How MagnifyMoney Gets Paid

Advertiser Disclosure

News

What Science Reveals About Your Money Habits

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

Written By

iStock

If an anthropologist were to have access to your bank account, what would they learn about you? Are you constantly carrying a credit card balance and spending beyond your means? Or, on the other end of the spectrum, do you miss out on life’s experiences because you’re constantly worried about your future nest egg?

Below, we turn to science for a glimpse of why we’re spenders or savers — and the role personality plays in your financial habits.

Your genetics can determine your spending and saving habits

When it comes to our finances, what is it about one person that makes them a spender while the other is a saver? Some studies say it’s learned behavior from your environment and upbringing, while other researchers point to genetics as a determinant for our financial choices.

A 2011 study titled “The Origins of Savings Behavior” found that DNA determines one-third of adults’ wealth and saving habits. Researchers examined the genes and spending habits of nearly 15,000 identical and fraternal twins from Sweden and noted that while “parenting contributes to the variation in savings rates among younger individuals,” the effects wane over time. By age 40, the spending and saving behaviors one learns from their upbringing revert back to their genetic predispositions.

According to the study, your genetics determine your self-control and how patient you are. This, in turns, impacts your money-handling habits. What this means, said Stephan Siegel, professor of finance and economics at the University of Washington and co-author of the study, is that while there is “a long list of small things that add up over time,” what’s instinctive is more important than learned behavior.

“It’s a little bit of a puzzle because people do think that, on the one hand, parents are important,” said Siegel, “but the evidence suggests they’re more important in terms of handing over their DNA and less important on shaping the environment for their kids.”

Use it to your advantage: Accepting that some behaviors are beyond your control is the first step to addressing what you want to change. But it’s not just about financial literacy, Siegel told MagnifyMoney. It’s learning to recognize your financial predispositions and managing them accordingly.

“Some of these tendencies are set early or at the point of conception,” he said, adding that thinking of spending habits as a biological issue can help you put a framework in place that protects you from your instinctual money habits.

This framework could mean coming up with a plan to save more early in the year, then using tools like direct deposit to pull from your paycheck and store funds safely in an outside savings account. It works for Siegel.

“It basically doesn’t even show up on my radar screen that I have that money and I can spend it,” he said. “Ideally, I don’t even see it in my checking account.”

If you feel pain during unpleasant experiences, you’re likely to be a saver

There is a region in the brain called the insula that “lights up” when you experience something unpleasant. The more activity or stimulation in the insula, the more “pain” you feel, likely resulting in you not doing the action again. This can influence whether you reach for another cookie or cigarette, are able to see disgust in someone’s face or have risky spending habits.

For the 2007 study published in the Journal of Consumer Research, participants’ brains were scanned while they pretended to shop. Researchers later found that the more stimulation in the insula, the less likely participants kept spending. In other words, if spending money gives your brain an unpleasant feeling, then you’re less likely to keep doing it.

Use it to your advantage: What if you have a high pain threshold? Make spending as difficult as possible. Try drawing out cash so that you get out of the habit of spending on credit, and make sure you know where your money goes. In fact, tracking your spending with mobile apps has been shown to cut back on individual spending by 15.7%.

Also, as Siegel mentioned above, make a point to automate your savings, then leave the account alone. “If people have to actively think about saving, then they probably won’t do it,” wrote Shlomo Benartzi, a professor of behavioral decision making at UCLA, in a 2017 article for the Harvard Business Review.

Benartzi’s well-known “Save More Tomorrow” study with Nobel Prize laureate and renowned behavioral economist Richard Thaler found that people are more successful at saving when they commit to it in advance. In other words, when people set their future savings rate to increase annually with their raises, they’re more likely to stick to the plan.

In the study, Benartzi and Thaler proposed a savings program that allowed 21,000 workers at three different companies to allocate a portion of their future savings toward their retirement fund. The researchers followed the participants from the late 1990s to early 2000s and found that savings increased from 3.5% to 11.6% over the course of 28 months.

If you’re a master at delayed gratification, you may be a good saver

A series of experiments conducted on preschoolers in the 1960s called the “marshmallow test” has become an iconic example of the relationship between savings and delayed gratification.

For the study, researchers informed the participants, who were nursery school children at the time, that they could choose one sweet treat from a tray and could either eat it immediately or wait 15 minutes. If they were able to wait 15 minutes, then they were rewarded with a second treat.

