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Fund Your Startup with Prosper

Fund Your Startup with Prosper

I was listening to Startup Nation’s podcast yesterday, and they featured Prosper, a website that’s the “eBay for peer-to-peer funding.” The idea seemed interesting, especially to someone forming a startup.

The basic premise is that you can borrow money from a group of peers instead of through a bank. The peers are all investing, and then bidding each other down to the lowest agreed-upon percentage base. (Check out their site for a better explanation). So, in the end, you could have a need for $5000, and maybe 50 people will offer up $100 each, with a return rate of 7% or some such.

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The benefit to borrowers is that the rate is competitive to banks, but the level of acceptible risk is determined by the people loaning money, and not some big formula. The benefit to lenders is that you feel good giving to specific projects (borrowers have to “pitch” their ideas), and have a strong sense of sharing the risk of loaning with fellow investors. Think of it as being micro-investors.

But there’s more to this idea for life hackers to consider.

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Investing in Each Other– Are you a developer trying to launch a startup out of your bedroom? Maybe you’re at the point you need a few servers instead of trying to simulate a million users on a laptop. Prosper does the whole social networking thing to a neat end. You can join GROUPS of investors, so that there’s an added “peer effect” for the borrowers to want to give the money back. If you’re all in the “Firefox Developer Network” (I made that up), you as a borrower might feel worse about not paying back a loan given to you by your peers in the same community.

Borrowing to Start Up– You as a borrower can get some money from peers, build your infrastructure, make some money (because your business model has a way to make revenue, right?), and then pay that money back into a community of like-minded investors. When you’re done and making money, maybe you will choose to invest back into the community that helped you.

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Because you can sign up to offer as little or as much of your own money as you’d like, you know the full level of your risk as an investor. Because borrowers must be approved by their peers, it’s a better sense of connectivity between the borrower and the community who gives the money out.

I’m saying that the beauty of this system is that it’s money towards specific projects with a lot of thinking and intent behind both parties, and that strikes me as a way to negotiate that’s more centered in the people involved. The “hack,” if there is one, is that this network might prove easier to use than a traditional funding source, and might return better rewards to those involved.

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Prosper — [via Startup Nation]

–Chris Brogan writes about self-improvement at [chrisbrogan.com]. He just launched the New Media School project in beta. Check it out and give some thoughts and feedback.

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Last Updated on March 4, 2019

How to Use Credit Cards While Staying Out of Debt

How to Use Credit Cards While Staying Out of Debt

Many people will suggest that the best thing to do with your credit cards during these tough economic times is to cut them up with a pair of scissors. Indeed, if you are already in huge debt, you probably should stop using them and begin a payback strategy immediately. However, if you are not currently in trouble with your credit cards, there are wise ways to use them.

I happen to really love my credit cards so I will share with you my approach to how I use mine without getting into deep financial trouble.

Ever since about 1983 when I got my first Visa card, I continue to charge as many of my purchases as possible on credit. Everything from gas, groceries and monthly payments for services like my cable and home security monitoring are charged on credit. Despite my heavy usage, I have maintained the joy of never paying any interest fees at all on any of my credit cards.

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Here are some tips on how best to use your credit cards without falling into the trap of paying those nasty double-digit interest fees.

Do Not Treat Credit Cards as Your Funding Sources

Too many people treat their credit cards as funding sources for major purchases. Do not do this if you want to stay out of trouble. I use my credit cards as convenient financial instruments so I do not have to carry around much cash. In fact, I hate carrying cash, especially coins. When you buy things on credit, the purchases are clean and you will not get annoying coins back as change.

I do not rely on my Visa, MasterCard or American Express to fund any of my purchases, large or small. This brings me to my golden rule when it comes to whether I will pull out any of my credit cards either at a retail or online store.

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I never purchase anything with my credit cards if I do not have the actual cash on hand in my bank account.

If I really cannot pay for the item or service with cash that I already have at the bank, then I simply will not make the purchase. Remember, my credit cards are not used as funding sources. They are just convenient alternatives to actual cash in my pocket.

Make Sure to Always Pay Off Balances in Full Each Month

The next very important part of my overall strategy is to make absolutely sure that I pay the balances in full each and every month no matter how large they are. This should never be a problem if the cash has been budgeted for my purchases and secured in the bank. I have always paid my full balances each month ever since my very first credit card and this is why I never pay interest charges.

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Using Credit Cards with Rewards

Most of my credit cards are of the “no annual fees” type, including one MasterCard on a separate account I keep at home as a spare in case I lose my wallet or incur any fraudulent charges. However, I do use a main Visa card which does have an annual fee because all purchases on that card reward me with airline frequent flyer points. For me, the annual fee is worth it since I do travel and I get enough points to redeem many free flights.

You have to decide for yourself if you will charge enough purchases on credit each year without paying interest charges to warrant a credit card that rewards you with airline points (or other rewards). In my case, the answer is “yes” but that might not be the case for you.

I occasionally use a MasterCard or American Express card on small purchases just to keep those accounts active. Also, I have been to the odd retailer that accepted only a certain type of credit card, so I find that having one from each major company is quite handy. Aside from my main Visa card which earns the airline points, the rest of my cards are of the “no annual fees” variety.

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So this is how I use my credit cards without getting into any financial trouble with them. This strategy is recommended only if you are not in debt, of course. In fact, it is worth keeping in mind once you’re out of debt so that you can keep your credit cards active and treat them responsibly.

What are your credit card usage strategies? Let me know in the comments — I’d love to hear what methods you use.

Featured photo credit: Artem Bali via unsplash.com

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