• An update on what we did for the past 18 months
• Google & publishers
• What went wrong? If anything? #

But why even write this in the first place?

There is a lot of misleading content about what it takes to build an online business, very little on this particular scale, and even less so about bad bets.

FinMasters journey

The last report ended with those 2 scenarios: 

• Downscale and keep the loss to a minimum while hoping that there will be some growth later on.
• Continue to double down on the good things and extend the timeline by one more year while committing $150,000 more to the project.

The traffic looked like this:

It’s not hard to guess that we chose the second option. We continued with what we have been doing, working with the most reputable and knowledgeable writers we can afford to hire, both for the site and for our freemium newsletter: and we ended the year generating around $7,000 per month in affiliate revenue.

We were still struggling to get any traffic for general personal finance topics due to a lack of authority, so we decided to continue building our library of content, while at the same time introducing two new types of articles:

1. Write the best research posts possible, e.g. https://finmasters.com/consumer-debt-statistics/, the best data available & best presentation, to differentiate ourselves.
2. Fun, easier, and cheaper to produce articles, like: https://finmasters.com/weird-jobs-that-pay-well/, which would give us short & medium-term gains, until we build out authority. We decided to work with an agency on those and edit in-house.

We’ve continued to invest in marketing as well, we started doing more PPC to promote our new research posts here is our traffic from November 2022:

Financially, towards the end of 2022, we were losing around $15,000/month, but the traffic was growing. We continued with the same strategy in 2023, but it was more about execution, without trying a lot of new things. Milica who managed the project moved to manage all our media projects.

We also acquired a smaller site on Flippa on a topic dear to me, logical fallacies: fallacyinlogic.com, if you want to read more about fallacies: https://finmasters.com/logical-fallacy/.

Here is what our costs looked like for 2023:

While the traffic was growing, our revenue was not, to continue growing more sustainably, we decided to experiment with display ads and join Raptive.

Right before joining Raptive, we had our first “surprise”, Google HCU came and we lost around 30% of the traffic, 2 weeks later, another update came and we lost another 30%, here is the chart again:

I was honestly surprised by the October update, which affected almost all our sites and was something that I haven’t seen happening in the past 13 years, Google specifically hitting sites that engage in affiliate marketing, no matter their history and reputation. For E.g. WPBeginner, which is the oldest and largest WordPress site, based on Ahrefs lost around 20+% of the traffic as well.

Pretty much all our affiliate income was gone and what we thought would be around $6,000/month in ads revenue, turned out to be $2,000. I was on my 3 months sabbatical, and I think in a bit of a shock, not recognizing nor accepting the new reality.

I think it took me maybe 6 more months to accept the new reality, for some time I was just thinking that this was a temporary thing and things would turn around. As I look at it now, is maybe the situation from 2-3 years ago that was atypical in terms of how good we’ve been doing.

Before coming back to our story, let me share my answer to the question: is Google hating small publishers?

No, Google is just simply serving its users, employees, and shareholders as always; it’s also aiming to maintain competitiveness in search against other information sources. 

For a long time, Google had a lot of unique but incomplete content, with bloggers sharing random thoughts on their sites, comments, and forums, and they encouraged long-form, in-depth content summarizing that information. However, now they don’t need that anymore. This is because they already have too much similar content, and AI can now effectively digest and summarize a thousand unique viewpoints. What Google truly needs now is to bring back the internet from 15 years ago – forums, discussions, and comments.

Now let’s get back to our story and what we decided to do further:

Focus on what you can control

Since we can control only our content and how users engage with it, we worked on coming up with multiple data points to figure out what articles need improving, besides bounce rate, we measure how many users and how long users are scrolling, if they click any resources or if they hit the back button.

On top of that, we run various user tests like: https://www.codeinwp.com/blog/content-quality/, to get more qualitative data on how we can improve UX on the sites.

Based on those we had our whole content team do a round of quick updates, particularly making sure the intros are more useful to users.

While our content engagement numbers improved, the traffic didn’t follow.

What we should be doing now?

Currently, as I’m writing this, there’s another significant Google update in progress. It seems we’re facing another -25% drop in traffic. However, given how far we’ve diverged from our original plans, this decline doesn’t affect our current strategy much.

Our immediate plan is to maintain our content library at a minimum level. Additionally, we’re considering splitting the site into two parts, with our investment-focused content moving to a new site. This move should make it easier for us to establish a more specialized brand, especially since we already own optionistics.com in this domain.

Overall, we’ll need to review our entire publishing approach, is still early to tell about the changes we’ll make.

What went wrong? If anything?

I believe decisions shouldn’t be judged solely in hindsight with a bias. A good decision might lead to a bad outcome, but what matters more to me is the process behind it. It’s easy to label it a bad idea now, considering we’ve lost about 90% of our investment. However, to evaluate it properly, I would revisit my initial thesis.

“Heads I win; Tails I don’t lose much.” This is the principle which guided my assessment of this investment. I reasoned that by investing in high-quality content, even if we didn’t achieve the desired return, the downside would be limited, while there was a slim chance for a significant upside.

In hindsight, we’re far from experiencing minimal losses. Reflecting on what could have been done differently, I realize that overconfidence was likely the biggest mistake. I relied too heavily on past success in our content business, without adequately adjusting to the current market conditions.

A question that I failed to ask for some time, especially when approaching the personal finance niche, where there is a huge amount of content written: What we’re bringing new & unique to what’s already there? The answer is that honestly, very very little.

While I was aware that market dynamics would change, I underestimated the urgency, assuming the window of opportunity was wider than it was.

Confronting past mistakes isn’t enjoyable, and in the past, I often avoided it by not even measuring our efforts in the first place. However, now that we do it, there’s no reason not to seize the opportunity for reflection.

For context, since I don’t want the post to sound like a complaint, we’re still running a profitable company, we didn’t rely on external funding for this venture. FinMasters represented a significant but not the largest portion of our investments, accounting for roughly 20%.

We’re still looking to acquire online businesses, if you’re interested in doing so, here is how we’re different:

We come up with a fair contract for both buyer & seller, without unnecessary restrictions, and we’re transparent with what are the prices we usually pay, those can still vary a lot, but for non-growing businesses is between 3-4x yearly revenue.

You’ll not be dealing with a layer of assistants, you can email me directly at ionut@themeisle.com and have an answer in a day. We can usually close in around 2 weeks. We are not asking for a million things that we can usually find ourselves.

Some products will grow, some will stay as they are, and some will die, but in all cases, we’ll be trying to find the best solution for the existing users and do the best we can to not cause damage to the work you’ve done.

A lot of people trusted us with their projects so far and we’re happy to provide references. We acquired products like PPOM, Multi Page Generator, Optionistics, imgbot.net, and http://blog.cathy-moore.com. Usually, people who want to move on to other things.

The post An update on our newest media brand 18 months and $289,000 later. appeared first on FinMasters.

While you’ll never lose an old HSA, even when you leave a previous employer, leaving your account untouched isn’t the best idea. Taking advantage of an HSA rollover can put you back in charge of your money. Let’s explore the HSA rollover rules and guidelines.

What Is an HSA?

A health savings account (HSA) is a tax-advantaged savings account that you can use to pay medical expenses that your health insurance doesn’t cover.

