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CircleBack Lending Raises $17.4 Million: The Marketplace Revolution Continues

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Today American Banker reported that CircleBack Lending, a marketplace lender based in Boca Raton, Florida, raised $17.4 million of equity capital to help fund its growth. This funding was provided by Pine River Capital, an alternative asset management company. In addition to providing equity, Pine River has been given the right to buy up to $500 million worth of loans. According to Crunchbase, Circleback was created with a $250,000 seed investment in 2012 and has originated over $200 million worth of personal loans since inception.

In a low interest rate environment, investors are hungry for the yield that a diversified consumer loan portfolio can provide. The market leader, LendingClub, has more investor demand for loans than consumer supply. In other words, LendingClub and other lenders are unable to grow fast enough to meet investor demand. In the CircleBack deal, an asset manager is willing to take equity risk in exchange for the right to participate in the loan origination volume.

CircleBack offers personal loans up to $35,000 with interest rates ranging from 6.63% – 35.18%. Like many other lenders, the application process is digital, and borrowers are able to determine their interest rate without hurting their credit score. In a recent CircleBack review written by MagnifyMoney, it was noted that the maximum APR is a lot higher than most other marketplace lenders. And the company charges these higher rates despite having a higher minimum score cutoff of 660.

CircleBack has recently completed its first securitization of $106 million in June, and we can expect more to come.

Are Marketplace Lenders Really Just Nonbank Lenders?

The model of peer-to-peer lending was created by Prosper. The original Prosper was a marketplace that resembled eBay. Lenders would bid on loans, determining the interest rate. Underwriting credit risk is complicated, and the power of the market was not sufficient to protect the original investors. Losses on some of the earliest loans increased dramatically, the SEC became involved and the entire business model had to shift.

The second phase of marketplace lending, at businesses like LendingClub and a revamped Prosper, created platforms that match institutional money with individual loans. Investors can still buy slices of a loan, and can make a decision on a loan-by-loan basis, although most are building algorithms that bid automatically within certain risk parameters.

The new marketplace lenders, like CircleBack, do not even have a marketplace. Their business models resemble traditional nonbank lending. Using a digital storefront, the lenders acquire customers. But in many cases, lenders are warehousing the loans until they have enough for a securitization. And in many ways, the securitization activity resembles traditional nonbank lending.

The leader in this space remains LendingClub, followed by Prosper. Quietly, Marlette Funding has build a large portfolio of loans. However, most of the new entrants look more like the Delaware nonbank financial institutions that were created in the 1990s, rather than the Silicon Valley disruptor that was the original vision of peer-to-peer lending.

Excellent News For (Most) New Borrowers

Interest rates in America for unsecured borrowing have been extremely high. 75% of Americans with credit card debt have an interest rate higher than 15%. The new marketplace lenders have been driving down costs for people looking to refinance expensive credit card debt.

There is a risk. For the highest risk borrowers, it is becoming increasingly easy to access debt quickly, and at rates that are not low. CircleBack is charging 35% to its riskiest borrowers. If marketplace lenders want to remain in the good books of regulators and the public, they need to focus on providing value, rather than just access to quick credit at prices that are a bit better than payday loans.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Nick Clements
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Nick Clements is a writer at MagnifyMoney. You can email Nick at [email protected]

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College Students and Recent Grads, Life Events

Decoding a Teacher’s Benefits Package

Depressed man slumped on the desk with his hands holding credit card and currency

Written by Dave Grant of Finance for Teachers

Suzie was exhausted. She had not been this tired since getting used to the social scene as a freshman in college. 

But this was a different kind of tired. The “I earned this Netflix binge” kind-of tired. After finishing her first week of teaching 4th grade, she collapsed on the couch in her dimly lit apartment and eagerly started spooning the Chinese take-out into her mouth.

As the TV screen flickered across the room, she barely saw the characters moving about the screen. The piles of papers on her coffee table distracted her eyes.

“Oh crap.” She muttered under her breath. The papers were those thrown into her lap by the HR Director during her new teacher orientation. Health insurance, teachers union, retirement savings, and pension details – it was so overwhelming when all she wanted to do was teach eight and nine year olds about the world.

Determined to finish her food before diving into this world of confusion, she savored every last bite of her chow mein. But the bottom of the carton came too soon, and she did the responsible thing, and grabbed the looming stack in front of her. 

Suzie’s plight is not unlike those of new teachers I work with every year.

As if starting a job in teaching wasn’t overwhelming enough, deciding what benefits package are right for you when you’re not versed in “Employee Benefits” is enough to push anyone over the edge.

So let’s go through some common benefit choices you can be faced with, and take you through how to evaluate which one could be right for you.

Health Insurance

The first thing you need to determine is whether you are eligible to stay on your parent’s health insurance plan. If you’re under 26, then this is a good possibility and if your parents are willing to still pick up the tab, then that is great news for your wallet.

But if you need to choose a plan for yourself, see if you can find a summary of what your district provides. All districts should provide a PPO, HMO and HSA plan.

Not sure what makes these different from one another?

