dougo: (Default)
( Apr. 1st, 2010 01:23 am)
Just over a year ago, I came up with the brilliant idea of asking my friends for money. An adventurous investor decided to take me up on my offer, and we worked out a deal: he gave me a one-year loan of $5000 with a flat 7% APR, i.e. I would pay him $5350 after one year. Six months later, I arranged an identical deal with another friend. And the first one recently extended his loan another 6 months (reinvesting the interest).

I think these deals work well for both sides: 7% is a lot more than you can get from a bank CD these days, but it's slightly less than the average interest rate on my credit cards (including fees). More importantly, moving some of my debt off of credit cards means I can worry a little less about credit card companies playing games with my credit limits, rates, and fees. (The recent Credit CARD Act helps too, though I am still wary of banks finding loopholes to screw around with me in other ways.)

The only reason I got into credit card debt to begin with was that I was expecting it to be a short-term situation: at this time last year I was in the middle of my job search, and expecting to land a salary job reasonably soon, which would have paid off all my debt in 12-18 months. Well, that didn't pan out, and being a contractor has been a bit wobbly, so financially I haven't done more than tread water over the past year. I have been hesitant to put out another call for investors, since I don't want to become the Bernie Madoff of LiveJournal, but I do think this is a finite-length plan; one way or another, by the end of this year I intend to have a solid, healthy income stream: either by getting more consulting clients, getting a salary job, or, who knows, maybe even getting funding for a startup. But right now the debt is looking more long-term than is comfortable to have all on credit cards.

Also, to be clear, I am serious about treating this like an investment opportunity rather than helping out someone in need. I do in fact have a safety net in the form of family, but I consider that a measure of last resort, and I'm not at that point yet. This is more about convenience for me, and about making a mutually financially beneficial deal with my friends.

So, yeah, mail me if you have some extra cash lying around that you'd like to put to good use. I am happy to make more $5k/7% deals, but feel free to suggest an alternate amount or rate or term or arrangement.

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