Usually, an HSA is set up by an employer. You can contribute pre-tax income to the account and withdraw it as needed to pay for doctor visits, dental services, and more.

To open an HSA you will need to have a high-deductible health plan (HDHP). The IRS sets strict guidelines on how much you can contribute to the HSA and what you can use the funds for.

What Are the Benefits of an HSA

Tax-free status is one of the biggest benefits to HSAs. You can contribute pre-tax dollars to the account and take distributions for qualifying expenses without ever paying income tax.

Plus, funds in the account can be invested and grow tax-free, and the funds never expire.

Even if you lose your employment or HDHP insurance, you get to keep your HSA account. At the age of 65, you can take distributions with no penalty.

Learn more: Unravel the complexities of the tax system and understand how do taxes work for individuals with our straightforward explanation.

What Is Covered By an HSA?

HSA funds can be used for a wide variety of health-related services, including services that insurance may not traditionally cover, such as:

• Infertility treatments
• Acupuncture
• Hearing aids
• Dentures
• Childbirth classes
• First aid kits
• Acne treatment

For the complete list of expenses covered (and those not covered), see the IRS’s 2024 Medical and Dental Expenses publication.

Learn more: Discover how to secure health insurance while self-employed with our step-by-step guide tailored for freelancers and entrepreneurs.

Basic HSA Rollover Rules

A HSA rollover occurs when you move funds from an old HSA into a new one. If you want to roll over your existing HSA funds into a different HSA, there are two important HSA rollover rules to remember.

1. You can complete an HSA rollover only once every 12 months
2. You have 60 days from disbursement to deposit funds into an HSA

If you violate rule 2 above, you’ll be hit with a 20% early HSA withdrawal penalty, and the money will be considered income.

It’s also worth noting what is not required when completing an HSA rollover.

• You do not have to be currently covered under an HDHP
• You do not need to be currently eligible to make HSA contributions
• Rollovers do not count towards yearly contribution limits
• Rollovers do not count as income

The IRS sets the above rules and regulations. Individual HSA providers may have their own HSA rollover rules.

How Does an HSA Rollover Work?

Completing an HSA rollover is straightforward, but you will have to complete a few steps.

Keep in mind that HSA funds won’t be available for you to use during the rollover process.

HSA Rollover Rules Versus Transfer Rules

One alternative to an HSA rollover is an HSA transfer. Transferring funds from one HSA to another often has fewer limitations than a rollover. Here are some key differences.

On paper, an HSA transfer is preferable, especially if you have multiple HSAs that you are looking to consolidate. However, some providers don’t allow transfers, and others charge fees for transfers, which can make a rollover the better option.

Should I Roll Over My HSA?

If you have an old HSA from a previous employer sitting unused, it may be worthwhile to look into completing a rollover. However, you should consider a few things before initiating that rollover.

Maximize your #HealthSavings with our guide to HSA rollover rules. Know what you can carry over.

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Account balance is a major factor. If your old HSA balance is low, it might be easier to simply spend the funds.

Account fees are another important consideration. If your old account charges hefty fees, then a rollover makes sense. But if your new account has higher fees, leaving the old account intact might be the better choice.

One more point of consideration is account options, specifically investment options. Different providers offer different investments and have different thresholds and limitations for investing. If you are getting good returns with your old HSA, you might want to keep the funds there.

Finally, you’ll want to evaluate the timing of the rollover. If you have an upcoming need for medical services, you may want to postpone your rollover. Or if you have multiple HSAs you wish to consolidate, the once-a-year limit may mean postponing some of your rollovers.

Just remember, if you do proceed with a rollover, you need to follow all the HSA rollover rules to avoid costly penalties.

FAQs

The post HSA Rollover Rules appeared first on FinMasters.

Let’s start with the basics.

SPY vs VOO vs IVV: By the Numbers

* As of October. 2023

Five-Year Performance

SPY vs VOO vs IVV: Overview

All three follow the same S&P 500 index, which is composed of 500 of the largest publicly traded companies in the US. That means the three funds will be holding essentially the same stocks in the same proportions. The only differences are in the details.

The S&P 500 index and the ETFs that track them are market cap weighted. That means that they give larger companies a heavier weight.

• SPY is the largest S&P 500 index, slightly ahead of the others in total assets under management and daily trading volume compared to the other two combined. It also has the largest expense ratio, 3x higher than VOO and IVV.
• VOO is by a small margin the S&P 500 ETF with the smallest amount of assets under management and the smallest trading volume.
• IVV Is very similar to VOO but slightly larger in assets and trading volume.

All three ETFs have an almost identical exposure as they follow the same index. The only difference is that VOO and IVV contain a few more stocks, as they are authorized to only partially follow the S&P 500 composition while trying to replicate the index, hence the slightly higher number of stocks held.

 Learn more: Unlock the basics of building wealth with our step-by-step investing guide for beginners.

SPY vs VOO vs IVV: The Differences

Because they are so similar, it is easy to get confused about which S&P 500 ETF to choose.

The first choice to make is between SPY and VOO/IVV. This is because SPY has a much higher expense ratio, more than 3 times higher. So why is SPY the largest of the three if it costs more to own it?

This is because the expense ratio only tells part of the story about an ETF’s costs. The expense ratio defines the costs you will pay when you own the ETF. However, the spread (the difference between buying and selling price) also affects the actual cost of owning shares in an ETF.

SPY has the most liquidity and the lowest spread, making it the favorite S&P 500 ETF for the largest financial institutions.

If you want to buy and hold, you want the lowest expense ratio possible and will prefer VOO or IVV. But if you intend to trade in and out of this position often enough, you’ll ultimately pay lower fees with SPY.

The choice between VOO and IVV is more difficult. Both have the same expense ratio, and the dividend yield only differs by a microscopic 0.02%.

One factor could be a preference for one issuer over the other. Both Vanguard and Blackrock are large and well-respected institutions.

While almost at the same price in 2020, VOO has somewhat lagged behind IVV since, trading at a lower price. This is due to small differences in how the ETF is managed and when it was created.

Deciding between #SPY, #VOO, or #IVV? Our comparison breaks down the key differences. #Investing #IndexFunds

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However, taking a long-term view (20+ years), it seems this difference is not getting greater over time. So it is not very likely to affect the performance of your portfolio in actual practice.

Which Is Best for You?

The first thing to decide is why you are interested in buying an S&P 500 ETF.

There’s very little difference between IVV and VOO. But if you worry about the slight but persistent discount of VOO compared to the other 2 large S&P 500 indexes, you might prefer IVV. A preference for Vanguard vs Blackrock could also decide for one against the other.

No matter which you choose, any of these ETFs will give you diversified exposure to the top 500 publicly listed companies in the US. If you intend to hold for many years, lower fees might make a real difference, especially if you hold the ETF in a retirement account.

If you want to diversify your S&P 500 ETF with other ETFs, you’ll have plenty of options. We’ve already looked at SPY vs QQQ, an SPX fund vs top NASDAQ 100 fund, and VTI vs VOO, a major SPX fund against a fund tracking the CRSP U.S. Total Market Index. Any of these funds will provide broad, inexpensive exposure to the US markets.

The post SPY vs VOO vs IVV: Major S&P 500 Index Funds Compared appeared first on FinMasters.