PPO = Preferred Provider Organization. This is coverage that is typically more expensive in it’s premiums and benefits but gives you the most flexibility in which doctors you use for health care. You can choose which dermatologist, OBGYN, or foot doctor you see without anyone saying that you can’t. They have to be in your insurance’s network, but that’s pretty much the only barrier.

HMO = Health Maintenance Organization. This coverage is cheaper every month, and caps out quite quickly in how much you have to pay, but there are trade offs. Before going to see any type specialist, you have to get a referral from your general practitioner, and only use those on a list of preferred HMO specialists. If the dermatologist your Mom recommends is not on the list, then you insurance won’t cover you paying them a visit.

HSA = Health Savings Account. This account accompanies a health insurance plan that has high deductibles, but the lowest premiums of the three plans. The account that goes along with this plan (the HSA) allows you to save money pre-tax to pay these deductible costs later on.

Determining which plan you use depends on how often you go to the doctor, if your current doctors are in your network, and how much money you can afford to spend on health insurance premiums. Before you decide, check with your district. While they may list premiums, if you’re single and not covering anyone else, they may provide health insurance as a free perk.

Retirement Savings

It’s not every day that you get to choose which account to use to save money for the rest of your life. But, unfortunately, choosing the wrong one can shave thousands off the amount you have to your name when you reach retirement.

You’ll no doubt have been told about the 403(b) plans during orientation. You may have one provider / vendor in your district or you may have as many as 15. Too much choice can be a bad thing!

Let’s explore what a 403(b) is before jumping on the bandwagon. A Traditional 403(b) is used to save for retirement with contributions that have not been taxed. While you won’t pay taxes on the money you contribute now, you’ll pay taxes on it, and the amount it’s grown to, when you withdraw it in retirement.

For those with big paychecks, avoiding taxation now is a great thing to do. But what about those with a first year’s teacher salary? Probably not. You just aren’t paying enough in taxes right now for it to make a big enough impact.

You should be using an account where you pay taxes on your contributions now, but where everything the account grows to can be withdrawn tax-free in retirement. This is called a Roth account. It can either be a Roth 403(b) or a Roth IRA.

If you’re going to use a 403(b) through your school district, use a company that doesn’t sell annuities as a 403(b). Look for a company – and ask them to show you – that has a wide selection of investments to choose from – less than 50 investment choices are providers that aren’t worthy of your time.

Keep in mind that you probably don’t want to walk away from an employer match, unless the options are just truly terrible. If your employer offers to match your retirement contribution, it’s best to at least contribute enough to get the free money. Just know when that contribution vests (when you’ll actually get the money).

Hint: If the company has “Insurance” in the name, then avoid them altogether. Better still, use a company not tied to your district – like Charles Schwab, Vanguard or Fidelity – and open a Roth IRA to save for your retirement. It will be a lot cheaper, you’ll have more flexibility, and if you decide to leave teaching, it’s not an account that is tied to your job. This fact alone can cause problems and further expense down the road.

Paycheck Deductions

When that first paycheck comes, stand out amongst your peers – study and understand it. There’s a high likelihood that there’ll be lots of acronyms on your check and you should be trying to understand what all of things mean.

Play a game of elimination:

  • Find the line of your pension deduction and strike it out. Determine how much of your paycheck goes into funding your pension so you’re aware of how much retirement savings you may already be doing. (That will come in handy when you calculate how much to save later on.)
  • Find the amounts that you pay in Federal and State taxes, and strike them out. Understand if you are contributing to Social Security, or if you live in a state that doesn’t allow you do this along with a teacher’s pension. Medicare will be on there as well, which you are paying now to subsidize your premiums when you enter retirement.
  • There will likely be union dues (if you’re part of a union) – these are to pay for representatives to bargain on your behalf during contract negotiations, help represent you during trial hearings, and other expenses. Strike these out once you find them.
  • You will be left with some that you don’t understand. When you have time, send HR an email and ask them to explain what these acronyms mean and what they pay for. They could be to subsidize retiree health care, pay for early retirement options, or for other district activities. Being aware of this and how much they typically cost will give you peace of mind as to where your money is going.

Never be afraid to ask about where your money is going and what you’re getting in return. It’s your money and you have a right to know!

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dave Grant
Dave Grant |

Dave Grant is a writer at MagnifyMoney. You can email Dave at [email protected]

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Graduated Repayment Plan Review and Process

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Are you struggling to make the minimum monthly payments on your Federal student loans? Are you aware of all the repayment plan options available to you? Even if you don’t qualify for income-driven payment plans, there’s another plan that may help to make your payments more manageable: the Graduated Repayment Plan.

This plan and the Extended Repayment Plan aren’t based on your income, can be easier to qualify for, and both options lower your monthly payment. If you need a break from trying to make ends meet when it comes to your student loans, read on to find out how the Graduated Repayment Plan can help.

How Does the Graduated Repayment Plan Work?

If you’re familiar with the Extended Repayment Plan, it has a graduated payment option within it that works much the same as the Graduated Repayment Plan itself. Essentially, you pay your loan back on the same 10-year term as you would normally, but your payments initially start out lower, and then increase every two years.

