included each:

• Ally Bank: Best All-Around

• Discover Bank: Best Rewards Checking

• Alliant Credit Union: Best Online Credit Union

• CIT Bank: Best for High-Interest Savings

• Capital One Bank: Best Online Banking with Credit Cards

• Chime: Best for Depositors with Bad Credit

• PenFed: Best High Interest on CDs

• Bank of America: Best Full-Service Bank

• NBKC: Best Small Full-Service Online Bank

• PNC: Best Banking Virtual Wallet

• Betterment: Best Investment Service with Banking

Given that interest rates have been rising in recent months, we strongly recommend looking into one or more of these banks. That doesn’t mean you need to shift all your accounts over to one of them, but you should definitely consider moving your savings if you’re not currently earning a comparable rate of return. You can also check out our post on other high-yield investments.

FAQs – Best Online Banks

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But, it’s also one of the biggest financial transactions most people make.

Get a good deal, and you’ll save a ton of money over the life of the car. Strike a bad deal, and it can haunt you for years.

 It can even interfere with the next car you buy!

You can avoid this outcome by preparing yourself for the new car purchase ahead of time.

And, one of the main factors in getting a great deal on a new (or new to you) vehicle is how you go about choosing when to buy a car.

In this post, we’re going to answer these questions and give you the best tips on scoring a deal on your next car.

When To You Buy a New Car: 13 Prodigious Tips!

1. Pay Off Your Current Car First
2. Stick to Your Budget
3. Never Take the First Offer
4. Have Your Downpayment Ready
5. Get Your Financing Straight
6. Fix Your Credit
7. Add Up All the Costs
8. Time It Just Right
9. Check Your Emotions
10. Create Competition
11. Be Careful with Add-Ons
12. Bring a Negotiator
13. Just Walk Away

When Should You Buy a New Car?

First things first, there are certain times which are more profitable for buying a new car.

The best times to buy a new car are weekdays, holidays, and dates close to the end of the model year. 

But there’s far more to getting the best deal on a new car than the purchase date. With those times of year in mind and the tips below, you can be sure to get the best deal possible when you buy a new car.

Don’t Even Think of Buying a New Car if You’re “Upside Down” on Your Current Car

What It Means to Be Upside-Down

If you’ve never heard the term “upside-down”, it’s probably because you’ve never worked in the car business. Everyone who does knows exactly what it is.

It’s a new car buyer who owes more money on his current car than the car is worth.

For example, “Steve” wants to buy a new car. His current car is worth $10,000, but he still owes $13,000 on it. It could be because he doesn’t actually know what his car is worth, but assumes it’s at least equal to the loan.

Or it could even be because he doesn’t have a clue.

He goes to a dealership hoping for the best – and lo and behold, that’s what he gets. Or at least he gets the answer he wants to hear. That’s the dealer telling him that he can buy a brand-new car.

The deficiency on the car loan may come up, or it may not. But whether it does or not, Steve is still clearly upside down on his current car. Here’s how this will play out…

After confident assurances by the dealer that, yes, Steve can buy a brand-new car, the process moves forward.

In fact, it’s almost as if the deficiency doesn’t exist.

That’s because the dealer can make the deficiency do a disappearing act. Or so it will appear. Obviously, Steve has no down payment for the new car. No problem. And if he trades in his current car, he’ll have a shortfall. No problem there either!

Steve wants to buy a $30,000 car and plans to do it with what he thinks will be 100% financing. But that’s not quite what will happen.

How Car Dealers Make Loan Deficiencies “Magically” Disappear

Sure, the dealer will give Steve 100% financing on the $30,000 car. But they’ll also add the $3,000 deficiency from the old car to the new loan. When Steve drives off the dealer lot with his $30,000 car, it’ll come complete with a $33,000 loan.

Do you see what happened there? The dealer simply took the deficiency from the old loan and rolled it over into the new loan! Maybe Steve knows what’s happening, and maybe he doesn’t.

All he knows is that he was able to drive away with the new car of his dreams. In the end, he’s still upside down – only this time he’s upside down on his brand-new car. 

Here’s the important takeaway:

Being upside-down in a car is practically a lifestyle. Once you get upside down on one car, it carries over to the next.

Usually, the deficiency gets a little bigger each time. In theory, at least, you could spend a lifetime being upside down on your car. The upside-down buyer is always at a disadvantage bargaining with a car dealer because he needs the dealer to bail him out. 

Know the Value of the Car You Want to Buy (And Stick To Your Budget!)

This is something every new car buyer should know, especially since there are so many resources online that can help.

Two of the very best sources are Kelly Blue Book and Edmunds.com. Both will provide you with reliable new-car values in your area.

But it’s even more important if you’re buying used.

After all, used-car values are based on very specific factors, such as the age and mileage of the car, as well as options and wear-and-tear. You’ll need to know the approximate value of the vehicle before you even begin negotiating on it.

The purpose of this step is to make sure you’re an informed buyer. If you know the approximate value of the vehicle, you’ll know immediately if a dealer or seller is trying to overcharge you.

Never assume that the dealer has your best interests in mind.

After all, he’s trying to get as much for his cars as possible. Your job is to make sure he doesn’t, at least not in your case.

If you really want to go in prepared, print off the value of the car you’re looking to buy. Be prepared use it as a negotiating tool.

Few things get a car dealer to behave more than recognized third-party documentation.

Know the Value of the Car You Want to Trade In (Hint: Never Take the First Offer)

The same thing goes for the car you’ll be trading in. If you throw yourself at the mercy of the dealer on the trade in, you’ll have no idea if you’re getting a fair price.

You probably won’t; car dealers know how to sniff out a weak hand, and they’ll take full advantage.

Don’t let this happen to you.

You’ll get around the problem by knowing the value of the car you want to trade in. Once again, you can do this by checking the car’s value on Kelly Blue Book or Edmunds.com.

At the same time, be aware that valuations on used cars – which is what your trade-in will be – are more subjective.

For example, the condition of the car is a major gray zone. You may believe your car is in excellent condition, but the dealer may counter that it’s in average or even fair condition.

When you go on the valuation sites, be as objective as possible about this. Each allows you to rate the condition of your car, but you have to be as honest as possible.

Bring the car to a mechanic and ask for an evaluation of the condition – excellent, good, average, fair or poor. The difference in each classification could mean thousands of dollars.

If you’re accurate in evaluating the condition, you should get a pretty solid value of your car from the valuation sites.

Once again, print off the results – from both sites if necessary – and be ready to show them to the dealer when price negotiations begin.

You could even pore through local Craigslist ads to find comparables, if need be.

Better Yet – Have Your Down Payment Before Going to the Dealer

Advantages

Unless you have the cash to put down on the new car, you’ll have to sell your current car yourself.

This will give you two advantages:

1. It will remove the down payment hurdle, and

2. Eliminate the need to rely on the dealer for trade-ins.

#1 makes you a stronger buyer.

#2 puts the dealer in a weaker position. It may not be as convenient to sell your own car, but it’s more important than it seems.

Anytime you have to rely on the dealer for the trade-in/down payment, you’re leaving it to the dealer to decide how much that will be.

Let’s say your research indicates your car is worth $10,000. You have a $7,000 loan outstanding on it.

1. If you sell the car, you can pay off the loan and walk away with $3,000 for the down payment on your new car.

2. If you trade it into the dealer, they might decide it’s only worth $8,000. That will leave you with only $1,000 to put down in your next car.

The difference will be made up by a larger loan, that will also include a higher monthly payment.

You Owe It to Yourself to Try to Sell Your Car on Your Own

If you’re in a hurry, you can sell it to another dealer as a standalone transaction. Carmax buys cars this way, and they pay cash.

You’ve probably seen their commercials on TV lately – with the WBYCEIYDBO thing – “We’ll buy your car even if you don’t buy ours”.

You won’t get as much as you will if you can sell it yourself, but it will at least eliminate having to sell your old car and buy your new car from the same dealer.

The less control the dealer has, the more you have.

Get Your Financing Lined Up Before You Go to the Dealer, Too

Why You Should Get Approved First

Financing is an important profit source for car dealers, and you can make it work to your advantage.

Before you even go to a car dealership, first get a loan pre-approval from your bank or credit union.

In fact, shop around several banks and credit unions to see where you can get the best deal.

There are four reasons for doing this:

1. Having your financing before you walk in the door gives you a stronger bargaining position with the dealer.

2. It removes one more function of the sales process from the dealer, weakening their position.

3. It prevents them from putting you into a high-interest rate subprime loan (increasing their profit on the deal).

4. Finally, it forces the dealer to give you a better deal than your bank or credit union, if they have one available.

How to Get a Loan for Your New Car

There are a lot of routes you can take to get your new car financed, from going to your local bank or credit union, as I mentioned earlier, to shopping online. 

One of the best ways to guarantee you get the best interest rates and loan possible is to use a service like LendingTree to see all of your options. 

• Quick Look
• APR as low as 3.09%
• Competitive refinancing rates
• Access to bad credit auto loans
• Get connected with a multitude of lenders in minutes

Why You Should Avoid Dealer Financing

At the same time, be careful not to be lured in by promises of low rate dealer financing. Advertised rates are “teaser” rates, available only to the most qualified customers.

If you’re determined to be anything less, the interest rate might be much higher than the promised rate. Finally, dealerships frequently offer you a choice between a very low-interest rate and a cash back offer.

If you already have a low rate loan from your bank or credit union, you can take the cash back and lower the price of the car. You can crunch the numbers, but it will usually work in your favor to take the cash.

Speaking of Financing – If You Have Credit Problems, Get Them Fixed!

What Credit Score Do You Need to Buy a New Car?

If you’re applying for a car loan with a bank or credit union, they like good credit scores.

You’ll need a FICO of at least 650 to qualify for an auto loan.

The problem is when you can’t qualify for traditional bank or credit union car financing. If you can’t, you’ll likely get a subprime loan arranged by the car dealership.

Car dealers love these loans. As I mentioned above, they make a lot of money on them. They’re only too happy to move you into one.

And if you can’t get a bank loan, that’s probably where you’ll be.

Subprime car loans aren’t just more expensive than bank and credit union loans, but much more expensive.

How to Check Your Credit Score

The first step to determining whether you’ll qualify for financing your new car purchase and improving your credit score is to check it! When it comes to finding and improving your credit score, you have several options.

Here are a couple of our top picks, depending on what you need:

• Experian: Best for a basic credit check, Experian offers users a free credit report. Get yours here>>

• myFICO: With myFICO, you can access and order reports from the three major credit bureaus to help you get approval for your auto loan. Get your myFICO reports today>>

What a Bad Credit Score Can do to a Car Loan

Real Life Case Study: I knew a young man – we’ll call him Ed – who found himself in a situation where he needed a new car immediately. He crashed his previous car and needed to get it replaced.

But he had a credit score of 500-something. No bank or credit union would give him a loan. But the dealer was only too happy to provide financing. It was a $10,500 loan for 72 months at 22.99%!

The monthly payment was about $265. Not only that, he got hit with a bunch of add-ons, like a prepaid maintenance program, and gap insurance – both of which he was told were mandatory.

It’s how the car business works when you’re playing with a weak hand. 18 months later, Ed raised his credit score by more than 100 points. He was then able to refinance the loan through his credit union.

At that point, the balance was paid down to about $9,000. He took a 36-month loan at 3.99% – a full 19 points below the original subprime loan!

The monthly payment stayed right around $265.

But, he chopped 18 months off the loan!

In doing so, he saved close to $4,800 over the life of the loan (18 months X $265). That true story shows why it’s important to clean up your credit before buying a car.

And, if you can’t do it ahead of time, do it as soon as possible after you buy the car. Subprime car loans not only have ridiculously high-interest rates, but they keep you locked in the loan longer than the car is likely to last.

Did I mention the 72-month loan was on a used car?

Factor in All Costs! (Not Just the Sticker)

Add-Ons That Impact Cost

When you purchase a new car, don’t be singularly focused on the purchase price alone.

That’s never the actual price.

There are a series of add-on fees anytime you buy a car, and that’s what determines the final buy price.

Add-on costs can include:

• State sales tax – If your state has a sales tax in place, and it applies to the purchase of motor vehicles, it can have a major impact on the final price of the car. For example, if you live in a state with a 7% sales tax, and you purchase a car for $30,000, sales tax will add $2,100 to the final purchase price. In some states, there are even county and municipal sales taxes added on top.

• Document fees – Simply put, these are extra fees the dealer adds on top of the purchase price. They can have various names. Some states limit these fees, others don’t. Where they’re imposed, they can add several hundred dollars to the final purchase price.

• DMV fees – All states impose these fees. They can be registration fees and/or title transfer fees, and they vary by state. For example, Illinois charges between $101 and $114 for your registration fee, plus $95 for the title fee.

Let’s do a quick example of how these fees affect the final purchase price:

New car purchase price: $30,000

State sales tax (6%): $1,800

Document fees: $500

DMV fees: $300

Final sale price: $32,600

As you can see, the add-on fees increase the final price of the car by $2,600, or almost 9%. That’s just a ballpark. In some states it can be lower, in others it can be much higher.

Don’t Forget About Insurance

Don’t forget to factor car insurance into your calculations. Just like financing your car, insuring it should come with careful consideration.

Get insurance quotes here to pick the best auto insurance options for you.

The Cost of Owning a Car is Different from One Vehicle to Another

While we’re on the subject of cost, let’s take a moment to consider the ongoing costs of owning a car.

The Automobile Association of America (AAA) estimates the annual cost to be $8,469, or $706 per month. That’s just an average.

It ranges from $6,354 per year for a small sedan, to $10,054 per year for a pickup truck. Those figures are comprised of the following expenses:

• Depreciation (this is how much your car drops in value each year you own it)

• Maintenance and Repair

• Fuel

• Tires

• Car Insurance

All except car insurance will be approximately the same across the country. Car insurance varies widely by state.

For example, while the average car insurance cost nationwide is $1,682 per year, it ranges from a low of $864 per year in Maine to a high of $2,394 in Michigan. Those are just averages.

Premiums can also vary considerably based on the type and cost of the vehicle you’re purchasing. That’s why it’s important to get a car insurance quote from your insurance carrier before buying a new car.

Trading in a small sedan for a pickup truck could cause your insurance to increase by more than $1,000 per year.

You’ll need to know that before you make the purchase.

Timing is Everything – When to Buy a Car

Now that you’re prepared to get a good deal, by the numbers, let’s about when you should make your purchase.

This is super critical.

There are certain times of the year, or even the day of the week when you’re more likely to get a better deal.

Here are a few of the best times to buy a car:

The End of the Model Year

Car manufacturers work on a fiscal year that ends August 31. That’s when they change their model years.

By the time August hits, they’re looking to get last year’s inventory off the lots. They’ll often discount those cars to move them quickly.

After all, they need room for the new models. You can usually find good deals straight through October, which is when they’re trying to close out the last of the older models.

Holidays

Dealers often run BIG sales on certain holidays, particularly Memorial Day, Labor Day and Independence Day. Black Friday is another big one.

It has two advantages, one is that it falls on the Thanksgiving holiday weekend, and the other is car dealers are competing with Christmas shopping for business.

But the biggest holiday advantage may come between Christmas and New Year’s.

At this time of year, holiday celebrations and travel are crowding out car buying. At the same time, dealers are concerned with meeting year-end sales goals. Dealer bonuses may even hinge on them meeting certain sales levels.

This is a time of dealer desperation, which is a big advantage for you as a buyer. But what if you need one sooner and it’s not a holiday season?