But which of these funds should you choose? Let’s start with the basics.

VTI vs VOO: By the Numbers

* As of Sept. 2023

Five-Year Performance

Source: Barchat

VTI vs VOO: What’s the Difference?

The most important difference between VTI and VOO is that each fund tracks a different index:

• VTI tracks the CRSP U.S. Total Market index. The CRSP U.S. Total Market index is an index of almost 4000 companies headquartered in the US, from mega to micro capitalization. This makes the index a good representation of the entire US stock market, not just the largest companies.
• VOO tracks the S&P 500. The S&P 500 is an index of the 500 top largest companies in the US.

These indices and the ETFs that track them are market cap weighted. That means that they give larger companies a heavier weight.

Learn more: Unlock the basics of building wealth with our step-by-step investing guide for beginners.

VTI vs VOO: Sector Exposure

VTI and VOO use slightly different terms to break down their sector exposure.

One thing that immediately stands out in these breakdowns is that both VTI and VOO are heavily weighted toward IT (tech & communication) especially VOO, reflecting the current large market capitalization of these sectors in the US stock market.

• VTI tracks a larger number of companies from a wider range of corporate sizes. It is weighted more heavily toward the consumer and industrial sectors, which contain more medium and small-size companies. The larger number of holdings and higher variation in the companies’ profiles make it more diversified.
• VOO tracks a smaller number of companies with a slightly greater concentration in tech. It gives a higher part to healthcare and financials, which tend to be dominated by large companies (sometimes referred to as Big Banks and Big Pharma).

Neither of these options is fundamentally better or worse. They provide exposure to slightly different sectors of the market, and that can lead to different performance characteristics.

VTI vs VOO: The Similarities

VTI and VOO have a lot in common. They are both extremely large ETFs. Both funds are managed by Vanguard, which has a reputation for providing low-cost funds.

If you’re looking for large, highly liquid funds with credible management, both of these ETFs will pass your screen.

There are also less obvious similarities, explaining the very similar performance charts stemming from three basic facts.

• As market cap-weighted indexes, they both give a predominant space to mega-caps worth trillions of dollars, most of them tech companies.
• A lot of the performance of the CRSP U.S. Total Market Index is driven by the top largest holdings, which are all part of the S&P 500.
• The stock market value of mid and small-cap stocks tends to move in unison with larger-cap stocks.

What does that mean in practice? Let’s look at the ten largest holdings of VTI and VOO.

Top Holdings: VTI vs VOO

The top holdings of both indexes are identical for the first 9th largest holdings, only in a slightly different order. It includes:

• Apple Inc.
• Microsoft Corp.
• Amazon.com Inc.
• NVIDIA Corp.
• Alphabet Inc. Class A
• Alphabet Inc. Class C
• Tesla
• Facebook Inc. Class A
• Berkshire Hathaway Inc. Class B

So the only difference among the top 10 holdings is that VTI contains insurance and healthcare stock UnitedHealth Group while VOO contains oil & gas Exxon Mobil Corp.

The same can be true even if looking at the next 10 holdings for each fund. The list is identical for 9th of them, with a very similar order:

• Exxon Mobil Corp or UnitedHealth Group
• Eli Lilly & Co.
• JPMorgan Chase & Co.
• Visa Inc. Class A
• Johnson & Johnson
• Broadcom Inc.
• Procter & Gamble Co.
• MasterCard Inc Class A
• Home Depot

The difference is in the 20th largest holdings: pharmaceutical company Merck & Co Inc. for VTI and energy company Chevron Corp. for VOO.

The only real difference is for the top holdings of VTI to be slightly less of the whole ETF, making space for the smaller holdings of smaller companies.

Diving into the details of #VTI vs #VOO: Which #indexfund comes out on top? #Investing

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Which Is Best for You?

Both VTI and VOO are good choices for an investor who is looking for a quality diversified index fund. Both are among the largest and most prominent ETFs in the country, both are highly liquid, and they have very similar track records. They also have the same low fee of 0.03%.

Your choice will be based on what you are looking for in an investment.

• VTI is giving some exposure to companies with a smaller market capitalization. This gives a slightly different profile when looking at the sector basis, giving more importance to the industrial and consumer sectors.
• VOO is a more aggressive, less diversified fund focused on major tech companies. This gives it greater potential for gains in bull market periods but also opens up the possibility of significant losses in a bear market.

How you see the markets makes a difference: if you think markets are going to keep favoring large caps, then you will prefer an index focused solely on them. If you believe that smaller companies might be able to outperform, you will prefer an index able to rebalance toward them and increase their weight into the index while their market capitalization grows.

If you are weighing VTI vs VOO and you’re having trouble making up your mind, consider allocating a portion of your portfolio to each fund. Keeping several ETFs in your portfolio can provide the best of both worlds.

The post VTI vs VOO: Index Funds Go Head to Head appeared first on FinMasters.

Fundrise allows non-accredited investors to invest in private real estate funds with initial investments as low as $10. The company has recently expanded to include private equity and private credit investments.

How It Works

Fundrise made its reputation by offering real estate funds to smaller investors who aren’t eligible for funds restricted to accredited investors.

The company has introduced new offerings and now offers funds in four strategy categories.

• Real estate funds offer multiple packages combining a range of real estate asset classes, serving several investment strategies.
• Private credit is an investment strategy pooling funds to lend to companies, capitalizing on the high interest rate environment to deliver strong fixed-income returns.
• Venture capital is a new investment strategy for Fundrise, offering investors exposure to a range of pre-IPO companies without the restrictions that often apply to private investors.
• Retirement accounts include both conventional and Roth IRAs.

Fundrise is building from its base in real estate to develop a fully integrated platform for investing in alternative assets. The company currently manages over 20 different funds, and investors can choose among them.

Learn more: Unlock the potential of property investment with our review of the 5 best real estate investment apps for 2024.

Funds are accessible to private investors who previously had little access to these asset classes, with minimum investments as low as $10.

Fundrise currently has over 393,000 active investors. The total portfolio holdings are over $7 billion, and Fundrise has paid out over $344 million in dividends to investors.

Investor communication is a priority, and investors can expect real time performance reporting, frequent analyses of economic trends affecting Fundrise portfolios, updates on portfolio changes, and other materials designed to enhance transparency.

Fundrise offers several investment tiers with different minimum investments and different features.

Each of these contains one or more of the Fundrise fund offerings. The difference is in the minimum investment and in the investor’s ability to tailor the portfolio to meet personal preferences and requirements.

Learn more: Begin your journey into property investment by exploring our six top strategies on how to start investing in real estate.

How to Invest

Fundrise offers an extremely simple investment process. You open an account, fund it, and select your investment strategy, investment goal, and tier.

From there, Fundrise will manage your portfolio for you, offering suggestions and updates, or you will design your own portfolio if you have selected one of the more customizable tiers.

The Fundrise site gets generally high marks for being informative and easy to navigate.

Let’s take a closer look at what Fundrise offers in its various asset classes.

Real Estate

Fundrise offers several real estate investment plans, differentiated by the mix of income-focused and growth-focused assets in each fund.

• Supplemental income funds are designed to produce consistent dividends over the life of the fund but may have lower long-term appreciation.
• Balanced investing funds are highly diversified and place an equal weight on income and growth.
• Long-term growth funds will generate dividends but place a higher priority on growth-focused assets.

