Today’s post comes courtesy of Coverrme (Crowdfunding 2.0) founder Rob van Haaren. Think Kickstarter and Indiegogo are the only crowdfunding platforms out there? Or that crowdfunding is only for tech companies and smart-watch startups? Think again!
Over to Rob:
Sometimes, life can throw you nasty curve balls: unexpected medical bills, sudden job loss, or creeping consumer debt. Financial emergencies many times snowball into something bigger: this is because unfortunately it costs money to be in debt. When your one source of income suddenly gets slashed and your spendings remain the same, “money stress” makes its way into your brain and there seems to be no end in sight. This is especially painful when you have a family to take care of and they suffer right along with you. It makes you want to invent a Debt Reset button and press it.
The strategies outlined on our website ManvsDebt.com can help you a long way in taking control of your financial life. But we have never really talked about using crowdfunding as a supporting (not primary!) means to further reduce debt.
Crowdfunding Platforms & Fees
Crowdfunding has been around for quite a few years. It has empowered people to use the power of community to raise money to accomplish bigger things. “Personal crowdfunding” has seen a vast increase in popularity over the past few years. Personal crowdfunding is crowdfunding for traveling, weddings, but can also be done for medical emergencies, natural disasters, vet bills and debt in general.
It can be for anything. Pioneering companies in this space are GoFundMe and Indiegogo, for example. However, these companies charge fees on every dollar you raise. There are two types of fees associated with crowdfunding:
- Transaction fees
- Platform fees
Transaction fees are associated with the payments made from contributors to the project creator. There is really no way around these: it simply costs money to transfer money. Transaction fees are typically 2.9% + $0.30 per transaction.
The Platform fee is the fee you pay to the crowdfunding company itself. They decide on the platform fees – a small amount of the fee will cover the platform’s expenses to run your campaign page, and the majority will go towards the company’s profit. Typically, platform fees are 5% (GoFundMe and Indiegogo).
So if you’re planning on raising $20,000 and the average Funder contributes $20, you end up giving almost 10% ($1,880) away in fees..
However, there are also new platforms around that do not charge any platform fees. An example of this is CoverrMe.com. CoverrMe is a 0% fee, first of its kind “visual crowdfunding” platform that allows contributors to leave their footprint on crowdfunding campaigns.
Debt crowdfunding strategies
There is some strategy involved in crowdfunding, especially when you raise money to reduce debt. It may not be tactical to start a campaign called: “Please fix my debt problem”. Instead, it would be better to focus the campaign on a specific expense, one that you think other people are most likely to help you with, such as:
- your kids’ tuition fees or other school expenses,
- medical bills,
- critical home improvement upgrades.
Another strategy is to effectively use the campaign description to add images of yourself, your family and the problem you’re facing. Even more powerful (but optional) is to add a video explaining the situation.
Are you ready to get started?
Take a look at CoverrMe.com and try it out.