When should you go?

Weekdays

More people shop for cars on weekends, because they work during the week. Dealers are usually more anxious to make sales on weekdays.

Mondays and Tuesdays are particularly good days because they’re quiet.

But this brings us to the next point… you can REALLY save…

When You Don’t Need a Car

 If you buy when you need a car, you might be desperate. But if you buy when you don’t need one, you’ll have a stronger negotiating position.

You’ll be thinking with dollars and cents (sense?), not just to fill an immediate need.

Leave Your Emotions at Home

This can be a tough one to pull off. After all, buying a new car is largely an emotional venture.

We’ve all heard the saying you are what you drive, and that affects the car buying decision.

It’s similar to buying a house – you’re not just buying a thing, but something that in some way defines both you and your lifestyle.

You have to detach yourself from that. After all, buying a car is first and foremost a business transaction. If your emotions are in control – i.e., I MUST have THIS car – your business sense isn’t. That increases the possibility of making a bad deal many times over.

After the new car high wears off, the reality of the car loan will set in. Only then will you know if you actually made a good deal. The time to make that happen is when you buy the car.

And that’s why you have to leave your emotions at home when you do.

Car dealers know how to exploit emotions – in fact, they’re banking on it. (Good pun, right?! I’ll see myself out.)

They can use your emotions to convince you to pay more for the car than you should, take options you don’t need, or even to put you into an upside-down loan.

None of that can happen if you approach the purchase as a business deal.

You may have to leave a thing or two on the table, but you’ll like yourself a lot better a few months later if you do.

Create Competition – Let the Dealer Know You’re Working With Other Dealers (Even if You’re Not)

Never go to a dealership hinting you need to buy a car right now, and from this dealer.

If you do, you’re setting yourself up to get your pocket picked. Instead, make it clear to the dealer that you’re shopping.

Drop a name or two for added effect.

The point is to make sure the dealer knows he’s in competition with other dealers for your business. They’ll respect you more, and give you a better deal.

Go Easy on the Options and Add-Ons

Dealers can quickly raise the price of a car with options and add-ons.

Be careful with this. Just as you never want to over-improve a house, you don’t want to overload a car with too many options.

Not only will they raise the price, but they may not increase the resale value of the car by the same amount. Most cars today have options packages that have most of what you need.

It may be okay to add a couple more as preferences, but don’t get carried away with it. Also, be aware there are options and add-ons that either don’t add value, or you plain don’t need.

Examples include credit life insurance, extended warranties (beyond those offered by the manufacturer), special car colors or editions, and various treatments, like undercoating, rust protection, sealants, and fabric protection treatments.

All can run up the cost of a car quickly, while adding very little value.

Bring Help

Some people are born negotiators, but it’s probably safe to say most aren’t.

If you aren’t, the workaround is to bring a negotiator with you.

This is perfectly acceptable. You can bring anyone you want to a car purchase. You may also want to bring someone who’s knowledgeable about cars, especially if you aren’t.

The basic idea is to make sure you’re not going into the dealership alone. After all, the salesperson you’re dealing with won’t be alone.

She’ll have the support of her sales manager, finance manager, other salespeople, or anyone else she needs to make the deal happen. If you have a more passive personality, you’ll be outnumbered and overwhelmed.

By bringing one or more of your own people, you’ll level the playing field. You can bring a strong negotiator or car expert as an advisor, but don’t be afraid to bring other people just because.

The point is, the salesperson has a team, and you need to bring your own.

If nothing else, they’ll be there for moral support.

But more important, they’ll be there during the tense negotiation phase. They may even be there to keep you from making a bad deal.

If the car buying/negotiating process has any potential to make you go weak in the knees, this is a step you can’t overlook.

There really is safety in numbers, even and especially when you’re buying a car.

Never – Ever – Be Afraid to Bug Out

This could be the most important car buying strategy of all.

Never feel obligated to go through with the car purchase (some people do).

If you don’t like the deal being offered, or you feel uncomfortable for any reason, simply get up and leave. 

Never allow a car dealer to intimidate you into taking a deal, or make you feel as if you’ll never get a car if you don’t buy this particular one.

There are more than 18,000 car dealerships in the US, so you don’t need this dealership, or this salesperson. They actually know that, but by getting up to leave, or threatening to do it, you’re letting them know you know it too.

Some dealerships and salespeople are experts at getting you to think you need them more than they need you. But the exact opposite is much closer to the truth.

This is why it’s best to shop when you don’t need a car. You can tell them you’re here to gather information, and you’re not buying a car today, period.

You can now take the decision home, sleep on it, and remove buyer’s remorse from the equation.

Final Thoughts on Getting the Best Deal on a New Car

Maybe you can’t use all these strategies to buy your next car. No problem – using just a few can make a real difference.

You’re not just looking to save money when you buy a new car, but to get the best car for the money you’re paying. 

That should always be the ultimate goal.

Unfortunately, when you buy a car from a dealer, you and the dealer are natural enemies. You want to buy the best car at the lowest price – the dealer wants you to pay the highest price.

Your job is to make sure that doesn’t happen, and that’s why you need to be prepared ahead of time.

Pick the best time to buy a car, do your research, and get a screamin’ deal.

You’ll be happy you spent the time, and not the money.

FAQs – Getting The Best Deal On Your Car

The post Best Time to Buy a Car and Tips to Save When Buying a New Ride appeared first on Good Financial Cents®.

Why else should you invest through Public?

• You can open an account with no money at all.

• Public enables you to invest through fractional shares, which means you can build an entire portfolio with just a few dollars.

• Public provides a social community where you can exchange ideas with other investors on the platform.

• The platform is constantly expanding its product menu, rolling out a Premium version, and acquiring a subsidiary that will enable investing in cultural assets, like art.

Want to know more?

About Public

Public is an online investing platform where you can invest in stocks, exchange-traded funds (ETFs), cryptocurrencies, and, in the future, art, non-fungible tokens (NFTs), collectibles, and other investments. Most trades can be made commission-free.

The platform provides company information, programs about the markets, and real-time analysis to help members be better investors.

But what sets the Public apart from most of the competition is the social aspect. The platform operates as a social community where millions of investors, creators, and analysts come together to share ideas and learn what each other is doing.

The community aspect of Public takes in well-known personalities, including actor Will Smith, NFL star J.J. Watt, creator and entrepreneur Casey Neistat, and skateboarding legend Tony Hawk.

Public was launched in 2019 and is based in New York City, with offices in Copenhagen, Denmark.

Is Public Legit?

Officially known as Open to the Public Investing, Inc., Public is an SEC and FINRA-registered investment broker.

The company has a Better Business Bureau rating of “A” (on a scale of A+ to F), where it has been accredited since 2020. A total of 38 complaints have been filed against the company with the BBB over the past three years, all of which have been answered by the Public.

The company also scores well with mobile users. It has a rating of 4.7 out of five stars among more than 58,000 iOS user reviews on The App Store and 4.4 stars out of five among more than 43,000 user reviews on Google Play.

How Do You Make Money With Public?

Public is a trading app where you can make money by buying stocks, ETFs, options, and cryptocurrencies and then selling them for capital gains. But that’s not the only way you can make money with the Public.

You can also earn dividends on any dividend-paying stocks or funds you hold. Public does provide a reinvestment feature, so you’ll have the option to either reinvest dividends and more company stock or take the income as cash.

Public does pay interest on cash balances. That interest income won’t be comparable to what you can get in CDs or U.S. Treasury securities, but it will provide you with an income on your uninvested cash.

But perhaps the easiest way to make money on Public is to take advantage of one or more of the three Public promotions.

That includes the Public New Member Reward Program, Account Transfer Bonus, and the Public Referral Program, each of which will be explained in greater detail later in this review. Those bonuses will pay between $3 and as much as $10,000, so they’re well worth participating in.

Public Account Types

Public offers taxable brokerage accounts only. At this time, they do not offer retirement accounts, custodial accounts, trusts, or college savings plans.

When you open an account with Public, you’ll be able to engage in commission-free trades of individual stocks, ETFs, and cryptocurrency (they plan to make art, NFTs, and collectibles available in the future).

And while Public does not offer customer service by phone, you can get plenty of support on the platform.

Public provides you with access to the following:

• Timely updates on stock, crypto, or other assets, including news on significant price changes. It also offers unique insights about your portfolio, upcoming earnings calls, company events, and more.

• Live shows (Public Live) where you can listen to experts, analysts, and journalists break down the day’s biggest market headlines.

• Advanced data reports, where you can explore fundamental metrics and institutional-grade research from Morningstar. You’ll also get perspectives from trusted research analysts.

• “Town Halls,” providing direct access to company founders and executives.

• The Top Movers List, where you can see the list of the stocks that have moved the most, either up or down, for the trading day.

• An investing glossary provides explanations of important investing topics and terms, like 12 B-1 fees, the 50/30/20 budgeting strategy, asset allocation, bid/ask spread, and more.

• Customer support specialists who are FINRA licensed and ready to help you through live chat seven days a week.

Public Premium

For $10 per month, Public Premium offers all the features available with a Public regular account but adds the following upgrades:

• Advanced Data and Unique Market Metrics – access Morningstar’s industry-leading performance data, including breakdowns of ETF holdings and company performance on revenue, ESG, and other factors.

• Analyst’s Insights – learn what bulls and bears think about popular securities, including analyst’s sentiment, Morningstar’s fair value estimate, and extensive research reports.

• VIP Customer Support – provides you with “white glove” support from Public’s US-based customer service team.

At this time, Public has instituted a wait list for Public Premium. You will receive early access to the service on a rolling basis based on your order on the waitlist.

How Public Works

As to the investment process, Public keeps it simple. Whether you’re investing in stocks, ETFs, or crypto, all you need to do is pull up the investment category, select the security, fund, or crypto you want to buy, then click the “Invest” button, and you’re all done.

Cryptocurrency

Public is joining the growing number of investment platforms that are offering investors access to cryptocurrency in addition to more traditional investments. In fact, they give you an opportunity to invest in more than 25 cryptos.

These include Bitcoin, Ether, Cardano, Dogecoin, Solana, Litecoin, Bitcoin Cash, Stellar, Ethereum Classic, Tazos, Dash, Zcash, and more. And just as is the case with stocks and ETFs, cryptos can be traded commission-free and using fractional shares (or “slices”).

Crypto can be traded 24 hours a day, seven days a week. But you should be aware that, like other investment platforms that make crypto available, Public does not use digital wallets.

That means while you can buy and sell crypto on the platform, you can’t move it into a wallet and then move it to another platform.

Similarly, you won’t be able to transfer crypto held on another broker or exchange to the Public.

Public Themes

You’ll also have access to Public Themes with either a regular account or with Public Premium. These are purpose-centered investment themes, giving you access and insight into companies participating in that particular industry or activity.

Examples include green power, space exploration, dividend stocks, cannabis, blockchain technology, media and entertainment, and more. Each theme will provide you with a list of individual stocks and ETFs that are part of that theme group.

The Public Social Community

One of the keys to the Public investment app is the Public Social Community. It adds a social media dimension to your investment activities, enabling you to learn from other investors and even share your own investment strategies, successes, and failures.

You can even embed a stock chart or a Public member’s profile within a message.

Think of it as an investment chat room within the Public app.

You can send or receive messages to or from an individual or groups within the community. Groups can hold up to 100 participants.

Community members who participate in productive conversations, share ideas, and uphold the Public’s values of transparency and respect are eligible to receive the Public Invest Hat. That’s not really a big deal since it’s basically a baseball cap with the word “Invest” imprinted across the front.

Public makes it possible to block a community member who you want to unfollow. You can do it by visiting the member’s profile and selecting Block.

Otis

Public recently acquired Otis, which is a move that will create even more investment opportunities for participants on the platform. With that acquisition, you’ll soon be able to invest in alternative assets, like collectibles, trading cards, and contemporary art.

The acquisition is recent, and Public projects will be at least six months before Otis will be officially integrated with the Public and available to investors.

How Does Public Make Money if They Don’t Charge Fees?

Among all investment brokers, Public is especially light on fees. So, how do they make money and stay in business?

For starters, they don’t use Payment for Order Flow (PFOF), as is commonly used by other commission-free retail brokers. That’s where a broker sends trades to market makers in exchange for rebates. It’s a common source of broker income but one that the Public doesn’t use.

Instead, Public relies on the following:

• Optional Tipping. As a social investment platform, members who want to support the platform and keep Public PFOF-free can provide tips to the company, though they aren’t required.

• Securities Lending. Public uses the services of Apex Clearing as their clearing agent. Investors on the platform can choose to enroll in the Fully Paid Securities Lending Program, in which Apex can loan out their shares to other investors and institutions, usually for short sales.
  
  Those borrowers will pay interest to Apex, a portion of which is rebated to Public.

• Interest on Cash Balances. Uninvested cash held by investors on the platform will earn interest, some of which is retained by Public. This is another common practice in the brokerage industry.

• Instant Withdrawal Fees. Public charges a fee of 2% of the amount withdrawn on instant withdrawals.

• Public Premium Subscription Fees. Premium has a fee of $10 per every 30 days, representing revenue to the company.

• Pulse Partnerships. Public offers this service to help companies create closer relationships with their retail investors. Public partners with companies to share important information via the Public platform, in an attempt to improve investor experience.
  
  Presumably, Public earns some sort of fee paid by the companies for the service, though this isn’t specifically disclosed.

Public Features

Feature Summary:

Tax Reporting and Exporting

You can import your Public 1099 form directly into TurboTax. You can even save up to $20 when you download TurboTax from Public.

Account Protection

Public is a fully regulated broker-dealer, and your account is protected by SIPC insurance for up to $500,000 in cash and securities, including $250,000 in cash.

Accounts are secured by bank rate security AES 128-bit encryption, TLS for secure data transit, and a default two-factor authentication.

Public Promotions

Public is currently offering three promotions:

Public New Member Reward Program: Open a Public account and deposit at least $20 into it to be eligible to receive a fractional share of a designated stock, ETF, or crypto asset. The reward will be worth between $1 and $300.

Public Referral Program: Refer family and friends to Public, and you’ll receive a fractional share of an asset of your choice.

The terms for your referrals will be the same as for the Public New Member Reward Program, except that both you and your referral will get $20 in an asset of your choice, subject to the terms and conditions.

Account Transfer Bonus: Public will pay you a bonus ranging from $150 to as much as $10,000 if you transfer $5,000 or more in securities from another broker.

You can make the transfer without needing to sell securities. Public does not charge a transfer fee and will cover any transfer fees from the source broker up to $500.

How to Sign Up for a Public Account

You can sign up for Public from either the website or the mobile app by clicking “Get Started” at the top of the page. You’ll need to enter your email address and phone number and a referral code if you have one.

To be eligible to sign up for an account with Public, you must be a US citizen and be at least 18 years old. Public will accept US permanent residents and those who have valid visas. You must also have a valid Social Security number, a US-based phone number, and a legal US residential address.

Once Public verifies the above information, you’ll receive an approval notification and a free stock available from the Free Stock button in the top right of the home screen.

Alternatively, Public can accept debit card funding of up to $5,000 per transfer. You can do this by connecting your debit card to your Public account. If you prefer, you can also fund your account by mailing a check or by setting up an incoming wire into your Public account.

Finally, you’ll need to upload a profile photo so you can easily be identified by friends and others participating on the Public platform.

Once your account has been funded, you can begin investing as you like.

Is Public Safe to Use for Beginners?