Fundrise calls their real estate funds eReits, and they are structured as Real Estate Investment Trusts (REITs). The main difference between Fundrise eREITS and public REITs is that public REITs are liquid: they trade on public exchanges and can be sold at any time.

The funds managed by Fundrise do not trade on an exchange and are considered illiquid. You can’t just sell any time you want to. There may be a waiting period for redemption – redemptions typically occur at the end of each quarter – and some funds may have early withdrawal penalties.

Fundrise advises that its real estate funds should be considered long-term investments. Investors should not commit funds that they are not willing to tie up for five years or more.

Fundrise offers an exceptional range of real estate assets, including the following:

• 8,962 multifamily apartments in 10 US markets.
• 2,310,800 square feet of leased industrial space.
• 3,471 single-family apartments in 30 US markets.

Fundrise also has 296 active real estate projects and 147 completed projects. These projects are divided into four categories with increasing risk levels.

• Fixed income investments generate immediate cash flow with an expected 6% to 8% annual return.
• Core Plus investments take 6-12 months to deliver yield, but expect to deliver 8% to 10% annualized yield, with a slightly higher risk profile.
• Value Add is a strategy of acquiring undervalued assets and investing additional capital to increase their value. Time to cash flow is 12-18 months, and projected returns are 10% to 12%.
• Opportunistic investments carry the highest risk. They may take 2-3 years to first cash flow but are expected to generate 12% to 15% returns on an annualized basis.

All figures for expected return are projections, not commitments.

A Fundrise portfolio can contain a mix of these assets tailored to fit the user’s risk tolerance and investment strategy.

The number of different strategies and asset types can be confusing, but that variety also offers a very high level of diversification for the size of the investments involved and offers the ability to construct many different portfolio types.

Learn more: Explore the top-performing market opportunities with our guide to the best real estate stocks & ETFs available today.

Private Credit

Fundrise has introduced a private credit fund, which the company describes as “an opportunistic strategy for income-focused investors. The strategy is based on the fact that short term loans currently carry higher interest rates than long-term loans.

The fund is designed to capitalize on the current high interest rate environment by pooling investor funds and lending them to companies. Fundrise is leveraging its real estate experience by lending specifically for real estate projects.

The fund currently has $516 million in capital deployed in 90 debt deals covering real estate projects with 20,194 units at an average interest rate of 10.8%. It delivered a 13% annualized return in its first quarter^[1].

This strategy is designed to be temporary and will only be viable while interest rates remain high. Fundrise does not expect this situation to last beyond 2024.

Venture Capital

Investment in privately held technology companies has traditionally been restricted to venture capital firms and well-heeled angel investors. Fundrise aims to upset that status quo with a venture capital fund that is accessible to any investor.

Called the innovation fund, this investment vehicle focuses on high-growth private companies, primarily in the tech sector. The fund primarily invests in four categories.

• Modern data infrastructure
• Artificial intelligence and machine learning
• Development operations
• Financial technology

The fund currently has over 35,000 investors, with over $100 million invested in 19 private companies.

As with any venture capital fund, profits are only gained when the companies held go public or are acquired. Investors should be prepared to hold the fund for a medium-term to long-term time frame.

Past Performance

Fundrise provides detailed information on investor returns. As you can see, average returns are solid, but some accounts deliver returns well below the average.

Fundrise also provides data on returns vs public REIT and the S&P 500. Again, these are averages and not all portfolios will deliver the same performance.

It’s clear from these figures that Fundrise can deliver very competitive returns. It’s also clear that these returns are not guaranteed.

You will need to pay close attention to the composition of your Fundrise portfolio, especially if you are using one of the more customizable plans. Evaluating these portfolios will require significant research and expertise.

Costs

Fundrise offers a generally low-cost investing model. There is an annual advisory fee of 0.15% or $1.50 for every $1000 you have invested. This fee does not cover actual fund management expenses.

There is also a management fee of 0.85%, which replaces the per-fund management fees charged by many fund managers.

This amounts to a total of 1%/year in management costs.

You may be required to pay a 1% early redemption fee if you choose to redeem your fund shares after a holding period of less than five years.

The Flagship Fund and the Income Fund do not charge any penalty for quarterly redemptions, but Fundrise can freeze redemptions during periods of economic stress.

There may be additional fees associated with specific projects. These will only be stated in the offering documents for the project, so you’ll need to read these carefully.

Risks

Any investment involves risks, and Fundrise is no exception. Be sure to consider these factors.

• Low liquidity. Fundrise offers private funds designed to be held for a minimum of five years. Redemptions are available quarterly, but you may pay a fee if you redeem before five years have passed.
• Possible redemption freeze. Fundrise reserves the right to suspend redemptions during periods of economic stress. You may not be able to withdraw your money.
• Complex investment vehicles. Fundrise offers a huge range of options, particularly in their higher tiers. Accurately assessing these options may require time and expertise that many investors don’t have.
• Fees may be higher than expected. The basic fee structure is reasonable and accessible, but individual projects may carry fees and restrictions of their own, which may not be as easy to find.
• No assurance of performance. As with all investments, there is no assurance that a Fundrise portfolio will deliver the expected returns. While average returns are competitive, past results do not assure future performance, and some accounts have delivered below-average returns.
• Tax issues. Income from your Fundrise portfolio will be taxed as regular income, not as capital gains or dividend income. You should remember this when comparing potential returns to those of other investments.

Unlike some competing platforms, Fundrise has not invested in projects in which the property developer failed to deliver the expected property and the money effectively disappeared. That doesn’t mean that it can’t happen in the future, but based on its track record to date, Fundrise has generally done a good job vetting and managing its projects.

User Reviews

Fundrise has an A+ rating from the Better Business Bureau (BBB), indicating a high degree of responsiveness to complaints. The site has only 8 reviews and 30 complaints, all resolved over the last three years. It’s not possible to draw a relevant conclusion from such a small sample.

Fundrise has 358 reviews on Trustpilot. The average is 2 of 5 stars, which is poor. At the same time, Trustpilot reports that 75% of reviews are five-star and 16% one-star, with the rest scattered between.

Considering real estate investing? Check out our latest #Fundrise review to see if it's the right platform for you. #InvestmentOpportunities

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Reading the reviews, there’s a clear division between those who were happy with their returns and those who were not. This may stem in part from a failure to fully understand the nature of the investment from the start.

Some investors were clearly unhappy.

Others had more favorable experiences.

If you do choose to invest in Fundrise, it’s important to recognize that these funds are complex and they are actively managed: fund composition may change rapidly. There is no assurance that a given level of return – or any return – will be achieved.

Is Fundrise Right For You?

Fundrise offers accessible exposure to alternative asset classes such as real estate, private credit, and private equity. You can diversify into these asset classes with investments as low as $10.

That is a substantial advantage over platforms that are only available to accredited investors.

Just because you can, of course, doesn’t mean that you should. A Fundrise investment will tie up your funds for a substantial amount of time, and you may pay a penalty if you need to withdraw early.

If you’re considering a Fundrise investment, be sure that you are assessing not only the potential returns you could get from Fundrise but also the possible returns you could get from other uses of the same funds.