The researchers found that 70% of the children chose to eat their treat immediately. Decades later, the researchers followed up with the same participants who were now adults and found that the 30% who were able to practice self-control were more successful and in better physical health overall.

However, in the years since the study, researchers have criticized the marshmallow test, pointing to various factors that impact a child’s level of self-control.

For instance, a 2018 study published in the Psychological Science journal, replicated the marshmallow test and found a strong correlation between delayed gratification and various controls like a child’s cognitive functioning, home environment and family background. Jessica McCrory Calarco, an associate professor of sociology at Indiana University, wrote in The Atlantic that “the capacity to hold out for a second marshmallow is shaped in large part by a child’s social and economic background — and, in turn, that that background, not the ability to delay gratification, is what’s behind kids’ long-term success.”

And this 2013 study published in Cognition journal noted that a child’s self-control abilities may be closely correlated to their “beliefs about the stability of the world” and whether a second treat would actually be available.

Use it to your advantage: Regardless, it makes sense that the more willpower you have, the better you can be at regulating your need to spend money. Psychologists Walter Mischel told The Atlantic in 2014 that what we should be getting from the marshmallow test are ways to curb our impulses. He recommends what’s called “if-then” strategies, saying: “If I want a cigarette, I’ll take a break to play a game on my phone instead.” So instead of focusing on delaying gratification, turn your attention to something else in order to distract yourself in satisfying ways.

Final thoughts

The research above can provide some valuable insight into your actions. It also highlights the importance of automating your financial decisions and tracking your spending — two relatively easy ways to trick yourself into making better financial choices.  Learning to work with your predispositions, instead of fighting them, will help you cultivate financial behaviors that work for you.

How MagnifyMoney Gets Paid

Advertiser Disclosure

Pay Down My Debt

A Procrastinator’s Guide to Managing Your Finances

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

Written By

iStock

Many of us fall victim to procrastination from time to time. And when it comes to managing your finances, avoiding or delaying tasks can get expensive very quickly.

“Our lives are busy, and sometimes we don’t want to deal with it,” says Gerri Detweiler, education director at the business credit management website Nav and author of “Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights.

In fact, Detweiler remembers the price she paid the year she pushed off renewing her business filings with the state.

“I didn’t get it done right away and paid enormously for it,” she said.

No matter the reason behind your procrastination, it can lead to a financial mess unless you move it to the forefront of your to-do list. Know that it is possible to transform into a doer – even if you’re a habitual procrastinator – by adopting the small changes below to achieve big results down the line.

1. Automate as much as possible

If you’re prone to procrastination, keeping on top of payments can feel overwhelming, especially if you have multiple lenders you need to pay every month. Consider automating your payments so you can avoid late fees and charges. Detweiler advises setting up text or email alerts so you know when payments are due and if there are any changes to the minimum payment amount. You can set up automatic payments with either the lender or through your bank’s bill pay tool; all you have to do is just make sure you have enough money in your account to cover what you owe.

2. Consolidate debt so you have fewer bills to keep track of

The average person has 3.06 bank cards and 2.5 retail cards, according to Experian’s 2018 State of Credit Report. Detweiler advises keeping two credit cards active at any given time: one with a lower interest rate to use for bigger purchases where you can revolve a balance, and a second credit card that is used for everything else, including earning rewards, that you pay off in full at the end of month. Then, put the rest of your cards in a drawer once they’re paid off and use them only occasionally to keep the accounts from being closed by the issuer.

If you have multiple high-interest credit card balances, you may be able to qualify for a balance transfer card offering 0% interest for a specific period of time. While most balance transfer deals charge a 3% balance transfer fee, which is added to the amount you transfer, it may make financial sense to move multiple balances to one card with one payment. Then, devise a repayment plan to knock down that balance as much as possible during the no-interest period as your payments will all be directed toward the principal until the 0% offer has expired.

Another option is to consolidate multiple card balances or other debts with a debt consolidation loan. Depending on how good your credit score is, you may be able to find a lender offering an interest rate lower than what you’re paying on your credit cards. The beauty of a debt consolidation loan is that you can use it to pay off your debts and then have one fixed payment over a specific period of time, generally two to five years. Of course, this will only help if you have the discipline to refrain from adding new debts or purchases to your now-cleared credit cards.

If you’re really struggling and over your head with your finances, consider talking to a credit counselor that can put you on a debt management plan.

3. Turn to technology to help change behavior

If you’re a procrastinator, relying on your willpower can be challenging. Thankfully, technology can help with that. Consider turning to apps or websites to help change any unhealthy behaviors and transform any bad habits.

