The pioneer crowdfunding site Indiegogo capped off January by announcing it had raised $40 million in a new round of financing, representing the largest crowdfunding venture capital investment to date and bringing the company’s fundraising total to $56.5 million. Indiegogo focuses its fundraising primarily on creative projects, charitable causes and entrepreneurial ventures, but crowdfunding is increasingly becoming a popular way to fund personal finances as well. For individuals in need of capital for any number of reasons, crowdfunding has joined traditional saving, loans and credit cards as a potential financing source when you need money.
Funding Education and Student Loan Debt
One personal application of crowdfunding quickly gaining popularity is raising funds to cover tuition or pay off student loan debt. Educational crowdfunding has been around since at least 2000, when Bronx high school teacher Charles Best created DonorsChoose.org, a site that enables donors to fund specific public school projects. Today, a growing number of sites such as Piglt, Yousery and Zero Bound offer crowdfunding resources for financing higher education and student loan debt, typically in return for community service or other services.
Peer-to-peer lending is a form of crowdfunding that’s become another way to attract personal loans. Sites such as Lending Club and Prosper enable users to review loan applications from their peers. The site owners screen the applicants for ability to repay, approve viable candidates and supervise repayment. Investors buy loan notes and collect interest. Loans are typically extended at rates more favorable than credit cards, making peer-to-peer lending an increasingly popular option for purposes such as funding debt repayment.
Other, more traditional alternatives are still popular methods of paying down debt. These include taking advantage of balance-transfer offers and debt consolidation. If you’re entitled to a structured settlement, another option may be to sell your future structured settlement payments for a lump sum of money now.
Crowdfunding is also helping health care consumers raise funds for medical care. Next Avenue contributor Linda Childers describes how friends of a woman with pancreatic cancer were able to raise $41,032 for cutting-edge radiation treatment by using the medical crowdfunding site GiveForward.com. GiveForward and other sites such as YouCaring.com specialize in helping raise funds for medical expenses. Some medical sites may also raise funds for other emergencies and causes, such as paying for funerals and memorials, disaster survival, mission trips, pet expenses and animal rescue.
Prospective parents seeking to cover the expense of adopting a child are turning to crowdfunding. The average adoption costs between $20,000 and $30,000, Bonfire Funds founder Brian Marks reports, citing data collected by Adoptive Families. Fees that must be covered can include applications, adoption agencies, attorneys, documentation and medical bills. Adoption crowdfunding sites raise financing for these expenses by attracting donors, and sometimes by rewarding them with incentives. For instance, Bonfire Funds rewards contributors with T-shirts displaying design elements related to the specific fundraiser.
About the Author: Kevin Strauss is freelance writer who started covering crowdfunding in 2011, when it was in its infancy. He is married and has a baby on the way.