Fundrise has achieved a solid record in its 13 years of operation. Not all portfolios have been profitable and not all years have been positive returns, but the company has avoided scandal and major issues and is a viable option if you want to diversify into alternative asset classes without a major commitment.

If you’re considering a new investment in any asset class, it’s always a good idea to consult a professional investment advisor.

 Learn more: Enhance your property investment knowledge with our selection of the best books on real estate investing.

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Auto Loan Statistics

The total balance of US auto loans has expanded rapidly, from 0.75 trillion in the second quarter of 2012 to a record high of $1.6 trillion in Q3 2023^[1].

The steep rise in loan balances is driven largely by the rapid increase in the prices of new vehicles, driven by supply constraints in the pandemic and post-pandemic periods^[13].

As with most other loans, auto loan interest rates have increased dramatically since 2007^[14].

Average monthly auto payments have also risen to new highs. The average car payment for new vehicles rose 16.23% from 2022 to 2023, reaching $726^[15].

Learn more: Find out what car loan interest rates you can expect based on your credit score in our comprehensive guide.

Auto loan delinquencies have spiked since 2021, especially for younger borrowers^[1]. They remain below the peak reached in the 2008 “Great Recession”.

Explore our analysis of #consumerdebt statistics, uncovering key trends and demographics. #FinancialInsights #DebtData

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How Has the Cost of Groceries Changed Over the Years?

Average food expenditures for both food prepared at home and food ordered outside the home have increased steadily for many years, with a particularly sharp jump during the high inflation period of 2022^[4].

Curious about your future #foodbudget? Dive into our analysis of the average #costofgroceries. #Budgeting #GroceryCosts

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Food prices increased sharply during the inflation surge in 2022. Food price inflation abated somewhat in 2023 but was still well above historical averages.

Egg and poultry prices were hit by an outbreak of Highly Pathogenic Avian Influenza (HPAI). Egg prices had the largest price increase (32.2%) between 2021 and 2022 of any category tracked by USDA. Beef and veal prices increased the least (5.3%) between 2021 and 2022 and generally declined from peak prices in November 2021.

The USDA predicts that food-at-home prices will drop 0.6% in 2024, with food-away-from-home prices forecast to rise 4.9%^[5].

The post What Is the Average Cost of Groceries ? appeared first on FinMasters.

If you’d like to transition to self-employment, here’s what you should know about how much it costs to start a business, why it’s such an important issue to consider, and how to save up the funds you need.

Why Startup Costs Matter

Startup costs are a critical consideration for would-be business owners and should factor heavily into your early financial planning.

You need to know how much it costs to start a business to determine whether you can realistically do so. Some business models require more than you can afford, even with external financing, making them unattainable.

Learn more: Our guide on S.M.A.R.T. financial goals offers a step-by-step approach to planning your finances effectively, illustrated with examples.

Others may be theoretically within your reach but require more capital than you’re willing to risk. After all, roughly 20% of businesses fail within their first two years. That goes up to around 45% over the first five years and about 65% over the first ten^[2].

You’ll also need a fairly accurate estimate of your startup costs to effectively prepare for the transition to self-employment. You want to be confident that you can cover your business expenses for a period without much revenue.

Typically, you’ll use that estimate to determine how much money you need to save up or gain access to through a credit account before transitioning to self-employment.

If they’re substantial enough, your startup costs can even impact your business’s finances over the long term. For example, if you get a 60-month business loan to purchase essential equipment, your profits will be lower for years due to the burden of servicing your debt.

For all of these reasons and more, knowing your business’s startup costs is essential for making strategic business decisions, especially in the earlier days of your company.

Learn more: Torn between employment and entrepreneurship? Our post on whether to get a job or start a business can help you decide.

How to Estimate Your Startup Costs

The cost of starting a business can vary wildly depending on your business model. For example, you can begin offering many services without paying anything, but opening a manufacturing company is prohibitively expensive for the average consumer.

As a result, the average cost of starting a business isn’t a practical measurement for gauging your own startup costs, even if you could calculate it. Instead, find a way to estimate the costs for your unique circumstances.

Let’s explore some strategies you can use.

Study Comparable Businesses

One of the best ways to estimate your startup costs is to study the expenses of existing operations like yours. While small businesses generally don’t publish their financial data like public companies do, you can still find information on them.

Many small business owners who have achieved some success enjoy sharing their insights with those interested in following a similar path. As a result, you can often find interviews, podcasts, or articles online in which they discuss the details of their experiences.

Alternatively, you can contact experts directly and ask for their advice yourself. They might participate in and be willing to answer questions in forums and social media, or you can attend networking events and attempt to connect with them in person.

Fortunately, there are countless YouTube channels where flippers share the details of specific projects they’ve completed from start to finish, including their numbers. There are also real estate meetups in virtually every city where you can mingle with other real estate investors, ask them questions, and look for a mentor.

Build a Budget From Scratch

It’s generally more efficient to estimate your startup costs using someone else’s historical expenses. However, the information isn’t always readily accessible, and finding it can be more trouble than it’s worth.

In that case, you can always create a budget for your company’s startup costs from scratch. It might not be as accurate, but you can easily factor the unknown into your budget by giving yourself a healthy contingency fund.

Start by listing the expenses you’re sure you’ll have to pay to open your business. That’ll serve as the foundation of your budget. Then, list all the costs you anticipate but aren’t entirely sure about.

Learn more: Explore 5 practical ways to get money to start a business and kickstart your entrepreneurial journey today.

Finally, inform your estimates for each cost with market research. Shop around with different vendors and get actual quotes so your numbers are as realistic as possible.

Generally, the safest strategy is to use your most conservative budget. That would mean assuming your most pessimistic estimates are accurate and factoring in a cushion to account for your uncertainties.

Free Resource: Monthly Budget Spreadsheet Template (Excel & Google Sheets)

Common Costs of Starting a Business

Expenses vary significantly between business models, but some are more common than others. If you have to build a budget from scratch, here are some costs you should probably include in your projections, no matter what product or service you offer.

Administration

If you want to do business as a legal entity other than a sole proprietor, you generally have to pay fees to a governing agency in your state. In addition, you’ll probably want to hire someone to draft documents like operating agreements or articles of incorporation.

Similarly, some businesses require that you purchase a license to offer whatever products or services you sell. Operate without them, and you risk incurring penalties or having your business activities shut down.

Finally, you’ll usually need to pay for bookkeeping services to keep your financial records in order. Depending on your needs, that can be anything from a software subscription to a professional service provider.

Marketing

Client acquisition is essential for every business, from real estate agencies to e-commerce websites. Not all forms of marketing cost money, but many of the most effective ones do, especially those that work for new companies.

When drafting your initial budget, it’s a good idea to leave some extra room in the marketing category since you can’t predict whether your early strategies will be successful. You may have to experiment until you find something that works for you, which will cost more money.

Materials

If you want to sell something tangible, you’ll inevitably have to pay for materials to create your final offering. That applies whether you’re assembling your product from scratch or merely refurbishing previously used goods.

Material costs are often one of the most significant expenses for product-centered businesses and have a large impact on profitability. You want to ensure that your raw material costs are roughly equal to or lower than your peers’ to compete effectively.