For instance, you could download a robo-saving app, such as Digit, or enroll in a savings program like Bank of America’s Keep the Change, that help make saving as painless and out-of-mind as possible. Remember that small financial goals (like saving $5 per day versus $150 per month) will seem more achievable and can help lead to big improvements.

Other apps or websites aggregate information about multiple accounts, so you can see what’s due and what’s outstanding on a weekly or monthly basis, can also come in handy. Detweiler suggests Mint, Credit Karma, or the EveryDollar budget app. She also suggests setting reminders so you can remember to log in regularly. When you see the progress you’ve made in a chart or graph, it acts like a reward that is sent to your brain, which is key to long-lasting behavior changes, as journalist Charles Duhigg noted in his book “The Power of Habit.”

Whether your procrastination is the result of being really bad at time management or overly demanding standards that result in unhealthy levels of perfectionism, it helps to be aware of what’s causing any counterproductive, irrational behavior so you can determine how to do better.

For instance, if you’re really bad at estimating how long it’ll take you to finish a task, then make a habit of starting earlier than you normally would. Or, if your overly demanding standards stop you from getting started, then remind yourself before you start the task that “done” is better than perfect and think back to times that procrastination has proven harmful to you.

Changing behaviors, like managing your time better or reducing any anxiety you feel when tackling big tasks (like paying multiple lenders every month), can be challenging, but not impossible. Breaking things down into small, simpler tasks and using technology to help you as much as possible can set you on a fresh path to break unhealthy habits and lead to big improvements on your finances.

Get Personal Loan Offers
Up to $50,000

$

Won’t impact your credit score

How MagnifyMoney Gets Paid

Advertiser Disclosure

Personal Loans

Best Personal Loans: 5 Top Options to Consider

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

Written By

If your goal is to pay off a credit card or consolidate debt, a personal loan that offers you a fixed amount of money for a fixed period can be a great option. In many cases, the interest rate is also fixed so you know exactly how much money you’ll be paying back and when you’ll be debt-free. Since your debts will be combined into one loan and a single monthly payment, a personal loan also makes it easier to manage your finances.

Unlike most traditional banks, which are required to do a hard credit inquiry when checking your interest rate (and each inquiry hurting your credit score by 10 points or more), many online lenders can perform a soft credit pull during pre-approvals, allowing you to shop around for loan terms and rates before deciding on a lender. After just a couple of minutes, these lenders present personalized loan offers which can include the loan amount, monthly payment, length of loan, interest rate and APR.

With so many available personal loan options, the likelihood of finding a lender that works for you may be good depending on your financial situation. Below, we’ve highlighted the top personal loans for people with excellent, good, average and bad credit. The lenders selected were sorted by college graduated borrowers looking for $10,000 and narrowed based on lowest APR.

LendingTree

With so many lenders out there, where should you start? You may explore lenders using LendingTree’s personal loan tool. After filling out one short form, LendingTree will perform a soft pull and match you with up to five loan offers from lenders based on your creditworthiness.

Using the personal loan tool is an easy way to get multiple offers at one time. For borrowers with excellent credit, you could aim for an APR below 6%, and for people with less than perfect credit, LendingTree may match you with lenders with more liberal acceptance criteria.

APR

As low as 2.49%

Credit Req.

Minimum 500 FICO®

Terms

24 to 60

months

Origination Fee

Varies

SEE OFFERS Secured

on LendingTree’s secure website

LendingTree is our parent company

Disclosure

LendingTree is not a lender. LendingTree is unique in that you may be able to compare up to five personal loan offers within minutes. Everything is done online and you may be pre-qualified by lenders without impacting your credit score. Terms Apply. NMLS #1136.



As of 17-May-19, LendingTree Personal Loan consumers were seeing match rates as low as 2.49% (2.49% APR) on a $20,000 loan amount for a term of three (3) years. Rates and APRs were based on a self-identified credit score of 700 or higher, zero down payment, origination fees of $0 to $100 (depending on loan amount and term selected). Terms Apply. NMLS #1136

Best personal loans for excellent credit: LightStream

LightStream is the online lending division of SunTrust Bank that offers competitive rates and terms for personal loan products. LightStream’s products are for prime borrowers with good to excellent credit. One big downside is that LightStream does not do pre-approvals.

APR

3.99%
To
19.99%*

with AutoPay

Credit Req.