Public is a safe investment platform for beginning investors. Your account will be completely protected by SIPC insurance for up to $500,000, and the platform uses numerous security features, including two-factor authentication, to keep your information safe.

The company is also registered with both the SEC and FINRA.

Another benefit of Public is that you can open an account with no money at all. With no minimum deposit requirement, you’re free to invest as little or as much as you feel comfortable doing.

That said, Public may not be the best choice for beginning investors. Larger brokerage firms offer more investment options, including mutual funds and bonds. They also provide more educational resources and trading tools, as well as superior customer service.

After all, Public does not provide investors with access to phone support.

Why You Should Open an Account With Public

Public has a lot going for it, especially for new investors looking to get their feet wet investing. They offer a combination of no minimum initial investment requirement, as well as commission-free trades.

And since they can also accommodate trading in more than 25 cryptocurrencies, you’ll have an opportunity to invest in crypto in the same account where you hold your other investments.

The social aspect of Public can also be important for new and intermediate investors. You’ll be part of the Public Social Community, where you’ll be able to learn what other investors are doing, run investment scenarios by other members, and participate in group discussions.

I’m not entirely certain the Public Premium version is worth the $10 per month fee. Especially when you consider the services offered are commonly available with other investment brokers at no additional charge.

More experienced investors may also find Public to be a limited platform. That’s because it does not offer mutual funds, bonds, penny stocks, options, or margin trading.

But at this point in the game, Public is designed for new and intermediate investors. And for that group, Public is an excellent choice.

Final Thoughts – Public Review – The Perfect Broker for New Investors?

Public stands out as an enticing option for budding investors, offering commission-free trades, no initial investment requirement, and a broad spectrum of investment options, including over 25 cryptocurrencies.

Additionally, the platform’s social community fosters an environment of learning and idea exchange, greatly benefiting novices and intermediate investors.

The recent inclusion of alternative assets, such as rare collectibles and art, adds another layer of diversity to investment choices.

However, it’s essential to note its limitations, including a lack of services like mutual funds, options, and margin trading. For those new to investing, Public presents a commendable starting point.

How We Review Brokers and Investment Companies:

Good Financial Cents conducts a thorough review of U.S. brokers, focusing on assets under management and notable industry trends.

Our primary objective is to offer a balanced and informative assessment, assisting individuals in making informed decisions about their investment choices. We believe in maintaining a transparent editorial process.

To achieve this, we gather data from providers through detailed questionnaires and take the time to observe provider demonstrations.

This hands-on approach, combined with our independent research, forms the basis of our evaluation process. After considering various factors, we assign a star rating, ranging from one to five, to each broker.

For a deeper understanding of the criteria we use to rate brokers and our evaluation approach, please refer to our editorial guidelines and full disclaimer.

Public.com Investing App Review

Product Name: Public.com

Product Description: Public.com is a social investing platform that allows users to invest in stocks and ETFs commission-free, as well as follow investment strategies of other notable investors. The platform also provides financial education, community engagement, and a rewards program for users to earn points for completing certain activities or referring new members.

• [ Learn More Here ]

Summary of Public.com Investing App

Public.com offers a social investing platform that allows users to discover and invest in companies, ETFs, IPOs, and cryptocurrencies with fractional shares. It also provides users with personalized news feeds and real-time stock ticker updates to help them stay informed about the markets. The platform also offers community forums to connect with other investors and ask questions or share insights.

• Cost and Fees
• Customer Service
• User Experience
• Product Offerings

Overall

4.2

Pros

• No minimum initial investment required

• Trade stocks, ETFs, and cryptocurrencies commission-free

• Year-end tax information can be exported directly into TurboTax.

• The New Member Reward Program will pay you a fractional share of a stock, ETF, or crypto asset worth between $1 and $300 just for opening a new account and depositing at least $20.

• The Public Referral Program pays a reward comparable to the New Member Reward Program (for both you and the referral) for each person you refer to the service.

• Account Transfer Bonus of $150 to $10,000 for transferring as little as $5,000 in securities and cash from another broker.

• The recent acquisition of Otis will enable investors to invest in alternative assets, like rare collectibles, trading cards, and contemporary art.

Cons

• The platform does not offer retirement accounts or custodial and trust accounts. All of which are commonly available with most brokerage firms.  

• Public does not offer customer service by phone.

• Not available for non-US citizens and those who do not have either  US permanent resident status or have a valid visa.

• Recurring deposits can only be set up with crypto, but not with stocks or ETFs.

• Public charges fees for domestic wire withdrawals and Instant Withdrawals.

• Does not offer margin trading.

• No availability of trading penny stocks.

• Does not offer investments in mutual funds, options, or bonds.

The post Public Review – The Perfect Broker for New Investors? appeared first on Good Financial Cents®.

Sproutt Insurance is trying to help by putting a unique spin on the insurance application process.

Sproutt doesn’t sell its own insurance policies – they’re an online marketplace that uses technology to match you with the right insurance provider. In minutes, you can complete a brief application and get a quote from one of their participating life insurance companies.

But is dealing with Sproutt as easy as they make it sound? And is there a benefit to dealing with a marketplace like Sproutt versus going through an individual provider?

I’ll cover this and more in this Sproutt Life Insurance Review.

What Is Sproutt?

Sproutt is an insurance fintech launched in 2018 under the name, Aktibo. They have their headquarters in Hartford, Connecticut, with offices in New York City and Tel Aviv.

Sproutt Life isn’t a direct provider of life insurance but a broker providing an AI-powered online life insurance marketplace.

They offer policies from nearly a dozen insurance companies, a list that includes some of the best-known brands in the industry. Sproutt is available to customers in all 50 states and the District of Columbia.

How Sproutt Works

Sproutt differs from traditional life insurers by using an AI-powered Quality of Life Index (QLI) to assess an individual’s healthy lifestyle behaviors rather than focusing on negative elements.

Sproutt says their self-serve digital process usually requires no medical exam, phone calls, or appointments to obtain life insurance coverage.

Sproutt is free to use, and the company provides live customer support. They have an A+ rating with the Better Business Bureau.

Key Features

• AI-powered online life insurance marketplace.

• Work with almost a dozen insurance companies across all 50 states.

• Quality of Life Index (QLI)takes into account your overall health.

• The QLI matches you with an insurance provider and policy that will be the best overall fit.

• Complete an application within 15 minutes.

• Customer support is available during business hours.

Sproutt Life Insurance Quality of Life Index

The QLI index is at the heart of Sproutt Life Insurance and the key to using their website.

The index uses an algorithm to assess your lifestyle and then provides a personalized set of suggestions, recommendations, and references based on the latest health information available.

The algorithm is called the Guided Artificial Intelligence Assessment (GAIA). To benefit from the index, you’ll need to complete a 15-minute assessment, a process I will cover in more detail further down.

The Index measures five areas of your life – referred to as pillars – to indicate your overall state of health and well-being:

• Movement. In a nutshell, this category assesses the amount of exercise you get.

• Sleep. Used to measure if you are getting an adequate amount of sleep.

• Emotional health. There’s growing evidence of a connection between strong relationships and longevity.

• Nutrition. This category is all about food and diet.

• Balance. It incorporates the other four pillars and also adds an evaluation of your sense of purpose in your life.

Once you’ve completed the QLI Assessment, Sproutt will match you with the best insurance company to fit your profile. This is expected to maximize the likelihood of approval, along with the most favorable premium rate.

Who Is Sproutt Life Insurance Best Suited For?

Sproutt Life Insurance is an excellent choice for applicants who are:

• Under 50 in good or excellent health (they go to age 60).

• In good or excellent health.

• Actively focused on maintaining their health, as determined by the Quality of Life Index Assessment.

• Looking for term life insurance versus whole life.

• Need a life insurance policy quickly.

• Prefer a life insurance policy without the need for a medical exam.

• Prefer the speed and convenience of an all-online application process.

Obtain a Quote from Sproutt Today

Types of Insurance Offered by Sproutt Life Insurance

According to their website, Sproutt offers no-exam life insurance, guaranteed issue life insurance, whole life insurance, critical illness insurance, and universal life insurance – all in addition to term life insurance.

Sproutt’s term life insurance offerings range from 10 years to 3 years. The minimum policy amount is $50,000 but can go as high as $3 million. All other details of the term policies offered are based on the guidelines of the individual insurance companies providing the policies.

As an online life insurance “fintech,” Sproutt undoubtedly targets younger applicants (at least under 60) and in good or excellent health. Though they do offer policies for those who are in less-than-perfect health, it is possible that your application will be denied.

Is Sproutt Life Insurance Legit?

As mentioned, Sproutt has a Better Business Bureau rating of A+ (on a scale of A+ to F). although it is not BBB-accredited.

Though we typically obtain the financial strength rating of insurance companies from A.M. Best, this rating is not available for Sproutt. The company is an online insurance broker and not a direct provider. A.M. Best does not provide financial strength ratings for insurance brokers.  

How Do Customers Rate Sproutt?

Sproutt scores 4.7 out of five stars with Trustpilot. The score is based on 423 reviews, with 89% ranking the company as “excellent” and 8% as “great.”

While the negative reviews were minimal (only 2% 1-star), I did review the comments to see if I could identify recurring themes. Most of the negative reviews were due to a lack of responsiveness and reps not getting back to the clients promptly.

One thing to note, the Sproutt team had responded on Trustpilot to almost all of the negative comments with a promise to follow up.

We could not obtain user ratings from Google Play or The App Store since Sproutt does not have a mobile app.

Sproutt Life Alternatives

When purchasing life insurance, always obtain quotes from multiple companies before making your choice. Even though the products are generally very similar, premiums between different providers can vary considerably.

For a quick comparison to Sproutt Life, I’ve included three companies – Fabric Life, Bestow, Haven Life, and Ladder Life – in a side-by-side comparison.

As you can see from the table, the products offered by each of the four companies closely match one another. One advantage Sproutt Life has is that it is an online life insurance marketplace.

With a single application, you can get quotes from multiple providers – including some of the biggest in the industry.

How to Use Sproutt to Shop for Life Insurance

The application process for Sproutt starts with completing the Quality of Life assessment. It will take about 15 minutes to complete the assessment online.

That process can be accessed from the Quality of Life page, where you can click the green bubble that says “Check your QL Index.”

You’ll be asked to provide the following: your name (you’ll only need to provide your first name), age bracket, gender, and marital status.

Once you provide that information, you’ll be asked the following questions:

• When it comes to taking care of your life, what describes you best? The answers are multiple-choice and will appear as follows:

• Please select your choice of a healthy breakfast.

• For a healthier meal, you should…

• Which of the following is true regarding a sufficient intake of protein:

• Should I eat whole grains?

• To maintain a healthy weight, should I reduce my caloric intake?

• How many hours of physical activity do you do during a normal week?

• What type of activities do you do? (Aga n, you’ll be supplied with a list to choose from.)

• Do you track your physical activities?

• Over the past week, on average, how many steps per day did you take? (determined by a device, like a Fitbit.)

• Do you know how many hours an adult should sleep at night?

• How many hours do you sleep on average?

• Do you use a sleep-tracking device?

• Do you know in which sleep phases the majority of dreams occur?

• Do you know what a circadian rhythm is?

• Do you have trouble falling asleep?

• Do you consume alcoholic beverages to help you fall asleep?

• Do you own a pet?

• Do you sometimes feel that your relationships are not meaningful?

• How many people in your life can you confide in?

• Do you feel hopeless, stressed, or depressed?

• Have you tried stress-reducing techniques such as breathing, meditation, etc.?

• As I get older, things are… much better, somewhat better, same, worse, much worse.

• Do you believe you’ll live past… 60, 70, 80, 90, 120.

Once you’ve completed the questions, the following screen will appear, requiring you to enter your email and submit (the results are blurred, pending receipt of the emailed version):

The next screen will provide your QL Index. I was classified as a “Master,” one of five categories.

Once you click “Check your eligibility,” you’ll be brought to the application process, with your QL Index being part of the recommendations you’ll be provided.

Unfortunately, when I completed the QL Index assessment, Sproutt’s system was undergoing a problem, so I got no immediate life insurance quotes.

But the important takeaway is that up to this point, I only completed the assessment – which is a requirement.

For the application, additional questions will be asked. Those include general questions, like family status, beneficiaries, address, date of birth, a health self-assessment, and other general questions.

Once you complete that information, Sproutt will make a policy recommendation based on the answers to your questions.

Once again, Sproutt Life does not provide the actual policies (it’s an online life insurance marketplace). The participating life insurance companies will offer the policies on the platform.

Once you select the plan you like, the direct provider will likely have additional questions, and you’ll need to complete the application process through that company.

Obtain a Quote from Sproutt Today

How to Save Money on Life Insurance

No matter where you apply for life insurance, there are seven strategies you can use to save money in the process:

• Buy term life insurance vs. whole life. Whole life insurance is far more expensive than the equivalent term coverage. Go with term insurance and get a larger policy at a lower premium.

• Apply when you’re in good health. No single factor will have a greater impact on your premium – or even if you’ll be approved – than the condition of your health. That’s why it’s important to apply when your health is good.

• Maintain good health habits. Exercise regularly, eat a balanced diet, and see your doctor regularly.

• Maintain clean credit and good driving history. Insurance companies also check credit histories and driving records. The cleaner they are, the better your chance at a low premium.

• Choose a shorter term. If you’re going with term insurance, the premiums are lower on shorter terms. For example, a ten-year policy will be less expensive than a 20-year policy.

• Shop around. Never take a policy from the first provider that gives you a quote. Get three or four, then make your choice.

• Don’t wait! Many people put off buying life insurance until “later.” But because age is a major factor in determining premiums – and you’ll never be younger than you are right now – now is the time to apply for coverage.

Obtain a Quote from Sproutt Today

Sproutt Life Insurance Review: Final Thoughts

Sproutt is an excellent choice if you’re beginning your search for life insurance. Because it’s an online life marketplace, you can get quotes from several major insurance companies with a single application.

Live customer support is a value add, given that Sproutt is an all-online platform. And if you’re proactive about your health, Sproutt captures that with their Quality of Life Index. It can help you track your progress and make improvements where needed.

But it’s also important to realize that, as an online life insurance source, Sproutt does focus its business on younger, healthier applicants.

If you’re older or have a significant health condition, you may still be able to get a policy through Sproutt, but you may be better served by working with an independent life insurance broker.

Otherwise, consider Sproutt if you’re looking to buy life insurance.

How We Review Insurance Companies: 

Good Financial Cents systematically reviews U.S. insurance companies, emphasizing policy offerings, customer experiences, and overall reliability.

Our goal is to present a balanced and comprehensive perspective to potential policyholders. Editorial transparency remains a cornerstone of our approach.

We actively collect information from insurance companies and place significant weight on customer feedback. By integrating this feedback with our research, we can offer a well-rounded evaluation.

Each company is then rated based on multiple criteria, resulting in a star rating from one to five.

For a deeper understanding of the criteria we use to rate insurance companies and our evaluation approach, please refer to our editorial guidelines and full disclaimer. 

Sprout Life Insurance Review

Product Name: Sprout Life Insurance

Product Description: Sprout Life Insurance is a life insurance policy that provides financial coverage to individuals in the event of their death. It can cover funeral costs, medical bills, and other costs associated with end-of-life expenses. It also provides beneficiaries with a lump sum payment that can help them cover living expenses in the wake of their loved one's passing.

