New online tool aims to help you manage your debt better
Called CreditSesame.com, the free site takes some personal information and pulls data about your existing debts, loans and outstanding balances, and tries to offer you alternatives to help you save on your monthly payments. The site is still in beta, and right now it's invitation-only; the main screen prompts you to enter your e-mail address to receive a login code. Nazari says this feature will be eliminated in another couple of weeks or so as his developers put the finishing touches on the tool.
WalletPop gave CreditSesame a whirl. How did it work? The sign-in process was pretty efficient. I did have to enter my Social Security number, but the site is secure and the system doesn't store that data. But when it came to the results, I was disappointed to find out that the site had no advice for me on how to save better. It told me my money was managed well enough that it didn't have any help to offer, which was flattering, but I would've appreciated some concrete suggestions for how to save more.
That said, most of the information about me was pretty spot-on. While it had the correct square footage, number of bedrooms and bathrooms for my house, it had the wrong house number, despite the fact that I'd entered the correct one, and for some reason my home-equity loan showed up as another type of unspecified loan. But all of my credit card balances and my mortgage showed up, though there does seem to be a time lag in the system's reporting: One credit card showed a large outstanding balance that I'd paid off recently. (I don't knock the system for this, though; it's entirely possible that Experian, from which CreditSesame pulls a lot of your info, hadn't recorded the drop in my balance from my card company yet.)
Overall, it wasn't super-useful for me as far as savings goes, but it was helpful to get a big-picture perspective of all my debts and my assets (although it was a little sobering to see how much value my home has lost in recent years.) Nazari said other people have had more luck using the same demo I did; in some cases, he says, the system will find an option that lets them refinance their mortgage and save money that way. Obviously, that only works if the homeowner has equity in his or her home.
He added that the system is set up to take into account the overall cost of the loan, so if it suggests an adjustable-rate mortgage, it factors in the risk of potential rate spikes down the road rather than just looking at the teaser rate (which many sites that aggregate mortgage rates, as well as many consumers, do).
"We look at cost of ownership of the loan. We find there are some options that initially look good but aren't," says Nazari. "Most variable loans fall into that category. For example, not all five or three-year ARMs are the same. Riskier ones might be cheaper."
Nazari says CreditSesame also searches for mortgage or home equity loan amounts shortly below what you'd actually need. Since lenders often run great, limited-time deals on loans of particular sizes that consumers never really know about, Nazari says CreditSesame, through its access to major banks' current offers, can ferret these out.
For instance, if Bank A has a killer rate on a mortgage for $190,000 and I'd need a $200,000 mortgage to refinance, the CreditSesame system will go looking for other loan options -- anything from a home-equity loan to peer-to-peer lending -- to "backfill," as Nazari calls it, the extra $10,000. "Our platform helps people qualify for loans they wouldn't otherwise be able to obtain," he says.
The same tactic that CreditSesame uses to account for overall risk when searching adjustable-rate mortgages also applies to credit cards. Since many issuers have switched from fixed- to variable-rate cards, Nazari says the system takes into account many factors that consumers generally don't consider because they're seduced by a low teaser rate.
Finally, CreditSesame lets you enter and track personal savings or debt-paydown goals, so this site could be motivating for people who are inspired by a visual illustration of how far they've come and how far they have to go. It also tells you your credit score as per Experian, which is a useful piece of information to have regardless of your debt.