Labor

Small businesses often start as one-person operations, which can work well for many self-employed people. However, you must incur labor costs eventually if you want to scale things up.

Like materials, labor is often one of the more significant business costs. You may be able to reduce it by using independent contractors rather than employees, but hiring people consistently is always relatively expensive.

Ever wondered how much does it cost to #startabusiness? Our latest post breaks down the financials you need to know. #StartupCosts #Entrepreneurship

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Overhead

Whatever your business is, you’ll often need space to conduct certain aspects of your operation. That could be an office to meet with clients, a storage unit to house your inventory, or even a factory to manufacture your products.

Assuming you can’t or don’t want to run your business out of your personal residence, you’ll need to lease or buy a separate space. That means taking on monthly rent or financing payments and utility costs.

Equipment

Businesses often need specialized equipment to offer whatever product or service they sell. That could be anything from a laptop computer for a freelance writer to a large commercial vehicle for a long-haul trucker.

Many of the most expensive business models are costly because the equipment they involve is expensive. If you pick a business that doesn’t require you to purchase any significant fixed assets, there’s a good chance you’ll have affordable startup costs.

Insurance

There are many types of business insurance, and it’s likely that at least one will be beneficial to you, no matter what your business is. Some policies may actually be required, such as workers’ compensation insurance when you have employees.

Some of the other most common types of business insurance include general liability insurance, commercial property insurance, and business income insurance. Many self-employed people buy a business owner’s policy, which combines all three.

Professional Services

Labor expenses generally refer to the cost of hiring someone for ongoing help with your primary operation. In contrast, professional service fees go to external parties you contract to manage a secondary aspect of your business that’s outside your wheelhouse.

Taxes

Last but certainly not least, every business has to pay taxes on their profits. In addition to income taxes, that also includes a flat 15.3% self-employment tax. It’s the combination of the Social Security and Medicare taxes that employees get to split with their employees.

In most cases, it’s best to hire a CPA for assistance with tax planning and preparation. You might be able to get away without one if your business is relatively simple, but as it grows in size and complexity, a CPA becomes increasingly valuable.

Learn More: Our latest post unveils 8 powerful ways how to save on taxes, helping you keep more money in your pocket.

How to Prepare Your Finances for Starting a Business

How much does it cost to start a business? If you’re asking that question, you already understand the importance of anticipating and preparing for your startup costs.

Starting a business that requires upfront and ongoing costs is inherently riskier than working for someone else. If your company fails or goes without revenue, you stand to lose your investment and source of income while having lingering business bills to pay.

As a result, it’s essential that you prepare your finances for self-employment by building a healthy runway of cash. The process isn’t too different from saving up an emergency fund to protect yourself as an employee.

Generally, this involves saving enough cash to weather the worst-case scenario. Just like it does for employees, that means having the funds to pay your bills during an extended period of little to no income.

However, there are several differences that mean your fund will probably need to be larger than the average employee’s. They include the following:

• Longer timeline: Most employees aim to have three to six months of expenses in their emergency fund because that’s the length of the average job search. However, it can take much longer for your business to become profitable.
• Higher costs: When an employee loses their job, they only need to be able to support their household. When business owners go without revenue, they must also cover their company’s recurring costs.
• No unemployment: When an employee loses their job, they can often fall back on unemployment insurance to offset their cost of living. Unfortunately, business owners generally don’t have access to the same benefits.

You can reduce your need for a cash runway by maintaining a second source of income while you get started, but that means you’ll have less time and energy to devote to your new business. There are pros and cons to both approaches, so consider carefully.

Learn More: How to Start a Business While Working Full-time (And Replace Your Job)

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Let’s take a look at some of the lemons that Shark Tank has produced: the worst Shark Tank products.

Shark Tank: How It Works

Shark Tank is based on a simple premise. Entrepreneurs bring their business ideas into the Shark Tank and ask for money in return for part ownership of their companies. A panel of investors – the “sharks” – listens to the pitches, analyzes their potential, and decides whether to invest.

Like all TV shows, Shark Tank was primarily developed for entertainment: viewers get a vicarious thrill out of watching entrepreneurs lay their ideas on the line and seeing some shot down and others walking away with hundreds of thousands in new capital.

While Shark Tank is all about entertainment, it has been a way for some entrepreneurs to gain both money and publicity, launching their companies to success. It has also launched some spectacular flops. We’ll look at some of the worst Shark Tank products here.

Learn more: Explore our roundup of the best Shark Tank products that made it big, from innovative gadgets to groundbreaking services.

The 12 Worst Shark Tank Products

Becoming an entrepreneur isn’t as easy as it might first appear. It’s not enough to have a cool idea and bring it straight to market. You need to fully develop your business plan, research the market, identify your target audience, assess the competition, develop an expansion strategy, test the viability of your product, and more.

These entrepreneurs have failed on at least one of these accounts.

1. The Breathometer (2013)

At first glance, the Breathometer, developed by Charles Michael Yim, seemed like an ingenious idea. Presented in season 5 of the show (2013), the portable breathalyzer could pair up with a smartphone to read the user’s blood alcohol levels.

All five of the sharks decided to invest in it, with Mark Cuban, Lori Greiner, Robert Herjavec, Kevin O’Leary, and Daymond John raising 1 million in exchange for just 30% of the business’s equity.

Problems arose after the investment, though. The business couldn’t meet the heightened demand for the product. The product also failed to meet user expectations, delivering inaccurate results and causing the Federal Trade Commission (FDC) to step in.

It wasn’t long before the Breathometer had to be taken off the market. The idea went down the drain, along with the money invested by the sharks.

 Learn more: Explore 5 effective ways to get money to start a business, helping you turn your entrepreneurial dreams into reality

2. CATEapp (2012)

In season 4 of the show (2012), the Shark Tank investors heard a presentation from Neal Desai, inventor of CATEapp. Known as the “cheater’s app”, CATEapp offered the ability to hide messages from select contacts, enabling them to only be seen by the phone’s primary user.

Two of the sharks, Kevin O’Leary and Daymond John, were intrigued enough to raise $70,000 in exchange for 35% equity.

The app got thousands of downloads after its Shark Tank appearance, but it quickly became clear that the app was laden with bugs and leaked sensitive information. Its features could also be circumvented rather easily. Moreover, it couldn’t compete with similar, more reliable apps that came to market.

CATEapp is no longer available for downloads, and the money invested in it is gone, making it one of the worst Shark Tank products.

 Learn more: Discover how to make money with your phone using our practical tips and ideas that turn your device into a revenue source.

3. Sweet Ballz (2013)

Although the investors in Shark Tank have, on multiple occasions, highlighted how risky investing in food businesses can be, Mark Cuban and Barbara Corcoran jumped at the opportunity to invest in Sweet Ballz.

In season 5 James McDonald and Cole Egger presented their idea: selling delicious little cake balls. The founders received $250,000 in exchange for 25% of their equity, and all was good for a while.

Unfortunately, though, James and Cole had a falling out and even filed for restraining orders against one another.

Sweet Ballz, now run by James, is still in business today, though it’s not nearly as successful as it could’ve been had he and his business partner stayed on the same page. Sweet Ballz may not have been one of the worst Shark Tank products, but it was certainly one of the worst partnerships!