• [ Learn More Here ]

Summary of Sprout Life Insurance

Sprout Life Insurance is a life insurance company that provides coverage options for individuals and families. The company offers both term and permanent life insurance policies, allowing customers to choose the coverage that best fits their needs and budget. In addition to life insurance, Sprout also offers a wellness program that provides discounts on gym memberships and healthy living products, further emphasizing their commitment to the health and well-being of their customers.

• Cost and Fees
• Customer Service
• User Experience
• Product Offerings

Overall

4.7

Pros

•  Personalized attention: Sprout Life Insurance may offer more personalized attention and customer service, as they are a smaller company and may have fewer customers to serve.
• Innovative offerings: Sprout Life Insurance may offer innovative life insurance options and added benefits, such as their wellness program, that larger insurance companies may not offer.
• Flexibility: As a smaller company, Sprout Life Insurance may be more flexible and responsive to customer needs, compared to larger insurance companies with more bureaucratic processes.

Cons

• Limited coverage options: Sprout Life Insurance may have limited coverage options compared to larger insurance companies, which may have a wider range of offerings.
• Less financial stability: Sprout Life Insurance may have less financial stability compared to larger insurance companies, which may have more resources and a longer track record.
• Less brand recognition: Sprout Life Insurance may have less brand recognition compared to larger insurance companies, which may have a longer history and more established reputation. 

The post Sproutt Life Insurance Review: Is it Legit? appeared first on Good Financial Cents®.

Not only does Fabric offer life insurance policies – and some of the largest available anywhere – but they also help you through the process of making your final arrangements, and they do it free of charge.

That includes drawing up a will to name a beneficiary, appointing a guardian for your children, and spelling out your final arrangements.

In this Fabric by Gerber Life review, I’ll cover some recent changes to the company and let you know how it stacks up to the competition.

Announcement: Fabric is now Fabric by Gerber Life

On October 11, 2022, Fabric announced on its website that they are now Fabric by Gerber Life, owned by parent company Western-Southern Life Assurance Company.

Aside from a new name and branding, customers’ biggest change is that Western-Southern Life will now issue Fabric’s insurance policies instead of Vantis Life Insurance Company.

In a news release on their website, Fabric by Gerber Life assured customers that they will receive “the same digital convenience that you expect from Fabric.”

With the news, Fabric by Gerber Life also informed customers that they can apply for a new or additional policy through an updated application experience. If you are already a policyholder, there is no change to your existing coverage.

Key Takeaways

• Fabric by Gerber Life is a direct provider of life insurance, not an online insurance marketplace.

• The company offers accidental death policies, free will preparation, and the ability to set up 529 college savings plans for your children.

• The application process takes about 10 minutes, can result in immediate approval, and generally does not require a medical examination.

• Fabric’s maximum death benefit of $5 million is at the high end of the online life insurance provider range.

About the Company

• Fabric by Gerber Life is a subsidiary of Western-Southern Life Assurance Company.

• The company offers accidental death insurance in addition to term life insurance.

• Though coverage is available for applicants between the ages of 21 and 60, Fabric strongly focuses on providing family life insurance.

• Customer service is available by phone, email, and live chat, Monday through Friday, from 9:00 AM to 6:00 PM, Eastern time.

• The company issues policies in 48 states (excluding New York and Montana).

Unique Features

• Fabric is a “fintech” insurance provider with an all-online application process that relies heavily on advanced algorithms.

• You can get a quote in a few minutes or complete an application in about 10 minutes.

• Because Fabric relies heavily on information provided by available databases (the Medical Information Bureau, your state department of motor vehicles, pharmacy benefit managers, consumer reporting agencies, and other publicly available sources), the need for a medical exam is often eliminated.

• Fabric by Gerber Life has licensed team members available to answer your questions and help you through the application process.

• Once issued, policy offers are valid for 60 days, giving you plenty of time to review the policy before accepting it.

• Even if you purchase the policy, you’ll have 30 days to decide if you want to keep the coverage or not. If you decide you don’t want it, you’ll be entitled to a full refund of the premium paid.

• In addition to term life and accidental death insurance, Fabric offers free will preparation online. That includes appointing a guardian for the dependent children, naming beneficiaries, and making final arrangements.

• You can open a 529 college savings plan for your child(ren) directly from the Fabric Life Insurance website or mobile app.

• Fabric offers a mobile app to track your policy for Android and iOS users.

To Whom Is Fabric Life Best For

Fabric by Gerber Life is an excellent choice for the following applicants:

• Looking for term life insurance rather than a whole life insurance policy.

• Require a life insurance policy in a hurry.

• Prefer life insurance without the need for a medical exam.

• Want accidental death insurance.

• Need coverage for both themselves and their spouse.

• Could benefit from a comprehensive financial plan .

Types of Insurance Offered by Fabric by Gerber Life

Fabric offers two types of life insurance: term and accidental death coverage. Here’s a closer look at each one.

Term Life Insurance

Term life insurance policies provide a death benefit only, with no cash value accumulation or investment provision. That means premiums are only a fraction of what they are for whole-life insurance policies. Lower premiums mean you can purchase more coverage at a lower cost.

Fabric by Gerber Life term policies are available for applicants and their spouses between the ages of 21 and 60. Policy face values range between $100,000 to as much as $5 million.

Because of the reliance on algorithms and available databases, a policy can be available in as little as a few minutes. However, if additional information or a medical exam is required, the process will take several days longer.

If a medical exam is required, an appointment will be scheduled with a qualified examiner to come to your home or office at no cost to you and on your schedule.

Accidental Death Insurance

Accidental death insurance provides a benefit only if the cause of death is the result of an accident – not an illness. Therefore, an application for accidental death insurance does not require you to answer health questions or submit a medical exam.

Because an accidental death policy excludes death due to illness, it’s generally less expensive than a term life insurance policy – as long as you don’t work in an occupation or regularly participate in hazardous activities.

Fabric by Gerber Life offers accidental death policies in all states except Colorado, Massachusetts, Montana, New York, North Dakota, Pennsylvania, Virginia, and Wisconsin.

The policy offered is a guaranteed issue plan, available to applicants between the ages of 25 to 50, which is the age range most likely to experience accidental death. The application process takes only about five minutes, and coverage begins as soon as your first premium payment is made.

The policy is automatically renewable as long as you make your premium payments. But it will expire on the policy’s anniversary date nearest your 60^th birthday.

Fabric by Gerber Life: Comprehensive Overview of Term and Accidental Death Insurance Policies

Is Fabric by Gerber Life Legit?

Yes, Fabric by Gerber Life is a legitimate business. Its policies are issued by Western-Southern Life Insurance Company, a long-standing business that dates back to 1888. Western & Southern is the parent company of Gerber Life Agency.

According to its website, Western-Southern has been granted a “Superior” A+ rating for financial strength from A.M. Best, the largest global credit rating agency specializing in the insurance industry.

Is Fabric a Good Company?

Whether Fabric by Gerber Life is a good company or not is subjective, but we can point to the online ratings from its customers.

Under its previous name, Fabric, the company enjoys the following ratings:

• 4.8 out of five stars on The App Store on 484 user reviews.

• 4 out of five stars on Google Play on more than 1,000 user reviews.

Under its new name, Fabric by Gerber Life has the following Trustpilot ratings:

• 4.8 out of five stars on Trustpilot on over 2,000 customer reviews.

Looking closely at the Trustpilot reviews, 97% of reviews were four or five stars. I perused the negative reviews and couldn’t identify any recurring issues.

There were a few complaints about wait times, and some reviewers were upset about their policies being declined for various reasons.

Fabric by Gerber Life Alternatives

Fabric is one of the rising numbers of fintech life insurance providers that have become available in the past decade. You may want to investigate similar providers before you purchase term life insurance.

Two of the most popular are Bestow and Haven Life. The table below shows a side-by-side comparison of the major features of all three companies:

Unlike Bestow, Haven Life, and Ladder Life, Fabric offers accidental death insurance coverage. It also offers a higher potential death benefit of up to $5 million.

All three offer no-medical exam policies, at least in most cases. In fact, Ladder Life states that they don’t require a medical exam for policies up to $3 million, although their coverage extends as high as $8 million.

An advantage to Haven Life is that they will accept applicants up to age 64, making it the better choice if you are over 60.

How to Use Fabric to Shop for Life Insurance

Getting policy quotes for applying for insurance on Fabric is straightforward, thanks to the all-online process. You can get a quote or complete the application within minutes. And if no medical exam is required, your policy will be issued shortly after.

When making an application, click the APPLY NOW button (which appears in various places on the website), then answer the following questions:

Screen 1:

• Do you have a spouse or partner?

• Do you have kids under 18?

• Do you have a will?

• Do you have life insurance through work?

• Do you have personal life insurance outside work?

• Assets, such as bank accounts, investments, or a home?

• Do you have a mortgage?

• Do you have a student loan, credit card, or other debt?

Once you complete Screen 1, the following will appear:

When you click NEXT, another screen will appear asking about your age, gender, state of residence, tobacco usage, and health.

You’ll be asked to indicate that your health is excellent, good, or OK. Once you’ve completed that screen, you’ll get your quote after clicking SEE YOUR ESTIMATE.

Getting a Rate Quote

A 40-year-old non-smoking male in excellent health and living in California produces the following results for a $500,000 term life insurance policy:

• 10 years – $16.77 per month

• 15 years – $22.86 per month

• 20 years – $32.29 per month

• 25 years – $46.32 per month

• 30 years – $54.94 per month

The application provides you with a quote tool that looks like this:

You can choose the dollar amount of the policy you want and the term. Once you’ve decided, you can proceed with the application by tapping APPLY NOW.

The application will ask for more specific information, including your age, height, and weight; your medical history and that of your family; employment information, including annual income and net worth; and lifestyle habits, including hobbies, tobacco use, and alcohol consumption.

Upon completion, you’ll either receive 1) an immediate offer, 2) a rejection, or 3) a request for more information, additional time for a more thorough review, or a request that you submit to a medical exam.

Whether you receive a quote or approval, you’re under no obligation to accept the policy. But be aware that your policy will not be in force until you make the first premium payment.

How to Save Money on Life Insurance

Though it may seem as if life insurance is a static product with fixed pricing, there’s plenty you can do to save money.

By following these seven strategies, you can save a small fortune on life insurance:

1. Buy a policy right now. Life insurance premiums are based on your age at the time of application. The younger you are, the lower the premium. Since you’ll never be younger than you are right now, now is the perfect time to apply.

2. Apply when you’re in good health. This is another compelling reason to make an application today. You’ll get the lowest premium possible if you’re in good or excellent health. But if you wait a few years, you may develop a health condition that will cause the policy to cost more.

3. Buy term life insurance rather than whole life. Whole life insurance can cost between five and 15 times the premium for an equivalent amount of term life insurance. You can buy more coverage with a term policy and pay less for the premium.

4. Choose a shorter term. Interestingly enough, the shorter the term, the lower the premium. You’ll pay less by choosing a 20-year term instead of a 30-year one.

5. Maintain good health habits. That means eating a balanced diet, exercising regularly, maintaining a favorable weight-to-height ratio, and visiting your doctor regularly. It also means avoiding health-impairing activities, like smoking and excess alcohol consumption.

6. Maintain clean credit and good driving history. Life insurance companies regularly check your credit report and your driving history. That’s because there is a correlation between bad credit, reckless driving, and early death.

7. Shop around! This may be the single best strategy for a low premium. Premium rates can vary significantly from one company to another. Get quotes from several companies before settling on a policy.

Final Thoughts on Fabric by Gerber Life Insurance

If you want to purchase life insurance online, you should consider Fabric by Gerber Life alongside similar providers, like Bestow and Haven Life. The company offers a quick online application process with fast approvals. Most applicants are approved without the need for a medical exam.

Fabric is especially well-suited to applicants with kids. Not only do they provide a very high death benefit, at $5 million, but they also offer will preparation and the ability to set up 529 college savings plans right from the website for the mobile app.

The fact that they offer live, licensed agents to help walk you through the process is an added bonus. Unfortunately, you won’t qualify for life insurance if you’re over age 60, but in that case, Haven may be a good alternative.

How We Review Insurance Companies: 

Good Financial Cents systematically reviews U.S. insurance companies, emphasizing policy offerings, customer experiences, and overall reliability.

Our goal is to present a balanced and comprehensive perspective to potential policyholders. Editorial transparency remains a cornerstone of our approach.

We actively collect information from insurance companies and place significant weight on customer feedback. By integrating this feedback with our research, we can offer a well-rounded evaluation.

Each company is then rated based on multiple criteria, resulting in a star rating from one to five.

For a deeper understanding of the criteria we use to rate insurance companies and our evaluation approach, please refer to our editorial guidelines and full disclaimer. 

Fabric Life Insurance Review

Product Name: Fabric Life Insurance

Product Description: Fabric Life Insurance is an online life insurance provider that offers flexible and affordable plans to help families provide financial protection in the event of death or other unexpected events. Fabric provides term life insurance, whole life insurance, and universal life insurance plans with no physical exam required. The company also offers additional products such as accidental death & dismemberment coverage and living benefit riders.

• [ Learn More Here ]

Summary of Fabric Life Insurance

Fabric Life Insurance offers comprehensive life insurance policies that provide financial protection and peace of mind for families and individuals. Coverage includes death benefit protection, living benefit riders, and policy customization options to help meet specific needs. Coverage can range from basic term life coverage to more complex universal life coverage.

• Cost and Fees
• Customer Service
• User Experience
• Product Offerings

Overall

4.5

Pros

• Instant coverage: With Fabric Life Insurance, you can get instant coverage after completing the online application process. This means that you don’t have to wait for weeks or even months before your policy takes effect. 
• Low-cost premiums: The premiums associated with Fabric Life Insurance are very affordable, making it an ideal option for those on a tight budget who still want to ensure they are covered in case of an emergency.
• Flexible term lengths: Fabric Life Insurance offers flexible term lengths ranging from 5 to 30 years so you can customize your policy to meet your needs and budgeting preferences.
• Simple application process: The application process forFabric Life Insurance is straightforward and easy to understand, making it an attractive choice for those who want to avoid complicated paperwork and lengthy forms.
• Variety of riders available: Fabric Life Insurance comes with a variety of riders, such as accidental death benefit, disability income protection and children’s insurance, that allow you to tailor your policy even further depending on your individual needs and circumstances. 

Cons

•  Limited Availability: Fabric life insurance is only offered in states where insurance companies are licensed to issue it. This means that many people are unable to acquire this type of policy.
• High Premium Costs: Fabric life insurance tends to be more expensive than traditional policies due to the additional features and benefits it offers.
• Limited Coverage Offered: The coverage offered by fabric life insurance may not be enough for some individuals, depending on their individual needs and financial situation.
• Complex Terms and Conditions: Fabric life insurance policies often come with complicated terms and conditions that can be difficult for the average

The post Fabric by Gerber Life Insurance Review appeared first on Good Financial Cents®.

In this article, we’re going to look at high-yield investments, many of which involve a higher degree of risk but are also likely to provide higher returns.

True enough, low-risk investments are the right investment solution for anyone who’s looking to preserve capital and still earn some income.

But if you’re more interested in the income side of an investment, accepting a bit of risk can produce significantly higher returns. At the same time, these investments will generally be less risky than growth stocks and other high-risk/high-reward investments.

Determine How Much Risk You’re Willing to Take On

The risk we’re talking about with these high-yield investments is the potential for you to lose money. As is true when investing in any asset, you need to begin by determining how much you’re willing to risk in the pursuit of higher returns.

I’m going to present a large number of high-yield investments, each with its own degree of risk. The purpose is to help you evaluate the risk/reward potential of these investments when selecting the ones that will be right for you.