Not specified

Terms

24 to 144*

months

Origination Fee

No origination fee

SEE OFFERS Secured

on LendingTree’s secure website

Lender Disclosure

LightStream is the online lending division of SunTrust Bank.... Read More


*Your loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Excellent credit is required to qualify for lowest rates. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice. Payment example: Monthly payments for a $10,000 loan at 3.99% APR with a term of 3 years would result in 36 monthly payments of $295.20.

The fine print

If you have excellent credit, LightStream is a good option to choose for a personal loan. It offers competitive rates, starting at 3.99% and going up to 19.99%, with a pay period from 24 to 144 months. It also offers a 0.50% rate discount for using autopay (included in the lowest rate of 3.99%).

Although a minimum credit score isn’t listed, LightStream is candid about its personal loans being for borrowers with good credit, which is generally defined as a credit score of 700 or above. LightStream does outline some key characteristics that it thinks people with good credit share, including:

  • Having many years of credit history
  • A credit history with a variety of accounts such as credit cards, installment loans and mortgages
  • Evidence of a good payment history and being able to save

Once approved, borrowers can receive their funds in as little as one day. If you meet LightStream’s strict excellent credit requirements, you get some perks: its Rate Beat program promises to beat the APR by any other lender by 0.10% (albeit the other lender must be offering the same loan amount, loan term, loan purpose and payment method. The borrower must be able to provide sufficient evidence that they are already approved for the other lender’s APR), and its Loan Experience Guarantee program rewards borrowers with cash if they’re unsatisfied with the application process.

While you can use the loan for almost anything — adoption fees, debt consolidation, dental work, home improvements, IVF/fertility treatments, weddings — LightStream’s personal loan cannot be used to finance a post-secondary education, commercial vehicles or other business needs.

Pros

  • Competitive rates on fixed loan (as low as 3.99%)
  • No origination fee or prepayment penalties.
  • Rate Beat Program
  • A 0.50% rate discount for autopay
  • Same day funding possible

Cons

  • Hard Pull when checking rates
  • Strict approval process for only borrowers with excellent credit
  • Cannot change payment date on loan
  • Loans cannot be used for refinancing student loans or college education

While its criteria for approvals are strict, borrowers could get their best deal with the Rate Beat program and customer experience with the Loan Experience Guarantee program.

Best personal loans for good credit: RocketLoans

RocketLoans is the personal loan business unit under the Quicken Loans family of companies. As the largest mortgage lender in the U.S., Quicken Loans expanded into personal loans in 2015. RocketLoans is an online lender promising short approval times and a user-friendly lending platform.

APR

7.16%
To
29.99%

Credit Req.

640

Minimum Credit Score

Terms

36 or 60

months

Origination Fee

1.00% - 6.00%

SEE OFFERS Secured

on LendingTree’s secure website

Rocketloans is a digital finance business that is part of the Quicken Loans family. ... Read More

The fine print

Borrower must be at least 18 years old (19 in Alabama and Nebraska), reside in the U.S., have a minimum FICO credit score of 640, and credit history of two years. The maximum debt-to-income ratio is 40% (excluding mortgage) and 70% (including mortgage) and the minimum income you have to make is $24,000 annually.

RocketLoans offers loans from $2,000 to $45,000 for 36 or 60 months with an APR starting at 7.16% (with autopay discount) and up to 29.99%. Borrowers can use their loan for anything. If you’re qualified, borrowers may receive up to $25,000 within the same business day.

Unfortunately, RocketLoans does charge fees: a one-time, non-refundable origination fee (1.00% - 6.00% of loan amount), a late fee of $15 once the payment is 10 days past due, and a fee of $15 if payment does not go through.

Pros

  • Same-day lending (up to $25,000)
  • Completely online
  • Soft pull pre-approval rate available
  • Can use the loan for anything

Cons

  • Origination fee: 1.00% - 6.00%
  • Late payment fee: $15 per occurrence
  • Payment return fee: $15 per occurrence

With its emphasis on digitization, RocketLoans is easy-to-use and can provide pre-approval loan term and rate within one to two minutes.

Best personal loans for average credit: Peerform

Founded in 2010 by Wall Street executives and acquired in 2016 by New York-based Versara Lending, Peerform is a peer-to-peer lending model that matches borrowers seeking loans with potential investors — individuals and corporations. Peerform consider borrowers who have difficulty qualifying for a personal loan through other lenders with a credit score as low as 600.