You can also choose to pay your loans back under the Graduated Repayment Plan if you consolidate them (using a Direct Consolidation Loan). In this case, you have up to 30 years to pay back your loans. Curious to know what your repayment term might be under consolidation? Check here for a chart that details what terms you’re eligible for based on your total amount of Federal student loan debt.

According to studentaid.ed.gov, under the Graduated Repayment Plan, your monthly payment “will never be less than the amount of interest that accrues between payments,” and it also “won’t be more than three times greater than any other payment.”

That means your payments will be high enough that you won’t fall behind with interest accruing month after month. For example, if you were paying $10 per month, but $20 in interest was accruing between payments, that wouldn’t be good. The last part is assuring you this payment option will never exceed three times any other payment option available to you. The Graduated Repayment Plan might not offer you the lowest monthly payments, but it will be lower than what you’re paying under the standard 10-year plan.

Which Federal Student Loans Are Eligible?

Only Federal student loans are eligible for the Graduated Repayment Plan. If you have private loans, you’ll have to speak with your lender to see if any repayment assistance options are available to you. Each one offers different programs.

Studentaid.ed.gov provides the following list of loans that are eligible for the Graduated Repayment Plan:

  • Direct Subsidized and Unsubsidized Loans
  • Direct PLUS Loans
  • Direct Consolidation Loans
  • Subsidized and Unsubsidized Federal Stafford Loans
  • FFEL PLUS Loans
  • FFEL Consolidation Loans

There are no additional eligibility requirements you need to meet to make payments under the Graduated Repayment Plan.

How Can I Change My Repayment Plan?

If you’d like to change your repayment plan from the standard 10-year plan to the Graduated Repayment plan, call your student loan servicer and ask if they can make the change for you. You might be able to find the option to change your repayment plan online on your account as well.

Before changing, make sure to ask your loan servicer if you’re eligible for any other repayment plan options that provide a lower monthly payment. You can also check out the U.S. Department of Education’s Repayment Estimator to see what options are available for you.

How Does the Graduated Repayment Plan Compare?

Even though there isn’t a laundry list of eligibility requirements for the Graduated Repayment Plan, that doesn’t mean it’s automatically the best one to choose. If you’ve taken a look at the Repayment Estimator and aren’t sure which plan to choose, here are a few things to consider.

The Graduated Repayment Plan can be compared with the Extended Repayment Plan, as the latter actually has a graduated payment option. The two are quite different, though. The Graduated Repayment Plan is on a term of 10 years – the same as the Standard Repayment Plan. The Extended Repayment Plan offers terms up to 25 years.

With both plans, you’ll pay more money overall throughout the life of your loan than you would under the Standard Repayment Plan. You’ll likely pay more with the Extended Repayment Plan, given the extra 15 years you have to make payments.

If you’re wondering why you’d pay more over the Graduated Repayment Plan when it’s on a 10-year term, it’s because your payments start off lower and increase every two years. When your payments are lower, less is going toward principal and more is going toward interest. Most of the time, initial payments on the Graduated Repayment Plan are interest-only. As a result, your balance isn’t going down very quickly.

Aside from that, to be eligible for the Extended Repayment Plan, you need $30,000 in Direct Loans or $30,000 in FFEL Loans. The Graduated Repayment Plan doesn’t require you to have a certain amount of debt to qualify.

Income-driven repayment plans require proof of financial hardship, and some are based off your annual income, making them harder to qualify for.

Who Benefits the Most from the Graduated Repayment Plan?

Recent graduates just starting out in their career benefit the most from the initial lower monthly payments the Graduated Repayment Plan provides. Depending on how much student loan debt you graduated with, it can be tough to afford your minimum payment under the standard 10-year plan when you’re earning an entry-level salary.

The Graduated Repayment Plan gives you a little breathing room and allows your salary time to grow with your increased monthly payments. However, once your salary catches up, you might want to consider paying extra each month so you’re not paying as much in interest over the life of the loan.

What if I Have Private Student Loans?

As we mentioned, private student loans don’t have access to any of the Federal repayment programs. However, it’s still worth talking to your lender about your options. Some private lenders are willing to work with borrowers, giving them access to forbearance or the option to undergo a loan modification.

Additionally, you can also apply to consolidate your loans, as many consolidations offer extended repayment terms with lower monthly payments. Only do this as a last resort – some lenders charge origination fees to consolidate, and you want to make sure the savings are worth it.

Evaluate All Your Options

There are many repayment plans available to Federal student loan borrowers. If you’re eligible for more than one plan, do your research to ensure you go with the one that will save you the most money every month.

Take a look at the Repayment Estimator before calling your student loan servicer so you’re informed about the different plans, and don’t be afraid to ask for their opinion. Their job is to help place borrowers in the plan that makes the most financial sense for them – for free.

Don’t forget, you can always increase your payments as you go along if you find you have the extra money. This will help you pay less in interest over the life of the loan.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at [email protected]

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