If you’re looking for investments that are completely safe, you should favor one or more of the highly liquid, low-yield vehicles covered in Best Low-Risk Investments for 2024.

In this article, we’re going to be going for something a little bit different. As such, please note that this is not in any way a blanket recommendation of any particular investment.

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Best High-Yield Investments for 2024

Below is my list of the 18 best high-yield investments for 2024. They’re not ranked or listed in order of importance. That’s because each is a unique investment class that you will need to carefully evaluate for suitability within your own portfolio.

Be sure that any investment you do choose will be likely to provide the return you expect at an acceptable risk level for your own personal risk tolerance.

1. Treasury Inflation-Protected Securities (TIPS)

Let’s start with this one, if only because it’s on just about every list of high-yield investments, especially in the current environment of rising inflation. It may not actually be the best high-yield investment, but it does have its virtues and shouldn’t be overlooked.

Basically, TIPS are securities issued by the U.S. Treasury that are designed to accommodate inflation. They do pay regular interest, though it’s typically lower than the rate paid on ordinary Treasury securities of similar terms.

The bonds are available with a minimum investment of $100 in terms of five, 10, and 30 years.

And since they’re fully backed by the U.S. government, you are assured of receiving the full principal value if you hold a security until maturity.

But the real benefit—and the primary advantage—of these securities is the inflation principal additions. Each year, the Treasury will add an amount to the bond principal that’s commensurate with changes in the Consumer Price Index (CPI).

Fortunately, while the principal will be added when the CPI rises (as it nearly always does), none will be deducted if the index goes negative.

You can purchase TIPS through the U.S. Treasury’s investment portal, Treasury Direct. You can also hold the securities as well as redeem them on the same platform. There are no commissions or fees when buying securities.

On the downside, TIPS are purely a play on inflation since the base rates are fairly low. And while the principal additions will keep you even with inflation, you should know that they are taxable in the year received.

Still, TIPS are an excellent low-risk, high-yield investment during times of rising inflation—like now.

2. I Bonds

If you’re looking for a true low-risk, high-yield investment, look no further than Series I bonds. With the current surge in inflation, these bonds have become incredibly popular, though they are limited.

I bonds are currently paying 4.30%. They can be purchased electronically in denominations as little as $25. However, you are limited to purchasing no more than $10,000 in I bonds per calendar year.

Since they are issued by the U.S. Treasury, they’re fully protected by the U.S. government. You can purchase them through the Treasury Department’s investment portal, TreasuryDirect.gov.

“The cash in my savings account is on fire,” groans Scott Lieberman, Founder of Touchdown Money. “Inflation has my money in flames, each month incinerating more and more. To defend against this, I purchased an I bond.

When I decide to get my money back, the I bond will have been protected against inflation by being worth more than what I bought it for. I highly recommend getting yourself a super safe Series I bond with money you can stash away for at least one year.”

You may not be able to put your entire bond portfolio into Series I bonds. But just a small investment, at nearly 10%, can increase the overall return on your bond allocation.

3. Corporate Bonds

The average rate of return on a bank savings account is 0.45%. The average rate on a money market account is 0.65% and 1.76% on a 12-month CD.

Now, there are some banks paying higher rates, but generally only in the 1-2%-plus range.

If you want higher returns on your fixed-income portfolio and you’re willing to accept a moderate level of risk, you can invest in corporate bonds. Not only do they pay higher rates than banks, but you can lock in those higher rates for many years.

For example, the average current yield on a AAA-rated corporate bond is 5.32%. Now, that’s the rate for AAA bonds, which are the highest-rated securities. You can get even higher rates on bonds with lower ratings, which we will cover in the next section.

Corporate bonds sell in face amounts of $1,000, though the price may be higher or lower depending on where interest rates are. If you choose to buy individual corporate bonds, expect to buy them in lots of ten.

That means you’ll likely need to invest $10,000 in a single issue. Brokers will typically charge a small per-bond fee on purchase and sale.

An alternative may be to take advantage of corporate bond funds. That will give you an opportunity to invest in a portfolio of bonds for as little as the price of one share of an ETF. And because they are ETFs, they can usually be bought and sold commission-free.

You can typically purchase corporate bonds and bond funds through popular stock brokers like Zacks Trade and TD Ameritrade.

4. High-Yield Bonds

In the previous section, we talked about how interest rates on corporate bonds vary based on each bond issue’s rating. A AAA bond, being the safest, has the lowest yield. But a riskier bond, such as one rated BBB, will provide a higher rate of return.

If you’re looking to earn higher interest than you can with investment-grade corporate bonds, you can get those returns with so-called high-yield bonds. Because they have a lower rating, they pay higher interest, sometimes much higher.

The average yield on high-yield bonds is 8.80%. But that’s just an average. The yield on a bond rated B will be higher than one rated BB.

You should also be aware that, in addition to potential market value declines due to rising interest rates, high-yield bonds are more likely to default than investment-grade bonds. That’s why they pay higher interest rates.

(They used to call these bonds “junk bonds,” but that kind of description is a marketing disaster.) Because of those twin risks, junk bonds should occupy only a small corner of your fixed-income portfolio.

High-yield bonds can be purchased under similar terms and in the same places where you can trade corporate bonds.

There are also ETFs that specialize in high-yield bonds and will be a better choice for most investors since they will include diversification across many different bond issues.

5. Municipal Bonds

Just as corporations and the U.S. Treasury issue bonds, so do state and local governments. These are referred to as municipal bonds. They work much like other bond types, particularly corporates. They can be purchased in similar denominations through online brokers.

The main advantage enjoyed by municipal bonds is their tax-exempt status for federal income tax purposes. And if you purchase a municipal bond issued by your home state or a municipality within that state, the interest will also be tax-exempt for state income tax purposes.

That makes municipal bonds an excellent source of tax-exempt income in a non-retirement account. (Because retirement accounts are tax-sheltered, it makes little sense to include municipal bonds in those accounts.)

Municipal bond rates are currently hovering just above 3% for AAA-rated bonds. And while that’s an impressive return by itself, it masks an even higher yield.

Because of their tax-exempt status, the effective yield on municipal bonds will be higher than the note rate.

For example, if your combined federal and state marginal income tax rates are 25%, the effective yield on a municipal bond paying 3% will be 4%. That gives an effective rate comparable with AAA-rated corporate bonds.

Like corporate bonds, municipal bonds carry ratings that affect the interest rates they pay. You can investigate bond ratings through sources like Standard & Poor’s, Moody’s, and Fitch.

6. Longer Term Certificates of Deposit (CDs)

This is another investment that falls under the low-risk/relatively high-return classification. As interest rates have risen in recent months, rates have crept up on certificates of deposit. Unlike just one year ago, CDs now merit consideration.

But the key is to invest in certificates with longer terms.

“Another lower-risk option is to consider a Certificate of Deposit (CD),” advises Lance C. Steiner, CFP at Buckingham Advisors. “Banks, credit unions, and many other financial institutions offer CDs with maturities ranging from 6 months to 60 months. Currently, a 6-month CD may pay between 1.75% and 2.25% where a 24-month CD may pay between 3.20% and 4.00%. We suggest considering a short-term ladder since interest rates are expected to continue rising.” (Stated interest rates for the high-yield savings and CDs were obtained at bankrate.com.)

Most banks offer certificates of deposit with terms as long as five years. Those typically have the highest yields.

But the longer term does involve at least a moderate level of risk. If you invest in a CD for five years that’s currently paying 3%, the risk is that interest rates will continue rising. If they do, you’ll miss out on the higher returns available on newer certificates.

But the risk is still low overall since the bank guarantees to repay 100% of your principal upon certificate maturity.

7. Peer-to-Peer (P2P) Lending

Do you know how banks borrow from you—at 1% interest—then loan the same money to your neighbor at rates sometimes as high as 20%? It’s quite a racket and a profitable one at that.

But do you also know that you have the same opportunity as a bank? It’s an investing process known as peer-to-peer lending or P2P for short.

P2P lending essentially eliminates the bank. As an investor, you’ll provide the funds for borrowers on a P2P platform. Most of these loans will be in the form of personal loans for a variety of purposes. But some can also be business loans, medical loans, and for other more specific purposes.

As an investor/lender, you get to keep more of the interest rate return on those loans. You can invest easily through online P2P platforms.

One popular example is Prosper. They offer primarily personal loans in amounts ranging between $2,000 and $40,000. You can invest in small slivers of these loans, referred to as “notes.” Notes can be purchased for as little as $25.

That small denomination will make it possible to diversify your investment across many different loans. You can even choose the loans you will invest in based on borrower credit scores, income, loan terms, and purposes.

Prosper, which has managed $20 billion in P2P loans since 2005, claims a historical average return of 5.7%. That’s a high rate of return on what is essentially a fixed-income investment. But that’s because there exists the possibility of loss due to borrower default.

However, you can minimize the likelihood of default by carefully choosing borrower loan quality. That means focusing on borrowers with higher credit scores, incomes, and more conservative loan purposes (like debt consolidation).

8. Real Estate Investment Trusts (REITs)

REITs are an excellent way to participate in real estate investment and the return it provides without large amounts of capital or the need to manage properties.

They’re publicly traded, closed-end investment funds that can be bought and sold on major stock exchanges. They invest primarily in commercial real estate, like office buildings, retail space, and large apartment complexes.

If you’re planning to invest in a REIT, you should be aware that there are three different types.

“Equity REITs purchase commercial, industrial, or residential real estate properties,” reports Robert R. Johnson, PhD, CFA, CAIA, Professor of Finance, Heider College of Business, Creighton University and co-author of several books, including The Tools and Techniques Of Investment Planning, Strategic Value Investing and Investment Banking for Dummies.  “Income is derived primarily from the rental on the properties, as well as from the sale of properties that have increased in value. Mortgage REITs invest in property mortgages. The income is primarily from the interest they earn on the mortgage loans. Hybrid REITs invest both directly in property and in mortgages on properties.”

Johnson also cautions:

“Investors should understand that equity REITs are more like stocks and mortgage REITs are more like bonds. Hybrid REITs are like a mix of stocks and bonds.”

Mortgage REITs, in particular, are an excellent way to earn steady dividend income without being closely tied to the stock market.

Examples of specific REITs are listed in the table below (source: Kiplinger):

9. Real Estate Crowdfunding

If you prefer direct investment in a property of your choice rather than a portfolio, you can invest in real estate crowdfunding. You invest your money, but the management of the property will be handled by professionals.

With real estate crowdfunding, you can pick out individual properties or invest in nonpublic REITs that invest in very specific portfolios.

One of the best examples of real estate crowdfunding is Fundrise. That’s because you can invest with as little as $500 or create a customized portfolio with no more than $1,000.

Not only does Fundrise charge low fees, but it also has multiple investment options. You can start small in managed investments and eventually trade up to investing in individual deals.

One thing to be aware of with real estate crowdfunding is that many require accredited investor status. That means being high-income, high net worth, or both. If you are an accredited investor, you’ll have many more choices in the real estate crowdfunding space.

If you are not an accredited investor, that doesn’t mean you’ll be prevented from investing in this asset class. Part of the reason why Fundrise is so popular is that they don’t require accredited investor status. There are other real estate crowdfunding platforms that do the same.

Just be careful if you want to invest in real estate through real estate crowdfunding platforms. You will be expected to tie your money up for several years, and early redemption is often not possible.

And like most investments, there is the possibility of losing some or all of your investment principal.

Invest in Real Estate

• Low minimum investment – $10
• Diversified real estate portfolio
• Portfolio Transparency

10. Physical Real Estate

We’ve talked about investing in real estate through REITs and real estate crowdfunding. But you can also invest directly in physical property, including residential property or even commercial.

Owning real estate outright means you have complete control over the investment. And since real estate is a large-dollar investment, the potential returns are also large.

For starters, average annual returns on real estate are impressive. They’re even comparable to stocks. Residential real estate has generated average returns of 10.6%, while commercial property has returned an average of 9.5%.

Next, real estate has the potential to generate income from two directions: rental income and capital gains. However because of high property values in many markets around the country, it will be difficult to purchase real estate that will produce a positive cash flow, at least in the first few years.

Generally speaking, capital gains are where the richest returns come from. Property purchased today could double or even triple in 20 years, creating a huge windfall. And this will be a long-term capital gain to get the benefit of a lower tax bite.

Finally, there’s the leverage factor. You can typically purchase an investment property with a 20% down payment. That means you can purchase a $500,000 property with $100,000 out-of-pocket.

By calculating your capital gains on your upfront investment, the returns are truly staggering. If the $500,000 property doubles to $1 million in 20 years, the $500,000 profit generated will produce a 500% gain on your $100,000 investment.

On the negative side, real estate is certainly a very long-term investment. It also comes with high transaction fees, often as high as 10% of the sale price. And not only will it require a large down payment upfront, but also a substantial investment of time in managing the property.

11. High Dividend Stocks

“The best high-yield investment is dividend stocks,” declares Harry Turner, Founder of The Sovereign Investor. “While there is no guaranteed return with stocks, over the long term, stocks have outperformed other investments such as bonds and real estate.

Among stocks, dividend-paying stocks have outperformed non-dividend-paying stocks by more than 2 percentage points per year on average over the last century. In addition, dividend stocks tend to be less volatile than non-dividend paying stocks, meaning they are less likely to lose value in downturns.”

You can certainly invest in individual stocks that pay high dividends. But a less risky way to do it, and one that will avoid individual stock selection, is to invest through a fund.

One of the most popular is the ProShares S&P 500 Dividend Aristocrat ETF (NOBL). It has provided a return of 1.67% in the 12 months ending May 31 and an average of 12.33% per year since the fund began in October 2013. The fund currently has a 1.92% dividend yield.

The so-called Dividend Aristocrats are popular because they represent 60+ S&P 500 companies with a history of increasing their dividends for at least the past 25 years.

“Dividend Stocks are an excellent way to earn some quality yield on your investments while simultaneously keeping inflation at bay,” advises Lyle Solomon, Principal Attorney at Oak View Law Group, one of the largest law firms in America.

“Dividends are usually paid out by well-established and successful companies that no longer need to reinvest all of the profits back into the business.”

It gets better. “These companies and their stocks are safer to invest in owing to their stature, large customer base, and hold over the markets,” adds Solomon. “The best part about dividend stocks is that many of these companies increase dividends year on year.”

The table below shows some popular dividend-paying stocks. Each is a so-called “Dividend Aristocrat”, which means it’s part of the S&P 500 and has increased its dividend in each of at least the past 25 years.

12. Preferred Stocks

Preferred stocks are a very specific type of dividend stock. Just like common stock, preferred stock represents an interest in a publicly traded company. They’re often thought of as something of a hybrid between stocks and bonds because they contain elements of both.

Though common stocks can pay dividends, they don’t always. Preferred stocks, on the other hand, always pay dividends. Those dividends can be either a fixed amount or based on a variable dividend formula.

For example, a company can base the dividend payout on a recognized index, like the LIBOR (London Inter-Bank Offered Rate). The percentage of dividend payout will then change as the index rate does.

Preferred stocks have two major advantages over common stock.

First, as “preferred” securities, they have a priority on dividend payments. A company is required to pay their preferred shareholders dividends ahead of common stockholders.

Second, preferred stocks have higher dividend yields than common stocks in the same company.

You can purchase preferred stock through online brokers, some of which are listed under “Growth Stocks” below.