The fine print

Applicants with poor credit (as low as 600) will need to show that their debt-to-income ratio is below 40% and that they have at least one revolving account such as a credit card. Borrowers cannot have any current delinquencies or a recent bankruptcy, court judgments, tax liens or non-medical-based collections from the past year.

Peerform offers fixed rate loans from $4,000 to $25,000 for three or five years. Loans come with APRs as low 5.99% and as high as 29.99%. It can take up to two weeks for loans to be fully funded and even so, Peerform cannot guarantee that it will be completely. If the fund is not funded by at least $4,000 and more than 60% of the requested amount within two weeks, the loan is considered incomplete and borrowers have a right to decline it.

There are certain restrictions on loans provided by Peerform, such as it cannot be used to refinance student loans. There are also fees: $15 for payments past 15 days from the due date, $15 on returned payments and an origination fee ranging from 1.00% - 5.00% that is subtracted from the loan amount.

Peerform does not lend to borrowers living in Connecticut, North Dakota, Vermont, West Virginia or Wyoming. Applicants must be at least 18 years old and a resident in the U.S. (or 19 for those living in Nebraska or Alabama).

Pros

  • Loans for borrowers with less-than-stellar credit
  • Can make a late payment up to 14 days past due date without paying a fee
  • Can accept or decline a partially-funded loan
  • No prepayment penalty

Cons

  • Soft Pull available for pre-approvals
  • Fees: origination, late payment, returned payment
  • May take up to 14 days to receive funding
  • Does not guarantee complete funding

While there are some cons, like the fact that Peerform does not guarantee complete funding within 14 days, it is still considered a viable option for those with average to poor credit.

Best personal loans for bad credit: Marcus by Goldman Sachs

Marcus by Goldman Sachs®

Marcus by Goldman Sachs is a digitized line of services that include personal loans, savings accounts and certificates of deposit.

APR

6.99%
To
19.99%

Credit Req.

Not specified

Terms

36 to 72

months

Origination Fee

No origination fee

SEE OFFERS Secured

on LendingTree’s secure website

Lender Disclosure

Marcus by Goldman Sachs® offers personal loans for up to $40,000 for debt consolidation and credit consolidation. ... Read More


Your loan terms are not guaranteed and are subject to our verification of your identity and credit information. To obtain a loan, you must submit additional documentation including an application that may affect your credit score. The availability of a loan offer and the terms of your actual offer will vary due to a number of factors, including your loan purpose and our evaluation of your creditworthiness. Rates will vary based on many factors, such as your creditworthiness (for example, credit score and credit history) and the length of your loan (for example, rates for 36 month loans are generally lower than rates for 72 month loans Your maximum loan amount may vary depending on your loan purpose, income and creditworthiness. Your verifiable income must support your ability to repay your loan. Marcus by Goldman Sachs is a brand of Goldman Sachs Bank USA and all loans are issued by Goldman Sachs Bank USA, Salt Lake City Branch. Applications are subject to additional terms and conditions.

The fine print

While there is no minimum credit score, a FICO Score higher than 660 is preferred. Marcus by Goldman Sachs performs a soft pull during the pre-approval stage.

Borrowers can qualify for up to $40,000 in debt consolidation and credit consolidation for 36 to 72 months and APRs start as low as 6.99%.

To get a loan, you must be a resident in the U.S. and at least 18 years old (19 in Alabama and Nebraska and 21 in Mississippi and Puerto Rico) and have a U.S. bank account and a Social Security number or Individual Taxpayer Identification Number.

There is no origination fee or late fees, so if you miss a payment, your loan will be extended and interest is added to the amount owed. Borrowers also have the option to defer a payment after making on-time payments for one year.

Pros

  • No origination fee
  • No late fees
  • Ability to defer a payment after a year of on-time payments
  • Wide range of repayment terms available between 36 to 72 months
  • Can see rates with a soft pull

Cons

  • Currently not available in Maryland
  • No joint applications
  • Late payments will accumulate more interest, resulting in a larger final payment

For borrowers who prefer to work with a personal lender, Marcus by Goldman Sachs is great option.

Methodology

Lenders were selected from MagnifyMoney’s personal loans comparisons page when sorted by borrowers looking for $10,000 with excellent, good, average and bad credit who hold a college degree. They were narrowed based on lowest APR. If a lender with the lowest APR was already highlighted in a previous category, we chose the lender with the next lowest APR.

Get Personal Loan Offers
Up to $50,000

$

Won’t impact your credit score