Learn more: Explore the top picks for the best food stocks & ETFs of 2025 to spice up your investment portfolio.

4. Squirrel Boss (2013)

Michael Desanti presented Squirrel Boss in season 4 (2013) of Shark Tank. At its core, it was a simple bird feeder, but it had a feature that would send an electric shock to pests like squirrels to deter them from stealing the bird food. Supposedly, the shock wouldn’t harm the squirrels.

The main problem was that the product couldn’t differentiate between pests and birds and would shock any animal that came into contact with it, a significant design flaw that could hardly be overlooked.

Squirrel Boss was also expensive and unpatented, so none of the sharks were willing to invest in it.

While it was available on Amazon for a while, Squirrel Boss never took off due to its major design flaws and hefty price.

5. Original Man Candle (2011)

The Original Man Candle was the brainchild of Johnson Bailey, who believed that traditional scented candles were too feminine.

Presenting his idea in season 2 of the show, Johnson tried to differentiate his product by introducing more “masculine” scents that would supposedly appeal to the male target audience.

Unsurprisingly, none of the “sharks” were interested in investing in the Original Man Candle. That may have been due to the selection of scents offered, which included “popcorn,” “golf course,” and “flatulence,” or due to the lack of a comprehensive business plan.

6. ToyGaroo (2011)

ToyGaroo is one of the better-known failures from Shark Tank. Originally presented in season 2 (2011), ToyGaroo was founded by Nikki Pope, Young Chu, Hutch Postik, Phil Smy, and Rony Mirzaians.

The premise behind it was simple. ToyGaroo rented out children’s toys in a subscription-based service. Parents could sign up for the service, rent high-quality toys for a month, return them, and get a new batch, avoiding the problem of spending on toys only to have the kids lose interest.

Mark Cuban and Kevin O’Leary saw the appeal, committing $250,000 to the venture.

However, ToyGaroo wasn’t ready for the heightened demand following the episode’s airing. Sourcing high-quality toys and shipping them proved to be more expensive than anticipated, leading the business to go bankrupt in months.

Learn more: Learn exactly what is bankruptcy and the steps involved in declaring it, in our latest post designed for clarity and insight.

7. Trunkster (2015)

Trunkster was a promising new company that was supposed to disrupt the travel industry. Founded by Gaston Blanchet and Jesse Potash, it brought a new level of technology to a very old product: luggage. The product was a smart suitcase with useful features like a GPS tracking system, USB ports, a digital scale in the handle, and more.

Presented on Shark Tank in season 7, Trunkster caught the attention of Mark Cuban and Lori Greiner, who invested $1.4 million in exchange for 15% of the company.

The deal, however, fell through. Trunkster’s apparent $28 million valuation only came from presales on Kickstarter and Indiegogo and aggressive revenue projections. Most of the customers who signed up for preorders never received their high-tech luggage and those who did received poor-quality products that didn’t meet the expectations set up by Trunkster’s marketing campaign.

Learn more: Explore our top picks for the best no-fee travel credit card options in 2025, perfect for savvy travelers looking to save.

8. Wired Waffles (2012)

Wired Waffles was a flop from the get-go. First presented in season 4 of Shark Tank, the business was founded by Roger Sullivan.

Wired Waffles are caffeine-infused waffles that would supposedly help busy people save time in the morning since they wouldn’t have to make both coffee and breakfast.

None of the sharks were interested in investing in this. After all, caffeine as a simple ingredient couldn’t be patented. The product didn’t have a pleasant taste, and worst of all, it could be ingested by children by accident.

Wired Waffles is a perfect example of what happens when entrepreneurs don’t think their ideas through, fail to test the viability of their products and don’t conduct proper market research.

9. Vestpakz (2014)

Vestpakz seemed like a promising product when it was presented during season 6 of the show (2014). Michael Woolley and Arthur Grayer created it as an innovative new children’s backpack that would reduce the wearer’s back and shoulder pain.

Shaped to look like a vest and boasting plenty of storage space, it seemed like the perfect product. Unfortunately, though, no shark wanted to invest in it.

Despite Vestpakz being available in Walmart stores, the sales were abysmal. The ratio between its manufacturing costs and selling price was too low, and there was minimal consumer demand. Ultimately, Vestpakz went out of business.

10. Cougar Energy (2012)

Cougar Energy was a product developed by Ryan Custar and presented to Shark Tank investors during season 3 (2012). As its name suggests, it was an energy drink designed for “cougars”, aka middle-aged single women.

Supposedly, the drink wouldn’t only bring the consumer’s energy levels up, but it would also positively affect the hair and nails. Moreover, it boasted “anti-aging” ingredients, though none of these claims were scientifically supportable.

Cougar Energy received no investments in Shark Tank. None of the investors believed there was a market for such a product, nor did they believe it would stand up to competitors. With low sales and plenty of negative comments on Amazon and social media, it was apparent that the investors were right.

11. Wake N Bacon (2011)

Wake N Bacon was first presented by Matty Sallin in season 2 of Shark Tank. It was an alarm clock/oven that would start cooking bacon 10 minutes before wake-up time, thus waking the user up to the sweet smell of bacon.

Curious about which pitches didn't swim? Dive into our list of the worst #SharkTank products. #SharkTankFails #BusinessLessons

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The concept gained popularity online before Matty came on the show, with plenty of people asking to buy it.

However, the sharks saw it as a gag gift that would have few legitimate users. Moreover, it quickly became apparent that Matty hadn’t thought the whole concept through. There were no safety guards that would minimize fire risks, for instance.

Matty hadn’t come up with a selling price. He hadn’t developed a plan that would help him sell more units after creating a prototype and had no sales projections.

All he had was an idea for a product and no plans to help him market and sell it. Despite many online consumers expressing a desire for Wake N Bacon, the business fell through because there really wasn’t a business there in the first place, just an idea.

12. Foot Fairy (2013)

Foot Fairy was presented during season 5 of Shark Tank. Inventors Sylvie Shapiro and Nicole Brooks developed an app to help parents measure their children’s feet and buy suitably sized shoes for them, thus minimizing the risks of common foot issues.

Foot Fairy would be free to use, and the company would earn commissions from popular stores like Zappos.

However, despite the app having thousands of downloads prior to Sylvie and Nicole’s appearance on Shark Tank, the two had earned no commissions.

While the concept, at its core, seemed interesting enough, there were a couple of issues that deterred the sharks from investing in it. The app was easy enough to copy, which would deter any major retailers from offering commissions for it. Moreover, it would have been a much more viable business plan for Sylvie and Nicole to develop their own brand of footwear and use Foot Fairy to increase their sales.

Although one of the sharks did offer a deal, it never came to fruition, and Foot Fairy is no longer available.

Conclusion

While there are a couple of outrageous Shark Tank pitches on this list, some would likely have proven to be lucrative had the entrepreneurs developed their ideas better. After all, having a great product idea is never enough to ensure the success of a business. Entrepreneurs always have to conduct thorough market, competitor, and audience research. They need to test their products’ viability, develop expansion strategies, and develop comprehensive business plans if they hope to attract customers and investors.

The post The Worst Shark Tank Products: 12 Epic Fails Revealed appeared first on FinMasters.

What Is a Personal Loan?