Preferred Stock Caveats

The disadvantage of preferred stocks is that they don’t entitle the holder to vote in corporate elections. However some preferred stocks offer a conversion option. You can exchange your preferred shares for a specific number of common stock shares in the company.

Since the conversion will likely be exercised when the price of the common shares takes a big jump, there’s the potential for large capital gains—in addition to the higher dividend.

Be aware that preferred stocks can also be callable. That means the company can authorize the repurchase of the stock at its discretion. Most will likely do that at a time when interest rates are falling and they no longer want to pay a higher dividend on the preferred stock.

Preferred stock may also have a maturity date, which is typically 30–40 years after its original issuance. The company will typically redeem the shares at the original issue price, eliminating the possibility of capital gains.

Not all companies issue preferred stock. If you choose this investment, be sure it’s with a company that’s well-established and has strong financials.

You should also pay close attention to the details of the issuance, including and especially any callability provisions, dividend formulas, and maturity dates.

13. Growth Stocks

This sector is likely the highest-risk investment on this list. But it also may be the one with the highest yield, at least over the long term. That’s why we’re including it on this list.

Based on the S&P 500 index, stocks have returned an average of 10% per year for the past 50 years. But it is important to realize that’s only an average.

The market may rise 40% one year, then fall 20% the next. To be successful with this investment, you must be committed for the long haul, up to and including several decades.

And because of the potential wide swings, growth stocks are not recommended for funds that will be needed within the next few years. In general, growth stocks work best for retirement plans. That’s where they’ll have the necessary decades to build and compound.

Since most of the return on growth stocks is from capital gains, you’ll get the benefit of lower long-term capital gains tax rates, at least with securities held in a taxable account.

(The better news is capital gains on investments held in retirement accounts are tax-deferred until retirement.)

You can choose to invest in individual stocks, but that’s a fairly high-maintenance undertaking. A better way may be to simply invest in ETFs tied to popular indexes. For example, ETFs based on the S&P 500 are very popular among investors.

You can purchase growth stocks and growth stock ETFs commission-free with brokers like M1 Finance,  Zacks Trade, Wealthsimple.

14. Annuities

Annuities are something like creating your own private pension. It’s an investment contract you take with an insurance company in which you invest a certain amount of money in exchange for a specific income stream.

They can be an excellent source of high yields because the return is locked in by the contract.

Annuities come in many different varieties. Two major classifications are immediate and deferred annuities. As the name implies, immediate annuities begin paying an income stream shortly after the contract begins.

Deferred annuities work something like retirement plans. You may deposit a fixed amount of money with the insurance company upfront or make regular installments. In either case, income payments will begin at a specified point in the future.

With deferred annuities, the income earned within the plan is tax-deferred and paid upon withdrawal. But unlike retirement accounts, annuity contributions are not tax-deductible. Investment returns can either be fixed-rate or variable-rate, depending on the specific annuity setup.

While annuities are an excellent idea and concept, the wide variety of plans, as well as the many insurance companies and agents offering them, make them a potential minefield. For example, many annuities are riddled with high fees and are subject to limited withdrawal options.

Because they contain so many moving parts, any annuity contracts you plan to enter into should be carefully reviewed. Pay close attention to all the details, including the small ones.

It is, after all, a contract and, therefore, legally binding. For that reason, you may want to have a potential annuity reviewed by an attorney before finalizing the deal.

15. Alternative Investments

Alternative investments cover a lot of territory. Examples include precious metals, commodities, private equity, art and collectibles, and digital assets.

These fall more in the category of high risk/potentially high reward, and you should proceed very carefully and with only the smallest slice of your portfolio.

To simplify the process of selecting alternative assets, you can invest through platforms such as Yieldstreet. With a single cash investment, you can invest in multiple alternatives.

“Investors can purchase real estate directly on Yieldstreet, through fractionalized investments in single deals,” offers Milind Mehere, Founder & Chief Executive Officer at Yieldstreet.

“Investors can access private equity and private credit at high minimums by investing in a private market fund (think Blackstone or KKR, for instance). On Yieldstreet, they can have access to third-party funds at a fraction of the previously required minimums.

Yieldstreet also offers venture capital (fractionalized) exposure directly. Buying a piece of blue-chip art can be expensive and prohibitive for most investors, which is why Yieldstreet offers fractionalized assets to diversified art portfolios.”

Yieldstreet also provides access to digital asset investments, with the benefit of allocating to established professional funds, such as Pantera or Osprey Fund. The platform does not currently offer commodities but plans to do so in the future.

• Access to wide array of alternative asset classes
• Access to ultra-wealthy investments
• Can invest for income or growth

Learn More Now

Alternative investments largely require thinking out of the box. Some of the best investment opportunities are also the most unusual.

“The price of meat continues to rise, while agriculture remains a recession-proof investment as consumer demand for food is largely inelastic,” reports Chris Rawley, CEO of Harvest Returns, a platform for investing in private agriculture companies. “Consequently, investors are seeing solid returns from high-yield, grass-fed cattle notes.”

16. Interest Bearing Crypto Accounts

Though the primary appeal of investing in cryptocurrency has been the meteoric rises in price, now that the trend seems to be in reverse, the better play may be in interest-bearing crypto accounts. A select group of crypto exchanges pays high interest on your crypto balance.

One example is Gemini. Not only do they provide an opportunity to buy, sell, and store more than 100 cryptocurrencies—plus non-fungible tokens (NFTs)—but they are currently paying 8.05% APY on your crypto balance through Gemini Earn.

In another variation of being able to earn money on crypto, Crypto.com pays rewards of up to 14.5% on crypto held on the platform. That’s the maximum rate, as rewards vary by crypto. For example, rewards on Bitcoin and Ethereum are paid at 6%, while stablecoins can earn 8.5%.

It’s important to be aware that when investing in cryptocurrency, you will not enjoy the benefit of FDIC insurance. That means you can lose money on your investment. But that’s why crypto exchanges pay such high rates of return, whether it’s in the form of interest or rewards.

17. Crypto Staking

Another way to play cryptocurrency is a process known as crypto staking. This is where the crypto exchange pays you a certain percentage as compensation or rewards for monitoring a specific cryptocurrency.

This is not like crypto mining, which brings crypto into existence. Instead, you’ll participate in writing that particular blockchain and monitoring its security.

“Crypto staking is a concept wherein you can buy and lock a cryptocurrency in a protocol, and you will earn rewards for the amount and time you have locked the cryptocurrency,” reports Oak View Law Group’s Lyle Solomon.

“The big downside to staking crypto is the value of cryptocurrencies, in general, is extremely volatile, and the value of your staked crypto may reduce drastically,” Solomon continues, “However, you can stake stable currencies like USDC, which have their value pegged to the U.S. dollar, and would imply you earn staked rewards without a massive decrease in the value of your investment.”

Much like earning interest and rewards on crypto, staking takes place on crypto exchanges. Two exchanges that feature staking include Coinbase and Kraken.

These are two of the largest crypto exchanges in the industry, and they provide a wide range of crypto opportunities in addition to staking.

Invest in Startup Businesses and Companies 

Have you ever heard the term “angel investor”? That’s a private investor, usually a high net worth individual, who provides capital to small businesses, often startups.

That capital is in the form of equity. The angel investor invests money in a small business, becomes a part owner of the company, and is entitled to a share of the company’s earnings.

In most cases, the angel investor acts as a silent partner. That means he or she receives dividend distributions on the equity invested but doesn’t actually get involved in the management of the company.

It’s a potentially lucrative investment opportunity because small businesses have a way of becoming big businesses. As they grow, both your equity and your income from the business also grow. And if the business ever goes public, you could be looking at a life-changing windfall!

Easy Ways to Invest in Startup Businesses

Mainvest is a simple, easy way to invest in small businesses. It’s an online investment platform where you can get access to returns as high as 25% with an investment of just $100. Mainvest offers vetted businesses (the acceptance rate is just 5% of businesses that apply) for you to invest in.

It collects revenue, which will be paid to you quarterly. And because the minimum required investment is so small, you can invest in several small businesses at the same time. One of the big advantages of Mainvest is that you are not required to be an accredited investor.

Another opportunity is through Fundrise Innovation Fund. I’ve already covered how Fundrise is an excellent real estate crowdfunding platform. But through their recently launched Innovaton Fund, you’ll have the opportunity to invest in high-growth private technology companies.

As a fund, you’ll invest in a portfolio of late-stage tech companies, as well as some public equities.

The purpose of the fund is to provide high growth, and the fund is currently offering shares with a net asset value of $10. These are long-term investments, so you should expect to remain invested for at least five years. But you may receive dividends in the meantime.

Like Mainvest, the Fundrise Innovation Fund does not require you to be an accredited investor.

Invest in Real Estate

• Low minimum investment – $10
• Diversified real estate portfolio
• Portfolio Transparency

Final Thoughts on High-Yield Investing

Notice that I’ve included a mix of investments based on a combination of risk and return. The greater the risk associated with the investment, the higher the stated or expected return will be.

It’s important when choosing any of these investments that you thoroughly assess the risk involved with each and not focus primarily on return.

These are not 100% safe investments, like short-term CDs, short-term Treasury securities, savings accounts, or bank money market accounts.

Because there is risk associated with each, most are not suitable as short-term investments. They make the most sense for long-term investment accounts, particularly retirement accounts.

For example, growth stocks—and most stocks, for that matter—should generally be in a retirement account. While there will be years when you will suffer losses in your position, you’ll have enough years to offset those losses between now and retirement.

Also, if you don’t understand any of the above investments, it will be best to avoid making them. And for more complicated investments, like annuities, you should consult with a professional to evaluate the suitability and all the provisions it contains.

The post 17 Best High-Yield Investments for 2024 appeared first on Good Financial Cents®.

But while a HELOC and home-equity loan both serve the same purpose, there are major differences in how they work and are repaid. We’re going to dive into those differences to help you decide which loan will work best for you.

What Is a HELOC?

The Benefits of a HELOC

HELOC is an abbreviation for home equity line of credit. The “line of credit” part of the title is what distinguishes a HELOC from a home equity loan.

A HELOC is essentially a revolving line of credit that works much like a credit card, except that it’s secured by your home. Because it is, you’ll not only get the benefit of a larger credit line, but also a much lower interest rate than you can get on a credit card.

And since it is a revolving line of credit, you’ll pay interest only on the outstanding loan balance. For example, if your HELOC is for $50,000, and $10,000 is outstanding, you’ll pay interest only on $10,000.

Much like a credit card, as you repay the balance on your credit line, the available balance will be restored.

Still another benefit is that HELOCs usually have a lower interest rate than a home equity loan. And during the first few years of a HELOC, you’ll pay interest only on the outstanding loan balance. This will leave you with a much lower payment than you’d have with a home equity loan.

HELOC proceeds can be used for any purpose, whether to make improvements on your home, pay off debts, or finance major purchases.

To qualify for a HELOC, you’ll need to have substantial equity in your home. Most lenders will typically lend between 80% and 90% of the value of your home, reduced by the balance of your existing first mortgage.

If your home is worth $500,000, you currently have $300,000 loan on the property, and a lender will provide a HELOC at up to 80% of the value of your home, the HELOC can be set as high as $100,000 ($500,000 X 80%, minus $300,000 for the first mortgage).

The Downsides of a HELOC

As easy as HELOC terms can be, there are some downsides you need to be aware of:

The draw period. That’s the period of time during which you’ll have access to the credit line, after which the loan must be fully repaid. While the typical term of a HELOC can be 20 or 30 years, you’ll only be able to draw funds against the line for 10 or 15 of those years. After that, you’ll need to make payments, including both interest and principal, until the loan is fully repaid.

Variable interest rate. Though HELOCs do have lower interest rates than home equity loans, those rates are variable. That means the rate you’ll pay on your HELOC will rise when interest rates increase. Naturally, when the interest rate rises, your payment will also increase. 

HELOCs can be reduced or frozen. A lender can reduce or freeze your HELOC under certain conditions. That can include a significant decline in your credit score or in the value of your home. For example, though your HELOC may be for $50,000, a drop in your credit score may cause the lender to freeze the line, denying you access to the unused portion of your line.

What Is a Home Equity Loan?

The Benefits of a Home Equity Loan

A home equity loan works much like a HELOC, except that it is a true loan, and not a revolving line of credit. You can think of it as a smaller version of your first mortgage. You’ll take a fixed loan amount, receive the proceeds at closing, then make regularly scheduled monthly payments until the loan is fully paid.

Because it is a fixed rate loan, the interest rate will be higher on a home-equity loan than it will be on a HELOC. But you will have the benefit of a fixed interest rate and monthly payment throughout the term of the loan.

Qualification for a home-equity loan works much the way it does with a HELOC. The lender will offer you access to between 80% and 90% of the value of your home, less the existing first mortgage balance.

You’ll also need to have good or excellent credit, as well as a stable income that will comfortably accommodate the new loan payment.

The Downsides of a Home Equity Loan

Like a HELOC, home equity loans have their own share of disadvantages:

Once the loan is taken, there are no more funds to access. This is unlike a HELOC where you can access the funds as needed, and even repay them ahead of time.

Higher cost than a HELOC. Though both loan types have closing costs, those costs are typically higher on a home equity loan. The interest rate will also be higher. While a HELOC may be available at, say, 4.75%, you may pay 6% for a home equity loan.

Higher monthly payments. HELOC payments are interest-only, at least during the draw period. However, home equity loan payments include both interest and principal, resulting in higher payments.

How a HELOC Compares With a Home Equity Loan

How a HELOC and a Home Equity Loan Are Similar

The primary similarity between a HELOC and a home equity loan is that both are loan programs designed to enable you to access the equity in your home.

This is generally a more cost-effective way to retrieve equity from your home than doing a cash-out refinance of your first mortgage. Not only may a cash-out refinance cost more than a HELOC or home equity loan in closing costs, but you may lose the benefit of an attractive interest rate if rates have gone up since the original loan was taken.

Both HELOCs and home-equity loans are also very flexible loan arrangements. You can either borrow the funds for a very specific purpose, like making an addition to your home, or to cover a series of expenses over several years.

How a HELOC and a Home Equity Loan are Different

The main differences between a HELOC and home equity are loan funds access and repayment.

Where a home-equity loan is a one-time loan, generally designed for a specific purpose, a HELOC is a revolving credit arrangement. You can borrow money as you need it, repay it, and pay interest only on the outstanding balance.

A home equity loan requires full payment of interest and principal throughout the term of the loan. A HELOC requires only the payment of interest during the draw period. However, once the draw period is over, you will be paying a combination of interest and principal on a HELOC, which will make it much more like a home equity loan.

When to Choose a HELOC

You should choose a HELOC when…

• You want to tap the equity in your home and pay the absolute lowest rate and monthly payment possible.

• Your plan is to use the HELOC as a source of funds, above your emergency fund. There’s no specific purpose for the funds, but you want them available for major expenses as they arise.

• You’re okay with the variable rate arrangement, perhaps because you plan to keep the outstanding balance low or repay the line early.

When to Choose a Home Equity Loan

You should choose a home equity loan when…

• You need a large amount of money quickly, perhaps because you want to add an addition to your home or cover the cost of an upcoming wedding.

• You prefer the stability of a fixed interest rate and monthly payment.

• You plan to stay in your home for many years, giving you plenty of time to fully repay the home equity loan.

• You want to consolidate variable-rate loans, like student loans and credit cards, into a single fixed-rate loan.

