Best Crowdfunding Sites

Crowdfunding is a way to raise funds for financial needs, emergencies or special projects by posting your request on an online platform and asking people to contribute.

For example, people have used crowdfunding to pay their bills after a car accident or job layoff and to raise money for funerals and weddings. GoFundMe reports that it supports over 250,000 medical fundraisers annually and collectively raises over $650 million.

There are a few different types of crowdfunding sites, with each created to serve a different purpose. Here are a few common types:

• Reward-based: Platforms like Kickstarter and Indiegogo allow creators to offer rewards or incentives to backers who contribute to their campaigns. This type of crowdfunding is popular with individuals launching a new product or business.
• Donation-based: Donation-based platforms, such as GoFundMe and Plumfund, focus on charitable causes or personal fundraising. People can donate money to support individuals in need, disaster relief efforts or community projects.
• Debt-based: Platforms such as Prosper use peer-to-peer lending. Borrowers repay their crowdfunded money plus interest, and those who loan money to borrowers earn a percentage back on their investment.
• Equity-based: On sites that have equity crowdfunding, investors pledge money in exchange for shares in a company.

Using crowdfunding to finance your needs or projects can help you raise money without taking on a personal loan or racking up credit card debt. However, there are some downsides to relying on crowdfunding.

While crowdfunding platforms are easy for most people to use, they are not a reliable source of funds for all of your big bills or more than one emergency. Friends and family might be sympathetic enough to give once, but they might not feel the same way if you create multiple campaigns in a short time span.

For those who want to use crowdfunding for a new business idea or product, it can help you secure flexible funding and validate that your idea is worth pursuing. However, be prepared to put time and effort into getting eyes on your campaign, and know that backers can have high expectations when it comes to your final product.

If you are using a crowdfunding site to launch a campaign, most sites are easy to navigate, and a donation page can be created within minutes. You will be able to choose your campaign’s title, duration, and desired fundraising goal, and you can disclose as much or as little information as you would like. After your campaign is published, you will be able to share the link with your family and friends and on your social media pages.

Depending on the platform’s fee structure, you will pay either a one-time platform fee, a transaction fee for each donation or both. Some sites, like Kickstarter, charge fees only if your campaign is fully funded.

If you are using crowdfunding as a way to invest, each site will have its own unique process. Some sites, like Fundrise, allow you to crowdfund with other investors in real estate. You can earn a percentage back on the financing you provide, but the return rate will vary based on your investment amount and the current market. Other sites might allow you to secure a stake in the company you help crowdfund.

Young Pham, project manager of the business news and review site BizReport, says that the factors he personally looks at when considering a crowdfunding site are the site’s active community, quality control and security.

“First, you need to check if the site has an active community or not,” said Pham. “After all, crowdfunding only works if there is a community of people who trust that particular crowdfunding site.”

Pham said to look at the following stats when researching crowdfunding platforms:

• The number of people who have raised money through the site
• How much money the site has helped raise
• The ratio of successful to unsuccessful campaigns on the platform
• The community’s level of social media engagement

Pham also recommends reviewing a site’s quality controls and safety measures. “Quality control simply refers to a set of rules and policies that a crowdfunding site puts in place to ensure its platform is not abused or exploited by bad actors,” said Pham.

You should also compare different platforms’ restrictions and fees. Consider how much the fees will affect your project goal. Will you still get your funds if you don’t meet your pledge goal?

While crowdfunding could work for a one-off financial emergency, it is not the best solution for everyone or every situation. Here are other options to consider when you need money quickly:

• Personal or emergency loans: Some lenders will approve and fund a personal loan or emergency loan the same day you apply. The only downside is that your loan approval and rate are based on your creditworthiness.
• Special financing: For medical or pet emergencies, many doctors and veterinarians offer special 0% financing for up to 24 months through CareCredit by Synchrony Financial.
• 0% APR credit card: Instead of reaching for the regular credit card in your wallet, which might have a high interest rate, see if you qualify for a card with a promotional annual percentage rate (APR) of 0%. A 0% APR promotion may be offered for a period of six to 21 months, and it can save you money if you repay your debt before the promotional period ends.
• Tap into equity: If you need money and aren’t in a rush, you can use your home equity to get a cash-out refinance or home equity loan. The process is not as quick as getting a personal loan or credit card, and it comes with fees.

One option you should never turn to, even when money is tight, is a payday lender. Payday lenders and other predatory lenders will grant you funds quickly, but their interest rates are astronomically high.