A personal loan is a flexible loan that you can use for a wide variety of purposes. Unlike loans designed for a specific thing, like a mortgage or auto loan, a personal loan can be used for nearly any legal purpose.

There are different types of personal loans. One of the most basic distinctions is between secured and unsecured personal loans.

Learn more: Dive into the latest personal loan statistics for 2025, including rates, debt levels, and borrower trends in our comprehensive overview.

Unsecured Personal Loan

Unsecured personal loans represent approximately 40% of all personal loan balances, and most personal loans you see advertised will fall into this category.

An unsecured personal loan doesn’t require any collateral. The lender offers the loan based purely on your credit history, financial situation, and a promise that you’ll repay the loan. This contrasts with secured loans, like mortgages, where an asset serves as collateral for the loan.

The obvious benefit of unsecured personal loans is that you don’t need to have anything of value to offer as collateral. You also don’t have to go through the process of letting the lender examine your collateral and make sure it’s worth enough to secure your loan, which can speed up the lending process.

However, because there’s no collateral, lenders are more choosey about offering these loans. You’ll need strong credit to qualify for these loans, and your interest rate will be higher than it would be with a secured loan.

Learn more: Find out exactly what documents and information you need to apply for a personal loan with our comprehensive guide.

Secured Personal Loan

Secured personal loans are the opposite of unsecured personal loans. When you apply for one of these loans, you need to offer a form of collateral.

Many lenders will accept a Certificate of Deposit (CD) or savings account balance as collateral for these loans. For example, if you have $5,000 in a CD at a bank, that bank may be willing to offer you a secured loan. The size of the loan that you can qualify for will depend on the value of your collateral and your credit score.

Learn more: Our detailed analysis answers the question: Is getting a personal loan a good idea for you? Find out now.

Because you’re offering collateral to secure the loan, secured personal loans are generally easier to qualify for. Many lenders will also offer lower interest rates on these loans because of the reduced risk that they face.

A major drawback of secured personal loans is the fact that you need to have something of worth to serve as collateral. If you’re in need of a loan, odds are good that you don’t have much savings available and might not have enough to serve as collateral.

Offering something as collateral also puts it at risk. If you’re not able to make payments on your loan, the lender could take possession of the collateral.

It may also take longer to get a secured loan because the lender has to assess your collateral and ensure it’s worth enough to secure the debt.

Learn more: Explore our expert picks for the best personal loans for excellent credit, tailored to maximize your financial options.

Branded Personal Loans

If you’re shopping for personal loans, you may find that some lenders offer specialized or branded personal loans. For example, you may see loans described as vacation loans, home renovation loans, or debt consolidation loans.

These loans are advertised as special types of personal loans for a specific purpose. Some of these loans may offer special features related to their branded purpose. For example, if you apply for a debt consolidation loan the lender may pay your other creditors directly, so you don’t need to handle the money at all.

Keep in mind that personal loans are highly flexible. You can use a personal loan for almost any purpose; the few that are disallowed by most lenders are things such as paying for education, gambling, or illegal activities.

Some branded personal loans may be a good deal. You might find a debt consolidation personal loan that can help you save a lot of money. However, just because a loan is described as being good for a specific purpose does not mean that it is the best loan available. Always shop around and consider generic personal loans before going for a branded one to make sure that you’re getting the best deal.

Bad Credit or No Credit Check Personal Loans

Another common thing to see when looking for personal loans is a loan advertised as a bad credit or no credit check personal loan. These may seem appealing, especially If you don’t have a great credit score or have struggled to get approved for loans in the past.

As with anything, you pay a price for these types of loans. Lenders who are willing to offer loans to people with poor credit or without checking people’s credit need to compensate for that risk somehow. Often, they compensate for that risk with highly unfavorable terms such as high interest rates or large origination fees.

If you need a personal loan, but don’t have good credit You should still avoid these loans due to their predatory terms. You’ll get a much better deal if you are able to qualify for a secured personal loan. If you don’t have enough assets to serve as collateral, you are likely to be better off if you spend some time working to improve your credit and apply for a traditional personal loan instead.

Learn more: Learn the step-by-step process of securing a personal loan with a co-signer in our comprehensive guide.

Payday Loans

A payday loan is a type of bad credit or no credit check loan. They share some characteristics with personal loans, but it is important to know that payday loans are highly predatory and should be avoided whenever possible.

Like bad credit or no credit check personal loans, payday lenders typically don’t look at your credit score when you apply for a payday loan. These loans have massive fees High interest rates and short repayment periods. For example, if you get a payday loan today, you might be expected to pay it off in 2 weeks. The idea is that you use the loan to make it the next payday and use your next paycheck to pay back the balance.

Payday loans typically come from specialized lenders, so if you look for loans from reputable Banks and online lenders, you are not likely to find them. Their high fees and interest rates can make it easy to get trapped in a cycle of debt, so try to avoid these loans except as a very last resort

Learn more: Unlock financial opportunities with our recommendations on the best personal loans for good credit and fair credit, designed to match your credit profile.

Other Types of Consumer Loans

Personal loans are a type of consumer loan, which is a wide category of loans that describes pretty much any type of loan that a regular person could apply for. Some examples include personal loans, mortgages, auto loans, and credit cards.

When looking to borrow money, it’s important to make sure that you’re applying for the right type of loan. Some types of purchases, such as a home or a car, have unique loan types designed specifically for those purchases. Trying to use a credit card or a personal loan will likely result in you paying more than if you used a specially designed loan.

Personal Lines of Credit

Personal lines of credit are similar to personal loans in many ways. Like personal loans, they’re highly flexible and can be used for many different purposes. They can also come in both secured and unsecured varieties.

What makes them different is that a line of credit is a pool of funds that you can draw from multiple times while a loan is a lump sum of cash that you can only access once.

That makes personal lines of credit more useful for people who have unpredictable financial needs. If you have a one-time expense and you know the size of that expense, you can apply for a personal loan for the correct amount. With a personal line of credit, you can take money out of the line of credit when the need arises and do so multiple times if you find that you need to draw money more than once.

For example, a personal loan might be a good fit if you have to pay an unexpected bill. A personal line of credit might be a better fit for someone working on a home improvement project who isn’t sure exactly how much it will cost.

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Common Uses for Personal Loans

Personal loans can be used for many different reasons.

One of the most common reasons is for debt consolidation. If you have multiple credit card balances and other small loans, you can use one personal loan to pay off those balances. That leaves you with a single monthly payment to make and may reduce the amount of interest you pay.

Home renovations and vehicle repairs are also common uses for personal loans.

You can also use a personal loan for unexpected expenses. Because they have lower interest rates and credit cards tend to, using a personal loan in this way may help you save money.

Many people use personal loans for weddings, vacations, and similar costs. Be careful: you’ll be paying off that loan long after the party or the trip is over!

Learn more: Learn how to protect yourself from personal loan scams by recognizing the warning signs in our latest guide.

Bottom Line

Personal loans are highly flexible loans that you can use for a variety of purposes. There are many types of personal loans, but they all offer money that can be used for a range of personal needs.

If you need money for something, applying for a personal loan can be one way to get that cash. Just keep in mind that you will be paying that loan back with interest. It’s best to use these loans for essentials, not luxuries, and to avoid borrowing if your credit isn’t up to par!

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