Where to Get a HELOC or Home Equity Loan

LendingTree is the leading online loan marketplace in America. You can use the platform to get a new first mortgage, credit cards, student loans, car loans, business loans, and other types of financing, in addition to HELOCs and home equity loans. Scores of lenders make their products available on LendingTree, which makes it an excellent choice to search for and find the best HELOC or home equity loan arrangement for you.

Figure is a direct HELOC lender, offering loans on single-family residences and townhouses. You can get a HELOC from Figure for second homes and investment properties, in addition to primary residences. They’ll lend up to $250,000, and you must have a minimum credit score 680. The entire loan application takes place online, and rates start as low as 3.00% APR.

Quicken Loans (ACCORDING TO THEIR WEBPAGE, QUICKEN LOANS DOES NOT OFFER HELOCS. THERE IS NO MENTION OF HOME EQUITY LOANS.)

AmeriValue (THE WEBSITE IS EXTREMELY LIMITED, AND I COULD FIND NO EVIDENCE THEY OFFER ANYTHING OTHER THAN FIRST MORTGAGES, NOT HELOCS OR HOME EQUITY LOANS.)

The Bottom Line – HELOC vs Home Equity Loan

HELOCs and home equity loans offer homeowners flexible access to their home equity, but they have crucial differences. A HELOC is like a revolving credit line secured by your home, offering lower interest rates and payments based on the outstanding balance. In contrast, a home equity loan provides a lump-sum amount with fixed interest rates and monthly principal and interest payments.

Choosing between them depends on your financial goals. HELOCs suit those seeking flexibility and lower initial costs. Home equity loans are ideal for large, one-time expenses or consolidation with a preference for fixed rates.

Both options help you leverage your home’s equity, so pick the one aligned with your specific financial needs and objectives.

The post HELOC vs Home Equity Loan appeared first on Good Financial Cents®.

Let’s drill down into the basics of debt consolidation to help you decide when it’s the right move, and when it holds the potential to only make your situation worse.

Debt Consolidation Guide

What Is Debt Consolidation?

Debt consolidation is a financing arrangement with the goal of wrapping two or more loans or credit lines into a new, single loan. It’s one of the best strategies to consider if you’re contemplating how to get out of debt. For many individuals and couples, it’s the first step toward debt freedom.

But what’s critical to understand with debt consolidation is that it doesn’t reduce the amount of debt you owe. It simply repackages it into a single, more manageable debt.

That alone can be an excellent strategy to get out of debt. Many debtors find it easier to manage a single monthly payment on one loan than to juggle multiple payments on several obligations.

But in a classic debt consolidation scenario, you’re not only consolidating multiple debts under a single loan, you’re also working to reduce your monthly payment. That will be possible if you’re able to obtain a loan that has a lower interest rate than the debts you’re consolidating.

The problem with credit cards is their revolving nature. Even as you make payments on your credit cards, the balance never seems to go down. That owes to a combination of very high-interest rates – often over 20% – as well as continued use of the card for new purchases.

With a fixed-term debt consolidation loan, you may be able to pay off all your outstanding debt in no more than three or five years. By contrast, credit cards tend to become permanent debt. Debt consolidation is a way to put a stop to that.

How Does Debt Consolidation Work?

Let’s say you have outstanding balances on five credit cards. The five cards together have a combined balance of $20,000, with an average interest rate of 24%.

Your monthly payment is about $500, or 2.5% of the outstanding balance. But $400 of that is interest! That means only $100 per month is going toward principal reduction. At that rate, it will take you at least a dozen years to pay off your credit cards, if it ever happens.

You have an opportunity to do debt consolidation. The loan is for $20,000, which will enable you to pay off all five cards. The term is five years at an interest rate of 8%. That’ll give you a monthly payment of $405.53.

By taking the debt consolidation, you’ll not only save almost $95 per month on your monthly payment, but you’ll also chop years off the payoff of the credit cards. Just the peace of mind that comes from knowing you’ll be debt-free in five years will justify debt consolidation.

But you’ll also save a fortune in interest. The monthly interest charge on the debt consolidation loan will be $133.33. That’s just one-third of the amount of interest you’re currently paying on your credit cards!

The best way to do debt consolidation is by using a personal loan. By taking advantage of the best personal loans you may be able to get a high enough loan amount to pay off all your debt and at a much lower interest rate. To do that, you’ll need to thoroughly understand how to get a personal loan approved. Many personal loans are now available from online sources, so you’ll need to know exactly how the application process works.

Some debtors have been known to do serial debt consolidations, rolling one consolidation loan into an ever-larger one.

Debt Consolidation and Your Credit

One of the unexpected benefits of debt consolidation is that it can improve your credit. Many borrowers have experienced an almost immediate 20 to 30-point upward bounce in their credit scores after doing a consolidation.

The reason for this score improvement is the way credit scores are calculated.

Two important factors in the calculation are 1) the number of accounts with outstanding balances, and 2) revolving credit vs. installment debt.

By doing a debt consolidation and paying off several credit cards, you’ll be reducing multiple credit lines down to one debt. That alone is worth a few points on your credit score. But you’ll pick up a few more points because you’ll be moving from revolving debt to installment debt. The credit bureaus prefer installment debt, because of its greater predictability, especially with regard to interest rates.

But that’s only the beginning. As you make regular, on-time payments on the debt consolidation, your credit score will continue to rise.

In fact, debt consolidation can be an important step in how to build your credit score, especially if your score needs improvement.

As you can see, good credit starts at 670. If your score is lower, you may need to consider working with one of the best credit repair services to bring your score up to where it needs to be.

When to Seek Out Debt Consolidation

A debt consolidation loan is never something that should be done automatically. You’ll first need to fully consider your financial situation, then ask yourself the question: should I do debt consolidation?

A debt consolidation loan makes sense if any of the following apply:

1. Your income and credit score are high enough that you can get a large enough loan to pay off all your debts.

2. Your credit score is high enough to give you the benefit of a lower interest rate than you’re currently paying on your debts.

3. The monthly payment on the debt consolidation loan will be lower than the combined payments on your current debts.

4. You have a budget in place and you’re able to live within your means.

5. You’re fully committed to the idea of getting out of debt. You’re prepared to avoid new debt once the debt consolidation loan is in place.

A debt consolidation loan may not make sense if any of the following apply:

1. You’re unable to get a debt consolidation loan for enough money to pay off all your debts.

2. Your credit score is fair or poor, and there’ll be no savings on the interest rate.

3. The monthly payment on the debt consolidation loan may be higher than the combined payments on your current debt.

4. You have no budget in place, and it’s not certain you can live within your means even after the consolidation.

Neither you nor your spouse are fully prepared to avoid using credit in the near future.

Bottom Line – Debt Consolidation

Debt consolidation can be a debtor’s best friend. You can think of it as something of a get-out-of-jail-free card. That’s because debt consolidation is something like voluntary bankruptcy.

Rather than defaulting on your loans, you’re consolidating them into a single loan with one monthly payment and then paying off all your debt within a few years. And as a bonus, the debt consolidation will produce an improvement in your credit score, which is the exact opposite of what will happen with bankruptcy.

But just remember that debt consolidation will only work if you have the discipline to maintain control over your finances and avoid incurring new debt until the consolidation is fully paid.

If you can get those two factors under control, debt consolidation may be the right strategy for you.

The post What Is Debt Consolidation and How Does It Work? appeared first on Good Financial Cents®.

And that means you’ll be free to earn even more money doing other things – or just enjoying your life. Jeff Rose is a big advocate of passive income, and he even wrote an article outlining 28 ways to make it a reality.

But like all forms of income, passive income is generally subject to income tax. How is passive income taxed? Much of it will depend on the source (such as passive income apps), as well as the type of income it is. As we’re about to see, not all passive income taxed the same way.

What Makes Passive Income Passive?

The definition of passive income I’ve given in the introduction (and italicized) is very general. It may even be a bit misleading. We can take it a step further and say that it’s also often subjective.

Let’s start with this: getting an income source to the point where it becomes passive is often anything but passive!

Still, another gray zone in the definition is in the amount of effort put into the activity. This is also where the definition can become subjective.

For example, you might build a successful blog that earns you $10,000 per month. But you’ve moved it to a point where the blog earns that income with no more than about 50 hours of work per month on your part.

This is an example of what would best be considered a semi-passive income source. And let’s not forget the years you spent building up the blog, when you may have been working 60 to 70 hours per week to make it happen.

Semi-passive income sources are often lumped in with true passive income sources, which is where the passive income gray zone lies. As we’ll see in a moment, the IRS has very specific guidelines on passive income.

That’s why it’s important to understand the often subtle difference between a truly passive income source, and a semi-passive one.

9 Examples of Passive Income Sources

Let’s start with a list of truly passive income sources, the kind that requires no effort on your part whatsoever. (But we’ll ignore the reality that real effort went into creating or building these sources.)

True passive income sources include:

1. Interest-earning investments, like bonds and certificates of deposit.
2. Stock investments, either earning dividends or producing capital gains.
3. Direct real estate investing for rental income and long-term capital gains, or both.
4. Most types of real estate crowdfunding, like pass-through business entities, in which you earn income, but have limited liability and are not involved in management. These typically include partnerships, S corporations, and limited liability companies.

Semi-passive income sources (those requiring little effort on your part):

1. Buying or building a business that requires only minimal work from you to earn an income.
2. Renting out part of your home.
3. Selling products through affiliate marketing.
4. Creating a digital product, like an e-book or instructional course, that’s sold through affiliate marketing arrangements.
5. Buying and selling websites, domain names, and other digital property.

Each of these ventures will require some effort on your part, even if it’s only a few hours a month. But that participation, small as it may seem, is critical to the success of the venture.

Passive Income for Income Tax Purposes

For income tax purposes, the IRS has very specific guidelines as to what constitutes a passive income activity. It centers around the question of material participation.

It’s the deciding factor in passive versus non-passive income sources, at least according to the IRS.

The IRS defines material participation as follows:

You materially participated in a trade or business activity for a tax year if you satisfy any of the following tests:

• You participated in the activity for more than 500 hours during the tax year.

• Your participation was substantial in relation to the activity of all individuals for the tax year, including the participation of individuals who didn’t own any interest in the activity.

• You participated in the activity for more than 100 hours during the tax year, and you participated at least as much as any other individual (including individuals who didn’t own any interest in the activity) for the year.

• The activity is a significant participation activity, and you participated in all significant participation activities for more than 500 hours.
  
  A significant participation activity is any trade or business activity in which you participated for more than 100 hours during the year and in which you didn’t materially participate under any of the material participation tests, other than this test.

• You materially participated in the activity (other than by meeting this fifth test) for any 5 (whether or not consecutive) of the 10 immediately preceding tax years.

• The activity is a personal service activity in which you materially participated for any 3 (whether or not consecutive) preceding tax years.
  
  An activity is a personal service activity if it involves the performance of personal services in the fields of health (including veterinary services), law, engineering, architecture, accounting, actuarial science, performing arts, consulting, or any other trade or business in which capital isn’t a material income-producing factor.

• Based on all the facts and circumstances, you participated in the activity on a regular, continuous, and substantial basis during the year.

Clear as mud, right? If you’re having difficulty figuring out if you materially participated in a venture based on the seven criteria above, I strongly recommend you consult with a tax professional.

Special Considerations for Passive Real Estate Income

Direct investment in real estate is probably the most confusing form of passive income. Unless you turn the job of managing investment properties over to a real estate management company, investment real estate almost always involves some sort of effort on your part.

But most real estate investing is considered passive for tax purposes.

By contrast, if you participate in fix-and-flip real estate investing, which is really more of a business, it’s considered a nonpassive activity. This is because it’s a business in which you buy, refurbish, and sell properties for a profit.

But rental real estate, as a passive activity, enjoys certain tax benefits, including:

• The ability to write off expenses incurred in connection with producing the income.

• Depreciation, which is a non-cash expense that reduces your profit without cutting into your cash flow.

• Lower long-term capital gains tax rates on the sale of your property held for more than one year. We’ll cover this topic in more detail shortly.

• Qualified Business Income (QBI) deduction, also known as Section 199A. It allows eligible taxpayers to deduct up to 20% of their qualified business income (QBI), plus 20 percent of qualified REIT dividends and qualified publicly traded partnership (PTP) income.

These tax benefits are one of the major reasons why real estate is such a popular investment. In fact, within certain limitations, losses from rental real estate can be deducted from other income sources. (More on that in a bit.)

Reporting Passive Income on Your Income Tax Return

Like any other kind of income, passive income must be reported on your income tax return. And despite the tax advantages listed above, most passive income is taxed as ordinary income.

“Contrary to popular belief, passive income is taxed at ordinary income tax rates although it is sometimes possible to use deductions to reduce the liability,” reports Brennan S. Schlagbaum, CPA and host of the blog BudgetDog.com.

“One common misconception is that income made from investments is ‘passive income.’  While that is technically the case, that type of income is not deemed passive by the IRS; it is considered ‘portfolio income’ and taxed accordingly.

There is a level of complexity for the tax code when it comes to this type of tax.”

Where to Report Passive Income on Your Tax Return

How you report passive income on your tax return depends on the source. If you own rental real estate directly, you’ll report income and expenses on IRS Schedule E, and carry the results through to Form 1040.

If you live in a part of the property and rent out the other part, you’ll report income and expenses only from the rental portion.

Passive income earned from traditional investment sources, partnerships, S corporations, and limited liability companies (LLC) must be handled based on how they are reported by the issuing company.

For example, a bank or investment broker will issue form 1099 for interest income (1099-INT), dividend income (1099-DIV) and capital gains transactions (1099-B).

If you have income from a pass-through entity, like a partnership, S corporation or LLC, you’ll be issued IRS Form K-1. The advantage of this form is that it can reduce a complicated income situation to a very simple one.

It will break down exactly what’s considered passive income, ordinary income, portfolio income, and other information.

In each case, you’ll need to transfer the information from the 1099 or the K-1 to the appropriate line on your income tax return.

If you do have passive income, you can take advantage of the best tax software to include it on your return. Tax software, like TurboTax and H&R Block, can easily accommodate tax situations like passive income.

But if you have a particularly complicated tax profile, or you feel uncomfortable with the proper way to report passive income, be sure to take advantage of the services of a tax professional.

How Is Passive Income Taxed?

Typically, net income from passive income investments is reported as ordinary income. More particularly, that means it will be taxed at your regular income tax rate.

But there is a special category for capital gains income.

Capital Gains Tax: Long-Term vs Short-Term

Exactly how that tax works depends on whether it’s long-term or short-term. According to IRS rules, a short-term capital gain is one earned from an asset held for one year or less.

A long-term capital gain is one earned from an investment held longer than one year. That means an investment held for one year and one day qualifies as a long-term capital gain.

Short-term capital gains are taxed at your ordinary tax rate. Long-term gains, on the other hand, get the benefit of lower long-term capital gains rates.

Capital gain tax rates look something like this for the 2024 tax year:

• 0% for taxable income up to $47,025 for single filers, or $94,050 for married filing jointly. (The tax rate for most filers in this income range is 10% or 12% for ordinary income/short-term capital gains.)

• 15% for taxable income of between $47,025 and $518,900 for single filers, or between $94,050 and $583,750 for married filing jointly. (The tax rate for most filers in this income range is 22%, 24%, 32%, or 35% for ordinary income/short-term capital gains.)

• 20% for taxable income greater than $518,900 for single filers, and greater than $583,750 for married filing jointly. (The tax rate for most filers in this income range is 35% or 37% for ordinary income/short-term capital gains.)

As you can see, the tax benefit for long-term capital gains is substantial. A married couple filing jointly earning $100,000 in taxable income will pay 22% on ordinary income, but only 15% on capital gains. That can represent a savings of $7,000 in taxes on the sale of property with a $100,000 profit.

Not only can you earn long-term capital gains by selling an investment property, but they can also come from pass-through entities and REITs.

Passive Income Limitations

As a general rule, passive losses can only be deducted against passive income. For example, if one activity has a loss of $6,000 and another has a gain of $10,000, you can offset the loss against the gain, resulting in a net passive income of $4,000.

However, if the situation was reversed – if instead you had a net loss from the two activities of $4,000 – you would not be able to deduct that loss on your tax return. Unfortunately, passive losses cannot be used to reduce income from nonpassive sources.

But the IRS does allow you to carry the losses forward. For example, the same $4,000 loss in 2021 can be carried forward and deducted against a $10,000 passive gain in 2022.

This allowance is phased out at certain income limits. It’s reduced by 50% of the amount of your modified adjusted gross income (MAGI) that exceeds $100,000. At $150,000, the $25,000 allowance disappears completely.

At Risk Limits

Under at risk limits the IRS limits deductible losses to the amount of your investment in a passive activity. For example, if you’ve invested $10,000 in a passive activity that produces a $15,000 loss, only $10,000 of the loss can be deducted, and then only against other passive income.

Bottom Line on Passive Income Taxation

Passive income really is the best type of income. It can be earned while you’re busy doing other things – like earning more money. It also has more than a fair share of generous tax breaks, particularly in the area of long-term capital gains.

And if you’re a small investor, with a taxable income below $150,000, you can even use some or all your passive losses to offset income from non-passive sources.

But the benefits that come with those tax breaks will definitely add complication to how passive income is taxed. For that reason, be sure to take advantage of top-quality tax-preparation software. Or be ready to pay a little extra for the services of a qualified tax professional.

The post How Is Passive Income Taxed? appeared first on Good Financial Cents®.

It won’t make your debt go away, but it will help it become more manageable. And by setting up the right loan, you can be debt-free in a few short years.

To help you in your search for the right loan, we prepared this guide on the 10 best consolidation loans for 2024.

The table below provides a summary of the main features offered by each lender. You can then scroll down and read our summary reviews with more information on each lender that may interest you.

Our Picks for Best Debt Consolidation Loans

Here is our list of the 10 best debt consolidation loan lenders of 2024:

• LendingTree: Best Lender Selection

• Credible: Lowest Rates

• LendingClub: Best for Peer-to-Peer Loans

• SoFi: Best for Comprehensive Financial Services

• Upstart: Best for Fair Credit

• Even: Best for High Loan Amounts

• LightStream: Best for Good to Excellent Credit

• Marcus by Goldman Sachs: Best for Investing

• Best Egg: Best for Good Customer Service

• Happy Money (formerly Payoff): Best for High DTI Ratios

Below are our summary reviews for each.

Best Debt Consolidation Loans – Company Reviews

Minimum/Maximum Loan Amount: $1,000 to $100,000
Interest Rate Range: 4.37% to 35.99% APR
Fees: 0% to 10%
Loan Terms: 24 to 144 months
Minimum Credit Score: 585

LendingTree is an online loan marketplace offering mortgages, auto loans, and credit cards. For debt consolidation, you can apply for a personal loan from $1,000 to $100,000, with terms ranging from two years to 12 years.

The big advantage of LendingTree is that you can get loan quotes from at least 11 personal loan lenders at the same time. Participating lenders are some of the biggest in the industry, and even include some of the lenders in this guide.

Minimum/Maximum Loan Amount: $600 to $100,000
Interest Rate Range: 5.40% to 35.99% APR
Fees: Varies by lender
Loan Terms: 24 to 84 months
Minimum Credit Score: 585

Much like LendingTree, Credible is an online loan marketplace. Not only do they offer personal loans, mortgages, and credit cards, but also student loans and student loan refinancing.

Personal loans are available for debt consolidation in amounts up to $100,000 and with terms as long as 84 months. Credible advertises the lowest interest rates of all lenders on this list. A total of 17 lenders offering personal loans participate on the platform.

Credible has a special offer for personal loan applicants; if they can’t find you the best personal loan rate available, they’ll give you $200.

Minimum/Maximum Loan Amount: $1,000 to $40,000
Interest Rate Range: 7.04% to 35.89% APR
Fees: 3% to 6%
Loan Terms: 36 or 60 months
Minimum Credit Score: Not disclosed

LendingClub is a peer-to-peer loan platform that brings together borrowers applying for loans that are funded by investors participating in the platform. 

You can apply for up to $40,000, with a loan term of either three years or five years. All loans are fixed-rate and will be fully repaid at the end of the term.

LendingClub is one of the biggest lenders in the personal loan space, having provided more than $60 billion in financing. It also provides business loans, medical loans (patient solutions), and auto refinancing loans.

Minimum/Maximum Loan Amount: $5,000 to $100,000
Interest Rate Range: 5.74% to 20.28% APR
Fees: None
Loan Terms: 24 to 84 months
Minimum Credit Score: 680

SoFi began as a service providing student loan refinancing. But it has since expanded, and now provides comprehensive financial services that include investments, banking, credit cards, insurance, and even credit scores and budgeting. The platform boasts more than 3.5 million members.

SoFi personal loans are designed primarily for those with good or excellent credit. If you qualify, you can borrow up to $100,000 for as long as 84 months. And you can do it all with no loan fees!

Minimum/Maximum Loan Amount: $1,000 to $50,000
Interest Rate Range: 3.09% to 35.99% APR
Fees: 0% to 8%
Loan Terms: 36 or 60 months
Minimum Credit Score: 600

Upstart offers several different loan options, including auto loan refinances, medical loans, home improvement loans, and personal loans for debt consolidation.

You can borrow up to $50,000 with rates starting as low as 3.09% APR (Annual Percentage Rate). The minimum credit score at 600, will accommodate borrowers with average or fair credit.

Like many other personal loan lenders, loan terms come in two sizes: 36 months and 60 months. This lender also has potentially steep loan fees, with an origination fee as high as 8%.

That could mean a $4,000 fee on a $50,000 loan, giving you net proceeds of only $46,000.

Minimum/Maximum Loan Amount: $1,000 to $100,000
Interest Rate Range: 4.99% to 35.99% APR
Fees: Varies by lender
Loan Terms: 24 to 84 months
Minimum Credit Score: Varies by lender

Even is a financial services platform that offers personal loans for just about any purpose. You can borrow up to $100,000, with rates starting at 4.99% APR and terms ranging from 24 to 84 months.

Like some of the other lenders in this guide, Even is an online loan marketplace. By completing a single online application, you’ll get rate quotes from multiple lenders. This gives you an opportunity to choose the loan that will work best for you.

Minimum/Maximum Loan Amount: $5,000 to $100,000
Interest Rate Range: 2.99% to 19.99% APR
Fees: None
Loan Terms: 24 to 144 months
Minimum Credit Score: High, but not specified

LightStream is the online personal loan program for Truist Bank (formerly SunTrust). The company is a direct lender, offering personal loans up to $100,000 for just about any purpose. They charge low rates, with terms as long as 144 months.

LightStream will work best for those with good or excellent credit, as their credit requirements are steep. 

Not only do they require an excellent payment history with no delinquencies, but also a proven ability to save money in the form of bank deposits, stocks, real estate, retirement, and other assets, as well as a solid credit history.

Minimum/Maximum Loan Amount: $3,500 to $40,000
Interest Rate Range: 6.99% to 19.99% APR
Fees: None
Loan Terms: 36 to 72 months
Minimum Credit Score: 660

Marcus by Goldman Sachs is a direct lender that not only offers personal loans but also savings accounts, investments, and credit cards. 

Personal loans are available in amounts up to $40,000, with rates starting as low as 6.99% APR. Not only do they charge no fees in connection with their personal loans, but there are also no late fees.

The minimum credit score requirement of 660 means you will need at least average credit to qualify. This is not a lender for consumers with fair or poor credit.

Minimum/Maximum Loan Amount: $2,000 to $50,000
Interest Rate Range: 5.99% to 35.99% APR
Fees: 0.99% to 5.99%
Loan Terms: 36 or 60 months
Minimum Credit Score: 600

While Best Egg provides personal loans for debt consolidation, the company is now expanding into offering credit cards.

Personal loans are available in amounts up to $50,000, with interest rates starting as low as 5.99% APR, in terms of 36 or 60 months. The company has already provided more than $10 billion in personal loans to consumers.

Best Egg is a direct lender, with loans provided by New Jersey-based Cross River Bank. Though the minimum credit score requirement is 600, the company requires a minimum individual income of $100,000.

Minimum/Maximum Loan Amount: $5,000 to $40,000
Interest Rate Range: 5.99% to 24.99% APR
Fees: 0% to 5%
Loan Terms: 24 or 60 months
Minimum Credit Score: 640

Happy Money is a direct online lender providing personal loans. However, those loans are available only for debt consolidation. They will not be available for major expenses, like a wedding or an upcoming vacation.

Loans are available in amounts up to $40,000, with rates as low as 5.99% APR. You’ll have a choice on the loan term of either 24 or 60 months. But expect to pay an origination fee as high as 5%.

Debt Consolidation Guide

What Is Debt Consolidation?

Ultimately, debt consolidation is both a way to get out of debt and an opportunity to lower your total monthly payments.

Debt consolidation doesn’t lower the total amount of existing debt you owe or your overall credit utilization. Instead, it rolls several loans into one, with a single loan balance and one monthly payment.

Just by consolidating several loans into one single installment loan, you may be able to benefit from a lower interest rate or more manageable repayment terms. 

That can translate into a lower monthly payment. And since debt consolidation loans are typically structured with a fixed rate and term, the consolidated debt will be fully repaid at the end of the term.

This can be especially beneficial with high-interest debt, such as that of credit cards, or for unsecured debt. 

The most basic reason why it’s so hard to get out of credit card debt is because of its revolving nature. As you pay down, the monthly payment drops. 

And when you use the card for additional purchases, the balance increases. That also raises your credit card payment.

But by paying off the credit card debt with a consolidation loan, the loan — which includes your credit card debt — will be fully repaid after just three to five years.

If you ever wonder if I should consolidate my debt, crunch the numbers and see how it can work with your credit card debt.

How Do Debt Consolidation Loans Work?

Debt consolidation loans are essentially unsecured loans that offer a fixed interest rate and term. The combination makes it possible to eliminate the consolidated debt within a very specific time frame.

Debt consolidation loans can range anywhere from 24 months to as long as 84 months, though it’s possible to extend that out to 144 months (12 years) through a lender like LightStream.

Debt consolidation loans are typically offered in the form of personal loans. These work especially well for debt consolidation since they can be used for just about any purpose, from medical bills to credit card consolidation. 

While most usually deposit the loan funds into the borrower’s bank account directly, some pay the money out directly to the lenders.

The interest rate you’ll pay on a debt consolidation loan will depend on a mix of factors, including your credit score, your debt-to-income ratio, and the amount borrowed.

Debt consolidation is one of the most simple ways to improve debt management skills. At a minimum, it enables you to reduce the number of monthly loan payments. That by itself can give you better control over your debts.

Does Debt Consolidation Affect My Credit Score or Monthly Payments?

Yes, on both counts! Let’s look at credit scores first.

One of the factors credit bureaus consider when calculating your credit score is the number of loans and credit lines with outstanding balances. 

When you use a debt consolidation loan to roll multiple debts into a single loan, the number of outstanding debts declines immediately.

Something else happens as well, at least when you’re consolidating credit cards. The credit bureaus consider installment debt, which is typically what debt consolidation loans are, to be less risky than revolving debt. 

In fact, revolving debt is considered the riskiest debt of all. By eliminating it through a debt consolidation loan, you’ll have another factor working in your favor towards improving a bad credit score and increasing your overall creditworthiness.

Many people who do debt consolidation loans experience an immediate increase in their credit scores for the reasons described above, even despite the drop from the credit inquiry your lender makes. 

It will help to know what a good credit score is so you can track any positive changes in your score after taking the loan.

A debt consolidation loan can also affect your monthly payments. If the monthly payment on the consolidation loan is lower than the total of the payments on the loans you’re paying off, your net monthly payment will drop.

What Are the Risks Behind Debt Consolidation Loans?

As good as a debt consolidation loan sounds, you will need to avoid debt consolidation pitfalls.

Probably the most common is when you set up a debt consolidation loan and then continue borrowing more money.

That’s an easy trap to fall into because the debt consolidation loan can seem like a get-out-of-jail-free card. But rest assured, it’s not. If you continue with this pattern, you’ll end up with a bunch of new debt on top of your debt consolidation loan.

Another potential pitfall is not getting full control of your budget after a debt consolidation loan.

You should think of a debt consolidation loan as a financial instrument designed to help you deal with past financial mistakes, like overspending. 

But if you continue to overspend, which will likely result in new debt, the debt consolidation effort will be a failure.

How to Qualify for a Debt Consolidation Loan?

How to get a personal loan approved involves a series of steps. These will center around your credit score, debt-to-income ratio, and the amount of money you borrow.

Many lenders will assign you a credit grade based on a combination of the three. The higher your grade, the lower the rate you’ll pay, and vice versa.

Your debt-to-income ratio, which is simply your monthly recurring debts divided by your stable monthly income, indicates how well the new loan will fit within your budget. 

The lower your debt ratio—say, less than 30%—the better your loan grade will be. A high ratio (exceeding 40%) will indicate a higher risk factor, contributing to a lower grade.

The same is true with the loan amount you borrow. A $50,000 loan will be considered a bigger risk to the lender than a $15,000 loan. Your loan grade may be lower if you take a larger loan amount.

Most important is your credit score. As you can see from the lenders included in this guide, a credit score of at least 680 will get you a lower interest rate. 

Below 680, you will see you paying at the upper end of the interest rate range. For this reason, it will be important to improve your credit score, even to apply for a debt consolidation loan.

Get a copy of your credit report and concentrate on fixing errors on your credit report. 

But if your credit score is much below 650, it may be time to look into using the services of one of the best credit repair services. It could mean the difference between a 10% interest rate and 20% or 30%.

Some lenders may allow you to access a better rate or up your potential eligibility by taking out the loan with a co-signer with better credit.

How We Found the Best Debt Consolidation Loans

To come up with this list of the 10 best debt consolidation loans for 2024, we used the following criteria:

• The minimum and maximum loan amounts offered

• The interest rate range advertised by the lender

• Any and all fees a lender may charge, including prepayment

• penalties, origination fees, and application fees

• Loan terms offered

• Minimum credit score requirements

Above and beyond these five factors, we also considered company reputation, popularity with consumers, and any special features or additional services each offers.

Summary of the Best Debt Consolidation Loans

Let’s recap the 10 best debt consolidation loans for 2024:

• LendingTree: Best Lender Selection

• Credible: Lowest Rates

• LendingClub: Best for Peer-to-Peer Loans

• SoFi: Best for Comprehensive Financial Services

• Upstart: Best for Fair Credit

• Even: Best for High Loan Amounts

• LightStream: Best for Good to Excellent Credit

• Marcus by Goldman Sachs: Best for Investing

• Best Egg: Best for Good Customer Service

• Happy Money (formerly Payoff): Best for High DTI Ratios

If you’re drowning in credit card debt, a debt consolidation loan may be the right strategy for you. It’s the perfect way for you to get off the revolving debt treadmill.

The post 10 Best Debt Consolidation Loans for 2024 appeared first on Good Financial Cents®.